<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
/x/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1992
Commission file number: 1-8756
AMERICAN HEALTHCARE MANAGEMENT, INC.
(Exact name of Registrant as specified in its charter)
Delaware 75-1636788
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
660 American Avenue, Suite 200
King of Prussia, Pa 19406
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (215) 768-5900
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
Common Stock
par value $0.01 per share American Stock Exchange
Indicate by check mark 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 shorter period that the Registrant was required to file such
reports) and (2) has been subject to such filing requirements for
the past 90 days. Yes /x/ No / /
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein, and
will not be contained, to the best of Registrant's knowledge, in
definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
Indicate by check mark whether the Registrant has filed all
documents and reports required to be filed by Section 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 /x/ No / /
The aggregate market value of the Registrant's common stock,
par value $0.01 per share, held by non-affiliates of the Registrant
as of the close of business on February 10, 1993 (an aggregate of
15,784,182 shares out of a total of 27,136,614 shares outstanding
at that time) is $92,732,069 computed by reference to the last
reported sale price ($5.875) on the American Stock Exchange on
February 10, 1993. For purposes of the foregoing calculation only,
all directors and executive officers have been deemed affiliates of
the Registrant.
As of February 10, 1993, there were 27,136,614 shares of the
Registrant's common stock, par value $0.01 per share, outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's definitive proxy statement relating to
its 1993 Annual Meeting -- Part III
<PAGE>
TABLE OF CONTENTS
Page
Part II.
Item 8. Financial Statements and
Supplementary Data 26
Part IV.
Signatures 52
<PAGE>
Item 8. Financial Statements and Supplementary Data
26
<PAGE>
Report of Independent Auditors
Stockholders and Board of Directors
American Healthcare Management, Inc.
We have audited the accompanying consolidated balance sheets of
American Healthcare Management, Inc. as of December 31, 1992 and
1991, and the related consolidated statements of operations,
changes in stockholders' equity, and cash flows for each of the
three years in the period ended December 31, 1992. Our audits also
included the financial statement schedules listed in the Index at
Item 14(a). These financial statements and schedules are the
responsibility of the Company's management. Our responsibility is
to express an opinion on these financial statements and schedules
based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the consolidated
financial position of American Healthcare Management, Inc. at
December 31, 1992 and 1991, and the consolidated results of its
operations and its cash flows for each of the three years in the
period ended December 31, 1992, in conformity with generally
accepted accounting principles. Also, in our opinion, the related
financial statement schedules, when considered in relation to the
basic financial statements taken as a whole, present fairly in all
material respects the information set forth therein.
January 28, 1993
27
<PAGE>
American Healthcare Management, Inc.
Consolidated Balance Sheets
<TABLE>
<CAPTION>
December 31
1992 1991
_________ _________
000's
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ - $ 15,749
Accounts receivable, net of allowances for
doubtful accounts of $4,550 in 1992 and
$6,983 in 1991 44,400 36,542
Supplies, at cost 4,267 3,659
Funds held by trustee--current portion 1,058 644
Prepaid expenses 3,300 2,033
Other 171 1,530
_________ _________
Total current assets 53,196 60,157
Other assets;
Funds held by trustee 4,349 6,042
Property held for disposal 1,609 479
Notes receivable, less allowances of
$1,108 in 1992 and 1991 3,940 4,385
Debt issuance costs 4,009 514
Other 2,449 1,661
_________ _________
16,356 13,081
Property and equipment, at cost:
Land and improvements 24,034 23,617
Buildings and improvements 244,526 241,388
Equipment 107,107 99,415
Construction in progress 14,844 3,365
_________ _________
390,511 367,785
Less: Allowances for depreciation and
amortization 122,227 106,092
_________ _________
268,284 261,693
_________ _________
$ 337,836 $ 334,931
_________ _________
_________ _________
</TABLE>
28
<PAGE>
American Healthcare Management, Inc.
Consolidated Balance Sheets
<TABLE>
<CAPTION>
December 31
1992 1991
_________ _________
000's
<S> <C> <C>
Liabilities and stockholders' equity
Current liabilities:
Bank checks outstanding, less cash in bank $ 3,364 $ -
Accounts payable 22,893 20,611
Accrued compensation 7,959 7,353
Accrued interest 1,767 804
Other payables and accruals 3,481 8,892
Current portion of long-term debt 10,932 3,136
_________ _________
Total current liabilities 50,396 40,796
Other liabilities 15,534 10,020
Long-term debt 143,822 227,275
_________ _________
209,752 278,091
Stockholders' equity:
Common Stock, $.01 par; authorized
60,000,000 shares; 27,073,280 and
26,936,479 issued and outstanding
in 1992 and 1991, respectively 271 269
Additional paid-in capital 138,291 138,127
Retained-earnings deficit (10,478) (81,556)
________ ________
128,084 56,840
_________ _________
$337,836 $334,931
_________ _________
_________ _________
See accompanying notes.
</TABLE>
29
<PAGE>
American Healthcare Management, Inc.
Consolidated Statements of Operations
<TABLE>
<CAPTION>
Year ended December 31
1992 1991 1990
________________________________
(000's, except
per share amounts)
<S> <C> <C> <C>
Net revenue $ 313,197 $ 289,466 $298,833
Costs and expenses:
Salaries and benefits 132,831 123,754 128,337
Purchased services 58,480 52,750 50,205
Supplies 32,804 29,049 34,994
Provision for bad debts 17,184 17,142 17,074
Other 29,375 26,736 34,558
Depreciation 17,366 16,452 17,182
Interest 9,401 15,267 19,871
Writedown of assets and
other changes - - 11,412
________________________________
297,441 281,150 313,633
________________________________
Income (loss) before income
taxes and extraordinary item 15,756 8,316 (14,800)
Income tax expense 249 280 70
________________________________
Income (loss) before extra-
ordinary item 15,507 8,036 (14,870)
Gain on early extinguish-
ment of debt 55,571 - -
________________________________
Net income (loss) $ 71,078 $ 8,036 $(14,870)
________________________________
________________________________
Earnings (loss) per common
share, primary:
Income (loss) before extra-
ordinary item $0.54 $0.43 $(.98)
Extraordinary item 1.95 - -
________________________________
Net income (loss) $2.49 $0.43 $(.98)
________________________________
________________________________
Earnings (loss) per common
share, fully diluted $0.41
____________
____________
</TABLE>
See accompanying notes
30
<PAGE>
American Healthcare Management, Inc.
Consolidated Statements of Change in Stockholders' Equity
(All amounts, including shares, in 000's)
<TABLE>
<CAPTION>
Common Stock
__________________ Additional Retained-
Number Paid-In Earnings
of Shares Par $.01 Capital Deficit
__________________________________________
<S> <C> <C> <C> <C>
Balances at
January 1, 1990 15,160 $ 152 $111,765 $(74,722)
Net loss (14,870)
__________________________________________
Balances at
December 31, 1990 15,160 152 111,765 (89,592)
Net income 8,036
Recapitalization 11,776 117 26,362
__________________________________________
Balances at
December 31, 1991 26,936 269 138,127 (81,556)
Net income 71,078
Common stock issuance 137 2 164
__________________________________________
Balances at
December 31, 1992 27,073 $ 271 $138,291 $(10,478)
</TABLE>
See accompanying notes.
31
<PAGE>
American Healthcare Management, Inc.
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Year ended December 31
1992 1991 1990
________________________________
(000's)
<S> <C> <C> <C>
Operating activities
Net income (loss) $ 71,078 $ 8,036 $(14,870)
Adjustments to reconcile net
income (loss) to net cash
provided by operations:
Extraordinary gain on early
extinguishment of debt (55,571) - -
Depreciation and amortization 17,792 16,452 17,182
Troubled debt interest 884 10,486 14,154
Troubled debt interest paid
in cash (13,718) (14,726) (5,978)
Provision for bad debts 17,184 17,142 17,074
Writedown of assets and
other charges - - 9,448
Charges against reserve
for losses on disposal (245) (1,778) 357
Effect of changes in operating
assets and liabilities:
Accounts receivable (20,784) (10,941) (6,877)
Supplies (608) (501) 1,009
Prepaid expenses and other
current assets 92 1,003 (1,455)
Accounts payable 2,282 4,105 (5,834)
Accrued compensation 606 (215) (498)
Accrued interest 963 (487) (2,829)
Other payables and accruals (2,276) 768 (4,714)
________________________________
Net cash provided by operating
activities 17,679 29,344 16,169
Investing activities
Purchases of property and
equipment (19,911) (12,622) (11,182)
Proceeds from asset sales - 19,262 10,171
Funds held by trustee & other (2,649) (2,467) 1,127
________________________________
Net cash (used in) provided
by investing activities (22,560) 4,173 116
Financing activities
Advance payments on troubled debt (100,834) (22,738) (17,452)
Repayments of other long-term debt (38,375) (3,447) (8,735)
Proceeds from issuance of
long-term debt 134,000 - -
Proceeds from issuance of
common stock 166 - -
Refinancing costs incurred (9,189) - -
Bank checks outstanding,
less cash in bank 3,364 - -
Recapitalization costs incurred - (3,232) -
________________________________
Net cash used in financing
activities (10,868) (29,417) (26,187)
________________________________
(Decrease) increase in cash
and cash equivalents (15,749) 4,100 (9,902)
Cash and cash equivalents at
beginning of year 15,749 11,649 21,551
________________________________
Cash and cash equivalents at
end of year $ - $ 15,749 $ 11,649
</TABLE>
32
<PAGE>
American Healthcare Management, Inc.
Consolidated Statements of Cash Flows (continued)
<TABLE>
<CAPTION>
Year ended December 31
1992 1991 1990
________________________________
(000's)
<S> <C> <C> <C>
Supplemental disclosure of
cash flow information:
Interest paid (net of amounts
capitalized in 1992 of $653) $ 20,846 $ 19,992 $ 14,315
Income taxes paid 284 208 93
Supplemental schedule of noncash
investing and financing activities:
Payment of interest by delivery
of additional notes - 8,286 7,355
Capital lease obligations,
principally equipment 4,820 - -
Increase in stockholders'
equity due to recapitalization
--see Note 2 - 26,479 -
See accompanying notes.
</TABLE>
33
<PAGE>
American Healthcare Management, Inc.
Notes to Consolidated Financial Statements
December 31, 1992
1. Business and Significant Accounting Policies
The Company is engaged primarily in the development, ownership, and
operation of hospitals and related health care facilities. Its
more significant accounting policies follow.
Principles of Consolidation
The consolidated financial statements include all subsidiaries.
All significant intercompany transactions have been eliminated.
Third-Party Payors
Net revenue represents patient service revenue and is reported at
the net realizable amounts from patients, third-party payors, and
others for services rendered. Such revenue generated from Medicare
and Medicaid/Medi-Cal reimbursement programs accounted for
approximately 64%, 59%, and 60% in 1992, 1991, and 1990,
respectively, of total net patient service revenue. Under these
programs, the Company is required to submit annual cost reports
which are subject to examination by agencies administering these
programs. Management believes that adequate provision has been
made in the consolidated financial statements for potential
adjustments resulting from such examinations. Net accounts
receivable from the Medicare and Medicaid/Medi-Cal reimbursement
programs at December 31, 1992 and 1991 were approximately
$26.7 million and $25.0 million, respectively.
Debt Issuance Costs
Costs incurred in connection with issuance of the Credit Agreement
(refer to footnote 3) are being amortized using the effective
interest method over the term of the related debt.
Depreciation
Depreciation expense is computed by the straight-line method. The
estimated useful lives are: buildings, 30 to 40 years; leasehold
improvements, the shorter of the expected useful life or the
remaining lease term; equipment, 10 years; and minor equipment, 3
years. Amortization of assets recorded under capital lease is
included with depreciation expense.
Earnings (Loss) Per Common Share
The computation of primary earnings (loss) per common share is
based on the weighted average number of shares outstanding during
the period after consideration of the dilutive effects of stock
options and warrants (1992--1,517,000; 1991--586,000 equivalent
shares) based on the treasury stock method using the average market
price of the common stock during the year. The primary weighted
average number of common shares outstanding is 28,547,600;
18,810,708; and 15,159,711 for the years ended December 31, 1992,
1991, and 1990, respectively.
34
<PAGE>
American Healthcare Management, Inc.
Notes to Consolidated Financial Statements (continued)
1. Business and Significant Accounting Policies (continued)
Earnings (Loss) Per Common Share (continued)
The computation of fully diluted earnings per common share
considers the dilutive effects of stock options and warrants (1991-
- -1,559,032 equivalent shares) based on the treasury stock method
using the year-end market price of the common stock. For the year
ended December 31, 1991, the fully diluted weighted average number
of common shares outstanding is 19,783,929.
Notes Receivable
Notes receivable includes $1.0 million of advances, principally to
officers of the Company.
Cash and Cash Equivalents
The Company considers all highly liquid debt instruments with
maturities of three months or less when purchased to be cash
equivalents.
2. Debt-For-Equity Exchange
On September 27, 1991, the Company's stockholders approved a
nontaxable recapitalization plan (the "Recapitalization") effective
on that date to issue 11,776,768 shares of the Company's common
stock to fifteen holders (the "Exchanging B Noteholders") of the
Company's Senior Secured B Notes (the "B Notes") in exchange for
$42,824,610 principal amount of B Notes. In addition, the Company
purchased from the Exchanging B Noteholders at par $2,450,720
principal amount of B Notes held by them. For Exchanging B
Noteholders holding warrants to purchase shares of the Company's
common stock, which amounted to an aggregate of 897,198 warrants,
the Company lowered the exercise price of the warrants from $2.67
per share to $1.60 per share. Accrued interest on the B Notes
through September 27, 1991 of $1.5 million was paid on that date to
the Exchanging B Noteholders on the B Notes exchanged and
purchased.
Expenses incurred in connection with the Recapitalization of $3.2
million were recorded as a reduction of additional paid-in capital.
35
<PAGE>
American Healthcare Management, Inc.
Notes to Consolidated Financial Statements (continued)
3. Long-Term Debt
A summary of long-term debt follows:
<TABLE>
<CAPTION>
1992 1991
_________ _________
000's
<S> <C> <C>
Parent Company:
Credit Agreement:
Revolving credit facility $ 12,000 $ -
Term Loan A 67,500 -
Term Loan B 20,000 -
Senior Secured A Notes; rate 12%,
payable semiannually through 1995 - 63,300
Senior Secured B Notes; rate 14%,
payable semiannually through 1999 - 37,534
Future interest included in
recorded liability - 75,300
_____________________
99,500 176,134
Subsidiaries:
Secured debt--other; rates, generally
fixed, average 10.3%; payable in
periodic installments through 2022 55,254 54,277
_____________________
154,754 230,411
Less current portion 10,932 3,136
_____________________
$ 143,822 $ 227,275
_____________________
_____________________
</TABLE>
The fair value of the Company's long-term debt is estimated to
approximate the recorded values, based on quoted market prices for
the same or similar issues or on the current rates offered to the
Company for debt of the same remaining maturities.
In the second quarter of 1992, the Company entered into commitment
agreements with a syndicate of lenders to borrow up to $105.0
million for the purposes of (i) refinancing at par (plus a
redemption premium) all of the Company's outstanding Senior Secured
A Notes due 1995 and Senior Secured B Notes due 1999 (the "Senior
Secured Notes"); and (ii) securing a line of credit, primarily for
funding working capital requirements. As a result of the
refinancing, the Company recognized an extraordinary gain on early
extinguishment of debt of $55.6 million.
The Company's Senior Secured Notes were issued in connection with
a debt restructuring followed by the Company's emergence from
bankruptcy on December 29, 1989. The debt restructuring had been
accounted for under Financial Accounting Standards Board (FASB)
Statement No. 15, "Accounting by Debtors and Creditors for Troubled
Debt Restructurings." The gain on early extinguishment primarily
resulted from the income recognition of "future interest" included
in long-term debt, less related expenses.
36
<PAGE>
American Healthcare Management, Inc.
Notes to Consolidated Financial Statements (continued)
3. Long-Term Debt (continued)
Following is a reconciliation of "future interest" recorded at
December 31, 1991 and the amount of the extraordinary gain (in
thousands):
<TABLE>
<S> <C>
Future interest in recorded liability
at December 31, 1991 $ 75,300
Add:
Related troubled debt interest expense from
January 1, 1992 to June 30, 1992 495
Less:
Related interest payable in 1992 through
extinguishment date (13,325)
Early redemption premium (3,192)
Transaction costs and other (3,707)
____________
Gain on early extinguishment of debt $ 55,571
</TABLE>
Pro forma income before extraordinary item for the years ended
December 31, 1992 and 1991 assuming the early extinguishment of
debt and recapitalization (refer to footnote 2) occurred January 1,
1991 would be as follows:
<TABLE>
<CAPTION>
December 31
1992 1991
_____________________
(Unaudited)
<S> <C> <C>
Income before extraordinary item,
as reported $ 15,507 $ 8,036
Less amortization of future interest in
recorded liability (5,904) (8,682)
Add pro forma reduction of interest expense
due to recapitalization and lower rate of
interest under the new debt 2,845 10,165
_____________________
Net change (3,059) 1,483
Tax (benefit) expense effect of change (119) 74
_____________________
Pro forma income before extraordinary item $ 12,567 $ 9,445
_____________________
_____________________
Pro forma weighted average number of
shares outstanding, primary 28,547 27,879
_____________________
_____________________
Pro forma earnings per share before
extraordinary item $.44 $.34
_____________________
_____________________
</TABLE>
37
<PAGE>
American Healthcare Management, Inc.
Notes to Consolidated Financial Statements (continued)
3. Long-Term Debt (continued)
The weighted average annual interest rate under the new debt during
the pro forma period before extinguishment is assumed to have been
6.4% and includes amortization of pro forma debt issuance costs.
The increase in pro forma interest expense for financial reporting
purposes occurred as a result of the effects of the application of
accounting rules under FASB Statement No. 15, under which rules the
effective annual interest rate on the extinguished debt through the
date of extinguishment was 0.5%.
Funds advanced under the Revolving Credit Facility (the "Facility")
are restricted to use for working capital purposes and
reimbursement for draws under letters of credit. The Facility is
limited to a maximum aggregate principal amount of $15.0 million
due in July 1995. Term Loan A is payable semiannually beginning
December 31, 1992, and matures in June 1999. Term Loan B matures
July 1997. The Facility and Term Loans bear interest on the
outstanding principal at either a rate based on the Prime Rate or
LIBOR as elected from time to time by the Company. Interest is
payable monthly if a rate based on Prime Rate is elected or at the
end of the LIBOR period if the rate based on LIBOR is elected (but
not to exceed three months if a six-month LIBOR period is elected).
The Company has elected various rates on the initial Facility
advance, Term Loan A, and Term Loan B representing a weighted
average annual interest rate at December 31, 1992 of 6.5%. On
September 22, 1992, the Company entered into interest rate swap
agreements effectively fixing the annual interest rate on
(i) $25.0 million of Term Loan A at 7.7% for three years and
(ii) $10.0 million of Term Loan A at 7.0% for two years.
In certain circumstances, the Company is required to make principal
prepayments of the Term Loans. These circumstances include the
receipt of proceeds from (i) certain sales of material assets,
(ii) issuance of additional indebtedness, and (iii) issuance of
equity securities. In addition, the Company is required to make
annual principal prepayments of the Term Loans based on 50 percent
of defined excess cash flow. The Company may prepay all or part of
the Facility and Term Loans without penalty.
The Credit Agreement limits, under certain circumstances, the
Company's ability to incur additional indebtedness, sell material
assets, acquire the capital stock or assets of another business, or
pay dividends and requires the Company to maintain a net worth
equal to certain specified amounts and meet or exceed certain
coverage, leverage, and indebtedness ratios. Indebtedness under
the Credit Agreement and under other secured debt and capital lease
agreements of the Company is secured by liens on substantially all
real and personal property and interests in real and personal
property of the Company and its subsidiaries.
Maturities on long-term debt, exclusive of capital lease
obligations, over the next five years are as follows:
<TABLE>
<CAPTION>
Years ending December 31: (000's)
<S> <C>
1993 $ 9,700
1994 10,180
1995 23,746
1996 26,587
1997 33,426
</TABLE>
38
<PAGE>
American Healthcare Management, Inc.
Notes to Consolidated Financial Statements (continued)
3. Long-Term Debt (continued)
A summary of assets under capital lease follows:
<TABLE>
<CAPTION>
1992 1991
_____________________
(000's)
<S> <C> <C>
Buildings and improvements $ 31,733 $ 31,733
Equipment 8,408 6,642
_____________________
40,141 38,375
Less allowance for amortization 10,068 8,984
_____________________
$ 30,073 $ 29,391
_____________________
_____________________
</TABLE>
At December 31, 1992, aggregate amounts of future minimum payments
under lease commitments are as follows:
<TABLE>
<CAPTION>
Capital Operating
Leases Leases
_____________________
(000's)
<S> <C> <C>
1993 $ 2,545 $ 5,498
1994 2,218 4,387
1995 1,942 3,746
1996 1,838 2,576
1997 1,243 1,596
Subsequent to 1997 19,387 8,842
_____________________
Total future minimum lease payments $ 29,173 $ 26,645
__________
__________
Amount representing interest 16,942
___________
Present value of minimum lease payments
(included in long-term secured
debt--other) 12,231
Less: current portion 1,232
___________
$ 10,999
___________
___________
</TABLE>
Operations for the years ended December 31, 1992, 1991, and 1990
included rental expense on operating leases of property and
equipment of $7.3 million, $7.6 million, and $8.8 million,
respectively, a majority of which represents rental expense
attributed solely to usage. Certain of these operating leases
include provisions for renewal options and escalation clauses.
4. Contingencies
Liability Risks
The general and professional liability risks of the Company are
self-insured up to $3.0 million per occurrence and $9.0 million in
aggregate per claim year. The Company carries general and
professional liability insurance from an unrelated commercial
carrier for per-occurrence losses in excess of $3.0 million on a
claims-made basis. Liabilities for self-insured professional and
general liability risks, for both asserted and unasserted claims,
are based on actuarially projected estimates discounted at a 7.5%
average rate to their present value of $6.2 million based on
historical loss payment patterns. At December 31, 1992, the
Company maintained $3.8 million in a trust fund for purposes of
meeting these estimated obligations. Although the ultimate
settlement of these liabilities may vary from such estimates,
management believes that the amounts provided in the Company's
financial statements are adequate.
39
<PAGE>
American Healthcare Management, Inc.
Notes to Consolidated Financial Statements (continued)
4. Contingencies (continued)
Liability Risks (continued)
Neither the Company nor any of its subsidiaries is party to, and
none of their properties is the subject of, any material pending
legal proceedings, other than ordinary, routine litigation
incidental to the business.
5. Stockholders' Equity and Stock Options
The Company has never paid any dividends on its common stock.
Under the terms of the Credit Agreement, the Company may not pay
dividends prior to July 29, 1994 and provided Term Loan B is paid
in full. Further, dividends in any fiscal year may not exceed the
lesser of ten percent of net income or $3.0 million.
At December 31, 1992, warrants to purchase 1,197,499 shares of
common stock were outstanding. The warrants may be exercised any
time prior to April 29, 1995 at a price of $2.67 per share for
warrants for 300,301 shares, and at $1.60 per share for warrants
for 897,198 shares.
The Company has reserved 1,640,000 shares (less options canceled)
of its common stock for issuance to officers and employees under
its 1990 Stock Plan and 360,000 shares under its 1990 Non-Employee
Directors' Stock Plan. Under both plans, options granted are
exercisable within a ten-year period at the market price on the
grant date and vest in equal annual amounts over a three-year
period. The following is a summary of option transactions during
1990, 1991, and 1992:
<TABLE>
<CAPTION>
Outstanding
1990 Non-Employee Option
Stock Directors' Price
Plan Stock Plan Range
___________________________________
<S> <C> <C> <C>
Balance at December 31, 1989 - -
Options granted 290,000 360,000 $1.00-$1.42
______________________
Balance at Decmeber 31, 1990 290,000 360,000
Options granted 250,000 0 $1.00-$3.00
______________________
Balance at December 31, 1991 540,000 360,000
Options granted 85,000 - $4.63
Options canceled (20,000) -
Options exercised (16,666) (120,000) $1.00-$1.38
______________________
Balance at December 31, 1992 588,334 240,000
______________________
______________________
Exercisable
at December 31, 1992 253,334 120,000
Available for future grant at
December 31, 1992 1,015,000 -
</TABLE>
In addition to the above plans, two officers of the Company were
granted options to acquire an aggregate of 470,000 shares of the
Company's common stock. The options are fully vested at a price of
$1.89 per option. The options expire in April 1995.
40
<PAGE>
American Healthcare Management, Inc.
Notes to Consolidated Financial Statements (continued)
6. Income Taxes
In the third quarter of 1992, the Company adopted the accounting
provisions of Financial Accounting Standards Board (FASB) Statement
No. 109, "Accounting for Income Taxes," effective as of January 1,
1991.
At December 31, 1992, significant deferred tax assets consist of:
tax return net operating loss carryforwards ($109.9 million),
allowances not yet deducted for tax purposes ($16.1 million),
capital lease liabilities ($12.3 million), and tax credit
carryforwards ($4.7 million). Significant deferred tax liabilities
consist of: accelerated depreciation ($119.4 million) and the
unamortized deferral of the effect of changing from the cash method
of tax accounting to the accrual method in a prior year
($16.4 million). As a result of the adoption of FASB Statement
No. 109, the ability of the Company to reduce future book income
tax expense with net operating loss carryforward benefits is
limited.
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities
for financial reporting purposes and the amounts used for income
tax purposes. Significant components of the Company's deferred tax
assets and liabilities are tax effected as follows (in thousands):
<TABLE>
<CAPTION>
December 31 January 1,
1992 1991 1991
____________________ _____________
<S> <C> <C> <C>
Deferred tax assets:
Capitalized inventory costs $ 19 $ 10 $ 10
Deductible allowances 5,474 6,746 10,758
Capital lease liability 4,182 3,621 2,242
Net operating losses 37,350 39,578 39,155
Tax credits 4,799 4,300 4,300
Excess book basis over
tax basis of parent
company debt - 25,600 25,000
_____________________ _____________
Total deferred tax assets 51,824 79,855 81,465
Valuation allowance (5,125) (32,354) (33,495)
_____________________ _____________
Net deferred tax assets 46,699 47,501 47,970
_____________________ _____________
Deferred tax liabilities:
Tax in excess of book
depreciation 40,587 40,505 39,383
Unamortized cash to
accrual method adjustment 5,597 6,996 8,587
_____________________ _____________
Total deferred tax liabilities 46,184 47,501 47,970
Net deferred tax assets $ 515 $ - $ -
_____________________ _____________
_____________________ _____________
</TABLE>
Significant components of the provision for income taxes
attributable to continuing operations are as follows (in
thousands):
<TABLE>
<CAPTION>
Liability Deferred
Method Method
____________________ _____________
1992 1991 1990
____________________ _____________
<S> <C> <C> <C>
Current:
Federal $ 287 $ 160 $ 47
State 477 120 23
____________________ _____________
Total current 764 280 70
Deferred federal (515) - -
____________________ _____________
$ 249 $ 280 $ 70
____________________ _____________
____________________ _____________
</TABLE>
41
<PAGE>
American Healthcare Management, Inc.
Notes to Consolidated Financial Statements (continued)
6. Income Taxes (continued)
The reconciliation of income tax attributable to continuing
operations computed at the U.S. federal statutory tax rates to
income tax expense is:
<TABLE>
<CAPTION>
Liability Method Deferred Method
________________________________ _________________
1992 1991 1990
_______________ ______________ ________________
Amount Percent Amount Percent Amount Percent
(000's) (000's) (000's)
<S> <C> <C> <C> <C> <C> <C>
Tax at U.S.
statutory rates $ 5,300 34% $ 2,827 34% $ - 0%
State income
taxes, net of
federal tax
benefit 777 5 549 6 -
Realization of
previously
unrecognized
tax benefits (5,600) (36) (3,256) (39) -
_______________ ______________ ________________
477 3 120 1 -
Alternative
minimum tax (228) (1) 160 2 70
_______________ ______________ ________________
$ 249 2% $ 280 3% $ 70 0%
_______________ ______________ ________________
_______________ ______________ ________________
</TABLE>
As a result of the accounting treatment of troubled debt (refer to
footnote 3), a previously unrecognized benefit of approximately
$5.9 million and $8.7 million representing the excess of deductible
interest for tax purposes over book interest expense was realized
in 1992 and 1991, respectively.
The following schedule summarizes approximate tax return net
operating loss and tax credit carryforwards, which are currently
available on an unlimited basis to offset federal net taxable
income:
<TABLE>
<CAPTION>
Expiration
Amount Period
<S> <C> <C>
Net operating loss ("NOL") $109.9 million 2000 - 2006
Alternative minimum tax
net operating losses 72.9 million 2000 - 2005
Investment tax credit,
reduced in accordance with TRA
of 1986 4.2 million 1994 - 2001
Alternative minimum tax credit 0.5 million no expiration
</TABLE>
The Company also has state tax loss carryforwards available in
various states in which it is required to file a return.
Pursuant to the provisions of Section 382 of the Internal Revenue
Code, the NOL carryforward could be subjected to annual use
limitations should an ownership change, as therein defined, occur
in any three-year period within the carryforward period.
42
<PAGE>
American Healthcare Management, Inc.
Notes to Consolidated Financial Statements (continued)
7. Asset Writedowns and Other Charges
Prior to 1989, a reserve was established for losses on disposal of
six company facilities, all of which were sold in the two-year
period ending December 31, 1990. As of December 31, 1990,
provision of $8.2 million was made for loss on disposal of three
subsidiaries, two of which were sold in 1991. Net losses on all
dispositions were charged against the related reserve. Also at
December 31, 1990, provision of $6.4 million was made for loss on
diminution in value of two hospital facilities which the Company
continues to operate.
During the fourth quarter of 1991, the Company reassessed its
allowance for diminution in value of properties recorded in the
fourth quarter of 1990 and reduced such allowance by $4.0 million
to reflect the effects of changed circumstances. Also during the
fourth quarter of 1991, the Company made a provision of
$4.0 million to adjust its capital lease obligations for
differences occurring in prior years. Such differences had no
material effect on results of operations of any prior year.
The following table summarizes the net value of property held for
disposal and the related activities for the three years ended
December 31, 1992:
43
<PAGE>
American Healthcare Management, Inc.
Notes to Consolidated Financial Statements (continued)
7. Asset Writedowns and Other Charges (continued)
Net Value of Property Held for Disposal
(000's)
<TABLE>
<CAPTION>
1990 Activity
_____________________
December December
31, Sales and 31,
1989 Operations Additions 1990
_________ __________ _________ _________
<S> <C> <C> <C> <C>
Property and
equipment, net $ 21,178 $ (21,178) $ 16,356 $ 16,356
Other assets, net 301 (301) 2,334 2,334
____________________________________________
21,479 (21,479) 18,690 18,690
Reserve for losses
on disposal 8,051 (6,158) 8,208 10,101
____________________________________________
Net value of
property held
for disposal $ 13,428 $ 8,589
</TABLE>
<TABLE>
<CAPTION>
1991
Activity
__________
December December
31, Sales and 31,
1990 Operations 1991
_________ __________ _________
<S> <C> <C> <C>
Property and
equipment, net $ 16,356 $ (10,053) $ 6,303
Other assets, net 2,334 (2,385) (51)
_________ __________ _________
18,690 (12,438) 6,252
Reserve for losses
on disposal 10,101 (4,328) 5,773
_________ __________ _________
Net value of property
held for disposal $ 8,589 $ 479
</TABLE>
<TABLE>
<CAPTION>
1992
Activity
__________
December December
31, Sales and 31,
1991 Operations 1992
_________ __________ _________
<S> <C> <C> <C>
Property and
equipment, net $ 6,303 $ (147) $ 6,156
Other assets, net (51) (284) (335)
_________ __________ _________
6,252 (431) 5,821
Reserve for losses
on disposal 5,773 (1,561) 4,212
_________ __________ _________
Net value of property
held for disposal $ 479 $ 1,609
44
<PAGE>
American Healthcare Management, Inc.
Notes to Consolidated Financial Statements (continued)
7. Asset Writedowns and Other Charges (continued)
Writedown of assets and other charges consists of the following:
</TABLE>
<TABLE>
<CAPTION>
1992 1991 1990
__________________________________
($ million)
<S> <C> <C> <C>
Provision for prior-year
differences on capital lease
obligation $ - $ 4.0 $ -
Provision for losses on
disposition of hospital
facilities - - 8.2
Provision (credit) for loss
on diminution of value of
hospital facilities - (4.0) 6.4
Valuation adjustment to notes
receivable received in
connection with previously
disposed operations - - (3.2)
__________________________________
$ - $ - $ 11.4
__________________________________
__________________________________
</TABLE>
The Company incurred $0.5 million of severance expense in 1990
relating to the resignation or termination of Company employees
following the Company's Reorganization. A substantial portion of
these payments were to executive officers. In September 1990, the
Company moved its executive offices from Dallas, Texas to King of
Prussia, Pennsylvania. Relocation expense approximated $0.5
million in 1990.
8. Quarterly Financial Information (Unaudited)
The following tables summarize the quarterly results of operations
for the two years ended December 31, 1992:
<TABLE>
<CAPTION>
(Unaudited)
Quarters
_________________________________________
Fourth Third Second First
_________________________________________
(000's except per share amounts)
<S> <C> <C> <C> <C>
1992:
Net revenue $ 80,883 $ 75,808 $ 77,966 $ 78,540
Income before income
taxes and extra-
ordinary item 2,590 1,331 5,375 6,460
Extraordinary item - - 55,571 -
Net income 2,549 1,584 60,737 6,208
Earnings per common
share before extra-
ordinary item .09 .06 .18 .22
Earnings per common
share .09 .06 2.12 .22
</TABLE>
45
<PAGE>
American Healthcare Management, Inc.
Notes to Consolidated Financial Statements (continued)
8. Quarterly Financial Information (Unaudited) (continued)
<TABLE>
<CAPTION>
(Unaudited)
Quarters
_________________________________________
Fourth Third Second First
_________________________________________
(000's except per share amounts)
<S> <C> <C> <C> <C>
1991:
Net revenue $ 79,439 $ 70,656 $ 70,355 $ 74,016
Income before income
taxes 3,766 690 1,095 2,765
Net income 3,636 550 1,115 2,735
Earnings per common
share, primary .13 .03 .07 .18
</TABLE>
46
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 of 15(d) 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, in King of Prussia, Pennsylvania, on February 4,
1994.
AMERICAN HEALTHCARE MANAGEMENT, INC.
/s/Bruce J. Colburn
____________________________
Bruce J. Colburn
Vice President, Controller
Chief Accounting Officer
