<PAGE> 1
================================================================================
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, 1998
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For The Transition Period From _____________ To ____________
---------------------------
PROVINCE HEALTHCARE COMPANY
(Exact name of registrant as specified in its charter)
DELAWARE 0-23639 62-1710772
(State or other jurisdiction of (Commission File Number) (I.R.S. Employer
incorporation or organization) Identification No.)
105 WESTWOOD PLACE
SUITE 400
BRENTWOOD, TENNESSEE 37027
(Address of principal executive offices) (zip code)
(615) 370-1377
(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
---- -----
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding at July 23, 1998
COMMON STOCK, $.01 PAR VALUE 15,695,268
<PAGE> 2
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Condensed Consolidated Balance Sheets
June 30, 1998 and December 31, 1997 1
Condensed Consolidated Statements of Income
Three Months Ended June 30, 1998 and 1997 2
Condensed Consolidated Statements of Income
Six Months Ended June 30, 1998 and 1997 3
Condensed Consolidated Statements of Cash Flows
Six Months Ended June 30, 1998 and 1997 4
Notes to Condensed Consolidated Financial Statements 5
</TABLE>
<PAGE> 3
PROVINCE HEALTHCARE COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
-------- ---------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 3,664 $ 4,186
Accounts receivable, less allowance for doubtful
accounts of $6,679 at June 30, 1998 and
$4,749 at December 31, 1997 51,924 30,902
Inventories 6,008 3,655
Prepaid expenses and other 5,861 8,334
-------- ---------
Total current assets 67,457 47,077
Property, plant and equipment, net 107,167 65,974
Other assets:
Unallocated purchase price 2,075 760
Cost in excess of net assets acquired, net 142,345 53,624
Other assets 8,284 9,026
-------- ---------
Total assets $327,328 $ 176,461
======== =========
LIABILITIES, REDEEMABLE PREFERRED STOCK AND
COMMON STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 6,314 $ 6,524
Accrued salaries and benefits 10,394 8,720
Accrued expenses 3,594 4,422
Current maturities of long-term obligations 2,355 6,053
-------- ---------
Total current liabilities 22,657 25,719
Long-term obligations, less current maturities 191,435 83,043
Third-party settlements 6,195 4,680
Other liabilities 8,201 13,088
Minority interest 862 825
Mandatory redeemable preferred stock -- 50,162
Common stockholders' equity:
Common stock--no par value at December 31, 1997; $0.01 par value at June 30,
1998; authorized 25,000,000 shares; issued and outstanding 13,009,768
shares and 6,330,614 shares at June 30, 1998 and December 31, 1997,
respectively 130 2,116
Additional paid-in-capital 97,338 --
Retained earnings 510 (3,172)
-------- ---------
Total common stockholders' equity 97,978 (1,056)
-------- ---------
Total liabilities, redeemable preferred stock
and common stockholders' equity $327,328 $ 176,461
======== =========
</TABLE>
See accompanying notes.
1
<PAGE> 4
PROVINCE HEALTHCARE COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Three Months Ended June 30,
---------------------------
1998 1997
------- --------
<S> <C> <C>
Revenue:
Net patient service revenue $51,242 $ 35,264
Management and professional services 2,964 2,728
Reimbursable expenses 1,551 1,672
Other 875 425
------- --------
Net operating revenue 56,632 40,089
Expenses:
Salaries, wages and benefits 22,102 14,717
Reimbursable expenses 1,551 1,672
Purchased services 7,128 5,472
Supplies 5,535 3,943
Provision for doubtful accounts 4,296 3,493
Other operating expenses 4,814 3,722
Rentals and leases 1,208 1,255
Depreciation and amortization 3,342 1,841
Interest expense 2,805 2,210
Minority interest 28 78
Loss (gain) on sale of assets 12 (135)
------- --------
Total expenses 52,821 38,268
------- --------
Income before provision for income taxes 3,811 1,821
Provision for income taxes 1,677 833
------- --------
Net income 2,134 988
Preferred stock dividends and accretion -- (1,156)
------- --------
Net (loss) income to common shareholders $ 2,134 $ (168)
======= ========
Basic earnings (loss) per common share:
Net income $ 0.16 $ 0.18
Preferred stock dividends and accretion -- (0.21)
------- --------
Net income (loss) to common shareholders $ 0.16 $ (0.03)
======= ========
Diluted earnings (loss) per common share:
Net income $ 0.16 $ 0.18
Preferred stock dividends and accretion -- (0.21)
------- --------
Net (loss) income to common shareholders $ 0.16 $ (0.03)
======= ========
</TABLE>
See accompanying notes.
2
<PAGE> 5
PROVINCE HEALTHCARE COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Six Months Ended June 30,
---------------------------------------------------
Actual Pro Forma
------------------------------ (Note 9)
1998 1997 1998
--------- -------- --------
<S> <C> <C> <C>
Revenue:
Net patient service revenue $ 93,992 $ 69,769 $ 93,992
Management and professional services 5,894 5,980 5,894
Reimbursable expenses 3,112 3,379 3,112
Other 1,484 1,420 1,484
--------- -------- --------
Net operating revenue 104,482 80,548 104,482
Expenses:
Salaries, wages and benefits 40,708 30,117 40,708
Reimbursable expenses 3,112 3,379 3,112
Purchased services 13,162 10,517 13,162
Supplies 10,162 7,760 10,162
Provision for doubtful accounts 7,378 5,903 7,378
Other operating expenses 9,071 8,075 9,071
Rentals and leases 2,683 2,578 2,683
Depreciation and amortization 5,547 3,612 5,547
Interest expense 4,660 3,971 4,186
Minority interest 96 147 96
Loss gain on sale of assets 45 (51) 45
--------- -------- --------
Total expenses 96,624 76,008 96,150
--------- -------- --------
Income before provision for income taxes 7,858 4,540 8,332
Provision for income taxes 3,449 2,044 3,638
--------- -------- --------
Net income 4,409 2,496 4,694
Preferred stock dividends and accretion (696) (2,271) --
--------- -------- --------
Net income to common shareholders $ 3,713 $ 225 $ 4,694
========= ======== ========
Basic earnings per common share:
Net income $ 0.39 $ 0.46 $ 0.36
Preferred stock dividends and accretion (0.06) (0.42) --
--------- -------- --------
Net income to common shareholders $ 0.33 $ 0.04 $ 0.36
========= ======== ========
Diluted earnings per common share:
Net income $ 0.38 $ 0.39 $ 0.35
Preferred stock dividends and accretion (0.06) (0.35) --
--------- -------- --------
Net income to common shareholders $ 0.32 $ 0.04 $ 0.35
========= ======== ========
</TABLE>
See accompanying notes.
3
<PAGE> 6
PROVINCE HEALTHCARE COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Six Months Ended June 30
1998 1997
--------- --------
<S> <C> <C>
NET CASH USED IN OPERATING ACTIVITIES: $ (5,813) $ (1,259)
INVESTING ACTIVITIES
Purchase of property, plant and equipment (6,928) (4,307)
Purchase of acquired companies (129,196) --
Other (81) (121)
--------- --------
Net cash used in investing activities (136,205) (4,428)
FINANCING ACTIVITIES
Proceeds from long-term debt 211,342 1,315
Repayments of debt (109,290) (899)
Net proceeds from issuance of common stock 77,067 --
Exchange of Junior Preferred Stock (14,884) --
Redemption of Senior Preferred Stock (22,739) --
--------- --------
Net cash provided by financing activities 141,496 416
--------- --------
Net decrease in cash and cash equivalents (522) (5,271)
Cash and cash equivalents at beginning of period 4,186 11,256
--------- --------
Cash and cash equivalents at end of period $ 3,664 $ 5,985
========= ========
SUPPLEMENTAL CASH FLOW INFORMATION
Interest paid during the period $ 3,072 $ 3,169
========= ========
Income taxes paid during the period $ 1,538 $ 2,783
========= ========
NONCASH TRANSACTIONS
Dividends and accretion on preferred stock $ 696 $ 2,271
Conversion and redemption of preferred stock 33,138 --
Property and equipment acquired through
capital leases -- 706
ACQUISITIONS
Fair value of assets acquired $ 131,537 $ --
Liabilities assumed 2,341 --
--------- --------
Cash paid $ 129,196 $ --
========= ========
</TABLE>
See accompanying notes.
4
<PAGE> 7
PROVINCE HEALTHCARE COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
JUNE 30, 1998
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form 10-Q 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. Interim results are not necessarily
indicative of results that may be expected for the full year.
In the opinion of management, the accompanying interim financial
statements contain all material adjustments, consisting only of normal recurring
adjustments, necessary to present fairly the consolidated financial position,
results of operations and cash flows of Province Healthcare Company (the
"Company").
For further information, refer to the consolidated financial statements
and footnotes thereto included in the Company's Annual Report on Form 10-K for
the year ended December 31, 1997.
2. LONG-TERM DEBT
On March 30, 1998, the Company amended and restated its Credit
Agreement and increased its credit facilities to $260 million, including a
five-year $35 million End-Loaded Lease Facility ("ELLF"). At June 30, 1998, the
Company had $185.1 million outstanding under its revolving line of credit and no
amounts outstanding under the ELLF. In July 1998, the Company completed a public
offering of common stock and used the net proceeds therefrom to reduce debt by
approximately $65.7 million. (See Note 8.)
The Amended and Restated Credit Agreement contains limitations on the
Company's ability to incur additional indebtedness (including contingent
obligations), sell material assets, retire, redeem or otherwise reacquire its
capital stock, acquire the capital stock or assets of another business, and pay
dividends. The Amended and Restated Credit Agreement also requires the Company
to maintain a specified net worth and meet or exceed certain coverage, leverage,
and indebtedness ratios. Indebtedness under the Amended and Restated Credit
Agreement is secured by substantially all assets of the Company.
5
<PAGE> 8
3. EARNINGS (LOSS) PER SHARE
The following table sets forth the computation of basic and diluted
earnings (loss) per share (in thousands, except per share date):
<TABLE>
<CAPTION>
Three Months Ended June 30,
1998 1997
------- -------
<S> <C> <C>
Numerator:
Net income $ 2,134 $ 988
Preferred stock dividends and accretion -- (1,156)
------- -------
Net income (loss) to common shareholders $ 2,134 $ (168)
======= =======
Denominator:
Denominator for basic earnings per share to
common shareholders-weighted-average shares 13,010 5,371
Effect of dilutive securities -
Incentive stock options 368 406
Stock purchase rights -- 663
------- -------
Denominator for diluted earnings per share 13,378 6,440
Basic earnings (loss) per common share:
Net income $ 0.16 $ 0.18
Preferred stock dividends and accretion -- (0.21)
------- -------
Net income (loss) per common share $ 0.16 $ (0.03)
======= =======
Diluted earnings (loss) per common share:(1)
Net income $ 0.16 $ 0.18
Preferred stock dividends and accretion -- (0.21)
------- -------
Net income (loss) per common share $ 0.16 $ (0.03)
======= =======
</TABLE>
(1) Diluted loss per share amounts for 1997 have been calculated using the same
denominator as used in the basic earnings (loss) per share calculation, as
the inclusion of dilutive securities in the denominator would have an
anti-dilutive effect.
6
<PAGE> 9
<TABLE>
<CAPTION>
Six Months Ended June 30,
--------------------------------------------------
Actual Pro Forma
------------------------------ (Note 9)
1998 1997 1998
--------- -------- --------
<S> <C> <C> <C>
Numerator:
Net income $ 4,409 $ 2,496 $ 4,694
Preferred stock dividends and accretion (696) (2,271) --
---------- ------- -------
Net income to common shareholders $ 3,713 $ 225 $ 4,694
========== ======= =======
Denominator:
Denominator for basic earnings per share to
common shareholders-weighted-average shares 11,176 5,371 13,010
Effect of dilutive securities -
Incentive stock options 317 353 317
Stock purchase rights -- 663 --
---------- ------- -------
Denominator for diluted earnings per share 11,493 6,387 13,327
Basic earnings per common share:
Net income $ 0.39 $ 0.46 $ 0.36
Preferred stock dividends and accretion (0.06) (0.42) --
---------- ------- -------
Net income per common share $ 0.33 $ 0.04 $ 0.36
========== ======= =======
Diluted earnings per common share:
Net income $ 0.38 $ 0.39 $ 0.35
Preferred stock dividends and accretion (0.06) (0.35) --
---------- ------- -------
Net income per common share $ 0.32 $ 0.04 $ 0.35
========== ======= =======
</TABLE>
4. INCOME TAXES
The income tax provision recorded for the three months and six months ended
June 30, 1998 and 1997 differs from the expected income tax provision due to
permanent differences and the provision for state income taxes.
5. ACQUISITIONS
In August 1997, the Company acquired Colorado River Medical Center ("CRMC")
(formerly Needles Desert Communities Hospital) in Needles, California by paying
cash of $3,191,000 and assuming liabilities totaling $518,000. The operating
results of CRMC are included in the Company's results of operations from the
date of purchase; therefore, the results of operations for the three months and
six months ended June 30, 1998 include CRMC.
On May 1, 1998, the Company acquired Havasu Samaritan Regional Hospital
("Havasu") in Lake Havasu City, Arizona, from Samaritan Health System for
approximately $105.5 million. On June 11, 1998, the Company acquired certain net
assets and assumed certain liabilities of Elko General Hospital ("Elko") for a
purchase price of approximately $21.7 million. To finance these acquisitions,
the Company borrowed $106.0 million and
7
<PAGE> 10
$22.0 million, respectively, under its revolving credit facility. These
acquisitions were accounted for as purchase business combinations, and the
results of operations of the two hospitals have been included in the results of
operations of the Company from the respective dates of acquisition. Cost in
excess of net assets acquired in these acquisitions totaled approximately $89.1
million. The allocation of the purchase price associated with these acquisitions
has been determined based upon available information and is subject to further
refinement.
The following pro forma information reflects the operations of the entities
acquired in 1998, as if the respective transactions had occurred at the
beginning of the periods presented (in thousands, except per share data):
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
-------------------------------- ----------------------------------
1998 1997 1998 1997
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Net operating revenue $ 67,010 $ 59,693 $ 137,579 $ 120,120
Net income (loss) 1,881 (1,647) 3,816 (1,720)
Net income (loss) to common shareholders 1,881 (2,803) 3,120 (3,991)
Basic earnings (loss) per common share:
Net income (loss) $ 0.14 $ (0.31) $ 0.34 $ (0.32)
Net income (loss) to common shareholders 0.14 (0.52) 0.28 (0.74)
Diluted earnings (loss) per common share:
Net income (loss) $ 0.14 $ (0.26) $ 0.33 $ (0.27)
Net income (loss) to common shareholders 0.14 (0.44) 0.27 (0.62)
</TABLE>
The pro forma results of operations do not purport to represent what the
Company's results of operations would have been had such transactions, in fact,
occurred at the beginning of the periods presented or to project the Company's
results of operations in any future period.
6. CONTINGENCIES
Management continually evaluates contingencies based on the best
available evidence and believes that adequate provision for losses has been
provided to the extent necessary. In the opinion of management, the ultimate
resolution of the following contingencies will not have a material effect on the
Company's results of operations or financial position.
GENERAL AND PROFESSIONAL LIABILITY RISKS
The reserve for the self-insured portion of general and professional
liability risks is included in "Other liabilities" and is based on actuarially
determined estimates.
LITIGATION
The Company currently, and from time to time, is expected to be subject
to claims and suits arising in the ordinary course of business.
8
<PAGE> 11
NET PATIENT SERVICE REVENUE
Final determination of amounts earned under the Medicare and Medicaid
programs often occurs in subsequent periods because of audits by the programs,
rights of appeal and the application of numerous technical provisions.
Differences between original estimates and subsequent revisions (including
settlements) are included in the statement of operations in the period in which
revisions are made, and resulted in increases in net patient services revenue of
$1.1 million, or 1.9% of net operating revenue, for the Company in the second
quarter of 1998. There were no increases or decreases recorded in the second
quarter of 1997.
FINANCIAL INSTRUMENTS
Interest rate swap agreements are used on a limited basis to manage the
Company's interest rate exposure. The agreements are contracts to periodically
exchange fixed and floating interest rate payments over the life of the
agreements. On March 10, 1997, as required by the Credit Agreement, the Company
entered into an interest rate swap agreement, which effectively converted for a
five-year period $35 million of floating-rate borrowings to fixed-rate
borrowings. The floating-rate payments are based on LIBOR, and fixed-rate
payments are dependent upon market levels at the time the swap agreement was
consummated. For the three months ended June 30, 1998 and 1997, the Company
received a weighted average rate of 5.69% and 5.62% and paid a weighted average
rate of 6.27% and 6.27%, respectively. For the six months ended June 30, 1998
and 1997, the Company received a weighted average rate of 5.78% and 5.61% and
paid a weighted average rate of 6.27% and 6.27%, respectively.
7. STOCKHOLDERS' EQUITY
REINCORPORATION
On February 4, 1998, the Company merged with a wholly-owned subsidiary in
order to change its jurisdiction of incorporation to Delaware and change its
name to Province Healthcare Company. In the Merger, the Company exchanged 1.83
shares of its no par common stock for each share of the subsidiary's $0.01 par
value common stock. All common share and per share data included in the
condensed consolidated financial statements and footnotes thereto have been
restated to reflect this reincorporation. As a result of the reincorporation,
$2,053,000 was reclassified from common stock to additional paid-in-capital upon
conversion from no par to $0.01 par value Common Stock.
PUBLIC OFFERING OF COMMON STOCK
On February 17, 1998, the Company closed its initial public offering of
common stock. In connection with the offering, the Series B redeemable junior
preferred stock was converted into common stock at the public offering price of
the common stock. The net proceeds from the offering were used to redeem the
outstanding balance of the Series A redeemable senior preferred stock plus
accrued dividends, reduce the balance of the outstanding term and revolving
credit loans, and repurchase a portion of the common stock which was issued upon
conversion of the Series B redeemable junior preferred stock.
9
<PAGE> 12
The following table sets forth the changes in the stockholders' equity
accounts as a result of the reincorporation and the initial public offering of
common stock (in thousands):
<TABLE>
<CAPTION>
No Par Value
Common Stock Additional
---------------------- Paid-in- Retained
Shares Amount Capital Deficit Total
---------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1997 6,330,614 $ 2,116 $ -- $(3,172) $ (1,056)
Reincorporation -- (2,053) 2,053 -- --
Conversion of junior preferred stock
and initial public offering of
common stock 6,679,154 67 95,285 (31) 95,321
Preferred stock dividends and accretion -- -- -- (696) (696)
Net income -- -- -- 4,409 4,409
---------- ------- ------- ------- --------
Balance at June 30, 1998 13,009,768 $ 130 $97,338 $ 510 $ 97,978
========== ======= ======= ======= ========
</TABLE>
8. SUBSEQUENT EVENT
In July 1998, the Company completed its public offering of 2,685,500
shares of common stock at an offering price of $26.00 per share. The net
proceeds from the offering of approximately $66.0 million were used primarily to
reduce debt.
9. PRO FORMA FINANCIAL INFORMATION
The condensed consolidated pro forma statement of income for the six months
ended June 30, 1998, gives effect to (i) the conversion of junior preferred
stock into common stock and (ii) the sale of common stock in the initial public
offering and the application of net proceeds thereof to the repurchase of
certain shares of common stock, the redemption of senior preferred stock and the
repayment of debt, as if all such transactions had been completed as of January
1, 1998, at the initial public offering price of $16.00 per share, as follows:
- The elimination of interest expense associated with the $39.6 million of
long-term obligations repaid with the net proceeds of the offering, and the
elimination of the related income tax benefit based on the combined federal
and state statutory rate of 39%.
- The elimination of the dividends and the accretion of issuance costs on
the senior preferred stock redeemed with a portion of the net proceeds of
the offering, and the junior preferred stock converted into common stock in
connection with the offering.
The pro forma condensed consolidated financial information gives effect to
the initial public offering completed in February 1998, and does not pro forma
the effect of the Company's public stock offering completed in July 1998 (See
Note 8) or any other transaction.
The pro forma condensed consolidated financial information does not purport
to represent what the Company's results of operations would have been had such
transactions in fact occurred as of January 1, 1998, or to project the Company's
results of operations in any future period.
10
<PAGE> 13
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
IMPACT OF ACQUISITIONS
An integral part of the Company's strategy is to acquire non-urban
acute-care hospitals. In August 1997, the Company acquired Colorado River
Medical Center ("CRMC") (formerly Needles Desert Communities Hospital) in
Needles, California (the "CRMC Acquisition"). The operating results of CRMC are
included in the Company's results of operations from the date of purchase;
therefore, the results of operations for the three-month and six-month periods
ended June 30, 1998 include CRMC.
On May 1, 1998, the Company acquired Havasu Samaritan Regional Hospital
("Havasu") in Lake Havasu City, Arizona, from Samaritan Health System for
approximately $105.5 million. On June 11, 1998, the Company acquired certain net
assets and assumed certain liabilities of Elko General Hospital ("Elko") for a
purchase price of $21.7 million. To finance these acquisitions, the Company
borrowed $106.0 million and $22.0 million, respectively, under its revolving
credit facility. These acquisitions were accounted for as purchase business
combinations, and the results of operations of the two hospitals have been
included in the results of operations of the Company from the purchase dates
forward. Therefore, the Company's operations for the three-month and six-month
periods ended June 30, 1998 include two months' operations of Havasu and a
partial month for Elko. The CRMC, Havasu and Elko acquisitions are collectively
referred to in this discussion as "the acquisitions."
Due to the relatively small number of owned and leased hospitals, each
hospital acquisition can materially affect the overall operating margin of the
Company. Upon the acquisition of a hospital, the Company typically takes a
number of steps to lower operating costs. The impact of such actions may be
offset by other cost increases to expand services, strengthen medical staff and
improve market position. The benefits of these investments and of other
activities to improve operating margins generally do not occur immediately.
Consequently, the financial performance of a newly acquired hospital may
adversely affect overall operating margins in the short term. As the Company
makes additional hospital acquisitions, the Company expects that this effect
will be mitigated by the expanded financial base of existing hospitals and the
allocation of corporate overhead among a larger number of hospitals.
RESULTS OF OPERATIONS
The following table presents, for the periods indicated, information
expressed as a percentage of net operating revenue. Such information has been
derived from the Condensed Consolidated Statements of Income of the Company
included elsewhere in this report. The results of operations for the periods
presented include hospitals from their acquisition dates, as discussed above.
11
<PAGE> 14
<TABLE>
<CAPTION>
THREE MONTHS PERCENTAGE
ENDED INCREASE (DECREASE)
JUNE 30, AMOUNTS
-------------------- -------
1998 1997
----- -----
<S> <C> <C> <C>
Net operating revenue 100.0% 100.0% 41.3%
Operating expenses (1) 82.3 85.5 36.1
----- ----- -----
EBITDA (2) 17.7 14.5 71.9
Depreciation and amortization 5.9 4.6 81.5
Interest 5.0 5.4 26.9
Minority interest 0.0 0.2 --
Loss (gain) on sale of assets 0.0 (0.3) (108.9)
----- ----- -----
Income before income taxes 6.8 4.6 109.2
Provision for income taxes 3.0 2.1 101.3
----- ----- -----
Net income 3.8% 2.5% 116.0%
===== ===== =====
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS PERCENTAGE
ENDED INCREASE (DECREASE)
JUNE 30, AMOUNTS
-------------------- -------------------
1998 1997
----- -----
<S> <C> <C> <C>
Net operating revenue 100.0% 100.0% 29.7%
Operating expenses (1) 82.6 84.9 26.3
----- ----- -----
EBITDA (2) 17.4 15.1 49.0
Depreciation and amortization 5.3 4.5 53.6
Interest 4.5 4.9 17.4
Minority interest 0.1 0.2 (34.7)
Loss on sale of assets 0.0 0.1 188.2
----- ----- -----
Income before income taxes 7.5 5.6 73.1
Provision for income taxes 3.3 2.5 68.7
----- ----- -----
Net income 4.2% 3.1% 76.6%
===== ===== =====
</TABLE>
(1) Operating expenses represent expenses before interest, minority interest,
loss on sale of assets, income taxes, depreciation and amortization expense.
(2) EBITDA represents the sum of income before income tax expense, interest,
minority interest, depreciation and amortization, and loss on sale of assets.
Management understands that industry analysts generally consider EBITDA to be
one measure of the financial performance of a company that is presented to
assist investors in analyzing the operating performance of the Company and its
ability to service debt. Management believes that an increase in EBITDA level is
an indicator of the Company's improved ability to service existing debt, to
sustain potential future increases in debt and to satisfy capital requirements.
However, EBITDA is not a measure of financial performance under generally
accepted accounting principles and should not be considered an alternative (i)
to net income as a measure of operating performance or (ii) to cash flows from
operating, investing, or financing activities as a measure of liquidity. Given
that
12
<PAGE> 15
EBITDA is not a measurement determined in accordance with generally accepted
accounting principles and is thus susceptible to varying calculations, EBITDA,
as presented, may not be comparable to other similarly titled measures of other
companies.
SELECTED OPERATING STATISTICS - OWNED HOSPITALS
The following table sets forth certain operating statistics for the
Company's owned hospitals for each of the periods presented.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
----------------------------------- -----------------------------------
1998 1997 1998 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
CONSOLIDATED HOSPITALS:
Number of hospitals end of period 10 7 10 7
Licensed beds end of period 746 517 746 517
Beds in service end of period 633 405 633 405
Inpatient admissions 5,161 3,535 9,736 7,445
Patient days 26,533 19,933 52,103 40,837
Adjusted patient days 46,785 36,219 89,080 72,656
Average length of stay (days) 5.1 5.6 5.4 5.5
Occupancy rates (licensed beds) 43.8% 42.4% 46.6% 43.6%
Occupancy rates (beds in service) 52.9% 54.1% 56.8% 55.7%
Gross inpatient revenue $50,107,334 $32,200,309 $95,159,662 $67,387,683
Gross outpatient revenue 38,435,799 27,819,663 68,445,942 53,679,899
</TABLE>
THREE MONTHS ENDED JUNE 30, 1998 COMPARED TO THREE MONTHS ENDED JUNE 30, 1997
Net operating revenue was $56.6 million for the three months ended June 30,
1998, compared to $40.1 million for the comparable period of 1997, an increase
of $16.5 million or 41.1%. Revenue generated by hospitals owned during both
periods ("same store hospitals") increased $1.5 million, or 4.1%, resulting from
inpatient and outpatient volume increases, as well as price increases. Also,
cost report settlements and the filing of costs reports in the current quarter
resulted in positive revenue adjustments of $1.1 million (1.9% of net patient
service revenue) and $0 for the three months ended June 30, 1998 and 1997,
respectively. The remaining increase of $15.0 million was primarily attributable
to the acquisitions.
Operating expenses were $46.6 million, or 82.3% of net operating revenue, for
the three months ended June 30, 1998, compared to $34.3 million, or 85.5% of net
operating revenue, for the comparable period of 1997. Operating expenses of same
store hospitals increased $0.7 million, primarily as a result of volume
increases, and change in case mix, offset by a decrease in bad debt expense. The
remaining $11.7 million increase was primarily attributable to the acquisitions.
EBITDA was $10.0 million or 17.7% of net operating revenue for the three months
ended June 30, 1998, compared to $5.8 million, or 14.5% of net operating
revenue, for the
13
<PAGE> 16
comparable period of 1997. EBITDA for the Company's hospitals owned during both
periods increased 10.2%, and as a percent of net operating revenue was 18.9% for
the three months ended June 30, 1998, compared to 17.9% for the comparable
period of 1997.
Depreciation and amortization expense was $3.3 million, or 5.9% of net operating
revenue, for the three months ended June 30, 1998, compared to $1.8 million, or
4.6% of net operating revenue for the comparable period of 1997. The increase in
depreciation and amortization resulted from the acquisitions and increased
capital expenditures. Interest expense as a percent of net operating revenue
decreased to 5.0% for the three months ended June 30, 1998, compared to 5.5% for
the comparable period of 1997.
Net income was $2.1 million, or 3.8% of net operating revenue, for the three
months ended June 30, 1998, compared to $1.0 million, or 2.5% of net operating
revenue for the comparable period of 1997.
SIX MONTHS ENDED JUNE 30,1998 COMPARED TO SIX MONTHS ENDED JUNE 30, 1997
Net operating revenue was $104.5 million for the six months ended June 30, 1998,
compared to $80.5 million for the comparable period of 1997, an increase of
$24.0 million or 29.8%. Revenue generated by hospitals owned during both periods
("same store hospitals") increased $4.8 million, or 6.7%, resulting from
inpatient and outpatient volume increases, as well as price increases. Also,
cost report settlements and the filing of cost reports resulted in positive
revenue adjustments of $1.1 million (1.9% of net patient service revenue) and $0
for the six months ended June 30, 1998 and 1997, respectively. The remaining
increase of $19.2 million was primarily attributable to the acquisitions, offset
by decreases in revenue in the management company of $0.4 million, resulting
primarily from a decrease in the number of management contracts, and a decrease
in various other revenue.
Operating expenses were $86.3 million, or 82.6% of net operating revenue, for
the six months ended June 30, 1998, compared to $68.3 million, or 84.9% of net
operating revenue, for the comparable period of 1997. Operating expenses of same
store hospitals increased $3.2 million, primarily as a result of volume
increases, change in case mix and an increase in salaries, wages and benefits.
The remaining $14.8 million increase was primarily attributable to the
acquisitions.
EBITDA was $18.2 million or 17.4% of net operating revenue for the six months
ended June 30, 1998, compared to $12.2 million, or 15.2% of net operating
revenue, for the comparable period of 1997. EBITDA for the Company's hospitals
owned during both periods increased 11.0%, and as a percent of net operating
revenue was 20.6% for the six months ended June 30, 1998, compared to 19.8% for
the comparable period of 1997.
Depreciation and amortization expense was $5.5 million, or 5.3% of net operating
revenue, for the six months ended June 30, 1998, compared to $3.6 million, or
4.5% of net operating revenue for the comparable period of 1997. The increase in
depreciation and amortization resulted from the acquisitions and increased
capital expenditures. Interest expense as a percent of net operating revenue
decreased to 4.5% for the six months ended June 30, 1998, compared to 4.9% for
the comparable period of 1997.
14
<PAGE> 17
Net income was $4.4 million, or 4.2% of net operating revenue, for the six
months ended June 30, 1998, compared to $2.5 million, or 3.1% of net operating
revenue for the comparable period of 1997.
The unaudited pro forma condensed consolidated statement of income for the six
months ended June 30, 1998 gives effect to (i) the conversion of junior
preferred stock into common stock and (ii) the sale of common stock in the
initial public offering and the application of net proceeds thereof to the
repurchase of certain shares of common stock, the redemption of senior preferred
stock and the repayment of debt, as if all such transactions had been completed
as of January 1, 1998, at the initial public offering price of $16.00 per share,
as follows:
- The elimination of interest expense associated with the $39.6 million
of long-term obligations repaid with the net proceeds of the offering,
and the elimination of the related income tax benefit based on the
combined federal and state statutory rate of 39%.
- The elimination of the dividends and the accretion of issuance costs
on the senior preferred stock redeemed with a portion of the net
proceeds of the offering and the junior preferred stock converted into
common stock in connection with the offering.
The pro forma condensed consolidated financial information gives effect to
the initial public offering completed in February, 1998, and does not pro forma
the effect of the Company's public stock offering completed in July 1998 or any
other transaction.
The pro forma condensed consolidated income statement does not purport to
represent what the Company's results of operations would have been had such
transactions in fact occurred as of January 1, 1998, or to project the Company's
results of operations in any future period.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1998, the Company had working capital of $44.8 million,
including cash and cash equivalents of $3.7 million. The ratio of current assets
to current liabilities was 3.0 to 1.0 and 1.8 to 1.0 at June 30, 1998 and
December 31, 1997, respectively.
In February 1998, the Company completed its initial public offering ("IPO")
of common stock. In connection with the offering, the Series B redeemable junior
preferred stock was converted into common stock at the public offering price of
the common stock. The net proceeds from the offering were used to reduce the
balance of the outstanding term and revolving credit loans ($39.6 million),
redeem the outstanding balance of the Series A redeemable senior preferred stock
plus accrued dividends ($22.7 million) and repurchase a portion of the common
stock which was issued upon conversion of the Series B junior preferred stock
($14.9 million).
At June 30, of 1998, total long-term obligations increased to $191.4
million from $83.0 million at year end. The increase resulted primarily from the
borrowing to finance the Havasu and Elko acquisitions, offset by a reduction in
debt from application of IPO proceeds. In March 1998, the Company amended and
restated its Credit Agreement and
15
<PAGE> 18
increased its credit facilities to $260 million, including a five-year $35
million End-Loaded Lease Facility ("ELLF").
Cash used in operations was $5.8 million for the six months ended June 30,
1998. Cash used in operations was $1.3 million for the six months ended June
30,1997. Cash used in investing activities was $136.2 million for the six months
ended June 30, 1998, primarily as a result of the Havasu and Elko acquisitions
and capital expenditures. Cash used in investing activities was $4.4 million for
the six months ended June 30, 1997, primarily as a result of capital
expenditures. Net cash provided by financing activities was $141.5 million for
the six months ended June 30, 1998, primarily as a result of the IPO and the
Havasu and Elko acquisitions. Net cash provided by financing activities was $0.4
million in 1997, primarily as a result of proceeds from debt.
The Company intends to acquire additional acute care facilities, and is
actively seeking out such acquisitions. There can be no assurance that the
Company will not require additional debt or equity financing for any particular
acquisition. Also, the Company continually reviews its capital needs and
financing opportunities and may seek additional equity or debt financing for its
acquisition program or other needs. At June 30, 1998, the Company had $185.1
million outstanding under its revolving line of credit and no amounts
outstanding under the ELLF.
Capital expenditures, excluding acquisitions for the six months ended June
30, 1998 and 1997 were $6.9 million and $4.3 million, respectively. Capital
expenditures for the owned hospitals may vary from year to year depending on
facility improvements and service enhancements undertaken by the hospitals. The
management services business does not require significant capital expenditures.
The Company expects to make capital expenditures in 1998 of approximately $12
million, exclusive of any acquisitions of businesses. Planned capital
expenditures for 1998 consist principally of capital improvements to owned and
leased hospitals. The Company expects to fund these expenditures through cash
provided by operating activities and borrowings under its revolving credit
agreement.
In July 1998, the Company completed its public offering of 2,685,500 shares
of common stock at an offering price of $26.00 per share. The net proceeds from
the offering of approximately $66.0 million were primarily used to reduce
amounts outstanding on the revolving line of credit.
GENERAL
The federal Medicare program accounted for approximately 57.3% and 58.8% of
hospital patient days for the three months and six months ended June 30, 1998,
respectively. The state Medicaid programs accounted for approximately 11.1% and
11.0% of hospital patient days for the three months and six months ended June
30, 1998, respectively. The payment rates under the Medicare program for
inpatients are prospective, based upon the diagnosis of a patient. The Medicare
payment rate increases have historically been less than actual inflation.
Both federal and state legislators are continuing to scrutinize the health
care industry for the purpose of reducing health care costs. While the Company
is unable to predict what, if any, future health reform legislation may be
enacted at the federal or
16
<PAGE> 19
state level, the Company expects continuing pressure to limit expenditures by
governmental health care programs. Under the Balanced Budget Act of 1997 (the
"1997 Act"), there are no scheduled increases in the inpatient Medicare rates
paid to acute care hospitals for inpatient care through September 30, 1998.
Payments for Medicare outpatient services provided at acute care hospitals and
home health services historically have been paid based on costs, subject to
certain limits. The 1997 Act requires that the payment for those services be
converted to a prospective payment system, which will be phased in over time.
The 1997 Act also includes a managed care option which could direct Medicare
patients to managed care organizations. Further changes in the Medicare or
Medicaid programs and other proposals to limit health care spending could have a
material adverse impact upon the health care industry and the Company.
The Company's acute care hospitals, like most acute care hospitals in the
United States, have significant unused capacity. The result is substantial
competition for patients and physicians. Inpatient utilization continues to be
negatively affected by payor-required pre-admission authorization and by payor
pressure to maximize outpatient and alternative health care delivery services
for less acutely ill patients. The Company expects increased competition and
admission constraints to continue in the future. The ability to respond
successfully to these trends, as well as spending reductions in governmental
health care programs, will play a significant role in determining hospitals'
ability to maintain their current rate of net revenue growth and operating
margins.
The Company expects the industry trend from inpatient to outpatient
services to continue due to the increased focus on managed care and advances in
technology. Outpatient revenue of the Company's owned hospitals was
approximately 43.4% and 46.4% of gross patient service revenue for the three
months ended June 30, 1998 and 1997, respectively, and approximately 41.8% and
44.3% for the six months ended June 30, 1998 and 1997, respectively.
The complexity of the Medicare and Medicaid regulations, increases in
managed care, hospital personnel turnover, the dependence of hospitals on
physician documentation of medical records and the subjective judgment involved
complicates the billing and collections of accounts receivable by hospitals.
There can be no assurance that this complexity will not negatively impact the
Company's future cash flow or results of operations.
The Company's historical financial trend has been favorably impacted by the
Company's ability to successfully acquire acute care hospitals. While the
Company believes that trends in the health care industry described above may
create possible future acquisition opportunities, there can be no assurances
that it can continue to maintain its current growth rate through hospital
acquisitions and successfully integrate the hospitals into its system.
The Company's owned hospitals accounted for 92.0% and 91.4% of the
Company's net operating revenue for the three months and six months ended June
30, 1998, respectively, compared to 89.0% and 88.4% for the three months and six
months ended June 30, 1997, respectively.
The federal government and a number of states are rapidly increasing the
resources devoted to investigating allegations of fraud and abuse in the
Medicare and Medicaid
17
<PAGE> 20
programs. At the same time, regulatory and law enforcement authorities are
taking an increasingly strict view of the requirements imposed on providers by
the Social Security Act and Medicare and Medicaid regulations. Although the
Company believes that it is in material compliance with such laws, a
determination that the Company has violated such laws, or even the public
announcement that the Company was being investigated concerning possible
violations, could have a material adverse effect on the Company.
INFLATION
The health care industry is labor intensive. Wages and other expenses
increase, especially during periods of inflation and labor shortages. In
addition, suppliers pass along rising costs to the Company in the form of higher
prices. The Company has generally been able to offset increases in operating
costs by increasing charges for services and expanding services. The Company has
also implemented cost control measures to curb increases in operating costs and
expenses. In light of cost containment measures imposed by government agencies
and private insurance companies, the Company is unable to predict its ability to
offset or control future cost increases, or its ability to pass on the increased
costs associated with providing health care services to patients with government
or managed care payors, unless such payors correspondingly increase
reimbursement rates.
FORWARD-LOOKING STATEMENTS
Certain statements contained in this discussion, including without
limitation, statements containing the words "believes," "anticipates,"
"intends," "expects," and words of similar import, constitute forward-looking
statements. Such forward-looking statements involve known and unknown risks,
uncertainties and other factors that may cause the actual results, performance
or achievements of the Company or industry results to be materially different
from any future results, performance or achievements expressed or implied by
such forward-looking statements. Such factors include, among others, the
following: general economic and business conditions, both nationally and in
regions where the Company operates; demographic changes; the effect of existing
or future governmental regulation and federal and state legislative and
enforcement initiatives on the Company's business, including the
recently-enacted Balanced Budget Act of 1997; changes in Medicare and Medicaid
reimbursement levels; the Company's ability to implement successfully its
acquisition and development strategy and changes in such strategy; the
availability and terms of financing to fund the expansion of the Company's
business, including the acquisition of additional hospitals; the Company's
ability to attract and retain qualified management personnel and to recruit and
retain physicians and other health care personnel to the non-urban markets it
serves; the effect of managed care initiatives on the non-urban markets served
by the Company's hospitals and the Company's ability to enter into managed care
provider arrangements on acceptable terms; the effect of liability and other
claims asserted against the Company; the effect of competition in the markets
served by the Company's hospitals; and other factors referenced in this report.
Certain of these factors are discussed in more detail elsewhere in this report.
Given these uncertainties, prospective investors are cautioned not to place
undue reliance on such forward-looking statements. The Company disclaims any
obligation to update any such factors or to publicly announce the result of any
revisions to any of the forward-looking statements contained herein to reflect
future events or developments.
18
<PAGE> 21
PART II
OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
On Friday, June 5, 1998, the Company held its 1998 Annual Meeting of
Shareholders. At such meeting, the shareholders voted on the following four
proposals.
First, the shareholders voted on the election of six nominees to the
Board of Directors. Prior to the Annual Meeting, the incumbent Board of
Directors had determined that the size of the Board of Directors should be set
at six directors. The incumbent Board of Directors also nominated all six of its
current directors, Martin S. Rash, Bruce V. Rauner, Joseph P. Nolan, A.E. Brim,
Michael T. Willis and David L. Steffey, for election at such Annual Meeting to
serve until the annual meeting of shareholders in 1999. The directors were
elected by the following votes:
<TABLE>
<CAPTION>
NAME FOR AGAINST ABSTAIN BROKER NON-VOTES
- ---- --- ------- ------- ----------------
<S> <C> <C> <C> <C>
Martin S. Rash 10,267,001 0 50 1,390,399
Bruce V. Rauner 10,267,001 0 50 1,390,399
Joseph P. Nolan 10,267,001 0 50 1,390,399
A.E. Brim 10,267,001 0 50 1,390,399
Michael T. Willis 10,267,001 0 50 1,390,399
David L. Steffey 10,267,001 0 50 1,390,399
</TABLE>
Second, the shareholders voted to approve adoption of the Province
Healthcare Company Employee Stock Purchase Plan ("ESPP"). Prior to the Annual
Meeting, the Board of Directors had adopted, subject to shareholder approval,
the ESPP, which grants to all eligible employees an option to purchase shares of
Company Common Stock at a discount from fair market value and is intended to
qualify as an employee stock purchase plan under section 423 of the Internal
Revenue Code. At the Annual Meeting, the shareholders voted to approve the ESPP,
with 10,267,001 votes for, 50 votes against, 0 abstentions, and 1,390,399 broker
non-votes.
Third, the shareholders voted to approve an amendment to the Company's
1997 Long-Term Equity Incentive Plan (the "1997 Plan"). Prior to the Annual
Meeting, the Board of Directors had adopted, subject to shareholder approval, an
amendment to the 1997 Plan to increase the number of authorized shares of Common
Stock available for incentive awards by 250,000 shares. At the Annual Meeting,
the shareholders voted to approve the amendment to the 1997 Plan, with
10,084,036 votes for, 182,895 votes against, 120 abstentions, and 1,390,399
broker non-votes.
Fourth, the shareholders voted to approve the appointment of the
Company's auditors. Prior to the Annual Meeting, the Board of Directors had
selected the accounting firm of Ernst & Young LLP as independent auditors of the
Company for the year ending
19
<PAGE> 22
December 31, 1998, subject to ratification by the Shareholders. At the Annual
Meeting, the shareholders voted to ratify the appointment of Ernst & Young LLP,
with 10,265,051 votes for, 0 votes against, 2,000 abstentions, and 1,390,399
broker non-votes.
ITEM 5. OTHER INFORMATION.
The deadline for delivering to the Company notice of shareholder
proposals, other than proposals to be included in the proxy statement, for the
1999 Annual Meeting of Shareholders will be March 27, 1999, pursuant to Rule
14a-4 under the Securities Exchange Act of 1934. The persons named as proxies in
the proxy statement may exercise discretionary authority to vote on any
proposals received after such date.
20
<PAGE> 23
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
Exhibit
Number Description of Exhibits
- ------ -----------------------
10.1 Asset Purchase Agreement, dated April 29, 1998, between Province,
PHC-Lake Havasu, Inc. and Samaritan Health System (a)
10.2 Asset Purchase Agreement, dated June 8, 1998, between Province and
the County of Elko (b)
10.3 Amendment to the Province Healthcare Company Long-Term Equity
Incentive Plan, effective March 24, 1998 (c)
10.4 Province Healthcare Company Employee Stock Purchase Plan, effective
March 24, 1998 (c)
27 Financial Data Schedule (for SEC use only)
- -------------------------
(a) Incorporated by reference to Exhibit 2.1 filed with the registrant's
Current Report on Form 8-K, dated May 14, 1998, Commission File No.
0-23639.
21
<PAGE> 24
(b) Incorporated by reference to Exhibit 10.26 filed with the registrant's
Registration Statement on Form S-1, Registration No. 333-56663.
(c) Incorporated by reference to the exhibits filed with the registrant's Proxy
Statement on Schedule 14A, dated May 11, 1998, Commission File No. 0-23639.
(b) Reports on Form 8-K.
During the three months ended June 30, 1998, the Company filed the
following reports on Form 8-K:
(i) Form 8-K dated May 14, 1998, in connection with the Company's
acquisition on May 1, 1998 of substantially all the assets of Havasu
Samaritan Regional Hospital in Lake Havasu City, Arizona. On June 15,
1998, the Company filed an Amendment No. 1 to such Current Report on
Form 8-K/A, containing the financial statements of Havasu Samaritan
Regional Hospital and certain pro forma financial information.
(ii) Form 8-K dated June 26, 1998, in connection with the Company's
acquisition on June 11, 1998 of substantially all the assets of Elko
General Hospital in Elko, Nevada. On August 14, 1998, the Company
filed an Amendment No. 1 to such Current Report on Form 8-K/A,
containing the financial statements of Elko General Hospital and
certain pro forma financial information.
22
<PAGE> 25
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant caused this report to be signed on behalf by the undersigned
thereunto duly authorized.
PROVINCE HEALTHCARE COMPANY
By: /s/ BRENDA B. RECTOR
-----------------------------------
Brenda B. Rector
Vice President and Controller
Date: August 14, 1998
23
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONDENSED
CONSOLIDATED BALANCE SHEET AND CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> APR-01-1998
<PERIOD-END> JUN-30-1998
<EXCHANGE-RATE> 1
<CASH> 3,664
<SECURITIES> 0
<RECEIVABLES> 58,603
<ALLOWANCES> 6,679
<INVENTORY> 6,008
<CURRENT-ASSETS> 67,457
<PP&E> 117,066
<DEPRECIATION> 9,899
<TOTAL-ASSETS> 327,328
<CURRENT-LIABILITIES> 22,657
<BONDS> 191,435
0
0
<COMMON> 130
<OTHER-SE> 97,848
<TOTAL-LIABILITY-AND-EQUITY> 327,328
<SALES> 55,757
<TOTAL-REVENUES> 56,632
<CGS> 0
<TOTAL-COSTS> 45,720
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 4,296
<INTEREST-EXPENSE> 2,805
<INCOME-PRETAX> 3,811
<INCOME-TAX> 1,677
<INCOME-CONTINUING> 2,134
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,134
<EPS-PRIMARY> 0.16
<EPS-DILUTED> 0.16
</TABLE>
