<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For quarter ended June 30, 1996
Commission file number 0-11851
Champion Healthcare Corporation
(Exact name of registrant as specified in its charter)
Delaware 59-2283872
------------------------------- ----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
515 W. Greens Road, Suite 800, Houston, Texas 77067
--------------------------------------------- ---------
(Address of principal executive offices) Zip Code
(713) 873-6623
- --------------------------------------------------------------------------------
(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: 14,457,331 shares outstanding as of
August 9, 1996.
<PAGE> 2
CHAMPION HEALTHCARE CORPORATION
FORM 10Q
INDEX
<TABLE>
<CAPTION>
Page
Number
------
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed consolidated balance sheet (unaudited) --
As of June 30, 1996 and December 31, 1995 . . . . . . . . . . . . . . . . . . . 2
Condensed consolidated statement of operations (unaudited) --
Three and Six Months Ended June 30, 1996 and 1995 . . . . . . . . . . . . . . . 3
Condensed consolidated statement of cash flows (unaudited) --
Three and Six Months Ended June 30, 1996 and 1995 . . . . . . . . . . . . . . 4
Notes to condensed consolidated financial statements . . . . . . . . . . . . . . 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . 8
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . . . . . . . . 11
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
SIGNATURE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
</TABLE>
1
<PAGE> 3
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CHAMPION HEALTHCARE CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
(Dollars in thousands, except share data)
(Unaudited)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1996 1995
--------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 13,273 $ 7,583
Patient accounts receivable, net of allowance for
doubtful accounts 34,725 33,262
Supplies 3,906 3,470
Other current assets 7,741 6,264
---------- -----------
Total current assets 59,645 50,579
Property and equipment 182,014 169,115
Less: Accumulated depreciation and amortization (14,272) (10,733)
---------- -----------
Net property and equipment 167,742 158,382
Investment in Dakota Heartland Health System 52,469 48,145
Other assets 34,983 34,154
---------- -----------
Total assets $ 314,839 $ 291,260
========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt and capital lease obligations $ 2,581 $ 2,467
Accounts payable 10,216 13,952
Other current liabilities 22,045 24,319
---------- -----------
Total current liabilities 34,842 40,738
Long-term debt and capital lease obligations 175,710 162,447
Other long-term liabilities 10,135 10,177
Redeemable preferred stock 46,127 46,029
Stockholders' equity:
Common stock, $.01 par value:
Authorized - 25,000,000 shares, 14,425,493 and 11,868,230
shares issued and outstanding at June 30, 1996
and December 31, 1995, respectively 144 119
Common stock subscribed, 80,000 shares at June 30, 1996
and December 31, 1995, respectively 40 40
Common stock subscription receivable (40) (40)
Paid in capital 61,403 47,643
Accumulated deficit (13,522) (15,893)
---------- -----------
Total stockholders' equity 48,025 31,869
Total liaibilities and stockholders' equity $ 314,839 $ 291,260
========== ===========
</TABLE>
See notes to condensed consolidated financial statements.
2
<PAGE> 4
CHAMPION HEALTHCARE CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(Dollars in thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
--------------------------- -----------------------------
1996 1995 1996 1995
--------- --------- ---------- ----------
<S> <C> <C> <C> <C>
Net patient service revenue $ 50,070 $ 41,936 $ 99,968 $ 69,561
Other revenue 742 1,383 1,525 2,485
--------- --------- ---------- ----------
Net revenue 50,812 43,319 101,493 72,046
--------- --------- ---------- ----------
Cost and expenses:
Salaries and benefits 21,687 18,498 43,693 31,260
Other operating expenses 18,617 17,403 37,849 28,316
Provision for bad debts 3,216 3,680 6,886 5,753
Interest 4,577 3,287 9,164 5,917
Depreciation and amortization 3,274 2,082 6,290 3,614
Equity in earnings of Dakota Heartland Health System (3,789) (2,267) (7,762) (3,745)
Merger costs 1,122 - 1,122 -
--------- --------- ---------- ----------
Total costs and expenses 48,704 42,683 97,242 71,115
--------- --------- ---------- ----------
Income before income taxes and extraordinary loss 2,108 636 4,251 931
Provision (benefit) for income taxes 1,130 (193) 1,880 (75)
--------- --------- ---------- ----------
Income before extraordinary loss 978 829 2,371 1,006
Extraordinary loss on early
extinguishment of debt - (1,118) - (1,118)
--------- --------- ---------- ----------
Net income (loss) $ 978 $ (289) $ 2,371 $ (112)
========= ========= =========== ==========
Income (loss) applicable to common stock $ 929 $ (1,778) $ 2,273 $ (3,092)
========= ========= =========== ==========
Income (loss) per common share:
Primary -
Before extraordinary loss $ 0.06 $ (0.16) $ 0.16 $ (0.47)
Extraordinary loss - (0.26) - (0.26)
--------- --------- ---------- ----------
$ 0.06 $ (0.42) $ 0.16 $ (0.73)
========= ========= =========== ==========
Fully Diluted -
Before extraordinary loss $ 0.05 n/a $ 0.12 n/a
Extraordinary loss - n/a - n/a
--------- --------- ---------- ----------
$ 0.05 n/a $ 0.12 n/a
========= ========= =========== ==========
Weighted average common and common
equivalent shares outstanding:
Primary 14,720 4,244 13,778 4,236
Fully Diluted 19,993 n/a 19,089 n/a
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE> 5
CHAMPION HEALTHCARE CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
--------
1996 1995
---------- -----------
<S> <C> <C>
Operating activities:
Net income $ 2,371 $ (112)
Equity in Dakota Heartland Health System's earnings, net of partnership
distributions (4,324) (3,745)
Non-cash expenses and changes in operating assets and liabilities (194) 11,383
---------- -----------
Net cash provided by (used in) operating activities (2,147) 7,526
---------- -----------
Investing activities:
Additions to property and equipment, net of disposition (5,937) (17,389)
Purchase of facilities (10,746) (58,768)
Investment in Dakota Heartland Health System - (2,000)
Other (624) (1,252)
---------- -----------
Net cash used in investing activities (17,307) (79,409)
---------- -----------
Financing activities:
Proceeds from exercise of stock warrants and options 9,034 696
Proceeds from issuance of long-term debt 29,900 117,905
Payments on long-term debt and capital lease obligations (13,489) (93,096)
Release of restricted funds - 5,000
Other (301) -
---------- -----------
Net cash provided by financing activities 25,144 30,505
---------- -----------
Increase (decrease) in cash and cash equivalents 5,690 (41,378)
Cash and cash equivalents at beginning of year 7,583 48,424
---------- -----------
Cash and cash equivalents at end of period $ 13,273 $ 7,046
========== ===========
</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. Accordingly, they do not include all of the information and notes
required by generally accepted accounting principles for annual financial
statements. In the opinion of management, all adjustments (consisting of
normal recurring accruals) considered necessary for a fair presentation have
been included. The Company's business is seasonal in nature and subject to
general economic conditions and other factors. Accordingly, operating results
for the quarterly period and six months ended June 30, 1996, are not indicative
of the results that may be expected for the year ended December 31, 1996. These
financial statements should be read in conjunction with the Company's audited
consolidated financial statements for the year ended December 31, 1995,
included in the Company's Annual Report on Form 10-K, as amended, for such
period.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
The Company's adoption of Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long- Lived Assets and for Long-Lived Assets
to be disposed of" on January 1, 1996 did not have a material effect on its
financial statements.
NOTE 2 -- PARACELSUS MERGER
On August 9, 1996, the Company's stockholders, at a special meeting of
stockholders (the "Special Meeting"), adopted and approved an Amended and
Restated Agreement and Plan of Merger dated May 29, 1996 (the "Merger
Agreement") between the Company and Paracelsus Healthcare Corporation
("Paracelsus"), pursuant to which a wholly owned subsidiary of Paracelsus will
be merged into the Company, resulting in the Company becoming a wholly owned
subsidiary of Paracelsus. The Company expects the merger to be consummated on
or about August 16, 1996, after satisfying certain other terms and conditions
of the Merger Agreement. The Company expensed approximately $1.1 million in
merger costs during the second quarter of 1996.
Upon the consummation of the merger, each share of the Company's common stock
and preferred stock will convert into one share and two shares of Paracelsus'
common stock, respectively. Dr. Manfred George Krukemeyer, currently the
Chairman of the Board and sole shareholder of Paracelsus, and members of
Paracelsus' management will own approximately 60% of the combined company, with
current Company's security holders owning the remaining 40% .
NOTE 3 -- 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. The Company accounts for its investment in DHHS under the equity
method. The following table summarizes certain income statement information of
DHHS (in thousands).
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30 SIX MONTHS ENDED JUNE 30
-------------------------- ------------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net revenue $ 27,581 $ 27,577 $ 55,204 $ 53,665
Operating margin 7,938 5,096 16,258 8,719
Net income 6,890 4,123 14,113 6,810
</TABLE>
5
<PAGE> 7
CHAMPION HEALTHCARE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 4 -- LONG-TERM DEBT
On April 12, 1996, in contemplation of the merger between the Company and
Paracelsus, holders of the Company's 11% Senior Subordinated Notes (the
"Notes") entered into an agreement with the Company, among other things, to (i)
waive any rights to cause the Company to purchase the Notes from such holders
as a result of a change in control caused by the merger and (ii) tender the
Notes to the Company for prepayment at certain specified premium amounts.
NOTE 5 -- ACQUISITIONS
On March 1, 1996, the Company acquired the 50-bed Jordan Valley Hospital
("Jordan") in West Jordan, Utah, from Columbia/HCA Healthcare Corporation
("Columbia"). In exchange, Columbia received the Company's 85-bed Autauga
Medical Center and adjacent skilled nursing facility in Prattville, Alabama,
plus approximately $10,750,000 in cash. Cash consideration included
approximately $3,750,000 for a net working capital differential, which is
subject to final settlement, and reimbursement of certain capital expenditures
made previously by Columbia.
The following unaudited pro forma consolidated results of operations for the
six months ended June 30, 1996 and 1995, assumes that the acquisition of Jordan
and Salt Lake Regional Medical Center ("SLRMC"), which was acquired on April
13, 1995, occurred on January 1, 1995. The pro forma financial information
does not purport to be indicative of the results that would have been attained
had the transactions described above occurred on January 1, 1995.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
----------------
JUNE 30
-------
1996 1995
--------- ---------
(Dollars in thousands,
except per share data)
<S> <C> <C>
Net revenue $102,731 $97,890
Income before extraordinary loss 2,291 2,031
Net income 2,291 913
Income (loss) applicable to common stock 2,193 (2,067)
Income (loss) per common share:
Primary-
Before extraordinary loss $ 0.16 $ (0.23)
Extraordinary loss - (0.26)
--------- -------
$ 0.16 $ (0.49)
========= =======
Fully diluted-
Before extraordinary loss $ 0.12 n/a
Extraordinary loss - n/a
--------- -------
$ 0.12 n/a
========= =======
</TABLE>
6
<PAGE> 8
CHAMPION HEALTHCARE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 6 -- INCOME LOSS PER SHARE
Primary income (loss) per common share is computed by dividing income (loss)
applicable to common stock (net income less preferred stock dividend
requirements and accretion of preferred stock issuance costs) by the weighted
average number of common and common equivalent shares outstanding. Fully
diluted income (loss) per common share is computed by dividing net income
(loss) by the weighted average number of common and common equivalent shares
outstanding, including additional shares of common stock resulting from the
assumed conversion of shares of convertible preferred stock.
NOTE 7 -- STOCKHOLDERS' EQUITY
During the six months ended June 30, 1996, warrants were exercised to purchase
approximately 2,458,000 shares of common stock, resulting in cash proceeds to
the Company of approximately $8,717,000 and the tender of approximately
$4,895,000 of the Notes in lieu of cash.
At the Special Meeting held on August 9, 1996, the Company's stockholders
approved certain amendments to the various stock option plans. With respect to
the Directors' Stock Option Plan, the authorized shares for issuance was
increased from 60,000 to 100,000. The plan provisions now allow options held by
directors whose services cease after a merger of the Company to remain
exercisable until the date specified in such options, rather than expiring 90
days following such merger. With respect to the Selected Executive Stock
Option Plan No. 5, the plan was amended to allow stock options or rights
granted thereunder to be assumed by the surviving company to a merger or
consolidation with the Company. With respect to certain stock option
agreements between the Company and each of Messrs. Charles R. Miller and James
G. VanDevender, a cashless exercise procedure was added to allow the Company
to withhold shares issuable upon exercise of options outstanding thereunder as
a means for such option holder to pay the option exercise price and/or any tax
withholding obligations incurred upon such exercise.
NOTE 8 -- SUBSEQUENT EVENT
On July 23, 1996, the Company's common stock commenced trading on the New York
Stock Exchange ("NYSE") under the symbol "CHC". Prior to that, its shares had
been traded on the American Stock Exchange. Upon the consummation of the merger
with Paracelsus (see Note 2), the Company will delist from the NYSE and cease
to be a separate public reporting entity.
7
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
PARACELSUS MERGER
On August 9, 1996, the Company's stockholders, at the Special Meeting, adopted
and approved the Merger Agreement between the Company and Paracelsus, pursuant
to which a wholly owned subsidiary of Paracelsus will be merged into the
Company, resulting in the Company becoming a wholly owned subsidiary of
Paracelsus. The Company expects the merger to be consummated on or about
August 16, 1996, after satisfying certain other terms and conditions of the
Merger Agreement. The Company expensed approximately $1.1 million in merger
costs during the second quarter of 1996.
Upon the consummation of the merger with Paracelsus, the Company will cease to
be a separate public reporting entity and therefore will no longer file
reports, proxy statements or other information with the Securities and Exchange
Commission.
RESULTS OF OPERATIONS
QUARTER ENDED JUNE 30, 1996 COMPARED TO QUARTER ENDED JUNE 30, 1995
Net revenue for the three months ended June 30, 1996 was $50.8 million, an
increase of $7.5 million, or 17.3%, over $43.3 million for the same period in
1995. The increase was primarily attributable to the acquisition of home
health operations since June 1995, the incremental contribution of the 101-bed
Westwood Medical Center ("WMC") in Midland, Texas, which replaced the Company's
then existing hospital in that market in October 1995, and the incremental
contribution of the 50-bed Jordan in West Jordan, Utah, which was acquired in
exchange for the Company's acute care hospital and related skilled nursing
facility in Prattville, Alabama, in March 1996.
Expressed as a percentage of net revenue, operating expenses (salaries and
benefits, other operating expenses and provision for bad debt, excluding merger
costs) decreased from 91.4% in the second quarter of 1995 to 85.6% in the same
period of 1996. This decrease was primarily attributable to management's focus
on improving operating efficiency and the successful integration of hospitals
acquired since April 1995.
Interest expense increased $1.3 million over the same period of 1995 due
primarily to (i) an increase in amounts outstanding the Company's Senior Bank
Credit Facility to finance the acquisition of Jordan and working capital
requirements and (ii) the issuance of $35.0 million of 11% Senior Subordinated
Notes on June 12, 1995.
Depreciation and amortization increased $1.2 million over the same period in
1995. This increase was primarily attributable to an incremental increase in
depreciation expense recorded on WMC over the facility which it replaced and
from purchases of medical equipment and facility improvements at existing
hospitals.
The Company's equity in DHHS' earnings increased 67.1% from $2.3 million in 1995
to $3.8 million in 1996. The increase is primarily due to a reduction in
operating expenses from the elimination of duplicate services and overhead
costs, reflecting the Company's successful efforts in integrating the
operations of the two hospitals comprising DHHS.
Income before income taxes and extraordinary loss for the quarter ended June
30, 1996 increased 231.4% to $2.1 million from $636,000 for the same period in
1995. Net income for 1996 increased $1.3 million to $978,000, compared to a
net loss of $289,000 for 1995. Included in 1996 and 1995 net income were
nonrecurring items consisting of merger costs of approximately $1.1 million in
1996 and an extraordinary loss from early extinguishment of debt of $1.1
million 1995. After deducting accretion of preferred stock issuance costs of
$49,000
8
<PAGE> 10
in 1996 and non-cash preferred stock dividends and accretion of issuance costs
of $1.5 million in 1995, the Company reported primary income per share of $0.06
($0.14 before merger costs) in 1996, compared to a loss per share of $0.42
($0.16 before extraordinary loss) in 1995. On a fully diluted basis, income
per share was $0.05 ($0.11 before merger costs) for the quarter ended June 30,
1996. Fully diluted loss per share was not presented for the quarter ended
June 30, 1995 because the result was anti-dilutive.
The Company's effective income tax rate for the quarter ended June 30, 1996 was
53.6% as a result of incurring certain nondeductible merger costs.
SIX MONTHS ENDED JUNE 30, 1996 COMPARED TO SIX MONTHS ENDED JUNE 30, 1995
Net revenue for the six months ended June 30, 1996 was $101.5 million, an
increase of $29.4 million, or 40.9%, over $72.0 million for the same period in
1995. The increase was primarily attributable to the acquisition of SLRMC in
April 1995 and home health operations since June 1995, and the incremental
contributions of WMC and Jordan.
Expressed as a percentage of net revenue, operating expenses (salaries and
benefits, other operating expenses and provision for bad debt, excluding merger
costs) decreased from 90.7% in the six months ended June 30, 1995 to 87.1% in
the same period in 1996. This decrease was primarily attributable to
management's focus on improving operating efficiency and the successful
integration of hospitals acquired since April 1995.
Interest expense increased $3.2 million over the same period in 1995 due
primarily to (i) an increase in amounts outstanding the Company's Senior Bank
Credit Facility to finance the acquisition of SLRMC and Jordan and working
capital requirements and (ii) the issuance of $35.0 million of 11% Senior
Subordinated Notes on June 12, 1995.
Depreciation and amortization increased $2.7 million over the same period of
1995. This increase was primarily attributable to an incremental increase in
depreciation expense recorded on WMC over the facility which it replaced, the
acquisition of SLRMC and from purchases of medical equipment and facility
improvements at existing hospitals.
The Company's equity in DHHS' earnings increased 107.3% from $3.7 million in
1995 to $7.8 million in 1996. The increase is due to an $1.5 million or $2.9%
increase in DHHS' net revenue for the six months ended June 30, 1996 as
compared to the same period in 1995, as a result of additional services
offered. The remaining increase was attributable to a reduction in operating
expenses from the elimination of duplicate services and overhead costs,
reflecting the Company's successful efforts in integrating the operations of
the two hospitals comprising DHHS.
Income before income taxes and extraordinary loss for the six months ended June
30, 1996 increased 356.6% to $4.3 million from $931,000 for the same period in
1995. Net income for 1996 increased $2.5 million to $2.4 million, compared to
a net loss of $112,000 for 1995. Included in 1996 and 1995 net income were
nonrecurring items consisting of merger costs of approximately $1.1 million in
1996, and an extraordinary loss from the early extinguishment of debt of $1.1
million in 1995. After deducting accretion of preferred stock issuance costs
of approximately $98,000 in 1996 and non- cash preferred stock dividends and
accretion of issuance costs of $3.0 million in 1995, the Company reported
primary income per share of $0.16 ($0.25 before merger costs) in 1996,
compared to a loss per share of $0.73 ($0.47 before extraordinary loss) in
1995. On a fully diluted basis, income per share was $0.12 ($0.18 before
merger costs) for the six months ended June 30, 1996. Fully diluted loss per
share was not presented for the six months ended June 30, 1995 because the
result was anti-dilutive.
9
<PAGE> 11
LIQUIDITY AND CAPITAL RESOURCES
Cash deficit from operations was $2.1 million for the six months ended June 30,
1996, due primarily to (i) an increase in the Company's equity in DHHS'
earnings, net of a partnership distribution and (ii) a decrease in accounts
payable and accrued liabilities, primarily attributable to payments made during
1996 to third parties for Medicare and Medicaid accounts settlement, to
employees for bonus earned during 1995 and to vendors and service providers for
ongoing trade accounts. Such deficit was partially offset by earnings generated
by the Company's consolidated operations. Cash used in investing activities
consisted primarily of $10.7 million of cash paid to acquire Jordan in an
exchange transaction in March 1996 (see Note 5) and $5.9 million in capital
expenditures to purchase medical equipment and finance facility improvements.
Cash provided by financing activities consisted primarily of (i) $17.9 million
net borrowings under the Company's Senior Bank Credit Facility to finance the
acquisition of Jordan and to fund other working capital requirements and (ii)
$9.0 million received from the exercise of stock warrants and options, net of
repayments in other long term debt.
Net working capital was $24.8 million at June 30, 1996, compared to $9.8
million at December 31, 1995. Total assets increased to $314.8 million at June
30, 1996, from $291.3 million at December 31, 1995. The Company's long term
debt as a percentage of total capitalization was 78.5% at June 30, 1996,
compared to 83.6% at December 31, 1995.
As of June 30, 1996, the Company had $33.8 million available under its Senior
Bank Credit Facility, subject to certain restrictions, and $13.3 million of
cash and cash equivalents to fund future capital expenditures, working capital
requirements and debt service. Upon the consummation of the merger with
Paracelsus, the Company anticipates that the outstanding balances under the
Senior Bank Credit Facility, the 11% Senior Subordinated Notes and certain
other indebtedness will be prepaid by the Company, using net proceeeds from
certain pending securities offerings by Paracelsus.
REGULATORY MATTERS
Federal and state legislators continue to consider legislation that could
significantly impact Medicare, Medicaid and other government funding of
healthcare costs. Initiatives currently before Congress, if enacted, could
significantly reduce payments under various government programs. The Company
is unable to predict what legislation, if any, will be enacted at the Federal
and state level in the future or what effect such legislation might have on the
Company's financial position, results of operation or liquidity.
10
<PAGE> 12
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Company's Special Meeting of Stockholders held on August 9,
1996, the stockholders approved the following:
1. An Agreement and Plan of Merger, dated May 29, 1996 by and
among the Company, Paracelsus and PC Merger Sub, Inc., a
wholly owned subsidiary of Paracelsus, pursuant to which such
subsidiary of Paracelsus will be merged into the Company,
resulting in the Company becoming a wholly owned subsidiary of
Paracelsus.
<TABLE>
<CAPTION>
Votes
-----
<S> <C>
For: 16,910,151
Against: 127,961
Abstain: 2,208
Broker nonvotes: 157,059
</TABLE>
2. Certain amendments to the Champion Healthcare Corporation
("Champion") Directors' Stock Option Plan ("Directors' Plan"),
the Champion Selected Executive Stock Option Plan No. 5
("Selected Plan") and certain stock options between Champion
and each of Messrs. Charles R. Miller and James G. VanDevender
("Founders' Plan"). The approval of the merger under Proposal
No. 1 above is deemed to constitute approval of the amendments
to the Directors' Plan and the Selected Plan. See voting
results at 1 above. Voting results to adopt the Founders' Plan
are as follows:
<TABLE>
<CAPTION>
Votes
-----
<S> <C>
For: 16,966,141
Against: 214,989
Abstain: 16,249
</TABLE>
The number of Broker nonvotes has been omitted because such
nonvotes are disregarded in determining the total number of
affirmative votes required for such matter's approval.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K:
(a) Exhibits
2.1(a) Amended and Restated Agreement and Plan of Merger dated
as of May 29, 1996 by and among Paracelsus, Champion and
PC Merger Sub, Inc.
11 Computation of Per Share Earnings
27 Financial Data Schedule
-----------------------------
(a) Incorporated herein by reference to Annex A to Champion
Healthcare Corporation Schedule 14A Definitive Proxy Statement
dated July 19, 1996 for Special Meeting of Stockholders held on
August 9, 1996.
11
<PAGE> 13
(b) Reports on Form 8-K
The Company filed a Current Report on Form 8-K, dated April 12,
1996, reporting pursuant to Item 5 thereof, that the Company
had entered into an Agreement and Plan of Merger (the "Merger
Agreement"), with Paracelsus, pursuant to which, among other
things, a wholly owned subsidiary of Paracelsus will be
merged with and into the Company, with the Company becoming
a wholly owned subsidiary of Paracelsus.
The Company filed a Current Report on Form 8-K, dated May 29,
1996, reporting pursuant to Item 5 thereof, that the Merger
Agreement as filed on a Current Report on Form 8-K, dated
April 12, 1996, had been amended and restated for certain
provisions as stated therein.
12
<PAGE> 14
SIGNATURE
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: August 14, 1996 By: /s/ James G. VanDevender
-------------------------------------
James G. VanDevender
Executive Vice President, Chief Financial
Officer and Director
13
<PAGE> 15
INDEX TO EXHIBITS
Exhibit Description
------- -----------
2.1(a) Amended and Restated Agreement and Plan of Merger dated
as of May 29, 1996 by and among Paracelsus, Champion and
PC Merger Sub, Inc.
11 Computation of Per Share Earnings
27 Financial Data Schedule
-----------------------------
(a) Incorporated herein by reference to Annex A to Champion
Healthcare Corporation Schedule 14A Definitive Proxy Statement
dated July 19, 1996 for Special Meeting of Stockholders held on
August 9, 1996.
<PAGE> 1
EXHIBIT 11
CHAMPION HEALTHCARE CORPORATION
COMPUTATION OF PER SHARE EARNINGS
(In thousands, except per share data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------- ----------------
1996 1995 1996 1995
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Primary:
-------
Weighted average shares outstanding 13,323 4,244 12,642 4,236
Net effect of dilute stock options and
warrants--(1) 1,397 - 1,136 -
--------- --------- --------- ---------
Total 14,720 4,244 13,778 4,236
========= ========= ========= =========
Net income (loss) $ 978 $ (289) $ 2,371 $ (112)
Preferred stock dividend requirements - (1,421) - (2,844)
Accretion of preferred stock issuance cost (49) (68) (98) (136)
--------- --------- --------- ---------
Income (loss) applicable to common stock $ 929 $ (1,778) $ 2,273 $ (3,092)
========= ========= ========= =========
Income (loss) per share:
Before extraordinary loss $ 0.06 $ (0.16) $ 0.16 $ (0.47)
Extraordinary loss - (0.26) - (0.26)
--------- --------- --------- ---------
Income (loss) per share $ 0.06 $ (0.42) $ 0.16 $ (0.73)
========= ========= ========= =========
Fully Diluted:
Weighted average shares outstanding 13,323 4,244 12,642 4,236
Net effect of dilutive stock options and
warrants 1,327 3,946 1,167 3,946
Assumed conversion of Preferred Stock(2) 5,343 9,920 5,280 9,920
--------- --------- --------- ---------
Total 19,993 18,110 19,089 18,102
========= ========= ========= =========
Net income (loss) $ 978 $ (289) $ 2,371 $ (112)
Interest reduction, net of tax effect - 465 - 930
--------- --------- --------- ---------
Income applicable to common stock $ 978 $ 176 $ 2,371 $ 818
========= ========= ========= =========
Income (loss) per share:
Before extraordinary loss $ 0.05 $ 0.07 $ 0.12 $ 0.11
Extraordinary loss - (0.06) - (0.06)
--------- --------- --------- ---------
Income per share $ 0.05 $ 0.01 $ 0.12 $ 0.05
========= ========= ========= =========
</TABLE>
(1) The effect of options was anti-dilutive for the quarter and six months
ended June 30, 1995.
(2) At June 30, 1996 and 1995, the Company had 2,605,714 and 10,408,285 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 QUARTER ENDED JUNE 30, 1996.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 13,273
<SECURITIES> 0
<RECEIVABLES> 49,915
<ALLOWANCES> 15,190
<INVENTORY> 3,906
<CURRENT-ASSETS> 59,645
<PP&E> 182,014
<DEPRECIATION> 14,272
<TOTAL-ASSETS> 314,839
<CURRENT-LIABILITIES> 34,842
<BONDS> 175,710
<COMMON> 144
46,128
0
<OTHER-SE> 47,881
<TOTAL-LIABILITY-AND-EQUITY> 314,839
<SALES> 0
<TOTAL-REVENUES> 101,493
<CGS> 0
<TOTAL-COSTS> 81,542
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 6,886
<INTEREST-EXPENSE> 9,164
<INCOME-PRETAX> 4,251
<INCOME-TAX> 1,880
<INCOME-CONTINUING> 2,371
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,371
<EPS-PRIMARY> .16
<EPS-DILUTED> .12
</TABLE>
