<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 SEPTEMBER 30, 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
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(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: 4,262,386 shares outstanding as of
November 13, l995.
<PAGE> 2
INDEX
CHAMPION HEALTHCARE CORPORATION
Page
Number
PART I. FINANCIAL INFORMATION
- --------------------------------
[S] [C]
Item 1. Financial Statements
Condensed consolidated balance sheet
as of September 30, 1995 and
December 31, 1994 (unaudited) 2
Condensed consolidated statement of operations for
the three months and nine months ended
September 30, 1995 and 1994 (unaudited) 3
Condensed consolidated statement of cash flows for
the nine months ended September 30, 1995 and 1994
(unaudited) 4
Notes to condensed consolidated financial statements at
September 30, 1995 (unaudited) 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
PART II. OTHER INFORMATION
- ----------------------------
Item 5. Other information 16
Item 6. Exhibits and Reports on Form 8-K 16
SIGNATURE 17
- ---------
1
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CHAMPION HEALTHCARE CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
(Dollars in thousands)
----------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 7,848 $ 48,424
Restricted cash -- 5,000
Accounts receivable, less allowance for doubtful
accounts of $7,097 and $4,959 at September 30, 1995 and
December 31, 1994, respectively 28,477 17,115
Supplies inventory 3,715 1,942
Prepaid expenses and other current assets 7,646 4,899
--------- ---------
Total current assets 47,686 77,380
Property and equipment, less allowances for depreciation and
amortization of $9,515 and $5,340 at September 30, 1995 and
December 31, 1994, respectively 155,608 81,913
Investment in DHHS 46,324 40,088
Other assets 24,442 17,172
--------- ---------
Total assets $ 274,060 $ 216,553
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt and capital lease obligations $ 2,243 $ 4,781
Accounts payable 9,250 10,637
Due to third parties 9,940 2,241
Other current liabilities 14,977 8,446
--------- ---------
Total current liabilities 36,410 26,105
Long-term debt and capital lease obligations 152,415 105,284
Other long-term liabilities 8,935 11,037
Redeemable preferred stock 81,491 76,294
Common stock, $.01 par value:
Authorized - 25,000,000 shares, 4,262,386 and 4,223,975
shares issued and outstanding at September 30, 1995
and December 31, 1994, respectively 43 42
Common stock subscribed, 80,000 and 100,000 shares at
September 30, 1995 and December 31, 1994, respectively 40 50
Common stock subscription receivable (40) (50)
Paid in capital 12,294 15,998
Accumulated deficit (17,528) (18,207)
--------- ---------
Total liabilities and stockholders' equity $ 274,060 $ 216,553
========= =========
</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 Nine Months Ended
September 30, September 30,
------------------------- -------------------------
1995 1994 1995 1994
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C>
Net patient service revenue $ 44,877 $ 22,074 $ 114,438 $ 67,742
Other revenue 912 1,257 3,397 3,555
-------- -------- --------- --------
Net revenue 45,789 23,331 117,835 71,297
Operating expenses:
Salaries and benefits 19,638 8,961 50,898 26,853
Other operating and administrative 18,269 9,629 46,493 28,916
Provision for bad debts 3,232 1,159 8,985 4,702
Interest 3,489 1,569 9,406 4,801
Depreciation and amortization 2,357 900 5,971 2,519
Equity in earnings of DHHS (2,500) -- (6,245) --
-------- -------- --------- --------
Total expenses 44,485 22,218 115,508 67,791
-------- -------- --------- --------
Operating income 1,304 1,113 2,327 3,506
Minority interest (15) -- 77 --
-------- -------- --------- --------
Income before income taxes and extraordinary item 1,319 1,113 2,250 3,506
Provision for income taxes 528 85 833 248
-------- -------- --------- --------
Income before extraordinary item 791 1,028 1,417 3,258
Extraordinary item-loss on early
extinguishment of debt, net of tax benefit of
$380 -- -- (738) --
-------- -------- --------- --------
Net income $ 791 $ 1,028 $ 679 $ 3,258
======== ======== ========= ========
Loss applicable to common stock $ (712) $ (150) $ (3,804) $ (214)
======== ======== ========= ========
Loss per common share:
Loss before extraordinary item $ (.17) $ (.12) $ (.73) $ (.18)
Extraordinary item -- -- (.17) --
-------- -------- --------- --------
Loss per common share $ (.17) $ (.12) $ (.90) $ (.18)
======== ======== ========= ========
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE> 5
CHAMPION HEALTHCARE CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1995 1994
-----------------------------
(Dollars in thousands)
<S> <C> <C>
Operating activities:
Net income $ 679 $ 3,258
Extraordinary item, net of a tax benefit of $380 738 --
Equity in earnings of DHHS (6,245) --
Minority interests 77 --
Depreciation and amortization 5,971 2,519
Provision for bad debts 8,985 4,702
Changes in assets and liabilities, net of effects from acquisitions
Increase in assets (5,548) (6,957)
Increase (decrease) in liabilities 6,127 (2,723)
--------- ---------
Net cash provided by operating activities 10,784 799
--------- ---------
Investing activities:
Additions to property and equipment (31,337) (7,540)
Purchase of hospital and healthcare related entities (58,768) --
Investment in Dakota Partnership (2,000) --
Proceeds from sale of property and equipment 1,470 --
Investment in note receivable (2,023) (175)
Other 363 (1,224)
--------- ---------
Net cash used in investing activities (92,295) (8,939)
--------- ---------
Financing activities:
Payments on long-term debt and capital lease obligations (93,977) (1,796)
Proceeds from long-term debt obligations 133,046 72
Payments related to issuance of long-term debt obligations (3,927) --
Release of restricted funds 5,000 --
Other 793 --
--------- ---------
Net cash provided by (used in) financing activities 40,935 (1,724)
--------- ---------
Decrease in cash and cash equivalents (40,576) (9,864)
Cash and cash equivalents at beginning of period 48,424 66,686
--------- ---------
Cash and cash equivalents at end of period $ 7,848 $ 56,822
========= =========
</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 accompanying unaudited condensed consolidated financial statements of the
Company have been prepared in accordance with generally accepted accounting
principles for interim financial statements and with the instructions to Form
10-Q and Article 10 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. Such financial statements include the
accounts of the Company and all wholly-owned and majority-owned subsidiaries
and partnerships. All significant intercompany transactions and accounts have
been eliminated in consolidation.
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.
Results for the nine months ended September 30, 1994, as previously reported in
the Company's Form 8-K dated December 21, 1994, as amended, have been restated
to reflect additional contractual allowances at one of the Company's hospitals.
The Company's business is seasonal in nature and subject to general economic
conditions and other factors. Accordingly, operating results for the three and
nine month periods ended September 30, 1995, are not necessarily indicative of
the results that may be expected for the year ended December 31, 1995.
NOTE 2 -- SUMMARIZED FINANCIAL INFORMATION OF EQUITY AFFILIATE
The Company, through a wholly-owned subsidiary, owns 50% of a partnership
operated as Dakota Heartland Health System ("DHHS"). DHHS owns and operates
two general acute care hospitals with a total of 341 beds in Fargo, North
Dakota, and the Company manages the combined operations of the two facilities
pursuant to an operating agreement with DHHS. Under the terms of the
partnership agreement, the Company is entitled to 55% of DHHS'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 DHHS to cover any and all operating deficits.
DHHS began operations on December 31, 1994.
5
<PAGE> 7
CHAMPION HEALTHCARE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
NOTE 2 -- SUMMARIZED FINANCIAL INFORMATION OF EQUITY AFFILIATE -- CONTINUED
The Company accounts for its investment in DHHS under the equity method. The
following table summarizes certain financial information of DHHS as of and for
the quarter and nine months ended September 30, 1995 (dollars in thousands).
Earnings before interest, taxes, depreciation and amortization ("EBITDA") has
been included because it is a widely used measure of internally generated cash
flow and is frequently used in estimating a company's value. EBITDA is not an
acceptable measure of liquidity, cash flow or operating income under generally
accepted accounting principles.
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, 1995 September 30, 1995
------------------ ------------------
<S> <C> <C>
INCOME STATEMENT DATA
Net revenue $ 26,520 $ 80,185
EBITDA 5,524 14,243
Net income 4,545 11,355
Company's equity in the earnings of DHHS 2,500 6,245
</TABLE>
<TABLE>
<CAPTION>
September 30, 1995 December 31,1994
------------------ ----------------
<S> <C> <C>
BALANCE SHEET DATA
Current assets $ 36,114 $ 28,220
Non-current assets 44,139 44,298
Current liabilities 8,678 12,212
Non-current liabilities 43 129
Partners' capital 71,532 60,177
</TABLE>
NOTE 3 -- LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS
Long-term debt and capital lease obligations consisted of the following at
September 30, 1995 and December 31, 1994 (dollars in thousands):
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
------------- ------------
<S> <C> <C>
Revolving Loan $ 37,200 $ --
Term Loan -- 18,500
11% Senior Subordinated Notes (face amount of $98,767, net of a
discount of $654 at September 30, 1995) 98,113 62,703
Wilmington Savings Fund Society -- 9,766
Health Care REIT, Inc. 11,320 12,770
Other notes payable & capital lease obligations 8,025 6,326
--------- ---------
Total debt and capital lease obligations 154,658 110,065
Less current portion (2,243) (4,781)
--------- ---------
Total long-term debt and capital lease obligations $ 152,415 $ 105,284
========= =========
</TABLE>
On May 31, 1995, the Company refinanced and prepaid its term and revolving
credit loans ("old credit facility") obtained in November 1993 with a
$100,000,000 revolving credit facility (the "Revolving Loan") with Banque
Paribas, as agent, AmSouth Bank of Alabama, Bank One of Texas, N.A., CoreStates
Bank, N.A., and NationsBank of Texas, N.A. Amounts available under the
Revolving Loan are subject to certain limitations, and the total
6
<PAGE> 8
CHAMPION HEALTHCARE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
NOTE 3 -- LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS -- CONTINUED
amount available under the Revolving Loan declines to $80,000,000 on the third
anniversary date. The Revolving Loan also provides for short term letters of
credit of up to $5,000,000. The Revolving Loan matures no later than March 31,
1999 and bears interest at a lender defined incremental rate plus, at the
Company's option, the LIBOR or Prime rate. The incremental rate to be applied
is based upon the Company meeting certain operational performance targets, as
defined, and ranges from 2.5% to 3.0% with respect to the LIBOR rate option and
from 1.0% to 1.5% with respect to the Prime rate option. At September 30, 1995
and December 31, 1994, the interest rates on the Revolving Loan and old credit
facility were 8.96% and 9.12%, respectively. The Company currently has
$649,000 outstanding under letters of credit. Proceeds from the refinancing
were used to prepay approximately $48,000,000 principal amount outstanding
under the Company's old credit facility and approximately $9,533,000 principal
amount of debt held by Wilmington Savings Fund Society ("WSFS"). The interest
rate on the WSFS Loan was 11.5% and 10.5% at May 31, 1995 (the date of
prepayment) and December 31, 1994, respectively. With the exception of certain
assets collateralizing debt assumed in the Company's 1994 acquisition of
Psychiatric Healthcare Corporation, the Revolving Loan is collateralized by
substantially all of the Company's assets. The terms of the Revolving Loan
eliminated the requirement under the Company's previous bank credit facility to
maintain a cash collateral account with the lender in the amount of $5,000,000.
The Company's future acquisitions and divestitures may require, in certain
circumstances, consent by lenders under this agreement.
In connection with the Company's refinancing and prepayment of its old credit
facility and the WSFS debt, the Company wrote off unamortized deferred
financing costs of $738,000 (net of an income tax benefit of $380,000). Such
amounts were recorded as an extraordinary loss in the accompanying condensed
consolidated statement of operations.
On June 12, 1995, the Company issued $35,000,000 face amount (less a discount
of approximately $668,000) of Senior Subordinated Notes (the "Notes"). The
Notes mature on December 31, 2003 and require quarterly interest payments at an
annual effective rate of 11.35% (11% stated rate). The Notes include
detachable warrants for the purchase of 525,000 shares of common stock. The
warrants are exercisable for common stock at the holder's option at an exercise
price of $9.00 per share until December 31, 2003. The Notes are subject to
redemption on or after December 31, 1995, at the Company's option, at prices
declining from 112.5% of the principal amount at December 31, 1995 to par on
December 31, 2002. Additionally, the Note holders may require the Company to
repurchase all outstanding Notes in the event of a change in control of the
Company based on a declining redemption premium ranging from 112.5% to 103% of
principal. Proceeds from the issuance of Notes were used to paydown
approximately $31,500,000 principal amount outstanding under the Revolving Loan
with the remainder retained for general corporate purposes. The Notes are
uncollateralized obligations and are subordinated in right of payment to
certain senior indebtedness of the Company. Approximately $668,000 of the
proceeds from the issuance of the Notes were allocated to the warrants.
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 September 30, 1995.
NOTE 4 -- ACQUISITIONS
On April 13, 1995, the Company acquired Salt Lake Regional Medical Center
("SLRMC") from HealthTrust, Inc.-The Hospital Company ("HTI"). SLRMC is
located in Salt Lake City, Utah, and is comprised of a 200 bed tertiary care
hospital and five clinics. During the third quarter of 1995, the Company and
the successor to HTI, Columbia/HCA, finalized total consideration paid for
SLRMC at approximately $58,015,000, which consisted of $56,248,000 in cash and
additional consideration due of approximately $1,767,000, which the Company has
recorded in other current liabilities. Cash consideration included
approximately $11,521,000 for certain working capital components and
reimbursement of certain capital expenditures made previously by the seller.
7
<PAGE> 9
CHAMPION HEALTHCARE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
NOTE 4 -- ACQUISITIONS -- CONTINUED
The Company funded the asset purchase from available cash and approximately
$30,000,000 in borrowings under its old credit facility. 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 acquisition
was accounted for as a purchase transaction with the purchase price allocated
preliminarily to the fair value of acquired net working capital and property
and equipment. Adjustments, if any, are not expected to be material to the
overall purchase accounting.
The following selected unaudited pro forma financial information for the nine
months ended September 30, 1995 and 1994 assumes that the acquisition of SLRMC
occurred on January 1, 1995 and 1994, respectively, and that the acquisition of
AmeriHealth, Psychiatric Healthcare Corporation, and the formation of the DHHS
partnership occurred on January 1, 1994. The pro forma financial information
does not purport to be indicative of the results that actually would have been
obtained had the operations been combined during the periods presented, and is
not intended to be a projection of future results or trends.
<TABLE>
<CAPTION>
Nine months ended
September 30,
1995 1994
----------- ----------
(Dollars in thousands,
except per share data)
<S> <C> <C>
Net revenue $ 139,855 $ 150,752
=========== ==========
Income before extraordinary item $ 1,901 $ 2,301
=========== ==========
Net income $ 1,163 $ 2,301
=========== ==========
Loss per common share before extraordinary item $ (0.61) $ (0.35)
=========== ==========
Loss per common share $ (0.78) $ (0.35)
=========== ==========
Weighted average number of common shares
outstanding 4,243 4,260
=========== ==========
</TABLE>
On October 21, 1994, the Company acquired Psychiatric Healthcare Corporation
("PHC") for a net purchase price of approximately $24,600,000. The Company has
completed its analysis of the assets acquired and liabilities assumed and has
allocated approximately $8,800,000 in excess purchase price to goodwill, which
is currently being amortized over a 20 year period. Additionally, the net
purchase price included contingent consideration of up to $2,000,000 in
additional preferred stock, notes and detachable warrants, including
approximately $1,300,000 due upon the disposition of a facility that was closed
and held for sale at the date of acquisition. The facility was sold in March
1995. To date, the Company has issued approximately $1,440,000 in additional
preferred stock, notes and detachable warrants as required under the PHC
purchase agreement, and expects to issue the remaining contingent consideration
of approximately $560,000 in the fourth quarter of 1995.
8
<PAGE> 10
CHAMPION HEALTHCARE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
NOTE 5 -- LOSS PER SHARE
Primary loss per share is calculated by dividing loss 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,
when dilutive, with an exercise price less than the average market price of the
common stock using the treasury stock method. Fully diluted income per share is
not presented for the quarter and nine months ended September 30, 1995 and 1994
as the results are anti-dilutive.
The weighted average number of shares used in computing loss per share are as
follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1995 1994 1995 1994
-------------------------- --------------------------
<S> <C> <C> <C> <C>
Primary 4,257,526 1,209,294 4,243,267 1,209,294
========= ========= ========= =========
Fully Diluted N/A N/A N/A N/A
</TABLE>
NOTE 6 -- CUMULATIVE CONVERTIBLE REDEEMABLE PREFERRED STOCK
At September 30, 1995, the Company had outstanding 10,440,385 shares of Series
A, A-1, B, C and D Cumulative Convertible Redeemable Preferred Stock
(collectively, "Preferred Stock") which were convertible into 9,984,625 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 September 30, 1995, the dividend arrearage on the Company's
Preferred Stock was $11,185,000 and will increase as dividends accumulate.
NOTE 7 -- INCOME TAXES
The income tax provision recorded for the quarter and nine months ended
September 30, 1995 and 1994, respectively, differs 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 -- CONTINGENCIES
Litigation. The Company is subject to claims and legal actions arising in the
ordinary course of operations. 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, results of operations or liquidity.
Professional Liability. The Company is self-insured up to $1,000,000 per
occurrence for the payment of claims arising from professional liability risks.
The Company has accrued liabilities for potential professional liability risks
based on estimates for losses limited to $1,000,000 per occurrence and
$4,000,000 in the aggregate. The Company is further insured by a commercial
insurer for claims in excess of these limits up to an additional $10,000,000
over its self-insured retention. In the opinion of management, any unaccrued
damages awarded will not have a material adverse effect on the Company's
financial position, results of operations or liquidity.
NOTE 9 -- SUBSEQUENT EVENT
On November 9, 1995, the Company entered into a definitive agreement with
Columbia/HCA to acquire Jordan Valley Hospital ("Jordan"), a 50 bed acute care
hospital in West Jordan, Utah, in exchange for Autauga Medical Center, an 85
bed acute care hospital, and Autauga Health Care Center, a 72 bed skilled
nursing facility, both in Prattville, Alabama, plus additional cash
consideration of approximately $7,500,000. The transaction is subject to
various third-party approvals, including that of the Federal Trade Commission.
The Company believes that consummation of this transaction is probable.
9
<PAGE> 11
PART I. FINANCIAL INFORMATION - CONTINUED
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
SIGNIFICANT ACQUISITIONS
The Company was formed on February 1, 1990 to acquire and operate general acute
care and specialty hospitals which may be under performing financially but have
or can develop a competitive market position by establishing themselves as the
low cost provider of quality health care services within their respective
markets. To date, the Company has acquired ten operating hospitals and one
skilled nursing facility and has entered into a partnership with an
unaffiliated hospital.
Because of the financial impact of the Company's recent acquisitions and the
formation of the DHHS partnership, it is difficult to make meaningful
comparisons between the Company's financial statements for the fiscal periods
presented. Furthermore, each additional hospital acquisition can have a
significant impact on the Company's overall financial performance. After
acquiring a hospital, the Company attempts to implement various operating
efficiencies and cost cutting strategies, including staffing adjustments. The
Company may also incur significant additional costs to expand the hospital's
services and improve its market position. The Company can give no assurance
that these investments and other activities will result in significant
increases in revenue or reductions in costs at the acquired facility.
Consequently, the financial performance of an acquired hospital may adversely
affect the Company's operating results in the near-term. The Company believes
this effect will be mitigated as additional hospitals are acquired.
EFFECT OF PROPOSED LEGISLATION
Congress continues to consider legislation that could significantly impact
Medicare, Medicaid and other government funding of health care costs.
Initiatives currently before Congress, if enacted, would significantly reduce
payments under various government programs, including, among others, payments
to disproportionate share and teaching hospitals. A reduction in these
payments would adversely affect net revenue and operating margins at certain of
the Company's hospitals. Approximately 54.9% of the Company's net patient
service revenue was attributable to the Medicare and Medicaid programs for the
nine months ended September 30, 1995. The Company is unable to predict what
legislation, if any, will be enacted by Congress in the future or what effect
such legislation might have on the Company's results of operations.
RESULTS OF OPERATIONS
Quarter Ended September 30, 1995 Compared to Quarter Ended September 30, 1994
The Company reported net income of $791,000 for the quarter ended September 30,
1995, compared to net income of $1,028,000 for the third quarter of 1994. On a
per share basis, after deducting non-cash dividend requirements for preferred
stockholders of $1,503,000 and $1,178,000 for the quarters ended September 30,
1995 and 1994, respectively, the Company reported a primary loss per share of
$0.17 for the quarter ended September 30, 1995, compared to a primary loss per
share of $0.12 for the third quarter of 1994. Fully diluted earnings per
share was not presented for the quarters ended September 30, 1995 and 1994 due
to the anti-dilutive effect of such calculation.
Operating income for the quarter ended September 30, 1995, included
approximately $2,500,000 attributable to the Company's equity in the earnings
of DHHS. The Company contributed Heartland Medical Center ("Heartland") to the
DHHS partnership effective December 31, 1994, and accounts for its investment
in DHHS under the equity method. Previously, the Company had consolidated
Heartland for financial reporting purposes. Operating income for the quarter
ended September 30, 1994, included $1,693,000 attributable to Heartland.
The Company had net revenue of $45,789,000 for the three months ended September
30, 1995, compared to $23,331,000 for same period in 1994, an increase of
$22,458,000 or 96.3%. The increase was due primarily to hospital acquisitions
in the fourth quarter of 1994 and April 1995 (collectively, the
"Acquisitions"), and was offset, in part, by the contribution of Heartland to
the DHHS partnership. Net revenue for the prior period included approximately
$9,563,000 attributable to Heartland.
10
<PAGE> 12
Net revenue for the quarter ended September 30, 1994, included approximately
$632,000 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 119.1% to $19,638,000 for the quarter ended September 30,
1995, compared to $8,961,000 for the third quarter of 1994, primarily as a
result of the Company's Acquisitions. As a percent of net revenue, salaries
and benefits were 42.9% and 38.4% for the quarters ended September 30, 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 under performing 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.
The major components of other operating and administrative expenses were
professional fees, taxes (other than income), insurance, utilities and other
services. Other operating and administrative expenses increased by 89.7% to
$18,269,000 for the quarter ended September 30, 1995, compared to $9,629,000 in
1994, once again as a result of the Company's Acquisitions. As a percent of
net revenue, other operating and administrative expenses were 39.9% for the
third quarter of 1995 compared to 41.3% in 1994.
Provision for bad debts was $3,232,000 for the quarter ended September 30,
1995, or 7.2% of net patient service revenue, compared to $1,159,000, or 5.3%
in 1994. The increase in provision for bad debts as a percent of net patient
service revenue resulted primarily from an increase in revenues attributable to
uninsured and underinsured patients at certain facilities, which have
historically been the source of the Company's uncollectable accounts.
Interest expense increased to $3,489,000 in the third quarter of 1995 compared
to $1,569,000 for the comparable period in 1994, due principally to (i) the
increase in amounts outstanding under the Company's Revolving Loan and old
credit facility as a result of its acquisition of SLRMC, (ii) the issuance of
$19,133,000 and $35,000,000 of 11% Senior Subordinated Notes on December 30,
1994 and June 12, 1995, respectively, and (iii) debt assumed and/or issued in
connection with the acquisitions of AmeriHealth, Inc. and Psychiatric
Healthcare Corporation in the fourth quarter of 1994. Interest expense also
increased due to an increase in the interest rate under which the Company
calculates interest payments on amounts outstanding under the Revolving Loan
and old credit facility (a weighted average of approximately 8.95% and 8.19%
for the quarters ended September 30, 1995 and 1994, respectively.)
Depreciation and amortization expense was $2,357,000 in 1995 compared to
$900,000 in 1994, an increase of $1,457,000 or 161.9%. This increase is due
primarily to the Company's Acquisitions, as well as the Company's ongoing
capital improvement programs at its existing hospitals.
For the quarters ended September 30, 1995 and 1994, the Company capitalized
approximately $576,000 and $139,000, respectively, in interest costs associated
with the construction of a hospital and other medical related facilities.
Nine Months Ended September 30, 1995 Compared to Nine Months Ended September
30, 1994
The Company reported net income of $679,000 for the nine months ended September
30, 1995, compared to net income of $3,258,000 for the comparable period in
1994. On a per share basis, after deducting non-cash dividend requirements for
preferred stockholders of $4,483,000 and $3,472,000 for the nine months ended
September 30, 1995 and 1994, respectively, the Company reported a primary loss
per share of $0.90 for the nine months ended September 30, 1995, compared to a
primary loss per share of $0.18 for the first nine months of 1994. The net
loss for the nine months ended September 30, 1995, included an extraordinary
loss of approximately $738,000 (net of an income tax benefit of $380,000), or
$0.17 per share, on the early extinguishment of debt. Fully diluted earnings
per share was not presented for the nine months ended September 30, 1995 and
1994 due to the anti-dilutive effect of such calculation.
11
<PAGE> 13
Operating income for the nine months ended September 30, 1995, included
approximately $6,245,000 attributable to the Company's equity in the earnings
of DHHS. The Company contributed Heartland Medical Center to the DHHS
partnership effective December 31, 1994, and accounts for its investment in
DHHS under the equity method. Previously, the Company had consolidated
Heartland for financial reporting purposes. Operating income for the nine
months ended September 30, 1994, included $4,954,000 attributable to Heartland.
The Company had net revenue of $117,835,000 for the nine months ended September
30, 1995, compared to $71,297,000 for same period in 1994, an increase of
$46,538,000 or 65.3%. The increase was due primarily to hospital acquisitions
in the fourth quarter of 1994 and April 1995, and was offset, in part, by the
contribution of Heartland Medical Center to the DHHS partnership. Net revenue
for the nine months ended September 30, 1994, included approximately
$29,464,000 attributable to Heartland.
Net revenue for the nine months ended September 30, 1995 and 1994, included
approximately $728,000 and $1,633,000, respectively, in interest income earned
on cash balances.
Salaries and benefits increased 89.5% to $50,898,000 for the nine months ended
September 30, 1995, compared to $26,853,000 for the first nine months of 1994,
primarily as a result of the Company's Acquisitions. As a percent of net
revenue, salaries and benefits were 43.2% and 37.7% for the nine months ended
September 30, 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 under performing 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.
The major components of other operating and administrative expenses were
professional fees, taxes (other than income), insurance, utilities and other
services. Other operating and administrative expenses increased by 60.8% to
$46,493,000 for the nine months ended September 30, 1995, compared to
$28,916,000 in 1994, once again as a result of the Company's Acquisitions. As
a percent of net revenue, other operating and administrative expenses declined
to 39.5% for the for the first nine months of 1995 compared to 40.6% in 1994.
Provision for bad debts was $8,985,000 for the nine months ended September 30,
1995, or 7.9% of net patient service revenue, compared to $4,702,000, or 6.9%
in 1994. The increase in provision for bad debts as a percent of net patient
service revenue resulted primarily from an increase in revenues attributable to
uninsured and underinsured patients at certain facilities, which have
historically been the source of the Company's uncollectable accounts.
Interest expense increased to $9,406,000 in the first nine months of 1995
compared to $4,801,000 for the comparable period in 1994, due principally to
(i) the increase in amounts outstanding under the Company's Revolving Loan and
old credit facility as a result of its acquisition of SLRMC, (ii) the issuance
of $19,133,000 and $35,000,000 of 11% Senior Subordinated Notes on December 30,
1994 and June 12, 1995, respectively, and (iii) debt assumed and/or issued in
connection with the acquisitions of AmeriHealth, Inc. and Psychiatric
Healthcare Corporation in the fourth quarter of 1994. Interest expense also
increased due to an increase in the interest rate under which the Company
calculates interest payments on amounts outstanding under the Revolving Loan
and old credit facility (a weighted average of approximately 9.21% and 7.40%
for the nine months ended September 30, 1995 and 1994, respectively.)
Depreciation and amortization expense was $5,971,000 in 1995 compared to
$2,519,000 in 1994, an increase of $3,452,000 or 137.0%. This increase is due
primarily to the Company's Acquisitions, as well as the Company's ongoing
capital improvement programs at its existing hospitals.
For the nine months ended September 30, 1995 and 1994, the Company capitalized
approximately $1,297,000 and $139,000, respectively, in interest costs
associated with the construction of a hospital and other medical related
facilities.
12
<PAGE> 14
LIQUIDITY AND CAPITAL RESOURCES
The Company had cash and cash equivalents of $7,848,000 at September 30, 1995.
The Company also had $62,151,000 available under its senior secured bank
facility, subject to certain limitations, which it refinanced and expanded from
$50,000,000 to $100,000,000 effective May 31, 1995.
The Company generated approximately $10,784,000 in cash from operations for the
nine months ended September 30, 1995. Cash flow from operations has not
contributed significantly to the Company's liquidity in the past, due
principally to its strategy of acquiring under performing 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 nine months ended September 30, 1995, the Company expended
approximately $31,337,000 for capital expenditures, which included
approximately $22,795,000 in expenditures related to a hospital and medical
building under construction in Midland, Texas and approximately $4,756,000
related to the construction of an ambulatory care center at the Company's
Baytown, Texas facility. The Baytown and Midland facilities began operations
in June and October of 1995, respectively. Also for the nine months ended
September 30, 1995, the Company expended approximately $93,977,000 for
principal payments on long-term debt and capitalized lease obligations, which
included a $850,000 debt reduction concurrent with the sale of a closed PHC
facility, the defeasement of approximately $1,200,000 principal amount of bonds
outstanding at a former AmeriHealth facility, and a $31,500,000 prepayment on
amounts outstanding under the Revolving Loan concurrent with the issuance of
Senior Subordinated Notes on June 12, 1995. In connection with the Company's
refinancing of its old credit facility on May 12, 1995, the Company prepaid
approximately $48,000,000 outstanding under the old credit facility and
approximately $9,533,000 principal amount of debt held by Wilmington Savings
Fund Society.
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, home
healthcare providers and physician practices 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 13, 1995, the Company acquired Salt Lake Regional Medical Center from
HealthTrust, Inc.-The Hospital Company. SLRMC is located in Salt Lake City,
Utah, and is comprised of a 200 bed tertiary care hospital and five clinics.
During the third quarter of 1995, the Company and the successor to HTI,
Columbia/HCA, finalized total consideration paid for SLRMC at approximately
$58,015,000, which consisted of $56,248,000 in cash and additional
consideration due of approximately $1,767,000, which the Company has recorded
in other current liabilities. The acquisition was accounted for as a purchase
transaction with the purchase price allocated preliminarily to the fair value
of acquired net working capital and property and equipment. Adjustments, if
any, are not expected to be material to the overall purchase accounting.
On June 12, 1995, a wholly-owned subsidiary of the Company acquired Brookside
Health Group, a home healthcare provider located in Richmond, Virginia. The
Company paid total consideration, including transaction costs, of approximately
$3,651,000, which consisted of approximately $2,520,000 in cash and the
issuance of $1,131,000 in notes payable to the seller. The Company funded the
acquisition from available funds.
On November 9, 1995, the Company entered into a definitive agreement with
Columbia/HCA to acquire Jordan Valley Hospital ("Jordan"), a 50 bed acute care
hospital in West Jordan, Utah, in exchange for Autauga Medical Center, an 85
bed acute care hospital, and Autauga Health Care Center, a 72 bed skilled
nursing facility, both in Prattville, Alabama, plus additional cash
consideration of approximately $7,500,000. The transaction is subject to
various third-party approvals, including that of the Federal Trade Commission.
The Company believes that consummation of this transaction is probable.
On May 31, 1995, the Company refinanced and prepaid amounts outstanding under
its old credit facility obtained in November 1993 with a $100,000,000 Revolving
Loan. Amounts available under the Revolving Loan are subject to certain
limitations, and the total amount available under the Revolving Loan declines
to $80,000,000 on the third anniversary date. The Company had approximately
$37,200,000 outstanding under its Revolving Loan at September 30, 1995. The
Revolving Loan also provides for short term letters of credit of up to
$5,000,000. The Revolving Loan matures no later than March 31, 1999 and bears
interest at a lender defined incremental rate plus,
13
<PAGE> 15
at the Company's option, the LIBOR or Prime rate. The incremental rate to be
applied is based upon the Company meeting certain operational performance
targets, as defined, and ranges from 2.5% to 3.0% with respect to the LIBOR
rate option and from 1.0% to 1.5% with respect to the Prime rate option. At
September 30, 1995 and December 31, 1994, the interest rates on the Revolving
Loan and old credit facility were 8.96% and 9.12%, respectively. The Company
currently has $649,000 outstanding under letters of credit. Proceeds from the
refinancing were used to prepay approximately $48,000,000 principal amount
outstanding under the Company's old credit facility and approximately
$9,533,000 principal amount of debt held by WSFS. In connection with the
prepayment of such debt, the Company expensed approximately $738,000 (net of a
tax benefit of $380,000) of deferred loan costs. With the exception of certain
assets collateralizing debt assumed in the Company's 1994 acquisition of
Psychiatric Healthcare Corporation, the Revolving Loan is collateralized by
substantially all of the Company's assets. The terms of the Revolving Loan
eliminated the requirement under the Company's previous bank credit facility to
maintain a cash collateral account with the lender in the amount of $5,000,000.
The Company's future acquisitions and divestitures may require, in certain
circumstances, consent by lenders under this agreement.
On June 12, 1995, the Company issued $35,000,000 face amount (less a discount
of approximately $668,000) of Senior Subordinated Notes. The Notes mature on
December 31, 2003 and require quarterly interest payments at an annual
effective rate of 11.35% (11% stated rate). The Notes include detachable
warrants for the purchase of 525,000 shares of common stock. The warrants are
exercisable for common stock at the holder's option at an exercise price of
$9.00 per share until December 31, 2003. The Notes are subject to redemption
on or after December 31, 1995, at the Company's option, at prices declining
from 112.5% of the principal amount at December 31, 1995 to par on December 31,
2002. Additionally, the Note holders may require the Company to repurchase all
outstanding Notes in the event of a change in control of the Company based on a
declining redemption premium ranging from 112.5% to 103% of principal.
Proceeds from the issuance of Notes were used to paydown approximately
$31,500,000 principal amount outstanding under the Revolving Loan with the
remainder retained for general corporate purposes. The Notes are
uncollateralized obligations and are subordinated in right of payment to
certain senior indebtedness of the Company. Approximately $668,000 of the
proceeds from the issuance of the Notes were allocated to the warrants.
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 September 30, 1995.
The Company is subject to certain credit agreements that restrict its right to
pay cash dividends on its common stock and Series A, A-1, B, C and D 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 September 30,
1995, the dividend arrearage on the Company's Preferred Stock was $11,185,000
and will increase as dividends accumulate. The Company is presently exploring
options to mitigate the impact of future Preferred Stock dividends which may
include modification of certain of the Company's Preferred Stock Agreements.
At September 30, 1995, 10,440,385 shares of Preferred Stock were redeemable and
convertible into 9,984,625 shares of common stock. Additionally, at September
30, 1995, the Company had outstanding 2,848,890 warrants to purchase 3,234,762
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
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
14
<PAGE> 16
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.
15
<PAGE> 17
PART II. OTHER INFORMATION
ITEM 5. OTHER INFORMATION:
On November 9, 1995, the Company entered into a definitive agreement with
Columbia/HCA to acquire Jordan Valley Hospital ("Jordan"), a 50 bed acute care
hospital in West Jordan, Utah, in exchange for Autauga Medical Center, an 85
bed acute care hospital, and Autauga Health Care Center, a 72 bed skilled
nursing facility, both in Prattville, Alabama, plus additional cash
consideration of approximately $7,500,000. The transaction is subject to
various third-party approvals, including the Federal Trade Commission.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K:
(a) Exhibits
11 Statement Re: Computation of Per Share Earnings
27 Financial Data Schedule
(b) Reports on Form 8-K
During the quarter for which this report on Form 10-Q is filed,
the Company amended its report on Form 8-K dated December 6,
1994, (Amendment No 2.), in which it had previously reported the
approval of the merger transaction in the Registrant's proxy
statement dated November 11, 1994, by the Registrant's
shareholders. The report amended previous disclosures made under
Item 7. Financial Statements and Exhibits.
During the quarter for which this report on Form 10-Q is filed,
the Company amended its report on Form 8-K dated December 21,
1994, (Amendment No 2.), in which it had previously reported the
formation of a general partnership by a subsidiary of the
Registrant. The report amended previous disclosures made under
Item 7. Financial Statements and Exhibits.
16
<PAGE> 18
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: November 14, 1995 By: /s/ JAMES G. VANDEVENDER
-----------------------------------
James G. VanDevender
Executive Vice President, Chief
Financial Officer and Director
17
<PAGE> 19
INDEX TO EXHIBITS
Exhibit No. Description
----------- -----------
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 NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1995 1994 1995 1994
------------------------------ ----------------------------------
<S> <C> <C> <C> <C>
Primary:
- --------
Weighted average shares outstanding 4,257,526 1,209,294 4,243,267 1,209,294
Net effect of dilutive stock options and
warrants--based on the treasury stock
method using average market price(1) -- -- -- --
------------- ------------ ------------ -------------
Total 4,257,526 1,209,294 4,243,267 1,209,294
============ =========== ============ =============
Net income $ 791,000 $ 1,028,000 $ 679,000 $ 3,258,000
Preferred stock dividend requirement (1,436,000) (1,125,000) (4,280,000) (3,339,000)
Accretion of preferred stock issuance cost (67,000) (53,000) (203,000) (133,000)
------------- ------------ ------------ -------------
Loss applicable to common stock $ (712,000) $ (150,000) $ (3,804,000) $ (214,000)
============ =========== ============ =============
Loss before extraordinary item $ (.17) $ (.12) $ (.73) $ (.18)
Extraordinary item -- -- (.17) --
------------- ------------ ------------ -------------
Loss per share $ (.17) $ (.12) $ (.90) $ (.18)
============ =========== ============ =============
Fully Diluted:
- --------------
Weighted average shares outstanding 4,257,526 1,209,294 4,243,267 1,209,294
Net effect of dilutive stock options and
warrants--based on the treasury stock 3,921,295 2,236,821 3,921,295 2,236,821
method using the year-end market price,
if higher than average market price
Assumed conversion of Preferred Stock(2) 9,989,338 8,233,090 9,962,827 8,233,090
------------- ------------ ------------ -------------
Total 18,168,159 11,679,205 18,127,389 11,679,205
============ =========== ============ =============
Net income $ 791,000 $ 1,028,000 $ 679,000 $ 3,258,000
Interest reduction, net of tax effect 472,000 258,000 1,400,000 766,000
------------- ------------ ------------ -------------
Income applicable to common stock $ 1,263,000 $ 1,286,000 $ 2,079,000 $ 4,024,000
============ =========== ============ =============
Income before extraordinary item $ .07 $ .11 $ .15 $ .34
Extraordinary item -- -- (.04) --
------------- ------------ ------------ -------------
Income per share $ .07 $ .11 $ .11 $ .34
============ =========== ============ =============
</TABLE>
(1) The effect of options was anti-dilutive for the quarter and nine months
ended September 30, 1995 and 1994.
(2) At September 30, 1995 and 1994, the Company had 10,440,385 and 9,564,609
shares of preferred stock outstanding, respectively.
18
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED BALANCE SHEET AND CONDENSED CONSOLIDATED STATEMENT OF
OPERATIONS AND IS QUALIFIED IN ITS ENTIREY BY REFERENCE TO THE COMPANY'S FORM
10-Q FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 9-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1994
<PERIOD-START> JAN-01-1995 JAN-01-1994
<PERIOD-END> SEP-30-1995 SEP-30-1994
<CASH> 7,848 0
<SECURITIES> 0 0
<RECEIVABLES> 28,477 0
<ALLOWANCES> 7,097 0
<INVENTORY> 3,715 0
<CURRENT-ASSETS> 47,686 0
<PP&E> 155,608 0
<DEPRECIATION> 9,515 0
<TOTAL-ASSETS> 274,060 0
<CURRENT-LIABILITIES> 36,410 0
<BONDS> 152,415 0
<COMMON> 43 0
81,491 0
0 0
<OTHER-SE> (5,234) 0
<TOTAL-LIABILITY-AND-EQUITY> 274,060 0
<SALES> 0 0
<TOTAL-REVENUES> 117,835 71,297<F1>
<CGS> 0 0
<TOTAL-COSTS> 97,468 55,769
<OTHER-EXPENSES> (274) 2,519<F2>
<LOSS-PROVISION> 8,985 4,702
<INTEREST-EXPENSE> 9,406 4,801
<INCOME-PRETAX> 2,250 3,506
<INCOME-TAX> 833 248
<INCOME-CONTINUING> 1,417 3,258
<DISCONTINUED> 0 0
<EXTRAORDINARY> (738) 0<F3>
<CHANGES> 0 0
<NET-INCOME> 679 3,258
<EPS-PRIMARY> (.90) (.18)
<EPS-DILUTED> 0 0<F4>
<FN>
<F1>TOTAL REVENUES INCLUDE OTHER REVENUE OF $3,397,000 AND $3,555,000 FOR THE
NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994, RESPECTIVELY.
<F2>OTHER EXPENSES INCLUDE DEPRECIATION AND AMORTIZATION EXPENSE OF $5,971,000
AND $2,519,000 FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994,
RESPECTIVELY. OTHER EXPENSES FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995,
ALSO INCLUDE A CREDIT OF $6,245,000, REPRESENTING EQUITY IN THE EARNINGS
OF DHHS.
<F3>LOSS ON EARLY EXTINGUSHMENT OF DEBT, NET OF TAX BENEFIT OF $380.
<F4>FULLY DILUTED INCOME PER SHARE IS NOT PRESENTED FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1995 AND 1994 AS THE RESULTS ARE ANTI-DILUTIVE.
</FN>
</TABLE>
