<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1994
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Transition period from ____________________to___________________
Commission file No. 0-13849
RAMSAY HEALTH CARE, INC.
(Exact name of registrant as specified in its charter)
Delaware 63-0857352
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
One Poydras Plaza
639 Loyola Avenue, Suite 1700
New Orleans, Louisiana 7011
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (504) 525-2505
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 such 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
----- -----
The number of shares of the Registrant's Common Stock outstanding at November
10, 1994 follows:
Common Stock, par value $0.01 per share - 7,723,799 shares
<PAGE> 2
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
FORM 10-Q
INDEX
<TABLE>
<CAPTION>
Part I. FINANCIAL INFORMATION Page
----
<S> <C>
Item 1. Financial Statements
Consolidated balance sheets - September 30, 1994 (unaudited)
and June 30, 1994 . . . . . . . . . . . . . . . . . . . . . . . . . 1
Consolidated statements of income - quarter ended
September 30, 1994 (unaudited) and 1993 (unaudited) . . . . . . . . 3
Consolidated statements of cash flows - quarter ended
September 30, 1994 (unaudited) and 1993 (unaudited) . . . . . . . . 4
Notes to consolidated financial statements - September 30, 1994
(unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . 8
Part II. OTHER INFORMATION
Item 6. Exhibits and Current Reports on Form 8-K . . . . . . . . . . . . 13
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
</TABLE>
<PAGE> 3
PART I. FINANCIAL INFORMATION
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30 JUNE 30
1994 1994
------------ -----------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and short-term investments . . . . . . . . . . . . . $ 3,197,000 $ 6,207,000
Restricted cash . . . . . . . . . . . . . . . . . . . . . 2,256,000 5,311,000
Patient accounts receivable, less allowances for doubtful
accounts of $4,360,000 and $3,925,000 at
September 30, 1994 and June 30, 1994, respectively . . 22,247,000 23,019,000
Amounts due from third-party contractual agencies . . . . 10,821,000 6,604,000
Other accounts receivable . . . . . . . . . . . . . . . . 2,594,000 2,139,000
Other current assets . . . . . . . . . . . . . . . . . . . 3,099,000 3,040,000
------------ ------------
TOTAL CURRENT ASSETS . . . . . . . . . . . . . . . . . . 44,214,000 46,320,000
OTHER ASSETS
Cash held in trust . . . . . . . . . . . . . . . . . . . . 1,786,000 1,805,000
Cost in excess of net asset value of purchased
businesses . . . . . . . . . . . . . . . . . . . . 11,941,000 12,042,000
Unamortized preopening and loan costs . . . . . . . . . . 3,713,000 3,731,000
Other intangible assets . . . . . . . . . . . . . . . . . 2,995,000 3,048,000
Real estate held for sale . . . . . . . . . . . . . . . . 1,150,000 1,150,000
Other non-current assets . . . . . . . . . . . . . . . . . 4,914,000 4,911,000
------------ ------------
26,499,000 26,687,000
PROPERTY AND EQUIPMENT
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,009,000 9,009,000
Building and improvements . . . . . . . . . . . . . . . . 118,684,000 118,555,000
Equipment, furniture and fixtures . . . . . . . . . . . . 21,202,000 20,626,000
------------ ------------
148,895,000 148,190,000
Less accumulated depreciation . . . . . . . . . . . . . . 39,359,000 38,029,000
------------ ------------
109,536,000 110,161,000
------------ ------------
$180,249,000 $183,168,000
============ ============
</TABLE>
See notes to consolidated financial statements.
1
<PAGE> 4
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30 JUNE 30
1994 1994
------------ ------------
(UNAUDITED)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,972,000 $ 2,306,000
Accrued salaries and wages . . . . . . . . . . . . . . . . . . . . 3,392,000 4,291,000
Other accrued liabilities . . . . . . . . . . . . . . . . . . . . 3,681,000 4,386,000
Amounts due to third-party contractual agencies . . . . . . . . . 6,022,000 4,729,000
Current portion of long-term debt . . . . . . . . . . . . . . . . 10,220,000 9,460,000
------------ ------------
TOTAL CURRENT LIABILITIES . . . . . . . . . . . . . . . . . . . 26,287,000 25,172,000
DEFERRED INCOME TAXES . . . . . . . . . . . . . . . . . . . . . . . . 4,879,000 4,932,000
LIABILITIES FOR SELF-INSURANCE CLAIMS, less
current portion . . . . . . . . . . . . . . . . . . . . . . . . . 1,476,000 1,341,000
LONG-TERM DEBT, less current portion . . . . . . . . . . . . . . . . 63,339,000 67,707,000
MINORITY INTERESTS . . . . . . . . . . . . . . . . . . . . . . . . . 3,279,000 3,548,000
STOCKHOLDERS' EQUITY
Class A convertible preferred stock, $1 par value--authorized
800,000 shares; issued 22,910 shares . . . . . . . . . . . . . 23,000 23,000
Class B convertible preferred stock, Series C, $1 par value
--authorized 152,321 shares; issued 142,486 shares
(liquidation value of $7,244,000) including accrued dividends
of $91,000 . . . . . . . . . . . . . . . . . . . . . . . . . . 233,000 233,000
Common Stock, $.01 par value--authorized 20,000,000
shares; issued 8,212,849 shares at September 30, 1994 and
8,200,760 shares at June 30, 1994 . . . . . . . . . . . . . . . 82,000 82,000
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . 100,025,000 100,048,000
Retained earnings (deficit) . . . . . . . . . . . . . . . . . . . (15,895,000) (16,483,000)
Treasury Stock, at cost--489,050 shares at September 30, 1994
and 481,750 shares at June 30, 1994 . . . . . . . . . . . . . . (3,479,000) (3,435,000)
------------ ------------
80,989,000 80,468,000
------------ ------------
$180,249,000 $183,168,000
============ ============
</TABLE>
See notes to consolidated financial statements.
2
<PAGE> 5
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
<TABLE>
<CAPTION>
QUARTER ENDED SEPTEMBER 30
-----------------------------
1994 1993
----------- ------------
<S> <C> <C>
NET REVENUES $35,823,000 $31,983,000
Operating Expenses:
Salaries, wages and benefits . . . . . . . . . . . . . . 17,734,000 15,460,000
Other operating expenses . . . . . . . . . . . . . . . . 11,011,000 9,318,000
Provision for doubtful accounts . . . . . . . . . . . . 1,285,000 1,715,000
Depreciation and amortization . . . . . . . . . . . . . 1,840,000 1,580,000
Interest and other financing charges . . . . . . . . . . 2,167,000 2,276,000
----------- ------------
TOTAL OPERATING EXPENSES . . . . . . . . . . . . . 34,037,000 30,349,000
----------- ------------
INCOME BEFORE MINORITY INTERESTS
AND INCOME TAXES . . . . . . . . . . . . . . . . . . . . 1,786,000 1,634,000
Minority interests . . . . . . . . . . . . . . . . . . . . 847,000 790,000
----------- ------------
INCOME BEFORE INCOME TAXES . . . . . . . . . . . . . . . . 939,000 844,000
Provision for income taxes . . . . . . . . . . . . . . . . 351,000 236,000
----------- ------------
NET INCOME . . . . . . . . . . . . . . . . . . . . . $ 588,000 $ 608,000
=========== ============
Income per common and dilutive common equivalent share:
Primary . . . . . . . . . . . . . . . . . . . . . . . . $ 0.06 $ 0.06
Fully diluted . . . . . . . . . . . . . . . . . . . . . $ 0.06 $ 0.06
Weighted average number of shares outstanding:
Primary . . . . . . . . . . . . . . . . . . . . . . . . 9,481,000 9,646,000
Fully diluted . . . . . . . . . . . . . . . . . . . . . 9,547,000 9,757,000
</TABLE>
See notes to consolidated financial statements.
3
<PAGE> 6
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
QUARTER ENDED SEPTEMBER 30
------------------------------
1994 1993
----------- ------------
<S> <C> <C>
Cash Flows from Operating Activities
Net Income . . . . . . . . . . . . . . . . . . . . . . . . $ 588,000 $ 608,000
----------- ------------
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization . . . . . . . . . . . . . 2,034,000 1,788,000
Provision (benefit) for deferred income taxes . . . . . (53,000) 48,000
Provision for doubtful accounts . . . . . . . . . . . . 1,285,000 1,715,000
Minority interests . . . . . . . . . . . . . . . . . . . 847,000 790,000
Cash flows from (increase) decrease in operating assets:
Accounts receivable . . . . . . . . . . . . . . . . . (513,000) 445,000
Amounts due from third-party contractual agencies . . (4,217,000) (540,000)
Other current assets . . . . . . . . . . . . . . . . (514,000) (5,000)
Other non-current assets . . . . . . . . . . . . . . (12,000) (352,000)
Cash flows from increase (decrease) in operating
liabilities:
Accounts payable . . . . . . . . . . . . . . . . . . 666,000 (1,063,000)
Accrued salaries, wages and other liabilities . . . . (1,604,000) 1,008,000
Unpaid self-insurance claims . . . . . . . . . . . . 135,000 (788,000)
Amounts due to third-party contractual agencies . . . 1,293,000 (748,000)
----------- ------------
Total adjustments . . . . . . . . . . . . . . . . (653,000) 2,298,000
----------- ------------
Net cash provided by (used in) operating
activities . . . . . . . . . . . . . . . . . (65,000) 2,906,000
----------- ------------
Cash Flows from Investing Activities
Proceeds from sale of facility . . . . . . . . . . . . . --- 11,950,000
Expenditures for property and equipment . . . . . . . . (787,000) (1,090,000)
Preopening costs . . . . . . . . . . . . . . . . . . . . (296,000) (68,000)
----------- ------------
Net cash provided by (used in) investing
activities. . . . . . . . . . . . . . . . . . (1,083,000) 10,792,000
----------- ------------
Cash Flows from Financing Activities
Loan costs . . . . . . . . . . . . . . . . . . . . . . . (145,000) (200,000)
Proceeds from exercise of stock options and employee
stock purchase plan . . . . . . . . . . . . . . . . . 68,000 8,000
Distributions to minority interests . . . . . . . . . . (1,116,000) (503,000)
Payments on debt . . . . . . . . . . . . . . . . . . . . (3,608,000) (3,016,000)
Payment of preferred stock dividends . . . . . . . . . . (91,000) ---
Purchase of treasury stock . . . . . . . . . . . . . . . (44,000) (205,000)
Restricted cash (reserved) used for debt payments . . . 3,055,000 (8,013,000)
Cash held in trust . . . . . . . . . . . . . . . . . . . 19,000 153,000
----------- ------------
Net cash used in financing activities . . . . . (1,862,000) (11,776,000)
----------- ------------
Net increase in cash and cash equivalents . . . . . . . . . (3,010,000) 1,922,000
Cash and cash equivalents at beginning of period . . . . . 6,207,000 10,682,000
----------- ------------
Cash and cash equivalents at end of period . . . . . . . . $ 3,197,000 $ 12,604,000
=========== ============
Supplemental Disclosures of Cash Flow Information
Cash paid during the period for:
Interest . . . . . . . . . . . . . . . . . . . . . . . . $ 1,747,000 $ 2,087,000
Income taxes . . . . . . . . . . . . . . . . . . . . . . 616,000 6,000
</TABLE>
See notes to consolidated financial statements.
4
<PAGE> 7
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
SEPTEMBER 30, 1994
NOTE 1
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and notes required by generally accepted accounting principles for
complete financial statements. In the opinion of management, all adjustments
considered necessary for a fair presentation of the interim information are of
a normal recurring nature and 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 quarter ended September 30,
1994 are not necessarily indicative of the results that may be expected for the
year. For further information, refer to the consolidated financial statements
and notes thereto included in the Company's Annual Report on Form 10-K for the
year ended June 30, 1994.
NOTE 2
At September 30, 1994, the Company's credit facilities included $45,200,000
in senior secured notes, approximately $22,000,000 in letters of credit (to
support the Company's variable rate demand revenue bonds), $2,538,000 in
subordinated secured notes and $4,000,000 in a working capital facility. The
senior secured notes bear interest at 11.6% and are due in semi-annual
installments that began on March 31, 1993 and end on March 31, 2000. The
subordinated secured notes bear interest at 15.6% and are due in semi- annual
installments that began on March 31, 1994 and end on March 31, 2000. The
variable rate demand revenue bonds were issued in 1984 and 1985, have terms of
30 years, and, as of September 30, 1994, require annual principal payments of
$800,000 (through year 2000) and $900,000 to $1,300,000 from years 2001 to
maturity. Amounts outstanding under the working capital facility bear interest
at a variable rate. There were no amounts outstanding under the working
capital facility at September 30, 1994 or June 30, 1994.
As part of the acquisition of Florida Psychiatric Management, Inc. ("FPM")
in October 1993, the Company issued 7%, three-year debentures totalling
$2,500,000. As part of the acquisition of Human Dynamics Institute in June
1994, the Company issued an 8.25%, $1,000,000 three-year promissory note,
payable in 36 equal monthly installments. These obligations are secured by the
common stock issued by these subsidiaries to the Company in connection with
these acquisitions.
Restricted cash in the accompanying balance sheets represent remaining
proceeds from the sale of Cumberland Hospital in August 1993. These monies are
held in trust and used to pay principal amounts due on the senior secured notes
and the subordinated secured notes. Restricted cash totalling $3,055,000 was
used to satisfy the September 30, 1994 principal payment on the senior secured
notes and the subordinated secured notes.
5
<PAGE> 8
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED - Continued)
The Company's long-term debt is as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30 JUNE 30
1994 1994
----------- -----------
<S> <C> <C>
11.6% senior secured notes . . . . . . . . . . . . . . . . . . $45,200,000 $48,025,000
Variable rate demand revenue bonds . . . . . . . . . . . . . . 20,900,000 21,000,000
15.6% subordinated secured notes . . . . . . . . . . . . . . . 2,538,000 2,769,000
7% debentures . . . . . . . . . . . . . . . . . . . . . . . . 2,083,000 2,292,000
8.25% note payable . . . . . . . . . . . . . . . . . . . . . . 917,000 1,000,000
Capital lease obligation . . . . . . . . . . . . . . . . . . . 1,221,000 1,318,000
Other notes payable . . . . . . . . . . . . . . . . . . . . . . 700,000 763,000
----------- -----------
73,559,000 77,167,000
Less amounts due within one year . . . . . . . . . . . . . . . 10,220,000 9,460,000
----------- -----------
$63,339,000 $67,707,000
=========== ===========
</TABLE>
The Company has pledged as collateral substantially all of its real property,
plus restricted cash.
NOTE 3
The provision for income taxes included in the consolidated statements
of income differs from the amounts computed by applying the normal statutory
rates to income before income taxes because such provision includes a) amounts
reportable as income for federal income tax purposes which are not income for
financial reporting purposes, b) amounts deducted for financial reporting
purposes that are not allowable deductions for federal and state income tax
purposes and c) amounts for state income taxes applicable to profitable
subsidiaries which do not utilize the operating losses generated by
unprofitable subsidiaries to offset taxable income. At September 30, 1994, the
Company has estimated operating loss carryforwards available to reduce future
taxable income of approximately $16 million subject to significant annual
limitations pursuant to Section 382 of the Internal Revenue Code of 1986, as
amended.
NOTE 4
On October 27, 1994, the Company announced its intention to distribute
the stock of its subsidiary, Ramsay Managed Care, Inc. (RMCI) to the Company's
shareholders. RMCI, which was formed in October 1993 and manages and provides
the delivery of mental health care and substance abuse treatment, includes
primarily the operations of FPM and Human Dynamics Institute. The distribution
is subject to the declaration of effectiveness of a registration statement
filed by RMCI with the Securities and Exchange Commission, the receipt of
certain investment banking opinions and certain other conditions. The Company
anticipates that the record date for the distribution will be in December 1994
and that the distribution will be made in January 1995.
6
<PAGE> 9
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED - Continued)
For the three months ended September 30, 1994, net revenues and income
before income taxes of RMCI were $3,463,000 and $63,000, respectively.
Provided that the distribution occurs as planned , the net cash advances made
to RMCI will be converted into an interest-bearing subordinated note due from
RMCI. In addition, the intangible assets and liabilities associated with RMCI,
totalling approximately $10,000,000 and $5,000,000, respectively, along with
other assets and liabilities associated with RMCI, will no longer be reflected
on the Company's consolidated balance sheet.
7
<PAGE> 10
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The Company pursues business expansion opportunities which are
consistent with its overall strategic plan and disposes of operations no longer
considered viable or consistent with this plan. In February 1994, the Company
sold its inpatient facility (Atlantic Shores Hospital) in Daytona Beach,
Florida due to, among other reasons, restrictive state certificate of need laws
that precluded the Company from expanding services at this location. Also, in
June 1994, two outpatient day treatment centers were closed due to poor
operating performance.
The Company's strategic plan also called for the development of
medical subacute units in certain of its inpatient facilities. Three such
units opened between January 1994 and July 1994. In addition, to further the
continuum of care at one of these units, an outpatient rehabilitation clinic
was acquired and began operations in January 1994.
In October 1993, the Company entered the managed mental healthcare
business through its acquisition of Florida Psychiatric Management, Inc. This
business subsequently expanded through an additional acquisition in June 1994
and through on-going development efforts. As noted elsewhere in this report,
the Company has announced its intention to distribute the common stock of this
business to the holders of its common and preferred stock.
In August 1993, the Company sold its inpatient facility (Cumberland
Hospital) in Fayetteville, North Carolina. The decision to sell this facility
occurred in June 1993, at which time the facility's basis of accounting was
changed from the going concern basis to the liquidation basis. Accordingly,
the operating results of this facility in July and August 1993 were recorded as
part of the loss on sale of this facility in the Company's June 1993 financial
statements.
RESULTS OF OPERATIONS
Excluding the net inpatient revenues associated with the significant
business transactions identified above, net inpatient revenues at the Company's
facilities declined $846,000 between periods because the overall increase in
patient volume (1.8% increase in inpatient days between periods) was offset by
a continued shift from charged-based payors to cost-based and negotiated rate
payors. Net revenue per patient day on cost-based and negotiated rate payors
is generally less than that for charged-based payors. Same store admissions
and average length of stay totalled 3,068 and 17.10 days, respectively, in the
quarter ended September 30, 1994, compared to 2,962 and 18.23 days,
respectively, in the quarter ended September 30, 1993. For the periods
presented, net inpatient revenues included significant amounts pursuant to
enhanced reimbursement rates under certain disproportionate share programs.
Recent federal statutory changes will significantly reduce the level of such
payments to state Medicaid programs, which
8
<PAGE> 11
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
programs are responsible for allocating these amounts to providers who render
care to a disproportionately high level of indigent patients. Accordingly,
these statutory changes will reduce the level of disproportionate share
payments to the Company in the future. The Company is investigating certain
cost saving and other measures at the Louisiana-based facilities which receive
most of these payments. Management believes these efforts, along with the
expected impact of the Company's subacute operations and other development
efforts, will offset some of the effects of reduced levels of disproportionate
share payments.
Excluding the net outpatient revenues associated with the significant
business transactions identified above, net outpatient revenues at the
Company's facilities increased 39.0% between periods due to a significant
increase in outpatient visits, particularly partial hospitalization visits, at
these facilities. This increase is consistent with management's expectations
and industry trends.
The following table sets forth, for the period indicated, certain
items of the Company's Consolidated Statements of Income as a percentage of the
Company's net revenues. For comparative purposes, the table excludes the
effect of the managed care and subacute operations on the current year period
and the closed/sold facilities on the prior year period.
<TABLE>
<CAPTION>
PERCENTAGE OF NET REVENUES
QUARTER ENDED
SEPTEMBER 30
--------------------------
1994 1993
----- -----
<S> <C> <C>
Net revenues . . . . . . . . . . . . . . . . 100.0% 100.0%
----- -----
Operating expenses:
Salaries, wages and benefits . . . . . . 50.2 48.1
Other operating expenses . . . . . . . . 28.4 28.6
Provision for doubtful accounts . . . . 4.0 5.4
Depreciation and amortization . . . . . 4.9 4.8
Interest expense . . . . . . . . . . . . 6.7 7.5
----- -----
Total operating expenses . . . . . . . . . . 94.2 94.4
----- -----
Income before minority interest and
income taxes . . . . . . . . . . . . . . 5.8 5.6
Minority interests . . . . . . . . . . . . . 2.7 2.6
----- -----
Income before income taxes . . . . . . . . . 3.1 3.0
===== =====
</TABLE>
Salaries, wages and benefits, as a percentage of net revenues,
increased between periods in response to higher inpatient and outpatient
volumes which, as stated previously, did not result
9
<PAGE> 12
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
in significantly higher net revenues due to payor mix changes. The ratio of
other operating expenses to net revenues slightly improved between periods due
to continued cost containment efforts at the Company's inpatient facilities.
The provision for doubtful accounts, which represents bad debt expense
associated with amounts owed by patients, decreased from 5.4% of net revenues
in the quarter ended September 30, 1993 to 4.0% in the quarter ended September
30, 1994. Again, the continued shift to cost-based and negotiated rate payors
decreased this expense as the patient portion of these billings is
substantially less than those of charged-based payors.
Depreciation and amortization expense as a percentage of net revenues
and in terms of amount, did not change significantly between periods as the
amortization of intangible assets associated with the managed mental healthcare
businesses acquired was offset by the depreciation and amortization associated
with the facilities that were sold/closed between periods.
Interest expense decreased from 7.5% of net revenues for the quarter
ended September 30, 1993 to 6.7% of net revenues for the comparable 1994
quarter. Debt levels were reduced between periods through principal payments
of $5,650,000 on the senior secured notes, $231,000 on the subordinated secured
notes and $800,000 on the variable rate demand revenue bonds still outstanding.
In addition, in connection with the sale of Atlantic Shores Hospital in
February 1994, the variable rate demand revenue bonds associated with that
facility, totalling $4,300,000, were repaid.
Minority interests reflects the limited partners' share of income
before income taxes of Three Rivers Hospital.
The Company's managed care and subacute businesses reported net
revenues of $3,463,000 and $992,000, respectively, for the quarter ended
September 30, 1994. In addition, the managed care business reported net income
before income taxes for the quarter ended September 30, 1994, after management
fees payable to the Company totalling $109,000, of $63,000. In October 1994,
the Company announced its intention to distribute the common stock of this
subsidiary, Ramsay Managed Care, Inc. (RMCI), to the holders of the Company's
common and preferred stock. This distribution is subject to the declaration of
effectiveness of a registration statement filed by RMCI with the Securities and
Exchange Commission, the receipt of certain investment banking opinions and
certain other conditions. The Company anticipates that the record date for the
distribution will be in December 1994 and that the distribution will be made in
January 1995.
10
<PAGE> 13
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
A condensed analysis of the September 30, 1993 operating results of
Atlantic Shores Hospital and the two outpatient day treatment centers closed
after September 30, 1993, is as follows:
<TABLE>
<S> <C>
Net revenues . . . . . . . . . . . . . . $1,368,000
Operating expenses . . . . . . . . . . . 1,451,000
----------
Loss before income taxes . . . . . . . . $ (83,000)
==========
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
The Company's credit facilities include $45,200,000 in senior secured
notes, approximately $22,000,000 in letters of credit, $2,538,000 in
subordinated secured notes and $4,000,000 in a working capital facility. The
senior secured notes bear interest at 11.6% and require semi-annual principal
payments of $3,531,000 through September 30, 1998 and semi-annual principal
payments of $5,650,000 from March 31, 1999 through March 31, 2000. The
subordinated secured notes bear interest at 15.6% and require semi-annual
principal payments of $231,000 through March 31, 2000. Required annual
principal payments on the variable rate demand revenue bonds total $800,000
through year 2000 and $900,000 to $1,300,000 in years 2001 through 2015.
Amounts outstanding under the working capital facility bear interest at a
variable rate. There were no amounts outstanding under the working capital
facility at September 30, 1994.
At September 30, 1994, restricted cash included $2,256,000 held in
trust to partially pay the March 31, 1995 principal amount due on the senior
secured notes.
At September 30, 1994, the amounts outstanding on debentures and notes
payable associated with RMCI totalled $3,000,000. This liability is expected
to be transferred to RMCI upon distribution of its stock to the Company's
shareholders in January 1995.
At the current time, the Company does not have any commitments to make
any material capital expenditures. The Company's current primary cash
requirements relate to its normal operating and debt service expenses, routine
capital improvements at its facilities and selective expansion of outpatient
programs and services. In addition, at the current time, the Company's
specific development projects include expansion of its management contract
operations and its network of affiliations with medical/surgical hospitals and
other healthcare providers. Management expects future construction and working
capital fundings in connection with the
11
<PAGE> 14
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
Company's subacute business will be minimal and that this business will
generate positive cash flow in the coming months. Also, in June 1994, the
Company closed two outpatient day treatment centers which were producing
negative cash flow.
On the basis of its historical experience and projected cash needs,
the Company believes that its internally generated funds from operations,
together with its $4,000,000 working capital facility and funds derived from
any future asset sales will be sufficient to fund its current cash requirements
and future identifiable needs. At the present time, the Company does not have
any agreement to sell any of its assets.
12
<PAGE> 15
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
The exhibits required to be filed as part of this Quarterly Report
on Form 10-Q are as follows:
Exhibit 11 Computation of Net Income per Share
Exhibit 27 Financial Data Schedule
Exhibit 99 Press Release dated October 27, 1994
(b) Current Reports on Form 8-K
There were no Current Reports on Form 8-K filed with the
Commission during the quarter ended September 30, 1994.
13
<PAGE> 16
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereupon duly authorized.
RAMSAY HEALTH CARE, INC.
Registrant
/s/ Gregory H. Browne
Gregory H. Browne
Chief Executive Officer
Date: November 14, 1994
14
<PAGE> 1
Exhibit 11
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
COMPUTATION OF NET INCOME PER SHARE
(unaudited)
<TABLE>
<CAPTION>
QUARTER ENDED SEPTEMBER 30
---------------------------
1994 1993
--------- ---------
<S> <C> <C>
PRIMARY
Weighted average common shares outstanding . . . . . . . . 8,033,278 8,198,356
Class A convertible preferred stock . . . . . . . . . . . 22,910 22,910
Class B convertible preferred stock, Series C . . . . . . 1,424,860 1,424,860
--------- ---------
TOTAL COMMON AND DILUTIVE
COMMON EQUIVALENT SHARES . . . . . . . . . . . . . . 9,481,048 9,646,126
========= =========
Net Income Available to Common Shareholders . . . . . $ 588,000 $ 608,000
========= =========
NET INCOME PER SHARE . . . . . . . . . . . . . . . . $ 0.06 $ 0.06
========= =========
FULLY DILUTED
Weighted average common shares outstanding . . . . . . . . 8,099,612 8,308,839
Class A convertible preferred stock . . . . . . . . . . . 22,910 22,910
Class B convertible preferred stock, Series C . . . . . . 1,424,860 1,424,860
--------- ---------
TOTAL COMMON AND DILUTIVE
COMMON EQUIVALENT SHARES . . . . . . . . . . . . . . 9,547,382 9,756,609
========= =========
Net Income Available to Common Shareholders . . . . . $ 588,000 $ 608,000
========= =========
NET INCOME PER SHARE . . . . . . . . . . . . . . . . $ 0.06 $ 0.06
========= =========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> QTR-3
<FISCAL-YEAR-END> JUN-30-1994
<PERIOD-START> JUL-1-1994
<PERIOD-END> SEP-30-1994
<CASH> 5,453,000
<SECURITIES> 0
<RECEIVABLES> 26,607,000
<ALLOWANCES> 4,360,000
<INVENTORY> 0
<CURRENT-ASSETS> 44,214,000
<PP&E> 148,895,000
<DEPRECIATION> 39,359,000
<TOTAL-ASSETS> 180,249,000
<CURRENT-LIABILITIES> 26,287,000
<BONDS> 63,339,000
<COMMON> 82,000
0
256,000
<OTHER-SE> 80,651,000
<TOTAL-LIABILITY-AND-EQUITY> 180,249,000
<SALES> 0
<TOTAL-REVENUES> 35,823,000
<CGS> 0
<TOTAL-COSTS> 28,745,000
<OTHER-EXPENSES> 2,687,000
<LOSS-PROVISION> 1,285,000
<INTEREST-EXPENSE> 2,167,000
<INCOME-PRETAX> 939,000
<INCOME-TAX> 351,000
<INCOME-CONTINUING> 588,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 588,000
<EPS-PRIMARY> 0.06
<EPS-DILUTED> 0.06
</TABLE>
<PAGE> 1
EXHIBIT 99
RAMSAY HEALTH CARE, INC.
PRESS RELEASE
NEW ORLEANS, LA., October 27, 1994: Ramsay Health Care, Inc. (NASDAQ:
RHCI) today announced that it plans to distribute its holdings of common stock
of Ramsay Managed Care, Inc. ("RMCI"), its subsidiary, to the holders of the
Company's common and preferred stock. The distribution will take the form of a
dividend payable to the holders of the Company's common and preferred stock on
a pro rata basis (as if the preferred stock had been converted into common
stock) as of a record date to be established by the Executive Committee of the
Board of Directors of the Company.
RMCI manages and provides the delivery of mental health care and substance
abuse treatment through networks of affiliated and independent care providers
on behalf of self-insured employers, HMO's, insurance companies and
governmental agencies. RMCI entered the managed mental health care business
through the acquisition of Florida Psychiatric Management of Orlando, Florida
in October 1993 and Human Dynamics Institute of Phoenix, Arizona in June 1994,
and through development efforts. For the fiscal year ended June 30, 1994 (an
eight month period), RMCI had total revenues of approximately $5.85 million and
net income of approximately $68,000.
Following the distribution, the common stock of the Company will continue
to be traded on the NASDAQ National Market System and it is anticipated that
the common stock of RMCI will be quoted on the NASDAQ OTC Electronic Bulletin
Board. The distribution is subject to the declaration of effectiveness of a
registration statement to be filed by RMCI with the Securities and Exchange
Commission, the receipt of certain investment banking opinions and certain
other conditions. The Company anticipates that the record date for the
distribution will be in December 1994 and that the distribution will be made in
January 1995.
The Company also announced that RMCI has completed $3.32 million of a $5.82
million private placement of its common stock to a corporate affiliate of Paul
J. Ramsay, the Chairman of the Board of the Company and RMCI, and to three
officers of RMCI. The closing for the remaining $2.5 million placement to the
corporate affiliate of Mr. Ramsay will occur on or before June 30, 1995. The
$1.00 purchase price per share for the RMCI common stock was determined by an
independent fair market valuation and was approved by an independent committee
of the Board of Directors of the Company. The private placement will assist
RMCI's growth and development strategy by providing funds for the establishment
of managed care businesses in the southeastern United States, including Florida
and Louisiana. Following the first closing of the private placement, and
before the distribution and the second closing mentioned above, the common
stock of RMCI is owned 58% by the Company, 26% by the corporate affiliate of
Mr. Ramsay, and 6% in the aggregate by officers of RMCI and an unrelated third
party.
<PAGE> 2
In commenting on the proposed distribution and the private placement,
Gregory H. Browne, Chief Executive Officer of the Company, stated "We believe
that the proposed distribution of RMCI will accomplish a number of important
business objectives, including allowing RHCI and RMCI to pursue the development
and growth strategies best suited for their individual goals. We expect that
the distribution will also serve as a means of enhancing shareholder value.
The private placement will provide RMCI with additional capital necessary to
implement its growth strategy and we are pleased that Mr. Ramsay and others
were in a position to provide this equity. We are excited about the prospects
for both companies."
RHCI is one of the leading providers of behavioral health services in the
country and presently operates 15 inpatient hospitals, as well as a managed
mental health care services business.
CONTACT: Gregory H. Browne
Chief Executive Officer
(504) 525-2505
