<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 2
CURRENT REPORT
PURSUANT TO SECTIONS 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED) DECEMBER 6, 1994
COMMISSION FILE NUMBER 0-11851
CHAMPION HEALTHCARE CORPORATION
--------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 0-11851 59-2283872
--------------------------------------------------------------------------------
(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation or organization) File Number) 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)
<PAGE> 2
This Form 8K/A Amendment No. 2 updates the Registrant's report on Form 8-K dated
December 6, 1994, reporting the approval of the merger transaction described in
the Registrant's proxy statement dated November 11, 1994, by the Registrant's
shareholders.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements (attached following the signature page):
Certain financial information of the Registrant and its subsidiaries as
of the dates and for the periods listed below has been previously reported in
the Registrant's Proxy Statement dated November 11, 1994. Additionally, certain
financial information for AmeriHealth, Inc. has been previously reported in its
Form 10-Q for the nine months ended September 30, 1994. Certain financial
information of the Registrant and its subsidiaries as of the dates and for the
periods listed below has been previously reported in the Registrant's Form 8-K/A
(Amendment No. 1) amending Form 8-K dated December 6, 1994. Accordingly, such
information is not being included in reliance on General Instructions B.3 to
Form 8-K because it has been previously reported.
AMERIHEALTH, INC.
Condensed Consolidated Statement of Operations for the eleven months
ended November 30, 1994 (Unaudited)(1)
Condensed Consolidated Statement of Cash Flows for the eleven months
ended November 30, 1994 (Unaudited) (1)
Notes to Condensed Consolidated Financial Statements (Unaudited) (1)
Condensed Consolidated Statement of Financial Position as of September
30, 1994 (Unaudited) (4)
Condensed Consolidated Statement of Operations for the quarter and nine
months ended September 30, 1994 and 1993 (Unaudited) (4)
Condensed Consolidated Statement of Cash Flows for the nine months
ended September 30, 1994 and 1993 (Unaudited) (4)
Notes to Condensed Consolidated Financial Statements (Unaudited) (4)
Consolidated Statement of Financial Position as of December 31, 1993
and 1992(3)
Consolidated Statement of Operations for the years ended December 31,
1993, 1992 and 1991(3)
Consolidated Statement of Shareholders' Equity for the years ended
December 31, 1993, 1992 and 1991(3)
Consolidated Statement of Cash Flows for the years ended December 31,
1993, 1992 and 1991(3)
Notes to Consolidated Financial Statements(3)
CHAMPION HEALTHCARE CORPORATION
Condensed Consolidated Balance Sheet at September 30, 1994
(Unaudited)(2)
Condensed Consolidated Statement of Operations for the nine months
ended September 30, 1994 and 1993(Unaudited) (2)
Condensed Consolidated Statement of Cash Flows for the nine months
ended September 30, 1994 and 1993(Unaudited)(2)
Notes to Condensed Consolidated Financial Statements(Unaudited)(2)
Consolidated Balance Sheets at December 31, 1993 and 1992(3)
Consolidated Statement of Operations for the years ended December 31,
1993, 1992 and 1991(3)
Consolidated Statement of Shareholders' Equity for the years
ended December 31, 1993, 1992 and 1991(3)
Consolidated Statement of Cash Flows for the years ended December 31,
1993, 1992 and 1991(3)
Notes to Consolidated Financial Statements(3)
<PAGE> 3
PSYCHIATRIC HEALTHCARE CORPORATION
Condensed Consolidated Balance Sheet as of September 30, 1994
(Unaudited)(2)
Condensed Consolidated Statement of Operations for the nine months
ended September 30, 1994 and 1993(Unaudited) (2)
Condensed Consolidated Statement of Cash Flows for the nine months
ended September 30, 1994 and 1993(Unaudited)(2)
Notes to Condensed Consolidated Financial Statements(Unaudited)(2)
Consolidated Balance Sheets as of December 31, 1993, 1992 and 1991(3)
Consolidated Statement of Operations for the years ended December 31,
1993, 1992 and 1991(3)
Consolidated Statement of Shareholders' Equity for the years ended
December 31, 1993, 1992 and 1991(3)
Consolidated Statement of Cash Flows for the years ended December 31,
1993, 1992 and 1991(3)
Notes to Consolidated Financial Statements(3)
GULF COAST HOSPITAL(3)
Balance Sheets as of December 31, 1991 and 1990
Statement of Operations for the years ended December 31, 1991 and 1990
Statement of Accumulated Deficit for the years ended December 31, 1991
and 1990
Statement of Cash Flows for the years ended December 31, 1991 and 1990
Notes to Financial Statements
Condensed Balance Sheet as of August 31, 1992(Unaudited)
Condensed Statement of Operations for the eight months ended August 31,
1992(Unaudited)
Condensed Statement of Cash Flows for the eight months ended August 31,
1992(Unaudited)
Notes to Condensed Financial Statements(Unaudited)
MIDLAND PHYSICIANS & SURGEONS HOSPITAL, INC. AND SUBSIDIARY(3)
Balance Sheet as of April 30, 1993, June 30, 1992 and 1991
Statement of Operations for the ten months ended April 30, 1993 and the
years ended June 30, 1993 and 1991
Statementof Stockholders' Equity for the ten months ended April 30,
1993 and the years ended June 30, 1992 and 1991
Statementof Cash Flows for the ten months ended April 30, 1993 and the
years ended June 30, 1992 and 1991
Notes to Financial Statements
<PAGE> 4
ST. ANSGAR HOSPITAL (PREDECESSOR TO HEARTLAND MEDICAL CENTER) (3)
Consolidated Balance Sheet as of August 31, 1992
Consolidated Statement of Revenue and Expenses and Changes in Fund
Balance (Deficiency in Assets) for the eleven months ended
August 31, 1992
Consolidated Statement of Cash Flows for the eleven months ended August
31, 1992
Notes to Consolidated Financial Statements
-
Consolidated Balance Sheets as of September 30, 1991 and 1990
Consolidated Statements of Revenue and Expenses and Changes in Fund
Balance for the years ended September 30, 1991 and 1990
Consolidated Statements of Cash Flows for the years ended September 30,
1991 and 1990 Notes to Consolidated Financial Statements
(1) Included in this Form 8-K/A, Amendment No. 2
(2) Previously reported in this Form 8-K/A, Amendment No. 1
(3) Previously reported in Proxy Statement dated November 11, 1994
(4) Previously reported in AmeriHealth, Inc.'s Form 10-Q for the
nine months ended September 30, 1994
<PAGE> 5
(b) Pro Forma Financial Information:
Champion Combined Company and Dakota Hospital
Pro Forma Combining Income Statement
For the Nine Months Ended September 30, 1994
Pro Forma Combining Income Statement
For the Year Ended December 31, 1993
Pro Forma Combining Balance Sheet
September 30, 1994
Notes to Pro Forma Combining Financial Statements
Champion Combined Group and AmeriHealth, Inc. (Combined Company)
Pro Forma Combining Income Statement
For the Nine Months Ended September 30, 1994
Pro Forma Combining Income Statement
For the Year Ended December 31, 1993
Pro Forma Combining Balance Sheet
September 30, 1994
Notes to Pro Forma Combining Financial Statements
Champion Combined Group
Champion Healthcare Corporation and Psychiatric Healthcare
Corporation
Pro Forma Combining Income Statement
For the Nine Months Ended September 30, 1994
Champion Healthcare Corporation, Midland Physicians and Surgeons
Hospital, Inc. and Psychiatric Healthcare Corporation
Pro Forma Combining Income Statement
For the Year Ended December 31, 1993
Champion Healthcare Corporation and Psychiatric Healthcare Corporation
Pro Forma Combining Balance Sheet, September 30, 1994
Notes to Pro Forma Combining Financial Statements
<PAGE> 6
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
Dated: August 4, 1995 Champion Healthcare Corporation
(Registrant)
By: /s/ James G. VanDevender
-----------------------------
James G. VanDevender
Executive Vice President
and Chief Financial Officer
(Principal Financial Officer)
<PAGE> 7
AMERIHEALTH, INC.
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE ELEVEN MONTHS ENDED NOVEMBER 30, 1994
<PAGE> 8
INDEX
AMERIHEALTH, INC.
<TABLE>
<CAPTION>
Page
Number
------
<S> <C>
FINANCIAL INFORMATION
Condensed consolidated statement of operations for the eleven months
ended November 30, 1994 (unaudited) 3
Condensed consolidated statement of cash flows for the eleven months ended
November 30, 1994 (unaudited) 4
Notes to condensed consolidated financial statements (unaudited) 5
</TABLE>
2
<PAGE> 9
AMERIHEALTH, INC.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Eleven Months
Ended
November 30, 1994
-----------------
<S> <C>
Net patient service revenue $ 35,811
Other income 1,142
--------
Net revenue 36,953
Operating expenses:
Salaries and wages 16,558
Other operating and administrative 16,471
Provision for doubtful accounts 4,163
Interest expense 1,666
Depreciation and amortization 1,909
--------
Total operating expenses 40,767
--------
Operating loss (3,814)
Minority Interest 21
--------
Loss before income taxes (3,793)
Benefit for income taxes 948
--------
Net loss $ (2,845)
========
Net loss $ (2,845)
Series B Preferred Stock dividend requirements (4)
--------
Net loss applicable to common stock $ (2,849)
========
Loss per share:
Primary $ (.20)
========
Fully Diluted $ --
========
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE> 10
AMERIHEALTH, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Eleven Months
Ended
November 30, 1994
-----------------
<S> <C>
Operating activities:
Net loss $(2,845)
Depreciation and amortization 1,909
Provision for doubtful accounts 4,163
Increase in current assets (665)
Decrease in liabilities (530)
-------
Net cash provided by operating activities 2,032
-------
Investing activities:
Additions to property and equipment (835)
Other (201)
Net cash used in investing activities (1,036)
-------
Financing activities:
Payments on debt and capital lease obligations (1,233)
-------
Net cash used in financing activities (1,233)
-------
Decrease in cash and cash equivalents (237)
Cash and cash equivalents at beginning of period 3,493
-------
Cash and cash equivalents at end of period $ 3,256
=======
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE> 11
AMERIHEALTH, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1 -- BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements
of AmeriHealth, Inc. and its subsidiaries ("AmeriHealth") have been
prepared in accordance with generally accepted accounting principles for
interim financial information and in accordance with Rule 3-02 of
Regulation S-X. Accordingly, these financial statements do not include
all of the information and disclosures required by generally accepted
accounting principles for complete financial statements. In the opinion
of management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation of the results for the
periods presented have been reflected.
These financial statements should be read in conjunction with the
audited consolidated financial statements of AmeriHealth for the year
ended December 31, 1993, included in AmeriHealth's definitive Proxy
Statement, dated November 11, 1994, and in conjunction with the Annual
Report of AmeriHealth's successor, Champion Healthcare Corporation
("Champion"), included on Form 10-K, as amended, for the year ended
December 31, 1994.
AmeriHealth merged with Champion on December 6, 1994. The transaction
was accounted for as a reverse acquisition with AmeriHealth as the
surviving entity and Champion as the accounting acquiror. Concurrent
with the merger, the name of the combined company was changed to
Champion Healthcare Corporation, and the combined company adopted
Champion's certificate of incorporation provisions (See "Note 4 --
Subsequent Event").
Net patient service revenues are presented based on established billing
rates less allowances and discounts for patients covered by Medicare,
Medicaid and other contractual programs. Payments received under these
programs are generally less than the established billing rates of
AmeriHealth's hospitals, and the differences are recorded as contractual
allowances or discounts. Such allowances have been deducted from
accounts receivable pending final audit and settlement. Provisions for
contractual allowances and discounts for the eleven months ended
November 30, 1994 were $25,578,000.
In the ordinary course of business, AmeriHealth rendered services
(charity care) in its facilities to patients who are financially unable
to pay for hospital care. The value of these services was not material
to AmeriHealth's Condensed Consolidated Statement of Operations.
NOTE 2 -- SIGNIFICANT ADJUSTMENTS
The results for the eleven months ended November 30, 1994, included
approximately $2,603,000 in merger related expenses, which consisted of
approximately $688,000 in severance costs for certain officers and key
employees, $663,000 in various professional fees, and an additional
$1,252,000 in provision for doubtful accounts (See "Note 4 -- Subsequent
Event").
NOTE 3 -- LOSS PER SHARE
Primary loss per share is computed by dividing loss attributable to
common shareholders (net loss less preferred stock dividend
requirements) by the weighted average number of common shares
outstanding during the eleven months ended November 30, 1994. Common
equivalent shares (consisting of officer and key employee stock options)
were antidilutive and therefore excluded from the calculation of primary
loss per share. Fully diluted per share information was not presented
for the eleven months ended November 30, 1994 due to the antidilutive
effect of such calculation.
For the eleven months ended November 30, 1994, 97,000 shares of Series B
Preferred Stock were converted into 4,850,000 shares of AmeriHealth's
Common Stock. If these conversions had occurred on January 1, 1994,
primary and fully diluted loss per share would have been $0.16 for the
eleven months ended November 30, 1994.
5
<PAGE> 12
AMERIHEALTH, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) --
CONTINUED
NOTE 3 -- LOSS PER SHARE -- CONTINUED
The weighted average number of shares used in computing primary income
per share for the eleven months ended November 30, 1994 was 14,448,505.
NOTE 4 -- SUBSEQUENT EVENT
Merger
On December 6, 1994, AmeriHealth merged with Champion Healthcare
Corporation, a Texas corporation, with AmeriHealth being the surviving
corporation resulting from the merger (the "Combined Company"). The
merger was accounted for as a recapitalization of Champion with Champion
as the acquiror (a reverse acquisition). Concurrent with the merger, the
name of the Combined Company was changed to Champion Healthcare
Corporation, and the Combined Company adopted Champion's certificate of
incorporation provisions.
Pursuant to the merger, the Combined Company: (a) paid a cash
distribution of $0.085 cents per share to all common stockholders of
AmeriHealth, (b) issued one share of its Combined Company common stock
for each 5.70358 shares of the approximately 17.2 million outstanding
shares of AmeriHealth's Common Stock (plus cash in lieu for fractional
shares); (c) one share of Combined Company common stock for each of the
approximately 1.2 million then outstanding shares of Champion common
stock; and (d) one share of newly authorized Combined Company preferred
stock for each of the then outstanding shares of Champion's preferred
stock. The terms of the new voting shares of Combined Company preferred
stock are identical to those of Champion's preferred stock outstanding
prior to the merger. In addition, holders of the outstanding shares of
AmeriHealth's $2.125 Increasing Rate Cumulative Convertible Preferred
Stock were canceled in exchange for cash equal to the redemption price
of such shares plus all unpaid dividends, which totaled approximately
$47,000. The net purchase price, including the assumption of
approximately $17,700,000 in debt, was approximately $38,300,000. The
transaction was subject to the approval by stockholders of each company,
which was obtained on December 6, 1994.
6
<PAGE> 13
PRO FORMA COMBINED SELECTED FINANCIAL DATA
Champion Combined Company and Dakota Hospital
Pro Forma Combining Financial Statements
The following Pro Forma Combining Balance Sheet as of September 30,
1994 and Pro Forma Combining Income Statements for the nine months ended
September 30, 1994 and for the year ended December 31, 1993, illustrate the
effect of the formation of the partnership (the "Partnership") between the
wholly owned subsidiary of Champion Healthcare Corporation, a Delaware
Corporation, (the "Company") that owned Heartland Medical Center ("HMC"), a 139
bed general acute care hospital in Fargo, North Dakota and Dakota Hospital
("Dakota"), a North Dakota not-for-profit corporation that owned Dakota
Hospital, a 199 bed general acute care hospital in Fargo, North Dakota. The
partnership is operated as Dakota Heartland Health System ("DHHS"). The Pro
Forma Combining Balance Sheet assumes that the Partnership was formed on
September 30, 1994 and the Pro Forma Combining Income Statements assume the
Partnership was formed on January 1, 1993.
In connection with the formation of the Partnership, the Company and
Dakota contributed their respective hospitals both debt and lien free (except
capitalized leases), and the Company contributed an additional $20,000,000 in
cash, each in exchange for 50% ownership in the Partnership. In addition, each
partner contributed $2,000,000 in cash to the working capital of the
Partnership. A $20,000,000 special distribution was made to Dakota after
capitalization of the Partnership in accordance with the terms of the
Partnership agreement. The ownership interest acquired by each partner was based
on the value of the assets contributed to the Partnership.
Also on December 21, 1994, the Company entered into an operating
agreement with the Partnership and Dakota to manage the combined operations of
the two hospitals. Under the terms of the Partnership agreement, the Company is
obligated to advance funds to the Partnership to cover any and all operating
deficits of the Partnership. The Company will receive 55% of the net income and
distributable cash flow ("DCF") of the Partnership until such time as it has
recovered on a cumulative basis an additional $10,000,000 of DCF in the form of
an "excess" distribution. The Company accounts for its investment in DHHS under
the equity method. DHHS began operations on December 31, 1994.
The Partnership is administered by a Governing Board comprised of
six members appointed by Dakota, three members appointed by the Company and
three members appointed by mutual consent of the Dakota members and the Company
members. Certain Governing Board actions require the majority approval of each
of the Company members and Dakota members. Because the partners through the
Partnership agreement have delegated management of the Partnership to the
Company through the operating agreement, the authority of the Governing Board is
limited.
From the 19th month after the commencement of the Partnership,
Dakota has the right to require the Company to purchase its Partnership interest
free of debt or liens for a cash purchase price equal to 5.5 times earnings
before depreciation, interest, income taxes and amortization less Dakota's
pro-rata share of the Partnership's long-term debt. From the 37th month after
the commencement of the Partnership, the purchase price for Dakota's Partnership
interest shall not be less than $50,000,000. After receipt of written notice of
Dakota's intent to sell its Partnership interest, the Company would have 12
months to complete the purchase. Should the Company not complete the purchase
during this period, Dakota would have the right to, among others, (i) terminate
the operating agreement and engage an outside party to manage the hospital, (ii)
replace the Company's designees to the Governing Board and (iii) enter into a
fair market value transaction to sell substantially all of the Partnership's
assets. The Company would likely finance the purchase through bank or other
borrowings.
The Pro Forma Combining Financial Statements should be read in
conjunction with the Company's consolidated financial statements for the year
ended December 31, 1994, included in the Company's Annual Report on Form 10K, as
amended, the Company's condensed consolidated financial statements for the
quarter ended March 31, 1995 (unaudited), included in the Company's Quarterly
Report on Form 10-Q, as amended, and Dakota's
1
<PAGE> 14
financial statements for the years ended September 31, 1994 and 1993 and for the
quarter ended December 31, 1994 (unaudited), included in the Company's report on
Form 8-K/A, Amendment No. 2, dated December 21, 1994.
The Pro Forma Combining Financial Statements are presented for
comparative purposes only and are not intended to be indicative of actual
results had the transactions occurred as of the dates indicated above, nor do
they purport to indicate results which may be attained in the future.
2
<PAGE> 15
CHAMPION COMBINED COMPANY AND DAKOTA HOSPITAL
PRO FORMA COMBINING INCOME STATEMENT
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1994
(Thousands, except per share data)
<TABLE>
<CAPTION>
Champion
Combined Pro Forma Pro Forma
Company Adjustments Reference Combined
------- ----------- --------- --------
<S> <C> <C> <C> <C>
Total revenue $ 121,803 $ (558) (1) $ 91,255
(29,990) (2)
Expenses:
Salaries and benefits 47,961 (10,434) (2) 37,527
Supplies 13,517 (3,787) (2) 9,730
Other operating expenses 33,902 (8,176) (2) 25,726
Provision for bad debts 10,096 (689) (2) 9,407
Interest 7,421 (28) (2) 7,393
Depreciation and amortization 5,959 (489) (2) 5,470
Equity in earnings of DHHS -- (4,558) (3) (4,558)
--------- --------- ---------
Total expenses 118,856 (28,161) 90,695
--------- --------- ---------
Operating income 2,947 (2,387) 560
Minority interest (164) (164)
--------- --------- ---------
Income before taxes 2,783 (2,387) 396
(Provision) benefit for income taxes (73) 945 (5) 872
--------- --------- ---------
Income from continuing operations 2,710 (1,442) 1,268
Adjustments to arrive at income applicable to
common stock (3,795) (3,795)
--------- --------- ---------
Loss from continuing operations
applicable to common stock $ (1,085) $ (1,442) $ (2,527)
========= ========= =========
Loss from continuing operations per
common and common equivalent share $ (0.25) $ (0.59)
========= =========
Shares used in loss from continuing operations per
common and common equivalent share
computation (in thousands): 4,260 4,260
========= =========
</TABLE>
See notes to pro forma combining financial statements (Champion Combined Company
and Dakota Hospital).
3
<PAGE> 16
CHAMPION COMBINED COMPANY AND DAKOTA HOSPITAL
PRO FORMA COMBINING INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 1993
(Thousands, except per share data)
<TABLE>
<CAPTION>
Champion
Combined Pro Forma Pro Forma
Company Adjustments Reference Combined
------- ----------- --------- --------
<S> <C> <C> <C> <C>
Total revenue $ 160,796 $ (39,182) (2) $ 121,614
Expenses:
Salaries and benefits 67,675 (14,944) (2) 52,731
Supplies 25,252 (5,411) (2) 19,841
Other operating expenses 39,144 (9,072) (2) 30,072
Provision for bad debts 11,477 (1,541) (2) 9,936
Interest 7,221 2,143 (2)(4) 9,364
Depreciation and amortization 8,568 (577) (2) 7,991
Equity in earnings of DHHS -- (3,908) (3) (3,908)
Asset write-off 15,456 -- 15,456
--------- --------- ---------
Total expenses 174,793 (33,310) 141,483
--------- --------- ---------
Operating loss (13,997) (5,872) (19,869)
Minority interest (234) (234)
--------- --------- ---------
Loss before taxes (14,231) (5,872) (20,103)
(Provision) benefit for income taxes (1,289) 2,009 (5) 720
--------- --------- ---------
Loss from continuing operations (15,520) (3,863) (19,383)
Adjustments to arrive at loss applicable to
common stock (2,036) (2,036)
--------- --------- ---------
Loss from continuing operations
applicable to common stock $ (17,556) $ (3,863) $ (21,419)
========= ========= =========
Loss from continuing operations per
common and common equivalent share $ (4.24) $ (5.18)
========= =========
Shares used in loss from continuing operations
per common and common equivalent share
computation (in thousands): 4,136 4,136
========= =========
</TABLE>
See notes to pro forma combining financial statements (Champion Combined Company
and Dakota Hospital).
4
<PAGE> 17
CHAMPION COMBINED COMPANY AND DAKOTA HOSPITAL
PRO FORMA COMBINING BALANCE SHEET
SEPTEMBER 30, 1994
(Dollars in thousands)
<TABLE>
<CAPTION>
Champion
Combined Pro Forma Pro Forma
Company Adjustments Reference Combined
------- ----------- --------- --------
<S> <C> <C> <C> <C>
ASSETS:
CURRENT ASSETS:
Cash and cash equivalents $ 47,061 $(22,250) (6) $ 24,811
Restricted cash 201 201
Accounts receivable, net 28,173 (7,208) (7) 20,965
Supplies inventory 2,400 (452) (7) 1,948
Other 7,602 (834) (7) 6,768
-------- -------- --------
TOTAL CURRENT ASSETS 85,437 (30,744) 54,693
PROPERTY AND EQUIPMENT, net 85,953 (9,564) 76,389
OTHER ASSETS:
Trusteed funds 1,247 1,247
Deferred charges 4,051 4,051
Goodwill 5,900 5,900
Investment in DHHS -- 37,400 (7) 37,400
Other 5,863 (300) (7) 5,563
-------- -------- --------
TOTAL ASSETS $188,451 $ (3,208) $185,243
======== ======== ========
LIABILITIES AND
SHAREHOLDERS' EQUITY:
CURRENT LIABILITIES:
Current portion of debt and capital
lease obligations $ 4,507 $ (136) (7) $ 4,371
Accounts payable 8,959 (1,361) (7) 7,598
Other current liabilities 8,301 (1,586) (7) 6,715
-------- -------- --------
TOTAL CURRENT LIABILITIES 21,767 (3,083) 18,684
DEBT AND CAPITAL LEASE
OBLIGATIONS 91,290 (125) (7) 91,165
OTHER LONG-TERM LIABILITIES 10,174 10,174
REDEEMABLE PREFERRED STOCK 65,177 65,177
SHAREHOLDERS' EQUITY:
Common Stock 45 45
Additional paid-in capital 16,563 16,563
Retained (deficit)/fund balance (16,565) (16,565)
-------- -------- --------
TOTAL SHAREHOLDERS'
EQUITY 43 43
-------- -------- --------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $188,451 $ (3,208) $185,243
======== ======== ========
</TABLE>
See notes to pro forma combining financial statements (Champion Combined Company
and Dakota Hospital).
5
<PAGE> 18
CHAMPION COMBINED COMPANY AND DAKOTA HOSPITAL
NOTES TO PRO FORMA COMBINING FINANCIAL STATEMENTS
The following is a summary of the pro forma adjustments by line item.
Reference to Notes to
Pro Forma Financial
Statements Explanations
--------------------- --------------------------------------------------
(1) To reflect a decrease in interest earnings for the
pro forma decrease in cash. This adjustment
assumes the Company's $20,000,000 capital
contribution to the Partnership and its $2,000,000
contribution to Partnership working capital were
made from available cash at January 1, 1994.
Interest earnings are computed at 3.38%, the
Company's average investment rate for the period.
Revenue for the period ended December 31, 1993 did
not include interest revenue; therefore, a pro
forma reduction in interest earnings is not needed
for such period.
(2) To remove the historical operating results of HMC
for the nine months ended September 30, 1994, and
the year ended December 31, 1993.
(3) The Company is entitled to 55% of the first $100
million in net income of the Partnership, after
which net income will be allocated on a 50/50
basis. The following represents the income
allocation.
<TABLE>
<CAPTION>
September 30, December 31,
1994 1993
---- ----
<S> <C> <C>
Dakota operating income (loss) $ 214 $ (855)
Pro forma adjustments to Dakota
operating income (loss)(a) 1,686 382
------ -------
Dakota pro forma operating income
(loss) attributable to the
Partnership 1,900 (473)
Heartland Medical Center operating
income attributable to the
Partnership 6,387 7,580
------ -------
Pro forma Partnership operating income 8,287 7,107
Company's equity participation in the
pro forma earnings of DHHS 55% 55%
------ -------
Company's equity in the pro forma
earnings of DHHS $4,558 $ 3,908
====== =======
</TABLE>
(a) To remove interest expense associated with
debt not contributed to the Partnership and
gains on investments not contributed to the
Partnership. The pro forma adjustment to
interest expense was approximately $1,708,000
and $1,591,000, respectively, for the nine
months ended September 30, 1994 and the year
ended December 31, 1993. The pro forma
adjustment to gains on investment was
approximately $22,000 and $1,209,000,
respectively, for the comparable periods.
(4) To reflect a pro forma increase in interest
expense of approximately $2,000,000. The pro forma
results for the year ended December 31, 1993,
assume the funds required to fund the Company's
$20,000,000 capital contribution to the
Partnership and its $2,000,000 contribution to the
Partnership's working capital were obtained at
10%, the Company's borrowing rate under its prior
Senior Subordinated Notes at January 1, 1993.
(5) To reflect the pro forma benefit for income taxes
due to the inclusion of the acquired operations
and the pro forma allocation of HMC operating
income to the Dakota partner.
6
<PAGE> 19
CHAMPION COMBINED COMPANY AND DAKOTA HOSPITAL
NOTES TO PRO FORMA COMBINING FINANCIAL STATEMENTS
The following is a summary of the pro forma adjustments by line item.
Reference to Notes to
Pro Forma Financial
Statements Explanations
--------------------- --------------------------------------------------
(6) To record the Company's $20,000,000 capital
contribution to the Partnership and its $2,000,000
contribution to the Partnership's working capital.
The Company also incurred approximately $250,000
in costs associated with the Partnership's
formation.
(7) To remove HMC assets and liabilities contributed
to DHHS.
7
<PAGE> 20
PRO FORMA COMBINED SELECTED FINANCIAL DATA
CHAMPION COMBINED GROUP AND AMERIHEALTH, INC.
(COMBINED COMPANY)
PRO FORMA COMBINING FINANCIAL STATEMENTS
The following Pro Forma Combining Balance Sheet as of September 30,
1994 and Pro Forma Combining Income Statements for the nine months ended
September 30, 1994 and for the year ended December 31, 1993, illustrate the
effect of the merger (the "Merger") of Champion Healthcare Corporation, a Texas
Corporation, ("Old Champion") with AmeriHealth, Inc. on December 6, 1994. The
Pro Forma Combining Balance Sheet assumes that the Merger occurred on September
30, 1994, and the Pro Forma Combining Income Statements assume that the Merger
occurred on January 1, 1993.
In connection with the consummation of the Merger, holders of the
AmeriHealth ("AHH") Common Stock received one share of Combined Company Common
Stock for each 5.70358 shares of AHH Common Stock and cash in lieu of fractional
shares. Holders of AHH Series B Preferred Stock not converted into AHH Common
Stock received cash equal to the redemption price of such shares plus accrued
dividends. Such shares were then canceled in connection with the Merger. Also,
in connection with the Merger, the Combined Company issued shares of the
Combined Company Common Stock and issued five new series of preferred stock of
the Combined Company to the Old Champion shareholders in exchange for their Old
Champion Common and Preferred Stock.
AHH declared and paid dividends on the AHH Common Stock and AHH Series
B Preferred Stock as follows: (a) to holders of record of the AHH Common Stock
at the close of business on the business day immediately preceding the date of
consummation of the Merger in the amount of 8 1/2 cents ($0.085) per share; and
(b) to holders of record of the AHH Series B Preferred Stock immediately prior
to consummation of the Merger in the amount of $21.72 per share. The foregoing
dividend payments were conditioned upon consummation of the Merger.
The Merger was accounted for as a purchase transaction. For accounting
purposes, the Company was deemed to be the surviving entity of the Merger with
the name of the Combined Company changed to Champion Healthcare Corporation, a
Delaware Corporation.
These Pro Forma Combining Financial Statements should be read in
conjunction with the Company's consolidated financial statements for the year
ended December 31, 1994, included in the Company's Annual Report on Form 10K, as
amended, the Company's condensed consolidated financial statements for the
quarter ended March 31, 1995 (unaudited), included in the Company's Quarterly
Report on Form 10-Q, as amended, the historical financial statements of
AmeriHealth, Inc. included in the definitive Proxy Statement of AmeriHealth,
Inc., dated November 11, 1994, the AmeriHealth, Inc. Form 10-Q for the nine
months ended September 30, 1994 (unaudited), and elsewhere herein.
The Pro Forma Combining Financial Statements are presented for
comparative purposes only and are not intended to be indicative of actual
results had the transactions occurred as of the dates indicated above, nor do
they purport to indicate results which may be attained in the future.
8
<PAGE> 21
CHAMPION COMBINED GROUP AND AMERIHEALTH, INC.
PRO FORMA COMBINING INCOME STATEMENT
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1994
(THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Champion
Combined Pro Forma Pro Forma
Group AmeriHealth Adjustments Reference Combined
---- ----------- ----------- --------- --------
<S> <C> <C> <C> <C> <C>
Total revenue $ 89,739 $ 32,270 $ (206) (1) $121,803
Expenses:
Salaries and benefits 35,065 12,896 47,961
Supplies 9,163 4,354 13,517
Other operating expenses 25,130 8,772 33,902
Provision for bad debts 7,646 2,450 10,096
Interest 6,600 1,335 (514) (2) 7,421
Depreciation and amortization 3,597 1,543 819 (3) 5,959
-------- -------- -------- --------
Total expenses 87,201 31,350 305 118,856
-------- -------- -------- --------
Operating income 2,538 920 (511) 2,947
Minority interest (164) (164)
-------- -------- -------- --------
Income before taxes 2,538 756 (511) 2,783
Benefit (provision) for income taxes 32 (274) 169 (4) (73)
-------- -------- -------- --------
Income from continuing operations 2,570 482 (342) 2,710
Adjustments to arrive at (loss) income from
continuing operations applicable to common
stock (3,795) (82) 82 (6) (3,795)
-------- -------- -------- --------
Net (loss) income from continuing
operations applicable to common stock $ (1,225) $ 400 $ (260) $ (1,085)
======== ======== ======== ========
(Loss) income from continuing
operations per common and common
equivalent share $ (1.01) $ 0.03 $ (0.25)
======== ======== =======
Shares used in (loss) income from continuing
operations per common and common equivalent
share computation (in thousands): 1,209 14,098 (11,047) (7) 4,260
======== ======== ======== =======
</TABLE>
See notes to pro forma combining financial statements (Champion Combined Group
and AmeriHealth, Inc.).
9
<PAGE> 22
CHAMPION COMBINED GROUP AND AMERIHEALTH, INC.
PRO FORMA COMBINING INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 1993
(Thousands, except per share data)
<TABLE>
<CAPTION>
Champion
Combined Pro Forma Pro Forma
Group AmeriHealth Adjustments Reference Combined
--------- ----------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C>
Total revenues $ 116,499 $ 44,297 $ 160,796
Expenses:
Salaries and benefits 49,512 18,163 67,675
Supplies 18,887 6,365 25,252
Other operating expenses 26,628 12,516 39,144
Provision for bad debts 8,596 2,881 11,477
Interest 5,315 1,707 $ 199 (2) 7,221
Depreciation and amortization 5,276 2,200 1,092 (3) 8,568
Asset write-off 15,456 -- 15,456
--------- --------- --------- ---------
Total expenses 129,670 43,832 1,291 174,793
--------- --------- --------- ---------
Operating (loss) income (13,171) 465 (1,291) (13,997)
Minority interest -- (234) (234)
--------- --------- --------- ---------
(Loss) income before taxes (13,171) 231 (1,291) (14,231)
Provision for income taxes (30) (1,327) 68 (4)(5) (1,289)
--------- --------- --------- ---------
Loss from continuing operations (13,201) (1,096) (1,223) (15,520)
Adjustments to arrive at loss from continuing
operations applicable to common stock (2,036) (353) 353 (6) (2,036)
--------- --------- --------- ---------
Loss from continuing operations
applicable to common stock $ (15,237) $ (1,449) $ (870) $ (17,556)
========= ========= ========= =========
Loss from continuing operations per
common and common equivalent share $ (13.58) $ (0.11) $ (4.24)
========= ========= =========
Shares used in loss from continuing operations
per common and common equivalent share
computation (in thousands): 1,122 13,188 (10,174) (7) 4,136
========= ========= ========= =========
</TABLE>
See notes to pro forma combining financial statements (Champion Combined Group
and AmeriHealth, Inc.).
10
<PAGE> 23
CHAMPION COMBINED GROUP AND AMERIHEALTH, INC.
PRO FORMA COMBINING BALANCE SHEET
SEPTEMBER 30, 1994
(Dollars in thousands)
<TABLE>
<CAPTION>
Champion
Combined Pro Forma Pro Forma
Group AmeriHealth Adjustments Reference Combined
-------- ----------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C>
ASSETS:
CURRENT ASSETS:
Cash and cash equivalents $ 58,218 $ 1,981 $(11,629) (8) $ 47,061
(1,509) (9)
Restricted cash -- 649 (448) (8) 201
Accounts receivable, net 22,117 6,056 28,173
Supplies inventory 1,496 904 2,400
Other 3,314 2,617 1,671 (11) 7,602
-------- ------- -------- --------
TOTAL CURRENT ASSETS 85,145 12,207 (11,915) 85,437
PROPERTY AND EQUIPMENT, net 48,601 18,796 18,556 (11) 85,953
OTHER ASSETS:
Trusteed funds -- 1,247 1,247
Deferred charges 4,051 -- 4,051
Goodwill 5,900 -- 5,900
Other 5,067 796 5,863
-------- ------- -------- --------
TOTAL ASSETS $148,764 $33,046 $ 6,641 $188,451
======== ======= ======== ========
LIABILITIES AND
SHAREHOLDERS' EQUITY:
CURRENT LIABILITIES:
Current portion of debt and
capital lease obligations $ 3,402 $ 9,621 $(8,516) (8) $ 4,507
Accounts payable 6,802 2,157 8,959
Other current liabilities 5,807 2,494 8,301
-------- ------- -------- --------
TOTAL CURRENT LIABILITIES 16,011 14,272 (8,516) 21,767
DEBT AND CAPITAL LEASE
OBLIGATIONS 80,505 10,785 91,290
OTHER LONG-TERM LIABILITIES 3,485 1,284 5,405 (11) 10,174
REDEEMABLE PREFERRED STOCK 65,177 65,177
SHAREHOLDERS' EQUITY:
Series B Preferred Stock -- 812 (812) (10)(11) --
Common Stock 151 167 (273) (11) 45
Additional paid-in capital -- 8,728 9,344 (11) 16,563
(1,509) (9)
Retained deficit (16,565) (3,002) 3,002 (11) (16,565)
-------- ------- -------- --------
TOTAL SHAREHOLDERS'
EQUITY (16,414) 6,705 9,752 43
-------- ------- -------- --------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $148,764 $33,046 $ 6,641 $188,451
======== ======= ======== ========
</TABLE>
See notes to pro forma combining financial statements (Champion Combined Group
and AmeriHealth, Inc.).
11
<PAGE> 24
CHAMPION COMBINED GROUP AND AMERIHEALTH, INC.
NOTES TO PRO FORMA COMBINING FINANCIAL STATEMENTS
The following is a summary of the pro forma adjustments by line item.
Reference to Notes to Pro
Forma Financial
Statements Explanations
------------------------- -----------------------------------------------
(1) To reflect a decrease in interest earnings for
the pro forma decrease in cash. This adjustment
assumes the $8,516,000 loan held by the
Resolution Trust Corporation (the "RTC Loan")
was retired from available cash at January 1,
1994, net of a discount of approximately
$384,000 obtained by the Company concurrent with
the Merger. Interest earnings are computed at
3.38%, the Company's average investment rate for
the period. Revenue for the period ended
December 31, 1993 did not include interest
revenue; therefore, a pro forma reduction in
interest earnings is not needed for such period.
(2) Concurrent with the Merger, the Company retired
the RTC Loan from available funds. The Pro Forma
Combining Income Statement for the nine months
ended September 30, 1994 assumes the Company
retired the RTC Loan ($8,516,000 principle
amount net of a discount of approximately
$384,000) from funds that became available as a
result of the Company's December 31, 1993
issuance of Series D Preferred Stock and related
11% Senior Subordinated Notes. The pro forma
results for the year ended December 31, 1993
assume the funds to retire the RTC Loan were
obtained at 10%, the Company's borrowing rate
under its prior Senior Subordinated Notes at
January 1, 1993.
(3) To adjust depreciation expense based upon the
step up in basis for the depreciable assets of
AHH. The acquired assets are estimated to have
an average remaining useful life of
approximately 17 years based upon management's
assumption that a hospital's depreciable assets
consist of approximately 50% buildings with a 30
year life and 50% equipment with a five year
life.
(4) To reflect the pro forma provision for income
taxes due to the inclusion of the acquired
operations. For the purposes of the pro forma
provision for income taxes, loss carryovers of
the Company can be utilized to reduce the
provision for income taxes.
(5) AHH's tax provision includes a valuation
allowance of approximately $1,234,000 recognized
by AHH in 1993 to offset tax assets related to
operating loss and tax credit carryforwards, net
of reversing deferred tax credits. The valuation
allowance was recognized as a result of the
RTC's decision not to extend the maturity of
AHH's debt. This change in circumstance raised
substantial doubt about AHH's ability to realize
the deferred tax assets recorded as a result of
the AHH's adoption of Statement of Financial
Accounting Standards No. 109, "Accounting for
Income Taxes."
(6) To reverse the dividend requirement on the AHH's
Series B Preferred Stock. For pro forma
purposes, 28,100 AHH Series B shares are assumed
to be converted into Combined Company Common
Stock in connection with the consummation of the
Merger with the remaining 1,000 shares of AHH
Series B redeemed at a redemption price of
$25.50 per share plus accrued dividends of
$21.72 per share.
12
<PAGE> 25
CHAMPION COMBINED GROUP AND AMERIHEALTH, INC.
NOTES TO PRO FORMA COMBINING FINANCIAL STATEMENTS
Reference to Notes to Pro
Forma Financial
Statements Explanations
------------------------- -----------------------------------------------
(7) To adjust common and common equivalent shares
used to calculate income (loss) from continuing
operations per share. The pro forma adjustment
reflects the following events:
(a) The exchange of each 5.70358 shares of the
AHH common and common equivalent shares
into one share of the Combined Company
Common Stock. At September 30, 1994,
AHH's common and common equivalent shares
would have decreased from 14,098,000
shares to 2,472,000 common and common
equivalent shares of the Combined Company
Common Stock, and at December 31, 1993,
AHH's common and common equivalent shares
would have decreased from 13,188,000
shares to 2,312,000 common and common
equivalent shares of the Combined Company
Common Stock.
(b) The Company purchased 880,000 shares of
the AHH's Common Stock in a private
transaction. In connection with the
Merger, these shares were retired,
resulting in a reduction of 154,000
shares of Combined Company Common Stock
that would have otherwise been issued.
The common shareholders of the Old Champion
received one share of the Combined Company
Common Stock for each share of Old Champion
Common Stock outstanding prior to the merger.
The preferred shareholders of the Old Champion
received one share of Combined Company Preferred
Stock for each share of Old Champion Preferred
Stock outstanding prior to the merger.
Therefore, the Company's common equivalent
shares at September 30, 1994 and December 31,
1993 are not adjusted as a result of the Merger.
Additionally, AHH Series B Preferred Stock
outstanding of 29,100 and 98,000 shares
convertible into 1,455,000 and 4,900,000 common
shares at September 30, 1994 and December 31,
1993, respectively, were not used in the
historical equivalent share computation due to
the anti-dilutive effect of such inclusion. The
Pro Forma Combining Income Statement reflects
the exchange of all but 1,000 shares of AHH
Series B Preferred Stock for AHH Common Stock
before the Merger was consummated. Therefore,
based on the outstanding shares listed above,
AHH Series B Preferred Stock will exchange into
246,000 shares and 850,000 shares of Combined
Company Common Stock at September 30, 1994 and
December 31, 1993, respectively.
The following table summarizes the adjustments
to shares used in the calculation of income
(loss) from continuing operations per common and
common equivalent share:
<TABLE>
<CAPTION>
September 30, December 31,
1994 1993
------------- ------------
<S> <C> <C>
Adjustment to AHH's common and common
equivalent shares for the exchange
ratio (a) 11,626 10,876
AHH common shares canceled (b) (726) (726)
Dilutive effect of shares of AHH Common Stock
issued in exchange for shares of AHH Series
B Preferred Stock during the period and AHH
Series B Preferred Shares canceled in
connection with the Merger. 147 24
-------- --------
11,047 10,174
======== ========
</TABLE>
13
<PAGE> 26
CHAMPION COMBINED GROUP AND AMERIHEALTH, INC.
NOTES TO PRO FORMA COMBINING FINANCIAL STATEMENTS
Reference to Notes to Pro
Forma Financial
Statements Explanations
------------------------- -----------------------------------------------
(8) To record the following cash payments in
connection with the merger:
<TABLE>
<S> <C>
Payment for stock purchase $ 660
Retirement of RTC debt, net of $384 discount
(see Note 11) 8,132
Merger expenses 3,285
-------
$12,077
=======
</TABLE>
(9) To record the pro forma cash dividend paid per
AHH Common and Preferred share at the
consummation of the Merger based on the
following shares:
<TABLE>
<CAPTION>
Dividend
Shares Amount
------ --------
<S> <C> <C>
AHH Common shares outstanding on
record date 16,669 $1,417
AHH Preferred shares converted into
Common shares (28,100 x 50) 1,405 120
AHH Preferred shares redeemed plus
accrued dividends -- 47
Less Champion owned shares (880) (75)
------ ------
17,194 $1,509
====== ======
</TABLE>
(10) To record the conversion of 28,100 shares of AHH
Series B Preferred Stock into 1,405,000 shares
of AHH Common Stock subsequent to September 30,
1994. Additionally, the pro forma reflects the
subsequent redemption of the remaining 1,000
shares of AHH Series B Preferred Stock at a
redemption price of $25.50 per share and the
payment of accrued dividends of $21.72 per
share. The pro forma entry consists of the
following:
<TABLE>
<CAPTION>
Shares Book Value
------ ----------
<S> <C> <C>
AHH Series B Preferred Stock converted into
Common Stock subsequent to
September 30, 1994 28 $ 765
Redemption of AHH Series B Preferred Stock
plus accrued dividends 1 47
----- -------
Total 29 $ 812
===== =======
</TABLE>
(11) To record the Merger using the purchase method
of accounting, including the adjustment of the
AHH's balance sheet to reflect the estimated
fair market value of its property based on
$0.9375 per share market price of AHH Common
Stock as of the Merger Agreement date. The
Merger Agreement does not specify the AHH Common
Stock market price to be used in the calculation
of the purchase price. The purchase price
allocation reflected in these pro forma
financial statements is based upon independent
appraisals of AHH's facilities obtained by AHH's
management prior to the Merger. For purposes of
allocation of the acquisition costs among the
various assets acquired, the Combined Company
has allocated the excess acquisition cost over
the carrying value of the acquired assets to
property, plant and equipment. Management does
not expect the final allocation of acquisition
costs to be materially different from that
assumed in the Pro Forma Combining Financial
Statements.
14
<PAGE> 27
CHAMPION COMBINED GROUP AND AMERIHEALTH, INC.
NOTES TO PRO FORMA COMBINING FINANCIAL STATEMENTS
Reference to Notes to Pro
Forma Financial
Statements Explanations
------------------------- -----------------------------------------------
(11) (Continued)
The following table summarizes the calculation
of the purchase price allocation (in thousands):
<TABLE>
<S> <C> <C>
AmeriHealth, Inc. total common and common equivalent
shares outstanding (a) 19,180
Shares to be canceled (880)
---------
18,300
Weighted average share price $ 0.9375
---------
Value of Common Stock $ 17,156
Less proceeds from options assumed exercised (699)
Plus cash paid for stock purchase 660
---------
17,117
Plus: estimated merger expenses 3,285
long-term deferred tax liability recorded as a result of
the merger 5,405
Less: short-term deferred tax asset recorded as a result of
the merger (1,671)
discount on RTC Loan (384)
Less: AmeriHealth, Inc. equity (6,705)
Cash paid to redeem AHH Series B
Preferred Stock and related accrued
interest (See Note 9) 47
Cash dividend paid per AHH Common
Stock share (See Note 9) 1,462
------
Net AmeriHealth, Inc. equity (5,196)
---------
Total purchase price allocated to property &
equipment $ 18,556
=========
</TABLE>
(a) AmeriHealth, Inc. total common and common
equivalent shares consist of the
following components as of September 30,
1994:
<TABLE>
<S> <C>
Common shares outstanding 16,669
Conversion of Series B Preferred Stock (29,100
shares outstanding, 28,100 converted) 1,405
Options assumed exercised 1,106
---------
AmeriHealth, Inc. total common and common
equivalent shares outstanding 19,180
=========
</TABLE>
15
<PAGE> 28
CHAMPION COMBINED GROUP
PRO FORMA COMBINING FINANCIAL STATEMENTS
The following Pro Forma Combining Balance Sheet as of September 30,
1994 and the Pro Forma Combining Income Statements for the nine months ended
September 30, 1994 and the year ended December 31, 1993 illustrate the effect of
the acquisition by the Company of Psychiatric Healthcare Corporation ("PHC") on
October 21, 1994. The Pro Forma Combining Balance Sheet assumes that the PHC
acquisition occurred on September 30, 1994 and the Pro Forma Combining Income
Statements assume that the PHC acquisition occurred at the beginning of the
earliest period presented and that the Company's acquisition of Midland
Physicians and Surgeons Hospital, Inc. ("MPS") on May 1, 1993 had occurred as of
January 1, 1993. Additionally, the Pro Forma Combining Income Statement for the
year ended December 31, 1993 assumes that PHC's acquisition of two psychiatric
facilities on April 13, 1993, had occurred as of January 1, 1993.
The Company acquired the two operating and one closed psychiatric
hospitals of PHC by merger of PHC with and into a wholly-owned subsidiary of the
Company. The PHC acquisition was accounted for as a purchase transaction. Total
consideration issued to the PHC shareholders was approximately $12,000,000
(including a "contingent" consideration feature of up to $2,000,000) through the
issuance of a combination of Company Series D Preferred Stock and 11% Senior
Subordinated Notes with detachable Warrants and the assumption of $14,784,000 of
long-term debt. The contingent consideration will be issued if within the next
two years PHC receives up to $2,000,000 in payments from some combination of the
sale of the Sherman, Texas facility, the resolution of a Medicaid lawsuit
against the State of Missouri or the receipt by the Louisiana facility of more
than $500,000 in specified Medicaid and indigent payments. In March 1995, the
Company sold the Texas facility for approximately $1,300,000 to an unrelated
third party; accordingly, the Company expects to issue additional preferred
stock, notes and detachable warrants as required under the PHC purchase
agreement. Based on a preliminary allocation of the purchase price,
approximately $5,900,000 in excess purchase price has been assigned to goodwill,
which the Company will amortize over a period of 20 years.
These Pro Forma Combining Financial Statements should be read in
conjunction with the historical financial statements of PHC, MPS and the Company
included in the definitive Proxy Statement of AmeriHealth, Inc., date November
11, 1994 and PHC's condensed consolidated financial statements for the nine
months ended September 30, 1994 (unaudited), included in the Company's report on
Form 8-K/A, Amendment No. 1, dated December 6, 1994.
The Pro Forma Combining Financial Statements are presented for
comparative purposes only and are not intended to be indicative of actual
results had the transaction occurred as of the dates indicated above, nor do
they purport to indicate results which may be attained in the future.
16
<PAGE> 29
CHAMPION HEALTHCARE CORPORATION AND PSYCHIATRIC HEALTHCARE CORPORATION
PRO FORMA COMBINING INCOME STATEMENT
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1994
(Thousands, except per share data)
<TABLE>
<CAPTION>
Pro Forma Pro Forma
Champion Psychiatric Adjustments Reference Combined
-------- ----------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C>
Total revenue $ 71,297 $18,442 $ 89,739
Expenses:
Salaries and benefits 26,853 8,212 35,065
Supplies 9,163 -- 9,163
Other operating expenses 19,753 5,377 25,130
Provision for bad debts 4,702 2,944 7,646
Interest 4,801 1,205 594 (1) 6,600
Depreciation and amortization 2,519 869 209 (2) 3,597
-------- ------- ------- --------
Total expenses 67,791 18,607 803 87,201
-------- ------- ------- --------
Income (loss) before taxes 3,506 (165) (803) 2,538
(Provision) benefit for income taxes (248) 78 202 (3) 32
-------- ------- ------- --------
Income (loss) from
continuing operations 3,258 (87) (601) 2,570
Adjustments to arrive at loss from
continuing operations applicable
to common stock (3,507) (286) (2) (4) (3,795)
-------- ------- ------- --------
Loss from continuing
operations applicable to
common stock $ (249) $ (373) $ (603) $ (1,225)
======== ======= ======= ========
Loss from continuing
operations per common
and common equivalent
share $ (0.21) $ (1.01)
======== ========
Shares used in loss from continuing
operations per common and
common equivalent share
computation (in thousands): 1,209 1,209
======== ========
</TABLE>
See notes to pro forma combining financial statements (Champion Healthcare
Corporation, Midland Physicians and Surgeons Hospital, Inc. and Psychiatric
Healthcare Corporation).
17
<PAGE> 30
CHAMPION HEALTHCARE CORPORATION, MIDLAND PHYSICIANS AND SURGEONS HOSPITAL, INC.
AND PSYCHIATRIC HEALTHCARE CORPORATION
PRO FORMA COMBINING INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 1993
(Thousands, except per share data)
<TABLE>
<CAPTION>
Physicians PHC Pro Forma Pro Forma
Champion & Surgeons Psychiatric Acquisition(8) Adjustments Reference Combined
-------- ---------- ----------- ----------- ----------- --------- ---------
(4 months) (3 months &
13 days)
<S> <C> <C> <C> <C> <C> <C> <C>
Total revenue $ 89,832 $ 4,276 $20,058 $2,333 $116,499
Expenses:
Salaries and benefits 36,698 2,034 9,486 1,294 49,512
Supplies 11,641 361 6,760 125 18,887
Other operating expenses 24,033 1,651 -- 944 26,628
Provision for bad debts 5,669 182 2,583 162 8,596
Interest 2,725 95 1,146 390 $ 959 (1) 5,315
Depreciation and
amortization 3,524 240 929 213 370 (2) 5,276
Asset write-down 15,456 -- -- -- 15,456
--------- ------- ------- ------ ------- --------
Total expenses 99,746 4,563 20,904 3,128 1,329 129,670
--------- ------- ------- ------ ------- --------
Loss before taxes (9,914) (287) (846) (795) (1,329) (13,171)
(Provision) benefit for
income taxes (1,009) 104 278 271 326 (3) (30)
--------- ------- ------- ------ ------- --------
Loss from continuing
operations (10,923) (183) (568) (524) (1,003) (13,201)
Adjustments to arrive at loss
from continuing
operations applicable to
common stock (1,652) -- (381) -- (3) (4) (2,036)
--------- ------- ------- ------ ------- --------
Loss from continuing
operations applicable
to common stock $ (12,575) $ (183) $ (949) $ (524) $(1,006) $(15,237)
========= ======= ======= ====== ======= ========
Loss from continuing
operations per
common and
common equivalent
share $ (11.21) $ (13.58)
========= ========
Shares used in loss from
continuing operations per
common and common
equivalent share
computation (in
thousands): 1,122 1,122
========= ========
</TABLE>
See notes to pro forma combining financial statements (Champion Healthcare
Corporation, Midland Physicians and Surgeons Hospital, Inc. and Psychiatric
Healthcare Corporation).
18
<PAGE> 31
CHAMPION HEALTHCARE CORPORATION AND PSYCHIATRIC HEALTHCARE CORPORATION
PRO FORMA COMBINING BALANCE SHEET
SEPTEMBER 30, 1994
(Dollars in thousands)
<TABLE>
<CAPTION>
Pro Forma Pro Forma
Champion Psychiatric Adjustments Reference Combined
-------- ----------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C>
ASSETS:
CURRENT ASSETS:
Cash and cash equivalents $ 56,822 $ 1,737 $ (341) (5) $ 58,218
Accounts receivable, net 18,237 3,880 22,117
Supplies inventory 1,428 68 1,496
Other 2,703 611 3,314
-------- ------- -------- --------
TOTAL CURRENT ASSETS 79,190 6,296 (341) 85,145
PROPERTY AND EQUIPMENT, net 32,792 12,432 3,377 (5)(6) 48,601
OTHER ASSETS:
Deferred charges 4,051 -- 4,051
Goodwill -- 5,900 (5) 5,900
Other 2,607 1,160 1,300 (5)(6) 5,067
-------- ------- -------- --------
TOTAL ASSETS $118,640 $19,888 $ 10,236 $148,764
======== ======= ======== ========
LIABILITIES AND SHAREHOLDERS'
EQUITY:
CURRENT LIABILITIES:
Current portion of debt and capital lease
obligations $ 2,720 $13,052 $(12,370) (7) $ 3,402
Accounts payable 6,002 800 6,802
Other current liabilities 5,112 695 5,807
-------- ------- -------- --------
TOTAL CURRENT LIABILITIES 13,834 14,547 (12,370) 16,011
1,200 (6)
6,000 (5)
DEBT AND CAPITAL LEASE
OBLIGATIONS 58,521 2,414 12,370 (7) 80,505
OTHER LONG-TERM LIABILITIES 2,322 92 1,071 (5) 3,485
800 (6)
4,000 (5)
REDEEMABLE PREFERRED STOCK 60,377 1,860 (1,860) (5) 65,177
SHAREHOLDERS' EQUITY:
Common Stock 151 1 (1) (5) 151
Additional paid-in capital -- 530 (530) (5) --
Retained deficit (16,565) 444 (444) (5) (16,565)
-------- ------- -------- --------
TOTAL SHAREHOLDERS' EQUITY (16,414) 975 (975) (16,414)
-------- ------- -------- --------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $118,640 $19,888 $ 10,236 $148,764
======== ======= ======== ========
</TABLE>
See notes to pro forma combining financial statements (Champion Healthcare
Corporation, Midland Physicians and Surgeons Hospital, Inc. and Psychiatric
Healthcare Corporation).
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<PAGE> 32
CHAMPION HEALTHCARE CORPORATION, MIDLAND PHYSICIANS AND SURGEONS HOSPITAL, INC.
AND PSYCHIATRIC HEALTHCARE CORPORATION
NOTES TO PRO FORMA COMBINING FINANCIAL STATEMENTS
The following is a summary of pro forma adjustments by line item.
Reference to Notes to
Pro Forma Financial
Statements Explanations
--------------------- ------------------------------------------------
(1) To record interest expense on the 11% Senior
Subordinated Notes assumed to be issued in the
acquisition of PHC and on the prior 10% Senior
Subordinated Notes assumed to be issued in the
acquisition of MPS.
(2) To adjust depreciation expense based upon the
step up in basis for the depreciable assets of
PHC. The acquired assets are assumed to have
average remaining estimated useful lives of
approximately 22 and 17 years for PHC and MPS,
respectively. The allocation with respect to PHC
was based on an independent appraisal obtained
by the Company which resulted in the preliminary
allocation of approximately $5,900,000 of excess
purchase price to goodwill, which is being
amortized on a straight line basis using a
twenty year life. The allocation with respect to
MPS is based on management's assumption that an
acute care hospital's assets consist of 50%
buildings and 50% equipment with a 30 year life
and a 5 year life, respectively.
(3) To reflect the pro forma provision for income
taxes due to the inclusion of the acquired
operations.
(4) Pro forma adjustments to arrive at income
applicable to common stock consist of the
following:
<TABLE>
<CAPTION>
September 30, December 31,
1994 1993
---- ----
<S> <C> <C>
Dividend requirements of the Company
Series D Preferred stock issued as
acquisition consideration $ (288) $ (384)
Reversal of dividend requirements on
PHC's Series A and Series B
redeemable convertible Preferred
Stock 286 381
--------- ---------
$ (2) $ (3)
========= =========
</TABLE>
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<PAGE> 33
CHAMPION HEALTHCARE CORPORATION, MIDLAND PHYSICIANS AND SURGEONS HOSPITAL, INC.
AND PSYCHIATRIC HEALTHCARE CORPORATION
NOTES TO PRO FORMA COMBINING FINANCIAL STATEMENTS
Reference to Notes to
Pro Forma Financial
Statements Explanations
--------------------- ------------------------------------------------
(5) To record the acquisition of PHC using the
purchase method of accounting, including the
adjustment of PHC's balance sheet to reflect the
estimated fair market value of its property and
equipment in excess of cost over fair value of
identified tangible assets. The purchase price
allocation reflected in the pro forma financial
statements is based on an independent appraisal
obtained by the Company which resulted in the
preliminary allocation of approximately
$5,900,000 of excess purchase price to goodwill.
It is management's intention to more fully
evaluate the acquired assets and, as a result,
the allocation of the acquisition costs among
the tangible and intangible assets acquired may
change. Management does not expect the final
allocation of acquisition costs to be materially
different from that assumed in the Pro Forma
Combining Financial Statements. The following
table summarizes the calculations of the
purchase price allocation:
<TABLE>
<S> <C>
Value of 11% Senior Subordinated Notes issued as
consideration (including $1,200,000 in contingent
consideration - See Note 7) $ 7,200
Value of the Company's redeemable Series D Preferred Stock
issued as consideration (including $800,000 in contingent
consideration - See Note 7) 4,800
Deferred tax liability recorded as a result of the acquisition 1,071
Transaction costs 341
Less: PHC equity ( 975)
PHC redeemable preferred stock (1,860)
-----------
10,577
Less purchase price allocated to property and equipment based
on a preliminary independent appraisal obtained by the
Company. (3,377)
Less purchase price allocated to assets held for sale (1,300)
-----------
Purchase price allocated to goodwill $ 5,900
===========
</TABLE>
(6) To record up to an additional 44,494 shares of
Series D Preferred Stock ($800,000) and
$1,200,000 of 11% Senior Subordinated Notes with
35,820 detachable warrants the Company agreed to
issue if, within the next two years, PHC
receives up to $2 million from a combination of
sale of the Texas property, a recovery from a
lawsuit and certain specified Medicaid payments,
and to allocate the related cost to the
underlying assets. If amounts received are less
than $2 million, the securities issued will be
reduced proportionately. In March 1995, the
Company sold the Texas facility for
approximately $1,300,000 to an unrelated third
party; accordingly, the Company expects to issue
additional preferred stock, notes and detachable
warrants as required under the PHC purchase
agreement. The pro forma balance sheet reflects
the reclassification of $1,300,000 allocated to
the Texas facility which was held for sale and
included in other assets.
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<PAGE> 34
CHAMPION HEALTHCARE CORPORATION, MIDLAND PHYSICIANS AND SURGEONS HOSPITAL, INC.
AND PSYCHIATRIC HEALTHCARE CORPORATION
NOTES TO PRO FORMA COMBINING FINANCIAL STATEMENTS
Reference to Notes to
Pro Forma Financial
Statements Explanations
--------------------- ------------------------------------------------
(7) To record the Company's pro forma assumption of
PHC's $12,970,000 mortgage note payable, less
the current portion of $600,000 at September 30,
1994. The PHC mortgage note payable was
classified as current because there was an event
of default arising from the closing of the
Sherman, Texas facility. Upon completion of the
PHC acquisition, the Company obtained a
permanent waiver from the lender as part of the
debt assumption; thus, the balance has been
reclassified to non-current.
(8) To reflect the historical operating results for
the period from January 1, 1993 to April 12,
1993 of two psychiatric facilities acquired by
Psychiatric Healthcare Corporation on April 13,
1993.
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