FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended February 28, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-7008
COMMUNITY PSYCHIATRIC CENTERS
(Exact name of registrant as specified in its charter)
NEVADA 94-1599386
(State or other jurisdiction of (I.R.S. Employer I.D. No.)
incorporation or organization)
24502 Pacific Park Drive, Laguna Hills, CA 92656
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (714)831-1166
Not Applicable
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months 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: 43,503,276 as of
February 28, 1994
Total number of pages: 12
Exhibit Index at page: 10
Page 1 of 12
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
COMMUNITY PSYCHIATRIC CENTERS AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
<CAPTION>
Three Months Ended
February 28
1994 1993
------------------------
(Thousands of dollars,
except per share data)
REVENUES:
<S> <C> <C>
Operating revenues, net $ 92,166 $ 83,663
Investment income and other 359 1,026
-------- --------
92,525 84,689
OPERATING COSTS AND EXPENSES:
Operating exclusive of
depreciation 53,524 45,505
General and administrative 33,821 39,634
Depreciation, and amortization 4,285 3,817
Interest, principally on long-term debt 728 617
Restructuring charge (credit) - Note B (875) 54,950
-------- -------
91,483 144,523
EARNINGS (LOSS) BEFORE TAXES 1,042 (59,834)
Income taxes (benefit) - Note C 417 (21,899)
NET EARNINGS (LOSS) $ 625 $(37,935)
======== ========
EARNINGS (LOSS) PER SHARE $ 0.01 $ (0.88)
WEIGHTED AVERAGE COMMON SHARES 43,125 42,972
DIVIDENDS PER COMMON SHARE $ -- $ 0.09
See notes to condensed consolidated financial statements.
</TABLE>
Page 2 of 12
<PAGE>
<TABLE>
COMMUNITY PSYCHIATRIC CENTERS AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<CAPTION>
February 28 November 30
1994 1993
(Unaudited) (Audited)
--------------------------
ASSETS (thousands of dollars)
CURRENT:
<S> <C> <C>
Cash and cash equivalents $ 21,179 $ 24,640
Short-term investments 10,932 10,932
Accounts receivable, less allowances
for doubtful accounts
1994 - $21,579/1993 - $22,658 91,738 80,024
Assets held for sale - Note B 7,774 10,551
Refundable income taxes 7,454 5,763
Other assets 14,937 18,327
-------- --------
TOTAL CURRENT ASSETS 154,014 150,237
PROPERTY, BUILDINGS & EQUIPMENT-at
cost less allowances for depreciation
1994 - $80,370/1993 - $77,851 349,956 339,078
DEFERRED TAXES 3,646 1,126
OTHER ASSETS 25,580 24,178
EXCESS OF INVESTMENTS IN SUBSIDIARIES
OVER NET ASSETS ACQUIRED 16,611 15,721
-------- --------
$549,807 $530,340
======== ========
LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT:
Accounts payable and accrued expenses $ 45,267 $ 41,006
Dividends payable 111 111
Payable to third parties under
reimbursable contracts 1,843 4,990
Accrued restructuring costs - Note B 6,287 8,666
Current maturities on long-term debt 1,826 940
-------- --------
TOTAL CURRENT LIABILITIES 55,334 55,713
LONG-TERM DEBT, EXCLUSIVE OF CURRENT
MATURITIES 48,516 40,718
DEFERRED COMPENSATION 1,791 1,814
DEFERRED INCOME TAXES 16,375 9,603
STOCKHOLDERS' EQUITY:
Preferred stock, par value $1.00,
authorized 2,000 shares; none issued
Common Stock, par value $1.00, authorized
100,000 shares; issued 1994 - 46,856
shares 1993 - 46,856 shares 46,856 46,856
Additional paid-in capital 61,245 65,341
Less due from employees for exercise
of stock options (35) (35)
Retained earnings 359,971 359,345
Foreign currency translation adjustment (3,794) (3,815)
Less treasury stock-at cost 1994 - 3,356
shares and 1993 - 3,763 shares (36,452) (45,200)
427,791 422,492
-------- --------
$549,807 $530,340
======== ========
NOTE: The balance sheet at November 30, 1993 has been derived from
the audited financial statement at that date.
See notes to condensed consolidated financial statements.
</TABLE>
Page 3 of 12
<PAGE>
<TABLE>
COMMUNITY PSYCHIATRIC CENTERS AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
Quarter Ended
February 28
1994 (Unaudited) 1993
----------------------
(thousands of dollars)
CASH FLOWS FROM
OPERATING ACTIVITIES:
<S> <C> <C>
Net earnings (loss) $ 625 $(37,935)
Items not resulting in cash flows:
Depreciation and amortization 4,285 3,817
Provision for uncollectible accounts 4,640 6,261
Restructuring charge (credit) (875) 54,950
(Gain) on sale of property,
buildings and equipment (222)
Deferred income taxes - Note B (20,044)
Other (1,633) (508)
Changes in assets and liabilities:
Accounts receivable (16,354) (8,679)
Receivable (payable) third party under
reimbursement contracts (3,147) 2,386
Prepaid expenses and other current assets 3,390 2,135
Accounts payable and accrued expense 4,261 (3,495)
Accrued restructuring costs (6,230) --
Dividend payable -- 54
Income taxes 2,561 (1,851)
-------- --------
Net cash used for operations (8,477) (3,131)
FINANCING:
Proceeds from revolving credit facilities 9,164 --
Dividends paid -- (3,899)
Purchase of treasury shares -- (838)
Payments of deferred compensation -- (6,286)
Net proceeds from exercise of stock options,
payments on loans and related transactions 4,652 --
Payments on long-term debt (500) (152)
-------- --------
Net cash provided (used for) financing
activities 13,316 (11,175)
INVESTING:
Payments received on notes 2,721 873
Purchase of property, buildings and
equipment (12,607) (5,170)
Proceeds from sale of property, buildings
and equipment 5,035 --
Payment for business acquisitions:
Property, buildings and equipment (2,517) --
Excess of purchase price over fair
value of assets acquired (932) --
-------- --------
Net cash used for investing activities (8,300) (4,297)
-------- --------
Net increase (decrease) in cash and
cash equivalents (3,461) (18,603)
Beginning cash and cash equivalents 24,640 67,837
-------- --------
Ending cash and cash equivalents $ 21,179 $ 49,234
======== ========
See notes to condensed consolidated financial statements.
</TABLE>
Page 4 of 12
<PAGE>
COMMUNITY PSYCHIATRIC CENTERS AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
February 28, 1994
NOTE A: 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 Rule
10-01 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, all adjustments
(consisting of normal recurring accruals) considered necessary
for a fair presentation have been included. For further
information, refer to the consolidated financial statements
and footnotes thereto included in the registrant's annual
report on Form 10-K for the year ended November 30, 1993.
NOTE B: Restructuring Charge (Credit)
Effective February 28, 1993, the Company recorded a pre-
tax charge of $55.0 million ($35.0 million after tax) in
connection with the decision to close seven of its psychiatric
hospitals. The charge comprised $35.3 million to write down
buildings and other fixed assets, $2.1 million to write off
intangibles, $14.4 million for future operating losses of the
seven hospitals and related corporate restructuring costs
associated with terminating employees, and $3.2 million for
additional accounts receivable allowances at the seven
hospitals. Six of the restructured hospitals have ceased
operations. The seventh hospital, which returned to operating
status effective March 1, 1994, has been reconstituted under
new management into a rapid stabilization facility and one-
third of its plant space is being converted into office space.
Of the six closed hospitals, two have been sold, one is in
escrow, two are being held for sale or lease and one is being
converted into a THC facility. The Company received cash
proceeds of approximately $5.0 million in January and February
of 1994 from the sale of two of these hospitals.
Effective February 28, 1994, the Company recorded a
restructuring credit totalling $7.2 million ($4.3 million
after tax) from the resolution of the previously restructured
psychiatric assets. The restructuring credit resulted from
the Company's success in controlling hospital closure costs
and in divesting one of its restructured properties at a
higher price than the year-ago writedown of the facility
anticipated.
Effective February 28, 1994, the Company recorded a
restructuring charge of $6.3 million ($3.8 million after tax)
in connection with the decision to close three addition
psychiatric facilities. The charge comprise $3.7 million for
future operating losses and $2.6 million for additional
accounts receivable allowances and reserves for other assets
at the three hospitals. Of the three closed hospitals, one is
being held for sale and two will be converted into THC
facilities.
Page 5 of 12
<PAGE>
COMMUNITY PSYCHIATRIC CENTERS AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
February 28, 1994
NOTE C: Statement of Financial Accounting Standards No. 109
The Company has elected to implement the provisions of
SFAS No. 109, "Accounting for Income Taxes", effective
December 1, 1992. The implementation had no material effect
on the financial statements of the Company.
NOTE D: Certain amounts have been reclassified to conform with
1994 presentations.
Page 6 of 12
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
COMMUNITY PSYCHIATRIC CENTERS AND SUBSIDIARIES
Results of Operations
Three Months Ended February 28, 1994
The following table represents selected unaudited pro forma income
statement data for the quarter ended February 28, 1994 and 1993, adjusted
as if the restructuring for the seven hospitals restructured in fiscal
year 1993 had occurred on November 30, 1992. The table excludes the
restructuring charge made in 1994. The data presented below may not be
indicative of the results that would have been obtained had the
transaction described above actually occurred on the date assumed. In the
opinion of management, this data includes all adjustments, consisting of
normal recurring adjustments that the Company considers necessary for a
fair presentation of the data set forth therein.
<TABLE>
<CAPTION>
Quarter Ended
February 28
1994 (Unaudited) 1993
---------------------
(thousands of dollars)
<S> <C> <C>
Net operating revenues $ 92,166 $ 74,807
Investment income and other 359 1,026
-------- --------
92,525 75,833
Costs and expenses:
Operating 53,524 39,397
General and Administrative 33,821 35,706
Depreciation and amortization 4,285 3,769
Interest expense 728 617
-------- --------
Total costs and expenses 92,358 79,489
Earnings (loss) before income taxes 167 (3,656)
Income taxes 67 (1,190)
-------- --------
Net earnings $ 100 $ (2,466)
======== ========
</TABLE>
The following discussion excludes the restructuring charges and the
operating results for the fiscal year 1993 Restructured Hospitals.
Net operating revenues for the quarter ended February 28, 1994
increased by approximately 23.3% to $92.2 million from $74.8 million for
the prior quarter. This increase was due primarily to the addition of
$14.2 million of THC revenue in the first quarter of 1994 as compared to
$1.1 million of THC revenue in the first quarter of 1993.
Net operating revenues from the United States psychiatric hospitals
increased by 3.3% or approximately $2.2 million as a result of a 4.3%
increase in adjusted patient days to 149,912 from 143,706 which was
partially offset by a decrease in the net revenue per adjusted patient
day. The increase in adjusted patient days was due in large part to the
success of program introductions and expansions, resulting in (i) a 29.7%
increase in residential treatment patient days to 31,941 from 24,627 and
(ii) a 36.7% increase in partial hospitalization visits to 33,686 from
24,649. Adjusted patient days increased despite a 14% decrease in average
length of stay. The decrease in net revenue per adjusted patient day was
the result of the continuing shift in reimbursement to negotiated rates
and cost-based reimbursement from private pay.
Net operating revenues from the Company's United Kingdom operations
increased by 28.6% or approximately $2.1 million as a result of an
increase in inpatient admissions and average length of stay which was
partially offset by a decline in net revenue per adjusted patient day.
Page 7 of 12
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
COMMUNITY PSYCHIATRIC CENTERS AND SUBSIDIARIES
Results of Operations (continued)
Operating expenses increased as a percentage of net operating
revenues to 58.1% in the quarter ended February 28, 1994 from 52.7% in the
quarter ended February 28, 1993. The year to year increase was primarily
attributable to expenses incurred in connection with expansion of the
Company's THC operations and an increase in personnel costs related to the
Company's development of an expanded continuum of care in its psychiatric
business.
General and administrative expenses decreased by approximately 5.3%
to $33.8 million from $35.7 million and decreased as a percentage of net
operating revenues to 36.7% from 47.7%. This change was due primarily to
the implementation of cost containment programs in the second quarter of
1993 and a management reorganization in the fourth quarter of 1993, which
included reduction of personnel and elimination of overhead.
For the THC subsidiary, operating and general and administrative
expenses exceeded revenues for the quarter ended February 28, 1994 due to
the fact that a large majority (eight of eleven facilities) of these
hospitals recently opened. Long-term critical care hospitals such as
those operated by THC typically sustain significant start-up costs due to
a six-month delay in receiving exemption from the Medicare Prospective
Payment System, during which time they are not reimbursed the full cost of
treating Medicare patients.
<TABLE>
Following is a summary of net income by business segment for the
quarter ended February 28, 1994:
<CAPTION>
(000's)
--------
<S> <C>
U.S. Psychiatric division $ 3,999
U.K. Psychiatric division 1,332
Long-term critical care division (4,706)
-------
Net income $ 625
=======
</TABLE>
For the reasons described above, earnings before depreciation,
amortization, interest, other income and income taxes for the quarter
ended February 28, 1994 increased from $(.3) million in the first quarter
of 1993 to $4.8 million in the first quarter of 1994.
Depreciation expense increased due to property and equipment
additions at THC.
Interest expense increased in 1994 due to the increase in long-term
debt.
Financial Condition at February 28, 1994
At February 28, 1994, cash and equivalents were $21,179 and total
working capital was $98,680, net of the accrual for restructuring costs of
$6,287. Cash was principally used to fund working capital and operating
losses for THC facilities, and for the purchase of equipment and
improvements ($12.6 million). The Company also acquired a residential
treatment center in the United Kingdom for a purchase price of $3.1
million. The increase in accounts receivable at February 28, 1994, is due
primarily to the expansion of THC's operations. Proceeds from borrowings
on revolving credit facilities totalled $9.2 million during the first
quarter of 1994.
Page 8 of 12
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
COMMUNITY PSYCHIATRIC CENTERS AND SUBSIDIARIES
Results of Operations (continued)
Financial Condition at February 28, 1994 (continued)
The Company presently expects to invest up to $100 million for
capital expenditures in fiscal 1994 for the following: (i) approximately
$75 million for the acquisition and conversion of facilities in connection
with the continued expansion of its THC operations, (ii) approximately
$13.0 million for maintenance of its United States psychiatric facilities
and acquisitions in the United Kingdom, and (iii) approximately $12.0
million for the completion of its computer system. In addition to these
capital expenditures, the Company expects to invest approximately $40.0
million of cash in fiscal 1994 to fund both the working capital
(principally accounts receivable) and start-up operating losses for THC
facilities opening in 1994.
The Company has a $25.0 million revolving credit facility with Bank
of America National Trust and Savings Association ("BofA"). At February
28, 1994, $15.0 million was outstanding under this facility. The
Company's subsidiary in the U.K. has a credit facility whereby the Company
is allowed to borrow up to $15 million. At February 28, 1994,
approximately $7.4 million was outstanding under this facility. In
December 1993, the Company received a commitment letter from a bank to
provide a $50.0 million revolving credit facility with a term loan
conversion option; the option is subject to the Company maintaining
certain financial covenants. A definitive credit facility is subject to
completing final loan documentation. The Company believes that its
current cash and cash equivalent balances, its operating cash flow, and
the amounts available under it revolving credit facilities will be
sufficient to fund the Company's operations and capital expenditures
through the middle of fiscal 1994. The Company is also presently
evaluating proposals for additional funding from other financing sources.
THC's planned expansion will be reduced if additional funding sources are
not obtained.
Page 9 of 12
<PAGE>
COMMUNITY PSYCHIATRIC CENTERS AND SUBSIDIARIES
February 28, 1994
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
See Part I, Item 3 of the Company's Report on Form 10-K for the
fiscal year ended November 30, 1993.
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K:
A) The following exhibits are included herein:
Exhibit 11: Computation of Earnings per Share
The registrant was not required to file a Form 8-K during the
three months ended February 28, 1994.
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.
COMMUNITY PSYCHIATRIC CENTERS
(Registrant)
Dated: April 13, 1994 /s/ STEVEN S. WEIS
--------------------------
Steven S. Weis
Chief Financial Officer
Page 10 of 12
<PAGE>
EXHIBIT INDEX
Exhibit Page No.
--------
11 Computation of Earnings Per Share 11
Page 11 of 12
<PAGE>
EXHIBIT 11
<TABLE>
COMMUNITY PSYCHIATRIC CENTERS AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
<CAPTION>
Three Months Ended
February 28
1994 1993
------------------
(Amounts in thousands, except per share data)
Weighted average
<S> <C> <C>
common shares,<F1> $43,125 $ 42,972
Net Earnings (Loss) $ 625 $(37,935)
======= ========
Earnings (Loss) per share $ .01 $ (0.88)
======= ========
<F1> Dilutive common stock equivalents are less than 3% of weighted average
common shares outstanding.
</TABLE>
Page 12 of 12
