<PAGE>
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, 1995
-----------------------------------------------
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
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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)
6600 W. Charleston Boulevard, Suite 118, Las Vegas, Nevada 89102
-----------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (702) 259-3600
---------------------------
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: 43,626,000 as of March 31,
1995. ------------
Total number of pages: 13
Exhibit Index at page: 12
Page 1 of 13
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
COMMUNITY PSYCHIATRIC CENTERS AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
February 28
1995 1994
(000s omitted
-------------
except per share data)
---------------------
<S> <C> <C>
REVENUES:
Operating revenues, net $119,541 $ 92,166
Investment income and other 829 359
-------- --------
120,370 92,525
COSTS AND EXPENSES:
Operating expense 88,182 75,648
General and administrative expense 8,688 7,521
Bad debt expense 7,684 4,285
Depreciation and amortization 5,013 4,176
Interest, principally on long-term debt 1,080 728
Restructuring (credit) - Note B -- (875)
-------- --------
110,647 91,483
INCOME BEFORE TAXES 9,723 1,042
Income taxes 3,793 417
-------- --------
NET INCOME $ 5,930 $ 625
======== ========
NET INCOME PER SHARE $ 0.14 $ 0.01
======== ========
WEIGHTED AVERAGE COMMON SHARES 43,597 43,125
======== ========
</TABLE>
See notes to condensed consolidated financial statements.
Page 2 of 13
<PAGE>
COMMUNITY PSYCHIATRIC CENTERS AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
February 28 November 30
1995 1994
(Unaudited) (Audited)
--------------------------------
ASSETS (OOOs omitted)
- - ------
<S> <C> <C>
CURRENT:
Cash and cash equivalents $ 16,645 $ 37,263
Short-term investments 13,756 13,756
Accounts receivable, less allowances -
for doubtful accounts
1995 - $ 30,107 /1994 - $29,381 118,054 103,128
Prepaid expenses and other current assets 19,986 18,305
Assets held for sale - Note B 7,774 7,774
Deferred income taxes 2,744 3,773
-------- --------
TOTAL CURRENT ASSETS 178,959 183,999
PROPERTY, BUILDINGS & EQUIPMENT-at
cost less allowances for depreciation
1995 - $ 97,457 /1994 - $92,937 382,615 376,765
REFUNDABLE AND DEFERRED TAXES 2,823 2,823
OTHER ASSETS 26,491 25,207
EXCESS OF INVESTMENTS IN SUBSIDIARIES
OVER NET ASSETS ACQUIRED 16,738 16,610
-------- --------
$607,626 $605,404
======== ========
LIABILITIES & STOCKHOLDERS' EQUITY
- - ----------------------------------
CURRENT:
Accounts payable and accrued expenses $ 49,425 $ 55,632
Income taxes payable 5,211 5,845
Payable to third parties under
reimbursable contracts 9,578 5,802
Current maturities on long-term debt 31,548 13,224
-------- --------
TOTAL CURRENT LIABILITIES 95,762 80,503
LONG-TERM DEBT, EXCLUSIVE OF CURRENT
MATURITIES 48,419 69,090
DEFERRED COMPENSATION 1,810 1,816
DEFERRED INCOME TAXES 13,981 13,956
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 1995 - 46,856
shares 1994 - 46,856 shares 46,856 46,856
Additional paid-in capital 62,234 61,357
Less due from employees for exercise
of stock options (35) (35)
Retained earnings 375,059 369,131
Foreign currency translation adjustment (1,339) (1,805)
Less treasury stock-at cost 1995 - 3,235
shares and 1994 - 3,265 shares (35,121) (35,465)
-------- --------
447,654 440,039
-------- --------
$607,626 $605,404
======== ========
</TABLE>
NOTE: The balance sheet at November 30, 1994 has been derived from the audited
financial statement at that date but does not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements.
See notes to condensed consolidated financial statements.
Page 3 of 13
<PAGE>
COMMUNITY PSYCHIATRIC CENTERS AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Quarter Ended
February 28
1995 (Unaudited) 1994
-----------------------
(000s omitted)
<S> <C> <C>
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net earnings $ 5,930 $ 625
Items not resulting in cash flows:
Depreciation and amortization 5,013 4,285
Provision for uncollectible accounts 7,684 4,174
Restructuring (credit) -- (875)
Other 2,021 1,359
Changes in assets and liabilities:
Accounts receivable (22,610) (15,888)
Payable to third parties under
reimbursement contracts 3,776 (3,147)
Prepaid expenses and other current assets (1,681) 3,390
Accounts payable and accrued expense (6,207) 4,261
Accrued restructuring costs -- (6,230)
Income taxes 420 2,561
-------- --------
Net cash used for operations (5,654) (5,485)
FINANCING:
Proceeds from revolving credit facilities 851 9,164
Net proceeds from exercise of stock options,
payments on loans and related transactions 293 4,652
Payments on long-term debt (4,167) (500)
-------- --------
Net cash provided (used for) financing activities (3,023) 13,316
INVESTING:
Payments received on notes 70 2,721
Purchase of property, buildings and equipment (9,879) (12,607)
Investment in pre-opening costs (1,183) (2,992)
Proceeds from sale of property, buildings
and equipment -- 5,035
Payment for business acquisitions:
Property, buildings and equipment (728) (2,517)
Excess of purchase price over fair value of
assets acquired (221) (932)
-------- --------
Net cash used for investing activities (11,941) (11,292)
-------- --------
Net decrease in cash and
cash equivalents (20,618) (3,461)
Beginning cash and cash equivalents 37,263 24,640
-------- --------
Ending cash and cash equivalents $16,645 $ 21,179
======= ========
</TABLE>
See notes to condensed consolidated financial statements.
Page 4 of 13
<PAGE>
COMMUNITY PSYCHIATRIC CENTERS AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
FEBRUARY 28, 1995
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, 1994.
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. Of the six closed hospitals, two have
been sold, three are being held for sale or lease, and one has been
converted into a THC facility. The Company received cash proceeds of
approximately $5.0 million in January and February 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 1993 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 additional psychiatric facilities. The charge
comprised $2.2 million for future operating losses, $1.5 million for
restructuring costs associated with terminating employees and $2.6
million for additional accounts receivable allowances and reserves for
other assets at the three hospitals. Approximately 225 employees of
the restructured hospitals were terminated. Amounts charged against
the reserve, including termination benefits paid, approximated amounts
originally accrued. Total revenue and net operating income or (loss)
for the three closed hospitals totalled $2.8 million and ($1.1
million) for
Page 5 of 13
<PAGE>
COMMUNITY PSYCHIATRIC CENTERS AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
FEBRUARY 28, 1995
the first quarter of 1994, $20 million and $.6 million for fiscal year
1993, and $23.5 million and $2.3 million for fiscal year 1992. Of the
three closed hospitals, one is being held for sale, one was converted
into a THC facility after the restructuring, and one will be converted
into a THC facility in fiscal year 1995.
Remaining restructuring reserves relate primarily to estimated
exposure on restructured assets held for sale.
NOTE C: Certain amounts have been reclassified to conform with 1995
presentations.
Page 6 of 13
<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, 1995
The following table represents selected unaudited pro forma income
statement data for the quarter ended February 28, 1995 and 1994, adjusted as if
the restructuring for the three hospitals restructured in fiscal year 1994 had
occurred on November 30, 1993. 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
1995 (Unaudited) 1994
----------------------
(000's omitted)
<S> <C> <C>
Net operating revenues $119,541 $ 90,574
Investment income and other 829 359
-------- --------
$120,370 90,933
Costs and expenses:
Operating expense 88,182 73,682
General and administrative expense 8,688 7,596
Bad debt expense 7,684 3,711
Depreciation and amortization 5,013 4,160
Interest expense 1,080 728
-------- --------
Total costs and expenses 110,647 89,877
Earnings before income taxes 9,723 1,056
Income taxes 3,793 422
-------- --------
Net earnings $ 5,930 $ 634
======== ========
</TABLE>
The following discussion excludes the restructuring charge and the
operating results for the three hospitals restructured in 1994.
Net operating revenues for the quarter ended February 28, 1995 increased by
approximately 32.0% to $119.5 million from $90.6 million for the first quarter
of the prior year. This increase was due to a $26.8 million increase in THC
revenue from $14.2 million in the first quarter of 1994 to $41.0 million in the
first quarter of 1995. THC's same-store admissions and patient days increased
86.9% and 104.9%, respectively.
Net operating revenues from the United States psychiatric hospitals
decreased by 4.3% or approximately $2.9 million as a result of a 5.0% decrease
in adjusted patient days. Although admissions increased 13.3% for the U.S.
Psychiatric division, adjusted patient days declined due to the continuing
decline in the average length of a patient's stay.
Page 7 of 13
<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)
THREE MONTHS ENDED FEBRUARY 28, 1995 (continued)
Net operating revenues from the Company's United Kingdom operations
increased by 54.6% or approximately $5.1 million as a result of an increase in
same-store patient days of 30.2% and a 12.7% increase in average net revenue per
patient day.
Operating expenses decreased as a percentage of net operating revenues to
73.8% in the quarter ended February 28, 1995 from 81.4% in the quarter ended
February 28, 1994. General and administrative expenses decreased as a
percentage of net operating revenues to 7.3% from 8.4%. A higher percentage of
THC's total costs are now being reimbursed because an increased number of THC
hospitals have received cost-based reimbursement under Medicare in the first
quarter of 1995 compared to the first quarter of 1994. THC hospitals incur
significant start up losses because they are not entitled to cost based
reimbursement for Medicare patients until they qualify as long term care
hospitals. Pending such qualifications, these start up hospitals are reimbursed
under the Medicare Prospective Payment System which does not pay the full cost
of treating Medicare patients. Of the 13 hospitals in operation during the first
quarter of 1995, 12 were designated as long-term care hospitals and therefore
received cost-based reimbursement under Medicare, where as in the year-earlier
quarter, 11 facilities were in operation, only three of which had been open long
enough to receive their long-term care hospital designation.
In addition to the above, the Company implemented cost-containment programs
in the fourth quarter of 1994 which included the reduction of personnel and
other overhead.
Bad debt expense increased from 4.1% of net operating revenues in the first
quarter of 1994 compared to 6.4% in the first quarter of 1995. Approximately
$1.6 million of this increase resulted from a slow down in the billing and
collection functions for 11 U.S. Psychiatric hospitals as the Company is in the
process of centralizing those functions in a central billing office in Las
Vegas, Nevada.
Approximately $.7 million of the increase in bad debt expense over the
prior year first quarter was due to continued interruptions in Medicare
reimbursement to the Company and other partial hospitalization providers in
California. A concerted effort is being made to collect the unpaid amounts, but
it is not certain when this situation will be resolved. The Company anticipates
future increases in bad debt expense due to decreased annual and lifetime
psychiatric maximum payment limits for individual patients and increased
deductibles and co-insurance.
Following is a summary of net income by business segment for the quarter
ended February 28, 1995:
<TABLE>
<CAPTION>
(000s)
-------
<S> <C>
U.S. Psychiatric division $ 2,522
U.K. Psychiatric division 2,206
Long-term critical care division 1,202
-------
Net income $ 5,930
=======
</TABLE>
Page 8 of 13
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
Results of Operations (continued)
For the reasons described above, earnings before depreciation,
amortization, interest, other income and income taxes for the quarter ended
February 28, 1995 increased from $5.6 million in the first quarter of 1994 to
$15.0 million in the first quarter of 1995.
LIQUIDITY AND CAPITAL RESOURCES AT FEBRUARY 28, 1995
Cash flows used for operations were $5.7 million for the quarter-ended
February 28, 1995 as compared to $5.5 million for the comparable period of 1994.
The $5.3 million increase in net income for the period was offset by increases
in working capital accounts. Net accounts receivable balances increased $14.9
million during the quarter-ended February 28, 1995 as compared to $11.7 million
during the comparable period of 1994. Approximately half of the increase in
accounts receivable at February 28, 1995 was due to increases in accounts
receivable for the U.S. Psychiatric Division and the remaining increase related
to THC accounts receivable. Both divisions are undergoing significant
conversions to new computer systems, including several conversions of the
hospitals' revenue and accounts receivable applications for both divisions in
the fourth quarter of 1994 and the first quarter of 1995. Also, in the fourth
quarter of 1994 and the first quarter of 1995, the U.S. Psychiatric Division
centralized the billing and collection functions for 11 of its hospitals in a
central billing office located in Las Vegas, Nevada. The above described
activity has led to a slow down in the billing and collection functions which
has resulted in higher accounts receivable balances. Management believes that
the centralization of the billing and collection functions will ultimately
result in lower accounts receivable levels and improved cash flow. In addition,
accounts receivable have increased at THC because of increased revenue.
Purchases of fixed assets totalled $9.9 million in the first quarter of
1995. The Company presently expects to expend up to $29 million in fiscal 1995
for the conversion and renovation of its THC facilities and expansion into new
markets. In addition to these capital expenditures, the Company expects to
expend up to $5 million in fiscal 1995 to fund both the working capital
(principally accounts receivable) and start-up operating losses principally for
THC facilities opening in late 1994 and 1995. The Company also expects to spend
approximately $14.0 million on capital expenditures for renovation of its
psychiatric facilities and acquisitions in the United Kingdom.
In January 1995, the Board of Directors authorized the expenditure of $9.5
million to build a new Corporate office which will be situated on the campus of
the THC Las Vegas Hospital in Las Vegas, Nevada. A portion of this building
will be utilized by the hospital to expand patient care space. The Company
expects to expend $8.2 million on the construction of the building in fiscal
year 1995.
The Company has a $25.0 million revolving credit facility with Bank of
America National Trust and Savings Association ("BofA"), all of which has been
borrowed as of February 28, 1995. The Company may borrow, repay and reborrow up
to $25 million through November 30, 1995 (the revolving loan period), at which
time any amount outstanding is converted into a term loan payable in equal
quarterly installments through November 30, 1998. The Company's subsidiary in
the United Kingdom has a credit facility whereby the Company is allowed to
borrow up to $15 million. At February 28, 1995, approximately $8.7 million was
outstanding under this facility. On May 6, 1994, the Company entered into an
additional revolving credit facility with Bank of America for $50 million. As
of February 28, 1995, $20 million was outstanding under this facility. Any
amount outstanding under this facility
Page 9 of 13
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
COMMUNITY PSYCHIATRIC CENTERS AND SUBSIDIARIES
LIQUIDITY AND CAPITAL RESOURCES AT FEBRUARY 28, 1995 (continued)
is due and payable on February 28, 1996. Unused revolving credit facilities of
approximately $36 million remain available to the Company at February 28, 1995.
The Company believes that its current cash and cash equivalent balances, its
operating cash flow, and the amounts available under its revolving credit
facilities will be sufficient to fund the Company's operations and capital
expenditures through the end of fiscal 1995. The Company will be evaluating
proposals for additional funding as needed to support further expansion of THC
and to repay outstanding borrowings under the $50 million credit facility.
Page 10 of 13
<PAGE>
COMMUNITY PSYCHIATRIC CENTERS AND SUBSIDIARIES
FEBRUARY 28, 1995
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, 1995.
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, 1995.
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, 1995 /s/ WENDY SIMPSON
------------------------------
Wendy Simpson
Chief Financial Officer
Page 11 of 13
<PAGE>
EXHIBIT INDEX
Exhibit Page No.
- - ------- --------
11 Computation of Earnings Per Share 13
Page 12 of 13
<PAGE>
EXHIBIT 11
COMMUNITY PSYCHIATRIC CENTERS AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
Three Months Ended
February 28
1995 1994
------------------
(000s, except per share data)
<S> <C> <C>
Weighted average
common shares* 43,597 43,125
====== ======
Net Earnings $ 5,930 $ 625
======= =======
Earnings per share $ .14 $ .01
======= =======
<FN>
* Dilutive common stock equivalents are less than 3% of weighted average
common shares outstanding.
</TABLE>
Page 13 of 13
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> NOV-30-1995
<PERIOD-START> DEC-01-1994
<PERIOD-END> FEB-28-1995
<EXCHANGE-RATE> 1.5838
<CASH> 16,645
<SECURITIES> 0
<RECEIVABLES> 118,054
<ALLOWANCES> 30,107
<INVENTORY> 0
<CURRENT-ASSETS> 178,959
<PP&E> 382,615
<DEPRECIATION> 97,457
<TOTAL-ASSETS> 607,626
<CURRENT-LIABILITIES> 95,762
<BONDS> 48,419
<COMMON> 46,856
0
0
<OTHER-SE> 400,798
<TOTAL-LIABILITY-AND-EQUITY> 607,626
<SALES> 119,541
<TOTAL-REVENUES> 120,370
<CGS> 88,182
<TOTAL-COSTS> 88,182
<OTHER-EXPENSES> 13,701
<LOSS-PROVISION> 7,684
<INTEREST-EXPENSE> 1,080
<INCOME-PRETAX> 9,723
<INCOME-TAX> 3,793
<INCOME-CONTINUING> 5,930
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,930
<EPS-PRIMARY> .14
<EPS-DILUTED> .14
</TABLE>
