<PAGE>
UNITED STATES
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 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 _______
AMERICAN MEDICAL HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
Delaware 1-10511 13-3527632
(State or other (Commission file number) (I.R.S. Employer
jurisdiction of Identification No.)
incorporation or
organization)
AMERICAN MEDICAL INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
Delaware 1-7612 95-2111054
(State or other (Commission file number) (I.R.S. Employer
jurisdiction of Identification No.)
incorporation or
organization)
14001 N. Dallas Parkway, Dallas, Texas 75240
(Address of principal executive offices) (Zip code)
(214) 789-2200
(Registrants' telephone number, including area code)
Indicate by check mark whether the Registrants (1) have 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 Registrants were required to file such reports), and (2) have
been subject to such filing requirements for the past 90 days. American
Medical Holdings, Inc. Yes X No_. American Medical International, Inc. Yes X
No _.
As of February 28, 1995, there were 77,660,133 shares of American
Medical Holdings, Inc. Common Stock, $.01 par value outstanding.
All shares of Common Stock, $.01 par value, of American Medical
International, Inc. are held by American Medical Holdings, Inc.
<PAGE>
AMERICAN MEDICAL HOLDINGS, INC. AND SUBSIDIARIES
AMERICAN MEDICAL INTERNATIONAL, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheets -
February 28, 1995 and August 31, 1994 .......................... 1
Condensed Consolidated Statements of Operations -
Three Months Ended February 28, 1995 and February 28, 1994 ..... 2
Condensed Consolidated Statements of Operations -
Six Months Ended February 28, 1995 and February 28, 1994 ....... 3
Condensed Consolidated Statements of Cash Flows -
Six Months Ended February 28, 1995 and February 28, 1994 ....... 4
Notes to Condensed Consolidated Financial Statements ........... 5
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS .................. 8
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS .............................................. 13
ITEM 2 - CHANGES IN SECURITIES .......................................... 13
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES ................................ 13
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS ............ 13
ITEM 5 - OTHER INFORMATION .............................................. 13
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K ............................... 13
SIGNATURES ..................................................... 14
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AMERICAN MEDICAL HOLDINGS, INC. AND SUBSIDIARIES
AMERICAN MEDICAL INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FEBRUARY 28, 1995 AUGUST 31, 1994
---------------------- ----------------------
HOLDINGS AMI HOLDINGS AMI
---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 89,433 $ 89,433 $ 31,941 $ 31,941
Accounts receivable, net 195,707 195,707 147,415 147,415
Income taxes, net (including
current portion of deferred
income taxes) 15,325 15,325 30,876 30,876
Other current assets 81,018 81,018 78,577 78,577
---------- ---------- ---------- ----------
Total current assets 381,483 381,483 288,809 288,809
---------- ---------- ---------- ----------
PROPERTY AND EQUIPMENT 2,060,285 2,060,285 1,971,396 1,971,396
Less - accumulated depreciation 569,282 569,282 507,653 507,653
---------- ---------- ---------- ----------
Net property and equipment 1,491,003 1,491,003 1,463,743 1,463,743
---------- ---------- ---------- ----------
NOTES RECEIVABLE AND INVESTMENTS 37,362 37,362 40,082 40,082
COST IN EXCESS OF NET ASSETS
ACQUIRED, NET 1,152,300 1,152,300 1,153,887 1,153,887
OTHER ASSETS 60,202 60,202 30,026 30,026
---------- ---------- ---------- ----------
$3,122,350 $3,122,350 $2,976,547 $2,976,547
========== ========== ========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES $ 428,526 $ 428,526 $ 476,464 $ 476,464
LONG-TERM DEBT 1,321,069 1,321,069 1,130,967 1,130,967
CONVERTIBLE SUBORDINATED DEBT 10,456 10,456 10,707 10,707
DEFERRED INCOME TAXES 211,452 211,452 218,651 218,651
OTHER DEFERRED CREDITS AND LIABILITIES 309,296 309,296 291,040 291,040
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Common stock 777 725 775 725
Additional paid-in capital 610,346 594,746 608,096 592,494
Retained earnings 235,999 251,651 245,547 261,199
Adjustment for minimum
pension liability (5,700) (5,700) (5,700) (5,700)
Translation Adjustment 129 129 - -
---------- ---------- ---------- ----------
Total shareholders' equity 841,551 841,551 848,718 848,718
---------- ---------- ---------- ----------
$3,122,350 $3,122,350 $2,976,547 $2,976,547
========== ========== ========== ==========
</TABLE>
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
1
<PAGE>
AMERICAN MEDICAL HOLDINGS, INC. AND SUBSIDIARIES
AMERICAN MEDICAL INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED FEBRUARY 28,
-----------------------------------------
1995 1994
------------------- -------------------
HOLDINGS AMI HOLDINGS AMI
-------- -------- -------- --------
<S> <C> <C> <C> <C>
NET REVENUES $667,923 $667,923 $583,339 $583,339
OPERATING COSTS AND EXPENSES:
Salaries and benefits 245,263 245,263 210,390 210,390
Supplies 96,411 96,411 83,130 83,130
Provision for uncollectible accounts 48,962 48,962 38,281 38,281
Depreciation and amortization 41,375 41,375 38,689 38,689
Merger costs 73,900 73,900 - -
Other operating costs 140,777 140,777 131,049 131,049
-------- -------- -------- --------
Total operating costs and expenses 646,688 646,688 501,539 501,539
-------- -------- -------- --------
OPERATING INCOME 21,235 21,235 81,800 81,800
Interest expense, net (39,150) (39,150) (38,092) (38,092)
-------- -------- -------- --------
INCOME (LOSS) BEFORE TAXES AND MINORITY
EQUITY INTEREST (17,915) (17,915) 43,708 43,708
Provision for income taxes (6,000) (6,000) (18,500) (18,500)
-------- -------- -------- --------
NET INCOME (LOSS) BEFORE MINORITY EQUITY
INTEREST (23,915) (23,915) 25,208 25,208
Minority equity interest (924) (924) (931) (931)
-------- -------- -------- --------
NET INCOME (LOSS) $(24,839) $(24,839) $ 24,277 $ 24,277
======== ======== ======== ========
PER SHARE DATA:
Net income (loss) per common and
common equivalent share $ (0.32) N/A $ 0.32 N/A
======== ========
Shares used for computation of
net income (loss) per share 77,647 N/A 77,058 N/A
======== ========
</TABLE>
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
2
<PAGE>
AMERICAN MEDICAL HOLDINGS, INC. AND SUBSIDIARIES
AMERICAN MEDICAL INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED FEBRUARY 28,
-------------------------------------------------
1995 1994
----------------------- -----------------------
HOLDINGS AMI HOLDINGS AMI
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
NET REVENUES $1,300,134 $1,300,134 $1,141,556 $1,141,556
OPERATING COSTS AND EXPENSES:
Salaries and benefits 482,188 482,188 415,804 415,804
Supplies 188,202 188,202 162,612 162,612
Provision for uncollectible accounts 91,084 91,084 77,317 77,317
Depreciation and amortization 82,465 82,465 76,962 76,962
Merger costs 73,900 73,900 - -
Other operating costs 280,977 280,977 257,703 257,703
---------- ---------- ---------- ----------
Total operating costs and expenses 1,198,816 1,198,816 990,398 990,398
---------- ---------- ---------- ----------
OPERATING INCOME 101,318 101,318 151,158 151,158
Interest expense, net (78,425) (78,425) (76,940) (76,940)
---------- ---------- ---------- ----------
INCOME BEFORE TAXES AND MINORITY EQUITY
INTEREST 22,893 22,893 74,218 74,218
Provision for income taxes (23,100) (23,100) (31,400) (31,400)
---------- ---------- ---------- ----------
NET INCOME (LOSS) BEFORE MINORITY
EQUITY INTEREST (207) (207) 42,818 42,818
Minority equity interest (1,586) (1,586) (2,028) (2,028)
---------- ---------- ---------- ----------
NET INCOME (LOSS) $ (1,793) $ (1,793) $ 40,790 $ 40,790
========== ========== ========== ==========
PER SHARE DATA:
Net income (loss) per common and
common equivalent share $ (0.02) N/A $ 0.53 N/A
========== ==========
Shares used for computation of net
income (loss) per share 77,607 N/A 76,998 N/A
========== ==========
</TABLE>
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
3
<PAGE>
AMERICAN MEDICAL HOLDINGS, INC. AND SUBSIDIARIES
AMERICAN MEDICAL INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED FEBRUARY 28,
-------------------------------------------
1995 1994
---------------------- ------------------
HOLDINGS AMI HOLDINGS AMI
--------- --------- -------- --------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (1,793) $ (1,793) $ 40,790 $ 40,790
Adjustments to reconcile to net cash
provided by operating activities:
Merger costs 73,900 73,900 - -
Depreciation and amortization 82,465 82,465 76,962 76,962
Deferred income taxes (7,200) (7,200) - -
Amortization of debt discount, deferred
financing costs and non-cash interest 25,264 25,264 24,716 24,716
Change in working capital (18,943) (18,943) (33,706) (33,706)
(Increase) decrease in other liabilities 5,222 5,222 (10,274) (10,274)
Other (6,654) (6,654) (761) (761)
--------- --------- -------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES 152,261 152,261 97,727 97,727
--------- --------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on debt (154,507) (154,507) (32,509) (32,509)
Revolving credit facility 172,000 172,000 (29,000) (29,000)
Cash dividends (7,755) (7,755) - -
Other 2,116 2,116 1,990 1,990
--------- --------- -------- --------
NET CASH PROVIDED BY (USED IN) FINANCING
ACTIVITIES 11,854 11,854 (59,519) (59,519)
--------- --------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Property and equipment additions (72,193) (72,193) (53,707) (53,707)
Acquisitions (23,151) (23,151) - -
Increase in other assets (17,240) (17,240) (3,441) (3,441)
Increase in notes receivable and
investments (3,468) (3,468) (3,339) (3,339)
Decrease in notes receivable and
investments 10,802 10,802 4,772 4,772
Other (1,373) (1,373) 1,710 1,710
--------- --------- -------- --------
NET CASH USED IN INVESTING ACTIVITIES (106,623) (106,623) (54,005) (54,005)
--------- --------- -------- --------
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 57,492 57,492 (15,797) (15,797)
Cash and cash equivalents, beginning of
period 31,941 31,941 44,335 44,335
--------- --------- -------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 89,433 $ 89,433 $ 28,538 $ 28,538
========= ========= ======== ========
</TABLE>
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
4
<PAGE>
AMERICAN MEDICAL HOLDINGS, INC. AND SUBSIDIARIES
AMERICAN MEDICAL INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
American Medical Holdings, Inc. ("Holdings") was organized in July 1989 to
acquire American Medical International, Inc. ("AMI" and, together with
Holdings, the "Company"). As a result of this acquisition, Holdings is the
owner of all of the outstanding shares of common stock of AMI.
The accompanying unaudited condensed consolidated financial statements
include the accounts of Holdings, AMI and all majority owned subsidiary
companies and have been prepared in accordance with generally accepted
accounting principles for interim financial information. In the opinion of
management, all adjustments, consisting only of normal recurring adjustments
necessary for a fair presentation, have been included in the accompanying
interim financial statements. The condensed consolidated balance sheet as of
August 31, 1994, was derived from the audited financial statements, but does
not include all disclosures required by generally accepted accounting
principles. All significant intercompany accounts and transactions have been
eliminated. Certain reclassifications have been made to the prior period's
financial statements to be consistent with the current year presentation.
For additional disclosure, refer to Holdings' and AMI's Annual Report on Form
10-K for the year ended August 31, 1994.
2. MERGER OF THE COMPANY AND NATIONAL MEDICAL ENTERPRISES, INC.
On October 10, 1994, Holdings, National Medical Enterprises, Inc. a Nevada
corporation ("NME") and a wholly-owned subsidiary of NME executed an
agreement and plan of merger (the "Merger Agreement"). On March 1, 1995,
under terms of the Merger Agreement, NME acquired all of the outstanding
shares of common stock of Holdings for approximately $1.5 billion in cash and
approximately 33.2 million shares of NME's common stock valued at
approximately $489 million. The shares of NME's common stock include the
buyout of employee stock options which were issued to certain of the
Company's executives and shares issuable upon the conversion of the 9 1/2%
convertible subordinated debentures, due 2001. On February 28, 1995
Holdings, under terms of the Merger Agreement paid a special dividend of
$0.10 per share to stockholders of record on February 10, 1995. As a result
of the Merger, Holdings became a wholly-owned subsidiary of NME and as of
March 1, 1995, the combined company began doing business as Tenet Healthcare
Corporation, Inc. ("Tenet"). Tenet is the second-largest healthcare services
company in the nation. The Merger was approved by shareholders owning
approximately 61.4% of Holdings' outstanding shares of common stock and,
therefore, further action by Holdings' shareholders was not required. (See
Note 5 for a discussion of debt repayments by NME.)
In connection with the Merger, the Company incurred non-recurring merger
costs of approximately $73.9 million ($55.2 million, net of tax), principally
related to the buyout of employee stock options, employee benefit costs and
professional fees.
3. ACCOUNTS RECEIVABLE
As of February 28, 1995, and August 31, 1994, Holdings and AMI had reserves
for uncollectible receivables of $104.9 million and $98.6 million,
respectively.
4. COST IN EXCESS OF NET ASSETS ACQUIRED
Cost in excess of net assets acquired is amortized over 40 years. Holdings'
and AMI's cumulative amortization of cost in excess of net assets acquired as
of February 28, 1995 and August 31, 1994, was $173.5 million and
5
<PAGE>
AMERICAN MEDICAL HOLDINGS, INC. AND SUBSIDIARIES
AMERICAN MEDICAL INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
4. COST IN EXCESS OF NET ASSETS ACQUIRED (CONTINUED)
$157.2 million, respectively. Amortization of cost in excess of net assets
acquired for Holdings and AMI was $8.2 million and $8.0 million for the three
months ended February 28, 1995 and 1994, respectively. Amortization of cost
in excess of net assets acquired for Holdings and AMI was $16.3 million and
$16.0 million for the six months ended February 28, 1995 and 1994,
respectively.
5. LONG-TERM DEBT
As of February 28, 1995, $438.0 million was outstanding under the Company's
$600 million revolving credit facility which expires in September 1999 and
presently accrues interest at 8.03%. In addition, as of February 28, 1995
$31.8 million in letters of credit were issued thereunder.
In connection with the Merger, and subsequent to February 28, 1995, Tenet
repaid approximately $1.2 billion of the Company's outstanding indebtedness
as of April 3, 1995. Repayments made by Tenet on the principal amount of the
Company's outstanding indebtedness are summarized as follows (in thousands):
<TABLE>
<S> <C>
$600 million Revolving Credit Facility $ 438,000
11 1/4% Senior notes, due 1995 47,793
11% Senior notes, due 2000 98,110
6 1/2% Swiss franc/dollar dual currency senior notes, due 1997 58,418
5% Swiss franc bonds, due 1996 45,391
Zero Coupon Guaranteed Bonds, due 1997 14,327
Zero Coupon Guaranteed Bonds, due 2002 16,986
9 1/2% Senior Subordinated Notes, due 2006 150,000
13 1/2% Senor Subordinated Notes, due 2001 178,512
15% Junior Subordinated Discount Debentures, due 2005 90,195
9 1/2% Convertible Subordinated Debentures, due 2001, 4,536
8 1/4% Convertible Subordinated Debentures, due 2008 14,456
----------
$1,156,724
==========
</TABLE>
In addition, the Company's $600 million revolving credit facility was
cancelled upon repayment of the outstanding principle and accrued interest.
6. COMMITMENTS AND CONTINGENCIES
Holdings and AMI are subject to claims and suits arising in the ordinary
course of business. In the opinion of management, the ultimate resolution of
all pending legal proceedings will not have a material adverse effect on the
business, results of operations, cash flows or financial condition of
Holdings or AMI.
6
<PAGE>
AMERICAN MEDICAL HOLDINGS, INC. AND SUBSIDIARIES
AMERICAN MEDICAL INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
7. CAPITAL STOCK
As of February 28, 1995, Holdings had 200 million shares of $0.01 par value
common stock authorized. Of such shares, 77,660,133 and 77,491,000 were
outstanding as of February 28, 1995, and August 31, 1994, respectively.
Holdings, under terms of the Merger Agreement, paid a special dividend of
$0.10 per share, on February 28, 1995, to stockholders of record on February
10, 1995. As of February 28, 1995, Holdings had five million shares of $0.01
par value of Preferred Stock authorized, of which none were outstanding. As
a result of the Merger, NME is the owner of all outstanding shares of common
stock of Holdings.
Holdings is the owner of all outstanding shares of common stock of AMI. As
of February 28, 1995, and August 31, 1994, AMI had 200 million shares of
$0.01 par value common stock authorized of which 72,481,000 shares were
outstanding.
8. NET REVENUES
The Company's sources of revenues are primarily provided from patient
services and are presented net of reserves to recognize the difference
between the hospitals' established billing rates for covered services and the
amount paid by third party or private payers. Patient revenues received
under government and privately sponsored insurance programs are based on cost
as defined under the programs or at predetermined rates based upon the
diagnosis, plus capital costs, return on equity, and other adjustments rather
than customary charges. Adjustments are recorded in the period services are
rendered based on estimated amounts to be reimbursed and contract
interpretations, however, such adjustments are generally subject to final
audit and settlement. Net revenues include adjustments for the three and six
months ended February 28, 1995 and 1994 of $585.1 million, $1,161.4 million,
$546.8 million and $1,037.4 million, respectively. In management's opinion,
the reserves established are adequate to cover the ultimate liabilities that
may result from final settlements.
Net revenues from Medicare/Medicaid programs represented 46% and 41% of
total net revenues for the six months ended February 28, 1995 and 1994,
respectively. The Company's net revenues from contracted business
represented 25% of total net revenues for the six months ended February 28,
1995 and 1994, respectively.
9. MINORITY EQUITY INTEREST
Minority equity interest expense of $1.3 million and $1.5 million for the
three months ended February 28, 1995 and 1994, respectively and $2.4 million
and $3.3 million for the six months ended February 28, 1995 and 1994,
respectively, is presented net of income taxes in the accompanying condensed
consolidated statements of operations.
10. SUPPLEMENTAL CASH FLOW INFORMATION
The Company paid income taxes (net of refunds) of $13.9 million and $36.1
million for the six months ended February 28, 1995 and 1994, respectively.
The Company paid interest (net of capitalized costs) for the six months ended
February 28, 1995 and 1994 of $68.2 million and $50.6 million, respectively.
Capitalized interest costs were $1.2 million and $2.0 million for the six
months ended February 28, 1995 and 1994, respectively. Interest income was
$2.0 million and $1.3 million for the six months ended February 28, 1995 and
1994, respectively.
In conjunction with the acquisition of Hilton Head Hospital in September
1994 by a limited partnership, of which a wholly-owned subsidiary of AMI is
general partner, the Company recorded net assets of $14.6 million.
7
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash and cash equivalents at February 28, 1995 were $89.4
million compared to $31.9 million at August 31, 1994. The increase of $57.5
million was primarily due to cash and short-term cash investments required
for certain costs related to the completion of the merger transaction
between the Company and National Medical Enterprises, Inc. ("NME") subsequent
to February 28, 1995 (the "Merger"). Accounts receivable of $195.7 million
at February 28, 1995 increased $48.3 million from $147.4 million at August
31, 1994 while the income tax receivable decreased $15.6 million to $15.3
million at February 28, 1995 from $30.9 million at August 31, 1994. The
addition of a hospital, growth in net revenues, and a decrease in the amount
of receivables collected during the period were the primary components of the
increase in accounts receivable at February 28, 1995. The decrease in the
income tax receivable is primarily due to the current income tax provision.
Current liabilities at February 28, 1995 of $428.5 million decreased $48.0
million from $476.5 million at August 31, 1994, largely as a result of
payments on the current portion of long-term debt which was partially offset
by a reserve for merger related costs. The changes discussed above in the
working capital accounts resulted in a reduction in the working capital
deficit; at February 28, 1995 the working capital deficit of $47.0 million
compared to a working capital deficit of $187.6 million at August 31, 1994.
The decrease in the working capital deficit at February 28, 1995, along with
the improved results of operation (excluding merger costs), increased the cash
provided by operating activities to $152.3 million for the six months ended
February 28, 1995 compared to $97.7 million for the six months ended
February 28, 1994. The funding contribution of the Company's pension plan
assets and acquisition related transactions resulted in other long term assets
of $60.2 million at February 28, 1995 compared to $30.0 million at August 31,
1994.
The Company invested $72.2 million in capital expenditures (excluding
acquisitions) for the six months ended February 28, 1995, compared to $53.7
million for the six months ended February 28, 1994. Capital expenditures
made by the Company and construction commitments outstanding of approximately
$44.5 million are for the expansion and renovations of facilities to
accommodate new inpatient and outpatient programs and to further develop
certain lines of business, including home health, surgery centers and
physician practices.
Cash of $23.2 million was used during the six months ended February 28, 1994
for the acquisition of healthcare related facilities and an investment in a
limited partnership, of which a wholly-owned subsidiary of AMI is general
partner, which acquired a hospital in Hilton Head, South Carolina. In
September 1994, the Company entered into a joint venture agreement with a
community organization (the "Burgergemeinde") located in Cham, Canton Zug,
Switzerland. The joint venture is owned 90% by the Company and 10% by the
Burgergemeinde. Under the terms of the transaction, the Company entered into
a long term lease for the land where the existing hospital is located and
will construct a new 56 bed acute care wing, convert an existing structure
into a medical office building and renovate and remodel the existing acute
care facility. In addition, the Company plans to contract to provide
management, food, physical therapy and rehabilitation services to the
hospital, an on-site nursing home and an affiliated retirement community.
The Company repaid (excluding repayments on the Company's $600 million
revolving credit facility) $154.5 million of long-term debt during the six
months ended February 28, 1995 from cash provided by operating activities,
short-term cash investments and borrowings under the Company's $600 million
revolving credit facility. The Company's repayments on long-term debt
include (i) $88.8 million for the redemption of the remaining principal
amount of the 11 3/8% senior debt due February 1, 1995 (ii) $62.7 million for
the redemption of the 11 1/4% senior notes due February 3, 1995 (L37 million
face value), and (iii) $3 million in other long-term debt. The amount
outstanding under the Company's $600 million revolving credit facility at
February 28, 1995 was $438.0 million, an increase of $172.0 million from
$266.0 million at August 31, 1994. The increase in the $600 million
revolving credit facility was primarily for the repayments made on long-term
debt.
8
<PAGE>
The terms of certain indebtedness of the Company imposed operating and
financial restrictions requiring the Company to maintain certain financial
ratios and restrict the Company's ability to incur additional indebtedness
and enter into leases and guarantees of debt; to make capital expenditures;
to make loans and investments; to pay dividends or repurchase shares of
stock; to repurchase, retire or refinance indebtedness prior to maturity; and
to purchase or sell assets. The Company has pledged the capital stock of
certain direct (first tier) subsidiaries as security for its obligations
under the revolving credit facility and certain other senior indebtedness.
In addition, the Company granted a security interest in its accounts
receivable as security for its obligations under the revolving credit
facility. Management believes that the Company is currently in compliance
with all material covenants and restrictions contained in all financing
agreements.
Subsequent to February 28, 1995 and in connection with the Merger on March 1,
1995 to form Tenet Healthcare Corporation, certain of the Company's long-term
debt was repaid. In addition, the Company's $600 million revolving credit
facility was cancelled upon repayment of the outstanding principal and accrued
interest. As the result of such repayments and the cancellation of the $600
million revolving credit facility, the operating and financial restrictions
required by such indebtedness are no longer in place.
9
<PAGE>
RESULTS OF OPERATIONS
AMI's results of operations are the same as that of the Company's;
therefore, separate results of operations and a discussion and analysis for
AMI are not presented. The following table summarizes certain consolidated
results of the Company (dollars in millions):
<TABLE>
<CAPTION>
SIX MONTHS ENDED FEBRUARY 28,
---------------------------------------
1995 1994
------------------ ------------------
% OF NET % OF NET
REVENUES REVENUES
-------- --------
<S> <C> <C> <C> <C>
NET REVENUES $1,300.1 100.0% $1,141.5 100.0%
OPERATING COSTS AND EXPENSES
Salaries and benefits 482.2 37.1 415.8 36.4
Supplies 188.2 14.5 162.6 14.2
Provision for uncollectible accounts 91.1 7.0 77.3 6.8
Depreciation and amortization 82.5 6.3 77.0 6.7
Merger costs 73.9 5.7 - -
Other operating costs 280.9 21.6 257.7 22.7
-------- ----- -------- -----
Total operating costs and expenses 1,198.8 92.2 990.4 86.8
-------- ----- -------- -----
OPERATING INCOME 101.3 7.8 151.1 13.2
Interest expense, net (78.4) (6.0) (76.9) (6.7)
-------- ----- -------- -----
INCOME BEFORE TAXES AND MINORITY EQUITY INTEREST 22.9 1.8 74.2 6.5
Provision for income taxes (23.1) (1.8) (31.4) (2.7)
-------- ----- -------- -----
INCOME (LOSS) BEFORE MINORITY EQUITY INTEREST (0.2) 0.0 42.8 3.8
Minority equity interest (1.6) (0.1) (2.0) (0.2)
-------- ----- -------- -----
NET INCOME (LOSS) $ (1.8) (0.1)% $ 40.8 3.6%
======== ===== ======== =====
</TABLE>
The following table sets forth certain operating statistics of the
Company's hospitals for the six months ended February 28, 1995 and 1994:
<TABLE>
<CAPTION>
OPERATING STATISTICS (1): 1995 1994
--------- ---------
<S> <C> <C>
Admissions 127,947 118,728
Equivalent Admissions (2) 178,358 160,926
Outpatient Visits 1,412,613 1,081,860
Patient days 769,147 695,102
Equivalent patient days (2) 1,048,608 932,055
Licensed beds occupancy rate 47.2% 47.2%
Licensed beds at end of period 9,002 8,131
<FN>
- ----------------------
(1) Represents statistics for hospitals only and has not been adjusted to
include statistics for related healthcare entities.
(2) Represents actual admissions/patient days as adjusted to include
outpatient and emergency room services by adding to actual admissions/
patient days an amount derived by dividing outpatient and emergency room
revenue by inpatient revenue per admission/patient days.
</TABLE>
10
<PAGE>
The results of operations for the six months ended February 28, 1995
include the results of operations of Saint Francis Hospital and Hilton Head
Hospital which were acquired May 1, 1994 and September 1, 1994, respectively,
and therefore, are not included in the results of operations for the six
months ended February 28, 1994. For the six months ended February 28, 1995,
Saint Francis Hospital and Hilton Head Hospital contributed approximately 59%
of the increase in net revenues and 63% of the increase in operating expenses
(excluding merger costs), primarily in salaries and benefits and supplies,
over the same period of the prior year. Operating expenses of $1,198.8
million for the six months ended February 28, 1995 include non-recurring
merger costs of $73.9 million incurred in connection with the Merger.
Excluding these merger costs, operating expenses of $1,124.9 million for the
six months ended February 28, 1995 remained stable as a percentage of net
revenue at 86.5% when compared to the six months ended February 28, 1994 of
86.8%. Operating income, excluding merger costs, increased to $175.2 million
for the six months ended February 28, 1995 from $151.1 million for the six
months ended February 28, 1994, resulting in an operating margin of 13.5% for
the six months ended February 28, 1995 compared to 13.2% for the six months
ended February 28, 1994.
While the additional revenues recognized from the acquisition of two
hospitals contributed primarily to the growth in the reported net revenues
and volume, the Company's historical hospitals experienced an increase in net
revenues from growth in volume from outpatient care from existing services
and the expansion of such services, and general price increases passed on for
patient care services. The growth in outpatient volume of 30.6% recognized
from February 28, 1995 compared to February 28, 1994 resulted in an increase
in net revenues from outpatient services, 30.4% of the Company's net patient
revenues for the six months ended February 28, 1995 compared to net revenues
of 28.7% from such sources for the six months ended February 28, 1994. The
increase in admissions of 7.8% for the six months ended February 28, 1995
from the six months ended February 28, 1994 was due to the addition of Saint
Francis Hospital and Hilton Head Hospital. Net revenues derived from
Medicare/Medicaid programs are a significant portion of the Company's net
revenues, comprising 45.8% of the Company's net revenues for the six months
ended February 28, 1995. This portion of the Company's net revenues has
increased when compared to the six months ended February 28, 1994 (41.4% of
net revenues) as an increasing portion of the population continues to qualify
for coverage under such programs and as a result of the impact of the payer
mix of the two additional hospitals. Net revenues derived from
non-contracted sources for the six months ended February 28, 1995 and 1994
were 25.4% and 30.2% of net revenues, respectively. Net revenues derived
from contracted sources for the six months ended February 28, 1995 and 1994
were 25.2% and 25.1% of net revenues, respectively. Net revenues from other
sources for the six months ended February 28, 1995 and 1994 contributed 3.6%
and 3.3%, respectively to the Company's net revenues.
The tax provision for the six months ended February 28, 1995 and 1994 is
greater than that which would occur using the Company's marginal tax rate
against its income before taxes and minority equity interest, due in large
part to the amortization of cost in excess of net assets acquired and certain
merger costs not being deductible for tax provision purposes.
A significant portion of the Company's operating costs and expenses are
subject to inflationary increases. Since the healthcare industry is labor
intensive, salaries and benefits are continually affected by inflation. The
Company's ability to pass on a certain portion of the increased costs
associated with providing healthcare to Medicare/Medicaid patients may be
limited by existing government reimbursement programs for healthcare services
unless the federal and state governments correspondingly increase the rates
of payments under these programs. Although the Company cannot predict its
ability to continue to cover future cost increases, management believes that
through the continued adherence to its cost containment programs, labor
management and reasonable price increases, inflation is not expected to have
a material adverse effect on operating margins.
Healthcare reform proposals have been introduced in Congress and in
state legislatures that could effect changes in the healthcare delivery
system, either at the national or state level. Among the proposals
considered by such legislatures are healthcare coverage for an increasing
percentage of the U.S. population, cost controls on healthcare providers,
insurance market reforms to increase the availability of group health
insurance to small businesses, requirements that all businesses offer health
insurance coverage to their employees, managed care programs for
11
<PAGE>
Medicare patients and the creation of a single government health insurance
plan (to reduce administrative costs) that would cover all citizens.
Although none of these proposals have been adopted, a broad range of both
similar and more comprehensive healthcare reform is likely to be considered
by all states, with some states having already implemented some type of
healthcare reform. Management believes that some form of federal healthcare
reform may occur; however, until such reform is finalized, management cannot
predict which proposals will be adopted, if any, and until adopted the impact
of any such proposals on the Company's business, results of operations, cash
flows or financial condition.
12
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
No material developments in the Company's legal proceedings have
occurred since the reporting of legal proceedings in the Company's
Annual Report on Form 10-K for the year ended August 31, 1994.
ITEM 2. CHANGES IN SECURITIES
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 5. OTHER INFORMATION
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
11 Computations of earnings per share.
27.1 Financial data schedule for American Medical Holdings, Inc.
27.2 Financial data schedule for American Medical International, Inc.
(b) REPORTS ON FORM 8-K
None.
13
<PAGE>
SIGNATURES
-----------
Pursuant to the requirements of the Securities Exchange Act of 1934, each
registrant has duly caused this report to be signed on its behalf by
undersigned thereunto duly authorized.
AMERICAN MEDICAL HOLDINGS, INC.
Date: April 14, 1995
By: RAYMOND L. MATHIASEN
-----------------------------------------
Raymond L. Mathiasen
Senior Vice President
Chief Financial Officer
AMERICAN MEDICAL INTERNATIONAL, INC.
Date: April 14, 1995
By: RAYMOND L. MATHIASEN
-----------------------------------------
Raymond L. Mathiasen
Senior Vice President
Chief Financial Officer
14
<PAGE>
EXHIBIT 11
AMERICAN MEDICAL HOLDINGS, INC.
COMPUTATIONS OF EARNINGS PER SHARE
(IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
FEBRUARY 28, FEBRUARY 28,
-------------------- -------------------
1995 1994 1995 1994
-------- ------- ------- -------
<S> <C> <C> <C> <C>
SIMPLE
Net income (loss) $(24,839) $24,277 $(1,793) $40,790
======== ======= ======= =======
Average outstanding shares 77,647 77,058 77,607 76,998
======== ======= ======= =======
Simple net income (loss) per share $ (0.32) $ 0.32 $ (0.02) $ 0.53
======== ======= ======= =======
PRIMARY
Net income (loss) $(24,839) $24,277 $ (1,793) $40,790
Adjustment for interest on
debentures, net of tax 72 72 146 143
-------- ------- ------- -------
Net income (loss) for primary $(24,767) $24,349 $ (1,647) $40,933
======== ======= ======= =======
Average outstanding shares 77,647 77,058 77,607 76,998
Common stock equivalents assuming
exercise of stock options 1,907 1,833 1,866 1,698
Common stock equivalents assuming
conversion of debentures 186 210 186 210
-------- ------- ------- -------
Shares for primary 79,740 79,101 79,659 78,906
======== ======= ======= =======
Primary net income (loss) per share $ (0.31)(1) $ 0.31(1) $ (0.02)(1) $ 0.52(1)
======== ======= ======= =======
FULLY-DILUTED
Net income (loss) for primary $(24,767) $24,349 $(1,647) $40,933
Adjustment for interest on
debentures, net of tax 154 133 307 266
-------- ------- ------- -------
Net income (loss) for fully-diluted $(24,613) $24,482 $(1,340) $41,199
======== ======= ======= =======
Shares for primary 79,740 79,101 79,659 78,906
Common stock equivalents
assuming additional conversion
of debentures and exercise of
stock options 416 414 457 573
-------- ------- ------- -------
Shares for fully-diluted 80,156 79,515 80,116 79,479
======== ======= ======= =======
Fully-diluted net income (loss)
per share $ (0.31)(1) $ 0.31(1) $ (0.02)(1) $ 0.52(1)
======== ======= ======= =======
<FN>
____________________
(1) The calculations for primary net income per share and fully-diluted net income
per share are submitted in accordance with Regulation S-K Item 601(b)(11)
although it is contrary to paragraph 40 of APB Opinion No. 15 because it
produces either no dilutive effect or the effect on dilution is not material.
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
ITEM 1, FINANCIAL STATEMENTS ON FORM 10-Q FOR AMERICAN MEDICAL HOLDINGS, INC.
</LEGEND>
<CIK> 0000861439
<NAME> AMERICAN MEDICAL HOLDINGS, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> AUG-31-1995
<PERIOD-START> SEP-01-1994
<PERIOD-END> FEB-28-1995
<CASH> 89433
<SECURITIES> 0
<RECEIVABLES> 195707
<ALLOWANCES> 104857
<INVENTORY> 64804
<CURRENT-ASSETS> 381483
<PP&E> 2060285
<DEPRECIATION> 569282
<TOTAL-ASSETS> 3122350
<CURRENT-LIABILITIES> 428526
<BONDS> 1331525
<COMMON> 777
0
0
<OTHER-SE> 840774
<TOTAL-LIABILITY-AND-EQUITY> 3122350
<SALES> 0
<TOTAL-REVENUES> 1300134
<CGS> 0
<TOTAL-COSTS> 1198816
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 91084
<INTEREST-EXPENSE> 78425
<INCOME-PRETAX> 22893
<INCOME-TAX> (23100)
<INCOME-CONTINUING> (207)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1793)
<EPS-PRIMARY> (0.02)
<EPS-DILUTED> (0.02)
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
Item 1, Financial Statements on Form 10-Q for American Medical Interantional,
Inc.
</LEGEND>
<CIK> 0000312655
<NAME> AMERICAN MEDICAL INTERNATIONAL, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> AUG-31-1995
<PERIOD-START> SEP-01-1994
<PERIOD-END> FEB-28-1995
<CASH> 89433
<SECURITIES> 0
<RECEIVABLES> 195707
<ALLOWANCES> 104857
<INVENTORY> 64804
<CURRENT-ASSETS> 381483
<PP&E> 2060285
<DEPRECIATION> 569282
<TOTAL-ASSETS> 3122350
<CURRENT-LIABILITIES> 428526
<BONDS> 1331525
<COMMON> 725
0
0
<OTHER-SE> 840826
<TOTAL-LIABILITY-AND-EQUITY> 3122350
<SALES> 0
<TOTAL-REVENUES> 1300134
<CGS> 0
<TOTAL-COSTS> 1198816
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 91084
<INTEREST-EXPENSE> 78425
<INCOME-PRETAX> 22893
<INCOME-TAX> (23100)
<INCOME-CONTINUING> (207)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1793)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
