<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
Form 8-K
Current Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported)........ October 22, 1996
COMMUNITY PSYCHIATRIC CENTERS
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(Exact name of registrant as specified in it's charter)
Nevada 1-7008 94-1599386
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(State or other jurisdiction (Commission File (I.R.S. Employer
of incorporation) Number) Identification Number)
5110 West Sahara Avenue
Las Vegas, Nevada 89102
(Address of principal executive offices)
Registrant's telephone number, including area code....... (702) 259-3600
Not Applicable
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(Former name or former address, if changed since last report)
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Item 5. Other Events.
On October 22, 1996, Community Psychiatric Centers (the "Company") issued a
press release regarding the Company's disposition of substantially all of its
psychiatric hospital and residential treatment center operations in the United
States and Puerto Rico, as well as two closed hospitals and certain excess land,
to Behavioral Healthcare Corporation.
The Press Release is attached hereto as Exhibit 99.1, and is hereby
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incorporated herein by reference.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibit Page
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<S> <C> <C>
99.1 Press Release issued by the
Company, dated October 22, 1996
</TABLE>
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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 hereunto duly authorized.
Date: October 24, 1996 COMMUNITY PSYCHIATRIC CENTERS,
a Nevada corporation
by: /s/ Julia L. Kopta
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Julia L. Kopta
Executive Vice President
and General Counsel
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EXHIBIT 99.1
[LETTERHEAD OF COMMUNITY PSYCHIATRIC CENTERS]
FOR IMMEDIATE RELEASE
Community Psychiatric Centers Announces Agreement to Sell
U.S. Psychiatric Operations to Behavioral Healthcare Corporation
and Expansion of Stock Repurchase Program
LAS VEGAS, NEVADA, October 22, 1996 -- Community Psychiatric Centers (CPC)
[NYSE:CMY] today announced that it has reached a definitive agreement with
privately-held Behavioral Healthcare Corporation to sell CPC's psychiatric
operations in the U.S. and Puerto Rico to BHC for a combination of cash and BHC
stock. Total purchase price of the transaction is in the range of $130 to $165
million, consisting of $60 million in cash to CPC and BHC stock and stock
equivalents valued by CPC in the range of $70 to $105 million, based upon
multiples generally accorded to publicly-traded psychiatric hospitals. In
addition, CPC will realize a tax benefit from this transaction by substantially
offsetting the gain attributable to the sale of its United Kingdom operations.
Following closely on the heels of the sale of CPC's U.K. psychiatric
operations for $136 million, or 14 times pretax earnings, the transaction marks
CPC's evolution from a psychiatric services company to a provider of long-term
acute care hospital services.
The new psychiatric company will retain the Behavioral Healthcare
Corporation name and will be based out of BHC's Nashville headquarters. The
combined entity, which will form the second largest psychiatric hospital network
in the U.S., will have 38 hospitals and 4 residential treatment centers in 18
states and Puerto Rico comprising approximately 3,500 beds. For the trailing 12
months as of July 31, 1996, pro forma annualized net revenues (including net
revenues of four hospitals BHC is purchasing from United Psychiatric Group) were
approximately $309 million. Pro forma net earnings and EBIDTA for the combined
entity were approximately $13.0 million and $39.1 million, respectively. Based
on the proposed ownership structure, CPC's share of the pro forma earnings would
have been approximately $5.7 million (or $0.13 per share of CPC stock).
The transaction, which is subject to regulatory approvals and certain other
conditions, is expected to close by November 30, 1996. BHC has received an
indication of intent to provide all financing to complete this transaction on an
underwritten basis from two leading financial institutions.
<PAGE>
Richard L. Conte, 42, CPC's chairman and chief executive officer, will
serve as BHC's chairman. Edward Stack, 50, BHC's founder and current president
and CEO, will be CEO of the new BHC. William Hale, 51, current president of
CPC's U.S. Psychiatric division, will serve as BHC's senior vice president for
operations. Michael E. Davis, 39, BHC's current chief financial officer, will
continue as CFO for the new company. Serving as vice presidents of operations
will be Charles E. Smith, 52, chief operating officer of CPC's U.S. Psychiatric
division, and Bruce Waldo, 46, currently vice president of operations at BHC.
Stack, formerly president of HCA Psychiatric Company Western Group,
launched BHC with backing from venture capitalist firms and other investors in
1993, starting with the acquisition of six HCA psychiatric hospitals. Welsh,
Carson, Anderson & Stowe, a New York venture capitalist firm, is the single
largest investor in BHC. Additional acquisitions, including the recently
announced UPG purchase, have brought BHC's total to 17 hospitals.
In addition to Edward Stack and Richard Conte, serving on the BHC Board
of Directors will be current BHC Chairman Russel L. Carson and Richard H. Stowe
of Welsh, Carson, Anderson & Stowe; Neil R. Anderson, Jack O. Bovender, Jr.,
Helen King Cummings, former Tennessee Governor Winfield C. Dunn, Howard C.
Landis, Wendy L. Simpson, CPC's chief operating officer and chief financial
officer, and Robert L. Thomas, a CPC Board member and the former executive
director of the National Association of Psychiatric Health Systems.
CPC, which currently operates 25 hospitals in the U.S. and Puerto Rico,
was the first investor-owned hospital management company to specialize in acute
psychiatric care when it went public in 1969. Upon Richard Conte's assumption
of the chairman and CEO position in 1992, CPC launched an aggressive expansion
of the company's U.K. operations and created a new subsidiary to develop and
operate long-term acute care hospitals called Transitional Hospitals
Corporation (THC), in order to reduce the company's dependence on the U.S.
psychiatric business in the wake of a nationwide industry downturn.
Following the transaction CPC's primary business will be THC, and pending
shareholder approval at the company's annual meeting on November 8, the company
intends to change its name to Transitional Hospitals Corporation. THC currently
operates 14 hospitals and two satellite facilities, has two more facilities in
the final stages of development, and is evaluating numerous other development
projects and potential acquisitions across the country. THC's net operating
revenues and net earnings through the first nine months of fiscal 1996 totaled
$179.7 million and $7.8 million, or $0.18 per share, respectively.
The sale of CPC's U.S. psychiatric business to BHC will further enhance
the company's balance sheet, which had already been strengthened by net proceeds
amounting to $97 million from the sale of its U.K. operations. After the close
of the BHC transaction and receipt of an expected tax refund, there will be
approximately $150 million in cash and just $25 million in debt on CPC's balance
sheet.
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The company plans to use its cash position to accelerate THC's expansion,
and to continue to take advantage of opportunities to buy back stock in the open
market to increase shareholder value. Today CPC's Board of Directors voted to
approve the expenditure of up to $50 million to repurchase the company's
shares--a program which is incremental to a $25 million buyback program
authorized by the Board in August 1996. To date, the company has spent
approximately $17 million to repurchase more than 2 million of its shares at an
average price of $8.12.
BHC plans to take the new combined psychiatric company public as soon as
market conditions and BHC's strategy permit. It is CPC's intention to retain
approximately 20% of the shares outstanding in the new public company, while
releasing the remaining 42% into the stock market in a manner most advantageous
to the company and its shareholders.
Commenting on the transaction, Richard L. Conte said, "Selling our U.S.
psychiatric operations to BHC fulfills a number of key objectives for the
company. We believe that combining CPC and BHC operations will provide economies
of scale that will allow BHC to operate more cost-efficiently and better
compete in today's cost-conscious psychiatric industry environment. We also
believe in Ed Stack's leadership and management abilities, which combined with
the experience of CPC's executives, gives us confidence that our stake in the
new BHC and our collective strategy to further consolidate and "roll-up" the
industry has the potential to be a rewarding one for both CPC's and BHC's
investors."
Conte continued, "On behalf of THC, we will greatly strengthen our balance
sheet and realize significant tax savings to offset the substantial taxable gain
from the sale of our U.K. division. Our strong cash position will facilitate
expansion of our long-term care operations, through acquisitions of both
individual hospitals and small chains, as well as the extension of our stock
repurchase program. We will reduce overhead significantly by eliminating about
60 positions and transferring some positions to BHC, at an estimated savings in
salaries and benefits of approximately $7 million, which does not include
expected savings in personnel expenses such as travel and supplies. Of course,
another key benefit to this transaction is that senior management now will be
free to focus our time and attention on enhancing the operations of our THC
hospitals."
Ed Stack commented, "CPC's psychiatric operations are an excellent fit
with BHC. Geographically, we will gain a much broader presence in key markets
across the country. Strategically, both companies have been concentrating on
building a full continuum of psychiatric and behavioral care services, and
developing and operating fully integrated behavioral health care delivery
systems in selective markets. CPC brings considerable experience in psychiatric
operations to our company, and we are excited by this opportunity to expand the
markets we serve with quality behavioral care services, and to strengthen our
position as a leading provider to managed care and government payers."
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Information in this release that is not historical should be considered
forward-looking and is based on management's estimates and assumptions. These
statements are subject to risk and uncertainty and there can be no assurance
that these future results will be achieved. Readers are cautioned that a number
of factors could adversely affect the company's ability to achieve these
results, including industry factors described in the company's Annual Report on
Form 10-K. Other important factors affecting certain statements in this release
that could cause results to differ materially are uncertainties related to the
securities markets and the timing and ability of the parties to the transaction
to satisfy all conditions required to complete the transaction.
#####
Contact: Suzanne Shirley, Sr. VP-Corporate & Investor Relations, October 22
only - (813) 874-6359; Las Vegas office: (702) 257-3663 or -3600
A CONFERENCE CALL WILL BE HELD WED., OCT. 23 AT 10 A.M. EASTERN TIME. CALL IN
(800) 390-8118, 15 MINUTES AHEAD OF CALL.
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