<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A AMENDMENT NO. 1
QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
Champion Healthcare Corporation
FOR QUARTER ENDED JUNE 30, 1995
COMMISSION FILE NUMBER 0-11851
- --------------------------------------------------------------------------------
(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
August 11, l995.
<PAGE> 2
INDEX
CHAMPION HEALTHCARE CORPORATION
<TABLE>
<CAPTION>
Page
PART I. FINANCIAL INFORMATION Number
- -------------------------------- ------
<S> <C>
Item 1. Financial Statements
Condensed consolidated balance sheet
as of June 30, 1995 (unaudited) and
December 31, 1994 2
Condensed consolidated statement of operations for
the three months and six months
ended June 30, 1995 and 1994 (unaudited) 3
Condensed consolidated statement of cash flows for
the six months ended June 30, 1995 and 1994
(unaudited) 4
Notes to condensed consolidated financial statements at
June 30, 1995 (unaudited) 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
PART II. OTHER INFORMATION
- ----------------------------
Item 4. Submission of Matters to a Vote of Security Holders 16
Item 6. Exhibits and Reports on Form 8-K 16
SIGNATURES 18
- ----------
</TABLE>
1
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CHAMPION HEALTHCARE CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
<TABLE>
<CAPTION>
June 30, December 31,
1995 1994
---------------------------------
(Dollars in thousands)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 7,046 $ 48,424
Restricted cash -- 5,000
Accounts receivable, less allowance for doubtful
accounts of $6,999 and $4,959 at June 30, 1995 and
December 31, 1994, respectively 30,023 17,115
Supplies inventory 3,768 1,942
Prepaid expenses and other current assets 7,405 4,899
---------- ----------
Total current assets 48,242 77,380
Property and equipment, less allowances for depreciation and
amortization of $7,757 and $5,340 at June 30, 1995 and
December 31, 1994, respectively 143,657 81,913
Investment in DHHS 43,836 40,088
Other assets 20,600 17,172
---------- ----------
Total assets $ 256,335 $ 216,553
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt and capital lease
obligations $ 1,626 $ 4,781
Accounts payable 9,107 10,637
Other current liabilities 17,295 10,687
---------- ----------
Total current liabilities 28,028 26,105
Long-term debt and capital lease obligations 141,838 105,284
Other long-term liabilities 11,622 11,037
Redeemable preferred stock 79,407 76,294
Common stock, $.01 par value:
Authorized - 25,000,000 shares, 4,243,975 and 4,223,975
shares issued and outstanding at June 30, 1995
and December 31, 1994, respectively 42 42
Common stock subscribed, 80,000 and 100,000 shares at
June 30, 1995 and December 31, 1994, respectively 40 50
Common stock subscription receivable (40) (50)
Paid in capital 13,717 15,998
Accumulated deficit (18,319) (18,207)
--------- ----------
Total liabilities and stockholders' equity $ 256,335 $ 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 Six Months Ended
June 30, June 30,
1995 1994 1995 1994
----------------------------- -----------------------------
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C>
Net patient service revenue $ 41,936 $ 22,269 $ 69,561 $ 45,668
Other revenue 1,383 1,134 2,485 2,298
--------- --------- ---------- --------
Net revenue 43,319 23,403 72,046 47,966
Operating expenses:
Salaries and benefits 18,498 8,900 31,260 17,892
Other operating and administrative 17,359 9,292 28,224 19,287
Provision for bad debts 3,680 1,664 5,753 3,543
Interest 3,287 1,810 5,917 3,232
Depreciation and amortization 2,082 896 3,614 1,619
Equity in earnings of DHHS (2,267) -- (3,745) --
--------- --------- ---------- --------
Total expenses 42,639 22,562 71,023 45,573
--------- --------- ---------- --------
Operating income 680 841 1,023 2,393
Minority interest 44 -- 92 --
--------- --------- ---------- --------
Income before income taxes and extraordinary
item 636 841 931 2,393
Provision for income taxes 187 84 305 163
--------- --------- ---------- --------
Income before extraordinary item 449 757 626 2,230
Extraordinary item-loss on early
extinguishment of debt, net of tax benefit
of $380 (738) -- (738) --
--------- --------- ---------- --------
Net (loss) income $ (289) $ 757 $ (112) $ 2,230
========= ========= ========== ========
Loss applicable to common stock $ (1,778) $ (380) $ (3,092) $ (64)
========= ========= ========== ========
Loss per common share:
Loss before extraordinary item $ (.25) $ (.31) $ (.56) (.05)
Extraordinary item (.17) -- (.17) --
--------- --------- ---------- --------
Loss per common share $ (.42) $ (.31) $ (.73) $ (.05)
========= ========= ========== ========
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE> 5
CHAMPION HEALTHCARE CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
1995 1994
--------------------------------
(Dollars in thousands)
<S> <C> <C>
Operating activities:
Net (loss) income $ (112) $ 2,230
Extraordinary item, net of a tax benefit of $380 738 --
Equity in earnings of DHHS (3,745) --
Minority interests 92 --
Depreciation and amortization 3,614 1,619
Provision for bad debts 5,753 3,543
Changes in assets and liabilities, net of effects from acquisitions
Increase in assets (2,111) (4,122)
Increase (decrease) in liabilities 3,297 (3,173)
--------- ---------
Net cash provided by operating activities 7,526 97
--------- ---------
Investing activities:
Additions to property and equipment (18,859) (5,080)
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 (1,615) (175)
Other 363 (38)
--------- ---------
Net cash used in investing activities (79,409) (5,293)
--------- ---------
Financing activities:
Payments on long-term debt and capital lease obligations (93,096) (960)
Proceeds from long-term debt obligations 121,832 --
Payments related to issuance of long-term debt obligations (3,927) --
Release of restricted funds 5,000 --
Other 696 --
--------- ---------
Net cash provided by (used in) financing activities 30,505 (960)
--------- ---------
Decrease in cash and cash equivalents (41,378) (6,156)
Cash and cash equivalents at beginning of period 48,424 66,686
--------- ---------
Cash and cash equivalents at end of period $ 7,046 $ 60,530
========= ========
</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.
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.
Results for the six months ended June 30, 1994, as previously reported in the
definitive Proxy Statement of AmeriHealth, Inc. dated November 11, 1994, 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
month and six month periods ended June 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 the partnership. 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. The partnership 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 six months ended June 30, 1995 (dollars in thousands).
<TABLE>
<CAPTION>
Three months Six months
ended ended
June 30, 1995 June 30, 1995
----------------- ---------------
<S> <C> <C>
INCOME STATEMENT DATA
Net revenue $ 27,577 $ 53,665
Operating income 5,096 8,719
Net income 4,123 6,810
Company's equity in the earnings of DHHS 2,267 3,745
June 30, 1995 December 31, 1994
------------- ------------------
BALANCE SHEET DATA
Current assets $ 34,016 $ 28,220
Non-current assets 44,277 44,298
Current liabilities 11,184 12,212
Non-current liabilities 123 129
Partners' capital 66,986 60,177
</TABLE>
NOTE 3 -- LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS
Long-term debt and capital lease obligations consisted of the following at June
30, 1995 and December 31, 1994 (dollars in thousands):
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1995 1994
----------- -----------
<S> <C> <C>
Revolving Loan $ 26,000 $ --
Term Loan -- 18,500
11% Senior Subordinated Notes (face amount of $97,905, net of a
discount of $666 at June 30, 1995) 97,239 62,703
Wilmington Savings Fund Society -- 9,766
Health Care REIT, Inc. 11,520 12,770
Other notes payable & capital lease obligations 8,705 6,326
--------- ---------
Total debt and capital lease obligations 143,464 110,065
Less current portion (1,626) (4,781)
--------- --------
Total long-term debt and capital lease obligations $ 141,838 $ 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 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
6
<PAGE> 8
CHAMPION HEALTHCARE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
NOTE 3 -- LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS -- CONTINUED
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 June 30, 1995 and December 31, 1994, the
interest rates on the Revolving Loan and old credit facility were 9.06% 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 incurred a prepayment premium and 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") bearing
interest that is payable quarterly at an annual effective rate of 11.35% (11%
stated rate) and maturing on December 31, 2003. 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, there is a requirement to repurchase all outstanding Notes
in the event of a change in control of the Company, at the holder's option,
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 June 30, 1995.
NOTE 4 -- 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 located in Salt Lake City, Utah, and is comprised of a 200 bed tertiary
care hospital and five clinics. The Company paid total preliminary
consideration of approximately $56,248,000 in cash, which included approximately
$11,521,000 for certain working capital components, reimbursement of certain
capital expenditures made previously by the seller and subject to capital lease
arrangements. 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
7
<PAGE> 9
CHAMPION HEALTHCARE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
NOTE 4 -- ACQUISITIONS -- CONTINUED
Trade Commission. Consummation of the sale had been subject to approval by the
Federal Trade Commission, which was received on April 7, 1995. The SLRMC
acquisition was accounted for as a purchase transaction. The preliminary
purchase price has been allocated 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 six
months ended June 30, 1995 and 1994 assumes that the acquisition of SLRMC had
occurred as of January 1, 1995 and 1994, respectively, and that the acquisition
of AmeriHealth, Psychiatric Healthcare Corporation, and the formation of the
DHHS partnership had occurred as of January 1, 1994. The pro forma financial
information below 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>
Six months ended June 30,
1995 1994
---- ----
(unaudited)
(Dollars in thousands, except
per share data)
<S> <C> <C>
Net revenue $ 94,066 $ 101,823
=========== ===========
Income before extraordinary item $ 1,211 $ 2,155
=========== ===========
Net income $ 473 $ 2,155
=========== ===========
Loss per common share before extraordinary item $ (0.42) $ (0.06)
=========== ===========
Loss per common share $ (0.59) $ (0.06)
=========== ===========
Weighted average number of common shares
outstanding 4,236 4,253
=========== ===========
</TABLE>
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 six months ended June 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 Six Months Ended
June 30, June 30,
1995 1994 1995 1994
--------------------------- --------------------------
<S> <C> <C> <C> <C>
Primary 4,243,975 1,209,294 4,236,019 1,209,294
========= ========= ========= =========
Fully Diluted N/A N/A N/A N/A
</TABLE>
8
<PAGE> 10
CHAMPION HEALTHCARE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
NOTE 6 -- CUMULATIVE CONVERTIBLE REDEEMABLE PREFERRED STOCK
At June 30, 1995, the Company had outstanding 10,408,285 shares of Series A - D
Cumulative Convertible Redeemable Preferred Stock (collectively, "Preferred
Stock") which were convertible into 9,920,425 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 June 30, 1995, the
dividend arrearage on the Company's Preferred Stock was $9,745,000 and will
increase as dividends accumulate.
NOTE 7 -- INCOME TAXES
The income tax provision recorded for the quarter and six months ended June 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.
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 underperforming 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. Additionally, 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
effect the Company's operating results in the near-term. The Company believes
this effect will be mitigated as additional hospitals are acquired.
RESULTS OF OPERATIONS
Quarter Ended June 30, 1995 Compared to Quarter Ended June 30, 1994
The Company reported a net loss of $289,000 for the quarter ended June 30, 1995,
compared to net income of $757,000 for the second quarter of 1994. On a per
share basis, after deducting non-cash dividend requirements for preferred
stockholders of $1,489,000 and $1,137,000 for the quarters ended June 30, 1995
and 1994, respectively, the Company reported a primary loss per share of $0.42
for the quarter ended June 30, 1995, compared to a primary loss per share of
$0.31 for the second quarter of 1994. The net loss for the quarter ended June
30, 1995 included an extraordinary loss of approximately $738,000 (net of income
tax benefit of $380,000), or $.17 per share, from the early extinguishment of
debt. Fully diluted earnings per share was not presented for the quarters ended
June 30, 1995 and 1994 due to the anti-dilutive effect of such calculations.
Operating income for the quarter ended June 30, 1995, included approximately
$2,267,000 attributable to the Company's equity in the earnings of DHHS.
The Company's net revenue was $43,319,000 for the quarter ended June 30, 1995,
compared to $23,403,000 for same period in 1994, an increase of $19,916,000 or
85.1%. The Company's net revenue for the quarter ended June 30, 1995 as
compared to the prior year was impacted significantly by the Company's
acquisition of four hospitals and one skilled nursing home in the fourth quarter
of 1994, the acquisition of SLRMC on April 13, 1995 (collectively, the
"Acquisitions"), and the formation of the DHHS partnership effective December
31, 1994, pursuant to which the Company contributed the 142 bed Heartland
Medical Center ("HMC").
Exclusive of HMC and the Acquisitions, net revenue at the Company's two
same-store hospitals decreased by approximately $1,747,000, or 13.7% for the
quarter ended June 30, 1995, as compared to the prior year. This decrease was
due primarily to a 13.3% decline in patient days and 9.6% decline in outpatient
surgeries over the comparable 1994 period. The decline in patient days was due,
in part, to the industry-wide trend of decreased inpatient utilization at acute
care hospitals. The decline in outpatient surgeries was due primarily to
continuing capacity constraints experienced at one facility as a result of its
consolidation with another Company owned hospital in the same market. The
Company completed the construction of an ambulatory care center at this facility
in late June 1995, which has alleviated 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.
10
<PAGE> 12
Net revenue for the quarters ended June 30, 1995 and 1994 included approximately
$149,000 and $556,000, 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 107.8% to $18,498,000 for the quarter ended June 30, 1995, compared to
$8,900,000 for the second quarter of 1994, primarily as a result of the
Company's Acquisitions. As a percent of net revenue, salaries and benefits were
42.7% and 38.0% for the quarters ended June 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
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.
Exclusive of HMC and the Acquisitions, salaries and benefits declined 11.3% over
the comparable period a year earlier; however, as a percent of net revenue,
salaries and benefits increased to 39.7% for the quarter ended June 30, 1995,
compared to 38.6% in 1994, primarily as a result of a decline in utilization
rates at one of the Company's facilities that was not sufficiently offset by a
corresponding reduction in staff levels. The Company continues to make progress
in its efforts to manage variable costs at this facility in response to
fluctuations in utilization rates.
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 86.8% to $17,359,000 for the quarter ended June
30, 1995, compared to $9,292,000 in 1994, once again as a result of the
Company's Acquisitions. As a percent of net revenue, other operating and supply
expenses were 40.1% for the second quarter of 1995 compared to 39.7% in 1994.
Provision for bad debts was $3,680,000 for the quarter ended June 30, 1995, or
8.8% of net patient service revenue, compared to $1,664,000, or 7.5% in 1994.
The increase in provision for bad debts resulted primarily from the 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 $3,287,000 in the second quarter of 1995 compared
to $1,810,000 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 Company's
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 Company's acquisition of AmeriHealth 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 its interest payments under its old credit facility and
Revolving Loan balances outstanding for the period (a weighted average of
approximately 9.57% and 7.42% for the quarters ended June 30, 1995 and 1994,
respectively.)
Depreciation and amortization expense was $2,082,000 in 1995 compared to
$896,000 in 1994, an increase of $1,186,000 or 132.4%. 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 quarter ended June 30, 1995, the Company capitalized approximately
$462,000 in interest costs associated with the construction of a hospital and
other medical related facilities.
Six Months Ended June 30, 1995 Compared to Six Months Ended June 30, 1994
The Company reported a net loss of $112,000 for the six months ended June 30,
1995, compared to net income of $2,230,000 for the comparable period in 1994.
On a per share basis, after deducting non-cash dividend requirements for
preferred stockholders of $2,980,000 and $2,294,000 for the six months ended
June 30, 1995 and 1994, respectively, the Company reported a primary loss per
share of $0.73 for the six months ended June 30, 1995, compared to a primary
loss per share of $0.05 for the first six months of 1994. The net loss for the
six months ended June 30, 1995 included an extraordinary loss of approximately
$738,000 (net of income tax benefit
11
<PAGE> 13
of $380,000), or $.17 per share, from the early extinguishment of debt. Fully
diluted earnings per share was not presented for the six months ended June 30,
1995 and 1994 due to the anti-dilutive effect of such calculations.
Operating income for the six months ended June 30, 1995, included approximately
$3,745,000 attributable to the Company's equity in the earnings of DHHS.
The Company's net revenue was $72,046,000 for the six months ended June 30,
1995, compared to $47,966,000 for same period in 1994, an increase of
$24,080,000 or 50.2%. The Company's net revenue for the six months ended June
30, 1995 as compared to the prior year was impacted significantly by the
Company's acquisition of four hospitals and one skilled nursing home in the
fourth quarter of 1994, the acquisition of SLRMC on April 13, 1995
(collectively, the "Acquisitions"), and the formation of the DHHS partnership
effective December 31, 1994, pursuant to which the Company contributed the 142
bed Heartland Medical Center ("HMC").
Exclusive of HMC and the Acquisitions, net revenue at the Company's two
same-store hospitals decreased by approximately $3,564,000, or 13.1% for the six
months ended June 30, 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 9.9% 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 completed the
construction of an ambulatory care center at this facility in late June 1995,
which has alleviated 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 six months ended June 30, 1995 and 1994 included
approximately $709,000 and $1,001,000, 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 74.7% to $31,260,000 for the six months ended June 30, 1995, compared
to $17,892,000 for the first six months of 1994, primarily as a result of the
Company's Acquisitions. As a percent of net revenue, salaries and benefits were
43.4% and 37.3% for the six months ended June 30, 1995 and 1994, respectively.
Exclusive of HMC and the Acquisitions, salaries and benefits declined 7.3% over
the comparable period a year earlier. As a percent of net revenue, salaries and
benefits increased to 39.7% for the six months ended June 30, 1995, compared to
37.2% in 1994, primarily as a result of a decline in utilization rates at one of
the Company's facilities that was not sufficiently offset by a corresponding
reduction in staff levels. The Company continues to make progress in its
efforts to manage variable costs at this facility in response to fluctuations in
utilization rates.
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 46.3% to $28,224,000 for the six months ended
June 30, 1995, compared to $19,287,000 in 1994, once again as a result of the
Company's Acquisitions. As a percent of net revenue, other operating and
supply expenses were 39.2% for the for the first six months of 1995 compared to
40.2% in 1994.
Provision for bad debts was $5,753,000 for the six months ended June 30, 1995,
or 8.3% of net patient service revenue, compared to $3,543,000, or 7.8% in
1994. The increase in provision for bad debts resulted primarily from the
increase in revenues attributable to uninsured and underinsured patients at
certain of the Company's facilities, which have historically been the source of
the Company's uncollectable accounts.
Interest expense increased to $5,917,000 in the first six months of 1995
compared to $3,232,000 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 Company's
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 Company's acquisition of AmeriHealth 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 its interest payments under its old credit facility
12
<PAGE> 14
and Revolving Loan balances outstanding for the period (a weighted average of
approximately 9.35% and 6.99% for the six months ended June 30, 1995 and 1994,
respectively.)
Depreciation and amortization expense was $3,614,000 in 1995 compared to
$1,619,000 in 1994, an increase of $1,995,000 or 123.2%. 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 six months ended June 30, 1995, the Company capitalized approximately
$721,000 in interest costs associated with the construction of a hospital and
other medical related facilities.
LIQUIDITY AND CAPITAL RESOURCES
The Company had cash and cash equivalents of $7,046,000 at June 30, 1995. The
Company also had available $73,352,000 under its senior secured bank facility,
which it refinanced and expanded from $50,000,000 to $100,000,000 effective May
31, 1995.
The Company generated approximately $7,526,000 in cash from operations for the
six months ended June 30, 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 six months ended June 30, 1995, the Company expended approximately
$18,859,000 for capital expenditures, which included approximately $12,710,000
in expenditures related to a hospital and medical building under construction
in Midland, Texas and approximately $4,616,000 related to the construction of
an ambulatory care center at the Company's Baytown, Texas facility. Also for
the six months ended June 30, 1995, the Company expended approximately
$93,096,000 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
issue 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 completed its acquisition of 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. The Company paid total preliminary consideration of
approximately $56,248,000 in cash, which included approximately $11,521,000 for
certain working capital components, reimbursement of certain capital
expenditures made previously by the seller and subject to capital lease
arrangements. 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 SLRMC acquisition was accounted for as a purchase transaction. The
preliminary purchase price has been allocated 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 of approximately
13
<PAGE> 15
$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 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 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
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 June 30, 1995 and
December 31, 1994, the interest rates on the Revolving Loan and old credit
facility were 9.06% 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 and prepayment fees during the quarter. 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 bearing interest that
is payable quarterly at an annual effective rate of 11.35% (11% stated rate)
and maturing on December 31, 2003. 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, there is a requirement to repurchase all outstanding Notes in the
event of a change in control of the Company, at the holder's option, 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 June 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 - 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 June 30, 1995, the
dividend arrearage on the Company's Preferred Stock was $9,745,000 and will
increase as dividends accumulate.
At June 30, 1995, 10,408,285 shares of Preferred Stock were redeemable and
convertible into 9,920,425 shares of common stock. Additionally, at June 30,
1995, the Company had outstanding 2,823,022 warrants to purchase 3,208,894
shares of Common Stock.
14
<PAGE> 16
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.
15
<PAGE> 17
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Company's annual stockholders meeting on May 25, 1995, the
stockholders elected the following directors:
<TABLE>
<CAPTION>
Broker Non-
Name For Withheld Abstentions Votes
---- --- -------- ----------- -----------
<S> <C> <C> <C> <C>
Charles R. Miller 13,460,952 181,245 --- ---
James G. VanDevender 13,460,901 181,296 --- ---
Manuel A. Ferris 13,460,649 181,548 --- ---
Nolan Lehmann 13,460,953 181,244 --- ---
Scott F. Meadow 13,460,953 181,244 --- ---
Paul B. Queally 13,460,953 181,244 --- ---
Richard D. Sage 13,392,636 249,561 --- ---
David S. Spencer 13,460,830 181,367 --- ---
William G. White 13,390,424 251,773 --- ---
James H. Conroy 13,460,946 181,251 --- ---
</TABLE>
The stockholders also approved the adoption of the Selected
Executive Stock Option Plan No. 5, which authorized 144,500 shares
of common stock for issuance under the plan. The voting on this
issue was as follows:
<TABLE>
<CAPTION>
For Against Abstain Broker Non-Votes
---- ------- ------- ----------------
<S> <C> <C> <C>
13,307,125 276,734 58,338 ---
</TABLE>
The stockholders also ratified the appointment of Coopers & Lybrand,
L.L.P. as the Company's independent auditors for 1995. The voting
on this issue was as follows:
<TABLE>
<CAPTION>
For Against Abstain Broker Non-Votes
---- ------- ------- ----------------
<S> <C> <C> <C>
13,458,053 182,362 1,782 ---
</TABLE>
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 filed one report on Form 8-K dated April 13, 1995, in which
it reported the completion of its acquisition of Salt Lake Regional
Medical Center from HealthTrust, Inc.-The Hospital Company. This
Form 8-K was subsequently amended on June 27, 1995 to include
disclosures under Item 7 as follows:
16
<PAGE> 18
Item 7. Financial Statements and Exhibits
(a) Financial Statements:
Salt Lake Regional Medical Center:
Report of Coopers & Lybrand, L.L.P., Independent Accountants
Consolidated Balance Sheets dated April 13, 1995 and May 31,
1994.
Consolidated Statements of Income for the period from June 1,
1994 through April 13, 1995, and for the years ended
May 31, 1994 and 1993.
Consolidated Statements of Equity for the period from June 1,
1994 through April 13, 1995, and for the years ended
May 31, 1994 and 1993.
Consolidated Statements of Cash Flows for the period from
June 1, 1994 through April 13, 1995, and for the years
ended May 31, 1994 and 1993.
Notes to Consolidated Financial Statements.
(b) Pro Forma financial information:
Champion Combined Group and Salt Lake Regional Medical Center
Pro Forma Combining Income Statement
For the Three Months Ended March 31, 1995
Pro Forma Combining Income Statement
For the Year Ended December 31, 1994
Pro Forma Combining Balance Sheet
March 31, 1995
Notes to Pro Forma Combining Financial Statements
Champion Combined Company and Dakota Hospital (Champion
Combined Group)
Pro Forma Combining Income Statement
For the Year Ended December 31, 1994
Notes to Pro Forma Combining Income Statement
Champion Combined Company (Champion Healthcare Corporation,
AmeriHealth, Inc. and Psychiatric Healthcare Corporation)
Pro Forma Combining Income Statement
For the Year Ended December 31, 1994
Notes to Pro Forma Combining Income Statement
17
<PAGE> 19
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: September 25, 1995 By: /s/ James G. VanDevender
----------------------------------------
James G. VanDevender
Executive Vice President, Chief Financial
Officer and Director
18
<PAGE> 20
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<S> <C>
11 Statement Re: Computation of Per Share Earnings
27 Financial Data Schedule
</TABLE>
<PAGE> 1
EXHIBIT 11 -- COMPUTATION OF PER SHARE EARNINGS
CHAMPION HEALTHCARE CORPORATION
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
1995 1994 1995 1994
----------------------------- --------------------------------
<S> <C> <C> <C> <C>
Primary:
- --------
Weighted average shares outstanding 4,243,975 1,209,294 4,236,019 1,209,294
Net effect of dilutive stock options and
warrants--based on the treasury stock
method using average market price (1) -- -- -- --
------------- ------------- -------------- -----------
Total 4,243,975 1,209,294 4,236,019 1,209,294
============= ============= ============== ===========
Net (loss) income $ (289,000) $ 757,000 $ (112,000) $ 2,230,000
Preferred stock dividend requirement (1,421,000) (1,084,000) (2,844,000) (2,214,000)
Accretion of preferred stock issuance cost (68,000) (53,000) (136,000) (80,000)
------------- ------------- -------------- -----------
Loss applicable to common stock $ (1,778,000) $ (380,000) $ (3,092,000) $ (64,000)
============= ============= ============== ===========
Loss before extraordinary item $ (.25) $ (.31) $ (.56) $ (.05)
Extraordinary item (.17) -- (.17) --
------------- ------------- -------------- -----------
Loss per share $ (.42) $ (.31) $ (.73) $ (.05)
============= ============= ============== ===========
Fully Diluted:
- --------------
Weighted average shares outstanding 4,243,975 1,209,294 4,236,019 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 3,945,620 2,184,503 3,945,620 2,184,503
Assumed conversion of Preferred Stock(2) 9,920,425 8,233,090 9,920,425 8,233,090
------------- ------------- -------------- -----------
Total 18,110,020 11,626,887 18,102,064 11,626,887
============= ============= ============== ===========
Net (loss) income $ (289,000) $ 757,000 $ (112,000) $ 2,230,000
Interest reduction, net of tax effect 465,000 249,000 930,000 498,000
------------- ------------- -------------- -----------
Income applicable to common stock $ 176,000 $ 1,006,000 $ 818,000 $ 2,728,000
============= ============= ============== ===========
Income before extraordinary item $ .05 $ .09 $ .09 $ .23
Extraordinary item (.04) -- (.04) --
------------- ------------- -------------- -----------
Income per share $ .01 $ .09 $ .05 $ .23
============= ============= ============== ===========
</TABLE>
(1) The effect of options was anti-dilutive for the quarter and six months
ended June 30, 1995 and 1994.
(2) At June 30, 1995 and 1994, the Company had 10,408,285 and 9,564,609
shares of preferred stock outstanding, respectively.
<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 entirety by reference to the Company's Form
10-Q for the six months ended June 30, 1995.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 6-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1994
<PERIOD-START> JAN-01-1995 JAN-01-1994
<PERIOD-END> JUN-30-1995 JUN-30-1994
<CASH> 7,046 0
<SECURITIES> 0 0
<RECEIVABLES> 30,023 0
<ALLOWANCES> 6,999 0
<INVENTORY> 3,768 0
<CURRENT-ASSETS> 48,242 0
<PP&E> 143,657 0
<DEPRECIATION> 7,757 0
<TOTAL-ASSETS> 256,335 0
<CURRENT-LIABILITIES> 28,028 0
<BONDS> 141,838 0
<COMMON> 42 0
79,407 0
0 0
<OTHER-SE> 0 0
<TOTAL-LIABILITY-AND-EQUITY> 256,335 0
<SALES> 0 0
<TOTAL-REVENUES> 72,046 47,966<F1>
<CGS> 0 0
<TOTAL-COSTS> 59,576 37,179
<OTHER-EXPENSES> (131) 1,619<F2>
<LOSS-PROVISION> 5,753 3,543
<INTEREST-EXPENSE> 5,917 3,232
<INCOME-PRETAX> 931 2,393
<INCOME-TAX> 305 163
<INCOME-CONTINUING> 626 2,230
<DISCONTINUED> 0 0
<EXTRAORDINARY> (738) 0<F3>
<CHANGES> 0 0
<NET-INCOME> (112) 2,230
<EPS-PRIMARY> (.73) (.05)
<EPS-DILUTED> 0 0<F4>
<FN>
<F1>Total revenues include other revenue of $2,485 and $2,298 for the six months
ended June 30, 1995 and 1994, respectively.
<F2>Other expenses include depreciation and amortization expense of $3,614 and
$1,619 for the six months ended June 30, 1995 and 1994, respectively. Other
expenses for the six months ended June 30, 1995, also include a credit of
$3,745, representing equity in the earnings of DHHS.
<F3>Extraordinary loss on early extinguishment of debt, net of tax benefit of $380.
<F4>Fully diluted income per share is not presented for the six months ended June
30, 1995 and 1994 as the results are anti-dilutive.
</FN>
</TABLE>
