<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 March 31, 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 70113
(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 May 10,
1994 follows:
Common Stock, par value $0.01 per share - 7,779,509 shares
<PAGE> 2
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
FORM 10-Q
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C>
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated balance sheets - March 31, 1994 (unaudited)
and June 30, 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Consolidated statements of income - quarter and nine months ended
March 31, 1994 (unaudited) and 1993 (unaudited) . . . . . . . . . . . . . . . . . . 3
Consolidated statements of cash flows - nine months ended
March 31, 1994 (unaudited) and 1993 (unaudited) . . . . . . . . . . . . . . . . . . 4
Notes to consolidated financial statements - March 31, 1994
(unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Part II. OTHER INFORMATION
Item 6. Exhibits and Current Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . 11
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
</TABLE>
<PAGE> 3
PART I. FINANCIAL INFORMATION
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31 JUNE 30
1994 1993
--------------- ---------------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and short-term investments . . . . . . . . . . . . . $ 4,538,000 $ 10,682,000
Restricted cash . . . . . . . . . . . . . . . . . . . . . 5,271,000 ---
Patient accounts receivable, less allowances for
doubtful accounts of $3,423,000 and $4,955,000 at
March 31, 1994 and June 30, 1993, respectively . . . . 25,084,000 26,696,000
Amounts due from third-party contractual agencies . . . . 8,011,000 4,971,000
Other accounts receivable . . . . . . . . . . . . . . . . 2,718,000 1,356,000
Other current assets . . . . . . . . . . . . . . . . . . . 1,984,000 3,385,000
----------- -----------
TOTAL CURRENT ASSETS . . . . . . . . . . . . . . . . . . 47,606,000 47,090,000
OTHER ASSETS
Cash held in trust . . . . . . . . . . . . . . . . . . . . 1,813,000 2,611,000
Cost in excess of net asset value of purchased
businesses . . . . . . . . . . . . . . . . . . . . . . 12,197,000 4,699,000
Unamortized preopening and loan costs . . . . . . . . . . 3,669,000 3,664,000
Real estate held for sale . . . . . . . . . . . . . . . . 1,150,000 1,150,000
Other non-current assets . . . . . . . . . . . . . . . . . 5,309,000 4,141,000
----------- -----------
24,138,000 16,265,000
PROPERTY AND EQUIPMENT
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,009,000 9,995,000
Building and improvements . . . . . . . . . . . . . . . . 118,366,000 134,468,000
Equipment, furniture and fixtures . . . . . . . . . . . . 19,444,000 18,419,000
------------ ------------
146,819,000 162,882,000
Less accumulated depreciation . . . . . . . . . . . . . . 36,032,000 35,867,000
------------ ------------
110,787,000 127,015,000
------------ ------------
$ 182,531,000 $ 190,370,000
=========== ===========
</TABLE>
See notes to consolidated financial statements.
1
<PAGE> 4
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31 JUNE 30
1994 1993
-------------- --------------
(UNAUDITED)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable . . . . . . . . . . . . . . . . . . . . . $ 2,904,000 $ 4,790,000
Accrued salaries and wages . . . . . . . . . . . . . . . . 3,283,000 3,760,000
Other accrued liabilities . . . . . . . . . . . . . . . . 3,242,000 1,467,000
Amounts due to third-party contractual agencies . . . . . 5,956,000 6,114,000
Current portion of long-term debt . . . . . . . . . . . . 9,042,000 7,148,000
----------- ----------
TOTAL CURRENT LIABILITIES . . . . . . . . . . . . . . . 24,427,000 23,279,000
DEFERRED INCOME TAXES . . . . . . . . . . . . . . . . . . . . 5,460,000 6,120,000
LIABILITIES FOR SELF-INSURANCE CLAIMS, less
current portion . . . . . . . . . . . . . . . . . . . . . 1,646,000 2,419,000
LONG-TERM DEBT, less current portion . . . . . . . . . . . . 67,165,000 77,429,000
MINORITY INTERESTS . . . . . . . . . . . . . . . . . . . . . 2,377,000 1,126,000
STOCKHOLDERS' EQUITY
Class A Convertible Preferred Stock, $1 par value --
authorized 800,000 shares; issued 313,500 shares;
outstanding 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 at March 31, 1994 . . . . 233,000 142,000
Common Stock, $.01 par value--authorized 20,000,000
shares; issued 8,173,259 shares at March 31, 1994
and 8,087,926 shares at June 30, 1993 . . . . . . . . . 82,000 81,000
Additional paid-in capital . . . . . . . . . . . . . . . . 100,008,000 99,847,000
Retained earnings (deficit) . . . . . . . . . . . . . . . (16,055,000) (17,805,000)
Treasury Stock, at cost--396,750 shares and 321,750
shares at March 31, 1994 and June 30, 1993,
respectively . . . . . . . . . . . . . . . . . . . . . (2,835,000) (2,291,000)
------------- ------------
81,456,000 79,997,000
------------- ------------
$ 182,531,000 $ 190,370,000
============ ============
</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 Nine Months Ended
March 31 March 31
-------- --------
1994 1993 1994 1993
---- ---- ---- ----
(Restated) (Restated)
---------- ----------
<S> <C> <C> <C> <C>
NET REVENUES $36,179,000 $35,827,000 $100,723,000 $ 98,521,000
Operating Expenses:
Salaries, wages and benefits . . . . . . . . . . . . 16,468,000 16,518,000 47,624,000 46,323,000
Other operating expenses . . . . . . . . . . . . . . 11,608,000 10,537,000 31,158,000 29,574,000
Provision for doubtful accounts . . . . . . . . . . 1,632,000 2,461,000 4,660,000 6,524,000
Depreciation and amortization . . . . . . . . . . . 1,714,000 1,744,000 5,011,000 4,849,000
Interest and other financing charges . . . . . . . . 2,090,000 2,400,000 6,592,000 7,137,000
Loss on closure of facility . . . . . . . . . . . . --- --- --- 1,109,000
----------- ---------- ------------ ----------
TOTAL OPERATING EXPENSES . . . . . . . . . . . . 33,512,000 33,660,000 95,045,000 95,516,000
----------- ---------- ------------ ----------
INCOME BEFORE MINORITY INTERESTS, INCOME
TAXES, CUMULATIVE EFFECT AND
EXTRAORDINARY ITEM . . . . . . . . . . . . . . . . . 2,667,000 2,167,000 5,678,000 3,005,000
Minority interests . . . . . . . . . . . . . . . . . . 1,504,000 --- 3,108,000 ---
----------- ---------- ------------ ----------
INCOME BEFORE INCOME TAXES, CUMULATIVE
EFFECT AND EXTRAORDINARY ITEM . . . . . . . . . . . 1,163,000 2,167,000 2,570,000 3,005,000
Provision for income taxes . . . . . . . . . . . . . . 341,000 402,000 665,000 525,000
----------- ---------- ------------ ----------
INCOME BEFORE CUMULATIVE EFFECT AND
EXTRAORDINARY ITEM . . . . . . . . . . . . . . . . . 822,000 1,765,000 1,905,000 2,480,000
Cumulative effect of change in accounting for
income taxes . . . . . . . . . . . . . . . . . . . . --- --- --- 2,353,000
----------- ---------- ------------ ----------
INCOME BEFORE EXTRAORDINARY ITEM . . . . . . . . . . . 822,000 1,765,000 1,905,000 4,833,000
Loss from early extinguishment of debt, net of
applicable income taxes . . . . . . . . . . . . . . (155,000) --- (155,000) ---
----------- ---------- ------------ ----------
NET INCOME . . . . . . . . . . . . . . . . . . . . . . $ 667,000 $ 1,765,000 $ 1,750,000 $ 4,833,000
=========== ========== ============ ==========
Income per common and dilutive common equivalent
share:
Primary:
Before cumulative effect and extraordinary
item . . . . . . . . . . . . . . . . . . . . . $ 0.09 $ 0.23 $ 0.20 $ 0.32
Cumulative effect . . . . . . . . . . . . . . . . --- --- --- 0.30
Extraordinary item . . . . . . . . . . . . . . . . (0.02) --- (0.02) ---
------ ------ ------ ------
$ 0.07 $ 0.23 $ 0.18 $ 0.62
===== ===== ====== =====
Fully diluted:
Before cumulative effect and extraordinary
item . . . . . . . . . . . . . . . . . . . . . $ 0.09 $ 0.23 $ 0.20 $ 0.32
Cumulative effect . . . . . . . . . . . . . . . . --- --- --- 0.30
Extraordinary item . . . . . . . . . . . . . . . . (0.02) --- (0.02) ---
------ ------ ------ ------
$ 0.07 $ 0.23 $ 0.18 $ 0.62
===== ===== ====== =====
Weighted average number of shares outstanding:
Primary . . . . . . . . . . . . . . . . . . . . . . 9,661,000 7,864,000 9,660,000 7,881,000
Fully diluted . . . . . . . . . . . . . . . . . . . 9,661,000 7,864,000 9,692,000 7,881,000
</TABLE>
See notes to consolidated financial statements.
3
<PAGE> 6
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED MARCH 31
--------------------------
1994 1993
---- ----
(RESTATED)
<S> <C> <C>
Cash Flows from Operating Activities
Net Income . . . . . . . . . . . . . . . . . . . . . . . . $ 1,750,000 $ 4,833,000
------------- ------------
Adjustments to reconcile net income to net cash
provided by operating activities:
Cumulative effect of change in accounting for
income taxes . . . . . . . . . . . . . . . . . . . . . --- (2,353,000)
Write-off of deferred loan costs . . . . . . . . . . . . 258,000 ---
Gain on sales of facilities . . . . . . . . . . . . . . (264,000) ---
Depreciation and amortization . . . . . . . . . . . . . 5,625,000 5,229,000
Provision for doubtful accounts . . . . . . . . . . . . 4,660,000 6,524,000
Provision for deferred income taxes . . . . . . . . . . (660,000) 251,000
Minority interests . . . . . . . . . . . . . . . . . . . 1,251,000 ---
Cash flows from (increase) decrease in operating
assets:
Accounts receivable . . . . . . . . . . . . . . . . . (3,048,000) (7,912,000)
Other current assets . . . . . . . . . . . . . . . . (3,001,000) 3,584,000
Other non-current assets . . . . . . . . . . . . . . (1,168,000) (437,000)
Cash flows from increase (decrease) in operating
liabilities:
Accounts payable . . . . . . . . . . . . . . . . . . (1,886,000) 22,000
Accrued salaries, wages and other liabilities . . . . 1,298,000 532,000
Unpaid self-insurance claims . . . . . . . . . . . . (773,000) (632,000)
Amounts due to third-party contractual agencies . . . (158,000) (443,000)
------------- ------------
Total adjustments . . . . . . . . . . . . . . . . 2,134,000 4,365,000
------------- ------------
Net cash provided by operating activities . . . 3,884,000 9,198,000
------------- ------------
Cash Flows from Investing Activities
Proceeds from sales of facilities . . . . . . . . . . . 16,195,000 ---
Acquisition of Florida Psychiatric Management, Inc. . . (4,207,000) ---
Acquisition of South Texas Rehabilitation Center . . . . (700,000) ---
Expenditures for property and equipment . . . . . . . . (3,754,000) (4,519,000)
Preopening costs . . . . . . . . . . . . . . . . . . . . (1,217,000) (1,084,000)
------------- ------------
Net cash provided by (used in) investing
activities . . . . . . . . . . . . . . . . . 6,317,000 (5,603,000)
------------- ------------
Cash Flows from Financing Activities
Loan costs . . . . . . . . . . . . . . . . . . . . . . . (211,000) (327,000)
Proceeds from sale/leaseback of equipment . . . . . . . --- 1,857,000
Proceeds from exercise of options and warrants . . . . . 437,000 ---
Payments on debt . . . . . . . . . . . . . . . . . . . . (11,370,000) (3,812,000)
Payment of preferred stock dividends . . . . . . . . . . (184,000) (75,000)
Purchase of treasury stock . . . . . . . . . . . . . . . (544,000) (309,000)
Restricted cash . . . . . . . . . . . . . . . . . . . . (5,271,000) ---
Cash held in trust . . . . . . . . . . . . . . . . . . . 798,000 (26,000)
------------- ------------
Net cash used in financing activities . . . . . (16,345,000) (2,692,000)
------------- ------------
Net increase (decrease) in cash and cash equivalents . . . (6,144,000) 903,000
Cash and cash equivalents at beginning of period . . . . . 10,682,000 8,628,000
------------- ------------
Cash and cash equivalents at end of period . . . . . . . . $ 4,538,000 $ 9,531,000
============ ===========
Supplemental Disclosures of Cash Flow Information
Cash paid during the period for:
Interest . . . . . . . . . . . . . . . . . . . . . . . . $ 6,597,000 $ 8,281,000
Income taxes . . . . . . . . . . . . . . . . . . . . . . 240,000 903,000
</TABLE>
See notes to consolidated financial statements.
4
<PAGE> 7
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
MARCH 31, 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 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 March 31,
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, 1993.
NOTE 2
At March 31, 1994, the Company's credit facilities included $48.0
million in senior secured notes, approximately $22.0 million in letters of
credit (to support the Company's variable rate revenue bonds), $2.8 million in
subordinated secured notes and $4.0 million 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. Amounts
outstanding under the working capital facility bear interest at a variable
rate. There were no amounts outstanding under the working capital facility at
June 30, 1993 or March 31, 1994. Proceeds from the sale of Atlantic Shores
Hospital on February 10, 1994 were used to redeem the outstanding balance of
$4.3 million on the variable rate revenue bonds associated with that facility.
As part of the acquisition of Florida Psychiatric Management, Inc. (FPM), a
managed mental health company, the Company issued an aggregate of $2.5 million
of three-year 7% debentures, secured by shares of FPM. Restricted cash in the
accompanying balance sheet represents amounts from the sale of Cumberland
Hospital in August 1993 that are held in trust for the repayment of the senior
secured and subordinated secured notes. The Company has pledged as collateral
substantially all of its real property, plus restricted cash.
The Company's long-term debt is as follows:
<TABLE>
<CAPTION>
MARCH 31 JUNE 30
1994 1993
---- ----
<S> <C> <C>
11.6% Senior secured notes due March 31, 2000 . . . . . . . . . $ 48,025,000 $ 53,675,000
Variable rate revenue bonds through 2015 . . . . . . . . . . . 21,000,000 26,200,000
15.6% Subordinated secured notes due March 31, 2000 . . . . . . 2,769,000 3,000,000
7% three-year debentures . . . . . . . . . . . . . . . . . . . 2,500,000 ---
Capital lease obligation . . . . . . . . . . . . . . . . . . . 1,413,000 1,700,000
Secured notes payable . . . . . . . . . . . . . . . . . . . . . 500,000 2,000
----------- -----------
76,207,000 84,577,000
Less amounts due within one year . . . . . . . . . . . . . . . 9,042,000 7,148,000
----------- -----------
$ 67,165,000 $ 77,429,000
=========== ===========
</TABLE>
5
<PAGE> 8
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) - (CONTINUED)
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 amounts
deducted for financial reporting purposes that are not allowable deductions for
federal and state income tax purposes and 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 March 31,
1994, the Company has estimated operating loss carryforwards available to
reduce future taxable income of approximately $18.0 million subject to
significant annual limitations pursuant to Section 382 of the Internal Revenue
Code of 1986, as amended.
NOTE 4
During the fourth quarter of fiscal 1993, effective July 1, 1992, the
Company changed its method of accounting for income taxes from the deferred
method to the liability method required by FASB Statement No. 109, "Accounting
for Income Taxes". As permitted under the new rules, the previously presented
quarterly results for fiscal year 1993 have been restated. The cumulative
effect of adopting FASB Statement No. 109 was to increase net income by $2.4
million in the nine month period ended March 31, 1993.
6
<PAGE> 9
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The psychiatric health care industry continues to experience intense
pressure from governmental and private reimbursement sources to shorten
patients' lengths of stay and otherwise to reduce the cost of delivery of
psychiatric health care services. While the Company is expanding its services
through outpatient programs and partial hospitalization treatment at inpatient
facilities, it expects these pressures to continue to impact psychiatric health
care providers' revenues and net income.
The Company is now firmly focused on developing its outpatient
business, both alongside the inpatient facilities in a further expansion of the
continuum of care, and in freestanding outpatient centers. This expansion may
include the acquisition and creation of multi-specialty practices in geographic
markets which the Company considers to be important. In addition, the Company
is actively pursuing expansion of its managed care operations.
In August 1993, the Company sold its Cumberland Hospital in
Fayetteville, North Carolina, with net cash proceeds of approximately $12.0
million. Proceeds from this sale have been earmarked for principal repayment
of the senior secured and subordinated secured notes. A provision for loss on
this transaction of approximately $3.6 million had been recorded as of June 30,
1993.
In October 1993, the Company purchased Florida Psychiatric Management,
Inc. (FPM), a managed mental health company, for $6.5 million in cash and
debentures, plus contingent consideration based on the attainment of certain
earnings and revenue levels over the ensuing two years.
The Company entered into a joint venture arrangement with an
independent entity whereby the joint venture would operate medical subacute
units within certain of the Company's inpatient facilities. In January 1994,
the joint venture opened its first subacute unit and acquired South Texas
Rehabilitation Center, an outpatient rehabilitation company, for $200,000 in
cash and a 3 year $500,000 note payable.
In February 1994, the Company sold its Atlantic Shores Hospital in
Daytona Beach, Florida for $4.8 million. The Company recognized a gain of
approximately $264,000 on the sale. Primarily all of the net proceeds from the
sale were used principally to redeem the variable rate revenue bonds associated
with that facility.
7
<PAGE> 10
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
LIQUIDITY
CURRENT STATUS
The Company's credit facilities include $48.0 million in senior
secured notes, approximately $22.0 million in letters of credit, $2.8 million
in subordinated secured notes and $4.0 million in a working capital facility.
The senior secured notes bear interest of 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. Amounts
outstanding under the working capital facility bear interest at a variable
rate. There were no amounts outstanding under the working capital facility at
March 31, 1994. Proceeds from the sale of Atlantic Shores Hospital on February
10, 1994 were used to redeem the $4.3 million outstanding balance of the
variable rate revenue bonds associated with that facility. The Company also
issued an aggregate of $2.5 million of 7% three-year debentures as part of the
acquisition of FPM. At March 31, 1994, restricted cash included $5.3 million
held in trust for repayment of the senior secured and subordinated secured
notes.
CASH REQUIREMENTS
The Company's primary cash requirements relate to its normal operating
expenses and debt service payments, routine capital improvements at its
facilities and the specific development projects outlined below.
DEVELOPMENT PROJECTS
The Company's specific development projects include the expansion of
its outpatient and partial hospitalization programs (including possible
acquisitions of physician and other outpatient practices), its managed mental
health care operations, its subacute ventures and ongoing discussions with
university-affiliated hospitals with a view toward establishing psychiatric
care facilities in association with these universities. In addition, on
October 29, 1993, the Company purchased FPM, a managed mental health company,
for $4.0 million in cash, $2.5 million in 3-year debentures, plus contingent
consideration based on the achievement of certain earnings and revenue levels
(such consideration not to exceed $2.0 million). The Company anticipates
utilizing this acquisition as a base for future expansion into the managed
mental health field. On the basis of its historical experience and projected
cash needs, the Company believes that its existing $4.0 million working capital
facility, together with internally generated funds from operations, will be
sufficient to fund its current cash requirements and development projects.
Over the long- term, the Company believes that its internally generated funds
from operations and its working capital facility will be sufficient to fund its
identifiable working capital, development and other cash needs. (See Note 2 to
Consolidated Financial Statements).
8
<PAGE> 11
RAMSAY HEALTH CARE , INC. AND SUBSIDIARIES
FINANCIAL CONDITION
On June 30, 1993, the interests in the Company controlled by Paul J.
Ramsay, the Company's chairman, were recapitalized. The Company issued 142,486
shares of Class B Preferred Stock, Series C (the "Series C Preferred Stock") in
exchange for all outstanding shares of the Company's Class B Convertible
Preferred Stock, Series 1987, the Company's $2.0 million 16.1% Subordinated
Promissory Note and $500,000 in cash.
In August 1993, the Company sold its Cumberland Hospital to Cape Fear
Valley Medical Center, with net cash proceeds of approximately $12.0 million.
The proceeds from this sale are earmarked for the payment of debt.
On October 29, 1993, the Company purchased the assets of Florida
Psychiatric Management, Inc. for $6.5 million, which included a cash payment of
$4.0 million and the issuance of an aggregate of $2.5 million of three-year 7%
debentures. Approximately $6.7 million of cost in excess of net asset value of
purchased businesses was recorded as a result of the transaction.
On February 10, 1994, the Company sold its Atlantic Shores Hospital to
Halifax Medical Center, with the net proceeds being used principally to repay
the $4.3 million balance of the Industrial Revenue Bonds associated with that
hospital.
RESULTS OF OPERATIONS
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. The discussion which follows should be read in
conjunction with the Consolidated Financial Statements and the notes thereto
contained elsewhere herein.
<TABLE>
<CAPTION>
PERCENTAGE OF NET REVENUES
QUARTER ENDED NINE MONTHS ENDED
MARCH 31 MARCH 31
--------- --------
1994 1993 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net revenues . . . . . . . . . . . . . . 100.0 % 100.0 % 100.0 % 100.0 %
----- ----- ----- -----
Operating expenses:
Salaries, wages and benefits . . . . 45.5 46.1 47.3 47.0
Other operating expenses . . . . . . 32.1 29.4 31.0 30.0
Provision for doubtful accounts . . . 4.5 6.8 4.6 6.6
Depreciation and amortization . . . . 4.7 4.9 5.0 4.9
Interest and other financing
charges . . . . . . . . . . . . . . 5.8 6.7 6.6 7.3
Loss on closure of facility . . . . . --- --- --- 1.2
----- ----- ----- -----
Total operating expenses . . . . . . . . 92.6 93.9 94.5 97.0
----- ----- ----- -----
Income before minority interests,
income taxes, cumulative effect and
extraordinary item . . . . . . . . . 7.4 % 6.1 % 5.5 % 3.0 %
=== === === ===
Net income . . . . . . . . . . . . . . . 1.8 % 4.9 % 1.7 % 4.9 %
=== === === ===
</TABLE>
9
<PAGE> 12
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
Net revenues were $36.2 million and $100.7 million for the quarter and
nine months ended March 31, 1994, respectively, compared to $35.8 million and
$98.5 million for the comparable prior year periods. Net outpatient revenues
increased to $4.9 million and $12.9 million for the quarter and nine months
ended March 31, 1994, respectively, increases of 39% and 52%, respectively,
over the comparable prior year periods, offsetting declines in inpatient
revenues of 9% and 6%, respectively, from the prior year quarterly and nine
month levels. Also, revenues from the managed care operations (acquired in
October 1993) offset the revenues lost from those facilities that were sold
during this fiscal year. Net outpatient revenues comprised 17% and 15% of
total net revenues for the quarter and nine months ended March 31, 1994,
respectively, compared to 10% and 9%, respectively, for the prior year periods.
Same store admissions increased 1% and 5% over the prior year quarter and nine
month levels while inpatient average length of stay declined to 17.3 days for
the nine months ended March 31, 1994. A contractual adjustment benefit of
approximately $1.3 million was recognized in the nine month period ended March
31, 1993 to reflect the combined effects of intermediary audits and the routine
evaluation of prior year estimated settlements. There can be no assurances
that any future adjustments will be favorable or of a comparable magnitude.
Salaries, wages and benefits and other operating expenses were 77.6%
and 78.3% of net revenues for the quarter and nine months ended March 31, 1994,
respectively, compared to 75.5% and 77.0% for the comparable prior year
periods. Additional costs associated with the managed care operations and the
start-up phase of the subacute ventures exceeded the cost savings derived from
the containment measures at the Company's inpatient facilities.
The provision for doubtful accounts was 4.5% and 4.6% of net revenues
for the quarter and nine months ended March 31, 1994, respectively, as
compared to 6.8% and 6.6% during the same periods in fiscal 1993. The
decrease reflects the shift in payor base toward more Medicaid, fixed rate,
negotiated rate and cost-based contracts, as well as the increase in managed
care revenues which are not susceptible to uncollectibility.
Depreciation and amortization was 4.7% and 5.0% of net revenues for
the quarter and nine months ended March 31, 1994, respectively, as compared to
4.9% for both the same periods in fiscal 1993. The decrease between the
quarterly periods relates primarily to the depreciation of fixed assets at the
facilities sold during the first nine months of fiscal 1994, offsetting the
additional amortization of the cost in excess of net asset value of FPM. The
increase for the comparable nine months periods relates primarily to
amortization of the preopening costs of the facility opened in January 1993,
plus the effects of the matters noted for the quarter fluctuation.
Interest expense decreased from 6.7% and 7.3% of net revenues for the
quarter and nine months ended March 31, 1993, respectively, to 5.8% and 6.6%,
respectively, of net revenues for the comparable 1994 periods. The decrease is
attributable to reduced levels of debt during the fiscal 1994 periods.
At March 31, 1994, the Company has estimated net operating loss
carryforwards available to reduce future taxable income of approximately $18.0
million subject to significant annual limitations pursuant to Section 382 of
the Internal Revenue Code of 1986, as amended.
10
<PAGE> 13
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
(b) Current Reports on Form 8-K
There were no Current Reports on Form 8-K filed with the
Commission during the quarter ended March 31, 1994.
11
<PAGE> 14
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
RAMSAY HEALTH CARE, INC.
Registrant
/s/ Jack V. Eumont, Jr.
Jack V. Eumont, Jr.
Vice President and
Chief Financial Officer
Date: May 12, 1994
12
<PAGE> 1
Exhibit 11
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
COMPUTATION OF NET INCOME PER SHARE
(unaudited)
<TABLE>
<CAPTION>
QUARTER ENDED MARCH 31
----------------------
1994 1993
------------ ------------
(RESTATED)
----------
<S> <C> <C>
PRIMARY
Weighted average common shares outstanding . . . . . . . . 8,213,407 7,841,565
Class A convertible preferred stock . . . . . . . . . . . 22,910 22,910
Class B convertible preferred stock, Series C . . . . . . 1,424,860 ---
--------- ---------
TOTAL COMMON AND DILUTIVE
COMMON EQUIVALENT SHARES . . . . . . . . . . . . . . 9,661,177 7,864,475
========= =========
Net Income Available to Common Shareholders . . . . . $ 667,000 $ 1,765,000
========= =========
NET INCOME PER SHARE . . . . . . . . . . . . . . . . $0.07 $0.23
===== =====
FULLY DILUTED
Weighted average common shares outstanding . . . . . . . . 8,213,407 7,841,565
Class A convertible preferred stock . . . . . . . . . . . 22,910 22,910
Class B convertible preferred stock, Series C . . . . . . 1,424,860 ---
--------- ---------
TOTAL COMMON AND DILUTIVE
COMMON EQUIVALENT SHARES . . . . . . . . . . . . . . 9,661,177 7,864,475
========= =========
Net Income Available to Common Shareholders . . . . . $ 667,000 $ 1,765,000
========= =========
NET INCOME PER SHARE . . . . . . . . . . . . . . . . $0.07 $0.23
===== =====
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED MARCH 31
--------------------------
1994 1993
------------ ------------
(RESTATED)
<S> <C> <C>
PRIMARY
Weighted average common shares outstanding . . . . . . . . 8,211,906 7,858,156
Class A convertible preferred stock . . . . . . . . . . . 22,910 22,910
Class B convertible preferred stock, Series C . . . . . . 1,424,860 ---
--------- ---------
TOTAL COMMON AND DILUTIVE
COMMON EQUIVALENT SHARES . . . . . . . . . . . . . . 9,659,676 7,858,066
========= =========
Net Income Available to Common Shareholders . . . . . $ 1,750,000 $ 4,833,000
========= =========
NET INCOME PER SHARE . . . . . . . . . . . . . . . . $0.18 $0.62
===== =====
FULLY DILUTED
Weighted average common shares outstanding . . . . . . . . 8,243,842 7,851,066
Class A convertible preferred stock . . . . . . . . . . . 22,910 22,910
Class B convertible preferred stock, Series C . . . . . . 1,424,860 ---
--------- ---------
TOTAL COMMON AND DILUTIVE
COMMON EQUIVALENT SHARES . . . . . . . . . . . . . . 9,691,612 7,881,156
========= =========
Net Income Available to Common Shareholders . . . . . $ 1,750,000 $ 4,833,000
========= =========
NET INCOME PER SHARE . . . . . . . . . . . . . . . . $0.18 $0.62
===== =====
</TABLE>
