<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
Date of Report (Date of earliest event reported):
November 18, 1998
NEW AMERICAN HEALTHCARE CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 001-14397 62-1750169
- ------------------------------- ---------------- ----------------------
(State or other jurisdiction of (Commission File (Employer
incorporation) Number) Identification Number)
109 Westpark Drive, Suite 440, Brentwood, Tennessee 37027
- --------------------------------------------------------------------------------
(Address of principal executive offices)
(615) 221-5070
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Not applicable
- --------------------------------------------------------------------------------
(Former name or former address,
if changed since last report)
<PAGE> 2
Item 7 (Financial Statements and Exhibits) of the Current Report on
Form 8-K filed on November 18, 1998, are amended and restated in their entirety
as follows:
(a) Financial Statements of Business Acquired
(i) Independent Auditors' Report.
(ii) Balance sheets of Memorial Hospital of Adel, Inc. as of
September 30, 1998 (unaudited) and June 30, 1998 and 1997.
(iii) Statements of operations, changes in stockholders' equity and
cash flows for the three months ended September 30, 1998 and
1997 (unaudited) and the two years ended June 30, 1998.
(iv) Notes to Financial Statements.
(b) Pro Forma Condensed Combined Financial Information
(i) Introductory information.
(ii) Unaudited pro forma condensed combined balance sheet of New
American Healthcare Corporation as of September, 1998.
(iii) Unaudited pro forma condensed combined statement of operations
of New American Healthcare Corporation for the year ended
March 31, 1998 and the six months ended September 30,
1998.
(iv) Notes to unaudited pro forma condensed combined statements of
operations.
(c) Exhibits. The exhibits filed as a part of this Report are listed in the
Index to Exhibits immediately following the signature page.
2
<PAGE> 3
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Memorial Hospital of Adel, Inc.:
We have audited the accompanying balance sheets of Memorial Hospital of Adel,
Inc. (the Company), as of June 30, 1998 and 1997, and the related statements of
operations, stockholders' equity and cash flows for the years then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Memorial Hospital of Adel, Inc.
as of June 30, 1998 and 1997, and the results of its operations and its cash
flows for the years then ended in conformity with generally accepted accounting
principles.
December 18, 1998
<PAGE> 4
MEMORIAL HOSPITAL OF ADEL, INC.
Balance Sheets
September 30, 1998 and June 30, 1998 and 1997
<TABLE>
<CAPTION>
JUNE 30,
SEPTEMBER 30, ----------------------------
ASSETS 1998 1998 1997
-------------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 1,490,668 1,440,564 593,692
Patient accounts receivable, net of allowances of
$853,000, $676,000 and $364,000 at September 30, 1998,
and June 30, 1998 and 1997, respectively 3,016,373 2,610,094 2,492,091
Related party receivables 27,561 116,950 411,693
Prepaid expenses and other current assets 276,172 292,555 248,331
Deferred income taxes 185,659 330,164 220,846
----------- --------- ---------
Total current assets 4,996,433 4,790,327 3,966,653
Property, plant and equipment, net 3,241,669 3,162,455 2,996,583
----------- --------- ---------
Total assets $ 8,238,102 7,952,782 6,963,236
=========== ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Capital leases obligations - current portion $ 30,275 31,179 10,237
Accounts payable 633,803 357,397 325,954
Accrued expenses 519,477 491,554 584,122
Estimated third-party payor settlements -- 125,000 169,000
----------- --------- ---------
Total current liabilities 1,183,555 1,005,130 1,089,313
Capital lease obligations, net of current portion 35,903 42,683 4,375
----------- --------- ---------
Total liabilities 1,219,458 1,047,813 1,093,688
----------- --------- ---------
Stockholders' equity:
Common stock, no par (authorized 10,000 shares, issued
and outstanding 1,000 shares) 170,845 170,845 170,845
Retained earnings 6,847,799 6,734,124 5,698,703
----------- --------- ---------
Total stockholders' equity 7,018,644 6,904,969 5,869,548
----------- --------- ---------
Total liabilities and stockholders' equity $ 8,238,102 7,952,782 6,963,236
=========== ========= =========
</TABLE>
See accompanying notes to financial statements.
2
<PAGE> 5
MEMORIAL HOSPITAL OF ADEL, INC.
Statements of Operations
Three months ended September 30, 1998 and 1997 and years ended
June 30, 1998 and 1997
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED JUNE 30,
--------------------------- ---------------------------
1998 1997 1998 1997
---------- --------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Net patient service revenues $4,116,416 3,536,525 15,189,185 13,331,038
Other revenue 61,501 106,562 862,225 814,512
---------- --------- ---------- ----------
Total operating revenues 4,177,917 3,643,087 16,051,410 14,145,550
Operating expenses:
Salaries and benefits 1,919,106 1,744,606 7,309,915 6,868,277
Professional fees 181,456 157,473 583,443 520,333
Supplies 562,562 550,565 2,257,165 1,964,694
Provision for doubtful accounts 513,119 301,412 1,463,410 1,117,392
Other 644,989 468,675 2,085,352 2,493,577
Depreciation and amortization 172,417 134,376 680,803 611,331
Interest 921 6 3,745 5,204
---------- --------- ---------- ----------
Total operating expenses 3,994,570 3,357,113 14,383,833 13,580,808
---------- --------- ---------- ----------
Operating income 183,347 285,974 1,667,577 564,742
Other income:
Interest income -- -- 27,656 30,847
Gain on sale of equipment -- -- 2,080 --
---------- --------- ---------- ----------
Net income before 183,347 285,974 1,697,313 595,589
income taxes
Income tax expense: 69,672 100,100 661,892 234,191
---------- --------- ---------- ----------
Net income $ 113,675 185,874 1,035,421 361,398
========== ========= ========== ==========
</TABLE>
See accompanying notes to financial statements.
3
<PAGE> 6
MEMORIAL HOSPITAL OF ADEL, INC.
Statements of Changes in Stockholders' Equity
Three months ended September 30, 1998 and years ended June 30, 1998 and 1997
<TABLE>
<CAPTION>
COMMON RETAINED
STOCK EARNINGS TOTAL
--------- --------- ---------
<S> <C> <C> <C>
Balance at June 30, 1996 $ 30,000 5,337,305 5,367,305
Shareholder contributions 140,845 -- 140,845
Net income -- 361,398 361,398
--------- --------- ---------
Balance at June 30, 1997 170,845 5,698,703 5,869,548
Net income -- 1,035,421 1,035,421
--------- --------- ---------
Balance at June 30, 1998 170,845 6,734,124 6,904,969
Net income (unaudited) -- 113,675 113,675
--------- --------- ---------
Balance at September 30, 1998 (unaudited) $ 170,845 6,847,799 7,018,644
========= ========= =========
</TABLE>
See accompanying notes to financial statements.
4
<PAGE> 7
MEMORIAL HOSPITAL OF ADEL, INC.
Statements of Cash Flows
Three months ended September 30, 1998 and years ended June 30, 1998 and 1997
<TABLE>
<CAPTION>
THREE MONTHS
ENDED YEAR ENDED JUNE 30,
SEPTEMBER 30, -----------------------------
1998 1998 1997
------------- ---------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 113,675 1,035,421 361,398
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 172,417 680,803 611,331
Provision for bad debts 513,119 1,463,410 1,117,392
Gain on sale of equipment -- (2,080) --
Deferred income taxes (benefit) 144,505 (118,619) (32,570)
Increase (decrease) in cash due to changes in:
Accounts receivable (919,398) (1,581,413) (1,373,700)
Prepaid expenses and other current assets 105,772 259,820 304,492
Accounts payable 276,406 31,443 (129,399)
Accrued expenses 27,923 (92,568) (29,137)
Estimated third-party payor settlements (125,000) (44,000) 169,000
----------- ----------- -----------
Net cash provided by operating activities 309,419 1,632,217 998,807
----------- ----------- -----------
Cash flows from investing activities:
Purchase of property and equipment (251,631) (761,073) (730,801)
Proceeds from sale of equipment -- 4,000 --
----------- ----------- -----------
Net cash used by investing activities (251,631) (757,073) (730,801)
----------- ----------- -----------
Cash flows from financing activities-
principal payments on capital lease obligations (7,684) (28,272) (48,821)
----------- ----------- -----------
Net increase in cash and cash equivalents 50,104 846,872 219,185
Cash and cash equivalents, beginning of period 1,440,564 593,692 374,507
----------- ----------- -----------
Cash and cash equivalents, end of period $ 1,490,668 1,440,564 593,692
=========== =========== ===========
SUPPLEMENTARY CASH FLOW INFORMATION:
Cash paid during the year for:
Interest $ 921 3,745 5,204
Income taxes -- 754,000 309,621
=========== =========== ===========
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Property and equipment acquired through capital lease agreements $ 74,148 87,522 7,927
Reclass shareholders' note payable to paid-in capital -- -- 140,845
Transfer of property from shareholder through shareholder note -- -- 158,126
=========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
5
<PAGE> 8
MEMORIAL HOSPITAL OF ADEL, INC.
Notes to Financial Statements
Years ended June 30, 1998 and 1997
(1) ORGANIZATION
Memorial Hospital of Adel, Inc. (the Company) was incorporated August
13, 1979. The Company acquired an acute care general hospital and
nursing home, including property, plant and equipment, from the
Hospital Authority of Cook County. The Company also operates a home
health agency. The Company began operations on January 1, 1980 as a
for-profit corporation, serving Adel, Georgia and the surrounding area.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) USE OF ESTIMATES
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.
(B) CASH AND CASH EQUIVALENTS
Cash and cash equivalents are considered to be cash on hand,
demand deposits and certificates of deposit with original
maturities of three months or less from the date of
acquisition.
(C) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are recorded at cost.
Depreciation is provided over the estimated useful life of
each class of depreciable asset which range from 5 to 20 using
the straight-line method. Equipment under capital leases is
amortized on the straight-line method over the shorter of the
lease term or the estimated useful life of the equipment. Such
amortization is included in depreciation and amortization in
the financial statements. Interest cost incurred on borrowed
funds during the period of construction of capital assets is
capitalized as a component of the cost of acquiring those
assets.
6 (Continued)
<PAGE> 9
MEMORIAL HOSPITAL OF ADEL, INC.
Notes to Financial Statements
Years ended June 30, 1998 and 1997
(D) NET PATIENT SERVICE REVENUES
Net patient service revenues are reported at the estimated net
realizable amounts from patients, third-party payors and
others for services rendered, including estimated retroactive
adjustments under reimbursement agreements with third-party
payors. Retroactive adjustments are accrued on an estimated
basis in the period the related services are rendered and
adjusted in future periods as final settlements are
determined.
The Company has agreements with third-party payors that
provide for payments to the Company at amounts different from
its established rates. A summary of the payment arrangements
with major third-party payors follows:
MEDICARE
Inpatient acute care services rendered to Medicare program
beneficiaries are paid at prospectively determined rates per
discharge. These rates vary according to a patient
classification system that is based on clinical, diagnostic,
and other factors. Inpatient nonacute services and certain
outpatient services related to Medicare beneficiaries are paid
based on a cost reimbursement methodology. The Company is
reimbursed for cost reimbursable items at a tentative rate
with final settlement determined after submission of an annual
cost report by the Company and audit thereof by the Medicare
fiscal intermediary. The Company's classification of patients
under the Medicare program and the appropriateness of their
admission are subject to an independent review by a peer
review organization under contract with the Company. The
Company's Medicare cost reports have been audited by the
Medicare fiscal intermediary through June 30, 1996.
MEDICAID
Inpatient services rendered to Medicaid program beneficiaries
are reimbursed under a hybrid system wherein some services,
based on a patient classification system, are reimbursed at a
fixed predetermined amount, while others are reimbursed on a
relationship of cost to charges. Outpatient services are
reimbursed at a tentative rate with final settlement after
submission of annual cost reports by the Company and audit
thereof by the Medicaid fiscal intermediary.
(E) CHARITY CARE
The Company provides care to patients who meet certain
criteria under its charity care policy without charge or at
amounts less than its established rates. Because the Company
does not pursue collection of amounts determined to qualify as
charity care, they are not reported as revenue.
7 (Continued)
<PAGE> 10
MEMORIAL HOSPITAL OF ADEL, INC.
Notes to Financial Statements
Years ended June 30, 1998 and 1997
(F) INCOME TAXES
The Company accounts for income taxes under the asset and
liability method. Under this method, deferred income taxes are
recognized for the tax consequences of "temporary differences"
by applying enacted statutory tax rates applicable to future
years to differences between the financial statement carrying
amounts and the tax bases of existing assets and liabilities.
The effect on deferred taxes of a change in tax rates is
recognized in income in the period that includes the enactment
date.
(G) INTERIM FINANCIAL STATEMENTS
The unaudited financial statements as of September 30, 1998
and for the three months ended September 30, 1998 and 1997
have been prepared in accordance with generally accepted
accounting principles for interim financial reporting and
Article 10 of Regulation S-X. Accordingly, they do not include
all of the information and footnotes required by generally
accepted accounting principles for complete financial
statements. In the opinion of management, these financial
statements contain all adjustments considered necessary for
fair presentation.
(3) PROPERTY, PLANT AND EQUIPMENT
A summary of property, plant and equipment as of June 30, 1998 and
1997, is as follows:
<TABLE>
<CAPTION>
1998 1997
----------- ----------
<S> <C> <C>
Land $ 33,161 33,161
Land improvements 66,033 65,525
Buildings and leasehold improvements 3,911,207 3,864,960
Furniture, fixtures and equipment 4,699,829 3,941,914
----------- ----------
8,710,230 7,950,560
Less: accumulated depreciation 5,547,775 4,908,977
----------- ----------
$ 3,162,455 2,996,583
=========== ==========
</TABLE>
Cost and accumulated depreciation on assets held under capital leases were
$94,947 and $19,500 at June 30, 1998, respectively.
8 (Continued)
<PAGE> 11
MEMORIAL HOSPITAL OF ADEL, INC.
Notes to Financial Statements
Years ended June 30, 1998 and 1997
(4) CAPITAL LEASES
The Company leases various equipment under lease agreements that have
been capitalized and noncancelable operating leases. A summary of
future minimum lease payments and the present value of future minimum
lease payments for the capitalized leases as of June 30, 1998 is as
follows:
<TABLE>
<CAPTION>
Year ending June 30, CAPITAL OPERATING
-------------------- -------- ---------
<S> <C> <C>
1999 $ 34,274 $179,035
2000 33,399 179,035
2001 12,335 159,433
2002 -- 117,165
2003 and later -- 104,184
-------- --------
80,008 $738,852
========
Less: amount representing interest ranging from 4.4% to 6% 6,146
--------
Capital lease obligations 73,862
Less: current capital lease obligations 31,179
--------
Capital lease obligations, excluding current portion $ 42,683
========
</TABLE>
Total rental expense was approximately $150,000 and $110,000 in 1998
and 1997, respectively.
(5) CONCENTRATIONS OF CREDIT RISK
The Company grants credit without collateral to its patients, most of
whom are local residents and are insured under third-party payor
agreements. The mix of receivables from patients and third-party payors
at June 30, 1998 and 1997 is as follows:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Medicare 29% 27%
Medicaid 18% 12%
Commercial insurance 38% 39%
Patients 15% 22%
--- ---
100% 100%
=== ===
</TABLE>
9 (Continued)
<PAGE> 12
MEMORIAL HOSPITAL OF ADEL, INC.
Notes to Financial Statements
Years ended June 30, 1998 and 1997
(6) INCOME TAXES
The components of income tax expense for the years ended June 30, 1998
and 1997 are summarized as follows:
<TABLE>
<CAPTION>
1998 1997
--------- -------
<S> <C> <C>
Current:
Federal $ 664,321 231,026
State 106,889 35,735
--------- -------
771,210 266,761
--------- -------
Deferred:
Federal (92,500) (27,560)
State (16,818) (5,010)
--------- -------
(109,318) (32,570)
--------- -------
$ 661,892 234,191
========= =======
</TABLE>
The actual income tax expense differs from the "expected" tax expense
(computed by applying the U.S. federal corporate income tax rate of 39%
to earnings before income taxes) as a result of the following:
<TABLE>
<CAPTION>
1998 1997
------- -------
<S> <C> <C>
Computed expected tax expense 661,952 232,280
Increase (reduction) in income
taxes resulting from:
Nondeductible expenses 977 1,911
Other (1,037) --
------- -------
661,892 234,191
======= =======
</TABLE>
10 (Continued)
<PAGE> 13
MEMORIAL HOSPITAL OF ADEL, INC.
Notes to Financial Statements
Years ended June 30, 1998 and 1997
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at
June 30, 1998 and 1997 are as follows:
<TABLE>
<CAPTION>
1998 1997
------- -------
<S> <C> <C>
Deferred tax assets:
Provision for doubtful accounts 263,499 142,098
Vacation pay 66,665 86,879
------- -------
Total gross deferred tax asset 330,164 228,977
Less: Valuation allowance -- (8,131)
------- -------
Total deferred tax assets 330,164 220,846
======= =======
</TABLE>
11 (Continued)
<PAGE> 14
MEMORIAL HOSPITAL OF ADEL, INC.
Notes to Financial Statements
Years ended June 30, 1998 and 1997
(7) COMMITMENTS AND CONTINGENCIES
The Company is involved in litigation and regulatory investigations
arising in the ordinary course of business. After consultation with
legal counsel, management estimates that these matters will be resolved
without a material adverse effect on the financial position or results
of operations.
The Company participates in a group employee health insurance plan, to
pay claims the Company's employees and their covered dependents. The
plan consists of an insured and a self-funded part. The total amount of
the Company's liability for a contract year, is $40,000 per month.
(8) RELATED PARTY TRANSACTIONS
Amounts included in the balance sheet as related party receivables
include a note receivable from a shareholder for $116,950 and $57,831
at June 30, 1998 and 1997, respectively. At June 30, 1997 the Company
has a receivable of $353,862 from two hospitals owned by the
shareholders of the Company for services and supplies provided to the
hospitals.
All of the outstanding stock of the Corporation is owned by one family.
A member of this family owns 100% of the outstanding stock of a
management company that was paid 4% of gross revenues through November
1997 when the contract was terminated for management services provided
to the Company. For the years ended June 30, 1998 and 1997, total
management fees paid were $317,508 and $690,664 respectively. The
home health agency rents a building from a company controlled by the
shareholders of the Company, at $5,000 per month with an unstated lease
term. An employee of the hospital operates a building repair service,
to which the Company paid repairs totaling $138,860 and $43,013,
respectively, during the years ended June 30, 1998 and 1997.
The Company purchased supplies totaling $106,845 during the year ended
June 30, 1998 from an office supply company in which a member of the
family owned for part of the year.
12 (Continued)
<PAGE> 15
MEMORIAL HOSPITAL OF ADEL, INC.
Notes to Financial Statements
Years ended June 30, 1998 and 1997
(9) SUBSEQUENT EVENT
Effective November 1, 1998, all of the outstanding stock of the Company
was sold for approximately $16,000,000.
13
<PAGE> 16
PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
(UNAUDITED)
The "New American Combined" column set forth in the unaudited pro forma
condensed combined balance sheet of the Company as of September 30, 1998 assumes
that the Lucius O. Crosby Memorial Hospital (Crosby Memorial Hospital) and
Memorial Hospital of Adel acquisitions had occurred on September 30, 1998.
The "New American as Adjusted" column set forth in the unaudited pro forma
condensed combined statement of operations for the six months ended September
30, 1998 assumes that the Puget Sound Hospital Acquisition and the application
of the net proceeds of the Company's initial public offering ("Offering")
received by the Company had occurred on April 1, 1998. The "New American as
Adjusted" column for the year ended March 31, 1998 assumes that the Memorial
Hospital of Center, Delta Medical Center-Memphis, Dolly Vinsant Memorial
Hospital, Davenport Medical Center, Lander Valley Medical Center, Woodland Park
Hospital, Eastmoreland Hospital and Puget Sound Hospital Acquisitions ("Hospital
Acquisitions") and the application of the net proceeds of the Offering received
by the Company had occurred on April 1, 1997. The "New American Combined" column
set forth in the unaudited pro forma condensed combined statement of operations
for the six months ended September 30, 1998 assumes that the Crosby Memorial
Hospital Acquisition, the Memorial Hospital of Adel Acquisition, the Puget Sound
Hospital Acquisition and the application of the net proceeds of the Offering
received by the Company had occurred on April 1, 1998. The "New American
Combined" column for the year ended March 31, 1998 assumes that the Hospital
Acquisitions, the application of the net proceeds of the Offering received by
the Company, the Memorial Hospital of Adel Acquisition and the Crosby Memorial
Hospital Acquisition had occurred on April 1, 1997. Crosby Memorial Hospital and
Memorial Hospital of Adel have December 31 and June 30 fiscal year ends,
respectively. For purposes of the March 31, 1998 pro forma presentation, the
fiscal years of Crosby Memorial Hospital and Memorial Hospital of Adel have been
combined with the Company's fiscal year. For the six months ended September 30,
1998, the same six month periods for each hospital have been combined with the
Company. Therefore, the three months ended March 31, 1998 have been excluded
from pro forma presentation for Crosby Memorial Hospital and the three months
ended June 30, 1998 have been included in both periods presented for Memorial
Hospital of Adel.
The unaudited pro forma condensed combined financial information presented
herein are not necessarily indicative of the Company's combined financial
position or the results of operations that actually would have occurred if the
transactions had been consummated on such dates. In addition, they are not
intended to be a projection of results of operations that may be obtained in the
Company's future. The pro forma results of operations, which do not take into
account certain operational changes instituted by the Company upon acquisition
of its hospitals, are not necessarily indicative of the results that may be
expected from such hospitals. The unaudited pro forma condensed combined
financial information should be read in conjunction with the Company's audited
financial statements, including the notes thereto.
<PAGE> 17
NEW AMERICAN HEALTHCARE CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1998
----------------------------------------------------------
MEMORIAL NEW
NEW CROSBY HOSPITAL PRO FORMA AMERICAN
AMERICAN MEMORIAL OF ADEL ADJUSTMENTS COMBINED
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash.................................................... $ 1,714 $ 380 $ 1,491 $ (355)(1) $ 2,850
(380)(2)
Patient accounts receivable............................. 28,325 5,892 3,016 (1,918)(1) 35,315
Prepaid expenses and other current assets............... 7,113 883 489 -- 8,485
-------- ------- ------- ------- --------
Total current assets.................................. 37,152 7,155 4,996 (2,653) 46,650
Property and equipment, net............................... 105,153 3,431 3,242 3,097(1) 114,923
Goodwill, net............................................. 21,029 -- -- 19,419(1) 40,448
Other assets, net......................................... 1,413 472 -- 300(1) 1,935
(250)(2)
-------- ------- ------- ------- --------
Total assets.......................................... $164,747 $11,058 $ 8,238 $19,913 $203,956
======== ======= ======= ======= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses................... $ 16,423 $ 2,235 $ 1,153 $ (134)(2) $ 19,677
Estimated third-party payor settlements................. 6,048 -- -- -- 6,048
Current portion of capital lease obligations............ 284 232 30 -- 546
Current portion of long-term debt....................... -- 214 -- (214)(2) --
-------- ------- ------- ------- --------
Total current liabilities............................. 22,755 2,681 1,183 (348) 26,271
-------- ------- ------- ------- --------
Capital lease obligations, less current portion........... 4,769 632 36 -- 5,437
Long-term debt............................................ 53,550 84 -- (84)(2) 88,575
35,025(1)
Deferred income taxes..................................... 1,339 -- -- -- 1,339
Stockholders' equity:
Non-voting common stock................................. 14 -- -- -- 14
Common stock............................................ 156 -- 30 (30)(1) 156
Additional paid-in capital.............................. 82,088 -- 141 (141)(1) 82,088
Common stock warrants................................... 235 -- -- -- 235
Deferred compensation................................... (561) -- -- -- (561)
Retained earnings....................................... 402 7,661 6,848 (14,509)(1) 402
-------- ------- ------- ------- --------
Total stockholders' equity............................ 82,334 7,661 7,019 (14,680) 82,334
-------- ------- ------- ------- --------
Total liabilities and stockholders' equity............ $164,747 $11,058 $ 8,238 $19,913 $203,956
======== ======= ======= ======= ========
</TABLE>
NEW AMERICAN HEALTHCARE CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
(IN THOUSANDS)
(1) To record the Crosby Memorial Hospital Acquisition for approximately $19,400
and the Memorial Hospital of Adel Acquisition for approximately $16,585
financed by $35,025 of long-term debt and $355 of cash. The total purchase
adjustments were allocated as follows: accounts receivable of ($1,918);
property and equipment of $3,097; goodwill of $19,419; prepaid rent of $300
common stock of $30 additional paid-in capital of $141 and retained earnings
of $14,509.
(2) To exclude certain assets and liabilities that were not acquired or assumed
by New American primarily related to cash of $380; assets whose use is
limited of $250 accrued expenses of $134; current portion of long-term debt
of $214 and long-term debt of $84.
<PAGE> 18
NEW AMERICAN HEALTHCARE CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
SIX MONTHS ENDED SEPTEMBER 30, 1998
---------------------------------------------------------------------------------------------------
NEW MEMORIAL NEW
NEW PUGET PRO FORMA AMERICAN CROSBY HOSPITAL PRO FORMA AMERICAN
AMERICAN SOUND(1) ADJUSTMENTS AS ADJUSTED MEMORIAL OF ADEL ADJUSTMENTS COMBINED
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Net patient service
revenue.................... 71,726 11,520 -- 83,246 10,149 8,265 -- 101,660
Other revenue................ 2,134 315 -- 2,449 233 504 -- 3,186
------ ------ ------ ------ ------ ------ ------ -------
Net operating
revenues............ 73,860 11,835 -- 85,695 10,382 8,769 -- 104,846
------ ------ ------ ------ ------ ------ ------ -------
Expenses:
Salaries and benefits........ 33,146 5,673 -- 38,819 4,478 3,800 -- 47,097
Professional fees............ 9,628 968 -- 10,596 2,096 309 -- 13,001
Supplies..................... 7,939 1,687 -- 9,626 1,246 1,160 -- 12,032
Provision for doubtful
accounts................... 6,098 349 -- 6,447 1,572 1,220 -- 9,239
Other........................ 7,881 2,203 (399)(2) 9,685 478 1,188 (102)(8) 11,244
50(9)
(55)(10)
General and administrative... 1,432 -- -- 1,432 -- -- -- 1,432
Depreciation and
amortization............... 2,634 391 495(3) 3,129 314 307 (621)(11) 3,701
(391)(3) 572 (11)
Interest expense............. 3,098 -- 881(4) 2,556 47 2 1,390(12) 3,979
(1,423)(5) (16)(12)
------ ------ ------ ------ ------ ------ ------ -------
Total operating
expenses............ 71,856 11,271 (837) 82,290 10,231 7,986 1,218 101,725
------ ------ ------ ------ ------ ------ ------ -------
Income before
income taxes........ 2,004 564 837 3,405 151 783 (1,218) 3,121
Income taxes................... 802 -- 560(6) 1,362 -- 298 (412)(6) 1,248
------ ------ ------ ------ ------ ------ ------ -------
Net income................... 1,202 564 277 2,043 151 485 (806) 1,873
Cumulative preferred
dividends.................... 710 -- (710)(7) -- -- -- -- --
------ ------ ------ ------ ------ ------ ------ -------
Net income available
to common stockholders..... 492 564 987 2,043 151 485 (806) 1,873
====== ====== ====== ====== ====== ====== ====== =======
Pro forma net income per common
share:
Basic........................ $ .14 $ .13
Diluted...................... .11 .10
====== ======
Weighted average shares
outstanding:
Basic........................ 14,350 14,350
Diluted...................... 18,110 18,110
====== ======
</TABLE>
<PAGE> 19
NEW AMERICAN HEALTHCARE CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED
COMBINED STATEMENTS OF OPERATIONS
SIX MONTHS ENDED SEPTEMBER 30, 1998
(IN THOUSANDS)
(1) To record the historical operations of the Puget Sound Hospital Acquisition
for the period April 1, 1998 through August 31, 1998, the date of
acquisition by the Company.
(2) To eliminate management fees in the amount of $399 that would not have been
incurred had the Puget Sound Hospital Acquisition been consummated on April
1, 1998.
(3) To record depreciation and amortization for the Puget Sound Acquisition in
the amount of $495 as if it had been acquired on April 1, 1998 and
elimination of historical depreciation and amortization in the amount of
$391 recorded prior to the date of acquisition.
(4) To record interest expense for the Puget Sound Acquisition in the amount of
$881 relating to acquisition debt of approximately $24,000 at 8.8% as if
it had been incurred on April 1, 1998.
(5) To record the elimination of interest expense in the amount of $1,423 on
average acquisition debt of approximately $37,950 at a weighted average
interest rate of 9.5% that was paid off with a portion of the net proceeds
of the Offering, as if the Offering had occurred on April 1, 1998.
(6) To record tax expense at the expected combined income tax rate of 40%.
(7) To record the elimination of cumulative preferred dividends in the amount
of $710 on Series A Preferred Stock that were repaid in the Company's
reincorporation in August 1998.
(8) To eliminate management fees in the amount of $102 that would not have been
incurred had Crosby Memorial Hospital been acquired on April 1, 1998.
(9) To record lease expense in the amount of $50 on the Crosby Memorial
Hospital Acquisition as if it had been acquired on April 1, 1998.
(10) To eliminate costs incurred at Crosby Memorial Hospital to consummate the
sale process in the amount of $55.
(11) To record depreciation and amortization for the Crosby Memorial Hospital
and Memorial Hospital of Adel Acquisitions in the amount of $572 as if it
had been acquired on April 1, 1998 and elimination of historical
depreciation and amortization in the amount of $621 recorded prior to the
date of acquisition which had been recorded on a higher cost basis.
(12) To record interest expense for the Crosby Memorial Hospital Acquisition in
the amount of $1,390 relating to acquisition debt of approximately $35,025
at a weighted average interest rate of 7.9% as if it had been incurred on
April 1, 1998 and elimination of historical interest expense in the amount
of $16 recorded prior to the date of acquisition for debt not assumed.
<PAGE> 20
NEW AMERICAN HEALTHCARE CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31, 1998
----------------------------------------------------------------------------------------------------------
NEW MEMORIAL NEW
NEW ACQUIRED PRO FORMA AMERICAN CROSBY HOSPITAL PRO FORMA AMERICAN
AMERICAN HOSPITALS(1) ADJUSTMENTS AS ADJUSTED MEMORIAL OF ADEL ADJUSTMENTS COMBINED
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Net patient service
revenue........... $73,725 $94,817 $ -- $168,542 $19,299 $15,189 $ -- $203,030
Other revenue....... 1,924 2,880 -- 4,804 485 892 -- 6,181
------- ------- -------- -------- ------- ------- ------- --------
Net operating
revenues........ 75,649 97,697 -- 173,346 19,784 16,081 -- 209,211
------- ------- -------- -------- ------- ------- ------- --------
Expenses:
Salaries and
benefits.......... 31,276 47,094 -- 78,370 8,016 7,310 -- 93,696
Professional fees... 8,608 11,941 -- 20,549 3,171 583 -- 24,303
Supplies............ 8,314 9,253 -- 17,567 3,053 2,257 -- 22,877
Provision for
doubtful
accounts.......... 7,837 6,968 -- 14,805 2,895 1,463 -- 19,163
Other............... 9,286 15,545 (2,131)(2) 22,700 1,075 2,086 (415)(9) 25,546
100(10)
General and
administrative.... 3,484 -- 905(3) 4,389 -- -- -- 4,389
Depreciation and
amortization...... 2,836 4,614 (4,614)(4) 6,510 540 681 (1,221)(11) 7,653
3,674(4) 1,143(11)
Interest expense.... 2,637 3,011 (2,651)(5) 4,533 156 4 2,781(12) 7,443
5,489(5) (31)(12)
(3,953)(6)
------- ------- -------- -------- ------- ------- ------- --------
74,278 98,426 (3,281) 169,423 18,906 14,384 2,357 205,070
------- ------- -------- -------- ------- ------- ------- --------
Income (loss)
before income
taxes........... 1,371 (729) 3,281 3,923 878 1,697 (2,357) 4,141
Income taxes.......... 579 89 902(7) 1,570 -- 662 (576)(7) 1,656
------- ------- -------- -------- ------- ------- ------- --------
Net income (loss)... 792 (818) 2,379 2,353 878 1,035 (1,781) 2,485
Cumulative preferred
dividends........... 617 -- (617)(8) -- -- -- -- --
------- ------- -------- -------- ------- ------- ------- --------
Net income (loss)
attributable to
common
stockholders...... $ 175 $ (818) $ 2,996 $ 2,353 $ 878 $ 1,035 $(1,781) $ 2,485
======= ======= ======== ======== ======= ======= ======= ========
Pro forma net income
per common share:
Basic............... $ 0.13 $ .14
Diluted............. 0.13 .14
======== ========
Weighted average
shares outstanding:
Basic............... 17,595 17,595
Diluted............. 17,707 17,707
======== ========
</TABLE>
<PAGE> 21
NEW AMERICAN HEALTHCARE CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED
COMBINED STATEMENTS OF OPERATIONS
YEAR ENDED MARCH 31, 1998
(IN THOUSANDS)
(1) To record the historical operations of the Hospital Acquisitions for the
period April 1, 1997 through March 31, 1998 or the date of acquisition by
the Company.
(2) To eliminate management fees in the amount of $2,131 that would not have
been incurred had the Hospital Acquisitions been consummated on April 1,
1997.
(3) To record estimated additional administrative salaries in the amount of
$905, representing the total additional incremental costs to manage
acquired and to be acquired hospitals, that would have been incurred had
the Hospital Acquisitions been consummated on April 1, 1997.
(4) To record depreciation and amortization for the Hospital Acquisitions in
the amount of $3,674 as if they had been acquired on April 1, 1997 and
elimination of historical depreciation and amortization in the amount of
$4,614 recorded prior to the date of acquisition which had been recorded on
a higher cost basis.
(5) To record interest expense for the Hospital Acquisitions in the amount of
$5,489 relating to acquisition debt of approximately $86,550 at a weighted
average interest rate of 7.94% (excluding previous interest recognized on
acquisition debt of $2,615) as if it had been incurred on April 1, 1997 and
elimination of historical interest expense in the amount of $2,651 recorded
prior to the date of acquisition for debt not assumed.
(6) To record the elimination of interest expense in the amount of $3,953 on
average acquisition debt of approximately $39,530 at a weighted average
interest rate of 10% that will be paid off with a portion of the net
proceeds of the Offering, as if the Offering had occurred on April 1, 1997.
(7) To record tax expense at the expected combined income tax rate of 40%.
(8) To record the elimination of cumulative preferred dividends in the amount
of $617 on Series A Preferred Stock that was converted into cash.
(9) To eliminate management fees in the amount of $415 that would not have been
incurred had Crosby Memorial Hospital been acquired on April 1, 1997.
(10) To record lease expense on the Crosby Memorial Hospital Acquisition in the
amount of $100 as if it had been acquired on April 1, 1997.
(11) To record depreciation and amortization for the Crosby Memorial Hospital
Acquisition in the amount of $1,143 as if it had been acquired on April 1,
1997 and elimination of historical depreciation and amortization in the
amount of $1,221 recorded prior to the date of acquisition.
(12) To record interest expense for the Crosby Memorial Hospital Acquisition in
the amount of $2,781 relating to acquisition debt of approximately $35,025
at 7.9% as if it had been incurred on April 1, 1997 and elimination of
historical interest expense in the amount of $31 recorded prior to the date
of acquisition for debt not assumed.
<PAGE> 22
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.
NEW AMERICAN HEALTHCARE CORPORATION
By: /s/ Dana C. McLendon, Jr.
--------------------------------------
Name: Dana C. McLendon, Jr.
Title: Chief Financial Officer
Date: January 19, 1999
