UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________
FORM 10-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For quarterly period ended November 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission File Number 1-11591
OrNda HealthCorp
(Exact name of registrant as specified in its charter)
DELAWARE 75-1776092
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3401 West End Avenue, Suite 700
(Address of principal executive offices)
37203-1042
(Zip Code)
Registrant's telephone number, including area code: 615-383-8599
____________
Former name, former address and former fiscal year, if changed since last
report: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (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[x] No[ ]
Number of shares of common stock ($.01 par value) outstanding as of
December 31, 1995: 58,048,772<PAGE>
ORNDA HEALTHCORP
FORM 10-Q
November 30, 1995
INDEX
Page No.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Income for the Three
Months Ended November 30, 1994 and 1995. . . . . 3
Consolidated Balance Sheets as of August 31, 1995
and November 30, 1995. . . . . . . . . . . . . . 4
Consolidated Statements of Cash Flows for the
Three Months Ended November 30, 1994 and 1995. . 5
Notes to Consolidated Financial Statements . . . 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. . . . . . 12
Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K . . . . . . . 20
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . 21
EXHIBIT 10
EXHIBIT 11
EXHIBIT 27<PAGE>
<TABLE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
ORNDA HEALTHCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(in thousands, except per share data)
<CAPTION>
Three Months Ended November 30,
1994 1995
<S> <C> <C>
Total Revenue $ 418,021 $ 493,565
Costs and Expenses:
Salaries and benefits 184,000 210,365
Supplies 53,379 64,890
Purchased services 46,145 52,219
Provision for doubtful accounts 28,738 33,207
Other operating expenses 46,152 59,953
Depreciation and amortization 20,641 23,461
Interest expense 27,150 27,186
Interest income (1,034) (1,154)
Minority interest 222 1,353
_________ __________
12,628 22,085
Income from investments in Houston
Northwest Medical Center 3,476 3,784
_________ __________
Income before income tax expense 16,104 25,869
Income tax expense 2,754 5,950
_________ __________
Net income 13,350 19,919
Preferred stock dividend requirements (495) (332)
_________ __________
Net income applicable to common shares $ 12,855 $ 19,587
========= ==========
Net income per common and common
equivalent share $ 0.29 $ 0.40
========= ==========
Net income per common share
assuming full dilution $ 0.29 $ 0.39
========= ==========
Weighted average common and dilutive
common equivalent shares outstanding 44,789 49,519
========= ==========
Weighted average common shares outstanding
assuming full dilution 44,789 50,763
========= ==========
</TABLE>
See the accompanying notes.<PAGE>
ORNDA HEALTHCORP AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands, except share data)
<TABLE>
August 31, November 30,
1995 1995
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 4,963 $ 119,816
Patient accounts receivable, net of allowance
for uncollectibles of $58,632 at August 31,
1995 and $62,922 at November 30, 1995 307,601 320,340
Supplies, at cost 34,097 35,006
Other 57,052 52,669
___________ ___________
Total Current Assets 403,713 527,831
Property, Plant and Equipment, at cost:
Land 126,436 129,436
Buildings and improvements 870,352 888,021
Equipment and fixtures 359,979 372,828
___________ ___________
1,356,767 1,390,285
Less accumulated depreciation and amortization 288,410 306,062
___________ ___________
1,068,357 1,084,223
Investments in Houston Northwest Medical Center 73,755 72,486
Excess of Purchase Price Over Net Assets Acquired,
net of accumulated amortization 318,029 327,695
Other Assets 82,550 95,631
___________ ___________
$ 1,946,404 $ 2,107,866
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 117,258 $ 120,153
Accrued expenses and other liabilities 220,851 166,894
Current maturities of long-term debt 60,182 56,127
___________ ___________
Total Current Liabilities 398,291 343,174
Long-term Debt 1,013,423 996,650
Other Liabilities 141,552 166,765
Shareholders' Equity:
Convertible preferred stock,
$.01 par value, 10,000,000 authorized shares,
issued 1,329,701 shares at August 31, 1995
and 7,416 shares at November 30, 1995 20,112 111
Common stock, $.01 par value,
authorized 200,000,000 shares, issued and
outstanding 44,877,804 shares at August 31, 1995
and 57,790,372 shares at November 30, 1995 449 578
Additional paid-in capital 414,805 627,688
Retained earnings (deficit) (94,020) (74,101)
Unrealized gains on available-for-sale
securities, net of tax 51,792 47,001
___________ ___________
393,138 601,277
___________ ___________
$ 1,946,404 $ 2,107,866
=========== ===========
</TABLE>
See the accompanying notes.<PAGE>
<TABLE>
ORNDA HEALTHCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
<CAPTION>
Three Months Ended November 30,
1994 1995
<S> <C> <C>
CASH FLOW USED IN OPERATING ACTIVITIES:
Net income $ 13,350 $ 19,919
Adjustments to reconcile net income to net cash
used in operating activities:
Non-cash portion of (income)loss
from investments in Houston Northwest
Medical Center (2,836) (3,160)
Depreciation and amortization 20,641 23,461
Provision for doubtful accounts 28,738 33,207
Changes in assets and liabilities net of effects
from acquisitions and dispositions of hospitals:
Patient accounts receivable (51,303) (45,946)
Other current assets (524) (10,040)
Other assets 318 457
Accounts payable, accrued
expenses and other liabilities (12,566) (53,739)
Other liabilities (1,515) 11,702
Proceeds from sales of trading investment security --- 19,115
___________ _________
Net cash used in operating activities (5,697) (5,024)
CASH FLOW USED IN INVESTING ACTIVITIES:
Acquisitions of hospitals and related assets (9,799) (29,825)
Capital expenditures (11,049) (14,096)
Increase in notes receivable (2,073) (7,606)
Payments received on long-term notes and
other receivables 854 3,297
Other investing activities (1,543) 1,545
__________ _________
Net cash used in investing activities (23,610) (46,685)
CASH FLOW PROVIDED BY FINANCING ACTIVITIES:
Proceeds from issuance of common stock 547 193,011
Principal payments on long-term debt borrowings (30,187) (37,636)
Proceeds received on long-term debt borrowings 52,040 15,003
Financing costs incurred in connection with
long-term borrowings (637) (3,744)
Other 155 (72)
__________ _________
Net cash provided by financing activities 21,918 166,562
__________ _________
NET INCREASE(DECREASE) IN CASH AND CASH EQUIVALENTS (7,389) 114,853
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 17,374 4,963
__________ _________
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 9,985 $ 119,816
========== =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest (net of amount capitalized) $ 37,509 $ 36,362
Income taxes 539 21,793
SUPPLEMENTAL DISCLOSURE OF NONCASH ACTIVITIES:
Preferred stock dividends 495 332
Capital lease obligations incurred 1,025 --
Stock issued for acquisitions of health care facilities 563 --
Exchange of minority ownership in hospitals for minority
interest ownership in physician practices -- 9,400
</TABLE>
See the accompanying notes.<PAGE>
ORNDA HEALTHCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
November 30, 1995
NOTE 1 - REPORTING ENTITY
OrNda HealthCorp ("Company"), which is incorporated in the State of
Delaware, is a provider of health care services through the operation of
medical/surgical hospitals located primarily in the southern and western
United States. On April 19, 1994, the Company exchanged shares of its common
stock for all the outstanding common stock of American Healthcare Management,
Inc. ("AHM"), and merged AHM with and into the Company (the "AHM Merger").
The transaction was accounted for as a pooling-of-interests. Where such
reference is necessary to enhance the understanding of the information
presented, OrNda HealthCorp, excluding the accounts of AHM, is hereafter
referred to as "OrNda." Also on April 19, 1994, OrNda purchased all the
outstanding common stock of Summit Health Ltd. ("Summit") pursuant to a merger
of SHL Acquisition Co., a wholly owned subsidiary of the Company, with and
into Summit (the "Summit Merger"). The Summit Merger was accounted for as a
purchase.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation. The accompanying unaudited consolidated financial
statements have been prepared in conformity with generally accepted accounting
principles for interim financial information and with the instructions to Form
10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all
of the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management,
all adjustments considered necessary for fair presentation have been included.
Certain prior year amounts have been reclassified to conform to the current
year presentation. Operating results for the three months ended November 30,
1995 are not necessarily indicative of the results that may be expected for
the entire year. For further information, refer to the consolidated financial
statements and footnotes thereto included in the Company's annual report on
Form 10-K for the year ended August 31, 1995.
Earnings Per Share. Earnings per common and common equivalent share is
based on the Company's weighted average number of outstanding shares adjusted
for the dilutive effect of common stock equivalents outstanding during the
period. Dilutive common stock equivalents consist of stock options and
warrants representing 1.2 million and 1.4 million equivalent shares for the
three months ended November 30, 1994 and 1995, respectively. Earnings per
common share assuming full dilution for the three months ended November 30,
1995, assumes the conversion of the Company's redeemable convertible preferred
stock into common shares. Earnings per common share assuming full dilution
for the three months ended November 30, 1994 was antidilutive.
NOTE 3 - LONG-TERM DEBT
On October 27, 1995, the Company executed an amended and restated credit
agreement (the "Restated Credit Facility") which increases the borrowing
capacity of the Company from approximately $660.0 million to $900.0 million of
which $460.0 million was outstanding on November 30, 1995 and of which
commitment availability had been reduced by $23.9 million as a result of
issued letters of credit. The Restated Credit Facility, which amends the
Company's previous credit agreement dated April 19, 1994, will mature on
October 30, 2001 and consists of the following facilities (the "Senior Credit
Facilities"): (i) a revolving commitment of $440 million to refinance the debt
under the previous credit agreement, for general corporate purposes, to issue
up to $50 million of letters of credit, and for strategic acquisitions; and,
(ii) a $460 million term loan to refinance debt under the previous credit
agreement payable in incremental quarterly installments beginning February 29,
1996.
Loans under the Restated Credit Facility will bear interest, at the
option of the Company, at a rate equal to either (i) the "alternate base rate"
plus 0.75% or (ii) LIBOR plus 1.75%, in each case subject to potential
decreases or increases dependent on the Company's leverage ratio. Interest is
payable quarterly if a rate based on the alternate base rate is elected or at
the end of the LIBOR period (but in any event not to exceed 90 days) if a rate
based on LIBOR is elected. The weighted average interest rate on the
Company's borrowings under the Senior Credit Facilities at November 30, 1995
was 7.34%.
In certain circumstances, the Company is required to make principal
prepayments on the Senior Credit Facilities, including the receipt of proceeds
from the issuance of additional subordinated indebtedness, certain asset sale
proceeds not used to acquire additional assets within a specified period, and
50% of the proceeds in excess of $50 million from the issuance of additional
equity not used to acquire additional assets, fund capital expenditures or
repay subordinated debt within one year. The Company may prepay at any time
all or part of the outstanding Senior Credit Facilities without penalty.
The Restated Credit Facility limits, under certain circumstances, the
Company's ability to incur additional indebtedness, sell material assets,
acquire the capital stock or assets of another business, or pay dividends.
The Restated Credit Facility also requires the Company to maintain a specified
net worth and meet or exceed certain coverage, leverage, and indebtedness
ratios. Indebtedness under the Restated Credit Facility is secured by a
perfected, first priority security interest in the stock of all existing and
future subsidiaries of the Company, intercompany notes of indebtedness,
majority-owned partnerships and certain specified investments.
NOTE 4 - INCOME TAXES
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS
No. 109). Under SFAS No. 109, an asset and liability approach for financial
accounting and reporting for income taxes is required.
The AHM Merger caused an "ownership change" within the meaning of Section
382(g) of the Internal Revenue Code for both OrNda and AHM. Consequently,
allowable federal deductions relating to net operating losses ("NOL's") of
OrNda and AHM arising in periods prior to the AHM Merger are thereafter
subject to annual limitations of approximately $19 million and $16 million for
OrNda and AHM, respectively. In addition, approximately $55 million of the
NOL's are subject to an annual limitation of approximately $3 million due to
prior "ownership changes" of OrNda. The annual limitations may be increased
in order to offset certain built-in gains which are recognized during the five
year period following an ownership change. In addition, the NOL's from pre-
merger tax years of AHM may only be applied against the prospective taxable
income of the AHM entities which incurred the losses in prior years. The
limitations described above are not currently expected to significantly affect
the ability of the Company to ultimately recognize the benefit of these NOL's
in future years.
The Company's federal income tax returns are not presently under audit by
the Internal Revenue Service (the "IRS"), except in respect of Summit as
disclosed below. Furthermore, the Company's federal income tax returns for
taxable years through August 31, 1991 are no longer subject to IRS audit, with
certain limited exceptions and except in respect of NOL's for prior years
which may be subject to IRS audit as they are utilized in subsequent tax
years.
The IRS is currently engaged in an examination of the federal income tax
returns for fiscal years 1984, 1985 and 1986 of Summit, which subsequent to
the Company's acquisition thereof in April 1994 merged into the Company.
Summit has received a revenue agent's report with proposed adjustments for the
years 1984 through 1986 and Summit has filed a protest opposing the proposed
adjustments. The IRS has challenged, among other things, the propriety of
certain accounting methods utilized by Summit for tax purposes, including the
use of the cash method of accounting by certain of Summit's subsidiaries (the
"Summit Subsidiaries") prior to fiscal year 1988. The cash method was then
prevalent within the hospital industry and the Summit Subsidiaries applied the
method in accordance with prior agreements reached with the IRS. The IRS now
asserts that an accrual method of accounting should have been used. The Tax
Reform Act of 1986 (the "1986 Act") requires most large corporate taxpayers
(including Summit) to use an accrual method of accounting beginning in 1987.
Consequently, the Summit Subsidiaries changed to the accrual method beginning
July 1, 1987. In accordance with the provisions of the 1986 Act, income that
was deferred by use of the cash method at the end of 1986 is being recognized
as taxable income by the Summit Subsidiaries in equal installments over ten
years beginning on July 1, 1987. The Company believes that Summit properly
reported its income and paid its taxes in accordance with applicable laws and
in accordance with previous agreements established with the IRS. The Company
believes that the final outcome of the IRS's examinations of Summit's prior
years' income taxes will not have a material adverse effect on the results of
operations or financial position of the Company.
NOTE 5 - HOUSTON NORTHWEST MEDICAL CENTER
Houston Northwest Medical Center ("HNW"), which was not operated by the
Company until January, 1996, is a 498-bed acute care facility located in
Houston, Texas. Effective January 1, 1996, the Company acquired the remaining
equity interests in HNW for a total purchase price of $155.9 million.
Prior to January 1996, the Company's investments in HNW consisted of (i)
two classes of mandatorily redeemable preferred stock with a redemption value
of $62.5 million; and, (ii) a mortgage note receivable with a balance of $7.4
million at November 30, 1995.
The Company will continue to apply the income recognition method
described in Note 3 to the consolidated financial statements included in the
Company's Form 10-K for the year ended August 31, 1995, for the Company's
investment in HNW's mandatorily redeemable preferred stock until January 1996.
Income from investments in Houston Northwest Medical Center consists of the
following (in thousands):<PAGE>
<TABLE>
Three Months Ended November 30,
1994 1995
<S> <C> <C>
Accretion of discount on mandatorily
redeemable preferred stock $ 521 $ 568
Dividend income on mandatorily
redeemable preferred stock 2,815 3,092
Interest income on mortgage note
receivable 140 124
________ ________
$ 3,476 $ 3,784
======== ========
</TABLE>
In May 1993, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 115, "Accounting for Certain Investments in
Debt and Equity Securities" (SFAS No. 115). The Company adopted SFAS No. 115
on September 1, 1993, which resulted in an $85.5 million increase in
shareholders' equity on the date of adoption (which primarily related to the
HNW mandatorily redeemable preferred stock classified as "available-for-sale")
with no impact on net income. There was no income tax effect because of the
availability of book tax attribute carryforwards to offset the excess book
basis over the tax basis of the investments. The unrealized gain on available
for sale HNW securities is $47.0 million at November 30, 1995. The reduction
from the original amount is due primarily to an increase in the book value of
the investment and changes in long-term interest rates used to discount future
cash flows.
If the acquisition of HNW, and the effects of the Company's November 1995
sale of common stock and Restated Credit Facility (see Note 6) had occurred on
September 1, 1995, results of operations for the three months ended November
30, 1995, on a pro forma basis, would have been as reflected below (in
thousands, except per share data):
<TABLE>
<S> <C>
Total revenue $ 533,342
Net income 20,703
Net income applicable to common shares 20,371
Net income per common share $ 0.35
Net income per common share
assuming full dilution $ 0.35
/TABLE
<PAGE>
If the acquisition of HNW had occurred on November 30, 1995, the balance
sheet of the Company would have been as reflected below (in thousands):
<TABLE>
<S> <C>
Current Assets $ 445,234
Property, Plant and Equipment, net 1,170,388
Investments in HNW --
Excess of Purchase Price Over Net
Assets Acquired , net 409,392
Total Assets 2,122,697
Current Liabilities 361,659
Long-Term Debt and Liabilities 1,206,762
Shareholders' Equity 554,276
</TABLE>
NOTE 6 - SHAREHOLDERS' EQUITY
On November 6, 1995, the Company completed the sale of 10,000,000 shares
of its Common Stock at a $17.625 per share public offering price. On November
9, 1995, the underwriters exercised an option to purchase an additional
1,500,000 shares to cover over-allotments. The net proceeds of approximately
$192.3 million, after deducting estimated offering expenses and underwriting
discounts, were used to reduce all of the indebtedness under the revolving
portion of the Restated Credit Facility in the amount of $27.2 million. The
remaining proceeds were used for general corporate purposes.
On November 7, 1995, the Company issued a notice of redemption to the
holders of its Payable in Kind Cumulative Redeemable Convertible Preferred
Stock (the "PIK Preferred") for $15 per share with a redemption date of
December 8, 1995. In the fiscal quarter ended November 30, 1995, 1,355,519
shares of PIK Preferred were converted into 1,355,519 shares of the Company's
Common Stock. On December 8, 1995, the remaining 7,416 shares of PIK
Preferred were redeemed for $15 per share plus dividends of $0.16 per share
accrued through the redemption date.
On November 29, 1995, nonqualified options to purchase 790,500 shares of
Common Stock at an exercise price of $18.75 per share were granted to officers
and key employees of the Company under the 1994 Management Equity Plan.
NOTE 7 - CONTINGENCIES
The Company continually evaluates contingencies based upon the best
available information. Final determination of amounts earned from certain
third-party payors is subject to review by appropriate governmental
authorities or their agents. In the opinion of management, adequate provision
has been made for any adjustments that may result from such reviews.
The Company is subject to various legal proceedings and claims which
arise in the ordinary course of business. In the opinion of management, the
ultimate resolution of such pending legal proceedings will not have a material
effect on the Company's financial position or results of operations.
NOTE 8 - OTHER
On November 9, 1995, the Company sold the real property of Pasadena
General Hospital in Pasadena, Texas to an unrelated third party as described
in Note 2 to the consolidated financial statements included in the Company's
Form 10-K for the year ended August 31, 1995.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
The Company's operating results for the three months ended November 30,
1995, as compared to the first quarter of fiscal 1995, were impacted by the
February 1995 acquisition of three hospitals and related businesses that
comprise the St. Luke's Health System ("St. Luke's") in Arizona.
Geographic Market Concentration. The Company's hospitals in greater Los
Angeles, South Florida and Arizona generated the following percentages of the
Company's total revenue for the three months ended November 30, 1994 and 1995,
respectively;
<TABLE>
<CAPTION>
Number Percentage of Number Percentage of
of 11/30/94 of 11/30/95
Hospitals Total Revenue Hospitals Total Revenue
<S> <C> <C> <C> <C>
Greater Los Angeles 15 36.5% 15 33.6%
South Florida 5 20.1% 6 18.7%
Arizona 3 6.0% 6 11.3%
</TABLE>
To the extent favorable or unfavorable changes in regulations or market
conditions occur in these markets, such changes would likely have a
corresponding impact on the Company's results of operations.
RESULTS OF OPERATIONS
General Trends. During the periods discussed below, the Company's
results of operations were affected by certain industry trends, changing
components of total revenue, and changes in the Company's debt structure. The
Company's results of operations have also been impacted by the acquisition of
St. Luke's discussed above.
Industry Trends. Outpatient services accounted for 30.7% and 27.9% of
actual gross patient revenue for the three months ended November 30, 1995 and
1994, respectively, reflecting the industry trend towards greater use of
outpatient services and the expansion of the Company's outpatient services
primarily achieved through activities including surgery, diagnostics,
physician clinics and home health. The Company expects the industry trend
towards outpatient services to continue as procedures currently being
performed on an inpatient basis become available on an outpatient basis
through technological and pharmaceutical advances.
As discussed below, excluding the effect of the St. Luke's acquisition
noted above ("same hospitals basis"), total revenues have increased,
reflecting higher utilization of outpatient and ancillary services, increased
acuity of patients admitted, and an increase in admissions for inpatient
procedures. The impact on revenue of increased patient acuity and general
price increases has been partially offset by the increasing proportion of
revenues derived from Medicare, Medicaid and managed care providers. The
Company's gross revenue from fixed reimbursement third party payors
represented approximately 87.7% of the Company's total gross revenue for the
first quarter of fiscal 1996. These major payors substantially pay on a fixed
payment rate on a per patient or a per diem basis instead of a cost or charge
reimbursement methodology. Fixed payments limit the ability of the Company to
increase revenues through price increases. While these fixed payment rates
have increased annually, the increases have historically been at a rate less
than the Company's increases in costs, and have been inadequate to reflect
increases in costs associated with improved medical technologies. The Company
has been able to mitigate such inflationary pressures through cost control
programs, as well as utilization management programs which reduce the number
of days that patients stay in the hospital and the amount of hospital services
provided to the patient. The Company also has programs designed to improve the
margins associated with the revenues derived from government payors and
managed care providers as well as programs designed to enhance overall
hospital margins. The Company's operations may also be enhanced through
strategic acquisitions as was particularly evident in fiscal 1994 and 1995
with the mergers with AHM and Summit and the individual hospital acquisitions.
The Company intends to pursue strategic acquisitions of health care providers
in geographic areas and with service capabilities that will facilitate the
development of integrated networks.
Three Months Ended November 30, 1995 Compared
With The Three Months Ended November 30, 1994
Total revenue for the quarter ended November 30, 1995, increased over the
same period in the prior year by $75.5 million or 18.1% to $493.6 million.
The 18.1% increase is a result of the acquisition discussed above as well as
an increase in same hospitals revenue as discussed below. The increase in
total revenue attributable to acquisitions, net of divestitures, was $38.8
million. Net income applicable to common shares for the quarter ended
November 30, 1995 was $19.6 million, or $0.40 per share, compared to $12.9
million, or $0.29 per share, in the same period last year. Earnings before
interest, taxes, depreciation, amortization, income (loss) from investments in
Houston Northwest Medical Center and non-recurring charges ("Adjusted EBITDA")
increased 20.5% to $71.6 million. While Adjusted EBITDA should not be
construed as a substitute for net income or a better indicator of liquidity
than cash flow from operating activities, which are determined in accordance
with generally accepted accounting principles, it is included herein to
provide additional information with respect to the ability of the Company to
meet its future debt service, capital expenditures and working capital
requirements.
Operating expenses in the quarter ended November 30, 1995, increased
17.4% ($62.2 million) compared to the same period in prior year primarily as a
result of the acquisition discussed above and the increase in same hospital
revenues and volumes discussed below. Actual salaries and benefits as a
percentage of total revenue decreased from 44.0% in the first quarter of
fiscal 1995 to 42.6% in the first quarter of fiscal 1996 mainly as a result of
labor efficiencies achieved at certain facilities.
Actual other operating expenses increased 29.9% ($13.8 million). This
category of expense increased at a rate greater than other categories due to
acquisitions of physician practice groups which include the majority of the
non-salary expenses in other operating expense. In addition, the St. Luke's
acquisition in fiscal 1995 also included a Medicaid HMO. Operating expenses
for the quarter ended November 30, 1995, increased approximately $4.3 million
for claims payments made by the Medicaid HMOs to third party providers. In
addition, other operating expenses increased $1.8 million for rent expense
related to acquisitions financed through leasing agreements with third
parties.
On a same hospitals basis, total revenue increased 8.9% ($36.8 million)
primarily as a result of a 2.8% increase in admissions and a 19.5% increase in
gross outpatient revenue. On a same hospitals basis, salaries and benefits
decreased as a percent of total revenue from 43.9% in the first quarter of
fiscal 1995 to 42.8% in the first quarter of fiscal 1996 due to labor
efficiencies achieved at certain hospitals. Supplies expense increased 8.0%
($4.2 million) but as a percentage of total revenue decreased from 12.8% in
the first quarter of fiscal 1995 to 12.7% in the first quarter of fiscal 1996,
primarily as a result of favorable reductions in prices under supply contracts
in pharmaceutical and other areas. Purchased services increased 6.1% ($2.8
million) but as a percentage of total revenue decreased from 11.0% in the
first quarter of fiscal 1995 to 10.7% in the first quarter of fiscal 1996 due
to cost control initiatives. The provision for doubtful accounts increased
3.1% ($0.9 million) but decreased from 6.9% of total revenue for the quarter
ended November 30, 1995 to 6.5% for the quarter ended November 30, 1996.
Other operating expenses increased 17.8% ($9.1 million) and as a percentage of
total revenue increased from 12.4% in fiscal 1995 to 13.4% in fiscal 1996,
primarily as a result of increases in marketing and rent expenses.
Depreciation and amortization for the quarter ended November 30, 1995,
increased 13.7% ($2.8 million) over the prior year primarily as a result of
the acquisition of St. Luke's. The increase in depreciation and amortization
attributable to acquisitions, net of divestitures, was $1.6 million. In
addition, amortization expense increased due to amortization on intangibles
related to new business units.
Interest expense for the first quarter of fiscal 1996 as compared to the
same period last year remained unchanged at $27.2 million as the increase in
market interest rates was offset by the decline in the average debt balance
outstanding and improved pricing under the Restated Credit Facility in the
first quarter of fiscal 996. Of the Company's total indebtedness of $1.1
billion at November 30, 1995, approximately $460.0 million bears interest at
rates that fluctuate with market rates, such as the Prime Rate or LIBOR.
Increases in market interest rates will adversely affect the Company's net
income.
Minority interest, which represents the amounts paid or payable to
physicians pursuant to the Company's joint venture arrangements, increased
$1.1 million in the first quarter of fiscal 1996 as compared to fiscal 1995,
primarily as a result of a $9.4 million exchange of minority interest
ownership in two hospitals for minority interest investment in two group
physician practices.
In the first quarter of fiscal 1996, the Company recorded income of $3.8
million, compared to $3.5 million in fiscal 1995, related to its investments
in Houston Northwest Medical Center ("HNW") which primarily represented non-
cash income related to the Company's investment in HNW redeemable preferred
stock. Effective January 1, 1996, the Company acquired HNW from the
hospital's Employee Stock Ownership Plan (ESOP). Following the transaction,
HNW is a wholly owned subsidiary of the Company. See Note 5 to the
accompanying consolidated financial statements for further discussion of the
Company's investments in HNW as well as the acquisition of HNW.
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS
No. 109). The majority of the Company's deferred tax assets related to
approximately $235.0 million of tax loss and credit carryforwards at November
30, 1995, which the Company has available to offset future taxable income.
The AHM Merger (see Note 1 to the consolidated financial statements) caused an
"ownership change" within the meaning of Section 382(g) of the Internal
Revenue Code (the "IRC") for both OrNda and AHM. Consequently, allowable
federal deductions relating to tax attribute carryforwards of OrNda and AHM
arising in periods prior to the merger are thereafter subject to annual
limitations (OrNda - $19.0 million; AHM - $16.0 million). For AHM, such tax
attribute carryforwards can only be applied against the prospective taxable
income of the entities that previously comprised AHM. These limitations may
be increased for "built-in-gains', as defined under the IRC, recognized during
a five-year period following the date of the merger. Management assesses the
realizability of the deferred tax assets on at least a quarterly basis and
currently is satisfied, despite the annual limitations, that it is more likely
than not that the deferred tax assets recorded at November 30, 1995 will be
realized through reversal of deferred tax liabilities.
For the quarter ended November 30, 1995, the Company recorded income tax
expense of $6.0 million on pre-tax income of $25.9 million, an amount less
than the statutory rate, primarily due to the availability of net operating
loss carryforwards.
LIQUIDITY AND CAPITAL RESOURCES
At November 30, 1995, the Company had working capital of $184.7 million,
of which $119.8 million is cash, compared with $5.4 million at August 31,
1995. Substantially all of the cash balance at November 30, 1995 was utilized
in connection with the January 1996 acquisition of HNW. The Company's cash
portion of working capital is normally managed primarily through a revolving
credit arrangement, whereby excess cash generated through operations or
otherwise is generally used to reduce the outstanding revolving credit
facility. When cash requirements arise, the revolving credit facility is
drawn upon as needed. The revolving credit facility matures on October 30,
2001 and is classified as long-term debt on the Company's balance sheet. At
November 30, 1995, the Company had $416.1 million of borrowing capacity
available for general corporate purposes and acquisitions under its Restated
Credit Facility.
In the three months ended November 30, 1995, the Company's operating
activities used cash of $5.0 million. Cash from operations was used for the
$12.7 million increase in patient accounts receivable, net of the provision
for doubtful accounts. The increase in patient accounts receivable resulted
primarily from delays in payment from certain state Medicaid/Medical programs.
The Company anticipates the receipt of these payments in the second and third
quarter of fiscal 1996. In addition, cash from operations was used for income
tax payments of $21.8 million and interest payments of $36.4 million. Such
uses were partially offset by $19.1 million of proceeds from sales of an
investment security classified as trading.
Net cash used in investing activities of $46.7 million during the quarter
ended November 30, 1995 consisted primarily of capital expenditures of $14.1
million and $29.8 million for the acquisition of hospitals and related assets.
The Company's Restated Credit Facility limits its annual capital expenditures
to $100.0 million, plus carry-overs of certain unused amounts as specified in
the Restated Credit Facility. The Company's management currently expects to
incur approximately $100.0 million of capital expenditures in fiscal 1996.
Net cash provided by financing activities for the quarter ended November 30,
1995 of $166.6 million resulted primarily from $193.0 million sale of common
stock and exercise of stock options offset by a $22.6 million use of cash
resulting from the net decrease in revolving credit facilities and scheduled
principal payments on other debt.
On October 27, 1995, the Company executed an amended and restated credit
agreement (the "Restated Credit Facility") to increase the borrowing capacity
of the Company from $660.0 million to $900.0 million. Under the terms of the
Restated Credit Facility, on November 30, 1995, the Company had $416.1 million
of borrowing capacity available for general corporate purposes and
acquisitions. See Note 3 to the accompanying consolidated financial
statements for further discussion of the Restated Credit Facility.
On November 6, 1995, the Company completed the sale of 10,000,000 shares
of its Common Stock at a $17.625 per share public offering price. On November
9, 1995, the underwriters exercised an option to purchase an additional
1,500,000 shares to cover over-allotments. The net proceeds of approximately
$192.3 million, after deducting estimated offering expenses and underwriting
discounts, was used to reduce the indebtedness under the revolving portion of
the Restated Credit Facility in the amount of $27.2 million and for general
corporate purposes.
On November 7, 1995, the Company issued a notice of redemption to the
holders of its Payable in Kind Cumulative Redeemable Convertible Preferred
Stock (the "PIK Preferred") for $15 per share with a redemption date of
December 8, 1995. In the quarter ended November 30, 1995, 1,355,519 shares of
PIK Preferred were converted into 1,355,519 shares of the Company's Common
Stock and 7,416 shares of the PIK Preferred remained outstanding. On December
8, 1995, the remaining 7,416 shares of PIK Preferred were redeemed for $15 per
share plus dividends of $0.16 per share accrued through the redemption date.
The Company believes that the cash flows generated by the Company's
operations together with availability of credit under the Company's Restated
Credit Facility will be sufficient to meet the Company's short and long-term
cash needs. However, the Company's net debt-to-total-capitalization ratio at
November 30, 1995 is 60.8%. If the acquisition of HNW had occurred on
November 30, 1995, the net debt-to-total-capitalization ratio would have been
approximately 66.3%. Such leverage may limit the amount of additional
indebtedness available to the Company for acquisitions requiring capital in
excess of amounts currently available under the Restated Credit Facility.
Alternative financing may be available under other arrangements, such as off-
balance-sheet financing arrangements or additional equity offerings.
As discussed in more detail in Note 4 to the accompanying consolidated
financial statements, the IRS is currently engaged in an examination of the
federal income tax returns for fiscal years 1984, 1985 and 1986 of Summit,
which subsequent to the Company's acquisition thereof in April 1994, merged
into the Company. Summit has received a revenue agent's report with proposed
adjustments for the years 1984 through 1986 aggregating as of November 30,
1995 approximately $16.6 million of income tax, $60.0 million of interest on
the tax, $43.9 million of penalties and $20.3 million of interest on the
penalties. Summit has filed a protest opposing the proposed adjustments. The
Company believes that Summit properly reported its income and paid its taxes
in accordance with applicable laws and in accordance with previous agreements
established with the IRS. The Company believes that the final outcome of the
IRS's examinations of Summit's prior years' income taxes will not have a
material adverse effect on the results of operations or financial position of
the Company.
Inflation. A significant portion of the Company's operating expenses are
subject to inflationary increases, the impact of which the Company has
historically been able to substantially offset through charge increases,
expanding services and increased operating efficiencies. To the extent that
inflation occurs in the future, the Company may not be able to pass on the
increased costs associated with providing health care services to patients
with government or managed care payors, unless such payors correspondingly
increase reimbursement rates.
As of November 30, 1995, the Company had approximately $460.0 million of
debt outstanding under the Restated Credit Facility with an interest rate of
LIBOR plus 1.50%. Interest rates in the future may be subject to upward and
downward adjustments based on the Company's leverage ratio. To the extent
that interest rates increase in the future, the Company may experience higher
interest rates on such debt. A 1% increase in the prime rate or LIBOR would
result in approximately a $4.6 million increase in annual interest expense
based upon the Company's credit facility indebtedness outstanding at November
30, 1995.
OUTLOOK
Revenue Trends. Future trends for revenue and profitability are
difficult to predict; however, the Company believes there will be continuing
pressure to reduce costs and develop integrated delivery systems with
geographically concentrated service capabilities. Accomplishment of these
objectives can be achieved through the continuation of strategic acquisitions
and affiliations with other health care providers. Such acquisitions and
affiliations enhance the Company's ability to 1) negotiate with managed care
providers in each area of geographic concentration; 2) negotiate reduced costs
with vendors; 3) acquire or create physician groups; and 4) reduce duplication
of services in local communities. The Company believes acquisitions and
affiliations are still highly probable as the investor-owned hospitals
represent only approximately 13.5% of the hospital industry as of December 31,
1993.
Health Care Reform. The Company derives a substantial portion of its
revenue from third party payors, including the Medicare and Medicaid programs.
During the quarters ended November 30, 1994 and 1995, the Company derived an
aggregate of 56.5% and 57.7%, respectively, of its gross revenue from the
Medicare and Medicaid programs.
Changes in existing governmental reimbursement programs in recent years
have resulted in reduced levels of reimbursement for health care services, and
additional changes are anticipated. Such changes are likely to result in
further reductions in the rate of increase in reimbursement levels especially
since, in order to reach a balanced budget by the year 2002, in October 1995
the U.S. House of Representatives and the U.S. Senate passed budget
reconciliation bills providing for $270 billion in savings under the Medicare
program over seven years by reducing the growth rate of the program to
approximately 6% a year from 10% and $169 billion and $172 billion in savings
under the Medicaid program in the House and Senate versions, respectively, by
converting the federal share of the program to a block grant to the states and
by gradually reducing growth to approximately 5% to 6% a year from 10%. In
addition, private payors, including managed care payors, increasingly are
demanding discounted fee structures or the assumption by health care providers
of all or a portion of the financial risk through prepaid capitation
arrangements. Inpatient utilization, average lengths of stay and occupancy
rates continue to be negatively affected by payor-required pre-admission
authorization and utilization review and by payor pressure to maximize
outpatient and alternative health care delivery services for less acutely ill
patients. In addition, efforts to impose reduced allowances, greater
discounts and more stringent cost controls by government and other payors are
expected to continue.
Significant limits on reimbursement rates could adversely affect the
Company's results of operations. The Company is unable to predict the effect
these changes will have on its operations. No assurance can be given that
such reforms will not have a material adverse effect on the Company.
Technological Changes. The rapid technological changes in health care
services will continue to require significant expenditures for new equipment
and updating of physical facilities. The Company believes that the cash flows
generated by the Company's operations together with availability of credit
under the Company's Restated Credit Facility will be sufficient to meet the
Company's short and long-term cash needs for capital expenditures and
operations.
Excess Capacity. Excess capacity in acute care hospitals will require
the Company to continue to shift resources from traditional inpatient care to
various outpatient activities. The Company's ability to effectively shift
those resources and maintain market share will have a direct impact on the
continued profitability of the Company.
Marketing Expense. Marketing expense is expected to increase in the
future as the Company increases efforts to gain market share in its areas of
geographic concentration. Additional marketing will be necessary to increase
awareness of the services provided by the Company's facilities in the local
market place and distinguish its facilities from their competitors.
Tax Rate. The Company expects its effective tax rate to increase to
approximately 28% for fiscal 1996 due to the January 1996 acquisition of HNW.
This estimated rate does not reflect the effect of any pending acquisitions
which may cause the rate to increase. Additionally, the Company expects its
effective tax rate to approximate the statutory tax rate by fiscal 1998.
Stock. The Company's stock price is subject to significant volatility.
If revenues or earnings fail to meet expectations of the investment community,
there could be an immediate and significant impact on the trading price for
the Company's stock. Because of stock market forces beyond the Company's
control and the nature of its business, such shortfalls can be sudden.
The Company believes it has the asset portfolio and financial resources
necessary for continued success, but revenue and profitability trends cannot
be precisely determined at this time.<PAGE>
PART II. OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
EXHIBIT INDEX
No.
10 Form of Stock Option Agreement between the Company and its executive
officer stock option grantees for its November 1995 stock option
grants
11 Computation of per share earnings
27 Financial Data Schedule (included only in filings under the
Electronic Data Gathering Analysis and Retrieval System)
b. Reports on Form 8-K. Seven reports on Form 8-K were filed by the
registrant during the fiscal quarter ended November 30, 1995 as
follows:
<TABLE>
<S> <C> <C>
Date of Current Item(s) Reported Any Financial Statements
Report Filed
September 27, 1995 Item 5-Other Evens No
Item 7(c) - Exhibits No
October 2, 1995 Item 5-Other Events No
Item 7(c) - Exhibits
October 10, 1995 Item 5-Other Events No
Item 7(c) - Exhibits
October 30, 1995 Item 5-Other Events No
Item 7(c) - Exhibits
October 31, 1995 Item 5-Other Events No
Item 7(c) - Exhibits
November 6, 1995 Item 5-Other Events No
Item 7(c) - Exhibits
November 24, 1995 Item 5-Other Events No
Item 7(c) - Exhibits
/TABLE
<PAGE>
ORNDA HEALTHCORP AND SUBSIDIARIES
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
OrNda HealthCorp
(Registrant)
January 12, 1996 (Signature)
PHILLIP W. ROE
Vice President and Controller
(Principal accounting officer
and authorized signatory)<PAGE>
Exhibit 10
STOCK OPTION AGREEMENT
AGREEMENT dated as of November 29, 1995, by and between OrNda HealthCorp,
a Delaware corporation (the "Company"), and ____________________ (the
"Executive").
WHEREAS, the Company has adopted the OrNda HealthCorp 1994 Management
Equity Plan (the "Plan") and the Company's stockholders have ratified such
adoption; and
WHEREAS, the Company desires to grant to the Executive an option under
the Plan to acquire an aggregate of ____________________ shares of the
Company's Common stock, $.01 par value (the "Common Stock"), on the terms set
forth herein.
NOW, THEREFORE, the parties agree as follows:
1. Definitions. Capitalized terms not otherwise defined herein shall
have the meanings set forth in the Plan.
2. Grant of Option. The Executive is hereby granted a Nonqualified
Stock Option (the "Option") to purchase an aggregate of ____________________
shares of Common Stock pursuant to the terms of this Agreement and the
provisions of the Plan.
3. Option Price. The exercise price of the Option shall be $18.75 per
share of Common Stock issuable thereunder.
4. Conditions to Exercisability.
(a) If the Executive continues to be employed by the Company on the
tenth anniversary of the date hereof, the Option shall become exercisable in
full on such date. Notwithstanding the foregoing, the Option will become
exercisable with respect to twenty percent (20%) of the shares of Common Stock
covered thereby as of the last day of each fiscal year of the Company set forth
on the table below if (1) the Executive continues to be employed by the
Company on such date and (2) the Company's Earnings Per Share (as defined
below) for such fiscal year (the "Required Earnings Per Share") equals or
exceeds the amounts set forth in the table below:
<TABLE>
Fiscal Year Required
Ending On Earnings Per Share
<S> <C>
August 31, 1996 $1.62
August 31, 1997 $2.11
August 31, 1998 $2.42
August 31, 1999 To be determined by Committee
August 31, 2000 To be determined by Committee
</TABLE>
(b) Notwithstanding the foregoing, if the Company's Earnings Per
Share with respect to the two (2) consecutive fiscal years of the Company
either (i) commencing September 1, 1995 and ending on August 31, 1997 or (ii)
commencing September 1, 1996 and ending August 31, 1998, equals or exceeds
$2.42 for each such year and the Executive continues to be employed by the
Company on the last day of the second such fiscal year, the Option shall become
exercisable in full as of the last day of the second such fiscal year.
(c) Notwithstanding the foregoing, the Option shall become
exercisable in full upon the occurrence of a Change in Control of the Company.
(d) Notwithstanding the foregoing, the Option shall become
exercisable, in whole or in part, at any time at the discretion of the
Compensation Committee of the Company's Board of Directors (the "Committee").
(e) The term "Earnings Per Share" shall mean the Company's publicly
reported primary earnings per share for a fiscal year period excluding (each an
"Exclusion") (i) extraordinary gains and losses; (ii) all gains and losses
from acquisitions and dispositions; (iii) pooling expenses, special executive
compensation charges and other non-recurring charges provided each such
Exclusion from said publicly reported primary earnings per share must be
approved by the Committee, in its sole discretion, as the type of non-operating
gain or loss properly excluded from the Company's publicly reported primary
earnings per share in arriving at a per share earnings number for the Company
which more accurately indicates the Company's operating earnings for each such
year to apply against the Required Earnings Per Share target for such year.
5. Period of Option. The Option shall expire on the earliest to occur
of:
(a) the expiration of one (l) month following the tenth anniversary
of the date hereof:
(b) the first anniversary of the Executive's death or termination
of employment for Disability; and
(c) three months after the Executive's termination of employment
other than for death or Disability.
6. Exercise of Option.
(a) The Option shall be exercised in the following manner: the
Executive, or the person or persons having the right to exercise the Option
upon the death or Disability of the Executive, shall deliver to the Company
written notice specifying the number of shares of Common Stock which the
Executive elects to purchase. The Executive (or such other person) must either
(i) include with such notice full payment of the exercise price for the Common
Stock being purchased pursuant to such notice or (ii) provide for a broker-
dealer to forward such full payment to the Company, in a manner and in a
period of time acceptable to the Company, in a cashless exercise procedure.
Payment of the exercise price must be made (i) in cash, (ii) by certified or
cashier's check, (iii) by delivery to the Company of Common Stock previously
owned for at least six months and having a Fair Market Value equal to the
aggregate exercise price, or (iv) in a combination of cash, check and Common
Stock. In lieu of the payment of the exercise price as set forth in the
foregoing sentence, upon request of the Executive (or such other person), the
Company may, in its sole discretion, allow the Executive to exercise the Option
or a portion thereof by tendering shares of Common Stock previously owned for
less than six months, including shares received upon exercise of such Option.
(b) Upon the request of the Executive, or the person or persons
having the right to exercise the Option upon the death or Disability of the
Executive, the Company may, in its sole discretion, in lieu of a normal
issuance of shares upon exercise of the Option in whole or in part, pay the
Executive in cash, Common Stock or a combination of cash and Common Stock, as
the Company shall determine, in an amount determined by multiplying (i) the
excess of the Fair Market Value of a share of Common Stock on the date of
exercise of such Option over the per share exercise price of the Option by
(ii) the number of shares of Common Stock as to which the Option is being
exercised.
(c) Full payment of the exercise price for shares subject to the
Option and any applicable federal and state withholding tax shall be made at
the time of exercise of any portion of the Option. No shares shall be issued
until full payment has been made, and the Executive shall have none of the
rights of a stockholder until shares are issued to him. The Company may
authorize, but shall have no obligation to permit, the payment of any
applicable federal or state withholding tax by the tender of shares of Common
Stock, including the tender of shares which otherwise would be issued to the
Executive upon exercise of the Option, provided, however, that any such payment
by a director or officer subject to Section 16(b) of the Exchange Act shall be
in compliance with Rule 16b-3.
(d) If the Plan or any law, regulation or interpretation requires
the Company to take any action regarding the Common Stock before the Company
issues certificates for the Common Stock being purchased, the Company may
delay delivering the certificates for the Common Stock for the period necessary
to take such action. The certificate or certificates representing the Common
Stock acquired pursuant to the Option may bear a legend restricting the
transfer of such Common Stock, and the Company may impose stop transfer
instructions to implement such restrictions, if applicable.
(e) The Executive will not be deemed to be a holder of any shares
pursuant to exercise of the Option until the date of the issuance of a stock
certificate to him for such shares of Common Stock and until the shares of
Common Stock are paid for in full.
7. Representations. (a) The Company represents and warrants that this
Agreement has been authorized by all necessary corporate action of the Company
and is a valid and binding agreement of the Company enforceable against the
Company in accordance with its terms.
(b) The Executive represents and warrants that he is not a party
to any agreement or instrument which would prevent him from entering into or
performing his duties in any way under this Agreement.
8. Entire Agreement. This Agreement contains all the understandings
between the parties hereto pertaining to the matters referred to herein, and
supersedes all undertakings and agreements, whether oral or in writing,
previously entered into by them with respect thereto. The Executive represents
that, in executing this Agreement, he does not rely and has not relied upon any
representation or statement not set forth herein made by the Company with
regard to the subject matter, bases or effect of this Agreement or otherwise.
9. Amendment or Modification Waiver. No provision of this Agreement
may be amended or waived unless such amendment or waiver is agreed to in
writing, signed by the Executive and by a duly authorized officer of the
Company. No waiver by any party hereto or any breach by another party hereto
of any condition or provision of this Agreement to be performed by such other
party shall be deemed a waiver of a similar or dissimilar condition or
provision at the same time, any prior time or any subsequent time.
10. Notices. Any notice to be given hereunder shall be in writing and
shall be deemed given when delivered personally, sent by courier or telecopy or
registered or certified mail, postage prepaid, return receipt requested,
addressed to the party concerned at the address indicated below or to such
other address as such party may subsequently give notice of hereunder in
writing:
To Executive at:
The Executive's residence address
then on file with the Company's or its affiliates'
Human Resources Department
To the Company at:
OrNda HealthCorp
3401 West End Avenue
Nashville, Tennessee 37203
Attn: General Counsel
Telecopy: (615) 783-1232
Any notice delivered personally or by courier under this Section 10 shall
be deemed given on the date delivered and any notice sent by telecopy or
registered or certified mail, postage prepaid, return receipt requested, shall
be deemed given on the date telecopied or mailed.
11. Severability. If any provision of this Agreement or the application
of any such provision to any party or circumstances shall be determined by any
court of competent jurisdiction to be invalid and unenforceable to any extent,
the remainder of this Agreement or the application of such provision to such
person or circumstances other than those to which it is so determined to be
invalid and unenforceable, shall not be affected thereby, and each provision
hereof shall be validated and shall be enforced to the fullest extent permitted
by law.
12. Nontransferability. This Option (or any portion thereof) is not
transferable by the Executive otherwise than by will or by the laws of descent
and distribution.
13. Survivorship. The respective rights and obligations of the parties
hereunder shall survive any termination of this Agreement to the extent
necessary to the intended preservation of such rights and obligations.
14. Governing Law. This agreement will be governed by and construed in
accordance with the laws of the State of Tennessee, without regard to its
conflicts of laws principles.
15. Headings. All descriptive headings of sections and paragraphs in
this Agreement are intended solely for convenience, and no provision of this
Agreement is to be construed by reference to the heading of any section or
paragraph.
16. Construction. This Agreement is made under and subject to the
provisions of the Plan, and all of the provisions of the Plan are hereby
incorporated herein as provisions of this Agreement. If there is a conflict
between the provisions of this Agreement and the provisions of the Plan, the
provisions of the Plan will govern. By signing this Agreement, the Executive
confirms that he has received a copy of the Plan and has had an opportunity to
review the contents thereof.
17. Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
ORNDA HEALTHCORP
(Signature)
Ronald P. Soltman
Senior Vice President
Executive:
________________________________________
[NAME]<PAGE>
<TABLE>
ORNDA HEALTHCORP AND SUBSIDIARIES
EXHIBIT 11 - COMPUTATION OF PER SHARE EARNINGS
(in thousands, except per share amounts)
<CAPTION>
Three Months Ended November 30,
1994 1995
<S> <C> <C>
Primary
Average shares outstanding . . . . . 43,540 48,130
Net effect of dilutive common stock
equivalents:
Stock options and warrants-
treasury stock method. . . . . . 1,249 1,389
________ _________
TOTAL. . . . . . . . . . . . . . . . . 44,789 49,519
======== =========
Net income as adjusted for . . . . . .
preferred stock dividends. . . . . . $ 12,855 $ 19,587
======== =========
Per share amount . . . . . . . . . . . $ 0.29 $ 0.40
======== =========
Fully Diluted
Average shares outstanding . . . . . . 43,540 48,130
Net effect of dilutive common stock
equivalents:
Stock options and warrants-
treasury stock method. . . . . . 1,249 1,385
Assumed conversion of redeemable
preferred stock. . . . . . . . . -- (1) 1,248
________ _________
TOTAL. . . . . . . . . . . . . . . . . 44,789 50,763
======== =========
Net income . . . . . . . . . . . . . . $ 13,350 $ 19,919
Preferred stock dividend requirements. (495) --
________ __________
Net income as adjusted for preferred .
stock dividends. . . . . . . . . . . $ 12,855 $ 19,919
======== ==========
Per share amount . . . . . . . . . . . $ 0.29 $ 0.39
======== ==========
(1) Shares issuable upon the conversion of redeemable preferred stock have
not been included in the calculation of earnings per share because the effect
of their inclusion would be anti-dilutive.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This Financial Data Schedule contains summary financial information extracted
from the Company's balance sheet and statement of income and is qualified in
its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> AUG-31-1996
<PERIOD-END> NOV-30-1995
<CASH> 119,816
<SECURITIES> 0
<RECEIVABLES> 383,262
<ALLOWANCES> 62,922
<INVENTORY> 35,006
<CURRENT-ASSETS> 527,831
<PP&E> 1,390,285
<DEPRECIATION> 306,062
<TOTAL-ASSETS> 2,107,866
<CURRENT-LIABILITIES> 343,174
<BONDS> 996,650
0
111
<COMMON> 578
<OTHER-SE> 600,588
<TOTAL-LIABILITY-AND-EQUITY> 2,107,866
<SALES> 0
<TOTAL-REVENUES> 493,565
<CGS> 0
<TOTAL-COSTS> 412,241
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 33,207
<INTEREST-EXPENSE> 27,186
<INCOME-PRETAX> 25,869
<INCOME-TAX> 5,950
<INCOME-CONTINUING> 19,919
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 19,919
<EPS-PRIMARY> .40
<EPS-DILUTED> .39
</TABLE>
