<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarter period ended September 30, 1996 or
[_] Transition Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from _________ to ________
Commission File Number: 0-27162
NATIONAL SURGERY CENTERS, INC.
Delaware 36-3549627
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
35 East Wacker Drive, Suite 2800, Chicago, Illinois 60601
(Address of principal executive offices) (Zip Code)
(312) 553-4200
Registrants telephone number, including area code
- -------------------------------------------------------------------------------
Former name, former address and former fiscal year, if changed since last report
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. [X] Yes [_] No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common stock, par value $.01; 11,179,660 shares outstanding at November 11,
1996 Non-Voting common stock, par value $.01; 654,313 Shares outstanding at
November 11, 1996
<PAGE>
NATIONAL SURGERY CENTERS, INC.
FORM 10-Q
INDEX
<TABLE>
<CAPTION>
PART I FINANCIAL INFORMATION PAGE
--------------------- ----
<S> <C> <C>
Item 1. Financial Statements
Consolidated Balance Sheets as of September 30, 1996 and
December 31, 1995............................................. 3
Consolidated Statements of Income for the Three
and Nine Month Periods Ended September 30, 1996 and 1995...... 4
Consolidated Statements of Cash Flows for the
Nine Month Periods Ended September 30, 1996 and 1995.......... 5
Notes to Consolidated Financial Statements.................... 6
Item 2. Management's Discussion and Analysis of the Consolidated
Financial Condition and Results of Operations................. 7
PART II OTHER INFORMATION
-----------------
Item 1. Legal Proceedings............................................. None
Item 2. Changes in Securities......................................... None
Item 3. Defaults Upon Senior Securities............................... None
Item 4. Submission of Matters to a Vote of Security Holders........... None
Item 5. Exhibits and Reports on Form 8-K.............................. 11
SIGNATURES.............................................................. 12
</TABLE>
Page 2
<PAGE>
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARES)
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
------------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 9,167 $ 14,653
Short-term investments 250 8,190
Accounts receivable (less allowance for
uncollectible accounts of $1,570 and $1,167) 12,265 8,764
Inventories 2,441 2,154
Prepaid expenses 1,173 581
Other current assets 541 259
-------- --------
25,837 34,601
-------- --------
Property and equipment 43,176 32,310
Less accumulated depreciation and amortization (9,838) (6,758)
-------- --------
33,338 25,552
-------- --------
Other assets:
Excess of purchase price over net assets acquired
(less accumulated amortization of $1,821 and $1,295) 27,857 16,446
Deferred income taxes 4,433 4,425
Deferred development costs (less accumulated
amortization of $1,070 and $591) 408 180
Other long-term assets 3,290 1,083
-------- --------
35,988 22,134
-------- --------
$95,163 $ 82,287
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current installments of long-term debt $10,849 $ 7,069
Accounts payable and accrued expenses 7,383 5,387
-------- --------
18,232 12,456
-------- --------
Long-term debt, less current installments:
Long-term debt 13,788 11,028
Convertible notes 1,446 5,977
-------- --------
15,234 17,005
-------- --------
Other long-term liabilities 504 449
Minority interests 6,269 4,185
Shareholders equity:
Preferred stock, $.01 par value; authorized
10,000,000 shares; no shares issued and outstanding --- ---
Non-voting common stock, $.01 par value; authorized
10,000,000 shares; issued and outstanding 981,470 shares
in 1996 and 654,313 shares in 1995 10 6
Common stock, $.01 par value; authorized 20,000,000
shares; issued and outstanding 8,073,618 shares in 1996
and 4,971,118 shares in 1995 81 50
Additional paid-in-capital 89,514 87,814
Accumulated deficit (34,681) (39,678)
-------- --------
54,924 48,192
-------- --------
$ 95,163 $ 82,287
======== ========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
Page 3
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------- ------------------
1996 1995 1996 1995
--------- --------- --------- --------
<S> <C> <C> <C> <C>
Net revenue $20,101 $13,391 $56,012 $38,488
Costs and expenses:
Operating expenses 13,305 9,518 37,070 26,784
General and administrative expenses 942 557 2,565 1,693
Depreciation and amortization expense 1,624 916 4,304 2,596
------- ------- ------- -------
Total costs and expenses 15,871 10,991 43,939 31,073
------- ------- ------- -------
Operating income 4,230 2,400 12,073 7,415
Other (income) and expenses:
Interest expense 714 1,090 2,011 3,283
Interest income (84) (49) (303) (146)
Minority interests 880 360 2,397 1,010
Other, net (93) 94 (246) 238
------- ------- ------- -------
Total other expenses 1,417 1,495 3,859 4,385
------- ------- ------- -------
Income before income taxes 2,813 905 8,214 3,030
Provision for income taxes 1,109 370 3,217 1,213
------- ------- ------- -------
Net income $ 1,704 $ 535 $ 4,997 $ 1,817
======= ======= ======= =======
Income per common share:
Primary $ 0.18 $ 0.11 $ 0.54 $ 0.37
Fully diluted $ 0.18 $ 0.11 $ 0.53 $ 0.37
Weighted average number of common and
common equivalent shares outstanding:
Primary 9,417 4,963 9,236 4,941
Fully diluted 9,788 4,963 9,755 4,941
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
Page 4
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
Nine Months Ended
September 30,
-------------------
1996 1995
-------- -------
<S> <C> <C>
Operating activities:
Net income $ 4,997 $ 1,817
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization expense 4,304 2,596
Minority interests 2,397 1,010
Distribution to minority interests (1,961) (1,250)
Deferred income taxes (45) 826
Change in assets and liabilities, net of entities acquired:
Accounts receivable (785) (545)
Inventories (43) 103
Prepaid expenses (114) (108)
Other current assets 338 103
Other long-term assets (693) (408)
Accounts payable and accrued expenses (833) 1,731
Other long-term liabilities and other (214) 50
-------- -------
Net cash provided by operating activities 7,348 5,925
-------- -------
Investing activities:
Payments for entities acquired, net of cash acquired (13,850) (2,332)
Investment in limited partnership (1,500) -
Purchases of property and equipment (3,498) (2,439)
Proceeds from sale of short-term investments 7,940 -
Proceeds from sale of property and equipment 1,039 21
Proceeds from sale of partnership interests 386 263
-------- -------
Net cash used in investing activities (9,483) (4,487)
-------- -------
Financing activities:
Payments on long-term debt (3,706) (2,062)
Proceeds from issuance of common stock 255 365
Proceeds from issuance of warrants and options 100 2
-------- -------
Net cash used in financing activities (3,351) (1,695)
-------- -------
Net increase (decrease) in cash and cash equivalents (5,486) (257)
Cash and cash equivalents at beginning of period 14,653 4,478
-------- -------
Cash and cash equivalents at end of period $ 9,167 $ 4,221
======== =======
NON-CASH TRANSACTIONS:
Long-term debt issued in acquisitions and contingent payments $ 240 $ 300
Conversion of convertible subordinated debt 1,380 -
Liabilities assumed in acquisitions 11,033 2,610
Capital lease obligations 204 574
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid $ 1,994 $ 2,350
Income taxes paid 3,212 190
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
Page 5
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY ACCOUNTING POLICIES
The Company - National Surgery Centers, Inc. and subsidiaries
(collectively the "Company") acquires, develops and manages ambulatory surgery
centers. Many of the Company's surgery centers are operated in partnership with
physicians and other health care providers.
The accompanying unaudited interim financial statements of the Company
have been prepared in accordance with generally accepted accounting principles
for interim financial information. In the opinion of management, all
adjustments (consisting only of normal recurring adjustments) have been made
which are necessary for a fair presentation of the financial position, results
of operations, and cash flows for the interim periods presented. The interim
statements presented herein do not include all disclosures normally provided in
annual financial statements.
Principles of Consolidation - The consolidated financial statements
include all accounts of the Company and its wholly-owned subsidiaries and
controlled partnerships. All significant intercompany balances and transactions
have been eliminated in consolidation.
Common Share Data - Primary income per common and common equivalent
share and income per common and common equivalent share assuming full dilution
are computed using the weighted average number of shares outstanding adjusted
for the incremental shares attributable to outstanding options and warrants to
purchase common stock. Certain convertible debt is dilutive and, therefore, is
included in the fully diluted weighted average number of shares outstanding for
the three and nine month periods ending September 30, 1996.
Stock Exchange - Effective May 31, 1996, the Company effected a 3-for-
2 stock split in the form of a 50% stock dividend. Accordingly, all references
in these unaudited interim financial statements to shares, average number of
shares outstanding and per share amounts have been restated to reflect this
stock split.
NOTE 2 - ACQUISITIONS
Purchases - During January, February, April and May, 1996, the Company
acquired three multi-specialty surgery centers and two companies which operated
specialty endoscopy centers. The aggregate purchase price was $13.6 million in
cash and of this purchase price, $ 11.9 million was recorded as goodwill. Also,
during each of August and October, 1995, the Company acquired a multi-specialty
surgery center. The following unaudited results of operations give effect to
the operations of the entities acquired in the first and second quarters of 1996
and during 1995 as if these respective transactions had occurred as of the first
day of 1995. The pro forma results of operations do not purport to represent
what the Company's results would have been had such transactions in fact
occurred at the beginning of the periods presented or to project the Company's
results of operations in any future period.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------- -------------------
1996 1995 1996 1995
------- ------- ------- -------
<S> <C> <C> <C> <C>
(in thousands, except per share amounts)
Net revenue $20,101 $18,035 $60,236 $53,139
Net income 1,704 569 4,872 2,297
Income per common share:
Primary $ 0.18 $ 0.11 $ 0.53 $ 0.46
Fully diluted 0.18 0.11 0.52 0.46
</TABLE>
The above pro forma operating results include adjustments to conform
accounting policies and excludes general and administrative expenses of one of
the specialty endoscopy companies.
Page 6
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
OVERVIEW
The Company's growth has resulted primarily from the acquisition and
development of ambulatory surgery centers. Since 1991, the Company has
completed the acquisition of 28 ambulatory surgery centers, including two
centers in which the Company has minority ownership positions; developed two
centers in which it has majority equity ownership; and developed centers for
other health care providers, including one hospital.
In January, April and May, 1996, the Company acquired three multi-
specialty surgery centers; in February 1996, the Company acquired a convertible
subordinated note which was converted in March 1996 into 90% of the common stock
of Endoscopy Center Affiliates, Inc., which operates and develops specialty
endoscopy centers; and in May 1996, the Company acquired a majority interest in
three specialty endoscopy centers. Additionally, in September 1996, the Company
acquired a ten percent interest in a multi-specialty surgery center and divested
its interest in a multi-specialty center in Dallas, Texas. In each of August and
October 1995, the Company acquired a multi-specialty surgery center, each of
which is operating as a limited partnership. All of these acquisitions have
been accounted for under the purchase method of accounting.
During July and September 1996, the Company redeemed $1.4 million of
its convertible subordinated notes into 97,293 shares of common stock.
Because of the financial impact of the Company's recent acquisitions
and developments, it is difficult to make meaningful comparisons between the
Company's financial statements to the comparable period in 1995. In addition,
due to the limited number of operated surgery centers, each additional center
acquired or developed can affect the overall operating margin of the Company.
Upon the acquisition of a surgery center, the Company has typically implemented
certain steps to improve operating margins. The impact of such actions and of
other activities to improve operating margins may not occur immediately.
Consequently, the financial performance of an acquired surgery center may
adversely affect overall operating margins in the near-term. As the Company
makes additional surgery center acquisitions, the Company expects that this
effect will be mitigated by the expanded financial base of the existing surgery
centers.
The Company's principal source of revenue is a facility fee charged
for surgical procedures performed in its surgery centers. This fee varies
depending on the procedure performed, but usually includes all charges for
operating room usage, special equipment usage, supplies, recovery room usage,
nursing staff and medications. Facility fees do not include the charges of the
patients' surgeons, anesthesiologists or attending physicians, which are billed
directly by such physicians. For those surgery centers providing extended
recovery care, an additional fee is typically charged for an overnight stay.
This fee generally includes a flat fee for post-operative care and may include
itemized amounts for medications and other supplies.
Page 7
<PAGE>
RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
1996 1995 1996 1995
------ ------ ------ ------
(percentage of net revenue)
<S> <C> <C> <C> <C>
Net revenue 100.0% 100.0% 100.0% 100.0%
Costs and expenses:
Operating expenses 66.2 71.1 66.2 69.6
General and administrative expenses 4.7 4.2 4.6 4.4
Depreciation and amortization expense 8.1 6.8 7.6 6.7
----- ----- ----- -----
Total costs and expenses 79.0 82.1 78.4 80.7
----- ----- ----- -----
Operating income 21.0 17.9 21.6 19.3
----- ----- ----- -----
Other (income) and expenses:
Interest expense 3.5 8.1 3.6 8.6
Interest income (0.4) (0.4) (0.5) (0.4)
Minority interests 4.4 2.7 4.3 2.6
Other, net (0.5) 0.7 (0.4) 0.6
----- ----- ----- -----
Total other expenses 7.0 11.1 7.0 11.4
----- ----- ----- -----
Income before income taxes 14.0 6.8 14.6 7.9
Provision for income taxes 5.5 2.8 5.7 3.2
----- ----- ----- -----
Net income 8.5 4.0 8.9 4.7
===== ===== ===== =====
</TABLE>
THREE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
Net Revenue. Net revenue is net of provisions for contractual
adjustments and doubtful accounts. Net revenue increased 50.1% to $20.1 million
in 1996 from $13.4 million in 1995. Overall net revenue per case declined 10.6%
to $880 in 1996 from $984 in 1995, primarily due to the inclusion of eleven
specialty endoscopy centers acquired during 1996. Separately, net revenue per
case was $1,018 for the multi-specialty centers and $482 for the specialty
endoscopy centers. Same center net revenue increased $1.7 million or 13.4 % due
to a 11.7% increase in cases combined with a 1.5% increase in net revenue per
case to $997 from $982.
Operating Expenses. Operating expenses include salaries and benefits,
drugs and medical supplies, utilities, marketing, maintenance costs and rent
expense of the centers. Operating expenses increased 39.8% to $13.3 million in
1996 from $9.5 million in 1995. Of this increase, $3.2 million resulted from
centers acquired in 1996 and 1995. As a percentage of net revenue, operating
expenses decreased to 66.2% in 1996 from 71.1% in 1995.
General and Administrative Expenses. General and administrative
expenses include only corporate-level expenses and do not include any center-
level administrative expenses. General and administrative expenses increased
69.1% to $942,000 in 1996 from $557,000 in 1995. As a percentage of net revenue,
general and administrative expenses increased to 4.7% in 1996 from 4.2% in 1995.
Depreciation and Amortization Expense. Depreciation and amortization
expenses increased 77.3% to $1.6 million in 1996 from $916,000 in 1995. Of this
increase, $589,000 resulted from centers acquired in 1996 and 1995. As a
percentage of net revenue, depreciation and amortization expense increased to
8.1% in 1996 from 6.8% in 1995.
Interest Expense. Interest expense decreased 34.5% to $714,000 in 1996
from $1.1 million in 1995. The decrease in interest expense was primarily the
result of the repayment of the $20.0 million subordinated debt in November 1995
with proceeds from the Company's public offering offset by additional interest
expense related to debt assumed from acquisitions in 1996 and 1995. As a
percentage of net revenue, interest expense decreased to 3.5% in 1996 from 8.1%
in 1995.
Minority Interests. Minority interests include the limited partners'
ownership share in the earnings (losses) of the operating center partnerships.
Minority interests increased 144.4% to $880,000 in 1996 from $360,000 in 1995.
Of this increase, $356,000 was attributable to centers acquired in 1996 and 1995
with the remaining increase resulting from improved center operating
performance. As a percentage of net revenue, minority interests increased to
4.4% in 1996 from 2.7% in 1995.
Page 8
<PAGE>
Provision for Income Taxes. Provision for income taxes increased to $1.1
million in 1996 from $370,000 in 1995. The effective tax rate decreased to 39.4%
in 1996 from 40.9% in 1995 due primarily to the effects of tax-exempt interest
earned during 1996 from short-term investments.
Net Income. Net income increased to $1.7 million in 1996 from $535,000 in
1995. As a percentage of net revenue, net income increased to 8.5% in 1996 from
4.0% in 1995.
NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
Net Revenue. Net revenue increased 45.5% to $56.0 million in 1996 from
$38.5 million in 1995. Overall net revenue per case declined 8.2% to $912 in
1996 from $993 in 1995, primarily due to the inclusion of the eleven specialty
endoscopy centers acquired in 1996. Seperately, net revenue per case was $1,015
for the multi-specialty centers and $476 for the specialty endoscopy centers.
Same center net revenue increased $5.8 million or 16.0% due to a 13.7% increase
in cases combined with a 2.0% increase in net revenue per case to $1,009 from
$989.
Operating Expenses. Operating expenses increased 38.4% to $37.1 million in
1996 from $26.8 million in 1995. Of this increase, $7.4 million resulted from
centers acquired in 1996 and 1995. As a percentage of net revenue, operating
expenses decreased to 66.2% in 1996 from 69.6% in 1995.
General and Administrative Expenses. General and administrative expenses
increased 51.5% to $2.6 million in 1996 from $1.7 million in 1995. As a
percentage of net revenue, general and administrative expenses increased to 4.6%
in 1996 from 4.4% in 1995.
Depreciation and Amortization Expense. Depreciation and amortization
expense increased 65.8% to $4.3 million in 1996 from $2.6 million in 1995. Of
this increase, $1.3 million resulted from centers acquired in 1996 and 1995. As
a percentage of net revenue, depreciation and amortization expense increased to
7.6% in 1996 from 6.7% in 1995.
Interest Expense. Interest expense decreased 38.7% to $2.0 million in 1996
from $3.3 million in 1995. The decrease in interest expense was primarily the
result of the repayment of the $20.0 million subordinated debt in November 1995
with proceeds from the Company's public offering offset by additional interest
expense related to debt assumed from acquisitions in 1996 and 1995. As a
percentage of net revenue, interest expense decreased to 3.6% in 1996 from 8.6%
in 1995.
Minority Interests. Minority interests increased 137.3% to $2.4 million in
1996 from $1.0 million in 1995. Of this increase, $661,000 is attributable to
centers acquired in 1996 and 1995 with the remaining increase resulting from
improved center operating performance. As a percentage of net revenue, minority
interests increased to 4.3% in 1996 from 2.6% in 1995.
Provision for Income Taxes. Provision for income taxes increased to $3.2
million in 1996 from $1.2 million in 1995. The effective tax rate decreased to
39.2% in 1996 from 40.0% in 1995 due primarily to the effects of tax-exempt
interest earned during 1996 from short-term investments.
Net Income. Net income increased to $5.0 million in 1996 from $1.8 million
in 1995. A a percentage of net revenues, net income increased to 8.9% in 1996
from 4.7% in 1995.
SEASONALITY
The Company's business experiences some degree of seasonality because
patients have discretion in scheduling elective surgery. The first quarter tends
to be lower due to beginning of the year deductibles while the third quarter
reflects the effects of vacations taken both by patients and physicians.
Although the Company's growth and development of centers may obscure the effects
of seasonality in the Company's financial results, the Company's first and third
quarters generally reflect lower net revenue and operating income margins on a
same center basis when compared to the Company's second and fourth quarters.
Page 9
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1996, the Company had working capital of $7.6 million
including cash and cash equivalents and short-term investments of $9.4 million.
The Company's cash flow from operations increased to $7.3 million for the nine
months ended September 30, 1996 from $5.9 million in 1995. The Company's cash
flow from operations combined with proceeds from sale of short-term investments
of $7.9 million, proceeds from sales of assets of $1.0 million and existing cash
and cash equivalents were used primarily to finance acquisitions of $13.9
million, an investment in a partnership of $1.5 million, capital expenditures of
$3.5 million, and repayment of long-term debt of $3.7 million.
The Company expects that its principal use of funds in the near future will
be in connection with the acquisition and development of surgery centers,
working capital requirements, debt repayments and purchases of property and
equipment. The Company expects that cash and cash equivalents, short-term
investments, cash generated from operations and available credit borrowings will
be adequate to provide for the Company's cash requirements for at least the next
twelve months, unless the rate of acquisitions significantly increases. No
assurances can be given that cash and borrowings will be sufficient to provide
for the Company's cash requirements beyond the next twelve months.
The Company's credit agreement provides for revolving and term loans of up
to $20.0 million, to be used by the Company for acquisitions and development of
surgery centers and related businesses. As of September 30, 1996, no amount was
outstanding under the credit agreement. Loans under the credit agreement are
secured by substantially all the assets of the Company (including the capital
stock or partnership units of the Company's subsidiaries) and matures on June
30, 2000. Loans under the credit agreement are denominated at the Company's
option as either Eurodollar Tranches (loans bearing interest at a rate of 1.5%
above the London Interbank Offered Rate) or Base Rate Tranches (loans bearing
interest at 0.5% above the prime rate for U.S. commercial loans) subject to
adjustments in certain circumstances.
SUBSEQUENT EVENTS
During October and November 1996, the Company completed an offering of
2,415,511 common shares priced at $24.25 per share with net proceeds of
approximately $55.2 million. The Company anticipates to use net proceeds to
repay certain indebtedness totaling $10 million, which bears interest at rates
ranging from 7.5% to 13.4% annually. The remaining proceeds will be used for
general corporate purposes, which may include future acquisitions and the
development of surgery centers.
During September 1996, the Company issued redemption notices with respect
to $4.3 million principal amount of convertible subordinated notes. In October,
$4.2 million of the notes were converted into 359,272 shares of common stock and
$71,000 of such notes were redeemed.
Page 10
<PAGE>
Part II. Other Information
ITEM 5. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
The exhibits to this report are listed in the Exhibit Index set
forth elsewhere herein.
b. Reports on Form 8-K
The registrant filed Amendment No. 2 to a report on Form 8-K on
July 15, 1996, which form includes items 7(a) and (b) with related
financial statements as follows:
1) Consolidated Balance Sheets as of February 23, 1996 and
December 31, 1995 and 1994 and Consolidated Statements of
Operations, Stockholders' Deficit and Cash Flows for the
period ended February 23, 1996 and the years ended Decmeber
31, 1995, 1994 and 1993 for Endoscopy Center Affiliates, Inc.
and Subsidiaries.
2) Unaudited Pro Forma Consolidated Balance Sheet as of December
31, 1995 and Statement of Operations for the year end
December 31, 1995.
The registrant filed Amendment No. 1 to a report on Form 8-K on
July 19, 1996, which form includes items 7(a) and (b) with related
financial statements as follows:
1) Combined and Consolidated Balance Sheet as of December 31,
1995; Combined and Consolidated Statement of Income,
Shareholders' Equity and Cash Flows for the year ended
December 31, 1995; and notes to Combined and Consolidated
Financial Statements for Surgex-Atlanta, Inc.; Surgex-Miami,
Inc.; and Surgex-Sarasota, Inc. and their Subsidiaries.
2) Balance Sheet as of December 31, 1995; Statement of Income,
Partner's Equity and Cash Flows for the year ended December
31, 1995; and notes to Financial Statements for Westside
Surgery Center, Ltd.
3) Unaudited Pro Forma Consolidated Balance Sheet as of December
31, 1995 and Statement of Operations for the year end
December 31, 1995.
Page 11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NATIONAL SURGERY CENTERS, INC.
(REGISTRANT)
Date: November 13, 1996 /s/ E. Timothy Geary
----------------- ----------------------------------
E. Timothy Geary
President and Chief
Executive Officer
/s/ Bryan S. Fisher
----------------------------------
Bryan S. Fisher
Vice President and
Chief Financial Officer
Page 12
<PAGE>
EXHIBIT INDEX
Number and Description of Exhibit*
2 None
4 None
10 None
11 Computation of Income Per Common Share
12 None
15 None
18 None
19 None
22 None
23 None
24 None
27 Schedule of Summary Financial Information
99 None
- ------------------------------------------
* Exhibits not listed are inapplicable.
Page 13
<PAGE>
EXHIBIT 11
COMPUTATION OF INCOME PER COMMON SHARE
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
1996 1995 1996 1995
------ ------ ------ ------
<S> <C> <C> <C> <C>
PRIMARY INCOME PER SHARE
Average shares outstanding 8,926 4,963 8,621 4,941
Net effect of dilutive stock options and warrants - based
on the treasury stock method using average market price 491 -- 615 --
------ ------ ------ ------
Total 9,417 4,963 9,236 4,941
====== ====== ====== ======
Income:
Net income $1,704 $ 535 $4,997 $1,817
====== ====== ====== ======
Per common share amount:
Net income $ 0.18 $ 0.11 $ 0.54 $ 0.37
====== ====== ====== ======
FULLY DILUTED INCOME PER SHARE
Average shares outstanding 8,926 4,963 8,621 4,941
Net effect of dilutive stock options and warrants-based on
the treasury stock method using market closing price 520 -- 733 --
Assumed conversion of certain convertible debt 342 -- 401 --
------ ------ ------ ------
Total 9,788 4,963 9,755 4,941
====== ====== ====== ======
Income:
Net income $1,704 $ 535 $4,997 $1,817
Add convertible debt interest, net of income tax effect 49 -- 172 --
------ ------ ------ ------
Net income $1,753 $ 535 $5,169 $1,817
====== ====== ====== ======
Per common share amount:
Net income $ 0.18 $ 0.11 $ 0.53 $ 0.37
====== ====== ====== ======
</TABLE>
NOTE: All number of shares and per share amounts have been adjusted to reflect
the one-for-three stock exchange related to the Company's reincorporation
in Delaware effected on September 14, 1995 and the three-for-two stock
split in the form of a 50% stock dividend effected on May 31, 1996.
Page 14
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial information extracted from the
financial statements of National Surgery Centers for the nine months ended
September 30, 1996 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 9,167,000
<SECURITIES> 250,000
<RECEIVABLES> 13,835,000
<ALLOWANCES> 1,570,000
<INVENTORY> 2,441,000
<CURRENT-ASSETS> 25,837,000
<PP&E> 43,176,000
<DEPRECIATION> 9,838,0000
<TOTAL-ASSETS> 95,163,000
<CURRENT-LIABILITIES> 18,232,000
<BONDS> 15,234,000
<COMMON> 91,000
0
0
<OTHER-SE> 54,833,000
<TOTAL-LIABILITY-AND-EQUITY> 95,163,000
<SALES> 56,012,000
<TOTAL-REVENUES> 56,012,000
<CGS> 41,374,000
<TOTAL-COSTS> 41,374,000
<OTHER-EXPENSES> 4,716,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,708,000
<INCOME-PRETAX> 8,214,000
<INCOME-TAX> 3,217,000
<INCOME-CONTINUING> 4,997,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,997,000
<EPS-PRIMARY> .54
<EPS-DILUTED> .53
</TABLE>
