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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 June 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 August 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 June 30, 1999 (unaudited)
and December 31, 1998........................................ 3
Consolidated Statements of Operations for the three months
and five months ended June 30, 1999, the one month ended
January 31, 1999, and the three months and six months ended
June 30, 1998 (unaudited).................................... 4
Consolidated Statements of Cash Flows for the five months
ended June 30, 1999, the one month ended January 31, 1999
and the six months ended June 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............................................................. 27
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)
Reorganized | Predecessor
Company | Company
June 30, | December 31,
1999 | 1998
(unaudited) |
----------- | ------------
ASSETS |
Current assets: |
Cash and cash equivalents....................... $ 3,157 | $ 16,863
Accounts receivable............................. 16,924 | 22,621
Prepaid expenses and other current assets ...... 3,070 | 8,670
---------- | ------------
Total current assets......................... 23,151 | 48,154
Property and equipment, net....................... 45,669 | 29,227
Reorganization value in excess of amounts |
allocable to identifiable assets................ 50,033 | --
Lease operating rights and other intangible |
assets, net..................................... 1,029 | 58,960
Goodwill, net..................................... -- | 24,816
Deposits.......................................... 8,255 | 9,383
---------- | ------------
$ 128,137 | $ 170,540
========== | ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) |
Current liabilities: |
Accounts payable................................ $ 11,057 | $ 10,815
Accrued expenses ............................... 17,120 | 15,175
Current portion of notes payable and |
long-term debt................................ 850 | 1,012
Long-term debt in default classified |
as current.................................... 35,137 | --
---------- | -----------
Total current liabilities.................... 64,164 | 27,002
Liabilities subject to compromise ................ -- | 166,870
Notes payable and long-term debt ................. 2,415 | 7,132
Lease financing obligation ....................... 38,200 | 38,200
Deferred taxes ................................... 9,000 | 5,456
Leasehold liability, net ......................... -- | 4,058
Other liabilities................................. 1,280 | 899
---------- | -----------
Total liabilities............................ 115,059 | 249,617
Stockholders' equity (deficit): |
Common stock, $.001 par value; authorized |
10,000,000 shares; 7,593,697 shares issued |
and outstanding at June 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...................... 20,573 | 36,211
Retained earnings (accumulated deficit)......... (6,996) | (115,293)
Unearned compensation........................... (507) | --
---------- | -----------
Net stockholders' equity (deficit)........... 13,078 | (79,077)
---------- | -----------
$ 128,137 | $ 170,540
========== | ===========
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 Five Months | One Month Three Months Six Months
Ended Ended | Ended Ended Ended
June 30, June 30, | January 31, June 30, June 30,
1999 1999 | 1999 1998 1998
------------ ----------- | ----------- ------------ ----------
<S> <C> <C> | <C> <C> <C>
Total revenues......................................... $ 30,949 $ 52,883 | $ 12,893 $ 48,123 $ 102,800
|
Expenses: |
Wages and related.................................... 17,687 30,228 | 7,074 24,471 52,447
Other operating...................................... 10,861 17,700 | 6,088 17,693 37,176
Rent................................................. 3,062 5,142 | 1,112 3,702 7,666
Interest (excludes contractual interest not |
accrued on prepetition debt of $1,507 in January |
1999 and $1,526 and $1,601 in the three and six |
months ended June 30, 1998, respectively........... 2,409 3,808 | 445 4,116 9,916
|
Depreciation and amortization ....................... 1,809 3,001 | 622 2,297 4,570
----------- ---------- | ---------- ----------- ----------
Total expenses.................................. 35,828 59,879 | 15,341 52,279 111,775
----------- ---------- | ---------- ----------- ----------
Loss from operations................................... (4,879) (6,996) | (2,448) (4,156) (8,975)
Reorganization expenses ............................... -- -- | 54,597 868 868
----------- ---------- | ---------- ----------- ----------
Loss before income taxes and extraordinary credit...... (4,879) (6,996) | (57,045) (5,024) (9,843)
Income tax benefit..................................... -- -- | -- -- --
----------- ---------- | ---------- ----------- ----------
Loss before extraordinary credit....................... (4,879) (6,996) | (57,045) (5,024) (9,843)
Extraordinary credit - gain on debt discharge.......... -- -- | 113,242 -- --
----------- ---------- | ---------- ----------- ----------
Net income (loss)...................................... $ (4,879) $ (6,996) | $ 56,197 $ (5,024) $ (9,843)
=========== ========== | ========== =========== ==========
Net income (loss) per share: |
Loss before income taxes and extraordinary credit.... $ (0.64) $ (0.92) | $ (8.88) $ (0.78) $ (1.53)
Extraordinary credit - gain on debt discharge........ -- -- | 17.63 -- --
----------- ---------- | ---------- ----------- ----------
Net income (loss) per share.......................... $ (0.64) $ (0.92) | $ 8.75 $ (0.78) $ (1.53)
=========== ========== | ========== =========== ==========
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
Five Months | One Month Six Months
Ended | Ended Ended
June 30, | January 31, June 30,
1999 | 1999 1998
----------- | ----------- ----------
<S> <C> | <C> <C>
Net cash provided by (used in) operating activities (including changes |
in all operating assets and liabilities).................................. $ (2,447) | $ (2,937) $ 4,897
---------- | ---------- ----------
INVESTING ACTIVITIES: |
Purchase of equipment and leasehold improvements............................. (1,367) | (218) (1,523)
Sale of assets............................................................... 1,220 | -- --
(Increase) decrease in lease and insurance deposits.......................... 1,141 | (13) (1,165)
---------- | ---------- ----------
Net cash provided by (used in) investing activities.......................... 994 | (231) (2,688)
---------- | ---------- ----------
FINANCING ACTIVITIES: |
Net increase (decrease) in revolving lines of credit......................... 5,552 | 1,012 (1,552)
Debt payments................................................................ (511) | (10) (1,365)
Change in bank overdrafts.................................................... (2,006) | 2,611 (239)
Increase in deferred financing costs......................................... (49) | -- (56)
---------- | ---------- ----------
Net cash provided by (used in) financing activities.......................... 2,986 | 3,613 (3,212)
---------- | ---------- ----------
REORGANIZATION ACTIVITIES: |
Cash paid to settle bankruptcy claims........................................ -- | (15,684) --
---------- | ---------- ----------
Net increase (decrease) in cash.............................................. 1,533 | (15,239) (1,003)
Cash and cash equivalents at beginning of period............................. 1,624 | 16,863 5,295
---------- | ---------- ----------
Cash and cash equivalents at end of period................................... $ 3,157 | $ 1,624 $ 4,292
========== | ========== ==========
Cash paid for: |
Interest $ 2,390 | $ 410 $ 1,975
Income taxes 45 | -- --
</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
June 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 five months ended June 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 $1.2 million and $1.7 million for the
three months and five months ended June 30, 1999, and $1.4 million, $904,000,
and $1.2 million for the one month ended January 31, 1999, and the three months
and six months ended June 30, 1998, respectively. The allowance for doubtful
6
<PAGE>
accounts totaled $3.7 million at June 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
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 certain 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 and other general unsecured claims.
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 aggregate amount of these general
unsecured claims was approximately $137.5 million.
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
8
<PAGE>
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 "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
========= ========= ======== ========
- -------------------------------
<FN>
(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.
</FN>
</TABLE>
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.
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
11
<PAGE>
receive one share of RainTree common stock upon the earlier of April 28, 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
$393,000 in the 1999 second quarter.
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 Five Months | One Month Three Months Six Months
Ended Ended | Ended Ended Ended
June 30, June 30, | January 31, June 30, June 30,
1999 1999 | 1999 1998 1998
------------ ----------- | ----------- ------------ ----------
<S> <C> <C> | <C> <C> <C>
Revenues from nonrelated entities: |
Long-term care..................................... $ 26,639 $ 44,304 | $ 10,142 $36,032 $ 76,982
Rehabilitation therapy............................. 303 1,775 | 715 3,328 6,828
Pharmacy........................................... 2,151 3,538 | 729 2,606 5,013
Laboratory......................................... 1,533 2,857 | 482 1,504 2,957
Corporate.......................................... 323 409 | 50 21 55
-------- -------- | -------- ------- --------
Total............................................ $ 30,949 $ 52,883 | $ 12,118 $43,491 $ 91,835
======== ======== | ======== ======= ========
Total revenues: |
Long-term care..................................... $ 26,639 $ 44,304 | $ 10,142 $36,032 $ 76,982
Rehabilitation therapy............................. 1,090 3,426 | 1,152 6,547 14,899
Pharmacy........................................... 2,663 4,401 | 1,039 4,019 7,907
Laboratory......................................... 1,610 2,993 | 510 1,504 2,957
Corporate.......................................... 1,941 3,227 | 676 2,379 5,086
Eliminations....................................... (2,994) (5,468) | (626) (2,358) (5,031)
-------- -------- | -------- ------- --------
Total............................................ $ 30,949 $ 52,883 | $ 12,893 $48,123 $102,800
======== ======== | ======== ======= ========
Operating income (loss): |
Long-term care..................................... $ 17 $ 221 | $ (251) $ (628) $ (1,411)
Rehabilitation therapy............................. (456) (816) | (1,476) (546) (155)
Pharmacy........................................... 75 41 | 140 780 1,547
Laboratory......................................... (280) (91) | (120) 58 (21)
Unallocated corporate expenses..................... (4,235) (6,351) | (741) (3,820) (8,935)
-------- -------- | -------- ------- --------
Consolidated operating loss...................... (4,879) (6,996) | (2,448) (4,156) (8,975)
Reorganization expenses.............................. -- -- | 54,597 868 868
-------- -------- | -------- ------- --------
Consolidated loss before income taxes and |
Extraordinary credit............................... $ (4,879) $ (6,996) | $(57,045) $(5,024) $ (9,843)
======== ======== | ======== ======= ========
June 30, | December 31,
1999 | 1998
-------- | ------------
Total assets: |
Long-term care.................................... $ 67,689 | $ 79,624
Rehabilitation therapy............................ 129 | 13,266
Pharmacy.......................................... 2,422 | 5,751
Laboratory........................................ 2,552 | 2,372
Corporate......................................... 55,561 | 73,732
Eliminations...................................... (216) | (4,205)
-------- | --------
Total.......................................... $128,137 | $170,540
======== | ========
</TABLE>
10. ISSUES IMPACTING LIQUIDITY
RainTree did not make the $1.3 million semiannual interest payment due July
1, 1999 on the Senior Secured Notes. The Indenture under which the Senior
Secured Notes were issued provides for a 45-day grace period before an event of
default occurs due to nonpayment of interest. The grace period for the July 1
payment expired on August 15, 1999. On August 16, 1999, the Company entered into
a forbearance agreement 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 agreement expires on August 20, 1999.
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. In
addition, a default under the Senior Secured Notes Indenture would result in a
13
<PAGE>
default under the Omega Master Lease, the Omega Returned Facilities Note and
RainTree's revolving credit agreement with 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
77.2% for the month of July 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.
The deferment of the interest payment will provide RainTree additional time
to increase occupancy and collect amounts due from Medicare. The Company
estimates that by January 1, 2000 it will collect between $3 million and $5
million from Medicare intermediaries related to cost report settlements and
routine cost limit exception requests. However, there can be no assurance that
the timing or amount of these payments will occur as expected, or that the
Company will be successful in increasing its occupancy. The Company's current
cash shortfall has forced it to consider other strategic alternatives, including
a possible 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. Both Omega and Health Partners have agreed not to exercise their
respective rights and remedies, as a result of the forbearance agreement with
the Senior Secured Note holders. Should the Company default on the Senior
Secured Notes, 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 $34,000 interest payment on the Whitehead Notes
that was due July 1, 1999 (Note 3). The Company did not make this payment
because these 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 Facility Note, Whitehead
Notes and borrowings from Health Partners as current liabilities on the
Company's consolidated balance sheet at June 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.
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" 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
14
<PAGE>
underlying these statements are reasonable, such 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 Indenture under which the Senior
Secured Notes were issued provides for a 45-day grace period before an event of
default occurs due to nonpayment of interest. The grace period for the July 1
payment expired on August 15, 1999. On August 16, 1999, the Company entered into
a forbearance agreement 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 agreement expires on August 20, 1999.
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 exercise their
right to accelerate this obligation, and the debt could become immediately due
and payable. In addition, a default under the Senior Secured Notes Indenture
would result in a default under the Omega Master Lease, the Omega Returned
Facilities Note and RainTree's revolving credit agreements with 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
77.2% for the month of July 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.
The deferment of the interest payment will provide RainTree additional time
to increase occupancy and collect amounts due from Medicare. The Company
estimates that by January 1, 2000 it will collect between $3 million and $5
million from Medicare intermediaries related to cost report settlements and
routine cost limit exception requests. However, there can be no assurance that
the timing or amount of these payments will occur as expected, or that the
Company will be successful in increasing its occupancy. The Company's current
cash shortfall has forced it to consider other strategic alternatives, including
a possible 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. Both Omega and Health Partners have agreed not to exercise their
respective rights and remedies, as a result of the forbearance agreement with
the Senior Secured Note holders. Should the Company default on the Senior
Secured Notes, 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 $34,000 interest payment on the Whitehead Notes
that was due July 1, 1999 (Note 3). The Company did not make this payment
because these 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 Facility Note, Whitehead
16
<PAGE>
Notes and borrowings from Health Partners as current liabilities on the
Company's consolidated balance sheet at June 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.
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 six months ended June 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 Six Months Ended
June 30, June 30,
---------------------- -----------------------
1999 1998 1999 (1) 1998
-------- ------- -------- --------
<S> <C> <C> <C> <C>
Total revenues............................................... $ 30,949 $48,123 $ 65,776 $102,800
Expenses:
Wages and related.......................................... 17,687 24,471 37,302 52,447
Other operating............................................ 10,861 17,693 23,788 37,176
Rent....................................................... 3,062 3,702 6,254 7,666
Interest (excludes contractual interest not accrued on
prepetition debt of $1,507 in the five months ended
June 30, 1999 and $1,526 and $1,601 in the three and
six months ended June 30, 1998, respectively )........... 2,409 4,116 4,253 9,916
Depreciation and amortization ............................. 1,809 2,297 3,623 4,570
-------- ------- -------- --------
Total expenses........................................ 35,828 52,279 75,220 111,775
-------- ------- -------- --------
Loss from operations......................................... (4,879) (4,156) (9,444) (8,975)
Reorganization expenses ..................................... -- 868 54,597 868
-------- ------- -------- --------
Loss before income taxes and extraordinary credit............ (4,879) (5,024) (64,041) (9,843)
Income tax benefit........................................... -- -- -- --
-------- ------- -------- --------
Loss before extraordinary credit............................. (4,879) (5,024) (64,041) (9,843)
Extraordinary credit - gain on debt discharge................ -- -- 113,242 --
-------- ------- -------- --------
Net income (loss)............................................ $ (4,879) $(5,024) $ 49,201 $ (9,843)
======== ======= ======== ========
- ---------------------------
<FN>
(1) This column represents the combination of historical results for the five
months ended June 30, 1999 for Reorganized RainTree and the one month ended
January 31, 1999 for the Predecessor Company.
</FN>
</TABLE>
The following table summarizes selected operating statistics.
At June 30,
---------------------
1999 1998
------ ------
Leased and Owned Facilities:
Number of facilities............................... 35 44
Number of licensed beds:
Long-term care.................................. 3,405 4,013
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 40
Laboratory Services:
Number of laboratories............................. 3 3
Nonaffiliated entities served...................... 356 228
18
<PAGE>
The following table identifies the Company's sources of net operating
revenues from nonaffiliated entities.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
-------------------- -------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Percentage of total revenues:
Long term care .............................. 87.1% 82.9% 84.5% 83.9%
Therapy services ............................ 1.0 7.6 3.8 7.4
Pharmacy services ........................... 7.0 6.0 6.6 5.5
Laboratory services ......................... 4.9 3.5 5.1 3.2
----- ----- ----- -----
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 Six Months Ended
June 30, June 30,
-------------------- -------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Medicare ......................................... 22.1% 29.9% 22.6% 30.9%
Private and other................................. 17.1 16.0 17.3 16.2
----- ----- ----- -----
Quality mix....................................... 39.2 45.9 39.9 47.1
Medicaid ......................................... 60.8 54.1 60.1 52.9
----- ----- ----- -----
Total........................................ 100.0% 100.0% 100.0% 100.0%
===== ===== ===== =====
AVERAGE OCCUPANCY
Nursing facilities............................... 78.0% 82.4% 78.0% 81.8%
Independent and assisted living facilities....... 49.9 58.8 51.7 59.2
</TABLE>
THREE MONTHS ENDED JUNE 30, 1999 COMPARED TO THREE MONTHS ENDED JUNE 30, 1998
In the 1999 second quarter, RainTree recorded a net loss of $4.9 million
compared to a net loss of $5.0 million in the prior year quarter. Net loss for
the 1998 second quarter includes reorganization expenses amounting to $868,000.
Loss from operations amounted to $4.9 million in the 1999 second quarter
compared to $4.2 million in the same period in 1998.
Total revenues decreased $17.2 million, or 35.7%, to $30.9 million in the
1999 second quarter from $48.1 million in the comparable 1998 quarter. Net
patient service revenues decreased from $47.8 million in the 1998 second quarter
to $30.6 million in the current period. Patient days decreased from 321,881 in
the 1998 period to 251,517 in the current period. Net patient service revenues
recorded by the long-term care facilities decreased by approximately $9.4
million, of which $5.1 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
the prior year quarter. The Company believes that the decrease in average
occupancy in 1999 is due primarily to the negative perception of RainTree as a
19
<PAGE>
result of the bankruptcy. 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 18% lower in fiscal
1999 than in 1998.
Therapy and pharmacy 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) the
pharmacy company's 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 outpatient
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 $6.8 million, or 27.7%, from $24.5
million in the 1998 second quarter to $17.7 million in the current quarter. The
decrease is due primarily to: (i) facility dispositions, which account for
approximately $2.7 million of the decrease; and (ii) a decrease in ancillary
company expenses of approximately $4.4 million. Most of the decrease in
ancillary company expense is related to therapy operations. Sunbelt has
experienced a decrease in the volume of services provided as a result of the
sale of contracts and of PPS, and has also changed its compensation structure in
order to control costs. In the 1999 second quarter, RainTree recorded
compensation expense amounting to $393,000 related to Restricted Stock Units
issued. See Note 7 of Notes to Consolidated Financial Statements.
Other operating expenses decreased $6.8 million, or 38.6%, from $17.7
million in the 1998 second quarter to $10.9 million in the 1999 second quarter.
Approximately $2.3 million of the decrease is due to the disposition of
facilities and $684,000 is attributable to the ancillary companies. 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 $320,000 from the prior year
period due to an increase in the age of nursing facility receivables.
Rent expense decreased from $3.7 million in the 1998 second quarter to $3.1
million in the 1999 period. The decrease is due primarily to the disposition of
facilities.
Interest expense amounted to $2.4 million in the 1999 second quarter
compared to $4.1 million in the 1998 second quarter. 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 $2.3 million in the
1998 second quarter to $1.8 million in the 1999 second quarter. The decrease is
due to the net reduction in intangible assets resulting from fresh start
reporting and the write-down of impaired assets in the fourth quarter of 1998.
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.
20
<PAGE>
SIX MONTHS ENDED JUNE 30, 1999 COMPARED TO SIX MONTHS ENDED JUNE 30, 1998
For the six-month period ended June 30, 1999, RainTree recorded net income
of $49.2 million compared to a net loss of $9.8 million in the prior year
period. The 1999 results include a $113.2 million gain on debt discharged in the
bankruptcy, as well as reorganization expenses amounting to $54.6 million.
RainTree recorded losses from operations amounting to $9.4 million in the 1999
period and $9.0 million in the 1998 period.
Total revenues decreased $37.0 million, or 36.0%, to $65.8 million in the
1999 period from $102.8 million in the comparable 1998 period. Net patient
service revenues decreased from $101.9 million in the 1998 period to $65.0
million in the current period. Patient days decreased from 683,873 in the 1998
period to 510,117 in the current period. Net patient service revenues recorded
by the long-term care facilities decreased by approximately $22.4 million, of
which $13.4 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 the negative perception of RainTree as a result of the
bankruptcy. 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 18% lower in fiscal 1999 than in 1998.
Therapy and pharmacy 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) the
ancillary companies' nursing facility 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 outpatient 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 $15.1 million, or 28.9%, from $52.4
million in the 1998 period to $37.3 million in the current period. The decrease
is due primarily to: (i) facility dispositions, which account for approximately
$7.2 million of the decrease; and (ii) a decrease in ancillary company expenses
of approximately $7.6 million. Most of the decrease in ancillary company expense
is related to therapy operations. Sunbelt has experienced a decrease in the
volume of services provided as a result of the sale of contracts and of PPS, and
has also changed its compensation structure in order to control costs. In the
1999 period, RainTree recorded compensation expense amounting to $393,000
related to Restricted Stock Units issued. See Note 7 of Notes to Consolidated
Financial Statements.
Other operating expenses decreased $13.4 million, or 36.0%, from $37.2
million in the 1998 period to $23.8 million in the current period. Approximately
$5.7 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 $1.9 from the prior year
period. The increase is due to Sunbelt receivables that were determined to be
uncollectible and an increase in the age of nursing facility receivables.
Rent expense decreased from $7.7 million in the 1998 period to $6.3 million
in the 1999 period. The decrease is due primarily to the disposition of
facilities.
21
<PAGE>
Interest expense amounted to $4.3 million in the 1999 period compared to
$9.9 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 $4.6 million in the
1998 period to $3.6 million in the current period. The decrease is due to the
net reduction in intangible assets resulting from fresh start reporting and the
write-down of impaired assets in the fourth quarter of 1998.
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
CASH FLOW PROVIDED BY OPERATING ACTIVITIES
RainTree had a cash balance of $3.2 million and a working capital deficit
of $41.0 million at June 30, 1999. Of this deficit, $35.1 million is due to the
current classification of long-term debt in default. See "--Recent
Developments."
RainTree's operating activities used net cash amounting to $2.4 million in
the five months ended June 30, 1999. The net outflow is due to the Company's
operating losses and fluctuations in current assets and liabilities.
Net accounts receivable decreased by approximately $5.7 million from
December 31, 1998 to June 30, 1999, primarily in connection with 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 17.8%. The percentage decrease is because the Sunbelt
receivables sold and disposition facilities' receivables that were written off
had a proportionately higher percentage of reserves for doubtful accounts. See
"-Results of Operations." 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 June 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.
CASH FLOWS FROM INVESTING AND FINANCING ACTIVITIES
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 Facility was
22
<PAGE>
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 June 30, 1999, borrowings
outstanding under the First Line totaled approximately $3.6 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 another $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 June 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 June 30, 1999.
Net cash provided by investing activities in the five months ended June 30,
1999 amounted to $994,000. The Company received $1.2 million in cash from the
sale of Sunbelt assets and lease and insurance deposits decreased by a net
amount of approximately $1.1 million. Routine capital expenditures amounted to
approximately $1.4 million.
Net cash provided by financing activities in the five months ended June 30,
1999 amounted to approximately $3.0 million, primarily as a result of a net
increase in borrowings.
At June 30, 1999, RainTree had approximately $76.6 million of total debt
and lease financing obligations. The Company also has aggregate minimum rent
obligations of approximately $132 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 merger or other business combinations. See "-- Recent Developments."
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. 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.
IMPACT OF THE YEAR 2000 ISSUE
Some of RainTree's information systems have time-sensitive software that
will not properly recognize the year 2000. Based on an on-going assessment, the
Company has determined that it will be required to modify or replace 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 modifications to existing software and conversions to new software, the
Company will be year 2000 ready by the end of 1999 and 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 will utilize 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 also
encompasses consideration of potential impacts on the Company's business
23
<PAGE>
operations. The Company is reviewing internal business operations and
relationships with external business partners to assess the current level of
compliance. RainTree is in the process of testing its systems and developing
contingency plans with the goal of achieving year 2000 readiness by October
1999.
During 1998 and the first quarter of 1999, RainTree replaced substantially
all of its computer equipment in connection with implementation of the Plan. The
Company believes the new equipment is year 2000 compliant. The Company estimates
that the incremental cost to upgrade existing software to make it year 2000
compliant will not exceed $150,000. As of June 30, 1999, the Company had
incurred approximately $50,000 of such costs.
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, 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, the Company believes that appropriate actions are being
taken and expects to complete its overall year 2000 remediation prior to any
anticipated 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 Unison's
business.
Reference is made to the securities class action lawsuits entitled Martin
Grossman, et al. v. Unison HealthCare Corporation, et al., USDC No. CIV 97-0583
PHX SMM (the "Federal Action"), and Jeffrey D. VanDyke v. Cruttenden Roth, Inc.,
Wheat First Butcher Singer, Individually and as Representatives of a Defendant
Underwriter Class, and Bruce H. Whitehead, Unison Healthcare Corp., John T.
Lynch, Jr., Trouver Capital Partners, L.P., Jerry M. Walker, Phillip R. Rollins,
Craig R. Clark, and Paul J. Contris, Case No. 779111 (Orange County Sup. Ct.)
(the "State Action") 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"). The
parties in the Federal Action reached a settlement that is expected to resolve
both the Federal and State Actions in their entirety. The settlement includes a
cash payment by the Company's primary insurer amounting to $4.25 million and
1,000,000 shares of old Common Stock. Under the Plan, old Common Stock was
converted into warrants; under the proposed settlement, class members who are to
receive RainTree shares will receive a pro rata share of such warrants. The
settlement was approved by the Bankruptcy Court on December 30, 1998 and by the
district court in the Federal Action on April 28, 1999.
24
<PAGE>
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 the First Quarter Form 10-Q.
Motions to dismiss the Colorado Action for lack of personal jurisdiction were
filed by the individual defendants, except for Jerry M. Walker. Mr. Walker filed
a motion to stay the Colorado Action pending plaintiffs' decision as to whether
they would participate in the settlement of the Securities Class Actions. 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. Mr. Walker's
motion to stay was granted because the Court was unable to determine whether the
plaintiffs have sufficiently met the legal requirements for "opting out" of the
Securities Class Actions.
Reference is made to an action styled Healthprime, Inc., HP/Healthcare
Acquirors, Inc., Markleysburg Healthcare Investors, L.P., Marshall Manor
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 granted the
defendants' motion to dismiss 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.
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 Indenture under which the Senior
Secured Notes were issued provides for a 45-day grace period before an event of
default occurs due to nonpayment of interest. The grace period for the July 1
payment expired on August 15, 1999. On August 16, 1999, the Company entered into
a forbearance agreement 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 agreement expires on August 20, 1999.
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. In
addition, a default under the Senior Secured Notes Indenture would result in a
default under the Omega Master Lease, the Omega Returned Facilities Note and
RainTree's revolving credit agreement with 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. Both Omega and Health Partners have agreed not to exercise their
25
<PAGE>
respective rights and remedies, as a result of the forbearance agreement with
the Senior Secured Note holders. Should the Company default on the Senior
Secured Notes, 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 $34,000 interest payment on the Whitehead Notes
that was due July 1, 1999 (Note 3). The Company did not make this payment
because these notes are subordinate to the Senior Secured Notes.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
10.1 Employment Agreement dated as of April 28, 1999 between RainTree
Healthcare Corporation and Michael A. Jeffries (incorporated by
reference to Exhibit 10.31 to the Company's Quarterly Report on
Form 10-Q for the period ended March 31, 1999)
10.2 Employment Agreement dated as of April 28, 1999 between RainTree
Healthcare Corporation and Jim Fields (incorporated by reference
to Exhibit 10.32 to the Company's Quarterly Report on Form 10-Q
for the period ended March 31, 1999)
10.3 Employment Agreement dated as of April 28, 1999 between RainTree
Healthcare Corporation and Nir E. Margalit (incorporated by
reference to Exhibit 10.33 to the Company's Quarterly Report on
Form 10-Q for the period ended March 31, 1999)
10.4 Employment Agreement dated as of April 28, 1999 between RainTree
Healthcare Corporation and Terry Troxell (incorporated by
reference to Exhibit 10.34 to the Company's Quarterly Report on
Form 10-Q for the period ended March 31, 1999)
10.5 Loan and Security Agreement dated May 11, 1999 by and among
RainTree Healthcare Corporation, BritWill Healthcare Company,
BritWill Funding Corporation, Cedar Care, Inc., Sherwood
Healthcare Corp., BritWill Investments-I, Inc., BritWill
Investments-II, Inc., BritWill Indiana Partnership, Brookshire
House, Inc., Christopher Nursing Center, Inc., Amberwood Court,
Inc., The Arbors Health Care Corporation, Los Arcos, Inc., Pueblo
Norte, Inc., Rio Verde Nursing Center, Inc., Signature Health
Care Corporation, Signature Management Group, Inc., and HCFP
Funding, Inc. (incorporated by reference to Exhibit 10.36 to the
Company's Quarterly Report on Form 10-Q for the period ended
March 31, 1999)
10.6 Revolving Credit Note dated May 11, 1999 by and among RainTree
Healthcare Corporation, BritWill Healthcare Company, BritWill
Funding Corporation, Cedar Care, Inc., Sherwood Healthcare Corp.,
BritWill Investments-I, Inc., BritWill Investments-II, Inc.,
BritWill Indiana Partnership, Brookshire House, Inc., Christopher
Nursing Center, Inc., Amberwood Court, Inc., The Arbors Health
Care Corporation, Los Arcos, Inc., Pueblo Norte, Inc., Rio Verde
Nursing Center, Inc., Signature Health Care Corporation,
Signature Management Group, Inc., and HCFP Funding, Inc.
(incorporated by reference to Exhibit 10.37 to the Company's
Quarterly Report on Form 10-Q for the period ended March 31,
1999)
27 Financial Data Schedule (included only in the EDGAR filing)
26
<PAGE>
(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: August 19, 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)
27
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM RAINTREE'S
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE 5 MOS ENDED JUNE 30, 1999
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH CONSOLIDATED FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 5-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> FEB-01-1999 <F1>
<PERIOD-END> JUN-30-1999
<CASH> 3,157
<SECURITIES> 0
<RECEIVABLES> 20,578
<ALLOWANCES> 3,654
<INVENTORY> 1,530
<CURRENT-ASSETS> 23,151
<PP&E> 53,710
<DEPRECIATION> 8,041
<TOTAL-ASSETS> 128,137
<CURRENT-LIABILITIES> 64,164
<BONDS> 75,752
0
0
<COMMON> 8
<OTHER-SE> 13,070
<TOTAL-LIABILITY-AND-EQUITY> 128,137
<SALES> 0
<TOTAL-REVENUES> 52,883
<CGS> 0
<TOTAL-COSTS> 46,272
<OTHER-EXPENSES> 8,143
<LOSS-PROVISION> 1,656
<INTEREST-EXPENSE> 3,808
<INCOME-PRETAX> (6,996)
<INCOME-TAX> 0
<INCOME-CONTINUING> (6,996)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,996)
<EPS-BASIC> (.92)
<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>
