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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 quarterly period ended September 30, 1999.
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 0-27374
RAINTREE HEALTHCARE CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 86-0684011
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
15300 N. 90th St., Suite 100
Scottsdale, AZ 85260
(Address of principal executive offices)
(480) 423-1954
(Registrant's telephone number, including area code)
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. Yes [X] No [ ]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes [X] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
As of November 1, 1999, there were 7,593,697 shares of $0.001 par value
common stock outstanding.
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<PAGE>
RAINTREE HEALTHCARE CORPORATION
INDEX
PART I - FINANCIAL INFORMATION Page No.
--------
Item 1. Financial Statements:
Consolidated Balance Sheets as of September 30, 1999
(unaudited) and December 31, 1998........................... 3
Consolidated Statements of Operations for the three months
and eight months ended September 30, 1999, the one month
ended January 31, 1999, and the three months and nine
months ended September 30, 1998 (unaudited)................ 4
Consolidated Statements of Cash Flows for the eight months
ended September 30, 1999, the one month ended January 31,
1999 and the nine months ended September 30, 1998
(unaudited)................................................ 5
Notes to Consolidated Financial Statements.................... 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.................................. 14
PART II - OTHER INFORMATION
Item 1. Legal Proceedings............................................. 24
Item 3. Defaults Upon Senior Securities............................... 25
Item 6. Exhibits and Reports on Form 8-K.............................. 26
Signatures ........................................................... 26
NOTE: Item 3 of Part I is omitted because it is not applicable. Items
2, 4 and 5 of Part II are omitted because they are not applicable.
2
<PAGE>
RAINTREE HEALTHCARE CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
<TABLE>
<CAPTION>
Reorganized | Predecessor
Company | Company
September 30, | December 31,
1999 | 1998
------------- | ------------
(unaudited) |
<S> <C> <C>
Assets |
Current assets: |
Cash and cash equivalents ................................................ $ 6,703 | $ 16,863
Accounts receivable ...................................................... 11,948 | 22,621
Prepaid expenses and other current assets ................................ 3,168 | 8,670
--------- | ---------
Total current assets .................................................. 21,819 | 48,154
Property and equipment, net ................................................ 45,371 | 29,227
Reorganization value in excess of amounts allocable to identifiable assets.. 49,112 | --
Lease operating rights and other intangible assets, net .................... 1,017 | 58,960
Goodwill, net .............................................................. -- | 24,816
Deposits ................................................................... 6,665 | 9,383
--------- | ---------
$ 123,984 | $ 170,540
========= | =========
Liabilities and stockholders' equity (deficit) |
Current liabilities: |
Accounts payable ......................................................... $ 10,171 | $ 10,815
Accrued expenses ......................................................... 16,109 | 15,175
Current portion of notes payable and long-term debt ...................... 380 | 1,012
Long term debt in default classified as current .......................... 34,643 | --
--------- | ---------
Total current liabilities ............................................. 61,303 | 27,002
Liabilities subject to compromise .......................................... -- | 166,870
Notes payable and long-term debt ........................................... 4,513 | 7,132
Lease financing obligation ................................................. 38,200 | 38,200
Deferred taxes ............................................................. 9,000 | 5,456
Leasehold liability, net ................................................... -- | 4,058
Other liabilities .......................................................... 1,415 | 899
--------- | ---------
Total liabilities ..................................................... 114,431 | 249,617
Stockholders' equity (deficit): |
Common stock, $.001 par value; authorized 10,000,000 shares; |
7,593,697 shares issued and outstanding at September 30, 1999........... 8 | --
Common stock, $.001 par value; authorized 25,000,000 shares; |
6,422,096 shares issued and outstanding at December 31, 1998............ -- | 5
Additional paid-in capital ............................................... 20,575 | 36,211
Retained earnings (accumulated deficit) .................................. (10,603) | (115,293)
Unearned compensation .................................................... (427) | --
--------- | ---------
Net stockholders' equity (deficit) .................................... 9,553 | (79,077)
--------- | ---------
$ 123,984 | $ 170,540
========= | =========
</TABLE>
See accompanying Notes to Consolidated Financial Statements and Management's
Discussion and Analysis of Financial Condition and Results of Operations.
3
<PAGE>
RAINTREE HEALTHCARE CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Reorganized Company | Predecessor Company
--------------------------- | ------------------------------------------
Three Months Eight Months | One Month Three Months Nine Months
Ended Ended | Ended Ended Ended
September 30, September 30, | January 31, September 30, September 30,
1999 1999 | 1999 1998 1998
------------- ------------- | ----------- ------------- -------------
|
<S> <C> <C> <C> <C> <C>
Total revenues........................................ $31,459 $ 84,342 | $ 12,893 $44,921 $147,721
|
Expenses: |
Wages and related................................... 17,496 47,724 | 7,074 23,642 76,089
Other operating..................................... 10,584 28,284 | 6,088 17,779 54,955
Rent................................................ 3,061 8,203 | 1,112 3,606 11,272
Interest (excludes contractual interest not accrued |
on prepetition debt of $1,507 in January 1999 and |
$4,965 and $6,565 in the three and nine months |
ended September 30, 1998, respectively............ 2,158 5,966 | 445 826 10,742
Depreciation and amortization ...................... 1,767 4,768 | 622 2,299 6,869
------- -------- | -------- ------- --------
Total expenses................................. 35,066 94,945 | 15,341 48,152 159,927
------- -------- | -------- ------- --------
Loss from operations.................................. (3,607) (10,603) | (2,448) (3,231) (12,206)
Reorganization expenses .............................. -- -- | 54,597 907 1,775
------- -------- | -------- ------- --------
Loss before income taxes and extraordinary credit..... (3,607) (10,603) | (57,045) (4,138) (13,981)
Income tax benefit.................................... -- -- | -- -- --
------- -------- | -------- ------- --------
Loss before extraordinary credit...................... (3,607) (10,603) | (57,045) (4,138) (13,981)
Extraordinary credit - gain on debt discharge......... -- -- | 113,242 -- --
------- -------- | -------- ------- --------
Net income (loss)..................................... $(3,607) $(10,603) | $ 56,197 $(4,138) $(13,981)
======= ========= | ======== ======= ========
|
Net income (loss) per share: |
Loss before income taxes and extraordinary credit... $ (0.47) $ (1.40) | $ (8.88) $ (0.64) $ (2.18)
Extraordinary credit - gain on debt discharge....... -- -- | 17.63 -- --
------- -------- | -------- ------- --------
Net income (loss) per share......................... $ (0.47) $ (1.40) | $ 8.75 $ (0.64) $ (2.18)
======= ======== | ======== ======= ========
|
Weighted average common shares used in |
per share calculation............................... 7,594 7,594 | 6,422 6,422 6,422
</TABLE>
See accompanying Notes to Consolidated Financial Statements and Management's
Discussion and Analysis of Financial Condition and Results of Operations.
4
<PAGE>
RAINTREE HEALTHCARE CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Reorganized | Predecessor Predecessor
Company | Company Company
Eight Months | One Month Nine Months
Ended | Ended Ended
September 30, | January 31, September 30,
1999 | 1999 1998
------------- | ----------- -------------
<S> <C> <C> <C>
Net cash provided by (used in) operating activities (including changes |
in all operating assets and liabilities)................................... $ 871 | $ (2,937) $ 4,348
-------- | -------- -------
INVESTING ACTIVITIES: |
Purchase of equipment and leasehold improvements............................. (1,891) | (218) (2,124)
Sale of assets............................................................... 1,220 | -- --
(Increase) decrease in lease and insurance deposits.......................... 2,731 | (13) (1,547)
-------- | -------- -------
Net cash provided by (used in) investing activities.......................... 2,060 | (231) (3,671)
-------- | -------- -------
FINANCING ACTIVITIES: |
Net increase (decrease) in revolving lines of credit......................... 5,145 | 1,012 (533)
Debt payments................................................................ (887) | (10) (1,621)
Change in outstanding checks................................................. (2,049) | 2,611 63
Increase in deferred financing costs......................................... (61) | -- (56)
-------- | -------- -------
Net cash provided by (used in) financing activities.......................... 2,148 | 3,613 (2,147)
-------- | -------- --------
REORGANIZATION ACTIVITIES: |
Cash paid to settle bankruptcy claims........................................ -- | (15,684) --
-------- | -------- -------
Net increase (decrease) in cash.............................................. 5,079 | (15,239) (1,470)
Cash and cash equivalents at beginning of period............................. 1,624 | 16,863 5,295
-------- | -------- -------
Cash and cash equivalents at end of period................................... $ 6,703 | $ 1,624 $ 3,825
======== | ======== =======
|
Cash paid for: |
Interest.................................................................. $ 3,731 | $410 $2,764
Income taxes.............................................................. 72 | -- --
</TABLE>
See accompanying Notes to Consolidated Financial Statements and Management's
Discussion and Analysis of Financial Condition and Results of Operations.
5
<PAGE>
RAINTREE HEALTHCARE CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS
RainTree is a provider of long-term and specialty healthcare services.
At September 30, 1999, RainTree operated 41 facilities, including six facilities
managed on behalf of a third party. RainTree also provides, either directly or
through third-party contracts, pharmaceutical services, rehabilitation therapy
services, medical supplies and laboratory testing, both to its facilities and to
nonaffiliated entities.
2. BASIS OF PRESENTATION
RainTree Healthcare Corporation (formerly Unison HealthCare
Corporation) (the "Predecessor Company") filed a voluntary petition on May 28,
1998 to reorganize under Chapter 11 of the U.S. Bankruptcy Code (the "Bankruptcy
Code"). In January 1999, the Plan of Reorganization (the "Plan") was confirmed
and became effective on January 31, 1999 (the "Effective Date"). On January 31,
1999, RainTree Healthcare Corporation (the "Reorganized Company", "RainTree", or
the "Company") adopted fresh start reporting in accordance with Statement of
Position 90-7, "Financial Reporting by Entities in Reorganization under the
Bankruptcy Code" ("SOP 90-7") of the American Institute of Certified Public
Accountants. Accordingly, RainTree's post-reorganization balance sheet and
statement of operations have not been prepared on a basis consistent with the
pre-reorganization financial statements and are not comparable to financial
statements prior to reorganization. For accounting purposes, the inception date
of the Reorganized Company is deemed to be January 31, 1999. A vertical black
line is shown in the financial statements to separate the Reorganized Company
from the Predecessor Company since they have not been prepared on a consistent
basis of accounting.
The consolidated financial statements included herein (except for the
balance sheet as of December 31, 1998) are unaudited; however, in the opinion of
management, they include all adjustments which are necessary to state fairly the
financial position, cash flows and results of operations of RainTree and the
Predecessor Company as of and for the periods indicated. RainTree presumes that
users of the interim financial information herein have read or have access to
the Company's audited financial statements and Management's Discussion and
Analysis of Financial Condition and Results of Operations for the preceding
fiscal year and that the adequacy of additional disclosures needed for a fair
presentation, except in regard to material contingencies, may be determined in
that context. Accordingly, footnote and other disclosures which would
substantially duplicate the disclosures contained in RainTree's most recent
annual report to stockholders have been omitted.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. Operating
results for the three months and eight months ended September 30, 1999 are not
necessarily indicative of the results which may be expected for the 11 months
ended December 31, 1999.
Certain reclassifications have been made to the Predecessor Company
financial statements to conform to the current year presentation.
The provision for doubtful accounts receivable is included in other
operating expenses. Provisions totaled $446,000 and $2.1 million for the three
months and eight months ended September 30, 1999, and $1.4 million, $2.0 million
and $3.2 million for the one month ended January 31, 1999, and the three months
and nine months ended September 30, 1998, respectively. The allowance for
6
<PAGE>
doubtful accounts totaled $3.7 million at September 30, 1999 and $9.7 million at
December 31, 1998.
3. PLAN OF REORGANIZATION
The implementation of the Plan allowed RainTree to restructure its
balance sheet, significantly reduce its debt burden and dispose of unprofitable
facilities. Prior to the confirmation of the Plan, the Company reached agreement
with respect to its restructuring with its major creditors including, among
others:
o Omega Healthcare Investors, Inc. ("Omega"), from whom RainTree
leases 18 long-term care facilities;
o The holders of $100.0 million of 12 1/4% Senior Notes due 2006
(the "12 1/4% Senior Notes") and $20.0 million of 13% Senior
Notes due 1999 (the "13% Senior Notes");
o Health Care Financial Partners ("Health Partners"), who provided
an $11.0 million accounts receivable-backed line of credit
facility (the "HCFP DIP Facility") for working capital during the
Chapter 11 proceedings;
o Bruce H. Whitehead, a major stockholder and creditor of the
Company and, until May 29, 1998, the Chairman of RainTree's board
of directors; and
o David A. Kremser, a major stockholder and creditor of the Company
and, until May 29, 1998, a director of RainTree.
Prior to the Effective Date, the Company leased six facilities from
BritWill Investments Texas, Ltd. ("BritWill Texas"), an affiliate of Mr.
Whitehead, which were subject to a mortgage in favor of Omega.
The major provisions of the Plan are as follows.
o All of RainTree's common stock was cancelled on the Effective
Date. As described below, RainTree will issue up to 8 million new
common shares (the "New Common Stock"). RainTree will also issue
up to approximately $26 million of new debt securities (the
"Senior Secured Notes") in satisfaction of bankruptcy claims held
by unsecured creditors, including the holders of the 13% Senior
Notes and the 12 1/4% Senior Notes. The Senior Secured Notes bear
interest at 11.0%, will mature four years from the Effective
Date, and are secured by the stock and personal property of
certain RainTree subsidiaries.
o On December 31, 1998, Omega purchased seven facilities owned and
operated by RainTree for a purchase price of $38.2 million. The
facilities were then leased back to RainTree (the "Sale
Leaseback"). A portion of the proceeds were used to (i) repay the
mortgage note related to six of these facilities amounting to
approximately $19.3 million, including a prepayment penalty (the
"Mortgage Note") and (ii) exercise the Company's option to
purchase The Arbors Health Care Center for approximately $3.2
million. The Arbors facility was included in the Sale Leaseback.
The remaining proceeds from the sale were held in escrow until
the Effective Date, when they were used to settle bankruptcy
claims as provided for in the Plan and described below. Omega
received closing costs, financing fees and reimbursement of
expenses in the amount of $1.0 million. These seven facilities
and eleven other facilities leased from Omega and BritWill Texas
were combined into a single master lease (the "Omega Master
Lease"). RainTree realized no gain or loss on the Sale Leaseback,
which was accounted for as a financing transaction.
7
<PAGE>
o Six leased facilities were returned to Omega and three BritWill
Texas facilities that RainTree disposed of in March 1997 pursuant
to a sublease agreement are excluded from the Master Lease. In
return, Omega received $2.0 million in cash, a seven-year, $3.0
million promissory note bearing interest at 7.0% (the "Indiana
Returned Facilities Note") and a guarantee by RainTree that
supersedes and replaces all previous guarantees of BritWill Texas
obligations. RainTree also paid to Omega, in cash, prepetition
rent payments and other obligations in the amount of
approximately $2.0 million. See Note 10.
o In settlement of approximately $15.8 million of allowed claims,
Mr. Whitehead and affiliates (the "Whitehead Affiliates")
received $541,000 in cash, unsecured promissory notes totaling
$1.5 million (the "Whitehead Notes"), Senior Secured Notes
amounting to $292,000 and approximately 729,000 shares of New
Common Stock. The unsecured promissory notes bear interest at
9.0%, payable quarterly, and the principal amount will be due and
payable at the end of four years. See Note 10.
o In settlement of approximately $5.4 million of allowed claims,
Mr. Kremser and affiliates (the "Kremser Affiliates") received
$541,000 in cash and a promissory note amounting to $1.4 million.
The promissory note bears interest at 9.0%, payable quarterly,
and the principal amount will be due and payable at the end of
five years. The Kremser Affiliates' note is secured by personal
property of certain RainTree subsidiaries.
o Convenience Claims, defined in the Plan as payables due to
general unsecured creditors amounting to $1,000 or less (or
$2,000 or less whose holders elect to reduce their claims to
$1,000), were paid in cash. RainTree paid approximately $520,000
to settle Convenience Claims. Essential Vendor Claims, defined in
the Plan as payables due to vendors and suppliers essential to
RainTree's ongoing business, were paid in cash in the aggregate
amount of approximately $2.5 million.
o Trade Unsecured Claims are defined in the Plan as payables to
other nonessential trade vendors. RainTree is currently in the
process of settling Trade Unsecured Claims, subject to amounts in
dispute. Each holder of a Trade Unsecured Claim will receive, in
cash, the lesser of 35% of the allowed amount of the claim or a
pro rata portion of $1.4 million, plus shares of New Common
Stock. The total amount of Trade Unsecured Claims was
approximately $3.4 million.
o All other general unsecured creditors will share pro rata in
approximately 91% of the New Common Stock and the Senior Secured
Notes. A subordination agreement related to the 13% Senior Notes
resulted in a reallocation among the holders of the 13% Senior
Notes and those holders of the 12 1/4% Senior Notes who had
consented to a subordination agreement (the "Consenting
Noteholders"). As a result of this reallocation, the holders of
the 13% Senior Notes received Senior Secured Notes equal to 100%
of their allowed claims ($22.1 million) and the Consenting
Noteholders received only New Common Stock totaling approximately
6,343,000 shares. The holders of the 12 1/4% Senior Notes who did
not consent to the subordination agreement received Senior
Secured Notes totaling $1.8 million and approximately 522,000
shares of New Common Stock. The final settlement of the remaining
general unsecured claims is subject to the outcome of claims in
litigation, including claims of Healthprime, Inc. et al. See Part
II, Item 1, "Legal Proceedings." The aggregate amount of general
unsecured claims was approximately $137.5 million.
8
<PAGE>
o Secured claims included the Mortgage Note, the HCFP DIP Facility,
claims of Omega, property tax liabilities and other secured
loans. Secured claims were either: (i) paid in cash; (ii) the
liability was continued in accordance with its original terms
after defaults, if any, were cured; or (iii) the collateral
securing such liability was returned to the creditor in full
satisfaction of the claim. The aggregate amount of secured claims
was approximately $34.7 million.
o The Company's stockholders and members of a shareholders class
action lawsuit settlement class will share pro rata in the
issuance of warrants to purchase approximately 400,000 shares of
New Common Stock.
o Shortly after the Effective Date, RainTree obtained $7.0 million
of a new $12.0 million line of credit from Health Partners that
replaced the HCFP DIP Facility. The remaining portion of the line
of credit was obtained on May 14, 1999. See Item 2, "Management's
Discussion and Analysis of Financial Condition and Results of
Operations-Liquidity and Capital Resources."
o On April 28, 1999, RainTree entered into employment agreements
with four of its executive officers ("Senior Management"). Under
the terms of the employment agreements, Senior Management was
awarded an aggregate of 360,000 restricted stock units. Each
restricted stock unit entitles the holder to receive, subject to
vesting, one share of New Common Stock upon the earlier of
February 1, 2002 or termination of employment. See Note 7.
4. FRESH START REPORTING
In accordance with SOP 90-7, RainTree adopted fresh start reporting as
of the Effective Date. RainTree, with the assistance of its financial advisors,
determined its reorganization value, which represents the fair market value of
the Company before considering liabilities. Reorganization value is intended to
represent the amount a willing buyer would pay for the assets of RainTree
immediately after its emergence from Chapter 11. The reorganization value was
based on, among other things, discounted cash flows for the reorganized Company
over a 14-year period. The projected cash flows included assumptions as to
anticipated revenues, operating expenses and capital expenditures. A discount
rate of 16% was used, which reflects the uncertainty of the cash flows, the
general inherent risk of the long-term care industry, and general business
conditions.
Under fresh start reporting, the reorganization value of the Company
has been allocated to RainTree's assets on a basis substantially consistent with
purchase accounting. The excess of the reorganization value over the value of
identifiable assets is reported as "reorganization value in excess of amounts
allocable to identifiable assets." All identifiable assets were recorded at fair
value, which approximated carrying value. The new Senior Secured Notes and all
other liabilities were recorded at fair value, which approximated carrying
value.
The adjustments made to give effect to the discharge of prepetition
liabilities and fresh start reporting are as follows. The reorganized balance
sheet gives pro forma effect to New Common Stock and Senior Secured Notes yet to
be issued under the Plan (in thousands).
9
<PAGE>
<TABLE>
<CAPTION>
January 31, 1999
Preconfirmation Reorganization Fresh Start Reorganized
Balance Sheet Adjustments Adjustments Balance Sheet
---------------- -------------- ----------- -------------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents....................... $ 17,308 $ (15,684) (a) $ -- $ 1,624
Accounts receivable, net........................ 21,459 -- -- 21,459
Prepaid expenses and other current assets....... 8,815 -- (5,456) (g)
(103) (h) 3,256
--------- --------- -------- --------
Total current assets......................... 47,582 (15,684) (5,559) 26,339
Property and equipment, net........................ 29,081 (3,117) (b) 19,751 (h) 45,715
Lease operating rights and other intangibles, net.. 58,608 (4,728) (c) (52,858) (h) 1,022
Goodwill, net...................................... 24,727 -- (24,727) (h) --
Deposits........................................... 9,675 (279) (d) -- 9,396
Reorganization value in excess of amounts allocable
to identifiable assets.......................... -- -- 42,568 (h)
9,000 (g) 51,568
-------- --------- -------- --------
$169,673 $ (23,808) $(11,825) $134,040
======== ========= ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable................................ $ 10,958 $ -- $ -- $ 10,958
Accrued expenses................................ 16,321 5,955 (e) -- 22,276
Current portion of long-term debt............... 1,012 (440) (e) -- 572
--------- --------- -------- --------
Total current liabilities.................... 28,291 5,515 -- 33,806
Liabilities subject to compromise.................. 166,870 (166,870) (e) -- --
Notes payable and long-term debt................... 8,144 24,305 (a) -- 32,449
Lease financing obligation......................... 38,200 -- -- 38,200
Deferred taxes .................................... 5,456 -- 3,544 (g) 9,000
Leasehold liability, net........................... 4,058 -- (4,058) (h) --
Other liabilities.................................. 897 -- -- 897
--------- --------- -------- --------
Total liabilities............................... 251,916 (137,050) (514) 114,352
Stockholders' equity (deficit):
Common stock, Predecessor Company.............. 5 -- (5) (i) --
Common stock, Reorganized Company.............. -- 8 (a) -- 8
Additional paid-in capital..................... 36,211 19,680 (a) (36,211) (i) 19,680
Retained earnings (accumulated deficit)........ (118,459) 93,554 (f) 24,905 (i) --
--------- --------- -------- --------
Net stockholders' equity (deficit).......... (82,243) 113,242 (11,311) 19,688
--------- --------- -------- --------
$169,673 $ (23,808) $(11,825) $134,040
======== ========= ======== ========
</TABLE>
(a) To record the settlement of bankruptcy claims through payment of cash,
issuance of Senior Secured Notes and issuance of New Common Stock.
(b) To reflect property and equipment returned to creditors in satisfaction of
bankruptcy claims.
(c) To record the write-off of deferred debt issue costs.
(d) To record adjustments to security deposits related to the Omega Master
Lease.
(e) To record the discharge or reclassification of prepetition obligations.
(f) To record the gain on discharge of indebtedness ($113,242) net of New
Common Stock issued ($19,688).
(g) To record adjustment to deferred tax assets and liabilities.
(h) To record adjustments to reflect assets and liabilities at fair market
values and to record reorganization value in excess of amounts allocable to
identifiable assets.
(i) To record the cancellation of Predecessor Company common stock and
elimination of retained earnings.
10
<PAGE>
REORGANIZATION EXPENSES. In accordance with SOP 90-7, reorganization
items are reported separately in the consolidated statement of operations.
Reorganization items for the one month ended January 31, 1999 are as follows (in
thousands):
Adjustments of assets and liabilities to fair value..... $53,879
Professional fees and other expenses related to the
Chapter 11 proceedings................................ 718
-------
$54,597
=======
5. LIABILITIES SUBJECT TO COMPROMISE
During the Chapter 11 process, the Predecessor Company and its
subsidiaries (the "Debtors") operated their businesses and managed their
properties as debtors-in-possession under authority of the Bankruptcy Code.
Under Chapter 11, certain claims against the Debtors in existence prior to the
filing of the petitions for reorganization under the federal bankruptcy laws
were stayed while the Debtors were in bankruptcy. These claims are set forth in
the December 31, 1998 balance sheet as "liabilities subject to compromise." In
accordance with SOP 90-7, the accrual for interest on unsecured, prepetition
obligations of the Debtors was discontinued from the filing date to the
Effective Date.
Liabilities subject to compromise consisted of the following as of
December 31, 1998 (in thousands):
12 1/4% Senior Notes.................................... $100,000
13% Senior Notes........................................ 20,000
Notes payable and long-term debt ....................... 24,495
Trade payables.......................................... 4,661
Accrued interest........................................ 11,486
Other................................................... 6,228
--------
$166,870
========
6. DISPOSITIONS
As part of RainTree's restructuring, the Company identified long-term
care facilities for disposition. As part of these plans, in 1998 the Company
terminated the leases of 12 long-term care facilities. RainTree's disposition
program was concluded in January 1999, when the Company terminated the leases of
seven facilities, six of which were leased from Omega.
On June 3, 1999, RainTree sold certain assets of Sunbelt Therapy
Management Services, Inc. and its subsidiaries ("Sunbelt"). Sunbelt provides
rehabilitation therapy services to certain RainTree facilities and third
parties. An affiliate of Paul Henderson and Paige Plash, who were the president
and vice-president, respectively, of Sunbelt until April 1, 1999, purchased the
therapy services contracts of Sunbelt's outpatient clinics, hospitals, home
health and other businesses not related to long-term care facilities. Messrs.
Henderson and Plash also acquired the therapy services contracts of two RainTree
nursing facilities. The sales price was approximately $1.2 million, in cash,
plus the assumption of certain Sunbelt liabilities amounting to approximately
$361,000. On April 14, 1999, RainTree entered into a one-year agreement with an
unrelated third party to manage Sunbelt's remaining long-term care therapy
operations for a monthly fee of $64,000 plus incentives.
11
<PAGE>
7. RESTRICTED STOCK AWARDS
On April 28, 1999, RainTree awarded a total of 360,000 restricted stock
units ("Units") to Senior Management. Each vested Unit entitles the holder to
receive one share of RainTree common stock upon the earlier of February 1, 2002
or termination of employment for any reason.
Of the Units, 136,000 vested on April 28, 1999, 112,000 will vest on
February 1, 2000 and 112,000 will vest on February 1, 2001. The Units were
recorded at the market value on the grant date, which was estimated to be $2.50
per share. The total market value of immediately vested Units was charged to
compensation expense. The total market value of the remaining Units is treated
as unearned compensation and recorded as a separate component of stockholders'
equity. Unearned compensation is charged to expense over the vesting period.
Total compensation expense related to the Units amounted to approximately
$80,000 in the 1999 third quarter and $446,000 in the eight months ended
September 30, 1999.
The Units are not included in the calculation of net loss per share
because they are antidilutive.
8. OPERATING SEGMENTS
During the fourth quarter of 1998, RainTree adopted Statement of
Financial Accounting Standards No. 131, "Disclosures About Segments of an
Enterprise and Related Information" ("SFAS No. 131"). SFAS No. 131 requires the
presentation of descriptive information about reportable segments that is
consistent with that made available to the management of the Company to assess
performance. RainTree's four reportable segments are strategic business units
that involve specialized healthcare services and require different marketing
strategies.
The long-term care segment consists of RainTree's nursing facilities
and assisted and independent living facilities. Sunbelt conducts the Company's
rehabilitation therapy segment operations. The pharmacy segment is comprised of
RainTree's institutional pharmacy and Medicare Part B billing and supply
business units. The laboratory segment represents the operations of RainTree's
medical reference laboratories.
12
<PAGE>
<TABLE>
<CAPTION>
Reorganized Company | Predecessor Company
--------------------------- | -----------------------------------------
Three Months Eight Months | One Month Three Months Nine Months
Ended Ended | Ended Ended Ended
September 30, September 30,| January 31, September 30, September 30,
1999 1999 | 1999 1998 1998
------------- ------------ | ------------ ------------- ------------
<S> <C> <C> <C> <C> <C>
Revenues from nonrelated entities: |
Long-term care..................................... $27,104 $71,408 | $ 10,142 $33,960 $110,942
Rehabilitation therapy............................. 69 1,844 | 715 3,042 9,870
Pharmacy........................................... 2,361 5,899 | 729 2,329 7,342
Laboratory......................................... 1,703 4,560 | 482 1,471 4,428
Corporate.......................................... 222 631 | 50 29 84
------- -------- | -------- ------- -------
Total............................................ $31,459 $ 84,342 | $ 12,118 $40,831 $132,666
======= ======== | ======== ======= ========
|
Total revenues: |
Long-term care..................................... $27,104 $ 71,408 | $ 10,142 $33,960 $110,942
Rehabilitation therapy............................. 1,106 4,532 | 1,152 5,913 20,812
Pharmacy........................................... 2,864 7,265 | 1,039 3,548 11,455
Laboratory......................................... 1,783 4,776 | 510 1,471 4,428
Corporate.......................................... 1,856 5,083 | 676 2,194 7,280
Eliminations....................................... (3,254) (8,722) | (626) (2,165) (7,196)
------- -------- | -------- ------- --------
Total........................................... $31,459 $ 84,342 | $ 12,893 $44,921 $147,721
======= ======== | ======== ======= ========
|
Operating income (loss): |
Long-term care.................................... $ (872) $ (651) | $ (251) $ (1,862) $ (3,273)
Rehabilitation therapy............................ 107 (709) | (1,476) (358) (513)
Pharmacy.......................................... 63 104 | 140 611 2,158
Laboratory........................................ (64) (155) | (120) (821) (842)
Unallocated corporate expenses.................... (2,841) (9,192) | (741) (801) (9,736)
------- -------- | -------- ------ -------
Consolidated operating loss..................... (3,607) (10,603) | (2,448) (3,231) (12,206)
Reorganization expenses............................. -- -- | 54,597 907 1,775
------- -------- | -------- ------ -------
Consolidated loss before income taxes and |
extraordinary credit.............................. $(3,607) $(10,603) | $(57,045) $ (4,138) $(13,981)
======= ======== | ======== ======== ========
September | December
1999 | 1998
--------- | --------
Total assets: |
Long-term care................................... $ 62,092 | $ 79,624
Rehabilitation therapy........................... 98 | 13,266
Pharmacy......................................... 5,418 | 5,751
Laboratory....................................... 2,512 | 2,372
Corporate........................................ 56,702 | 73,732
Eliminations..................................... (2,838) | (4,205)
-------- | --------
Total......................................... $123,984 | $170,540
======== | ========
</TABLE>
10. ISSUES IMPACTING LIQUIDITY AND FINANCIAL POSITION
RainTree did not make the $1.3 million semiannual interest payment due
July 1, 1999 on the Senior Secured Notes. The Company entered into a forbearance
agreement with the Indenture Trustee (the "Forbearance") whereby the holders of
a majority of the Senior Secured Notes have agreed not to exercise any rights
and remedies under the Indenture and related documents arising from the failure
to pay the interest when due. The Forbearance expires on January 15, 2000. The
Company expects to enter into another agreement that it anticipates will further
extend the forbearance of the noteholders' exercise of their rights and remedies
under the Indenture. However, if RainTree does not obtain this extension, the
holders of the Senior Secured Notes could elect to accelerate this obligation,
and the debt could become immediately due and payable. The holders of the Senior
Secured Notes could then take possession of the stock and personal property of
certain RainTree subsidiaries that secures the Senior Secured Notes. In
addition, a default under the Senior Secured Notes Indenture constitutes a
13
<PAGE>
default under the Omega Master Lease, the Indiana Returned Facilities Note and
RainTree's revolving credit agreement with Heller Financial, the successor in
interest to Health Partners. See Item 2, "Management's Discussion and Analysis
of Financial Condition and Results of Operations -- Recent Developments," and
"-- Liquidity and Capital Resources."
RainTree's inability to pay the interest is due in part to professional
fees and other costs related to the Company's reorganization and emergence from
bankruptcy, which were approximately $4.2 million greater than estimated. In
addition, the bankruptcy had a negative impact on the Company's overall census,
and thus cash flows from operations. Although average occupancy increased to
80.0% for the month of October 1999 from 76.4% for the 1999 second quarter, the
Company has not yet been successful in restoring average occupancy to
pre-bankruptcy levels. In connection with the preparation of the Plan, the
Company projected an average occupancy rate of 83% for fiscal 1999. If the
Company is unable to increase its average occupancy levels in the near future,
it will experience a material negative impact on its results of operations and
cash flows.
Management believes that the deferment of the interest payment will
provide RainTree with additional time to increase occupancy and complete its new
business plan. The Company's current cash shortfall has forced it to consider
various strategic alternatives, including a possible recapitalization, merger or
other business combination.
The failure to make the interest payment on the Senior Secured Notes
constitutes an event of default under the Omega Master Lease, the Indiana
Returned Facilities Note and the revolving credit agreement with Health
Partners. In connection with the Forbearance, both Omega and Health Partners
have agreed not to exercise their respective rights and remedies. In the event
that the Forbearance is not extended, or other events of default occur, Omega
could exercise its remedies under the Master Lease, including a termination of
such lease. Health Partners could suspend its obligations to make advances under
the lines of credit, or terminate the agreement, whereby all outstanding
borrowings would become due and payable. Any material default of RainTree's debt
or lease obligations, if uncured, would have a material adverse effect on its
results of operations and cash flows.
RainTree did not make the interest payments on the Whitehead Notes that
were due July 1 and October 1, 1999 in the aggregate amount of to $68,000 (Note
3). The Company did not make the payments because these unsecured notes are
subordinate to the Senior Secured Notes.
Due to the uncertainty surrounding the payment default on the Senior
Secured Notes and related cross-defaults, RainTree has classified the principal
balances of the Senior Secured Notes, Indiana Returned Facilities Note,
Whitehead Notes and borrowings from Health Partners as current liabilities on
the Company's consolidated balance sheet at September 30, 1999. The financial
statements do not include further adjustments, if any, for the possible future
effects on the recoverability of RainTree's long-lived assets.
The Company is in the process of analyzing its long-lived assets for
impairment in accordance with statement of Financial Accounting Standards No.
121, "Accounting for the Impairment of Long-Lived Assets and Assets to be
Disposed Of." Adjustments arising from this analysis, if any, will be recorded
in the fourth quarter of 1999.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Certain statements contained in this Quarterly Report, including
without limitation statements containing the words "believes", "anticipates",
"intends", "expects", "projected" and words of similar import, are
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended (the "Securities Act") and Section 21E of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). While the Company
believes that the assumptions underlying these statements are reasonable, such
14
<PAGE>
assumptions (and thus the statements based upon them) could prove to be
inaccurate. Important factors which could cause results to vary include, among
others: delays in or inability to conclude transactions; unsuccessful
implementation of RainTree's new business strategy; general economic and
business conditions; competition; loss of customers; changes in applicable laws
and regulations; availability, terms and deployment of capital in light of
recent losses and cash flow shortfalls; cancellation of leases or contracts;
demand fluctuations; adverse uninsured determinations in any existing or future
litigation or regulatory proceedings; health care statutory or regulatory
changes which disfavor the types of care delivered by the Company; reversal of
the current limitations in the supply of long-term care facilities; and Year
2000 issues. Important factors which could cause results to vary also include
the factors discussed in RainTree's Annual Report on Form 10-K for the year
ended December 31, 1998 in "Item 1 Business" and "Item 7 - Management's
Discussion and Analysis of Financial Condition and Results of Operations - Risks
and Uncertainties", as well as factors discussed elsewhere in this report or in
any document incorporated herein by reference.
The following material should be read in conjunction with the
Consolidated Financial Statements of the Company and the related notes thereto.
All references in this discussion and analysis to years are to fiscal years of
the Company ended December 31 of such year.
PLAN OF REORGANIZATION
RainTree operated under the protection of Chapter 11 of the Bankruptcy
Code from May 28, 1998 until January 31, 1999. The restructuring began on
January 7, 1998, when three of RainTree's subsidiaries, BritWill Investments-I,
Inc., BritWill Investments-II, Inc. and BritWill Indiana Partnership (the
"BritWill Debtors"), with operations in Texas and Indiana, filed for protection
under Chapter 11 with the United States Bankruptcy Court for the District of
Arizona (the "Bankruptcy Court"). The Chapter 11 filings were necessitated by
actions taken by Omega to terminate or otherwise enforce the terms of its lease
agreements with the Company. RainTree, through its subsidiaries, leased 14
long-term care facilities from Omega under three master lease agreements. In
addition, RainTree leased six facilities from BritWill Texas, which were subject
to a mortgage in favor of Omega. BritWill Texas is an affiliate of Bruce H.
Whitehead, a major stockholder and creditor of RainTree and formerly chairman of
its Board of Directors.
RainTree initiated negotiations to reach a consensual restructuring of
its debt and lease obligations with Omega, representatives of certain of the
holders of its 12 1/4% Senior Notes and 13% Senior Notes (the "Ad Hoc
Committee"), the Whitehead Affiliates and the Kremser Affiliates. On June 15,
1998, RainTree concluded an agreement in principle with respect to a consensual
restructuring with some, but not all, of its creditor constituencies. The
agreement in principle formed the basis of the plan of reorganization filed with
the Bankruptcy Court on August 10, 1998. On October 16, 1998, the amended Plan
was filed. The significant elements of the Plan are described in Note 3 of Notes
to Consolidated Financial Statements. Under Bankruptcy Court supervision, the
Company continued to manage and operate its business as a debtor in possession
and, as described above, developed the Plan to restructure its financial
affairs, including assuming or rejecting executory contracts and leases. The
Plan was confirmed by the Bankruptcy Court effective January 31, 1999.
EMERGENCE FROM CHAPTER 11 AND PLAN OF REORGANIZATION
The Plan set forth a method for repaying or otherwise compensating the
Company's creditors in order of the relative priority of their respective claims
while seeking to maintain the Company as a going concern. The Plan provided,
among other things, for: (i) the conversion of substantially all of the
Company's prepetition liabilities into equity interests in the Company and
approximately $26 million of Senior Secured Notes due 2003; (ii) cancellation of
all of the prepetition equity interests in the Company, including the old common
stock; and (iii) restructuring of the Company's master leases for certain
facilities with Omega. The Plan became effective and the Company emerged from
Chapter 11 on the Effective Date. See Note 3 of Notes to Consolidated Financial
Statements.
15
<PAGE>
RECENT DEVELOPMENTS
RainTree did not make the $1.3 million semiannual interest payment due
July 1, 1999 on the Senior Secured Notes. The Company entered into the
Forbearance with the Indenture Trustee whereby the holders of a majority of the
Senior Secured Notes agreed not to exercise any rights and remedies under the
Indenture and related documents arising from the failure to pay the interest
when due. The Forbearance expires on January 15, 2000. The Company expects to
enter into another agreement that it anticipates will further extend the
forbearance of the noteholders' exercise of their rights and remedies under the
Indenture. However, if RainTree does not obtain this extension, the holders of
the Senior Secured Notes could elect to accelerate this obligation, and the debt
could become immediately due and payable. The holders of the Senior Secured
Notes could then take possession of the stock and personal property of certain
RainTree subsidiaries that secures the Senior Secured Notes. In addition, a
default under the Senior Secured Notes Indenture constitutes a default under the
Omega Master Lease, the Indiana Returned Facilities Note and RainTree's
revolving credit agreements with Heller Financial, the successor in interest to
Health Partners. See "-- Liquidity and Capital Resources."
RainTree's inability to pay the interest is due in part to professional
fees and other costs related to the Company's reorganization and emergence from
bankruptcy, which were approximately $4.2 million greater than estimated. In
addition, the bankruptcy had a negative impact on the Company's overall census,
and thus cash flows from operations. Although average occupancy increased to
80.0% for the month of October 1999 from 76.4% for the 1999 second quarter, the
Company has not yet been successful in restoring average occupancy to
pre-bankruptcy levels. In connection with the preparation of the Plan, the
Company projected an average occupancy rate of 83% for fiscal 1999. If the
Company is unable to increase its average occupancy levels in the near future,
it will experience a material negative impact on its results of operations and
cash flows.
Management believes that the deferment of the interest payment will
provide RainTree with additional time to increase occupancy and complete its new
business plan. The Company's current cash shortfall has forced it to consider
various strategic alternatives, including a possible recapitalization, merger or
other business combination.
The failure to make the interest payment on the Senior Secured Notes
constitutes an event of default under the Omega Master Lease, the Indiana
Returned Facilities Note and the revolving credit agreement with Health
Partners. In connection with the Forbearance, both Omega and Health Partners
have agreed not to exercise their respective rights and remedies. In the event
that the Forbearance is not extended, or other events of default occur, Omega
could exercise its remedies under the Master Lease, including a termination of
such lease. Health Partners could suspend its obligations to make advances under
the lines of credit, or terminate the agreement, whereby all outstanding
borrowings would become due and payable. Any material default of RainTree's debt
or lease obligations, if uncured, would have a material adverse effect on its
results of operations and cash flows.
RainTree did not make the interest payments on the Whitehead Notes that
were due July 1 and October 1, 1999 in the aggregate amount of $68,000 (Note 3).
The Company did not make the payments because these unsecured notes are
subordinate to the Senior Secured Notes.
Due to the uncertainty surrounding the payment default on the Senior
Secured Notes and related cross-defaults, RainTree has classified the principal
balances of the Senior Secured Notes, Indiana Returned Facilities Note,
Whitehead Notes and borrowings from Health Partners as current liabilities on
the Company's consolidated balance sheet at September 30, 1999. The financial
statements do not include further adjustments, if any, for the possible future
effects on the recoverability of RainTree's long-lived assets.
The Company is in the process of analyzing its long-lived assets for
impairment in accordance with Statement of Financial Accounting Standards No.
16
<PAGE>
121, "Accounting for the Impairment of Long-Lived Assets and Assets to be
Disposed Of." Adjustments arising from this analysis, if any, will be recorded
in the 1999 fourth quarter.
IMPACT OF FRESH START REPORTING
When RainTree emerged from bankruptcy, it adopted fresh start reporting
in accordance with SOP 90-7. Under fresh start reporting, the reorganization
value of RainTree has been allocated to its assets on a basis substantially
consistent with purchase accounting. The portion of reorganization value not
attributable to specific assets has been recorded as "Reorganization Value in
Excess of Amounts Allocable to Identifiable Assets." Certain fresh start
adjustments, primarily related to the adjustment of the Company's assets and
liabilities to fair market values, will have a significant effect on RainTree's
future results of operations. The more significant adjustments relate to
increased depreciation expense on property and equipment and reduced
amortization expense on intangible assets.
As of the Effective Date, Reorganized RainTree recorded total assets of
$134.0 million, total debt and lease financing obligations of $71.2 million and
stockholders' equity of $19.7 million. See Note 4 of Notes to Consolidated
Financial Statements for further detail regarding fresh start reporting.
DISPOSITIONS
As part of RainTree's restructuring, the Company identified long-term
care facilities for disposition. As part of these plans, in 1998 the Company
terminated the leases of 12 long-term care facilities. RainTree's disposition
program was concluded in January 1999, when the Company terminated the leases of
seven facilities, six of which were leased from Omega.
On June 3, 1999, RainTree sold certain assets of Sunbelt. Sunbelt
provides rehabilitation therapy services to certain RainTree facilities and
third parties. An affiliate of Paul Henderson and Paige Plash, who were the
president and vice-president, respectively, of Sunbelt until April 1, 1999,
purchased the therapy services contracts of Sunbelt's outpatient clinics,
hospitals, home health and other businesses not related to long-term care
facilities. Messrs. Henderson and Plash also acquired the therapy services
contracts of two RainTree nursing facilities. The sales price was approximately
$1.2 million, in cash, plus the assumption of certain Sunbelt liabilities
amounting to approximately $361,000. On April 14, 1999, RainTree entered into a
one-year agreement with an unrelated third party to manage Sunbelt's remaining
long-term care therapy operations for a monthly fee of $64,000 plus incentives.
RESULTS OF OPERATIONS
As a result of the reorganization and the implementation of fresh start
reporting, the Company's results of operations after January 31, 1999 (the
cutoff date used for financial reporting purposes) are not comparable to results
reported in prior periods. See Notes 3 and 4 of Notes to Consolidated Financial
Statements for information on the implementation of the Plan and fresh start
reporting.
To facilitate a meaningful comparison of RainTree's operating
performance in the 1999 and 1998 periods, the following discussion of results of
operations is presented on a traditional comparative basis. Consequently, the
information presented below for the nine months ended September 30, 1999 does
not comply with accounting requirements for companies that emerge from
bankruptcy. These requirements call for separate reporting for Reorganized
RainTree and the Predecessor Company.
17
<PAGE>
RainTree Healthcare Corporation and Subsidiaries
Consolidated Results of Operations
(in thousands)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------- -----------------------
1999 1998 1999 (1) 1998
-------- -------- --------- ---------
<S> <C> <C> <C> <C>
Total revenues.................................................. $31,459 $44,921 $ 97,235 $ 147,721
Expenses:
Wages and related............................................. 17,496 23,642 54,798 76,089
Other operating............................................... 10,584 17,779 34,372 54,955
Rent.......................................................... 3,061 3,606 9,315 11,272
Interest (excludes contractual interest not accrued on
prepetition debt of $1,507 in the eight months ended
September 30, 1999 and $4,965 and $6,565 in the three
months and nine months ended September 30,1998,
respectively................................................ 2,158 826 6,411 10,742
Depreciation and amortization ................................ 1,767 2,299 5,390 6,869
------- ------- -------- ---------
Total expenses........................................... 35,066 48,152 110,286 159,927
------- ------- -------- ---------
Loss from operations............................................ (3,607) (3,231) (13,051) (12,206)
Reorganization expenses ........................................ -- 907 54,597 1,775
------- ------- -------- ---------
Loss before income taxes and extraordinary credit............... (3,607) (4,138) (67,648) (13,981)
Income tax benefit.............................................. -- -- -- --
------- ------- -------- ---------
Loss before extraordinary credit................................ (3,607) (4,138) (67,648) (13,981)
Extraordinary credit - gain on debt discharge................... -- -- 113,242 --
------- ------- -------- ---------
Net income (loss)............................................... $(3,607) $(4,138) $ 45,594 $ (13,981)
======= ======== ======== =========
</TABLE>
(1) This column represents the combination of historical results for the eight
months ended September 30, 1999 for Reorganized RainTree and the one month
ended January 31, 1999 for the Predecessor Company.
The following table summarizes selected operating statistics.
At September 30,
----------------------
1999 1998
---- ----
Leased and Owned Facilities:
Number of facilities.............................. 35 43
Number of licensed beds:
Long-term care................................. 3,405 3,957
Assisted and independent living................ 214 233
Managed Facilities:
Number of facilities.............................. 6 --
Number of licensed beds........................... 406 --
Institutional Pharmacies:
Number of outlets................................. 2 2
Nonaffiliated facilities served................... 42 37
Laboratory Services:
Number of laboratories............................ 3 3
Nonaffiliated entities served..................... 355 252
18
<PAGE>
The following table identifies the Company's sources of net operating
revenues from nonaffiliated entities.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Percentage of total revenues:
Long term care .............................. 86.9% 83.2% 85.2% 83.8%
Therapy services ............................ 0.2 7.5 2.7 7.4
Pharmacy services ........................... 7.5 5.7 6.9 5.5
Laboratory services ......................... 5.4 3.6 5.2 3.3
----- ----- ----- -----
Total.................................... 100.0% 100.0% 100.0% 100.0%
===== ===== ===== =====
</TABLE>
RainTree's revenues fluctuate from facility to facility based on various
factors, including total capacity, occupancy rates, reimbursement methodologies
and rates among the payor categories, payor mix and the scope and utilization of
the Company's ancillary services. In general, the Company believes that private
pay and Medicare sources are more profitable to the Company than other
governmental reimbursement sources.
Sources of net patient revenues and patient mix by payor type are set
forth below (long-term care only).
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Medicare ......................................... 21.8% 27.1% 22.1% 29.7%
Private and other................................. 17.2 16.3 17.4 16.3
----- ----- ----- -----
Quality mix....................................... 39.0 43.4 39.5 46.0
Medicaid ......................................... 61.0 56.6 60.5 54.0
----- ----- ----- -----
Total........................................ 100.0% 100.0% 100.0% 100.0%
===== ===== ===== =====
AVERAGE OCCUPANCY
Nursing facilities............................... 79.0% 80.4% 78.4% 81.4%
Independent and assisted living facilities....... 48.9 59.2 50.8 59.2
</TABLE>
THREE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO THREE MONTHS ENDED SEPTEMBER
30, 1998
In the 1999 third quarter, RainTree recorded a net loss of $3.6 million
compared to a net loss of $4.1 million in the prior year quarter. Net loss for
the 1998 third quarter includes reorganization expenses amounting to $907,000.
Loss from operations amounted to $3.6 million in the 1999 third quarter compared
to $3.2 million in the same period in 1998.
Total revenues decreased $13.5 million, or 30.0%, to $31.5 million in
the 1999 third quarter from $44.9 million in the comparable 1998 quarter. Net
patient service revenues decreased from $44.5 million in the 1998 third quarter
to $31.2 million in the current period. Patient days decreased from 306,760 in
the 1998 period to 257,187 in the current period. Net patient service revenues
recorded by the long-term care facilities decreased by approximately $6.9
million, of which $4.1 million is attributable to the disposition of facilities.
The long-term care facilities experienced declines in occupancy and quality mix
(the percentage of revenues from Medicare and private pay sources) compared to
19
<PAGE>
the prior year quarter. The Company believes that the decrease in average
occupancy in 1999 is due primarily to (i) the negative perception of RainTree as
a result of the bankruptcy; and (ii) competition from assisted living facilities
in some local markets, which has negatively affected average occupancy in the
current quarter. On a same store basis, long-term care average occupancy in the
1999 third quarter was 79.0% compared to 81.9% in the 1998 period. Quality mix
was impacted by both the bankruptcy and the new Medicare Prospective Payment
System ("PPS"), which applied to RainTree on January 1, 1999. Under PPS, skilled
nursing facilities are paid a fixed per diem rate for virtually all covered
services. RainTree estimates that its average daily Medicare rate under PPS will
be approximately 21% lower in fiscal 1999 than in 1998.
Total ancillary company revenues also decreased from the prior year
period because (i) on April 1, 1999, the Company sold most of Sunbelt's therapy
contracts that were unrelated to RainTree nursing facilities; and (ii) some of
the ancillary companies' customers have negotiated lower contract rates in an
effort to control costs in the PPS environment. In addition, under PPS there is
an annual per-patient cap of $1,500 on reimbursement for combined Part B
physical and speech therapy services and an annual cap of $1,500 on Part B
occupational therapy services. See "-Dispositions."
Wages and related expenses decreased $6.1 million, or 26.0%, from $23.6
million in the 1998 third quarter to $17.5 million in the current quarter. The
decrease is due primarily to: (i) facility dispositions, which account for
approximately $2.2 million of the decrease; and (ii) a decrease in ancillary
company expenses of approximately $3.9 million. The decrease in ancillary
company expense is due primarily to the sale of therapy contracts and a decrease
in the utilization of services provided under PPS. Sunbelt has also changed its
compensation structure in order to control costs. In the 1999 third quarter,
RainTree recorded compensation expense amounting to $80,000 related to
Restricted Stock Units issued. See Note 7 of Notes to Consolidated Financial
Statements.
Other operating expenses decreased $7.2 million, or 40.5%, from $17.8
million in the 1998 third quarter to $10.6 million in the 1999 third quarter.
Approximately $1.8 million of the decrease is due to the disposition of
facilities and $1.6 million is attributable to the ancillary companies. The
provision for doubtful accounts decreased by $1.6 million from the prior year
period due to a decrease in the age of nursing facility receivables. In
addition, the provision in the prior year period included approximately $886,000
attributable to notes receivable from former affiliates of acquired companies.
See Part II, Item 1,"Legal Proceedings." The remaining decrease is due primarily
to a reduction in ancillary expenses recorded by the long-term care facilities.
RainTree renegotiated its therapy and pharmacy provider contracts in response to
the reimbursement changes under PPS.
Rent expense decreased from $3.6 million in the 1998 third quarter to
$3.1 million in the 1999 period. The decrease is due to the disposition of
facilities.
Interest expense amounted to $2.2 million in the 1999 third quarter
compared to $826,000 in the 1998 third quarter. The prior year period did not
include contractual interest not accrued on prepetition debt of approximately
$5.0 million. See Note 5 of Notes to Consolidated Financial Statements.
Depreciation and amortization expense decreased from $2.3 million in
the 1998 third quarter to $1.8 million in the 1999 third quarter. The decrease
is due to the net reduction in intangible assets resulting from fresh start
reporting.
RainTree did not record income tax expense or benefit in the current or
prior year periods. In both periods, the Company generated net losses for tax
purposes. The discharge of debt and other obligations on the Effective Date
resulted in an extraordinary gain for financial reporting purposes of
approximately $113.2 million. The Company did not record tax expense related to
this gain. The Internal Revenue Code provides that, in a Chapter 11 bankruptcy
case, income normally arising from the discharge of debt is excluded from
taxable income. However, to the extent that income from discharge is excluded
from income, taxpayers must reduce specified tax attributes that include net
20
<PAGE>
operating losses. The Company anticipates that, as a result of the restructuring
of its debt obligations, its net operating losses will be substantially reduced
or limited. Therefore, the Company has established a valuation allowance against
its net operating loss carryforward benefits.
NINE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1998
For the nine-month period ended September 30, 1999, RainTree recorded
net income of $45.6 million compared to a net loss of $14.0 million in the prior
year period. The 1999 results include a $113.2 million gain on debt discharged
in the bankruptcy and reorganization expenses amounting to $54.6 million.
RainTree recorded losses from operations amounting to $13.1 million in the 1999
period and $12.2 million in the 1998 period.
Total revenues decreased $50.5 million, or 34.2%, to $97.2 million in
the 1999 period from $147.7 million in the comparable 1998 period. Net patient
service revenues decreased from $146.4 million in the 1998 period to $96.2
million in the current period. Patient days decreased from 990,633 in the 1998
period to 767,332 in the current period. Net patient service revenues recorded
by the long-term care facilities decreased by approximately $29.3 million, of
which $17.5 million is attributable to the disposition of facilities. The
long-term care facilities experienced declines in occupancy and quality mix (the
percentage of revenues from Medicare and private pay sources) compared to the
prior year. The Company believes that the decrease in average occupancy in 1999
is due primarily to (i) the negative perception of RainTree as a result of the
bankruptcy; and (ii) competition from assisted living facilities in some local
markets, which has negatively affected average occupancy in the current quarter.
On a same store basis, long-term care average occupancy through the 1999 third
quarter was 78.4% compared to 84.1% in the 1998 period. Quality mix was impacted
by both the bankruptcy and the new Medicare Prospective Payment System, which
applied to RainTree on January 1, 1999. Under PPS, skilled nursing facilities
are paid a fixed per diem rate for virtually all covered services. RainTree
estimates that its average daily Medicare rate under PPS will be approximately
21% lower in fiscal 1999 than in 1998.
Total ancillary company revenues also decreased from the prior year
period because (i) on April 1, 1999, the Company sold most of Sunbelt's therapy
contracts that were unrelated to RainTree nursing facilities; and (ii) some of
the ancillary companies' customers have negotiated lower contract rates in an
effort to control costs in the PPS environment. In addition, under PPS there is
an annual per-patient cap of $1,500 on reimbursement for combined Part B
physical and speech therapy services and an annual cap of $1,500 on Part B
occupational therapy services. See "-Dispositions."
Wages and related expenses decreased $21.3 million, or 28.0%, from
$76.1 million in the 1998 period to $54.8 million in the current period. The
decrease is due primarily to: (i) facility dispositions, which account for
approximately $9.5 million of the decrease; and (ii) a decrease in ancillary
company expenses of approximately $11.5 million. Most of the decrease in
ancillary company expense is due primarily to the sale of therapy contracts and
a decrease in the utilization of services provided under PPS. Sunbelt has also
changed its compensation structure in order to control costs. In the 1999
period, RainTree recorded compensation expense amounting to $473,000 related to
Restricted Stock Units issued. See Note 7 of Notes to Consolidated Financial
Statements.
Other operating expenses decreased $20.6 million, or 37.5%, from $55.0
million in the 1998 period to $34.4 million in the current period. Approximately
$7.5 million of the decrease is due to the disposition of facilities. The
remaining decrease is due primarily to a reduction in ancillary expenses
recorded by the long-term care facilities. RainTree renegotiated its therapy and
pharmacy provider contracts in response to the reimbursement changes under PPS.
The provision for doubtful accounts increased by $247,000 from the prior year
period.
21
<PAGE>
Rent expense decreased from $11.3 million in the 1998 period to $9.3
million in the 1999 period. The decrease is due primarily to the disposition of
facilities.
Interest expense amounted to $6.4 million in the 1999 period compared
to $10.7 million in the 1998 period. The decrease is due to the decrease in
RainTree's debt as a result of emergence from bankruptcy on January 31, 1999.
Depreciation and amortization expense decreased from $6.9 million in
the 1998 period to $5.4 million in the current period. The decrease is due to
the net reduction in intangible assets resulting from fresh start reporting.
RainTree did not record income tax expense or benefit in the current or
prior year periods. In both periods, the Company generated net losses for tax
purposes. The discharge of debt and other obligations on the Effective Date
resulted in an extraordinary gain for financial reporting purposes of
approximately $113.2 million. The Company did not record tax expense related to
this gain. The Internal Revenue Code provides that, in a Chapter 11 bankruptcy
case, income normally arising from the discharge of debt is excluded from
taxable income. However, to the extent that income from discharge is excluded
from income, taxpayers must reduce specified tax attributes that include net
operating losses. The Company anticipates that, as a result of the restructuring
of its debt obligations, its net operating losses will be substantially reduced
or limited. Therefore, the Company has established a valuation allowance against
its net operating loss carryforward benefits.
Reorganization expenses recorded in January 1999 in the amount of $54.6
million are comprised primarily of fresh start adjustments and professional fees
related to the bankruptcy and restructuring. See Note 4 of Notes to Consolidated
Financial Statements.
LIQUIDITY AND CAPITAL RESOURCES
RainTree had a cash balance of $6.7 million and a working capital
deficit of $39.5 million at September 30, 1999. Of this deficit, $34.6 million
is due to the current classification of long-term debt in default. See "--Recent
Developments."
RainTree's operating activities provided net cash amounting to $871,000
in the eight months ended September 30, 1999. The net cash generated is due
primarily to an increase in accounts payable and collection of accounts
receivable.
Net accounts receivable decreased by approximately $10.7 million from
December 31, 1998 to September 30, 1999, primarily in connection with collection
of third party receivables, facility dispositions and the sale of certain
Sunbelt receivables. During this same period, the allowance for doubtful
accounts as a percentage of total receivables decreased from 29.9% to 23.5%. The
percentage decrease is because the Sunbelt receivables sold and disposed
facilities' receivables that were written off had a proportionately higher
percentage of reserves for doubtful accounts. RainTree anticipates that its
allowance for doubtful accounts may continue to fluctuate in the future and will
depend, in large part, on the mix of revenues, as well as the timing of payments
by private, third party and governmental payors. While the Company believes that
the allowance for doubtful accounts is adequate at September 30, 1999, if the
Company is not successful in collecting its accounts receivable on a timely
basis, the Company will be required to increase its provision for doubtful
accounts.
During the bankruptcy proceedings, RainTree financed its working
capital needs out of its operating cash flows and under the HCFP DIP Facility,
an $11 million accounts receivable-backed revolving credit facility. Interest on
the HCFP DIP Facility accrued at the prime rate plus 3.0% (10.75% at December
31, 1998). As of January 31, 1999, borrowings under the HCFP DIP Facility
amounted to approximately $8.0 million. On the Effective Date, the HCFP DIP
22
<PAGE>
Facility was replaced partially with a new $7 million revolving line of credit
from Health Partners (the "First Line"). Interest on amounts outstanding under
the First Line accrues at the prime rate plus 0.85%. As of September 30, 1999,
borrowings outstanding under the First Line totaled approximately $3.1 million,
which, based on the level of eligible accounts receivable, was the maximum
amount that could be borrowed at that time. On May 14, 1999, the Company entered
into a second $7 million line of credit with Health Partners (the "Second
Line"). Total combined borrowings under the First Line and Second Line cannot
exceed $12 million. Availability under the Second Line is subject to the Company
having met certain requirements, including sufficient eligible accounts
receivable and quarterly financial covenants contained in the Omega Master
Lease. For the quarterly period ended September 30, 1999, the Company did not
attain the necessary fixed charge coverage ratio of 1.55 and is therefore
currently limited to borrowings of $2.0 million under the Second Line, which was
the balance at September 30, 1999.
Net cash provided by investing activities in the eight months ended
September 30, 1999 amounted to $2.1 million. The Company received $1.2 million
in cash from the sale of Sunbelt assets and lease and insurance deposits
decreased by approximately $2.7 million. Routine capital expenditures amounted
to approximately $1.9 million.
Net cash provided by financing activities in the eight months ended
September 30, 1999 amounted to approximately $2.1 million, primarily as a result
of a net increase in borrowings.
The terms of certain of RainTree's debt and lease obligations require
the Company to meet certain financial and reporting covenants. The terms of the
Omega Master Lease require that RainTree maintain specified operating ratios,
levels of working capital and net worth. As of September 30, 1999, the Company
was not in compliance with the financial covenants of the Omega Master Lease,
which require that RainTree maintain a minimum fixed charge coverage ratio of
1.4 for the four quarters ended September 30, 1999. RainTree has not obtained a
waiver of this covenant violation from Omega. Although Omega has not indicated
an intention to declare a default, it could exercise its remedies under the
Master Lease, including a termination of such lease.
The Indenture for the Senior Secured Notes includes covenants that
prohibit or limit asset sales, acquisitions, incurrence of additional debt and
liens, the making of restricted payments, affiliate transactions, engaging in
certain mergers and consolidations and entering new lines of business. For
example, should RainTree sell collateral securing the Senior Secured Notes, any
net cash proceeds from such sale must be used to redeem Senior Secured Notes.
At September 30, 1999, RainTree had approximately $77.7 million of total
debt and lease financing obligations. The Company also has aggregate minimum
rent obligations of approximately $130.0 million (subject to certain increases)
during the remainder of the initial terms and first renewal periods under its
operating leases. RainTree's ability to meet its debt service and lease
obligations in the next year and beyond will depend on its ability to generate
sufficient cash flows from operations. Since the Effective Date, the Company has
focused its efforts on efficiently providing quality patient care, improving
average occupancy and collecting accounts receivable. However, the Company's
current cash shortfall has forced it to consider other strategic alternatives,
including a possible recapitalization, merger or other business combination. See
" - Recent Developments."
IMPACT OF THE YEAR 2000 ISSUE
Based on an assessment of some of RainTree's information systems, the
Company determined that it had time-sensitive software that would not properly
recognize the year 2000. Accordingly, the Company modified or replaced
23
<PAGE>
significant portions of its software so that its computer systems will function
properly with respect to dates in the year 2000 and thereafter. RainTree
believes that with the modifications to existing software and conversions to new
software, the Company will be year 2000 ready and that the year 2000 issue will
not pose significant operational problems for its computer systems.
RainTree has completed a detailed inventory and analysis of computer
hardware, software and operating systems. The Company utilized both internal and
external resources to reprogram, or replace, and test the hardware and software
for year 2000 readiness. The scope of the year 2000 project encompassed
consideration of potential impacts on the Company's business operations. The
Company is continuing to review internal business operations and relationships
with external business partners to assess the current level of compliance. As of
September 30, 1999, the Company had incurred approximately $74,000 of
incremental costs to upgrade existing software to make it year 2000 compliant.
RainTree has had ongoing formal communications with significant
suppliers and payors to determine the extent to which the Company's systems and
operations are vulnerable to those third parties' failure to remediate their own
year 2000 issues. Examples of such issues include, but are not limited to,
payroll processing by the Company's outside service bureau and electronic
interfaces with external agents such as payors, suppliers and banks. The ability
of third parties with which RainTree transacts business to adequately address
their year 2000 issues is outside the Company's control. Although RainTree will
seek to replace any of its current vendors who are unable to become year 2000
ready in a timely manner, there can be no assurance that the Company's
operations will not be adversely affected by the ability of third parties,
including the federal and state governments on which RainTree's operations rely,
to also manage the year 2000 issue.
The Company will continue to assess each of its systems and their year
2000 readiness. At this time, all of the Company's application programs have
been modified or upgraded except for payroll, which is expected to be upgraded
by November 30, 1999. The Company believes that it is substantially complete
with its overall year 2000 remediation with minimal impact on its operations.
However, there can be no assurance that these assumptions will be achieved, and
actual results could differ materially from those anticipated. Specific factors
that might cause such material differences include, but are not limited to, the
availability and cost of personnel trained in this area, the ability to locate
and correct all relevant computer codes, third party modification plans and
similar uncertainties.
ITEM 3 IS NOT APPLICABLE
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
RainTree is, and may in the future be, party to litigation arising in
the ordinary course of its business. It is also routinely subject to surveys and
investigations by regulators and payors. There can be no assurance that
RainTree's insurance coverage will be adequate to cover all liabilities
occurring by reason of such claims or investigations or that any such matters
that are not covered by insurance will not have an adverse effect on RainTree's
business.
Reference is made to an action styled JOHN D. FILKOSKI, ET AL. V.
UNISON HEALTHCARE CORPORATION, ET AL., filed in Colorado Superior Court on May
27, 1998 (the "Colorado Action") and described on page 22 of RainTree's
Quarterly Report on Form 10-Q for the quarter ended March 31, 1999 (the "First
Quarter Form 10-Q"). On August 6, 1999, the Colorado District Court Judge
granted motions to dismiss with respect to the former nonemployee directors, and
denied motions to dismiss with respect to certain current and former officers of
the Company. Currently, the case is about to enter the discovery phase.
Reference is made to an action styled HEALTHPRIME, INC., HP/HEALTHCARE
ACQUIRORS, INC., MARKLEYSBURG HEALTHCARE INVESTORS, L.P., MARSHALL MANOR
24
<PAGE>
HEALTHCARE SERVICES, INC., AND LAKE CITY NURSING HOMES, INC. V. UNISON
HEALTHCARE CORPORATION AND SUNQUEST SPC, INC., filed in the Superior Court of
Fulton County, Georgia (Case No. E.68081) (the "Georgia Action"), and described
on page 23 of the First Quarter Form 10-Q. On November 11, 1998, the Company
filed an action in Bankruptcy Court (UNISON V. HEALTHPRIME, INC. ET AL.,
Adversary Proceeding No. 98-808-GBN) seeking to recover management fees related
to these facilities totaling $1.6 million plus interest and attorneys' fees. The
defendants have asserted counterclaims containing allegations made against the
Company in the Georgia Action. The Georgia Action was stayed by the Company's
Chapter 11 proceedings. On June 15, 1999, the Bankruptcy Court entered an order
abstaining from hearing the Company's complaint and lifted the stay of the
Georgia Action.
Reference is made to actions styled AMERICAN PROFESSIONAL HOLDINGS,
INC. [SIC] V. JOHN L. MAGUIRE, W. JEROME MCGEE, AND HAROLD N. MCKINNEY, filed in
the Bankruptcy Court (Adversary No. 98-861), and AMERICAN PROFESSIONAL HOLDING,
INC. V. ASSOCIATED SOLUTIONS, INC., also filed in the Bankruptcy Court
(Adversary No. 98-862) and described on page 23 of the First Quarter Form 10-Q.
The defendants have answered the complaints, admitting the material allegations
therein. In August 1999, the defendants filed counterclaims alleging common law
fraud. RainTree denies defendants' allegations and intends to pursue its claims.
Reference is made to an action styled RAINTREE HEALTHCARE CORPORATION
AND BRITWILL INVESTMENTS - II, INC. V. HASMARK CORPORATION AND HASMARK EAST
LTD., filed in the Bankruptcy Court (Adversary No. 99-396) on May 27, 1999. The
company is seeking to recover sublease payments for facilities in Texarkana,
Texas totaling $1.5 million plus interest and attorney's fees.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
RainTree did not make the $1.3 million semiannual interest payment due
July 1, 1999 on the Senior Secured Notes. The Company entered into the
Forbearance with the Indenture Trustee whereby the holders of a majority of the
Senior Secured Notes have agreed not to exercise any rights and remedies under
the Indenture and related documents arising from the failure to pay the interest
when due. The Forbearance expires on January 15, 2000. The Company expects to
enter into another agreement that it anticipates will further extend the
forbearance of the noteholders' exercise of their rights and remedies under the
Indenture. However, if RainTree does not obtain this extension, the holders of
the Senior Secured Notes could elect to accelerate this obligation, and the debt
could become immediately due and payable. The holders of the Senior Secured
Notes could then take possession of the stock and personal property of certain
RainTree subsidiaries that secures the Senior Secured Notes. In addition, a
default under the Senior Secured Notes Indenture constitutes a default under the
Omega Master Lease, the Indiana Returned Facilities Note and RainTree's
revolving credit agreement with Heller Financial, the successor in interest to
Health Partners. See Item 2, "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Recent Developments," and "-- Liquidity
and Capital Resources."
The failure to make the interest payment on the Senior Secured Notes
constitutes an event of default under the Omega Master Lease, the Indiana
Returned Facilities Note and the revolving credit agreement with Health
Partners. In connection with the Forbearance, both Omega and Health Partners
have agreed not to exercise their respective rights and remedies. In the event
that the Forbearance is not extended, or other events of default occur, Omega
could exercise its remedies under the Master Lease, including a termination of
such lease. Health Partners could suspend its obligations to make advances under
the lines of credit, or terminate the agreement, whereby all outstanding
borrowings would become due and payable. Any material default of RainTree's debt
or lease obligations, if uncured, would have a material adverse effect on its
results of operations and cash flows.
RainTree did not make the interest payments on the Whitehead Notes that
were due July 1 and October 1, 1999 in the aggregate amount of $68,000 (Note 3).
The Company did not make the payments because these unsecured notes are
subordinate to the Senior Secured Notes.
25
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
27 Financial Data Schedule (included only in the EDGAR filing)
(b) Reports filed on Form 8-K:
None
ITEMS 2, 4 AND 5 ARE NOT APPLICABLE.
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.
RAINTREE HEALTHCARE CORPORATION
(Registrant)
Date: November 15, 1999 /s/ JIMMY L. FIELDS
----------------- --------------------------------------
Jimmy L. Fields
Executive Vice President and Chief
Financial Officer (Principal Financial Officer)
/s/ WARREN K. JERREMS
--------------------------------------
Warren K. Jerrems
Vice President and Chief Accounting
Officer (Principal Accounting Officer)
26
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM RAINTREE'S
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE 8 MOS ENDED SEPTEMBER 30,
1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH CONSOLIDATED
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 8-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> FEB-01-1999 <F1>
<PERIOD-END> SEP-30-1999
<CASH> 6,703
<SECURITIES> 0
<RECEIVABLES> 15,614
<ALLOWANCES> 3,666
<INVENTORY> 1,688
<CURRENT-ASSETS> 21,819
<PP&E> 54,238
<DEPRECIATION> 8,867
<TOTAL-ASSETS> 123,984
<CURRENT-LIABILITIES> 61,303
<BONDS> 77,356
0
0
<COMMON> 8
<OTHER-SE> 9,545
<TOTAL-LIABILITY-AND-EQUITY> 123,984
<SALES> 0
<TOTAL-REVENUES> 84,342
<CGS> 0
<TOTAL-COSTS> 73,906
<OTHER-EXPENSES> 12,971
<LOSS-PROVISION> 2,102
<INTEREST-EXPENSE> 5,966
<INCOME-PRETAX> (10,603)
<INCOME-TAX> 0
<INCOME-CONTINUING> (10,603)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (10,603)
<EPS-BASIC> (1.40)
<EPS-DILUTED> 0
<FN>
<F1> RainTree Healthcare Corporation emerged from Chapter 11 on January 31, 1999
and adopted fresh start reporting in accordance with Statement of Position
90-7. Accordingly, the Company's post-reorganization financial statements
have not been prepared on a consistent basis with such pre-reorganization
financial statements and are not comparable in all respects to financial
statements prior to reorganization.
</FN>
</TABLE>
