<PAGE>
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-Q
X QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
- - --- OF 1934
For the quarterly period ended March 31, 1994
OR
- - --- TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 0-11479
SUMMIT HEALTH LTD.
(Exact name of Registrant as specified in its charter)
California 95-3154694
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2600 W. Magnolia Blvd.
P.O. Box 2100
Burbank, California 91507-2100
(address of principal executive offices)
(818) 841-8750
(Registrant's telephone number, including area code)
Indicate by checkmark whether the Registrant (1) has 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 period that Registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
Yes X No
----- -----
APPLICABLE ONLY TO ISSUERS INVOLVED IN
BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Indicate by checkmark whether the Registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes No
----- -----
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Shares of Registrant's common stock outstanding at April 13, 1994 -- 32,704,670
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
<PAGE>
SUMMIT HEALTH LTD.
FORM 10-Q
QUARTER ENDED
MARCH 31, 1994
TABLE OF CONTENT
Page of
Form 10-Q
---------
Part I - Financial Information
Item 1. Financial Statements
Consolidated Statements of Income 3
Consolidated Balance Sheets 4
Consolidated Statements of Cash Flows 6
Notes to Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
Part II - Other Information
Item 1. Legal Proceedings 18
Item 4. Submission of matters to a Vote of Security Holders 18
Item 6. Exhibits and Reports on Form 8-K 18
Signatures 19
2
<PAGE>
PART I
SUMMIT HEALTH LTD.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
MARCH 31, MARCH 31,
1994 1993 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net revenues $ 141,521 $ 131,061 $ 404,650 $ 382,844
Interest income 499 279 1,268 1,175
--------- --------- --------- ---------
Total revenue 142,020 131,340 405,918 384,019
Operating expenses:
Salaries and benefits 55,202 52,550 158,569 157,112
Purchased services and
professional fees 18,904 15,296 48,774 45,507
Supplies 17,545 16,368 50,665 47,393
Rental and insurance
premiums to affiliates 6,544 8,239 20,628 22,126
Contracted physician, hospital
and other services 5,438 4,993 15,883 14,651
Other operating 12,735 11,131 37,933 32,490
Depreciation and amortization 5,459 4,933 15,879 13,492
Interest 2,054 2,043 6,348 5,349
Provision for doubtful
accounts 6,023 6,255 17,202 19,447
--------- --------- --------- ---------
129,904 121,808 371,881 357,567
--------- --------- --------- ---------
Income before income taxes and
minority interest 12,116 9,532 34,037 26,452
Provision for income taxes (5,242) (3,800) (14,759) (10,707)
Minority interest in net income of
consolidated subsidiary, net of
taxes (729) (597) (2,138) (1,773)
--------- --------- --------- ---------
Net income $ 6,145 $ 5,135 $ 17,140 $ 13,972
--------- --------- --------- ---------
--------- --------- --------- ---------
Earnings per common and
common equivalent share: $ 0.18 $ 0.15 $ 0.51 $ 0.42
--------- --------- --------- ---------
--------- --------- --------- ---------
Weighted average number
shares of common stock
outstanding 34,115 33,414 33,870 33,217
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
SUMMIT HEALTH LTD.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
MARCH 31, 1994 JUNE 30, 1993
-------------- -------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 19,350 $ 40,857
Accounts receivable, less allowance for
doubtful accounts: March 1994 - $9,971;
June 1993 - $9,295 88,153 73,933
Other receivables 9,088 9,684
Supplies inventory, at cost (first-in, first-out) 9,706 9,452
Deferred income taxes 3,109 3,520
Prepaid expenses and other 4,502 6,711
-------- ---------
Total current assets 133,908 144,157
Property, plant and equipment, at cost:
Land and land improvements 29,488 26,936
Buildings and leasehold improvements 203,513 197,621
Furniture and equipment 111,747 108,681
Construction in progress 15,704 3,653
-------- ---------
360,452 336,891
Less accumulated depreciation and amortization 123,904 114,946
-------- ---------
236,548 221,945
Long-term notes receivable (interest at 6% - 10.5%) 10,093 9,707
Non-current assets held for sale 5,419 5,419
Other assets and deferred charges 20,297 13,331
-------- ---------
$406,265 $394,559
-------- ---------
-------- ---------
</TABLE>
See accompanying notes
(Continued)
4
<PAGE>
<TABLE>
<CAPTION>
SUMMIT HEALTH LTD.
CONSOLIDATED BALANCE SHEETS (CONTINUED)
(Dollars in thousands)
MARCH 31, 1994 JUNE 30, 1993
-------------- -------------
(Unaudited)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Payable to bank $ 9,649 $ 8,545
Accounts payable 23,214 22,188
Employee compensation and benefits 21,063 16,892
Due to third-party payors 26,745 30,807
Income taxes payable 3,262 2,839
Accrued liabilities 15,522 13,724
Commercial paper notes 5,822 27,722
Long-term debt due within one year 8,184 11,383
-------- --------
Total current liabilities 113,461 134,100
Long-term debt 87,186 84,711
Other long-term liabilities 22,540 13,369
Deferred income taxes 33,574 33,152
Minority interest 17,275 15,104
-------- --------
Total liabilities 274,036 280,436
Commitments and contingencies
Shareholders' equity:
Preferred stock, $1 par value; 2,000,000
authorized shares, none issued -- --
Common stock, 100,000,000 authorized shares,
Issued and outstanding: March 1994 -
32,700,670; June 1993 - 32,048,800 53,384 51,118
Retained earnings 78,845 63,005
-------- --------
Total shareholders' equity 132,229 114,123
-------- --------
$406,265 $394,559
-------- --------
-------- --------
</TABLE>
See accompanying notes
5
<PAGE>
<TABLE>
<CAPTION>
SUMMIT HEALTH LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
NINE MONTHS ENDED
MARCH 31,
1994 1993
---- ----
<S> <C> <C>
Operating activities:
Net income $17,140 $13,972
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 15,879 13,492
Provisions for doubtful accounts 17,202 19,447
Deferred income taxes 833 (1,409)
Minority interest 2,171 1,773
Changes in operating assets and liabilities:
Accounts receivable (31,611) (13,776)
Other receivables 596 (3,718)
Supplies inventory (254) (965)
Prepaid expenses and other 2,209 340
Other assets (7,276) (1,956)
Payable to bank 1,104 (6,682)
Accounts payable 1,026 (2,854)
Accrued employee compensation and benefits 4,171 448
Due to third-party payors (4,062) (1,399)
Accrued liabilities 3,935 (769)
Other liabilities 9,171 1,934
Income taxes payable 1,598 (3,473)
------- -------
Total adjustments 16,692 433
------- -------
Net cash provided by operating activities 33,832 14,405
------- -------
Investing activities:
Expenditures for additions to property, plant and
equipment (23,033) (39,051)
Disposition of assets 753 79
(Increase) decrease in notes receivable (386) 9,933
------- -------
Net cash used in investing activities (22,666) (29,039)
------- -------
</TABLE>
See accompanying notes
(Continued)
6
<PAGE>
<TABLE>
<CAPTION>
SUMMIT HEALTH LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(Unaudited)
(Dollars in thousands)
NINE MONTHS ENDED
MARCH 31,
1994 1993
--------- ----------
<S> <C> <C>
Financing activities:
Proceeds from borrowings $ 5,835 $ 87,865
Payment of commerical paper notes, long-term
and mortgage debts (37,017) (57,183)
Dividends paid (2,582) (1,877)
Proceeds from exercise of common stock options 1,091 1,570
---------- ---------
Net cash provided by (used in) financing activities (32,673) 30,375
---------- ---------
Net increase (decrease) in cash and cash equivalents (21,507) 15,741
Cash and cash equivalents at beginning of period 40,857 24,937
---------- ---------
Cash and cash equivalents at end of period $ 19,350 $ 40,678
---------- ---------
---------- ---------
Cash paid during the period for:
Interest (net of amount capitalized) $ 5,271 $ 4,887
Income taxes, net 13,418 15,636
Supplemental disclosures of non-cash investing
and financing activities:
Issuance of long-term debt in connection with
acquisition $ 8,558 $ --
Writeoff of net assets from discontinued operation (855) --
Subsidiary stock offering adjustment -- 3,937
Tax benefit of stock transactions with employees (1,175) (1,430)
</TABLE>
See accompanying notes
7
<PAGE>
SUMMIT HEALTH LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands)
1. The unaudited financial information included herein, in the opinion of
management, reflects all adjustments (all of which are of a normal recurring
nature), which are considered necessary to fairly state the Company's
financial position, its cash flows and the results of operations. Certain
reclassifications have been made to the prior year amounts to conform to the
fiscal 1994 presentation. These statements do not include all of the
information and footnotes required by generally accepted accounting
principles forcomplete financial statements. For further information, refer
to the consolidated financial statements and footnotes thereto included in
the Company's 1993 Annual Report and Form 10-K.
2. The interim financial information herein is not necessarily representative
of those to be expected for a full year.
3. Net revenues are net of provisions for contractual allowances consisting
primarily of price adjustments for contractual reimbursement related to
patients participating in governmental and other health care programs
including reimbursement based on diagnosis related groups under the
Medicare prospective payment system.
4. On April 19, 1994 the Company completed its merger with OrNda Healthcorp
("OrNda") providing for the acquisition of the Company by OrNda. Pursuant to
the merger, the Company was acquired by and merged with a wholly owned
subsidiary of OrNda. Each outstanding share of the Company's common stock
was converted into the right to receive $5.50 in cash and 0.2157 shares of
OrNda common stock. The transaction was accounted for as a purchase.
8
<PAGE>
SUMMIT HEALTH LTD.
FORM 10-Q
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Dollars in thousands, except share data)
MERGER
On April 19, 1994, the Company completed its merger with OrNda Healthcorp
(OrNda), with OrNda as the surviving company and Summit Health Ltd. becoming a
wholly owned subsidiary of OrNda. See Note 4 to the financial statements.
OrNda has operations in 17 states and operates 46 acute-care hospitals with more
than 7,700 licensed beds, two psychiatric centers with 138 licensed beds, four
surgery centers and a Medicaid HMO with more than 22,000 covered lives.
The combined company will have pro forma revenues of approximately $1.5 billion
and will be the fifth largest investor-owned hospital chain in the country. The
combined company expects to realize significant operating synergies through a
combination of overhead reduction and improved operating efficiencies.
RESULTS OF OPERATIONS
For the quarter and nine months ended March 31, 1994, the Company reported
earnings of $6,145 and $17,140, respectively, an increase of 20 percent and 23
percent from the same periods a year ago. Earnings per share increased 20
percent from $.15 per share for the third quarter in fiscal 1993 to $.18 per
share for the comparable period in fiscal 1994. Year to date earnings per share
increased 21 percent from $.42 per share in fiscal 1993 to $.51 per share in
fiscal 1994. Total net revenues increased 8 and 6 percent, respectively, for
the quarter and nine months ended March 31, 1994.
Effective July 1, 1993 the Company adopted Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes" (SFAS 109). Under SFAS 109, an
asset and liability approach for financial accounting and reporting for income
taxes is required. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date. SFAS 109 requires provision of taxes on the undistributed net
income of subsidiaries which formerly was not required under the indefinite
reversal criterion in APB 23. The impact of the implementation of SFAS 109
increased the consolidated income tax rate by approximately 2 percent. The
cumulative effect on the deferred tax balances was not significant. Net income
for fiscal year 1993 did not required retroactive restatement, because the
application of SFAS 109 is prospective only.
Income tax provisions for the nine months ended March 31, 1994 and 1993 were
computed at effective rates of 43.4 and 40.5 percent, respectively.
9
<PAGE>
SUMMIT HEALTH LTD.
FORM 10-Q
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Dollars in thousands, except share data)
For the first nine months of fiscal 1994, interest and depreciation/amortization
expense increased 19 and 18 percent, respectively, compared to the same period
in the prior year. Interest expense increased from $5,349 in fiscal 1993 to
$6,348 in fiscal 1994. This was due primarily from the $25,000 Summit Care
Corporation senior subordinated debentures issued in December, 1992.
Depreciation and amortization expense increased from $13,492 in fiscal 1993 to
$15,879 in fiscal 1994. The increase in expense is primarily a result of
capital additions in the prior fiscal year for ambulatory surgery centers and
Summit Care Corporate purchases in December 1992 of the buildings associated
with ten of its facilities that it previously operated under lease agreements.
Acute Care
Net revenues for the quarter increased four percent from $103,131 in fiscal 1993
to $107,191 in fiscal 1994. The acute hospitals contributed $5,948 towards the
increase, while the Medical Office Buildings and other joint ventures combined
had a $(1,888) decrease from fiscal year 1993 compared to fiscal year 1994. The
hospitals' third quarter growth was due to a higher acuity on an inpatient basis
and a further reduction in average length of stay from 4.4 days to 4.3 days for
the nine months ended march 31, 1993 compared to the same period in fiscal year
1994.
For the nine months ended March 31, 1994 compared to the nine months ended March
31, 1993, net revenues increased marginally to $306,775 from $302,580.
Long Term Care
Summit Care Corporation ("Summit Care") revenues increased $4,237 or 20 percent
from $21,341 for the quarter ended March 31, 1993 to $25,578 for the quarter
ended March 31, 1994. Revenues increased $9,620 or 15 percent from $62,105 for
the nine months ended March 31, 1993 to $71,725 for the nine months ended March
31, 1994. Approximately 23 percent of the increase was due to patient rate
increases and increased census, 26 percent was due to increased use of
rehabilitative and other ancillary services, coupled with an eight percent
decrease in contractual allowances due to prior year settlements, 18 percent was
due to increased pharmaceutical sales, and 25 percent was due to new operations
and other income. As a result of increased rehabilitative and ancillary
services, private and Medicare patient revenues from Summit Care's nursing care
and retirement centers as a percent of gross operating revenue (excluding
pharmaceutical revenues) was 63 percent for the nine months ended March 31,
1994, and for the same period in 1993.
10
<PAGE>
SUMMIT HEALTH LTD.
FORM 10-Q
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Dollars in thousands, except share data)
Managed Care and Other
Health Choice Arizona (HCA) net revenues increased 15 percent for the quarter
from $8,982 in fiscal 1993 to $10,297 in fiscal 1994. For the nine months ended
March 31, 1994 compared to the same period a year ago, net revenues increased 14
percent from $26,718 to $30,345. HCA membership increased 12 percent for the
quarter and 17 percent for the nine months ended March 31, 1994 compared to
fiscal 1993.
Summit Ambulatory Network, Inc. (SANI) contributed $1,487 and $4,662 in
increased net revenues, respectively, for the quarter and nine months ended
March 31, 1994 compared to the same period a year ago of $564 for the quarter
and $1,118 for the nine months. This increase was attributed to the addition of
two surgery centers located in Arizona and Southern California.
11
<PAGE>
<TABLE>
<CAPTION>
SUMMIT HEALTH LTD.
FORM 10-Q
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONT.)
Three Months Ended March 31,
-----------------------------------------------
INCREASE %
1994 1993 (DECREASE) CHANGE
------- -------- ---------- ------
<S> <C> <C> <C> <C>
NET REVENUES
Acute Care $107,191 $103,131 $4,060 4%
Long Term Care 25,578 21,341 4,237 20%
Managed Care and Other 11,784 9,546 2,238 23%
Eliminations -
Intersegment revenue (3,032) (2,957) (75) (3)%
--------- --------- -----
Net revenues $141,521 $131,061 $10,460 8%
------- ------- -------
------- ------- -------
INCOME BEFORE INCOME TAXES
AND MINORITY INTEREST
Acute Care $ 10,952 $ 9,219 $ 1,733 19%
Long Term Care 3,041 2,615 426 16%
Managed Care and Other 815 264 551 200+%
------- --- -------
Operating profit 14,808 12,098 2,710 22%
Corporate expenses, net of
interest income (638) (523) (115) (22)%
Interest expense (2,054) (2,043) (11) (1)%
------ ------ ----
Income before income taxes
and minority interest $ 12,116 $ 9,532 $2,584 27%
------ ----- -----
------ ----- -----
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
SUMMIT HEALTH LTD.
FORM 10-Q
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONT.)
NINE MONTHS ENDED MARCH 31,
------------------------------------------
INCREASE %
1994 1993 (DECREASE) CHANGE
------ ------ ---------- ------
<S> <C> <C> <C> <C>
NET REVENUES
Acute Care $306,775 $302,580 $4,195 1%
Long Term Care 71,725 62,105 9,620 15%
Managed Care and Other 35,007 27,836 7,171 26%
Eliminations -
Intersegment revenue ( 8,857) (9,677) 820 8%
-------- -------- --------
Net revenues $404,650 $382,844 $21,806 6%
-------- -------- --------
-------- -------- --------
INCOME BEFORE INCOME TAXES
AND MINORITY INTEREST
Acute Care $ 29,360 $ 25,495 $ 3,865 15%
Long Term Care 9,203 6,819 2,384 35%
Managed Care and Other 2,991 161 2,830 200+%
-------- -------- --------
Operating profit 41,554 32,475 9,079 28%
Corporate expenses, net of
interest income (1,169) (675) (494) (73)%
Interest expense (6,348) (5,348) (1,000) (19)%
-------- -------- --------
Income before income taxes
and minority interest $ 34,037 $ 26,452 $ 7,585 29 %
-------- -------- --------
-------- -------- --------
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
SUMMIT HEALTH LTD.
FORM 10-Q
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONT.)
Selected Statistics are Shown Below:
FISCAL
-------------------- INCREASE
1994 1993 (DECREASE)
---- ---- ----------
<S> <C> <C> <C>
HOSPITALS
Facilities in operation
September 30 12 12 --
December 31 12 12 --
March 31 12 12 --
Licensed beds at:
September 30 1,618 1,641 (23)
December 31 1,618 1,641 (23)
March 31 1,618 1,641 (23)
Average occupancy:
First quarter 29% 31% (2)%
Second quarter 32% 32% --
Third quarter 36% 35% 1 %
Patient days:
First quarter 43,641 47,255 (3,614)
Second quarter 47,299 48,310 (1,011)
Third quarter 53,030 51,791 1,239
Net inpatient revenue per
patient day:
First quarter $1,475 $ 1,236 $ 239
Second quarter $1,430 $ 1,346 $ 84
Third quarter $1,344 $ 1,335 $ 9
Outpatient net revenue per visit:
First quarter $ 352 $ 411 $ (59)
Second quarter $ 338 $ 364 $ (26)
Third quarter $ 338 $ 327 $ 11
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
SUMMIT HEALTH LTD.
FORM 10-Q
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONT.)
<S> <C> <C> <C>
Admissions:
First quarter 10,776 10,973 (197)
Second quarter 11,170 11,027 143
Third quarter 11,781 11,461 320
Percentage of net revenues from
Medicare and Medicaid:
First quarter 34.9% 36.3% (1.4)%
Second quarter 38.2% 35.6% 2.6 %
Third quarter 41.0% 37.1% 3.9 %
LONG TERM CARE
Facilities in operation at:
September 30 21 21 --
December 31 22 21 1
March 31 23 21 2
Licensed beds at:
First quarter 2,720 2,696 24
Second quarter 2,926 2,696 230
Third quarter 3,002 2,696 306
Total occupancy:
First quarter 87% 88% (1) %
Second quarter 88% 89% (1) %
Third quarter 88% 89% (1) %
Percentage of revenues from
Private and Medicare:
First quarter 63% 63% --
Second quarter 62% 63% (1)%
Third quarter 65% 64% 1 %
Percentage of revenues from
Medicaid:
First quarter 37% 37% --
Second quarter 38% 37% 1 %
Third quarter 35% 36% (1)%
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
SUMMIT HEALTH LTD.
FORM 10-Q
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONT.)
FISCAL
------------------- INCREASE
1994 1993 (DECREASE)
---- ---- --------
AMBULATORY SURGERY CENTERS
- - --------------------------
<S> <C> <C> <C>
Facilities in operation
Owned
September 30 3 1 2
December 31 3 1 2
March 31 4 2 2
Managed
September 30 1 0 1
December 31 2 0 2
March 31 1 0 1
Surgeries
Owned facilities
First Quarter 1,515 121 1,394
Second Quarter 1,755 362 1,393
Third Quarter 1,741 664 1,077
Managed facilities
First Quarter 357 0 357
Second Quarter 623 0 623
Third Quarter 432 0 432
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1994, the Company had $19,350 in cash and cash equivalents and
working capital of $20,447. During the nine months ended March 31, 1994, the
Company's cash and cash equivalents had a net decrease of $21,507.
16
<PAGE>
SUMMIT HEALTH LTD.
FORM 10-Q
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONT.)
Net cash provided by operating activities increased $19,427 from $14,405 in the
first nine months of 1993 to $33,832 in the first nine months of 1994. Net cash
provided by operating activities in the first three quarters of 1994 was used
primarily to reduce $15,117 in long-term mortgage debt, $21,900 in short-term
commercial paper notes and $23,033 for additions to property, plant and
equipment.
Capital expenditures were $23,033 for the first nine months of 1994 which was a
decrease of $16,018 from the same period last year which included $25,000 for
Summit Care's acquisition of leased properties.
In December 1993, the Company declared a $.04 per share cash dividend to
shareholders of record as of December 16, 1993 payable January 18, 1994. The
total cost was $1,300.
As a result of an examination of the Company's Federal income tax returns for
fiscal year 1984, 1985 and 1986, the Internal Revenue Service has challenged the
propriety of certain accounting methods utilized for tax purposes as well as
other issues. The most significant area of dispute involves the cash method of
accounting used by certain of the Company's subsidiaries on which the Company
expects to prevail. As of June 30, 1993, the Company estimated that $10,000 of
income tax and interest would be required to be provided and would be payable
along with $19,500 of previously provided taxes, if the Internal Revenue Service
prevailed on all significant areas of dispute. Based upon analysis of the
issues, the Company believes the amount of tax and interest payable upon
settlement will be less than amounts previously provided.
Legislative and regulatory action has continued to limit payment increases under
Medicare and Medicaid reimbursement programs. The Company, however, believes
that these continued changes will not have a material adverse effect on the
Company's future revenue or liquidity. Management believes that $19,350 of cash
and cash equivalents at March 31, 1994 combined with the unused proceeds from
its senior bank financing and short-term commercial paper notes, as well as
funds generated by operations, will be adequate to meet the Company's future
commitments.
17
<PAGE>
PART II
SUMMIT HEALTH LTD.
OTHER INFORMATION
QUARTER ENDED
MARCH 31, 1994
Item 1. LEGAL PROCEEDINGS
None
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the company during the
three months ended March 31, 1994.
18
<PAGE>
SUMMIT HEALTH LTD.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
company has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SUMMIT HEALTH LTD.
Date: May 10, 1994 By: BRUCE J. COLBURN
--------------------------------
Bruce J. Colburn
Senior Vice President of Finance
and Chief Accounting Officer
19
