<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR QUARTER ENDED MARCH 31, 1995
COMMISSION FILE NUMBER 0-11851
CHAMPION HEALTHCARE CORPORATION
- --------------------------------------------------------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 59-2283872
- ------------------------------- ----------------------
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
14340 TORREY CHASE, SUITE 320, HOUSTON, TEXAS 77014
- ------------------------------------------------------------- --------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) ZIP CODE
(713) 583-5491
- --------------------------------------------------------------------------------
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
Indicate by check mark whether the registrant has (1) 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 periods that the registrant was
required to file such reports), and (2) has been subject to filing requirements
for the past 90 days.
Yes X No
----- -----
Common stock, par value $.01 per share: 4,243,975 shares outstanding as of
May 12, l995.
<PAGE> 2
INDEX
CHAMPION HEALTHCARE CORPORATION
<TABLE>
<CAPTION>
Page
Number
------
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed consolidated balance sheet
as of March 31, 1995 (unaudited) and
December 31, 1994 2
Condensed consolidated statement of operations for
the three months ended March 31, 1995 and 1994 (unaudited) 3
Condensed consolidated statement of cash flows for the three
months ended March 31, 1995 and 1994
(unaudited) 4
Notes to condensed consolidated financial statements at
March 31, 1995 (unaudited) 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 11
SIGNATURES 12
</TABLE>
1
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CHAMPION HEALTHCARE CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
March 31, December 31,
1995 1994
(UNAUDITED)
------------------------
(Dollars in thousands)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 39,068 $ 48,821
Restricted cash 5,000 5,000
Accounts receivable, less allowance for doubtful
accounts of $9,926 and $9,111, respectively 37,706 38,645
Supplies inventory 2,989 3,189
Prepaid expenses and other current assets 7,193 9,467
--------- ---------
Total current assets 91,956 105,122
Property and equipment, less allowances for depreciation and
amortization of $7,078 and $5,340 at March 31, 1995 and
December 31, 1994, respectively 129,961 124,247
Other assets 22,098 19,145
--------- ---------
Total assets $ 244,015 $ 248,514
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt and capital lease obligations $ 4,277 $ 4,908
Accounts payable 9,163 14,425
Other current liabilities 18,343 18,512
--------- ---------
Total current liabilities 31,783 37,845
Long-term debt and capital lease obligations 104,747 105,388
Other long-term liabilities 11,338 10,731
Minority interests 21,680 20,423
Redeemable preferred stock 77,782 76,294
Common stock, $.01 par value:
Authorized - 15,000,000 shares, 4,243,975 and 4,223,975
shares issued and outstanding at March 31, 1995
and December 31, 1994, respectively 42 42
Common stock subscribed, 100,000 shares 40 50
Common stock subscription receivable (40) (50)
Paid in capital 14,673 15,998
Accumulated deficit (18,030) (18,207)
--------- ---------
Total liabilities and stockholders' equity $ 244,015 $ 248,514
========= =========
</TABLE>
See notes to condensed consolidated financial statements.
2
<PAGE> 4
CHAMPION HEALTHCARE CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1995 1994
-----------------------------
(Dollars in thousands, except
per share data)
<S> <C> <C>
Net patient service revenue $ 52,199 $ 23,399
Other revenue 2,616 1,164
-------- --------
Net revenue 54,815 24,563
Operating expenses:
Salaries and benefits 22,607 8,992
Other operating and administrative 22,465 9,995
Provision for bad debts 3,093 1,879
Interest 2,638 1,422
Depreciation and amortization 2,460 723
-------- --------
Total expenses 53,263 23,011
-------- --------
Operating income 1,552 1,552
Minority interests 1,257 --
-------- --------
Income before income taxes 295 1,552
Provision for income taxes 118 79
-------- --------
Net income $ 177 $ 1,473
======== ========
(Loss) income per common share:
Primary (loss) income per share $ (.31) $ .21
======== ========
Fully diluted income per share $ -- $ .15
======== ========
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE> 5
CHAMPION HEALTHCARE CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1995 1994
--------- --------
(Dollars in thousands)
<S> <C> <C>
Operating activities:
Net income $ 177 $ 1,473
Depreciation and amortization 2,460 723
Minority interests 1,257 --
Provision for bad debts 3,093 1,879
Decrease (increase) in current assets 2,292 (2,558)
(Decrease) increase in liabilities (4,476) 1,531
--------- --------
Net cash provided by operating activities 4,803 3,048
Investing activities:
Additions to property and equipment (7,263) (1,535)
Investment in Dakota Partnership (2,000) --
Investment in Salt Lake Regional Medical Center (3,000) --
Proceeds from sale of assets 1,300 --
Investment in note receivable (793)
Other (575) 227
--------- --------
Net cash used in investing activities (12,331) (1,308)
Financing activities:
Payments on debt and capital lease obligations (2,002) --
Other (223) (218)
--------- --------
Net cash used in financing activities (2,225) (218)
--------- --------
(Decrease) increase in cash and cash equivalents (9,753) 1,522
Cash and cash equivalents at beginning of period 48,821 66,686
--------- --------
Cash and cash equivalents at end of period $ 39,068 $ 68,208
========= ========
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE> 6
CHAMPION HEALTHCARE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1 -- BASIS OF PRESENTATION
The consolidated financial statements include the accounts of the Company, all
majority-owned subsidiaries and partnerships controlled by the Company either
through majority ownership or through ownership and an operating agreement. All
significant intercompany transactions and accounts have been eliminated in
consolidation.
The accompanying unaudited condensed consolidated financial statements of the
Company have been prepared in accordance with generally accepted accounting
principles for interim financial statements and in accordance with Rule 3-01 and
3-02 of Regulation S-X. Accordingly, these financial statements do not include
all of the information and disclosures required by generally accepted accounting
principles for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for a
fair presentation of the results for the periods presented have been reflected.
The year-end condensed consolidated balance sheet data was derived from audited
financial statements, but does not include all disclosures required by generally
accepted accounting principles.
These financial statements should be read in conjunction with the Company's
audited consolidated financial statements for the year ended December 31, 1994,
included in the Company's Annual Report on Form 10-K, as amended, for the year
ended December 31, 1994.
Net patient service revenue is presented based on established billing rates less
allowances and discounts for patients covered by Medicare, Medicaid and other
contractual programs. Payments received under these programs are generally less
than the established billing rates of the Company's hospitals with the
differences recorded as contractual allowances or discounts. Such allowances
have been deducted from accounts receivable pending final audit and settlement.
Provision for contractual allowances and discounts for the quarters ended March
31, 1995 and 1994 were $34,870,000 and $15,081,000, respectively.
The Company adopted Statement of Financial Accounting Standards No. 115
"Accounting for Certain Investments in Debt and Equity Securities" ("SFAS 115")
on January 1, 1995. All investments accounted for under SFAS No. 115 are
classified as available-for-sale, and accordingly, the implementation of this
statement had no impact on net income.
The Company's business is seasonal in nature and subject to general economic
conditions and other factors. Accordingly, operating results for the three month
period ended March 31, 1995 are not necessarily indicative of the results that
may be expected for the year ended December 31, 1995.
NOTE 2 -- MINORITY INTERESTS IN CONSOLIDATED PARTNERSHIPS
The Company, through a wholly-owned subsidiary, owns 50% of a partnership
operated as Dakota Heartland Health System ("DHHS"), which is comprised of the
142 bed Heartland Medical Center and the 199 bed Dakota Hospital, both of which
are general acute care hospitals located in Fargo, North Dakota. The Company
manages the combined operations of the two facilities pursuant to an operating
agreement with the partnership that, coupled with its rights under the
partnership agreement, vests control of the partnership with the Company. Under
the terms of the partnership agreement, the Company is entitled to 55% of the
partnership's net income and distributable cash flow ("DCF") until such time as
it has recovered on a cumulative basis an additional $10,000,000 of DCF. The
Company is also obligated to advance funds to the partnership to cover any and
all operating deficits. Accordingly, the Company consolidates the partnership
for financial reporting purposes.
The Company, through a wholly-owned subsidiary, has an 88.3% general partnership
interest in the limited partnership that owns Metropolitan Hospital, a 180-bed
acute care hospital in Richmond, Virginia. The third-party ownership interests
in the DHHS and Metropolitan partnerships has been reflected as "Minority
interests" in the Company's Condensed Consolidated Balance Sheet and Condensed
Consolidated Statement of Operations.
5
<PAGE> 7
CHAMPION HEALTHCARE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
NOTE 3 -- LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS
Long-term debt and capital lease obligations consisted of the following at March
31, 1995 and December 31, 1994 (dollars in thousands):
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1995 1994
--------- ---------
<S> <C> <C>
Term Loan $ 18,000 $ 18,500
11% Senior Subordinated Notes 62,905 62,703
Wilmington Savings Fund Society 9,533 9,766
Health Care REIT, Inc. 11,720 12,770
Other notes payable & capital lease obligations 6,866 6,557
--------- ---------
Total debt and capital lease obligations 109,024 110,296
Less current portion (4,277) (4,908)
--------- ---------
Total long-term debt and capital lease obligations $ 104,747 $ 105,388
========= =========
</TABLE>
The Company is subject to various loans, notes and mortgages that contain
restrictive covenants which include, among others, restrictions on additional
indebtedness, the payment of dividends and other distributions, the repurchase
of common stock and related securities under certain circumstances, and the
requirement to maintain certain financial ratios. The Company was in compliance
with or has obtained permanent waivers for all loan covenants to which it was
subject at March 31, 1995.
NOTE 4 -- DISPOSITION OF ASSETS
In March 1995, the Company sold a closed hospital facility that had been
acquired as part of its 1994 acquisition of Psychiatric Healthcare Corporation
("PHC"). Total proceeds from the sale were approximately $1,300,000. As part of
the PHC acquisition, the Company had agreed to issue additional contingent
consideration upon the sale of this facility; accordingly, the Company expects
to issue additional preferred stock and notes with detachable warrants as
required under the PHC purchase agreement.
NOTE 5 -- (LOSS) INCOME PER SHARE
Primary (loss) income per share is calculated by dividing income attributable to
common stockholders (net income less preferred stock dividend requirements) by
the weighted average number of common and common equivalent shares outstanding
during each period, assuming the exercise of all stock options and warrants
having an exercise price less than the average market price of the common stock
using the treasury stock method. The fully diluted income per share computation
for the quarter ended March 31, 1994, assumed the conversion of convertible
preferred stock into 8,233,090 common shares, and that no preferred dividends on
the preferred stock were provided (see Note 6). Fully diluted income per share
is not presented for the quarter ended March 31, 1995 as the results are
anti-dilutive.
The weighted average number of shares used in computing income per share are as
follows:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1995 1994
----------------------------
<S> <C> <C>
Primary 4,227,975 1,637,940
========= ==========
Fully Diluted N/A 11,626,887
</TABLE> ==========
6
<PAGE> 8
CHAMPION HEALTHCARE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
NOTE 6 -- CUMULATIVE CONVERTIBLE REDEEMABLE PREFERRED STOCK
At March 31, 1995, the Company had outstanding 10,408,286 shares of Series A - D
Cumulative Convertible Redeemable Preferred Stock (collectively, "Preferred
Stock") which was convertible into 9,920,427 shares of common stock. The Company
is subject to certain credit agreements which restrict its right to pay cash
dividends on its common stock and Preferred Stock. At March 31, 1995, the
dividend arrearage on the Company's Preferred Stock was $8,327,000 and will
increase as dividends accumulate.
NOTE 7 -- INCOME TAXES
The income tax provision recorded for the quarters ended March 31, 1995 and 1994
differ from the expected income tax provision due to permanent differences, the
provision for state income taxes and the realization of net deferred tax assets.
NOTE 8 -- SUBSEQUENT EVENTS
a.) Expansion of Bank Credit Facility
On April 6, 1995, the Company received a firm commitment to expand its senior
bank credit facility from $50,000,000 to $100,000,000.
b.) Acquisitions
On April 13, 1995, the Company completed its acquisition of Salt Lake Regional
Medical Center ("SLRMC") from HealthTrust, Inc.-The Hospital Company ("HTI").
SLRMC is comprised of a 200 bed tertiary care hospital and five clinics and is
located in Salt Lake City, Utah. The Company paid total cash consideration of
approximately $56,248,000, which included approximately $11,248,000 for certain
working capital components and reimbursement of certain capital expenditures.
The Company funded the asset purchase from available cash and borrowings under
its revolving credit agreement. SLRMC was formerly a not-for-profit hospital
acquired by HTI in August 1994 and was sold pursuant to a consent decree and
settlement agreement between HTI and the Federal Trade Commission. Consummation
of the sale had been subject to approval by the Federal Trade Commission, which
was received on April 7, 1995.
7
<PAGE> 9
PART I. FINANCIAL INFORMATION - CONTINUED
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
Quarter Ended March 31, 1995 Compared to Quarter Ended March 31, 1994
The Company reported net income of $177,000 for the quarter ended March 31,
1995, compared to net income of $1,473,000 for the first quarter of 1994. On a
per share basis, after deducting dividend requirements for preferred
stockholders of $1,489,000 and $1,128,000 for the quarters ended March 31, 1995
and 1994, respectively, the Company reported a primary loss per share of $0.31
for the quarter ended March 31, 1995, compared to primary income per share of
$0.21 for the first quarter of 1994. On a fully diluted basis, the Company
reported net income per share of $0.15 in the first quarter of 1994. Such
calculation was anti-dilutive for the quarter ended March 31, 1995.
Net income for the quarter ended March 31, 1995, included a deduction of
$1,257,000 for minority interests, of which approximately $1,209,000 was
attributable to third-party ownership interest in the DHHS partnership. The
Company, through a wholly-owned subsidiary, owns 50% of the DHHS partnership
and operates the partnership pursuant to an operating agreement that, coupled
with its rights under the partnership agreement, vests control of the
partnership with the Company. Under the terms of the operating agreement, the
Company is entitled to 55% of the partnership's net income and distributable
cash flow ("DCF") until such time as it has recovered on a cumulative basis an
additional $10,000,000 of DCF. The Company consolidates the partnership for
financial reporting purposes.
Operating income was $1,552,000 for the quarters ended March 31, 1995 and 1994.
The Company's net revenue was $54,815,000 for the quarter ended March 31, 1995,
compared to $24,563,000 for same period in 1994, an increase of $30,252,000 or
123.2%. This increase was due primarily to the Company's acquisition and
investment activity in the fourth quarter of 1994, during which the Company
acquired four hospitals and one skilled nursing home and entered into the DHHS
partnership (collectively, the "1994 Acquisitions").
On a same hospital basis, net revenue decreased by approximately $1,755,000, or
7.3% for the quarter ended March 31, 1995, as compared to the prior year. This
decrease occurred primarily at one facility and was due, in part, to the
elimination of a psychiatric program that had contributed approximately 16.5% of
that facility's patient days in the comparable 1994 period, and due to
continuing capacity constraints experienced at this facility as a result of its
consolidation with another Company owned hospital in the same market. The
Company expects to complete the construction of an ambulatory care center at
this facility in the third quarter of 1995, which will alleviate the
aforementioned constraints; however, the Company can give no assurance that the
decline in outpatient surgeries experienced over the last year will abate as a
result of this addition.
Net revenue for the quarters ended March 31, 1995 and 1994 included
approximately $560,000 and $445,000, respectively, in interest income earned on
cash balances.
The Company's operations are labor intensive with salaries and benefits
comprising the single largest item in operating expenses. Salaries and benefits
increased 151.4% to $22,607,000 for the quarter ended March 31, 1995, compared
to $8,992,000 for the first quarter of 1994, primarily as a result of the
Company's 1994 Acquisitions. As a percent of net revenue, salaries and benefits
were 41.2% and 36.6% for the quarters ended March 31, 1995 and 1994,
respectively. This trend is consistent with the Company's strategy of acquiring
hospitals that have attractive market share and profit potential, but which may
be underperforming due to a lack of capital or management resources. In many
instances, these hospitals incur labor and other operating costs in excess of
what the Company believes is necessary for the efficient operation of the
facility. The Company attempts to reduce these costs over time by implementing
various operating efficiencies and cost cutting strategies. However, the Company
can give no assurance that its efforts will ultimately result in significant
cost reductions at these facilities.
On a same hospital basis, salaries and benefits as a percent of net revenue
increased to 38.0% for the quarter ended March 31, 1995, compared to 35.6% in
1994, primarily as a result of a decline in utilization rates at one of the
8
<PAGE> 10
Company's facilities that was not sufficiently offset by a corresponding
reduction in staff levels. The Company has implemented a program to reduce
salary costs at this facility and believes that such program will improve the
Company's ability to manage variable costs at this facility in response to
future fluctuations in utilization rates. Excluding this facility, salary and
benefits were 36.7% and 36.2% of net revenue for the quarters ended March 31,
1995 and 1994, respectively.
The major components of other operating expenses were professional fees, taxes
(other than income), insurance, utilities and other services. Other operating
and supply expenses increased by 124.8% to $22,465,000 for the quarter ended
March 31, 1995, compared to $9,995,000 in 1994, once again as a result of the
Company's 1994 Acquisitions. As a percent of net revenue, other operating and
supply expenses were 41.0% for the first quarter of 1995 compared to 40.7% in
1994.
Provision for bad debts was $3,093,000 for the quarter ended March 31, 1995, or
5.9% of net patient service revenue, compared to $1,879,000, or 8.0% in 1994.
The decline in provision for bad debts as a percentage of net patient revenue
was due principally to the Company's efforts to improve collections at its
facilities.
Depreciation and amortization expense was $2,460,000 in 1995 compared to
$723,000 in 1994, an increase of $1,737,000 or 240.2%. This increase is due
primarily to the Company's 1994 Acquisitions as well as the Company's ongoing
capital improvement programs at its existing hospitals.
Interest expense increased to $2,638,000 in the first quarter of 1995 compared
to $1,422,000 for the comparable period in 1994, due principally to the
Company's issuance of $19,133,000 of 11% Senior Subordinated Notes effective
December 30, 1994, as well as interest expense associated with debt assumed
and/or issued in connection with the 1994 Acquisitions. Interest expense also
increased due to an increase in the interest rate under which the Company
calculates its interest payments under its term loan (approximately 9.12% and
6.56% for the quarters ended March 31, 1995 and 1994, respectively.)
The Company capitalized interest costs of approximately $259,000 for the quarter
ended March 31, 1995.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1995, the Company had cash and cash equivalents of $39,068,000. The
Company also had available $30,000,000 under its senior secured bank facility.
The Company generated approximately $4,803,000 in cash from operations for the
quarter ended March 31, 1995. Cash flow from operations have not contributed
significantly to the Company's liquidity in the past, due principally to its
strategy of acquiring underperforming hospitals. The Company seeks to improve
cash flows at its acquired facilities through the implementation of improved
operating efficiencies over time. However, there can be no assurance that the
Company's efforts will be successful, nor can it give any assurance that these
improvements, if achieved, will result in increased cash flows from operations.
For the three months ended March 31, 1995, the Company expended approximately
$7,263,000 for net capital expenditures, which included approximately $4,254,000
in expenditures related to the hospital and medical building under construction
in Midland, Texas and approximately $1,966,000 related to the construction of an
ambulatory care center at the Company's Baytown, Texas facility. Also for the
quarter ended March 31, 1995, the Company expended approximately $2,002,000 for
principal payments on long-term debt and capitalized lease obligations, $850,000
of which was related to debt reduction concurrent with the sale of the closed
PHC facility.
The Company anticipates that existing capital sources and internally generated
cash flows will be sufficient to fund capital expenditures, debt service and
working capital requirements through the foreseeable future. The Company intends
to acquire additional acute care and specialty facilities and is actively
pursuing several of such acquisitions. However, depending upon the individual
circumstances, the Company will likely require additional debt or equity
financing as it pursues its acquisition strategy.
On April 6, 1995, the Company received a firm commitment to expand its senior
bank credit facility from $50,000,000 to $100,000,000.
9
<PAGE> 11
On April 13, 1995, the Company completed its acquisition of Salt Lake Regional
Medical Center ("SLRMC") from HealthTrust, Inc.-The Hospital Company ("HTI").
SLRMC is comprised of a 200 bed tertiary care hospital and five clinics and is
located in Salt Lake City, Utah. The Company paid total cash consideration of
approximately $56,248,000, which included approximately $11,248,000 for certain
working capital components and reimbursement of certain capital expenditures.
The Company funded the asset purchase from available cash and borrowings under
its revolving credit agreement. SLRMC was formerly a not-for-profit hospital
acquired by HTI in August 1994 and was sold pursuant to a consent decree and
settlement agreement between HTI and the Federal Trade Commission. Consummation
of the sale had been subject to approval by the Federal Trade Commission, which
was received on April 7, 1995.
The Company is subject to various loans, notes and mortgages that contain
restrictive covenants which include, among others, restrictions on additional
indebtedness, the payment of dividends and other distributions, the repurchase
of common stock and related securities under certain circumstances, and the
requirement to maintain certain financial ratios. The Company was in compliance
with or has received permanent waivers for all loan covenants to which it was
subject as of March 31, 1995.
The Company is subject to certain credit agreements that restrict its right to
pay cash dividends on its common stock and Series A - D Preferred Stock
(collectively, "Preferred Stock"). Furthermore, the Company can not pay cash
dividends on its common stock until dividends on the Preferred Stock have been
paid in full. At March 31, 1995, the dividend arrearage on the Company's
Preferred Stock was $8,327,000 and will increase as dividends accumulate.
At March 31, 1995, 10,408,286 shares of Preferred Stock were redeemable and
convertible into 9,920,427 shares of common stock. Additionally, at March 31,
1995, the Company had outstanding 2,298,022 warrants to purchase 2,683,894
shares of Common Stock.
INFLATION
The health care industry is labor intensive. Wages and other expenses are
subject to rapid escalation, especially during periods of inflation and when
shortages occur in the marketplace. In addition, suppliers attempt to pass along
increases in their costs by charging the Company higher prices. In general, the
Company's revenue increases through price increases or changes in reimbursement
levels have not kept up with cost increases. In light of cost containment
measures imposed by government agencies, private insurance companies and
managed-care plans, the Company is likely to experience continued pressure on
operating margins in the future.
RECENT PRONOUNCEMENTS
The Company adopted Statement of Financial Accounting Standards No. 115
"Accounting for Certain Investments in Debt and Equity Securities" ("SFAS 115")
on January 1, 1995. All investments accounted for under SFAS No. 115 are
classified as available-for-sale, and accordingly, the implementation of this
statement had no impact on net income.
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121 ("SFAS 121"), Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of.
SFAS 121, which is effective for fiscal years beginning after December 15, 1995,
requires that long-lived assets and certain identifiable intangibles 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. The Company will adopt SFAS 121 at the beginning of 1996. It is
anticipated that the impact of adopting this statement will not have a material
effect on the financial statements.
10
<PAGE> 12
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
11 Statement Re: Computation of Per Share Earnings
(b) Reports on Form 8-K
During the quarter for which this report on Form 10-Q is filed,
the Company filed one report on Form 8-K dated January 25, 1995,
which reported under "Item 5. Other Events" that the Company had
entered into an Asset Purchase Agreement with HealthTrust,
Inc.-The Hospital Company to acquire substantially all of the
assets of Salt Lake Regional Medical Center, a 200 licensed bed
tertiary care hospital located in Salt Lake City, Utah, as well
as certain related assets.
11
<PAGE> 13
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Company
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
Champion Healthcare Corporation
-----------------------------------------
(Registrant)
Date: May 12, 1995 By: /s/ James G. VanDevender
-----------------------------------------
James G. VanDevender
Executive Vice President, Chief Financial
Officer and Director
12
<PAGE> 14
INDEX TO EXHIBITS
Exhibits
11 Statement Re: Computation of Per Share Earnings
27 Financial Data Schedule
<PAGE> 1
EXHIBIT 11 -- COMPUTATION OF PER SHARE EARNINGS
CHAMPION HEALTHCARE CORPORATION
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
1995 1994
--------------------------------
<S> <C> <C>
Primary:
Weighted average shares outstanding 4,227,975 1,209,294
Net effect of dilutive stock options and warrants--
based on the treasury stock method using average
market price (1) -- 428,646
------------ ------------
Total 4,227,975 1,637,940
============ ============
Net income $ 177,000 $ 1,473,000
Preferred stock dividend requirement (1,421,000) (1,101,000)
Accretion of preferred stock issuance cost (68,000) (27,000)
------------ ------------
(Loss) income applicable to common stock $ (1,312,000) $ 345,000
============ ============
Per share amount $ (.31) $ .21
============ ============
Fully Diluted:
Weighted average shares outstanding 4,227,975 1,209,294
Net effect of dilutive stock options and warrants--based on
the treasury stock method using the year-end market
price, if higher than average market price 3,329,120 2,184,503
Assumed conversion of Preferred Stock (2) 9,920,427 8,233,090
------------ ------------
Total 17,477,522 11,626,887
============ ============
Net income $ 177,000 $ 1,473,000
Interest reduction, net of tax effect 363,000 249,000
------------ ------------
Income applicable to common stock $ 540,000 $ 1,722,000
============ ============
Per share amount $ .03 $ .15
============ ============
</TABLE>
- ---------------
(1) The effect of options was anti-dilutive for the quarter ended March 31,
1995.
(2) At March 31, 1995 and 1994, the Company had 10,408,286 and 9,564,611 shares
of preferred stock outstanding.
13
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSENSED CONSOLIDATED BALANCE SHEET AND CONDENSED CONSOLIDATED STATEMENT OF
OPERATIONS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE COMPANY'S FORM
10-Q FOR THE QUARTER ENDED MARCH 31, 1995
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1994
<PERIOD-START> JAN-01-1995 JAN-01-1994
<PERIOD-END> MAR-31-1995 MAR-31-1994
<CASH> 44,068<F1> 0
<SECURITIES> 0 0
<RECEIVABLES> 37,706 0
<ALLOWANCES> 9,926 0
<INVENTORY> 2,989 0
<CURRENT-ASSETS> 91,956 0
<PP&E> 129,961 0
<DEPRECIATION> 7,078 0
<TOTAL-ASSETS> 244,015 0
<CURRENT-LIABILITIES> 31,783 0
<BONDS> 109,024 0
<COMMON> 42 0
77,782 0
0 0
<OTHER-SE> (3,357) 0
<TOTAL-LIABILITY-AND-EQUITY> 244,015 0
<SALES> 0 0
<TOTAL-REVENUES> 54,815<F2> 24,563
<CGS> 0 0
<TOTAL-COSTS> 45,072 18,987
<OTHER-EXPENSES> 3,717<F3> 723
<LOSS-PROVISION> 3,093 1,879
<INTEREST-EXPENSE> 2,638 1,422
<INCOME-PRETAX> 295 1,552
<INCOME-TAX> 118 79
<INCOME-CONTINUING> 177 1,473
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 177 1,473
<EPS-PRIMARY> (.31) .21
<EPS-DILUTED> 0 .15
<FN>
<F1>CASH INCLUDES $5,000 IN RESTRICTED CASH.
<F2>TOTAL REVENUES INCLUDE OTHER REVENUE OF $2,616 AND $1,164 FOR THE QUARTERS
ENDED MARCH 31, 1995 AND 1994, RESPECTIVELY.
<F3>OTHER EXPENSES INCLUDE DEPRECIATION AND AMORTIZATION EXPENSE OF $2,460 AND $723
FOR THE QUARTERS ENDED MARCH 31, 1995 AND 1994, RESPECTIVELY. OTHER EXPENSES
FOR THE QUARTER ENDED MARCH 31, 1995, ALSO INCLUDE $1,257 FOR MINORITY
INTEREST.
</FN>
</TABLE>
