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, 2000 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 value
--------------------------------------------------------------------------------
(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 (223,568 at June 30,2000).
Total number of pages, including cover - 42
-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 and the
Medical Office complex adjacent to the Hospital. In addition,
a M.R.I.. was opened this year and major renovation has
started for Radiology and the I.C.U. unit. The Hospital is
improving landscaping and the overall appearance of the
facility.
Another positive factor supporting Hospital use is community
involvement. As the largest private employer in Arcata, the
Hospital provides employment to approximately 500 local
residents and, through its Home Health and recently expanded
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 80-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.
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 was expanded. This entity will continue to lease the
facility from the Hospital.
-4-
<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.
-5-
<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 392 shareholders at June 30, 2000. No dividends
were paid on common stock during the three years ended June
30, 2000. The Company is current on paying all cumulative
preferred stock dividends.
-6-
<PAGE>
Item 6. Selected Financial Data
------- -----------------------
<TABLE>
<CAPTION>
Year ended June 30
-----------------------------------------------------------------
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Total operating
revenue, net $ 24,759,228 $ 24,089,600 $ 22,992,958 $ 22,096,357 $ 22,895,801
Net income (loss) 541,259 (164,824) 350,874 200,588 223,815
Basic earnings
per share 2.00 (1.15) 1.12 .45 .52
Diluted
earnings per share 1.71 (1.15) 1.09 .62 .67
Cash dividends per
common share -- -- -- -- --
Total assets 22,409,022 22,302,627 22,411,941 20,342,679 20,557,286
Long-term debt 676,132 741,865 206,265 206,932 403,581
Working capital 8,861,853 8,553,820 8,905,761 8,542,725 7,851,133
Redeemable
preferred stock 46,829 47,442 47,690 48,334 50,850
Stockholders'
equity 15,690,291 15,416,989 15,891,443 15,060,535 14,633,038
</TABLE>
-7-
<PAGE>
Item 7 Management's Discussion and Analysis of
------ ---------------------------------------
Financial Condition and Results of Operations
---------------------------------------------
2000
----
Results of Operations
---------------------
Hospital revenues increased during 2000 as the Hospital
continues to expand services to encourage use. Use of
outpatient services increased, and there was a rate increase.
Patient revenue totaled $50,615,000 in 2000 compared to
$46,721,000 in 1999, a 8.3% increase of $3,894,000.
Contractual allowances totaled $27,579,000 in 2000 compared to
$23,808,000 in 1999, a 15.8% 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 three years
ended June 30, 2000, contractual allowances and provisions for
bad debts have amounted to approximately $74,200,000 or 52% 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 Medi- Cal patients.
Operating costs and expenses were $24,908,000 compared to
$25,459,000 in 1999, a 2.2% decrease. Operating costs actually
decreased $1,098,000 while the provision for bad debts
increased by $547,000, resulting in the combined decrease of
$551,000. The increase in accounts written off is indicative
of the industry wide difference between standard rates and the
amount actually collected. The decrease in operating cost is
mainly attributable to a decrease in employee health and
welfare benefits paid, caused by not incurring a number of
catastrophic claims that result in maximum reimbursement, as
incurred in 1999.
The continued reduction in third-party reimbursement is the
major contributing factor to the increase in contractual
allowances. The Hospital is still dealing with third-party
payors to finalize cost reports under audit. Management is
actively appealing various adjustments made by the
intermediary, and, even though, it appears the Hospital will
prevail on various issues, no amount will be booked as a
receivable until the ultimate outcome of the appeal is known.
Net income, after investment income was $541,259 in 2000
compared to net loss of $164,824 in 1999. Even though the
Hospital continues to be negatively impacted by poor
reimbursement contracts with third party payers, if the
required daily census can be maintained and costs are
controlled, management anticipates continued profitable
operations.
.
-8-
<PAGE>
1999 continued
----
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 $168,000,
while total investment income was $773,000. 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.
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 $6,727,000 in cash and
short-term investments. Included in this amount are $3,457,000
in unrealized holding gains.
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
$768,647 in 2000. 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>
Item 7 Management's Discussion and Analysis of
------ ---------------------------------------
Financial Condition and Results of Operations
---------------------------------------------
1999
----
Results of Operations
---------------------
Hospital revenues increased slightly during 1999 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 $46,721,000 in 1999 compared
to $44,682,000 in 1998, a 4.6% increase of $2,039,000.
Contractual allowances totaled $23,808,000 in 1999 compared to
$21,690,000 in 1997, a 9.8% 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, 1999, contractual allowances and provisions for
bad debts have amounted to approximately $104,000,000 or 49%
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 Medi- Cal patients.
Operating costs and expenses were $25,459,000 compared to
$23,984,000 in 1998, a 6.2% increase. Operating costs actually
increased $1,416,000 while the provision for bad debts
increased by $59,000, resulting in the combined increase of
$1,475,000. 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 the
major contributing factor to the 1999 operating loss of
$980,000. The Hospital is still dealing with third- party
payors to finalize cost reports under audit. Management is
actively appealing various adjustments made by the
intermediary, and, even though, it appears the Hospital will
prevail on various issues, no amount will be booked as a
receivable until the ultimate outcome of the appeal is known.
Net loss, after investment income was $165,000 in 1999
compared to net income of $350,874 in 1998. In addition to the
negative impact of write offs and contractual allowances on
operations, for 1999, the Hospital, under its self insurance
program had to pay for various catastrophic claims that
resulted in maximum reimbursement. Management feels these
types of claims will not be recurring cost in the future.
.
-10-
<PAGE>
1999 continued
----
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 $433,000,
while total investment income was $863,000. 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.
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 $6,070,000 in cash and
short-term investments. Included in this amount are $3,055,000
in unrealized holding gains.
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 1999. 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.
-11-
<PAGE>
Item 8. Financial Statements and Supplementary Data
------- -------------------------------------------
FINANCIAL STATEMENTS
--------------------
Description Page
----------- ----
Independent Auditors' Reports 14-15
Financial Statements:
Balance Sheets - June 30, 2000 and 1999 16-17
Statements of Operations
Years ended June 30, 2000, 1999 and 1998 18
Statements of Comprehensive Income
Years ended June 30, 2000, 1999 and 1998 19
Statements of Stockholders' Equity
Years ended June 30, 2000, 1999 and 1998 20
Statements of Cash Flows -
Years ended June 30, 2000, 1999 and 1998 21-22
Notes to Financial Statements 23-33
Item 14. Exhibits, Financial Statement, Schedules
and Reports on Form 8-K 39
-12-
<PAGE>
AMERICAN HOSPITAL MANAGEMENT CORPORATION
Annual Report for Corporations - Form 10-K
Years ended June 30, 2000 and 1999
Financial Statements,
Supplementary Data and Auditors' Report
-13-
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
American Hospital Management Corporation
We have audited the accompanying balance sheet of American Hospital
Management Corporation as of June 30, 2000 and the related statements
of income, stockholders' equity and cash flows and the supporting
financial statements as listed in the accompanying index for the year
then ended. The financial statements are the responsibility of the
management of American Hospital Management Corporation. Our
responsibility is to express an opinion on these financial statements
based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
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 audit provides 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 as of June 30, 2000, and the results of
their operations and their cash flows for the year then ended, in
conformity with generally accepted accounting principles, and the
supporting financial schedules as listed in the accompanying index,
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/ Hurley & Company
---------------------
Hurley & Company
Granada Hills, California
October 1, 2000
-14-
<PAGE>
Independent Auditors' Report
----------------------------
The Board of Directors and Stockholders:
American Hospital Management Corporation
We have audited the accompanying balance sheet of American Hospital
Management Corporation as of June 1999, and the related statements of
operations, comprehensive income and loss, 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, 1999
and 1998. 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, 1999, and the results of
its operations and its cash flows for the years ended June 30, 1999 and
1998 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
----------------------
KC Miller, CPA
West Covina, California
September 30, 1999
-15-
<PAGE>
AMERICAN HOSPITAL MANAGEMENT CORPORATION
Balance Sheets
June 30, 2000 and 1999
<TABLE>
<CAPTION>
Assets
------
2000 1999
----------- -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 769,953 $ 103,244
Marketable securities 5,957,315 5,966,623
Receivables:
Patients, net of estimated uncollectibles of $157,532
and $230,699, in 2000 and 1999, respectively 6,716,586 7,097,948
Other 236,216 347,203
Estimated third-party payor settlements 336,129 --
Refundable income tax -- 174,800
Supplies, at lower of cost (first-in, first-out) or market 913,690 1,031,050
Prepaid expenses 87,750 76,436
----------- -----------
Total current assets 15,017,639 14,797,304
Property and equipment, net 4,443,847 4,456,871
Real estate held for investment, net 1,999,909 2,045,578
Deferred income taxes 354,705 397,236
Other assets 592,922 605,638
----------- -----------
$22,409,022 $22,302,627
=========== ===========
</TABLE>
(continued)
The accompanying notes are an integral part of these financial statements.
-16-
<PAGE>
AMERICAN HOSPITAL MANAGEMENT CORPORATION
Balance Sheets
June 30, 2000 and 1999
<TABLE>
<CAPTION>
Liabilities and Stockholders' Equity
------------------------------------
2000 1999
----------- -----------
<S> <C> <C>
Current Liabilities:
Current maturities of long-term debt $ 113,187 $ 99,711
Portfolio credit line 654,363 --
Accounts payable and accrued expenses:
Trade 1,596,078 2,068,082
Accrued liabilities 1,704,211 1,723,938
Estimated third-party payor settlements 323,364 577,572
Income taxes:
Current 77,226 --
Deferred 1,687,357 1,774,181
----------- -----------
Total current liabilities 6,155,786 6,243,484
----------- -----------
Long-term debt, less current maturities 562,945 642,154
----------- -----------
Stockholders' equity:
$2cumulative preferred stock, par value $1
per share; authorized 100,000 shares;
issued 65,270.82 shares; reacquired
18,442.26 and 17,828.68 shares; outstanding
46,828.56 and 47,442.14 shares; aggregate
redemption and liquidating value of $1,287,778
and $1,304,659 at June 30, 2000 and 1999, respectively 46,829 47,442
Common stock, par value $1.00 per share;
authorized 400,000 shares, issued
249,051 shares, reacquired 25,483 and 24,024
shares; outstanding - 223,568 and 225,027 shares
at June 30, 2000 and 1999, respectively 223,568 225,027
Additional paid-in capital 122,384 148,783
Accumulated other comprehensive income 1,681,714 1,838,505
Retained earnings 13,615,796 13,157,232
----------- -----------
Total Stockholders' equity 15,690,291 15,416,989
----------- -----------
$22,409,022 $22,302,627
=========== ===========
</TABLE>
(concluded)
The accompanying notes are an integral part of these financial statements.
-17-
<PAGE>
AMERICAN HOSPITAL MANAGEMENT CORPORATION
Statements of Operations
Years ended June 30, 2000, 1999, and 1998
<TABLE>
<CAPTION>
2000 1999 1998
------------ ------------ ------------
<S> <C> <C> <C>
Net patient service revenue $ 24,759,228 $ 24,089,600 $ 22,992,958
Other revenue 346,071 389,879 396,746
------------ ------------ ------------
Total operating revenue 25,105,299 24,479,479 23,389,704
------------ ------------ ------------
Operating costs and expenses:
Professional care of patients 15,160,791 14,819,559 14,552,630
General services 2,357,961 2,456,966 2,485,699
Administrative services 3,304,688 3,583,756 3,227,783
Employee health and welfare 1,132,846 2,084,133 1,210,164
Medical malpractice insurance 296,639 323,546 395,630
Interest 104,938 74,966 16,327
Depreciation and amortization 827,340 939,858 979,028
Provision for bad debts 1,723,497 1,176,463 1,116,908
------------ ------------ ------------
Total operating costs and expenses 24,908,700 25,459,247 23,984,169
------------ ------------ ------------
Income (loss) from operations 196,599 (979,768) (594,465)
------------ ------------ ------------
Other income:
Investment income 487,129 627,759 1,049,449
Other 12,642 12,385 13,391
------------ ------------ ------------
499,771 640,144 1,062,840
------------ ------------ ------------
Income (loss) before income taxes 696,370 (339,624) 468,375
Provision for income tax expense (benefit) 155,111 (174,800) 117,501
------------ ------------ ------------
Net income (loss) $ 541,259 $ (164,824) $ 350,874
============ ============ ============
Basic earnings (loss) per common share $ 2.00 $ (1.15) $ 1.12
============ =========== ============
Diluted earnings (loss) per common share $ 1.71 $ (1.15) $ 1.09
============ =========== ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
-18-
<PAGE>
AMERICAN HOSPITAL MANAGEMENT CORPORATION
Statements of Comprehensive Income and Loss
Years ended June 30, 2000, 1999, and 1998
<TABLE>
<CAPTION>
2000
----
<S> <C> <C>
Net income $ 541,259
Other comprehensive income, net of tax
Unrealized gains on securities
Unrealized holding gains arising during tax period $ 10,799
Less: reclassification adjustment for gains realized
in net income (167,590) (156,791)
---------- ---------
Comprehensive income $ 384,468
=========
1999
Net loss $(164,824)
Other comprehensive income, net of tax
Unrealized gains on securities
Unrealized holding gains arising during tax period $ 216,142
Less: reclassification adjustment for gains realized
in net income (432,691) (216,549)
---------- ---------
Comprehensive loss $(381,373)
=========
1998
Net income $ 350,874
Other comprehensive income, net of tax
Unrealized gains on securities
Unrealized holding gains arising during tax period $1,116,880
Less: reclassification adjustment for gains realized
in net income (517,370) 599,510
---------- ---------
Comprehensive income $ 950,384
=========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-19-
<PAGE>
AMERICAN HOSPITAL MANAGEMENT CORPORATION
STATEMENTS OF STOCKHOLDERS' EQUITY
Years ended June 30, 2000, 1999 and 1998
<TABLE>
<CAPTION>
2000 1999 1998
------------ ------------ ------------
<S> <C> <C> <C>
Stockholders' Equity:
Cumulative Preferred Stock
Beginning balance $ 47,442 $ 47,690 $ 48,334
Reacquired stock 613 248 644
------------ ------------ ------------
Ending balance 46,829 47,442 47,690
------------ ------------ ------------
Common Stock
Beginning balance 225,027 226,157 228,057
Reacquired stock 1,459 1,130 1,900
------------ ------------ ------------
Ending balance 223,568 225,027 226,157
------------ ------------ ------------
Additional paid-in-capital
Beginning balance 148,783 163,769 194,427
Reacquired stock 26,399 14,986 30,658
------------ ------------ ------------
Ending balance 122,384 148,783 163,769
------------ ------------ ------------
Accumulated other comprehensive income
Beginning balance 1,838,505 2,055,054 1,455,544
Change in unrealized holdings gains, net (156,791) (216,549) 599,510
------------ ------------ ------------
Ending balance 1,681,714 1,838,505 2,055,054
------------ ------------ ------------
Retained Earnings
Beginning balance 13,157,252 13,398,773 13,134,173
Net income (loss) 541,259 (164,824) 350,874
Cash dividends paid on preferred stock (82,715) (76,717) (86,274)
------------ ------------ ------------
Ending balance 13,615,796 13,157,232 13,398,773
------------ ------------ ------------
Total Stockholders' equity $ 15,690,291 $ 15,416,989 $ 15,891,443
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
-20-
<PAGE>
AMERICAN HOSPITAL MANAGEMENT CORPORATION
Statements of Cash Flows
Years ended June 30, 2000, 1999 and 1998
<TABLE>
<CAPTION>
2000 1999 1998
------------ ------------ ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Cash received from patients
and third-party payors $ 23,172,826 $ 21,394,707 $ 22,985,273
Cash paid to employees and suppliers (22,638,608) (22,010,456) (22,342,220)
Investment income received 344,897 232,119 565,439
Interest paid (104,938) (74,966) (16,327)
Income taxes, net change 147,720 (116,602) (52,147)
------------ ------------ ------------
Net cash provided by (used in)
operating activities 921,897 (575,198) 1,140,018
------------ ------------ ------------
Cash flows from investing activities:
Purchase of real estate held for investment -- -- (198,387)
Purchase of property and equipment, net (768,647) (1,380,999) (1,258,401)
Proceeds from sale of short-term investments 1,844,750 3,719,964 3,189,509
Purchase of short-term investments (1,919,742) (2,247,503) (2,691,389)
Other 110,987 (65,191) 68,417
------------ ------------ ------------
Net cash (used in) provided by
investing activities (732,652) 26,271 (890,251)
------------ ------------ ------------
Cash flows from financing activities:
Proceeds from issuance of long-term debt 41,522 679,699 251,216
Principal reductions of long-term debt (107,255) (144,099) (251,882)
Proceeds from margin line of credit 654,363
Dividends paid (82,695) (76,717) (86,274)
Payments for reacquired stock (28,471) (16,364) (33,202)
------------ ------------ ------------
Net cash provided by (used in)
financing activities 477,464 442,519 (120,142)
------------ ------------ ------------
Net increase (decrease) in cash and cash equivalents 666,709 (106,408) 129,625
Cash and cash equivalents, beginning of year 103,244 209,652 80,027
------------ ------------ ------------
Cash and cash equivalents, end of year $ 769,953 $ 103,244 $ 209,652
============ ============ ============
Supplemental schedule of non-cash investing
activities:
(Decrease ) increase in fair value of investments $ (251,889) $ (360,915) $ 989,757
Change in deferred taxes 95,098 144,366 (390,247)
------------ ------------ ------------
(Decrease) increase in unrealized holding gains $ (156,791) $ (216,549) $ 599,510
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
-21-
<PAGE>
AMERICAN HOSPITAL MANAGEMENT CORPORATION
Statements of Cash Flows (concluded)
Years ended June 30, 2000, 1999 and 1998
<TABLE>
<CAPTION>
2000 1999 1998
----------- ----------- -----------
<S> <C> <C> <C>
Reconciliation of net income to net cash
provided by (used in) operating activities:
Net income (loss) $ 541,259 $ (164,824) $ 350,874
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Depreciation and amortization 844,241 964,524 1,046,223
Partnership income (4,185) -- (4,688)
Gain on sale of investments (167,590) (432,691) (517,370)
Increase in cash surrender value -- -- (162,300)
Change in assets and liabilities:
Decrease (increase) in patient receivables, net 381,362 (724,760) (326,890)
(Decrease) increase in third-party payors, net (590,337) (1,183,549) 1,039,367
Change in income taxes, net 302,832 (291,402) 65,354
Decrease (increase) in supplies 117,360 (56,484) (121,912)
(Increase) decrease in prepaid expenses (11,313) 651 31,120
(Decrease) increase in trade accounts payable (472,004) 1,257,343 (163,204)
(Decrease) increase in accrued expenses, net (19,727) 55,994 (96,556)
----------- ----------- -----------
Net cash provided by (used in)
operating activities $ 921,897 $ (575,198) $ 1,140,018
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-22-
<PAGE>
AMERICAN HOSPITAL MANAGEMENT CORPORATION
Notes to Financial Statements
June 30, 2000, 1999 and 1998
(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.
-23-
<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." 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.
-24-
<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, 1998.
* Medicaid. Inpatient 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 the
cost effect of the reclassification of revenue, as required
by Medicaid, in its financial statements. Management of the
Hospital feels this reclassification was made in error and
is appealing 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, 1998.
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.
-25-
<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>
2000 1999 1998
----------- ----------- -----------
<S> <C> <C> <C>
Gross patient service revenue $50,615,111 $46,721,019 $44,682,474
Less contractual allowances 25,855,883 22,631,419 21,689,516
----------- ----------- -----------
Net patient service revenue $24,759,228 $24,089,600 $22,992,958
</TABLE>
At June 30, 2000 and 1999, 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, 2000, contractual allowances and
provisions for bad debts has totaled $74,193,686, approximately 52% of
gross revenue.
(3) Marketable Securities
---------------------
Cost and fair value of marketable equity securities at June 30, 2000
and 1999, are as follows:
2000 1999
---- ----
Available for sale:
Cost $2,500,094 $2,911
Fair Value 5,957,315 5,966,623
Unrealized Gain 3,637,800 3,085,653
Unrealized Loss (180,579) (30,906)
Gain or loss from sale of securities is based on specific
identification of the securities sold. The change in net unrealized
holding gains on securities available for sale, net of the tax effect,
of $(156,791), $(216,549) and $599,510 for the years ended June 30,
2000, 1999 and 1998 have been charged to comprehensive income. For the
years ended June 30, 2000, 1999 and 1998, realized gains and realized
losses were $343,889 and $(176,299), $606,848 and $(174,157), and
$578,111 and $(60,741), respectively.
The Company has a portfolio credit line with the broker, Salomon Smith
Barney, secured by the investment portfolio. The maximum amount
available under the credit line at June 30, 2000 is $2,300,812, of
which $654,363 is outstanding. The interest rate at June 30, 2000 was
8.875%.
-26-
<PAGE>
AMERICAN HOSPITAL MANAGEMENT CORPORATION
Notes to Financial Statements, continued
(4) Property and Equipment
----------------------
At June 30, 2000 and 1999, property and equipment is comprised of the
following:
<TABLE>
<CAPTION>
2000 1999
----------- -----------
<S> <C> <C>
Land and improvements $ 44,500 $ 44,500
Buildings 5,575,593 4,814,668
Equipment 8,302,909 7,969,647
Construction in progress 204,707 562,247
----------- -----------
14,127,709 13,391,062
Accumulated depreciation and amortization 9,683,862 8,934,191
----------- -----------
Net property and equipment $ 4,443,847 $ 4,456,871
========== ===========
Property and equipment include certain capitalized leases, as follows:
2000 1999
----------- -----------
Equipment $ 975,913 $ 2,308,972
Less accumulated amortization 223,218 1,499,472
----------- -----------
$ 752,695 $ 809,500
=========== ===========
</TABLE>
Amortization expense on capitalized leases for the years ended June 30,
2000, 1999 and 1998 totaled $138,957, $136,087 and $301,767,
respectively.
Annual future minimum lease payments under capitalized leases at June
30, 2000 are as follows:
2001 $ 160,774
2002 160,774
2003 327,250
2004 8,979
2005 717
---------
Total minimum lease payments 658,494
Less amount representing interest (6.75% to 19.46%) 116,067
---------
Present value of minimum lease payments 542,427
Less current maturity 110,244
---------
$ 432,183
=========
-27-
<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 their lots. These are itemized as follows:
Property Location:
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 441,350
----------
$1,999,909
==========
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, 2000 and 1999, other assets include cash surrender value of
four life insurance polices totaling $449,570, and investment in
partnerships of $96,302.
(7) Long-Term Debt
--------------
Long-term debt at June 30, 2000 and 1999, consists of the following:
2000 1999
-------- -------
Bank note, secured by investment property,
interest rate of 2.25% above bank index
(6.812% at June 30, 1999), payable in monthly
installments, maturing in 2021 $133,705 $136,468
Lease obligations, payable in installments
through 2004 with a weighted average
interest rate of 10.24% 542,427 605,397
-------- -------
676,132 741,865
Less current maturities 113,187 99,711
-------- --------
$562,945 $642,154
======== ========
The maturities of long-term debt for each of the succeeding five years
subsequent to June 30, 2000, are as follows: 2001-$113,187;
2002-$124,937; 2003-$304,523; 2004-$12,539; 2005- $4,694, and
beyond-$116,252.
-28-
<PAGE>
AMERICAN HOSPITAL MANAGEMENT CORPORATION
Notes to Financial Statements, continued
(8) Income Taxes
------------
At June 30, income tax expense (benefit) consisted of the following:
<TABLE>
<CAPTION>
2000
------------------------------------------------------------
Federal California Total
------- ----------- ----------
<S> <C> <C> <C>
Current $ 69,120 $ 9,564 $ 78,684
Deferred 61,486 14,941 76,427
------- ----------- ----------
$ 130,606 $ 24,505 $ 155,111
======= =========== ==========
1999
Federal California Total
Current $(175,600) $ 800 $ (174,800)
========= =========== ==========
1998
Federal California Total
Current $ 82,505 $ 33,069 $ 115,574
Deferred 4,743 (2,816) 1,927
--------- ----------- ----------
$ 87,248 $ 30,253 $ 117,501
========= =========== ==========
</TABLE>
Deferred tax expenses (credits) for 2000, 1999, and 1998 result from
the following temporary differences:
<TABLE>
<CAPTION>
2000 1999 1998
--------- -------- --------
<S> <C> <C> <C>
California franchise tax $ ( 7,167) $(11,750) $ 8,921
Depreciation and amortization 84,089 (13,667) (31,277)
Allowance for bad debts 29,221 (26,571) (3,067)
Vacation accrual (32,700) (2,692) 39,391
Correction of deferred tax liability 54,680
Other 2,984 (12,041)
--------- -------- --------
$ 76,427 $ 0 $ 1,927
========= ======== ==========
</TABLE>
In addition, deferred tax liability is recorded in the balance sheet,
resulting from the change in unrealized holdings for investments. The
change in deferred income taxes for the years ended June 30, 2000 and
1999 was $(239,465) and $(144,367), respectively.
-29-
<PAGE>
AMERICAN HOSPITAL MANAGEMENT CORPORATION
Notes to Financial Statements, continued
(8) Income Taxes continued
------------
Recorded income tax expense (benefit) differs from that computed by
applying the statutory income tax rates for the following reasons:
<TABLE>
<CAPTION>
2000 1998
--------- --------
<S> <C> <C> <C>
Computed tax at statutory rate $ 298,325 $ (115,472) $ 186,574
Increases (decreases) resulting from:
California franchise tax (8,108) (272) (1,365)
Domestic dividend exclusion allowance (18,165) (22,361) (27,335)
Cash surrender value (112,833) (4,321) (60,958)
Entertainment deduction 11,093 9,649 11,438
Net operating loss carryover (18,043) -- --
Other 2,842 (42,023) 9,147
--------- ------- --------
$ 155,111 $ (174,800) $ 117,501
========= ========== ==========
</TABLE>
(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, 2000 and 1999, was
$1,287,778 and $1,304,659, 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
-----------------------
Basic income per common share was computed by dividing the net income
after deduction of preferred stock dividend requirements of $93,657,
$94,884 and $95,380, by the weighted average number of common shares
outstanding (224,298, 225,592 and 227,332) for 2000, 1999 and 1998,
respectively.
Diluted income per common share was computed by dividing net income by
the weighted average number of common shares outstanding, after
redemption of preferred stock, (317,225 and 321,537) for 2000 and 1998,
respectively. For 1999, there was an anti-dilutive effect for all
shares.
-30-
<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 employer contribution was made for any of the
three years ended June 30, 2000.
(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, 2000 and 1999, was as follows:
2000 1999
---- ----
Medicare 33.4% 38.4%
Medi-Cal 18.4 15.1
Other third-party payors 41.0 33.8
Patients 7.2 12.7
----- -----
100.0% 100.0%
===== =====
-31-
<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,
2000. 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 $1,268,767.
Health care benefit expense was approximately $830,022, $2,084,133 and
$1,210,164 for the years ended June 30, 2000, 1999 and 1998,
respectively.
(15) Commitments and Contingencies
-----------------------------
Commitments.
The Company had one operating lease with monthly payments of $2,450
with a remaining term of 11 months. Total rental expense for the years
ended June 30, 2000, 1999 and 1998 was $388,708, $380,325 and $227,486,
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.
-32-
<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, 2000, 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.
-33-
<PAGE>
Item 9. Changes in and disagreements with accountants on
------- ------------------------------------------------
Accounting and Financial Disclosure
-----------------------------------
None.
-34-
<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 74 Director President of
Freight For-
warding Co.
Charles F. Forbes, Attorney 1968 70 Secretary & Retired
Director Attorney
Allen E. Shaw, President 1960 82 President & President of
of the Company Director Company
Douglas A. Shaw, Vice President 1981 49 Vice President Hospital
Administrator & Director Administrator
Richard J. Stanczak 1977 74 Director Business
Business Consultant Consultant
Michael Young, Controller 1978 52 Treasurer Hospital
Administrator Controller
Donald J. Krpan, D.O. 1988 64 Director President of
the American
Osteopath
Association
John Aryanpur, M.D. 1998 40 Director Neurosurgeon
</TABLE>
-35-
<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, 2000, 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 $109,402
the Board
Douglas A. Shaw Vice President, Administrator 52,000
Michael Young Treasurer and Controller of 71,032
Mad River Community Hospital
All other directors
and officers as a
group (5 persons) 6,950
--------
(8 persons) $239,384
========
</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 2000 was $6,950. There have not been any
payments made to officers or directors for severance of relationship.
-36-
<PAGE>
Item 12. Security Ownership of Certain
-------- -----------------------------
Beneficial Owners and Management
--------------------------------
Owners of 5% or more of outstanding voting securities at June
30, 1999, 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 52.80%
San Clemente, California Preferred 1,970 4.20%
Arcata Hospital Corporation* Common 20,898 9.38%
Palos Verdes Estates, California Preferred 11,481 24.51%
Security ownership of management as a group
-------------------------------------------
All directors and officers as Common 120,579 53.92%
a group
All directors and officers Preferred 1,970 4.20%
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.
-37-
<PAGE>
Item 13. Certain Relations and
-------- ---------------------
Related Transactions
--------------------
None.
-38-
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement
-------- -----------------------------
Schedules, and Reports on Form 8-K
----------------------------------
Page
----
(a) (1) The following financial statements are included in
Part II, Item 8:
Reports of Independent Auditors'
Financial Statements:
Balance Sheets
June 30, 2000 and 1999
Statements of Operations
Years ended June 30, 2000, 1999 and 1998
Statements of Comprehensive Income
Years ended June 30, 2000, 1999 and 1998
Statements of Stockholders' Equity
Years ended June 30, 2000, 1999 and 1998
Statements of Cash Flows
Years ended June 30, 2000, 1999 and 1998
Notes to Financial Statements
(2) The following financial schedules for the Years 2000, 1999
and 1998 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, 2000.
-39-
<PAGE>
Schedule II
AMERICAN HOSPITAL MANAGEMENT CORPORATION
Valuation and Qualifying Accounts
Years ended June 30, 2000, 1999 and 1998
<TABLE>
<CAPTION>
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> <C>
2000 $ 230,699 $ 1,723,497 $ 1,796,664 $ 157,532
1999 292,723 1,176,463 1,238,487 230,699
1998 285,055 1,116,908 1,109,240 292,723
</TABLE>
-40-
<PAGE>
Schedule III
AMERICAN HOSPITAL MANAGEMENT CORPORATION
Real Estate and Accumulated Depreciation
Years ended June 30, 2000, 1999 and 1998
<TABLE>
<CAPTION>
Related Accumulated Useful
Description debt Land Buildings Total Depreciation Life
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Rental property $133,705 $482,346 $1,126,725 $1,609,071 $441,351 25
Investment None 832,189 832,189
----------------------------------------------------------------
$133,705 $1,314,535 $1,126,725 $2,441,260 $441,351
===============================================================
</TABLE>
Cost:
Balance at June 30, 2000, 1999 and 1998 $ 2,241,260
Accumulated Depreciation:
Balance at June 30, 1998 $ 350,013
Depreciation during period 42,669
-----------
Balance at June 30, 1999 395,682
Depreciation during period 45,669
-----------
Balance at June 30, 2000 $ 441,351
===========
-41-
<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, hereunto duly authorized:
AMERICAN HOSPITAL MANAGEMENT CORPORATION
By: /s/ Allen E. Shaw
-------------------------------
Allen E. Shaw, President
Date: September 16, 2000
-----------------------------
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 September 16, 2000
------------------------- ---------------------- -------------------
Allen E. Shaw
/s/ Charles F. Forbes Secretary and Director September 16, 2000
------------------------- ---------------------- -------------------
Charles F. Forbes
/s/ Michael J. Young Treasurer and Chief September 16, 2000
------------------------- Accounting Officer -------------------
Michael J. Young ----------------------
/s/ Donald J. Krpan Director September 16, 2000
------------------------- ---------------------- -------------------
Donald J. Krpan
/s/ Doug Shaw Director September 16, 2000
------------------------- ---------------------- -------------------
Doug Shaw
-42-
