UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report June 30, 1998 Commission file number 0-2751
------------- ------
AMERICAN HOSPITAL MANAGEMENT CORPORATION
----------------------------------------
(Exact name of registrant as specified in its charter)
CALIFORNIA 95-1861243
---------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P.O. Box 1116
Arcata, California 95521
- ------------------ -----
(Address of principal executive (Zip Code)
offices)
Registrant's telephone number, including area code: (707) 839-8474
------------------
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
------------------- ----------------
None
- --------------------------------------------------------------------------------
Securities registered pursuant to Section 12(g) of the Act:
Common Stock $1.00 par value
- --------------------------------------------------------------------------------
(Title of class)
$2.00 Cumulative Preferred Stock $1.00 par valu
- --------------------------------------------------------------------------------
(Title of class)
Indicate by check mark whether the registrant (1) has filed reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes No X
--- ---
-1-
<PAGE>
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. Yes No X
--- ---
State the aggregate market value of the voting stock held by nonaffiliates of
the registrant. The aggregate market value shall be computed by reference to the
price at which the stock was sold, or the average bid and asked prices of such
stock, at a specified date within 60 days prior to the date of filing. (See
definition of affiliate in Rule 405, 17 CRF 230.405.)
There is no market for the registrant's stock.
(APPLICABLE ONLY TO CORPORATE REGISTRANTS)
Indicate the number of share outstanding of each of the registrant's classes of
common stock as of the latest practicable date (225,937 at October 31, 1998).
Total number of pages, including cover - 40
-2-
<PAGE>
PART 1
Item 1. Business
- ------- --------
The primary business of the Company is the operation and
ownership of Mad River Community Hospital (the Hospital) and
satellite clinics, located in the Humboldt County area of
Northern California.
Over the last several years the Company has expanded the scope
of services offered by the Hospital to include advanced
ancillary service departments used by physicians practicing in
the rural service area. As a result of the ongoing expansion
of facilities and services, the Hospital continues to recruit
new physicians to provide the added care as well as to replace
physicians who are retiring from active practice. The
Hospital's service area on the north coast is experiencing the
highest rate of growth in the county and is especially
attractive to physicians who want to live and work in a
community with high family values.
The nearest competition to the Hospital is in Eureka
(approximately 12 miles south) where two acute care facilities
are located. Management of the Hospital feels that as long as
it maintains a strong position in providing a full scope of
health care services, the facilities located in Eureka will
have less of a negative impact on Hospital use or occupancy.
For this reason, the Hospital organized out-patient clinics in
the outlying communities thereby maintaining the Hospital's
presence in the service area. New buildings are planned for
those departments still housed in mobile facilities adjacent
to the Hospital. In addition, a cath-lab was opened in the
spring of 1998 and a M.R.I.
is currently under construction.
Another positive factor supporting Hospital use is community
involvement. As the largest private employer in Arcata, the
Hospital provides employment to approximately 520 local
residents and, through its Home Health and Adult Day Health
Care departments, is highly visible in the community served.
The Hospital continues to try to build on this strength by
maintaining a strong image through the media and a helping
hand in the community, while providing personalized quality
services. The Hospital is a strong advocate for a community
health care plan involving the medical staff, employers and
the area's hospitals and health care providers wherein they
will work together to provide a locally based alternative to
out of the area managed care.
As the health care industry is dependent on government payment
of care for the elderly and indigent, the Hospital may be
negatively impacted by new Government regulations. As
mentioned above, the Hospital is working diligently to
establish a community health care plan that could compete with
the various outside managed care plans planning to enter the
Humboldt County area.
-3-
<PAGE>
Item 2. Properties
- ------- ----------
The main facility operated by the Company is Mad River
Community Hospital in Arcata, California. This single-level
structure is licensed as a 78-bed acute hospital in Northern
Humboldt County, California, where it provides full hospital
services to a population of approximately 55,000. Since
opening in 1972, the Hospital has maintained a program of
expansion and improvements. It is located on 12 acres (part of
a 48 acre site) adjacent to an expanded medical office complex
owned by staff doctors which leaves sufficient open area for
further expansion of medical services as needed.
The Company owns 27 acres of land approximately 4 miles from
the Hospital held for future residential development. A house
and barn on the property is currently used as an office, guest
quarters and storage space for the Company. The Company owns a
personal residence adjacent to the Hospital that had been used
as a physician's office. This acquisition was made to
facilitate a continued favorable occupancy by a
hospital-related specialty and is presently being leased to an
unrelated private resident, providing a child day care service
to hospital employees. The Company also owns residences and
commercial properties in Eureka and McKinleyville, California.
From time to time, the Company acquires real estate being held
for investment purposes.
As part of its outreach program, the Company owns and operates
medical office buildings under the name of Willow Creek Six
Rivers Medical Center in Willow Creek, California (38 miles
east of the Hospital). The Company also owns and operates real
property in McKinleyville which provides laboratory and
radiology outpatient services. It also operates an after-hours
clinic at this location.
Adult Day Health Care of Mad River , a separate not-for-profit
organization, is operating an adult day health care facility
in a building adjacent to and owned by Mad River Community
Hospital. Michael Young, Controller of the Company, is
functioning as Adult Day Health Care's Administrator and
performs minimal accounting services for the organization. To
meet the growing demands for this service, the existing
building will be expanded. This entity will continue to lease
the facility from the Hospital.
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<PAGE>
Item 3. Legal Proceedings
- ------- -----------------
None.
Item 4. Submission of Matters to Vote of Security Holders
- ------- -------------------------------------------------
There were no matters submitted to a vote by the security
holders during the fourth quarter of the fiscal year covered
by this report.
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<PAGE>
PART II
Item 5. Market for the Registrant's Common Stock and Related
Security Holder Matters
- ------- --------------------------------------------------------------
There is no market for the registrant's stock. There are
approximately 407 shareholders at June 30, 1998. No dividends
were paid on common stock during the three years ended June
30, 1998. The Company is current on paying all cumulative
preferred stock dividends.
-6-
<PAGE>
Item 6. Selected Financial Data
- ------- -----------------------
<TABLE>
<CAPTION>
Year ended June 30
------------------
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Total operating
revenue, net $22,992,958 $22,096,357 $22,895,801 $21,148,254 $20,671,387
Net income 350,874 200,588 223,815 593,342 502,956
Primary earnings
per share 1.12 .45 .52 2.06 1.67
Fully diluted
earnings per share 1.09 .62 .67 1.75 1.47
Cash dividends per
common share -- -- -- -- --
Total assets 22,411,941 20,342,679 20,557,286 19,800,615 18,325,512
Long-term debt 206,265 206,932 403,581 803,248 861,648
Working capital 8,905,761 8,542,725 7,851,133 7,165,927 6,010,324
Redeemable
preferred stock 47,690 48,334 50,850 51,623 51,768
Stockholders'
equity 15,891,443 15,060,535 14,633,038 14,077,102 13,040,598
</TABLE>
-7-
<PAGE>
Item 7 Management's Discussion and Analysis of
Financial Condition and Results of Operations
- ------ ---------------------------------------------
1998
----
Results of Operations
---------------------
Hospital revenues increased slightly during 1998 as the
Hospital continues to expand services to encourage use. Use of
outpatient services increased, and there was a small rate
increase. Patient revenue totaled $44,682,000 in 1998 compared
to $41,030,000 in 1997, a 8.9% increase of $3,652,000.
Contractual allowances totaled $21,690,000 in 1998 compared to
$18,934,000 in 1997, a 14.6% increase. Government regulatory
agencies attempt to reimburse the Hospital based on cost of
services. But, as the government continues its efforts to cut
back on rising health care payments, the actual reimbursement
to the Hospital continues to decrease as evidenced by the
large increase in contractual allowances. For the five years
ended June 30, 1998, contractual allowances and provisions for
bad debts have amounted to approximately $111,000,000 or 48%
of gross revenue. At times the Hospital is unable to even
recoup costs on Medicare patients under the current
methodology of reimbursement. Medi-Cal has also imposed
certain limitations that negatively impacted the amount the
Hospital is reimbursed for MediCal patients.
Operating costs and expenses were $23,984,000 compared to
$23,358,000 in 1997, a 2.7% increase. Operating costs actually
increased $219,000 while the provision for bad debts also
increased by $407,000, resulting in the combined increase of
$626,000. The increase in accounts written off is indicative
of the industry wide difference between standard rates and the
amount actually collected.
The continued reduction in third-party reimbursement is a
major contributing factor to the 1998 operating loss of
$594,000. During the current operating year, the Hospital
charged to operations approximately $967,000 of cost as a
result of the audit finalization of prior years' cost reports.
Management intends to appeal various adjustments made by the
intermediary, but no amount as been booked as a receivable for
ultimate outcome of the appeal. Net income, after investment
income was $351,000 in 1998 compared to $224,000 in 1997.
Over the years, as the Company incurs more contractual
allowances and uncollectible accounts, results from operations
have suffered. The Company continues to enjoy good returns on
its investments to help maintain a net profit. For the current
year, sales of investments resulted in gains of $517,000,
while total investment income was $1,049,000. As discussed in
Item 1, the Company continues to expand operations to maintain
a competitive edge in a continuing ever changing health care
environment. All construction projects, considered necessary
to maintain operations, will be completed without negative
impact on the financial statements.
-8-
<PAGE>
1998 continued
----
The purpose of these projects is to keep the users of the
Hospital in their primary service area when health care is
required, thereby enhancing the Hospital's inpatient service
occupancy. By so doing, it is anticipated that operations will
improve, even though the continued burden of government
contractual agreements to provide health care, sometimes below
cost, is being further complicated by the introduction of
managed care contracts in the Humboldt County area.
Liquidity and Capital Resources
-------------------------------
The Company's financial condition remains very strong with
substantial investments, strong liquidity and minimal debt.
The cash and liquid investments are being maintained to
subsidize Hospital operations, finance needed construction and
increased services at Mad River Community Hospital. Currently,
the Company has approximately $7,251,000 in cash and
short-term investments. Included in this amount are $2,055,000
in unrealized holding gains. Subsequent to year end, the
market had an approximately 15% decrease in market value which
will affect the fair value of equity securities held by the
Company As previously noted, some of these investments, as
determined by management, will be used to fund needed
expansion.
Cash provided by operating and investing activities continue
to fund investing activities, the largest of which is the
purchase of real estate, property and equipment, which totaled
$1,258,000 in 1998. As the long-term debt relates only to the
acquisition of major equipment, cash required for financing
activities remains relatively low.
As discussed in Item I, government regulations, as well as
managed care contract agreements, may continue to negatively
impact operations. Management is unable to estimate any
potential negative impact of forthcoming laws or regulations.
Management believes that long-term key employees approve of
the working conditions at the Hospital and have proven their
ability to keep the Hospital staffed under difficult
conditions.
Inflation
---------
The inflation rate affecting costs has remained relatively
low, approximately 5%, over the last three years. This
moderate rate contributes to the Hospital's success in
maintaining a moderate increase in costs from year to year.
-9-
<PAGE>
Management's Discussion and Analysis of
Financial Condition and Results of Operations
---------------------------------------------
1997
----
Results of Operations
---------------------
Hospital revenues increased slightly during 1997 as the
Hospital continues to expand services to encourage use. Use of
outpatient services increased, and there was a small rate
increase. Patient revenue totaled $41,030,000 in 1997 compared
to $40,617,000 in 1996, a 1% increase of $413,000.
Contractual allowances totaled $15,147,000 in 1997 compared to
$13,808,000 in 1996, a 10% increase. Government regulatory
agencies attempt to reimburse the Hospital based on cost of
services. But, as the government continues its efforts to cut
back on rising health care payments, the actual reimbursement
to the Hospital continues to decrease as evidenced by the
large increase in contractual allowances. At times the
Hospital is unable to even recoup costs on Medicare patients
under the current methodology of reimbursement. Medi-Cal has
also imposed certain limitations that negatively impacted the
amount the Hospital is reimbursed for MediCal patients.
Operating costs and expenses were $27,145,000 compared to
$27,928,000 in 1996, a 3% decrease. Operating costs actually
increased $524,000 while the provision for bad debts decreased
by $1,309,000, resulting in the combined decrease of 3%. The
Hospital has concentrated efforts in the collection of
receivables resulting in less accounts being written off.
The continued reduction in third-party reimbursement is a
major contributing factor to the 1997 operating loss of
$805,000. Net income, after investment income was $201,000 in
1997 compared to $224,000 in 1996.
Over the years, as the Company incurs more contractual
allowances and uncollectible accounts, results from operations
have suffered. The Company continues to enjoy good returns on
its investments to help maintain a net profit. For the current
year, sales of investments resulted in gains of $125,000,
while total investment income was $990,000. As discussed in
Item 1, the Company continues to expand operations to maintain
a competitive edge in a continuing ever changing health care
environment. All construction projects, considered necessary
to maintain operations, will be completed without negative
impact on the financial statements.
The purpose of these projects is to keep the users of the
Hospital in their primary service area when health care is
required, thereby enhancing the Hospital's inpatient service
occupancy. By so doing, it is anticipated that operations will
improve, even though the continued burden of government
contractual agreements to provide health care, sometimes below
cost, is being further complicated by the introduction of
managed care contracts in the Humboldt County area.
-10-
<PAGE>
Item 8. Financial Statements and Supplementary Data
------- -------------------------------------------
FINANCIAL STATEMENTS
--------------------
Description Page
----------- ----
Independent Auditors' Report 14
Financial Statements:
Balance Sheets - June 30, 1998 and 1997 15-16
Statements of Income -
Years ended June 30, 1998, 1997 and 1996 17
Statements of Stockholders' Equity
Years ended June 30, 1998, 1997 and 1996 18
Statements of Cash Flows -
Years ended June 30, 1998, 1997 and 1996 19-20
Notes to Financial Statements 21-31
Item 14. Exhibits, Financial Statement, Schedules
and Reports on Form 8-K 37
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<PAGE>
AMERICAN HOSPITAL MANAGEMENT CORPORATION
Annual Report for Corporations - Form 10-K
Years ended June 30, 1998 and 1997
Financial Statements,
Supplementary Data and Auditors' Report
-12-
<PAGE>
Independent Auditors' Report
----------------------------
The Board of Directors and Stockholders:
American Hospital Management Corporation
We have audited the accompanying balance sheets of American Hospital
Management Corporation as of June 30, 1998 and 1997, and the related
statements of income, stockholders' equity, and cash flows and the
supporting financial statement schedules as listed in the accompanying
index at Item 14, for the years ended June 30, 1998, 1997 and 1996.
These financial statements and financial statement schedules are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements and financial
statement schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits
to obtain reasonable assurance about whether the financial statements
and financial statement schedules are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of American
Hospital Management Corporation at June 30, 1998 and 1997, and the
results of its operations and its cash flows for the years ended June
30, 1998, 1997 and 1996 in conformity with generally accepted
accounting principles, and the supporting financial statement schedules
as listed in the accompanying index at Item 14, when considered in
relation to the basic financial statements taken as a whole, in our
opinion, present fairly in all material respects, the information set
forth therein.
/s/ K.C. Miller, CPA
--------------------
K.C. Miller, CPA
West Covina, California
September 30, 1998
-13-
<PAGE>
<TABLE>
<CAPTION>
AMERICAN HOSPITAL MANAGEMENT CORPORATION
Balance Sheets
June 30, 1998 and 1997
Assets
1998 1997
---- ----
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 209,652 $ 80,027
Restricted cash, held as security for letter of credit 326,336 425,000
Marketable securities 7,040,973 5,933,303
Receivables:
Patients, net of estimated uncollectibles of $292,723
and $285,055, in 1998 and 1997, respectively 6,373,188 6,046,298
Other 282,012 350,429
Supplies, at lower of cost (first-in, first-out) or market 974,566 852,654
Prepaid expenses 77,087 108,207
----------- -----------
Total current assets 15,283,814 13,795,918
Property and equipment, net 3,970,061 3,690,688
Real estate held for investment, net 2,091,247 1,935,397
Deferred income taxes 436,515 432,702
Other assets 630,304 487,974
----------- -----------
$22,411,941 $20,342,679
=========== ===========
</TABLE>
(continued)
The accompanying notes are an integral part of these financial statements.
-14-
<PAGE>
<TABLE>
<CAPTION>
AMERICAN HOSPITAL MANAGEMENT CORPORATION
Balance Sheets
June 30, 1998 and 1997
Liabilities and Stockholders' Equity
1998 1997
---- ----
<S> <C> <C>
Current Liabilities:
Current maturities of long-term debt $ 63,820 $ 177,981
Accounts payable and accrued expenses:
Trade 810,740 973,944
Accrued liabilities 1,667,944 1,764,500
Estimated third-party payor settlements 1,761,121 721,754
Income taxes:
Current 115,574 30,502
Deferred 1,958,854 1,584,512
----------- -----------
Total current liabilities 6,378,053 5,253,193
----------- -----------
Long-term debt, less current maturities 142,445 28,951
----------- -----------
Stockholders' equity:
$2cumulative preferred stock, par value $1 per share; authorized 100,000
shares; issued 65,270.82 shares; reacquired 17,580.96 and 16,937.28 shares;
outstanding 47,689.86 and 48,333.54 shares; aggregate redemption and
liquidating value of $1,311,471
and$1,329,172 at June 30, 1998 and 1997, respectively 47,690 48,334
Common stock, par value $1.00 per share;
authorized 400,000 shares, issued 249,051 shares, reacquired 22,894 and
20,994 shares; outstanding - 226,157 and 228,507 shares
at June 30, 1998 and 1997, respectively 226,157 228,057
Additional paid-in capital 163,769 194,427
Unrealized holdings gains, net, for investments 2,055,054 1,455,544
Retained earnings 13,398,773 13,134,173
----------- -----------
Total Stockholders' equity 15,891,443 15,060,535
----------- -----------
$22,411,941 $20,342,679
=========== ===========
</TABLE>
(concluded)
The accompanying notes are an integral part of these financial statements.
-15-
<PAGE>
<TABLE>
<CAPTION>
AMERICAN HOSPITAL MANAGEMENT CORPORATION
Statements of Income
Years ended June 30, 1998, 1997, and 1996
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Net patient service revenue $22,992,958 $22,096,357 $22,895,801
Other revenue 396,746 456,549 417,075
----------- ----------- -----------
Total operating revenue 23,389,704 22,552,906 23,312,876
----------- ----------- -----------
Operating costs and expenses:
Professional care of patients 14,552,630 13,730,083 13,462,486
General services 2,485,699 2,588,394 2,734,438
Administrative services 3,227,783 3,388,734 2,989,859
Employee health and welfare 1,210,164 1,459,831 1,318,048
Medical malpractice insurance 395,630 382,619 406,630
Interest 16,327 48,775 76,290
Depreciation and amortization 979,028 1,050,221 1,135,152
Provision for bad debts 1,116,908 709,204 1,891,169
----------- ----------- -----------
Total operating costs and expenses 23,984,169 23,357,681 24,014,072
----------- ----------- -----------
Loss from operations (594,465) (804,775) (701,196)
----------- ----------- -----------
Other income:
Investment income 1,049,449 990,102 1,076,148
Other 13,391 36,418 31,019
----------- ----------- -----------
1,062,840 1,026,520 1,107,167
----------- ----------- -----------
Income before income taxes 468,375 221,745 405,971
Provision for income taxes 117,501 21,157 182,156
----------- ----------- -----------
Net income $ 350,874 $ 200,588 $ 223,815
=========== =========== ===========
Primary earnings per common share $ 1.12 $ .45 $ .52
=========== =========== ===========
Fully diluted earnings per common share $ 1.09 $ .62 $ .67
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-16-
<PAGE>
<TABLE>
<CAPTION>
AMERICAN HOSPITAL MANAGEMENT CORPORATION
STATEMENTS OF STOCKHOLDERS' EQUITY
Years ended June 30, 1998, 1997 and 1996
1998 1997 1996
---- ---- ----
Stockholders' Equity:
<S> <C> <C> <C>
Cumulative Preferred Stock
Beginning balance $ 48,334 $ 50,850 $ 51,623
Reacquired stock 644 2,516 773
------------ ------------ ------------
Ending balance 47,690 48,334 50,850
------------ ------------ ------------
Common Stock
Beginning balance 228,057 233,213 236,479
Reacquired stock 1,900 5,156 3,266
------------ ------------ ------------
Ending balance 226,157 228,057 233,213
------------ ------------ ------------
Additional paid-in-capital
Beginning balance 194,427 296,210 340,912
Reacquired stock 30,658 101,783 44,702
------------ ------------ ------------
Ending balance 163,769 194,427 296,210
------------ ------------ ------------
Unrealized holdings gains, net, for investments
Beginning balance 1,455,544 1,026,809 551,933
Increase in unrealized holdings gains, net 599,510 428,735 474,876
------------ ------------ ------------
Ending balance 2,055,054 1,455,544 1,026,809
------------ ------------ ------------
Retained Earnings
Beginning balance 13,134,173 13,025,956 12,896,155
Net income 350,874 200,588 223,815
Cash dividends paid on preferred stock (86,274) (92,371) (94,014)
------------ ------------ ------------
Ending balance 13,398,773 13,134,173 13,025,956
------------ ------------ ------------
Total Stockholders' equity $ 15,891,443 $ 15,060,535 $ 14,633,038
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
-17-
<PAGE>
<TABLE>
<CAPTION>
AMERICAN HOSPITAL MANAGEMENT CORPORATION
Statements of Cash Flows
Years ended June 30, 1998, 1997 and 1996
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Cash received from patients
and third-party payors $ 22,985,273 $ 20,927,495 $ 22,245,219
Cash paid to employees and suppliers (22,342,220) (21,256,175) (21,312,243)
Investment income received 565,439 934,579 1,025,397
Interest paid (916,327) (48,775) ( 76,290)
Income taxes, net change (52,147) (20,332 (412,073)
------------ ------------ ------------
Net cash provided by
operating activities 1,140,018 577,456 1,470,010
------------ ------------ ------------
Cash flows from investing activities:
Purchase of real estate held for investment (198,387) -- (127,135)
Purchase of property and equipment, net (1,258,401) (706,159) (608,324)
Proceeds from sale of short-term investments 3,189,509 2,433,022 2,381,529
Purchase of short-term investments (2,691,389) (2,691,259) (2,356,870)
Other 68,417 (60,401) (110,286)
------------ ------------ ------------
Net cash used in investing activities (890,251) (1,024,797) (821,086)
------------ ------------ ------------
Cash flows from financing activities:
Proceeds from issuance of long-term debt 251,216 121,216 --
Principal reductions of long-term debt (251,882) (317,865) (399,667)
Dividends paid (86,274) (92,371) (94,014)
Payments for reacquired stock (33,202) (109,455) (48,741)
------------ ------------ ------------
Net cash used in financing activities (120,142) (398,575) (542,422)
------------ ------------ ------------
Net increase (decrease) in cash and cash equivalents 129,625 (845,816) 106,502
Cash and cash equivalents, beginning of year 80,027 925,843 819,341
------------ ------------ ------------
Cash and cash equivalents, end of year $ 209,652 $ 80,027 $ 925,843
============ ============ ============
Supplemental schedule of non-cash investing
activities:
Increase in fair value of investments $ 714,559 $ 714,559 $ 791,459
Increase in deferred taxes (285,824) (285,824) (316,583)
------------ ------------ ------------
Increase in unrealized holding gains $ 428,735 $ 428,735 $ 474,876
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
-18-
<PAGE>
<TABLE>
<CAPTION>
AMERICAN HOSPITAL MANAGEMENT CORPORATION
Statements of Cash Flows (concluded)
Years ended June 30, 1998, 1997 and 1996
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Reconciliation of net income to net cash
provided by operating activities:
Net income $ 350,874 $ 200,588 $ 223,815
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 1,046,223 1,083,162 1,169,924
Partnership income (4,688) (343) (2,957)
Gain on sale of investments (517,370) (124,539) (113,586)
Increase in cash surrender value (162,300) (60,000) (18,621)
Change in assets and liabilities:
(Increase) decrease in patient receivables, net (326,890) 185,008 (53,082)
Increase (decrease)in third-party payors, net 1,039,367 (1,101,395) 876,594
Increase (decrease) in income taxes, net 65,354 41,489 (229,917)
(Increase) decrease in supplies (121,912) 2,680 31,842
Decrease (increase) in prepaid expenses 31,120 (23,226) (19,295)
(Decrease) increase in trade accounts payable (163,204) 411,638 (576,265)
(Decrease) increase in accrued expenses, net (96,556) (37,606) 181,558
---------- ---------- ----------
Net cash provided by operating activities $1,140,018 $ 577,456 $1,470,010
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-19-
<PAGE>
AMERICAN HOSPITAL MANAGEMENT CORPORATION
Notes to Financial Statements
June 30, 1998, 1997 and 1996
(1) Summary of Significant Accounting Policies
------------------------------------------
Organization
------------
The Corporation owns and operates one acute-care hospital, located in
Arcata, California. The Hospital provides inpatient, outpatient and
emergency care services for residents of Humboldt County. It also
operates other health-care related enterprises in the same location.
Admitting physicians are primarily practitioners in the local area. The
Company was incorporated as a C-Corporation in California in 1955.
Use of Estimates
----------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could
differ from those estimates
Cash and Cash Equivalents
-------------------------
Cash and cash equivalents represent cash in checking and demand savings
accounts. Cash is held in several banks with no significant
concentration of risk.
Investments
-----------
Investments in marketable securities with readily determinable fair
values and all investments in debt securities are measured at fair
value in the balance sheets. All investments are held for sale
Investment income or loss (including realized gains and losses on
investments, interest and dividends) is included in net income.
Unrealized gains and losses on investments are excluded from net income
but are reported as a separate component of stockholders' equity.
Property and Equipment
----------------------
Property and equipment acquisitions are recorded at cost. Depreciation
is provided over the estimated useful life of each class of depreciable
asset and is computed on the straight-line method. Equipment under
capital leases is amortized on the straight-line method over the
shorter period of the lease term or the estimated useful life of the
equipment. Such amortization is included in depreciation and
amortization in the financial statements.
Statements of Income
--------------------
Transactions deemed by management to be ongoing, major or central to
the provision of health care services are reported as revenues and
expenses. Peripheral or incidental transactions are reported as other
income, net.
-20-
<PAGE>
AMERICAN HOSPITAL MANAGEMENT CORPORATION
Notes to Financial Statements, continued
Net Patient Service Revenue
---------------------------
The Hospital has agreements with third-party payors that provide for
payments to the Hospital at amounts different from its established
rates. Payment arrangements include prospectively determined rates per
discharge, reimbursed costs, discounted charges and per diem payments.
Net patient service revenue is reported at the estimated net realizable
amounts from patients, third-party payors, and others for services
rendered, including estimated retroactive adjustments under
reimbursement, agreements with third-party payors. Retroactive
adjustments are accrued on an estimated basis in the period the related
services are rendered and adjusted in future periods as final
settlements are determined.
Income Taxes
------------
Deferred income taxes are provided for the estimated income tax effect
of temporary differences between financial and taxable income.
Investments in Partnership
Investment in a partnership is carried at the Company's equity in the
partnership's net assets. The partnership was organized in 1968 to
provide property sites for the hospital and medical centers. The two
general partners, the Company and its president, own 26% each. The
limited partners, consisting of local doctors, own the remaining 48%.
Impairment of Long-Lived Assets
-------------------------------
The Company adopted Statement of Financial Accounting Standards No.
121, "Accounting for the Impairment of Long-Lived Assets and Long-Lived
Assets to be Disposed Of." Historically, the Company has complied with
the requirements of SFAS No. 121. This statement requires that
long-lived assets and certain identifiable intangibles to be held and
used by an entity be reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset may not
be recoverable. Also, in general, long-lived assets and certain
identifiable intangibles to be disposed of should be reported at the
lower of carrying amount or fair market value less cost to sell.
Reclassifications
-----------------
Certain accounts from prior years financial statements have been
reclassified to be comparable with disclosure for the current year.
-21-
<PAGE>
AMERICAN HOSPITAL MANAGEMENT CORPORATION
Notes to Financial Statements, continued
(2) Net Patient Service Revenue
---------------------------
The Hospital has agreements with third-party payors that provide for
payments to the Hospital at amounts different from its established
rates. A summary of the payment arrangements with major third-party
payors follows:
* Medicare. Inpatient acute care services rendered to Medicare
program beneficiaries are paid at prospectively determined
rates per discharge. These rates vary according to a patient
classification system that is based on clinical, diagnostic,
and other factors. Inpatient nonacute services, certain
outpatient services, and defined capital and medical education
costs related to Medicare beneficiaries are paid based on a
cost reimbursement methodology. The Hospital is reimbursed for
cost reimbursable items at a tentative rate with final
settlement determined after submission of annual cost reports
by the Hospital and audits thereof by the Medicare fiscal
intermediary. The Hospital's classification of patients under
the Medicare program and the appropriateness of their
admission are subject to an independent review by a peer
review organization under contract with the Hospital. The
Hospital's Medicare cost reports have been audited by the
Medicare fiscal intermediary through June 30, 1997.
* Medicaid. Inpatient and outpatient services rendered to
Medicaid program beneficiaries are reimbursed under a cost
reimbursement methodology. The Hospital is reimbursed at a
tentative rate with final settlement determined after
submission of annual cost reports by the Hospital and audits
thereof by the Medicaid fiscal intermediary. The Hospital
records supplies cost acquired and used by the operating room
department as operating cost of that department. The
intermediary disagreed with the classification of cost in the
operating department and reclassified the revenue relating to
the cost to Central Supply. Therefore, the Hospital has
included cost in 1998 of approximately $967,000 relating to
audit adjustments made by the intermediary for prior years'
cost reports. Management of the Hospital feels this
reclassification was made in error and intends to appeal the
decision made by the intermediary. Until a final decision is
reached, the Hospital will not include the effect of including
the supplies cost in the operating department as part of the
revenues of the Hospital. The Hospital's Medicaid cost reports
have been audited by the Medicaid fiscal intermediary through
June 30, 1996.
The Hospital has also entered into payment agreements with certain
commercial insurance carriers, health maintenance organizations and
preferred provider organizations. The basis for payment to the Hospital
under these agreements includes prospectively determined rates per
discharge, discounts from established charges and prospectively
determined daily rates.
-22-
<PAGE>
AMERICAN HOSPITAL MANAGEMENT CORPORATION
Notes to Financial Statements, continued
(2) Net Patient Service Revenue, continued
----------------------------
Gross patient service revenue and related provision for contractual
allowances for the years ended June 30, are summarized as follows:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Gross patient service revenue $44,682,474 $41,030,222 $40,617,321
Less contractual allowances 21,689,516 18,933,865 17,721,520
---------- ---------- ----------
Net patient service revenue $22,992,958 $22,096,357 $22,895,801
=========== =========== ===========
</TABLE>
At June 30, 1998 and 1997, accounts receivable are primarily
concentrated in federal and state governmental entities and other
patients in which the Company does not believe there is any undue
credit risk. For the three years ended June 30, 1998, contractual
allowances and provisions for bad debts has totaled $62,062,182,
approximately 48% of gross revenue.
(3) Marketable Securities
---------------------
Cost and fair value of marketable equity securities at June 30, 1998
and 1997, are as follows:
1998 1997
---- ----
Available for sale:
Cost $3,625,311 $3,507,397
Fair Value 7,040,973 5,933,303
Unrealized Gain 3,459,682 2,466,856
Unrealized Loss (44,020) (40,950)
Gain or loss from sale of securities is based on specific
identification of the securities sold. Net unrealized holding gains on
securities available for sale, net of the tax effect of $1,360,608 and
$970,362 for the years ended June 30, 1998 and 1997, are shown as a
separate component of stockholders' equity. For the years ended June
30, 1998, 1997 and 1996, realized gains and realized losses were
$578,111 and $(60,741), $327,314 and $(202,775), and $170,507 and
$(56,921), respectively.
The Company intends to implement the provision of FASB No. 130,
Reporting Comprehensive Income, beginning with the fiscal year ending
June 30, 1999. The Statement establishes standards for reporting and
display of comprehensive income and its components in a full set of
general purpose financial statements. Currently, net unrealized holding
gains is the only income that would be disclosed as part of
comprehensive income. For the year ended June 30, 1998, the change in
net unrealized holding gains on securities available for sale,
representing comprehensive income, is $989,756, net of $390,246 in
deferred tax.
-23-
<PAGE>
AMERICAN HOSPITAL MANAGEMENT CORPORATION
Notes to Financial Statements, continued
(4) Property and Equipment
----------------------
At June 30, 1998 and 1997, property and equipment is comprised of the
following:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Land and improvements $ 44,500 $ 44,500
Buildings 4,678,975 4,233,728
Equipment 6,867,846 6,314,556
Construction in progress 418,741 158,879
----------- -----------
12,010,062 10,751,663
Accumulated depreciation and amortization 8,040,001 7,060,975
----------- -----------
Net property and equipment $ 3,970,061 $ 3,690,688
=========== ===========
Property and equipment include certain capitalized leases, as follows:
1998 1997
---- ----
Equipment $ 1,629,274 $ 1,495,799
Less accumulated amortization 1,363,655 1,061,888
----------- -----------
$ 265,619 $ 433,911
=========== ===========
</TABLE>
Amortization expense on capitalized leases for the years ended June 30,
1998, 1997 and 1996 totaled $301,767, $287,038 and $272,240,
respectively.
Annual future minimum lease payments under capitalized leases at June
30, 1998 are as follows:
<TABLE>
<S> <C>
1999 $ 63,767
2000 6,940
---------
Total minimum lease payments 70,707
Less amount representing interest (5.5% to 10.75%) 2,829)
----------
Present value of minimum lease payments 67,878
Less current maturity 61,326
----------
$ 6,552
==========
</TABLE>
-24-
<PAGE>
AMERICAN HOSPITAL MANAGEMENT CORPORATION
Notes to Financial Statements, continued
(5) Real Estate Held for Investment
-------------------------------
Real estate held for investment consists of 14 properties, 9 of which
have a building on its lot. These are itemized as follows:
<TABLE>
<CAPTION>
Property Location:
<S> <C>
McKinleyville, California $1,475,472
Willow Creek, California 335,608
Lakeport, California 333,521
Arcata, California 161,750
Eureka, California 134,908
----------
2,441,259
Less accumulated depreciation for rented property 350,012
----------
$2,091,247
</TABLE>
The properties with buildings attached are either used temporarily for
Hospital purposes, or used as rental property. All properties are
valued at cost as it is not cost effective to determine fair value.
Based on the property records available, there is no impairment of
value.
(6) Other Assets
------------
At June 30, 1998 and 1997, other assets include cash surrender value of
four life insurance polices totaling $449,570 and $287,270, and
investment in partnerships of $$92,117 and $87,429.
(7) Long-Term Debt
--------------
Long-term debt at June 30, 1998 and 1997, consists of the following:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Bank note, secured by investment property, interest rate of 2.25%
above bank index (7.218% at June 30, 1998), payable in monthly
installments, maturing in 2021 $138,386 --
Lease obligations, payable in installments
through 2000 with a weighted average
interest rate of 9.8% 67,878 $206,932
-------- -------
206,264 206,932
Less current maturities 63,820 177,981
-------- -------
$142,445 $ 28,951
======= =======
</TABLE>
The maturities of long-term debt for each of the succeeding five years
subsequent to June 30, 1998, are as follows: 1999-$63,820; 2000-$9,620;
2001-$2,880; 2002-$3,095; 2003-$3,326 and 2004 and beyond-$123,913.
-25-
<PAGE>
AMERICAN HOSPITAL MANAGEMENT CORPORATION
Notes to Financial Statements, continued
(8) Income Taxes
------------
At June 30, income tax expense consisted of the following:
1998
----
Federal California Total
------- ---------- -----
Current $ 82,505 $ 33,069 $115,574
Deferred 4,743 ( 2,816) 1,927
-------- -------- --------
$ 87,248 $ 30,253 $117,501
======== ======== ========
1997
----
Federal California Total
------- ---------- -----
Current $ 48,502 $ 33,995 $ 82,497
Deferred (38,344) (22,996) (61,340)
-------- -------- --------
$ 10,158 $ 10,999 $ 21,157
======== ======== ========
1996
----
Federal California Total
------- ---------- -----
Current $139,977 $ 54,424 $194,401
Deferred (8,447) (3,798) (12,245)
-------- -------- --------
$131,530 $ 50,626 $182,156
======== ======== ========
Deferred tax expenses (credits) for 1998, 1997, and 1996 result from
the following temporary differences:
1998 1997 1996
---- ---- ----
California franchise tax $ 8,921 $ 16,095 $ 19,494
Depreciation and amortization (31,277) (67,878) 26,532
Allowance for bad debts (3,067) (35,681) (229)
Vacation accrual 39,391 33,937 (26,387)
Other (12,041) (7,813) (31,655)
-------- -------- --------
$ 1,927 $(61,340) $(12,245)
======== ======== ========
In addition, deferred tax liability is recorded in the balance sheet,
resulting from the change in unrealized holdings for investments. The
increase in deferred income taxes for the years ended June 30, 1998 and
1997 was $390,246 and $235,471, respectively.
-26-
<PAGE>
AMERICAN HOSPITAL MANAGEMENT CORPORATION
Notes to Financial Statements, continued
(8) Income Taxes continued
----------------------
Recorded income tax expense differs from that computed by applying the
statutory income tax rates for the following reasons:
1998 1997 1996
---- ---- ----
Computed tax at statutory rate $186,574 $ 95,866 $175,785
Increases (decreases) resulting from:
California franchise tax (1,365) (5,691) (13,671)
Domestic dividend exclusion
allowance (27,335) (37,056) (24,661)
Cash surrender value (60,958) (22,260) 8,063
Entertainment deduction 11,438 6,000 10,200
Prior year (over) under accrual 9,147 (15,702) 26,440
-------- -------- --------
$117,501 $ 21,157 $182,156
======== ======== ========
(9) Preferred Stock
---------------
The preferred stock provides for cumulative dividends of $2 per share
per year. The stock has a redemption and liquidating value of $27.50
per share, plus dividends in arrears. Total redemption and liquidating
value of the outstanding shares at June 30, 1998 and 1997, was
$1,311,471 and $1,329,172, respectively. In the event of redemption,
two shares of common stock can be issued for each share of preferred
stock redeemed (if option is exercised by preferred stockholder).
Redemption of the preferred stock, in total only, is at the option of
the Company.
(10) Income per Common Share
- ---- -----------------------
Income per common share, assuming no dilution, was computed by dividing
the net income after deduction of preferred stock dividend requirements
of $95,380, $96,667 and $101,699, by the weighted average number of
common shares outstanding (227,332, 230,635 and 234,846) for 1998, 1997
and 1996, respectively.
Income per common share, assuming full dilution, was computed by
dividing net income by the weighted average number of common shares
outstanding, after redemption of preferred stock, (321,537, 324,724,
334,912) for 1998, 1997 and 1996, respectively.
-27-
<PAGE>
AMERICAN HOSPITAL MANAGEMENT CORPORATION
Notes to Financial Statements, continued
(11) Malpractice Insurance Arrangements
----------------------------------
The Hospital purchases professional and general liability insurance to
cover medical malpractice insurance claims. The coverage, through a
commercial insurance carrier, is on a claims-made basis. Under
claims-made policies, all accidents reported to the insurer are
covered. On the basis of the Hospital's current experience, neither an
accrual for a potential extended period reporting policy, which could
be necessary if the Hospital ceases to purchase claims-made coverage,
nor an accrual for unreported incidents has been made.
(12) 401(k) Plan
-----------
The Plan is a defined contribution plan to which all employees are
permitted to make salary deferrals under the 401(k) provision. Such
contributions are credited directly to their accounts. Based on the
Plan document, the Employer can make discretionary contributions for
the participants. No contribution was made for any of the three years
ended June 30, 1998.
(13) Concentrations of Credit Risk
-----------------------------
The Hospital grants credit without collateral to its patients, most of
whom are local residents and are insured under third-party payor
agreements. The mix of receivables from patients and third-party payors
at June 30, 1998 and 1997, was as follows:
1998 1997
---- ----
Medicare 37.5% 33.7%
Medi-Cal 16.2 19.7
Other third-party payors 33.4 32.5
Patients 12.9 14.1
------ ------
100% 100%
===== ======
-28-
<PAGE>
AMERICAN HOSPITAL MANAGEMENT CORPORATION
Notes to Financial Statements, continued
(14) Self-insurance Program
----------------------
The Hospital has elected to self-insure for health care benefits to its
employees. Amounts charged to expense and transferred monthly to a
trust fund to cover such claims are estimated using rates comparable to
actual rates in the industry. Management believes that amounts provided
are sufficient to cover claims and costs incurred through June 30,
1998. The rates used to determine the amounts charged to expense for
claims and costs are adjusted periodically, as appropriate, to reflect
actual experience. The Hospital has 100 percent insurance coverage for
individual claim expenses in excess of $50,000 and for aggregate claim
expenses in excess of $1,365,218.
Health care benefit expense was approximately $1,210,164, $1,459,831
and $1,318,370 for the years ended June 30, 1998, 1997 and 1996,
respectively.
(15) Commitments and Contingencies
-----------------------------
Commitments.
At June 30, 1998, the Company had an outstanding letter of credit for
approximately $326,000 to acquire a new MRI machine. The letter of
credit is secured by restricted cash.
The Company had one operating lease with monthly payments of $2,450
with a remaining term of 23 months. Total rental expense for the years
ended June 30, 1998, 1997 and 1996 was $242,124, $227,486 and $201,118,
respectively
Litigation. The Hospital is involved in litigation and regulatory
investigations arising in the course of business. After consultation
with legal counsel and insurance carriers, management estimates that
these matters will be resolved without material adverse effect on the
Hospital's future financial position or results from operations.
(16) Risks and Uncertainties
-----------------------
The Company's future operating results may be affected by a number of
factors. The Hospital's operations are in part dependent on
governmental reimbursement plans. Significant changes in the level of
governmental reimbursement could have a favorable or unfavorable impact
on the operating results of the Hospital. Also, as additional managed
health-care plans are introduced into the service area, actual
admissions to the Hospital could increase or decrease depending on the
Hospital's ability to contract with the health plans.
-29-
<PAGE>
AMERICAN HOSPITAL MANAGEMENT CORPORATION
Notes to Financial Statements, concluded
(17) Fair values of Financial Instruments
------------------------------------
Fair value estimates are made at a specific point in time and are based
on relevant market information and information about the financial
instrument; they are subjective in nature and involve uncertainties,
matters of judgment and, therefore, cannot be determined with
precision. These estimates do not reflect any premium or discount that
could result from offering for sale at one time the Company's entire
holdings of a particular instrument. Changes in assumptions could
significantly affect the estimates.
Since the fair value is estimated as of June 30, 1998, the amounts that
will actually be realized or paid at settlement of the instruments
could be significantly different.
The carrying amount of cash and cash equivalents is assumed to be the
fair value because of the liquidity of these instruments. Accounts
receivable, accounts payable and accrued expenses approximate fair
value because of the short maturity of these instruments. The recorded
balance of notes payable are assumed to be the fair value since the
rates specified in the notes approximate current market rates.
-30-
<PAGE>
Item 9. Changes in and disagreements with accountants on
Accounting and Financial Disclosure
- ------- ------------------------------------------------
None.
-31-
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant
- -------- --------------------------------------------------
<TABLE>
<CAPTION>
Name and principal occupation
during last five years Since Age Office Occupation
- ---------------------- ----- --- ------ ----------
<S> <C> <C> <C> <C>
Lawrence V. Blashaw 1970 72 Director President of
Freight For-
warding Co.
Charles F. Forbes, Attorney 1968 68 Secretary & Attorney
Musick, Peeler & Garrett Director
Allen E. Shaw, President 1960 80 President & President of
of the Company Director Company
Douglas A. Shaw, Vice President 1981 47 Vice President Hospital
(son of president) & Director Administrator
Richard J. Stanczak 1977 72 Director Business
Business Consultant Consultant
Michael Young, Controller 1978 50 Treasurer Hospital
Administrator Controller
Scott L. Holmes, M.D. 1988 61 Director Physician
Donald J. Krpan, D.O. 1988 62 Director Dean of
Students
College of
Medicine
</TABLE>
-32-
<PAGE>
Item 11. Executive Compensation
- -------- ----------------------
The following table sets forth the aggregate direct
remuneration paid or accrued by the Company for services in
all capacities for the fiscal year ended June 30, 1998, to
each director and officer of the Company whose aggregate
direct remuneration exceeded $100,000 and to all directors and
officers (as a group) who were such at any time during the
last fiscal year.
<TABLE>
<CAPTION>
Cash and cash equivalent
forms of remuneration
---------------------
Name of individual Salaries, fees,
or number of Capacities in which directors' fees
persons in group remuneration was received and bonuses
- ---------------- ------------------------- -----------
<S> <C> <C>
Allen E. Shaw President and Chairman of $ 100,000
the Board
Douglas A. Shaw Vice President, Administrator 52,000
Michael Young Treasurer and Controller of 64,057
Mad River Community Hospital
All other directors
and officers as a
group (5 persons) 6,800
---------
(8 persons) $ 222,857
=========
</TABLE>
Note: There was no contractual agreement with any directors regarding
compensation, pensions or stock options. Directors, from time to time,
are compensated for attendance at meetings for their general
administrative duties although there is no required payment. Total
director compensation for 1998 was $6,800. There have not been any
payments made to officers or directors for severance of relationship.
-33-
<PAGE>
Item 12. Security Ownership of Certain
Beneficial Owners and Management
- -------- --------------------------------
Owners of 5% or more of outstanding voting securities at June
30, 1998, were as follows:
<TABLE>
<CAPTION>
Amount and
nature of
Title of beneficial Percent
Name of beneficial owner class ownership of class
- ------------------------ ----- --------- --------
<S> <C> <C> <C>
Allen E. Shaw Family Common 118,079 52.21%
San Clemente, California Preferred 1,970 4.13%
Arcata Hospital Corporation* Common 20,898 9.24%
Palos Verdes Estates, California Preferred 11,481 24.07%
Security ownership of management as a group
- -------------------------------------------
All directors and officers as Common 120,579 53.32%
a group
All directors and officers Preferred 1,970 4.13%
a group
</TABLE>
Security ownership of management is as follows:
Number of shares
----------------
Name Common Preferred
---- ------ ---------
Lawrence V. Blashaw 2,500 --
Allen E. Shaw Family 118,079 1,970
------- -------
120,579 1,970
======= =======
* Arcata Hospital Corporation is 98% owned by shareholders of the Company.
-34-
<PAGE>
Item 13. Certain Relations and
Related Transactions
- -------- --------------------
None.
-35-
<PAGE>
PART IV
<TABLE>
<CAPTION>
Item 14. Exhibits, Financial Statement
Schedules, and Reports on Form 8-K
- -------- ----------------------------------
Page
- ----
<S> <C>
(a) (1) The following financial statements are included in
Part II, Item 8:
Report of Independent Auditors'
Financial Statements:
Balance Sheets
June 30, 1998 and 1997
Statements of Income and Retained Earnings Years
ended June 30, 1998, 1997 and 1996
Statements of Cash Flows -
Years ended June 30, 1998, 1997 and 1996
Notes to Financial Statements
(2) The following financial schedules for the Years 1998, 1997 and 1996 are
submitted herewith:
Schedule II - Valuation and Qualifying Accounts
Schedule III - Real Estate and Accumulated Depreciation
All other schedules are omitted because they are not
applicable or not required, or because the required
information is included in the financial statements
or notes hereto.
(3) Exhibits included herein:
None
(b) Registrant did not file any reports on Form 8-K during the quarter ended June 30,
1998
</TABLE>
-36-
<PAGE>
<TABLE>
<CAPTION>
Schedule II
AMERICAN HOSPITAL MANAGEMENT CORPORATION
Valuation and Qualifying Accounts
Years ended June 30, 1998, 1997 and 1996
Balance, Charged Charged Balance,
beginning to to other end
of year income accounts Deductions of year
------- ------ -------- ---------- -------
Allowance for
doubtful receivables:
<S> <C> <C> <C> <C>
1998 $ 285,055 $ 5,903,673 $ 5,896,005 $ 292,723
1997 202,650 4,495,864 4,413,459 285,055
1996 217,709 5,804,777 5,819,836 202,650
</TABLE>
-37-
<PAGE>
<TABLE>
<CAPTION>
Schedule III
AMERICAN HOSPITAL MANAGEMENT CORPORATION
Real Estate and Accumulated Depreciation
Years ended June 30, 1998, 1997 and 1996
Related Accumulated Useful
Description debt Land Buildings Total Depreciation Life
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Rental property $138,386 $482,346 $1,126,725 $1,609,071 $350,013 25
Investment None 832,189 832,189
--------------------------------------------------------------------
$138,386 $1,314,535 $1,126,725 $2,441,260 $350,013
====================================================================
</TABLE>
Cost:
Balance at June 30, 1996 and 1997 $2,242,874
Purchases 198,386
----------
Balance at June 30, 1998 $2,441,260
==========
Accumulated Depreciation:
Balance at June 30, 1996 $ 268,071
Depreciation during period 39,405
----------
Balance at June 30, 1997 307,476
Depreciation during period 42,537
Balance at June 30, 1998 $ 350,013
==========
-38-
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) 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:
AMERICAN HOSPITAL MANAGEMENT CORPORATION
By:/s/ Allen E. Shaw
------------------------
Allen E. Shaw, President
Date: November 6, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the principal Executive Officer, principal Financial
Officer, Secretary and majority of Board Members on behalf of the Registrant and
in the capacities and on the dates indicated:
Signature Capacity Date
--------- -------- ----
/s/ Allen E. Shaw President and Director November 6, 1998
- ---------------------
Allen E. Shaw
/s/ Charles F. Forbes Secretary and Director November 6, 1998
- ---------------------
Charles F. Forbes
/s/ Michael J. Young Treasurer and Chief November 6, 1998
- --------------------- Accounting Officer
Michael J. Young
/s/ Donald J. Krpan Director November 6, 1998
- ---------------------
Donald J. Krpan
/s/ Doug Shaw Director November 6, 1998
- ---------------------
Doug Shaw
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> JUN-30-1998
<CASH> 326,336
<SECURITIES> 7,040,973
<RECEIVABLES> 6,947,923
<ALLOWANCES> (292,723)
<INVENTORY> 974,566
<CURRENT-ASSETS> 15,283,814
<PP&E> 12,010,062
<DEPRECIATION> (8,040,001)
<TOTAL-ASSETS> 22,411,941
<CURRENT-LIABILITIES> 6,378,053
<BONDS> 0
0
47,690
<COMMON> 226,157
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<TOTAL-REVENUES> 23,389,704
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<INCOME-PRETAX> 468,375
<INCOME-TAX> 117,501
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<NET-INCOME> 350,874
<EPS-PRIMARY> 1.12
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</TABLE>
