TCR_Public/960808.MBX BANKRUPTCY CREDITORS' SERVICE, INC.


Bankruptcy and Troubled Company News


August 8, 1996



  1. Coastal Physician Group, Inc. announces second quarter financial results





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Coastal Physician Group, Inc. announces second quarter financial results


        


            DURHAM, N.C.  --  Aug. 8, 1996  --  Coastal Physician
        Group, Inc. (NYSE: DR) today reported financial results for the
        second quarter and six month period ended June 30, 1996.
        


            Total net operating revenue for the second quarter was
        $146,038,000, a 30.9 percent decrease from net operating revenue of
        $211,342,000 for the same period in 1995.  The decrease in operating
        revenue was primarily due to the sale of the Company's south Florida
        clinics on Nov. 30, 1995 (averaging approximately $53 million in
        quarterly revenue during 1995.)
        


            The Company reported a net loss for the second quarter of
        $24,860,000, or $1.04 per share, compared with a net loss of
        $10,491,000, or $0.44 per share, for the second quarter of 1995.
        The net loss for the second quarter of 1996 was due primarily to
        contract attrition and lower new business development during the
        second half of 1995 in the hospital-based contract services
        division, lower net collections per patient visit in the billing and
        accounts receivable management services division, increased
        investments associated with the growth in the company's health
        plans, and increased expenses in information technology.  
        


            Approximately $4.5 million of the loss was due to certain
        charges in the quarter, including accelerated recognition of
        expenses related to telecommunications and information technology
        contracts, provisions for lease terminations and severance costs
        related to the closure of offices, and higher reserves related to
        the company's hospital-based business.
        


            For the six month period ended June 30, 1996, total net
        operating revenue decreased 28.7% to $298,772,000 from $419,201,000
        for the same period in the prior year.  The decrease in operating
        revenue was primarily due to the late-1995 south Florida divestiture
        mentioned above.  The company incurred a net loss for the first six
        months of 1996 of $36,590,000, or $1.54 per share compared with a
        net loss of $4,124,000, or $0.17 per share, for the first half of
        1995.
        


            Joseph G. Piemont, president and chief executive officer of
        Coastal Physician Group Inc. said:  "It is important to note that
        our financial results for the first six months largely reflect the
        company's performance prior to the implementation of our
        Comprehensive Business Plan, which was designed to revitalize
        Coastal's core operations, restore profitability and maximize
        shareholder value.  Moreover, we are encouraged by the meaningful,
        measurable improvement in our core businesses since plan
        implementation began.  The fundamental elements of our action plan
        are progressing ahead of schedule in terms of cash flow enhancement
        and we are continuing to vigorously pursue the steps necessary to
        achieve an operational and financial turnaround."
        


            Coastal's core businesses are beginning to show clear signs that
        the operational initiatives over the past few months are taking
        hold.  For example:
        


            As of July 31, the company's hospital-based contract services
        division, Coastal Physician Services Inc. (CPS) had terminated 34
        unprofitable contracts (representing approximately $21 million in
        revenue), which is expected to improve EBITDA (earnings before
        interest, taxes, depreciation and amortization) by nearly $4 million
        per year.  Twelve contracts operating at a loss, and noticed for
        termination in March, have instead been re-negotiated to provide
        Coastal with a fair profit margin. New business development during
        the first six months of 1996 has been successful as compared to the
        same period in 1995.  During the first half this year, CPS added
        more than $14 million in revenue, with an aggregate EBITDA margin of
        approximately 14% -- an improvement over the same period in 1995.
        


            Healthplan Southeast, the company's northern Florida health
        maintenance organization, reported that its medical loss ratio
        improved in the second quarter to 84.8% from 92.5% in the first
        quarter, reflecting more efficient contracting and utilization
        review processes.  Healthplan Southeast achieved a return to
        profitability during the second quarter for the first time since
        first quarter of 1995.
        


            Separately, CPS announced that it will implement a regional
        organizational structure over the next six months as part of the
        business unit's continuing efforts to enhance its competitive
        position while reducing administrative overhead and logistics costs.
        Three hubs in Durham, N.C., Ft. Lauderdale, Fla. and Dallas will
        handle all job functions, including contract management, operations,
        finance, new business development and medical affairs; three
        operating offices will include Washington, Atlanta, Ga. and Oakland,
        Calif.; and four remote sites will be located in Orlando, Fla.,
        Memphis, Tenn., Cleveland, Ohio and St. Louis, Mo.  The company may
        incur a charge in the third or fourth quarter of 1996 related to
        this restructuring.
        


            In addition, management continues to analyze corporate overhead
        costs, and has developed a preliminary plan to decrease expenses as
        asset sales progress.
        


            "The turnaround process in which we are currently and actively
        engaged is based on managerial and financial discipline and on the
        skillful execution of business fundamentals.  While our Company's
        recent performance, the legacy of decisions made by the Company's
        previous leadership, is unacceptable, we are making real progress.
        We are increasingly confident that, by continuing to implement our
        Comprehensive Business Plan, we will succeed in returning Coastal to
        a position of operational excellence, profitability and industry
        leadership," Mr. Piemont concluded.
        


                Coastal is Committed To Maximizing Shareholder Value
        


            Coastal's Comprehensive Business Plan is designed to maximize
        shareholder value.  Consistent with that objective, the company
        announced today that Coastal's management team and committee of
        independent directors have determined to actively pursue and
        evaluate all strategic alternatives to maximize shareholder value,
        including the possible sale or disposition of assets in addition to
        those currently slated for sale, an investment from strategic or
        financial partners or the sale of the entire company.  In
        conjunction with this effort, the company expects to hold
        preliminary discussions with parties interested in such possible
        transactions.
        


            There can be no assurance that such evaluation or discussions
        will lead to any proposed transaction, or that any proposed
        transaction, which would be subject to approval of the board of
        directors of Coastal, would be consummated.
        


            Coastal Physician Group, Inc. is one of the largest publicly-
        traded physician management companies in the U.S. and provides a
        broad range of health care and administrative services to
        physicians, hospitals, employers, managed care programs and other
        health care providers.
        


            Forward-looking Information or Statements: Except for statements
        of historical fact, statements made herein are forward-looking in
        nature and are inherently subject to uncertainties.  The actual
        results of the company may differ materially from those reflected in
        the forward-looking statements based on a number of important risk
        factors, including, but not limited to: receipt of sufficient
        proceeds from divested assets and the timing of any divestitures;
        the level and timing of improvements in the operational efforts; the
        possibility of poor accounts receivable collection and/or
        reimbursement experience; the possibility of increased medical
        expenses due to increased utilization; the possibility that the
        company may not be able to improve operations or execute its
        divestiture strategy as planned; and other important factors
        disclosed from time to time in the company's Form 10-K, Form 10-Q
        and other Securities and Exchange Commission filings.  

        
            Certain Additional Information: Coastal Physician Group Inc.
        will be soliciting proxies to elect directors at its 1996 Annual
        Meeting of Stockholders.  The following individuals may be deemed
        participants in such solicitations of proxies: Jacque J. Sokolov,
        M.D.; Robert V. Hatcher Jr.; Stephen D. Corman; John P. Mahoney,
        M.D.; Norman H. Chenven, M.D.; Joseph G. Piemont; Robert B.
        Borchert; Dennis I. Simon; and Bettina M. Whyte.  As of May 31,1996,
        Dr. Sokolov is the beneficial owner of 263,423 shares of the
        company's common stock; Mr. Hatcher is the beneficial owner of
        16,808 shares of the Company's common stock; Mr. Corman is the
        beneficial owner of 10,138 shares of the company's common stock; Dr.
        Mahoney is the beneficial owner of 4,090 shares of the company's
        common stock; Mr. Piemont is the beneficial of 11,110 shares of the
        company's common stock; and Mr. Borchert is the beneficial owner of
        less than 100 shares of the company's common stock.  Mr. Simon and
        Ms. Whyte are employees of Price Waterhouse LLP and have been
        appointed by agreement of Price Waterhouse and Coastal to be Plan
        Managers of the Company's revitalization plan.  
      

  
            In connection with such agreement, the Company has agreed to pay
        Price Waterhouse $70,000 per month for the services of the Plan
        Managers, and $46,400 per month for any additional Price Waterhouse
        personnel that may provide services under the agreement.  The
        Company also granted Price Waterhouse an option to purchase 50,000
        shares of Coastal common stock at a price of $7 7/8, which has not
        yet vested, and a separate option to purchase up to 50,000 shares of
        Company common stock, which will vest at a rate of 10,000 shares
        each month for five months commencing May 15, 1996, at a strike
        price equal to the average closing price of the common stock on the
        New York Stock Exchange for the first ten trading days of each month
        prior to the vesting date.
        


            Steven M. Scott, Bertram E. Walls, M.D., and John A. Hemingway
        are also directors of Coastal, but are not expected to solicit
        proxies on behalf of the Company.



        
                                    Unaudited Consolidated Statements of Operations
                  (In thousands, except per share data)
        
                                                Three Months Ended
                                                     June 30,
                                                 1996       1995
        
        Operating revenue, net                     $146,038   $211,342
        Costs and expenses:                                 
         Physician and other provider services      114,127    161,250
         Medical support services                    23,094     35,761
         Selling, general and administrative         31,215     26,737
        Total costs and expenses                168,436    223,748
        
        Operating income (loss)                     (22,398)   (12,406)
                                            
        Other income (expense):                    
         Interest expense                            (2,124)    (1,886)
         Interest income                                 77        274
         Acquisition and related expenses                --       (919)
         Other, net                                    (415)    (1,383)
        Total other expense                      (2,462)    (3,914)
        
        Income (loss) before income taxes           (24,860)   (16,320)
        Provision for income taxes                      ---     (5,829)
        Net income (loss)                          ($24,860)  ($10,491)
        Net income (loss) per share                  ($1.04)   $ (0.44)
        Weighted average number of shares
          outstanding                                23,839     23,657
        
                                                 Six Months Ended
                                                     June 30,
                                                 1996       1995
        
        Operating revenue, net                     $298,772   $419,201
        Costs and expenses:                                 
         Physician and other provider services      227,692    305,414
         Medical support services                    47,271     66,740
         Selling, general and administrative         56,116     48,073
        Total costs and expenses                331,079    420,227
        
        Operating income (loss)                     (32,307)    (1,026)
                                            
        Other income (expense):                    
         Interest expense                            (4,227)    (3,051)
         Interest income                                202        467
         Acquisition and related expenses                --       (919)
         Other, net                                    (258)    (1,362)
        Total other expense                      (4,283)    (4,865)
        
        Income (loss) before income taxes           (36,590)    (5,891)
        Provision for income taxes                      ---     (1,767)
        Net income (loss)                          ($36,590)   ($4,124)
        Net income (loss) per share                  ($1.54)   $ (0.17)
        Weighted average number of shares
          outstanding                                23,815     23,598
        

        CONTACT: Coastal Physician Group, Inc.
                 Robert P. Borchert, 919/383-0355