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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A-1
(Mark One)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
FOR THE FISCAL YEAR ENDED JUNE 30, 1994
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
FOR THE TRANSITION PERIOD FROM ____________TO___________
COMMISSION FILE NUMBER 0-13849
RAMSAY HEALTH CARE, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 63-0857352
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
ONE POYDRAS PLAZA
639 LOYOLA AVENUE, SUITE 1700 70113
NEW ORLEANS, LOUISIANA (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (504) 525-2505
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
------------------- -----------------------------------------
NONE NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
COMMON STOCK, $0.01 PAR VALUE
(TITLE OF CLASS)
Indicate by a 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, 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/A or any
amendment to this Form 10-K/A. / /
The number of shares of the registrant's Common Stock outstanding as
of September 22, 1994 was 7,719,749. The aggregate market value of Common Stock
held by non-affiliates on such date was $46,496,160.
DOCUMENTS INCORPORATED BY REFERENCE
Certain sections of the registrant's definitive Proxy Statement to be filed
for the 1994 Annual Meeting of Stockholders are incorporated by reference into
Part III.
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PART I
ITEM 1. BUSINESS.
GENERAL
Ramsay Health Care, Inc. ("RHCI" or the "Company") is one of the
leading providers of behavioral health services in the country. RHCI has two
business units: a facilities division offering patient care through integrated
networks of mental health delivery systems in eleven states principally in the
southeast and southwest built around 15 inpatient hospitals with 1,264 beds
(including subacute and residential treatment units), day hospitals, and
outpatient centers; and a managed care division providing utilization control
and cost management services. The Company also operates mental health programs
for public sector and private owners under management contracts.
FACILITIES DIVISION
The Company's facilities are dedicated to the treatment of psychiatric
and chemical dependency disorders. Substance abuse treatment is provided to
patients who have a primary diagnosis of alcohol or substance abuse; however,
many of these patients have a secondary diagnosis of, and are treated for,
mental illness. Each of the Company's facilities also conducts outpatient
programs at the facilities and in clinics in the surrounding area. The Company's
current strategy is to expand its outpatient network in its continued effort to
provide intermediate mental health care for patients who do not require
inpatient care.
The initial goal of acute psychiatric hospitalization treatment is to
evaluate and stabilize the patient so that effective treatment can be continued
either on an inpatient, partial hospitalization or an outpatient basis. Under
the direction of a psychiatrist, the patient's condition is assessed, a
diagnosis is made and prescribed treatment follows, utilizing, where
appropriate, medication, individual and group therapy, adjunctive therapy, and
family therapy.
The most common disorders for which adult patients are admitted to the
Company's hospitals are mood and affective disorders (such as depression),
schizophrenia, situational crises and alcohol and drug dependency. For children
and adolescents, common disorders include those seen in adult patients, as well
as attention deficit disorders and conduct disorders. Many of these disorders
are often associated with child abuse. The Company has evaluation and treatment
programs designed specifically for adults, adolescents or children. Specialized
programs
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focusing upon neuropsychiatric disorders and pain and sleep disorders have also
been developed. All units and programs emphasize family involvement in the
evaluation and treatment process.
Each psychiatric hospital has a multidisciplinary team of health care
professionals, including psychiatrists, psychologists, social workers, nurses,
mental health and substance abuse counselors and therapists. Generally,
physician members of the professional staffs maintain a private practice. In
certain situations the Company guarantees minimum incomes, usually for one year,
to psychiatrists willing to relocate to certain facilities. All of the Company's
hospitals also have a medical director who acts as liaison between the
professional staff and the hospital administration staff. In addition, each
clinical program has a medical unit administrator.
Each of the Company's hospitals has a consulting board, comprised of
hospital executives, consulting physicians and other members of the local
community, which is responsible for standards of patient care. A hospital CEO
supervises and is responsible for the day-to-day operations of each hospital.
The Company emphasizes frequent communication, the setting of operational and
financial goals and the monitoring of actual results against targeted goals. To
this end, the Company collects and analyzes information on key indicators such
as admissions by treatment program and payor category, daily census, full-time
equivalent employees per patient day and average length of stay. On the basis of
this information, the administrative staff of each hospital together with the
corporate staff of the Company adopts new programs and modifies existing
programs to improve performance.
All of the Company's hospitals have been accredited by the Joint
Commission on Accreditation of Healthcare Organizations ("JCAHO"). The JCAHO is
a voluntary national organization which undertakes a comprehensive review for
purposes of accreditation of health care facilities. In general, hospitals and
certain other health care facilities are initially surveyed by JCAHO within 12
months after the commencement of operations and resurveyed at appropriate
intervals thereafter. Ten of the Company's fifteen hospitals were resurveyed in
fiscal 1994 and retained their JCAHO accreditation for an additional three
years.
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The following tables summarize certain operating data related to (i)
the facilities currently operated by the Company and which were also operated by
the Company during the fiscal years referred to below ("same facilities") and
(ii) all facilities operated by the Company during the fiscal years referred to
below ("all facilities"):
Same Facilities
---------------
<TABLE>
<CAPTION>
Year Ended June 30/(1)/
----------------------------
1994 1993 1992
<S> <C> <C> <C>
Inpatient admissions 12,019 11,442 9,978
Average bed days available 439,825 441,285 397,110
Inpatient days 218,173 208,592 194,840
Overall inpatient occupancy
percentage 50% 47% 49%
Partial hospitalization
days/(2)/ 57,414 33,009 /(4)/
Outpatient visits/(3)/ 31,027 /(4)/ /(4)/
</TABLE>
All Facilities
--------------
<TABLE>
<CAPTION>
Year Ended June 30/(1)/
---------------------------
1994 1993 1992
<S> <C> <C> <C>
Inpatient admissions 12,474 12,917 12,824
Average bed days available 484,355 512,825 507,715
Inpatient days 225,392 234,294 235,250
Overall inpatient occupancy
percentage 47% 46% 46%
Partial hospitalization
days/(2)/ 60,699 40,077 /(4)/
Outpatient visits/(3)/ 47,725 /(4)/ /(4)/
</TABLE>
---------
(1) During fiscal 1994, the Company converted approximately 77 beds available
in four of its facilities from beds utilized by behavioral health patients
to beds utilized by medical subacute patients. Operating results and
statistics related to the subacute units opened during fiscal 1994 were not
material.
(2) Partial hospitalization days refers to treatment of patients which exceed
three hours and do not require an overnight stay at an inpatient facility.
(3) Outpatient visits refer to home health visits and behavioral health patient
services which do not exceed three hours in a given day.
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(4) Data not available for fiscal 1993 or 1992.
MANAGED CARE DIVISION
RHCI entered the managed mental healthcare business in October 1993
with the acquisition of Florida Psychiatric Management, Inc. ("FPM") for a
purchase price of $6.5 million. The managed care division expanded in June 1994
with the acquisition of a Phoenix, Arizona-based managed mental health business.
The managed care division provides a comprehensive range of managed mental
healthcare services to the commercial market as well as to insurance companies
and health maintenance organizations. The Company is considering various
options regarding the expansion of its managed care operations. Any such
expansion would require additional capital and there can be no assurances that
the Company will expand its managed care operations. See "Acquisitions and
Sales" below and "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources."
COMPETITION
At June 30, 1994, the Company operated 15 inpatient facilities in 11
states. Many of the Company's facilities are located in outlying areas and in
suburban areas of large metropolitan cities. Each facility competes with other
facilities, including proprietary free-standing hospitals, not-for-profit
hospitals, governmental free-standing hospitals and psychiatric units of acute
care hospitals. Some of these other facilities are larger and have greater
financial resources than the Company's hospitals. In addition, some of these
competing hospitals are substantially exempt from income and property taxation.
The Company's outpatient centers are generally located in the areas surrounding
its inpatient facilities and compete with private practitioners, community
mental health centers, and inpatient facilities and other companies which
provide outpatient services in the markets in which the Company's outpatient
centers are doing business. The number of behavioral health service competitors
located within each of the Company's service areas varies significantly. Also,
in certain markets, the Company treats certain patient populations (e.g.,
adolescents or geriatrics) or provides services which are different from those
provided by the Company's competitors in the particular market. The Company
does not consider any of the behavioral health service competitors in its
markets as dominant providers that place the Company at a competitive
disadvantage.
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The ability of a psychiatric facility to compete with other facilities
depends on the number and quality of psychiatrists and clinical psychologists
practicing at the facility, and the number, type and quality of other
psychiatric facilities in the area. Another factor affecting the competitiveness
of psychiatric facilities is the extent to which the facility's clinical
programs satisfy community needs in an effective manner from both a clinical and
an economic standpoint. The Company believes that the quality of its
professional staff as well as the quality and effectiveness of its programs
permit it to compete effectively with the other providers of psychiatric and
chemical dependency care in the communities served by the Company's facilities.
In addition, the Company's facilities actively seek relationships with managed
care companies, which are increasingly responsible for steering patients to high
quality, cost-effective providers of behavioral health care.
The Company's managed care businesses compete directly with
independent local and national entities that offer managed mental health care
services, as well as with large insurance companies, health maintenance
organizations and other provider groups that have established or acquired
managed mental health care capabilities. In addition, the Company competes with
not-for-profit health plan corporations, preferred provider organizations and
other provider networks as well as third party administrators, which also offer
services to manage mental health care costs. Certain of these operations and
facilities have substantially greater financial resources than the Company and
offer a wider range of services than the Company.
SOURCES OF REVENUE
The Company's facilities receive payments from third-party
reimbursement sources, including commercial insurance carriers, Medicare,
Medicaid, the Civilian Health and Medical Program of the Uniformed Services
("CHAMPUS") and Blue Cross, in addition to payments directly from patients.
Third-party reimbursement programs generally reimburse facilities
either on the basis of facility charges (charge-based), on the basis of the
facility's cost as audited or projected by the third-party payor (cost-based),
or on the basis of negotiated rates (per diem-based). Generally, charge-based
programs are more profitable to the Company. The following table sets forth, by
category, the approximate percentages of the Company's consolidated gross
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patient revenues charged by the Company's facilities derived from various
sources for the periods indicated.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30
------------------
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Charge-based programs:
Commercial Insurance.............. 14% 20% 24%
Blue Cross........................ 1 3 3
Other Private Pay................. 5 2 2
--- --- ---
Sub-total...................... 20 25 29
--- --- ---
Cost based and per diem-based programs:
Blue Cross........................ 6 9 8
CHAMPUS........................... 7 10 17
Medicare.......................... 21 22 20
Medicaid.......................... 33 25 17
State, HMO and PPO................ 13 9 9
--- --- ---
Sub-total...................... 80 75 71
--- --- ---
Total...................... 100% 100% 100%
=== === ===
</TABLE>
Most commercial insurance carriers reimburse their policyholders or
make direct payment to facilities for charges at rates and limits specified in
their policies. Patients generally remain responsible to the facilities for any
amounts not covered under their insurance policies. The trend in reimbursement
for psychiatric inpatient and chemical dependency care by commercial insurance
carriers is to limit inpatient days to a maximum number per year or for the
patient's lifetime, or to limit the maximum dollar amount expended for a patient
in a given period.
Most third-party payors and other commercial carriers have also
expanded benefit coverage to include partial hospitalization and other
outpatient services. Partial hospitalization is formally recognized by Medicare
and CHAMPUS as a covered service. In addition, managed care companies are
seeking to contract with providers that offer the full spectrum of psychiatric
care.
Medicare is the federal health insurance program for the aged and
disabled. Medicare reimbursement is typically less than the Company's
facilities' established charges for services provided to Medicare patients.
Patients are not responsible for the difference between the reimbursed amount
and the facilities' established charges other than for applicable noncovered
charges, coinsurance and deductibles. In 1983, Congress changed the Medicare law
applicable to Medicare reimbursement for medical/surgical
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services from a retrospectively determined reasonable cost system to a
prospectively determined diagnosis-related grouping ("DRGs") system. Psychiatric
and chemical dependency hospitals and units are exempt from this change in the
Medicare law. To date, no DRG implementation or conversion date has been
proposed for psychiatric and chemical dependency facilities. However, excluded
hospitals and units are subject to the payment limitations and incentives
established in the Tax Equity and Fiscal Responsibility Act of 1982 ("TEFRA").
They are paid on the basis of each facility's historical costs trended forward,
with a limit placed on the rate of increase in per case reimbursable costs.
These TEFRA target rates are updated annually. Facilities with costs less than
the target rate per discharge are reimbursed based on allowable Medicare costs
plus an additional payment. Beginning in the federal fiscal year 1992, providers
with costs exceeding their target rates are subject to a payment ceiling of the
target amount plus the lesser of 5% of the target amount or 50% of the amount in
excess of the target amount. Exemptions and exceptions are available to
hospitals when events beyond the hospitals' control result in an increase in
costs for a reporting period. Moreover, "new hospitals" are eligible to be
exempt from the limits until they have been in operation for three years. At
June 30, 1994, 14 of the Company's facilities were subject to the TEFRA
provisions. The Health Care Financing Administration ("HCFA") has implemented
changes to Medicare covering inpatient services which are reimbursed under
TEFRA. These changes provide for an increase to the TEFRA payment limitations,
subject to annual revision. However, since 13 of the Company's 14 facilities
which are subject to the TEFRA payment limitations are currently operating at
cost levels below their respective TEFRA payment limitations, any increase in
the TEFRA payment limitations should have a minimal effect on the Company's
results of operations. In addition, HCFA has implemented changes to Medicare
covering fee reimbursement schedules for physician services. While these changes
affect Medicare reimbursement paid directly to physicians, they do not directly
affect the rate of Medicare reimbursement paid to the Company since most of the
physicians practicing at the Company's facilities bill their fees directly.
Accordingly, these changes have had only a minimal effect on the Company's
results of operations.
Medicaid is the federal/state health insurance program for the
underprivileged. Subject to certain minimum federal requirements, each state
defines the extent and duration of the services covered by its Medicaid program.
Moreover, although there are certain federal requirements
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governing the payment levels for Medicaid services, each state has its own
methodology for making payment for services provided to Medicaid patients. The
Medicaid program covers payment for services provided to Medicaid patients at 14
of the Company's facilities. The Company received significant payments pursuant
to enhanced reimbursement rates in 1994, 1993 and 1992 under certain state
programs. Statutory changes will decrease the level of these payments in the
future. See "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations--Results of Operations."
In November 1991, Congress passed the Medicaid Voluntary Contribution
and Provider-Specific Tax Amendments of 1991. The effect of this legislation
was to restrict the states' abilities to generate federal matching funds for
Medicaid through the use of provider tax and donation programs. Existing
donation and taxation programs were allowed to continue into 1992 with exact
expiration dates based on the individual state's fiscal year end. The
legislation specified that provider taxation programs are eligible for federal
matching funds only if the tax applies to all providers in a class and if those
providers are not held harmless from the cost of the tax by compensating
payments from the state. The legislation limits the amount of the states'
funding for Medicaid that could come from provider taxes to the greater of the
existing level as of November 1991 or 25% of provider tax generated funds. This
cap will expire on September 30, 1995.
Acute psychiatric services for CHAMPUS patients are reimbursed on a
prospectively determined per diem basis. For the Company's high volume
facilities (as defined by CHAMPUS), 1991-1992 rates were fixed at 1988 levels
subject to an all-inclusive cap of $714 per day. This capped rate is higher than
the Company's net revenue per patient day for all of the Company's acute
psychiatric services. The Company's low volume facilities (as defined by
CHAMPUS) are reimbursed at prospectively determined per diem rates established
on a regional basis. These regional rates are lower than the hospitals'
established charges. CHAMPUS revenues in these low volume facilities did not
represent a significant portion of the Company's consolidated gross revenues for
the fiscal years ended June 30, 1994, 1993, or 1992.
RTC reimbursement for CHAMPUS patients is currently capped on a per
diem basis at the lesser of $477 per day or an inflation adjusted hospital-
specific rate based on per diem rates generally paid as of June 30, 1988.
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These rates are adjusted annually each October 1 for inflation. The legislated
reimbursement cap is higher than the Company's CHAMPUS net revenue per patient
day of $275 for fiscal 1994 for the Company's two CHAMPUS certified RTC
facilities. In addition, these two RTCs had overall net revenue per patient day
of $345 and $366, respectively, in fiscal 1994.
In 1991, Congress imposed a reduction in the annual reimbursable
length of stay for patients covered under the CHAMPUS program. Effective
October 1, 1991, CHAMPUS began to limit its coverage for hospital psychiatric
services to 30 days for adult patients, 45 days for child and adolescent
patients and 150 days for RTC services, subject to waivers which are available
under limited circumstances if an extension of the length of stay can be
justified. The lengths of stay currently experienced by the Company on CHAMPUS
adult, child and adolescent beneficiaries have generally been within the above
limits. Given that certain of the Company's facilities are located in close
proximity to major military installations, these limits have reduced the volume
of CHAMPUS patients treated at the Company's facilities. As set forth in the
above table, the amount of the Company's patient revenues attributable to
CHAMPUS have decreased from 17% in fiscal 1992 to 7% in fiscal 1993. However,
overall patient days increased during this period as the decreases in CHAMPUS
volume were more than offset by increases in the volume of other patients
treated at the Company's facilities.
Blue Cross plans in all areas in which the Company presently operates
facilities, except Alabama and Michigan, reimburse based on charges or
negotiated rates. In many states in which the Company operates, Blue Cross
charges are approved through a rate-setting process and, therefore, Blue Cross
may reimburse the Company at a rate less than billed charges. Under cost-based
Blue Cross programs, such as those in Alabama and Michigan, direct reimbursement
to hospitals typically is lower than the hospital's charges, and patients are
not responsible for the difference between the reimbursement amount and the
hospital's charges.
With respect to its managed mental health care programs, the Company
typically charges each customer a monthly fee for each beneficiary enrolled in
the customer's mental health benefit program. Depending upon both the type of
program from which a customer contracts and the benefits covered under such
program, the fee arrangement is designed so that, with respect to both
inpatient and outpatient care, the Company accepts either full risk (all service
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capitated), as is generally the case, partial risk (selected services capitated)
or limited risk (full risk up to a
10
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maximum amount), in each case for costs that exceed the fees attributable to
such program.
MARKETING
The Company's marketing programs are directed to referral sources
within a selected service area rather than to the general public and are
designed to increase awareness of a facility's programs and services. Referral
sources include psychiatrists, medical practitioners, managed mental health
organizations, courts and probationary officers, law enforcement agencies,
schools and clergy. Each facility's marketing staff, together with other
facility personnel, maintains direct contact with referral sources to meet the
needs of the referral sources. These needs may be related to a desired treatment
program, the desires of the patient's family, hospital policies or the timely
receipt of accurate information. Each facility establishes admission targets for
each referral source and results are monitored and evaluated at the facility and
by the corporate staff.
The Company focuses its marketing and sales efforts for its managed
care businesses primarily on insurance carriers, nonprofit health care
corporations, HMOs, government employee groups and self-insured employers. The
Company has also targeted employee benefit consulting firms, representing
employers and groups of employers in the selection and purchase of managed
mental health care benefit programs. Typically, the Company markets its
services to the potential customer's senior operating and marketing staff,
medical directors or health care managers.
REGULATION
Operations of the Company's facilities are subject to extensive
federal, state and local government regulation, including periodic inspection
and licensing requirements. This regulation is primarily concerned with the
fitness and adequacy of the facility, equipment and personnel, standards of
medical care provided, the dispensing of drugs, the adequacy of fire prevention
measures and other building standards and the confidentiality of medical records
of drug and alcohol abuse patients.
The Company believes that federal and state regulation may become more
comprehensive and restrictive in the future, particularly with respect to
reimbursement rates. In addition, legislative initiatives aimed at a
comprehensive overhaul of the U.S. health care system have been introduced in
Congress. The Company cannot predict the
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form or timing of any prospective legislation or regulation, nor the effect
which any legislation or regulation might have on its revenues or profitability.
Capital expenditures for the construction of new facilities, the
addition of beds or the acquisition of facilities or medical equipment are
reviewable by governmental authorities in certain states which place limits or
restrictions on construction and acquisition of hospitals and the expansion of
existing hospitals and services. State certificate of need statutes provide
generally that prior to the construction of new beds or facilities or the
introduction of a new service, a state agency must determine that a need exists
for those beds, facilities or services. A certificate of need is generally
issued for a specific maximum amount of expenditures, number of beds or services
to be provided and the holder is generally required to implement the approved
project within a specific time period. Certificate of need proceedings for new
facilities are extremely competitive, often with several applicants for a single
license. Except for Arizona, Texas and Utah, all of the states in which the
Company operates facilities have adopted certificate of need statutes or other
statutes which limit the development of new beds.
The Social Security Act contains a number of provisions designed to
ensure that services rendered by health care facilities to Medicare and Medicaid
patients are medically necessary and meet professionally recognized standards.
These provisions include a requirement that admissions of Medicare and Medicaid
patients to hospitals must be reviewed in a timely manner to determine the
medical necessity of the admissions. In addition, the Peer Review Improvement
Act of 1982 ("Peer Review Act") provides that a hospital may be required by the
federal government to reimburse the government for the cost of Medicare paid
services determined by a peer review organization to have been medically
unnecessary. Each of the Company's hospitals has developed and implemented a
quality assurance program and implemented procedures for utilization review and
retrospective patient care evaluation to meet its obligations under the Peer
Review Act. As a result of new legislation passed in Texas as described below,
Peer Review Organizations in that state are applying extremely restrictive
interpretations to the medical necessity of admissions and other services.
Consequently, significant amounts of the Texas facilities' charges have been
denied by such organizations.
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To be covered by CHAMPUS, RTC services must be preauthorized as being
medically necessary. Effective October 1, 1991, hospital psychiatric services
also have had to be preauthorized. If the criteria for establishing medical
necessity are not met, CHAMPUS will not pay for the services provided.
The Defense Appropriations Act of 1991 provides that no funds will be
appropriated for CHAMPUS care when a patient is referred to a provider of
inpatient mental health care or residential treatment care by a medical or
health care professional having an economic interest in the facility to which
the patient is referred. The Medicare and Medicaid Anti-Fraud and Abuse
Amendments (the "Amendments") to the Social Security Act prohibit individuals or
entities participating in the Medicare or Medicaid programs from knowingly and
willfully offering, paying, soliciting, or receiving remuneration in order to
induce referrals for items or services reimbursed under those programs. The
policy objective of the Amendments is to ensure that the purpose for a referral
is quality of care and not monetary gain by the referring individual. The
Amendments' prohibitions only apply to Medicare and Medicaid patients and impose
felony criminal penalties and civil sanctions, as well as exclusion from the
Medicare or Medicaid programs. In 1989, CHAMPUS adopted regulations authorizing
it to exclude from the CHAMPUS program any provider who has committed fraud or
engaged in abusive practices. The Company believes that it is in compliance
with all aspects of the regulations.
The Company has entered into various types of agreements with
physicians and other health care providers in the ordinary course of operating
its facilities, many of which provide for payments to physicians or other health
care providers by the Company as compensation for services or other
consideration by the providers. On July 29, 1991, the Office of Inspector
General published final regulations establishing "safe harbors" for
relationships between health care providers and referral sources. Any
relationship that complies with the terms of a safe harbor would not be subject
to enforcement action under the Social Security Act. Although a relationship
that fails to satisfy a safe harbor is not necessarily illegal, that
relationship will not be exempt from scrutiny under the Amendments. The Company
believes that its agreements and arrangements in this area comply with the
Amendments. The Company intends to comply with any and all other similar
legislation that may be adopted in the future in this regard.
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Several states have been investigating whether psychiatric hospitals
have engaged in fraudulent practices such as inflated bills for medications and
services, bills for services never rendered and admitting patients, especially
children, who do not require hospitalization. In 1991, the Texas Attorney
General disclosed that several of the Company's competitors doing business in
Texas were under investigation for fraudulent practices and a lawsuit seeking
injunctive relief was filed against one of those competitors. New legislation
was passed in Texas, effective September 1, 1993, that placed severe
restrictions on the marketing of behavioral health care services. In general,
the legislation prohibits certain advertisement and solicitation techniques.
Specifically, advertisements may not promise a cure or guarantee treatment
results that cannot be substantiated, and mental health intervention and
assessment services must be available and properly credentialed before
advertised. The legislation also requires disclosure of any relationship
between the treatment facility and its referral sources and prohibits a referral
service from holding itself out as a qualified mental health referral service
without complying with the legislation's definition of such (which requires,
among other things, compliance with regulations regarding confidentiality,
participation in and staffing of the referral service and payments to referral
sources). Violation of the legislation may result in injunctive relief and civil
penalties of up to $25,000 per violation. In June 1993, the Company signed an
agreement with the Texas Attorney General whereby it agreed to continue to
comply with Texas statutes regarding marketing and operating standards
applicable to all psychiatric hospital companies.
As a managed health care services business and a health care provider,
the Company is also currently subject to extensive and frequently changing
federal, state and local government regulation. This regulation is primarily
concerned with licensure, conduct of operations, financial solvency, standards
of medical care provided, the confidentiality of medical records of drug and
alcohol abuse patients, and the direct employment of psychiatrists,
psychologists, and other licensed professionals by business corporations. The
various types of regulatory activity affect the Company's business either by
controlling its operations, restricting licensure of the business entity or by
controlling the reimbursement for services provided.
See also "Sources of Revenue."
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ACQUISITIONS AND SALES
In August 1991, the Company purchased a 72-bed hospital facility in
San Antonio, Texas and other personal property for a cash purchase price of
$2,100,000. After refurbishment and renovations totalling approximately
$1,800,000, the facility, Mission Vista Hospital, opened as a 66-bed facility in
November 1991.
In December 1991, the Company entered into a one-year lease for a 36-
bed facility in Concord, California. The Company had an option to purchase this
facility for $1,050,000, which option expired in December 1992. The Company
terminated operations at this facility in September 1992 and allowed this option
to lapse.
In November 1992, the Company purchased a 64-bed hospital facility in
Covington, Louisiana for $2,000,000. The facility, Three Rivers Hospital, opened
in January 1993. The hospital is operated by a limited partnership in which the
Company is the general partner. See "Ownership Arrangements and Operating
Agreements."
In January 1993, the Company leased Harbor Oaks Hospital in Fort
Walton Beach, Florida to another health care provider. The lease gives the
lessee the option to purchase the facility at a fixed price through January
1996.
In August 1993, Cumberland Hospital in Fayetteville, North Carolina
was sold to Cape Fear Valley Medical Center for approximately $12.3 million.
In October 1993, the Company purchased the stock of Florida
Psychiatric Management, Inc., a regional provider of mental health care cost
management services based in Orlando, Florida for a cash payment of $4.0
million, the issuance of an aggregate of $2.5 million of three-year 7%
debentures, and a contingent earn-out payment based upon the attainment of
certain earnings and revenue levels over the ensuing two years ending June 30,
1995. The earn-out payment is an aggregate amount (in no event to exceed $2.0
million in the aggregate) equal to the product of (i) 25%, multiplied by (ii)
the positive excess, if any, of the average consolidated gross revenues of FPM
and its subsidiaries for the fiscal years ended June 30, 1994 and ending June
30, 1995 over $6.8 million, multiplied by (iii) the change in operating income
factor (as defined), a formula-based factor which will increase or decrease the
aggregate earn-out payment based upon the increase or decrease in the average
operating margin (consolidated net
15
<PAGE>
income or loss divided by consolidated gross revenues) of FPM and its
subsidiaries for the fiscal years ended June 30, 1994 and ending June 30, 1995
over the 1993 operating margin.
In February 1994, the Company sold its 50-bed Atlantic Shores Hospital
in Daytona Beach, Florida to Halifax Medical Center for $4.8 million.
In June 1994, the Company purchased the assets and assumed certain
liabilities of Human Dynamics Institute, a Phoenix, Arizona-based managed mental
health business for a cash payment of $1 million, a three-year, $1 million note
bearing interest at 8.25%, 172,850 shares of common stock of Ramsay Managed
Care, Inc., a subsidiary of the Company, and a contingent earn-out payment based
upon the attainment of certain revenue levels over the ensuing two years ending
June 30, 1996. The earn-out payment is an aggregate amount (in no event to
exceed $750,000 in the aggregate) equal to the sum of (i) the positive excess
(in no event to exceed $400,000), if any, of the average gross revenues of HDI
for the fiscal years ending June 30, 1995 and June 30, 1996 over, the gross
revenues of HDI for the fiscal year ended June 30, 1994 less $400,000 and (ii)
an aggregate amount (in no event to exceed $350,000) equal to the product of (a)
2.5% multiplied by (b) the positive excess, if any, of the average gross
revenues of HDI for the fiscal years ending June 30, 1995 and June 30, 1996 over
the gross revenues of HDI for the fiscal year ended June 30, 1994.
OWNERSHIP ARRANGEMENTS AND OPERATING AGREEMENTS
One physician owns a 5% interest in the subsidiary which owns the
Company's Harbor Oaks Hospital. The Company may be required to repurchase, and
the minority shareholder may be required to sell, the minority interest at a
formula price dependent upon many factors, including the earnings per share of
the subsidiary which owns the subject hospital and the price/earnings multiple
of the Company, after a fixed period of time. Although the amount of the
Company's repurchase obligation cannot be precisely determined, the Company does
not believe that this obligation will require a material payment by the Company
in the foreseeable future.
In 1985, the Company and Bethany General Hospital in Bethany, Oklahoma
entered into a joint development project. The general hospital and the Company
hold a joint certificate of need by which they have converted 23
medical/surgical beds to psychiatric beds, and constructed a psychiatric
pavilion containing an additional 20 psychiatric
16
<PAGE>
beds. Pursuant to a joint venture agreement entered into in December 1985, the
Company began managing the 23 existing beds in December 1985 and completed
construction of the 20-bed pavilion in October 1986. Under the joint venture
agreement, the Company is obligated to provide working capital to operate the
43-bed psychiatric unit. There are no outstanding working capital advances at
June 30, 1994. The Company is operating the unit under the agreement for a
three-year term (with four additional three-year terms, at the Company's option)
for an annual management fee of 5% of the unit's gross revenues and 65% of the
net profits or losses of the unit. The agreement also provides that the Company
will recover construction costs amortized over 15 years and working capital
advances from operating revenue, unless the Company does not renew or breaches
the agreement.
In November 1992, the Company formed a limited partnership to operate
Three Rivers Hospital, the 64-bed facility acquired in November 1992. The
limited partners have a 45% interest in the venture. In addition to its 55%
share of the profits as general partner, the Company leases the 64-bed facility
to the partnership for an annual rental of $276,000, subject to annual
inflationary adjustments.
INSURANCE
The Company and its facilities are insured on a "claims made" basis
for professional and general liability in the aggregate amount of $25,000,000,
with self-insured retentions of $500,000 per claim. The Company's self-insurance
program also includes "tail" coverage for prior acts retroactive to the date on
which the Company became responsible for such acts. This prior occurrence
coverage operates with the same self-insured retention levels. It is the
Company's policy to record the liability for uninsured losses related to
asserted and unasserted claims arising from reported incidents and losses
related to unreported incidents based upon an actuarial valuation of the
Company's past experience and other relevant information.
EMPLOYEES
As of June 30, 1994, the Company employed approximately 1,695 full-
time and 578 part-time employees at its facilities, including approximately 762
nurses. In addition, the Company has a corporate headquarters staff of
approximately 35, including persons who specialize in various areas of hospital
operations to assist facilities
17
<PAGE>
with particular management issues. The Company considers its relationship with
its employees to be good.
EXECUTIVE OFFICERS OF THE REGISTRANT
Certain information with respect to the executive officers of the
Company is set forth below:
<TABLE>
<CAPTION>
POSITION WITH THE COMPANY AND
PRINCIPAL OCCUPATIONS DURING
NAME OF EXECUTIVE OFFICER AGE THE PAST FIVE YEARS
------------------------- --- ------------------------------
<S> <C> <C>
Gregory H. Browne.............................. 41 Chief Executive Officer of the Company since January 1992;
President of the Company from January 1992 until September 1994;
Chief Executive Officer of Ramsay-HMO, Inc. from November 1989
to January 1992; Chief Financial Officer of Ramsay-HMO, Inc.
from January 1989 to January 1992; various executive positions
with corporations controlled by Paul J. Ramsay since prior to
1989.
Reynold J. Jennings............................ 48 President and Chief Operating Officer of the Company since
September 1994; Executive Vice President and Chief Operating
Officer of the Company from November 1993 until September 1994;
various management and administrative positions with National
Medical Enterprises, Inc. since prior to 1989 to October 1993.
Bruce R. Soden................................. 40 Senior Vice President of the Company since prior to 1989; Chief
Financial Officer of the Company from September 1991 to
September 1993.
Wallace E. Smith............................... 51 Senior Vice President of the Company since June 1992. Vice
President--Regional Operations of the Company from prior to 1989
to June 1992.
John A. Quinn.................................. 40 Vice President--Regional Operations of the Company since
September 1991; various administrative and management positions
with Community Psychiatric Centers, Inc. from prior to 1989 to
September 1991.
Curtis L. Dosch................................ 42 Vice President--Finance of the Company since August 1993.
Regional controller of the Company from prior to 1989 to July
1993.
William N. Nyman............................... 41 Vice President--Finance of the Company since August 1993.
Regional controller of the Company from prior to 1989 to July
1993.
</TABLE>
Effective September 30, 1994, Jack V. Eumont, Jr. resigned from his
position as Vice President and Chief Financial Officer of the Company.
18
<PAGE>
ITEM 2. PROPERTIES.
The following table provides information concerning the 15 inpatient
facilities owned and operated by the Company at June 30, 1994.
<TABLE>
<CAPTION>
DATE OPENED LICENSED
HOSPITAL OR ACQUIRED BEDS
-------- ----------- --------
<S> <C> <C>
Havenwyck Hospital
Auburn Hills, MI............... November 1983 120
Brynn Marr Hospital
Jacksonville, NC............... December 1983 76
Hill Crest Hospital
Birmingham, AL................. January 1984 130
Heartland Hospital
Nevada, MO..................... April 1984 128
Greenbrier Hospital
Covington, LA.................. October 1984 61
Coastal Carolina Hospital
Conway, SC..................... November 1984 98
Bayou Oaks Hospital
Houma, LA(1)................... November 1985 98
The Bethany Pavilion
Bethany, OK(2)................. December 1985 43
Meadowlake Hospital
Enid, OK....................... February 1986 50
Benchmark Regional Hospital
Woods Cross, UT................ August 1986 56
Desert Vista Hospital
Mesa, AZ....................... February 1987 102
Chestnut Ridge Hospital
Morgantown, WV(3).............. November 1987 70
The Haven Hospital
DeSoto, TX..................... April 1990 102
Mission Vista Hospital
San Antonio, TX................ November 1991 66
Three Rivers Hospital
Covington, LA (4).............. January 1993 64
--------
Total (5) 1,264
========
</TABLE>
(1) The building in which the Company's facility at Houma, Louisiana is located
is leased for an initial period ending January 31, 2005 (with an option to
renew for 20 years).
(2) The Bethany, Oklahoma facility is operated as a joint venture. The Company
has one year remaining on a three-year lease with options to renew totaling
an additional 9 years. See "Item 1. Business -- Ownership Arrangements and
Operating Agreements."
(3) The Company has entered into a 50-year ground lease for the property on
which its 70-bed facility at Morgantown, West Virginia is located.
(4) In November 1992, the Company purchased a 64-bed hospital facility in
Covington, Louisiana for $2,000,000. The facility, Three Rivers Hospital,
opened in January 1993. The hospital is operated by a limited partnership
in which the Company is the general partner. See "Item 1. Business --
Ownership Arrangements and Operating Agreements."
(5) Excludes Harbor Oaks Hospital, a 98 bed facility in Fort Walton Beach, FL,
that is owned by the Company but is being leased to another health care
provider. The lease gives the lessee the option to purchase the facility at
a fixed price through January 1996.
19
<PAGE>
The Company leases its corporate headquarters in New Orleans,
Louisiana for a term of five years ending in April 1999, and leases other space
for various clinics and regional offices. The Company believes that its
facilities are well maintained and are of adequate size for present needs.
ITEM 3. LEGAL PROCEEDINGS.
The Company is subject to claims and suits arising in the ordinary
course of business. In the opinion of management, the ultimate resolution of
such pending legal proceedings will not have a material adverse effect on the
Company's financial position, results of operations or liquidity.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
20
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
The Company's Common Stock is traded in the over-the-counter market
and is quoted on the NASDAQ National Market System under the symbol RHCI. On
September 22, 1994 there were 667 holders of record of the Company's Common
Stock. No dividends have been declared on the Common Stock since the Company was
organized. The Company's credit documents governing its credit facilities
include provisions which prohibit the payment of dividends unless the sum of (i)
all dividends, redemptions and all other distributions in respect of its capital
stock and (ii) all restricted investments (as defined) during the applicable
fiscal year would not exceed an amount equal to 50% of the consolidated net
income of the Company for the immediately preceding fiscal year and provided
that, at the time of such dividend and after giving effect thereto, certain
specified financial ratio covenants would not be violated and no other default
or event of default would occur. Notwithstanding the foregoing restrictions,
those provisions expressly permit the payment of regular fixed dividends from
time to time on the Company's issued and outstanding Class B Preferred Stock,
Series C, provided that such dividends may not exceed $387,200 in each 12-month
period. Under these provisions, the Company is permitted to pay the full amount
of the regular fixed dividends on its issued and outstanding Class B Preferred
Stock, Series C.
21
<PAGE>
The following table sets forth the range of high and low closing sales
prices per share of the Common Stock for each of the quarters during the years
ended June 30, 1994 and 1993, as reported on the NASDAQ National Market System:
<TABLE>
<CAPTION>
HIGH LOW
------- -------
<S> <C> <C>
Year ended June 30, 1994
First Quarter........... $8 7/8 $6 3/8
Second Quarter.......... 9 3/4 6 3/4
Third Quarter........... 9 7/16 7 1/8
Fourth Quarter.......... 8 1/8 6 5/8
Year ended June 30, 1993
First Quarter........... $8 $4 7/8
Second Quarter.......... 6 1/8 4 5/8
Third Quarter........... 6 4 3/4
Fourth Quarter.......... 6 7/8 5
</TABLE>
On September 22, 1994, the closing sales price of the Company's Common
Stock was $ 7 3/8 per share.
22
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA.
The following table sets forth selected consolidated financial information
for the periods shown and is qualified by reference to, and should be read in
conjunction with, the Consolidated Financial Statements and Notes thereto and
"Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations" appearing elsewhere in this Annual Report on Form 10-K.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30
----------------------------------------------------
1994 1993 1992 1991 1990
--------- --------- --------- -------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Net revenues............................................................ $137,002 $136,354 $136,946 $132,739 $122,124
Salaries, wages and benefits............................................ 64,805 63,810 60,626 55,524 51,665
Other operating expenses................................................ 42,907 40,454 40,161 37,086 33,893
Provision for doubtful accounts......................................... 5,846 8,148 8,628 6,992 5,782
Depreciation and amortization........................................... 6,836 6,605 5,439 5,545 5,311
Interest and other financing charges.................................... 8,906 9,494 10,488 14,462 15,448
Loss on sales and closure of facilities................................. 802 7,524 -- -- --
Restructuring and other charges......................................... -- 1,367 2,283 -- --
-------- -------- -------- -------- --------
130,102 137,402 127,625 119,609 112,099
-------- -------- -------- -------- --------
Income (loss) before minority interests, income
taxes, extraordinary items and cumulative
effect of accounting change........................................... 6,900 (1,048) 9,321 13,130 10,025
Minority interests...................................................... 4,824 1,126 -- -- --
-------- -------- -------- -------- --------
Income (loss) before income taxes,
extraordinary items and cumulative effect
of accounting change.................................................. 2,076 (2,174) 9,321 13,130 10,025
Income taxes............................................................ 599 -159 3,974 5,126 4,260
-------- -------- -------- -------- --------
Income (loss) before extraordinary items
and cumulative effect of accounting
change................................................................ 1,477 (2,333) 5,347 8,004 5,765
Extraordinary items:
Loss from early extinguishment of debt,
net of income tax benefit of $103 in 1994,
$312 in 1992 and $1,032 in 1990...................................... (155) (1,580) (366) -- (1,874)
Income tax benefit from net
operating loss carryovers........................................... -- -- 953 922 1,158
Cumulative effect of change in accounting
for income taxes.................................................... -- 2,353 -- -- --
-------- -------- -------- -------- --------
Net income (loss)....................................................... $ 1,322 $ (1,560) $ 5,934 $ 8,926 $ 5,049
======== ======== ======== ======== ========
Primary earnings per share:
Income (loss) per common share before
extraordinary items and cumulative
effect of accounting change........................................... $.15 $(.29) $.68 $1.57 $1.15
Net income (loss)...................................................... $.14 $(.20) $.75 $1.75 $1.01
Weighted average shares
outstanding(1)........................................................ 9,641 7,932 7,886 5,091 5,009
</TABLE>
(1) Includes common and dilutive common equivalent shares outstanding.
<TABLE>
<CAPTION>
JUNE 30
---------------------------------------------------
1994 1993 1992 1991 1990
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
(IN THOUSANDS)
Balance Sheet Data:
Working capital $ 21,148 $ 23,811 $ 26,718 $ 24,913 $ 11,722
Total assets 183,168 190,370 194,357 196,158 186,294
Long-term debt 67,707 77,429 84,879 119,188 124,876
Class B preferred stock, Series 1987 -- -- 2,500 2,537 2,537
Stockholders' equity 80,468 79,997 76,068 40,550 28,816
</TABLE>
23
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
RESULTS OF OPERATIONS
Operating revenues of the facilities are affected by changes in the
rates the Company charges or by changes in the number of patient days in the
period. Additionally, increases in one factor can offset decreases in the other.
Patient days are primarily a function of the number of admissions multiplied by
the average length of stay by all patients. Accordingly, increases in admissions
can offset, in whole or in part, decreases in average length of stay.
Generally, charges for each facility's services are reimbursed under
third-party reimbursement programs at the amount billed or at a rate which can
be less than the facility's charges. This lower rate can be based on a
negotiated per diem amount or based on the facility's costs as audited or
projected by the third-party payors. When operating revenues (charges) per
patient day are higher than the negotiated per diem rate or the facility's
costs, the difference is added to contractual adjustments. Bad debts consist
primarily of the uncollectible commercial and self-pay accounts receivable.
The Company records amounts due to or from third-party reimbursement
sources based on its best estimates of amounts to be ultimately received or paid
under cost reports filed with appropriate intermediaries, such as Blue Cross.
The final determination of amounts earned under reimbursement programs is
subject to review and audit by these intermediaries. Differences between amounts
recorded as estimated settlements and the audited amounts are reflected as
adjustments to the Company's net revenues in the period the final determination
is made. During the years ended June 30, 1992, 1993, and 1994 the Company
recorded contractual adjustment benefits of approximately $2,400,000,
$2,300,000, and $1,400,000 respectively. The adjustments were made 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 of a favorable nature or of a magnitude comparable to those
made in fiscal 1992, 1993, or 1994.
In fiscal 1994 and 1993, the Company received significant Medicaid
disproportionate share payments at two of its Louisiana facilities. In
addition, during fiscal 1992 and prior fiscal years, the Company received
24
<PAGE>
significant Medicaid disproportionate share payments at its facilities in North
Carolina and Michigan.
Disproportionate share funding is meant to adequately reimburse
facilities serving a disproportionately high volume of Medicaid patients,
relative to other providers. Disproportionate share funding is available under
Title XIX of the Social Security Act and is administered at the State level but
approved and/or overseen by the Health Care Financing Administration, since
Medicaid services are jointly funded by each State as well as the Federal
Government. Statutory changes will decrease the level of disproportionate share
payments in fiscal 1995 and, in management's estimation, eliminate these
payments in fiscal 1996 and beyond.
Management has evaluated the impact of reduced levels of
disproportionate share payments on fiscal 1995 income from continuing operations
and estimated that, without any change in the operations of the two facilities
receiving these payments in fiscal 1994, income from continuing operations would
decrease by approximately $3.7 million. However, management is considering a
number of responses in an effort to partially offset the effects of this
decrease, including (a) a possible consolidation of the operations of the
Company's Three Rivers facility with the Company's facility located less than
five miles away (Greenbrier Hospital), thereby achieving significant cost
savings, (b) utilization of available space at the Three Rivers facility for new
programs such as residential treatment, (c) introduction of cost-based programs
to the Three Rivers facility, thereby providing additional third-party
reimbursement to the facility's overhead expenses, and (d) potential volume
increases through a possible contraction in the number of behavioral health
providers treating Louisiana Medicaid patients and/or the adoption by the State
of Louisiana of a Medicaid managed care plan allowing for the treatment of adult
Medicaid patients (who, presently cannot be treated in a free-standing
psychiatric setting). Management believes that certain of the above
alternatives are also available to its Bayou Oaks facility, which will also be
adversely affected by the eventual elimination of the disproportionate share
program. In addition, at the Bayou Oaks facility, management expects a reversal
of the cost reimbursement dilution created when this facility began treating a
high volume of Medicaid patients in mid-fiscal 1993.
Which of the above-described alternatives will be implemented and the
success of these alternatives in
25
<PAGE>
offsetting the expected reduction and eventual elimination of disproportionate
share payments cannot be predicted at this time.
In recent years, approximately 7% to 17% of the Company's patient
revenues have come from CHAMPUS since some of the Company's hospitals are in
close proximity to major military installations in the United States. Congress
has imposed a reduction in the annual reimbursable length of stay for patients
covered by the mental health benefits of CHAMPUS, a federal government health
benefit program for the members (active and retired) of all seven uniformed
services and their families. Effective October 1, 1991, CHAMPUS began to limit
its coverage for hospital psychiatric services to 30 days for adult patients, 45
days for child and adolescent patients and 150 days for RTC services, subject to
waivers which will be available under limited circumstances if an extension of
the length of stay can be justified. The lengths of stay currently experienced
by the Company on CHAMPUS adult, child and adolescent beneficiaries have
generally been within the above limits. Given that certain of the Company's
facilities are located in close proximity to major military installations, these
limits have reduced the volume of CHAMPUS patients treated at the Company's
facilities. However, overall patient days increased during this period as the
decreases in CHAMPUS volume were more than offset by increases in the volume of
other patients treated at the Company's facilities.
The following table sets forth, for the periods indicated, certain
items of the Company's Consolidated Statements of Operations as a percentage of
the Company's net revenues.
<TABLE>
<CAPTION>
AS A PERCENTAGE OF NET REVENUES
YEAR ENDED JUNE 30,
-------------------------------
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Net revenues.................................. 100.0% 100.0% 100.0%
Salaries, wages and benefits.................. 47.3 46.8 44.3
Other operating expenses...................... 31.3 29.7 29.3
Provision for doubtful accounts............... 4.3 6.0 6.3
Depreciation and amortization................. 5.0 4.8 4.0
Interest and other financing charges.......... 6.5 7.0 7.6
Loss on sales and closure of facilities....... 0.6 5.5 --
Restructuring and other charges............... -- 1.0 1.7
---- ---- ----
Income (loss) before minority interests,
income taxes, extraordinary items and
cumulative effect of accounting change 5.0% (0.8)% 6.8%
==== ==== ====
Net income (loss)............................. 1.0% (1.1)% 4.3%
==== ==== ====
</TABLE>
26
<PAGE>
1994 COMPARED TO 1993
Net revenues for fiscal 1994 were $137.0 million, compared to $136.4
million in fiscal 1993. The material changes in net revenues consisted of (a)
an $11.1 million decrease (9%) in net inpatient revenues, (b) a $5.2 million
increase (43%) in net outpatient revenues and (c) $5.5 million of net revenues
associated with managed care businesses acquired during fiscal 1994. The
overall decrease in net inpatient revenues was attributable to the sale of the
Cumberland and Atlantic Shores hospital facilities during fiscal 1994 and the
lease of the Harbor Oaks Hospital facility during mid-fiscal 1993 (the
"sold/leased facilities"). See "Item 1. Business--Acquisitions and Sales."
Same facility net inpatient revenues remained stable between fiscal years as the
increase in net inpatient revenues associated with the Three Rivers facility,
which was fully operational during all of fiscal 1994 but only four and one-half
months in fiscal 1993, offset declines in net inpatient revenues at the
Company's other facilities during fiscal 1994. The increase in net outpatient
revenues was attributable to an increase in same facility and free-standing
outpatient clinic net revenue of $4.8 million (of which $1.3 million relates to
the Three Rivers facility) and $1.9 million, respectively, net of a $1.5 million
decrease in net outpatient revenues associated with the sold/leased facilities.
The increase in outpatient revenues is due to an expansion of partial
hospitalization day programs and other outpatient services by the Company's
inpatient facilities.
Net outpatient revenues comprised 14.2% of total net patient revenues
for fiscal 1994 compared to 9.5% for the prior year. In addition, with respect
to the Company's inpatient business, same facility admissions in fiscal 1994
increased 5% over fiscal 1993 while same facility average length of stay
decreased from 18.3 days in fiscal 1993 to 17.6 days in fiscal 1994.
Total salaries, wages and benefits in fiscal 1994 were $64.8 million,
compared to $63.8 million in fiscal 1993. The material changes in this expense
item consisted of (a) a $4.3 million increase in same facility salaries, wages
and benefits (from $52.6 million in fiscal 1993 to $56.9 million in fiscal
1994), (b) salaries, wages, and benefits of $1.7 million attributable to managed
care businesses acquired during fiscal 1994, (c) $1.1 million of salaries, wages
and benefits attributable to subacute and management contract operations which
began during fiscal 1994 and (d) a decrease of $6.1 million in salaries, wages
27
<PAGE>
and benefits attributable to the sold/leased facilities. The increase in same
facility salaries, wages and benefits was due primarily to a $3.7 million
increase at the Three Rivers Hospital facility.
Other operating expenses in fiscal 1994 were $42.9 million, compared
to $40.5 million in fiscal 1993. The material changes in other operating
expenses consisted of (a) a $1.7 million increase in same facility other
operating expenses (from $30.5 million in fiscal 1993 to $32.2 million in fiscal
1994), (b) other operating expenses of $3.3 million attributable to managed care
businesses acquired during fiscal 1994, (c) other operating expenses of $800,000
attributable to subacute and management contract operations and (d) a decrease
of $4.0 million in other operating expenses attributable to the sold/leased
facilities. The increase in same facility other operating expenses was due to a
$2.1 million increase at the Three Rivers Hospital facility, net of a $400,000
decrease at the Company's other inpatient facilities.
The provision for doubtful accounts in fiscal 1994 was $5.8 million,
compared to $8.1 million in fiscal 1993. Same facility provision for doubtful
accounts decreased to $5.8 million in fiscal 1994 (from $7.2 million in fiscal
1993) and the provision for doubtful accounts attributable to the sold/leased
facilities was negligible in fiscal 1994 (compared to $900,000 in fiscal 1993).
The provision for doubtful accounts in fiscal 1994 attributable to the Three
Rivers Hospital facility, acquired managed care businesses and subacute and
management contract operations was not material. The decrease in same facility
provision for doubtful accounts was primarily the result of a continued shift in
patient mix and the corresponding shift from charge-based payors (which requires
a larger amount to be paid by the patient) to cost-based and negotiated per diem
rate payors, particularly state governments and other governmental agency payors
which administer Medicaid programs. For fiscal 1994, approximately 80% of the
Company's net revenues were related to cost-based and negotiated per diem rate
payors, compared to 75% in fiscal 1993. See "Item 1. Business--Sources of
Revenue."
Depreciation and amortization in fiscal 1994 totalled $6.8 million,
compared to $6.6 million in fiscal 1993. The overall change in this expense
item was primarily due to (a) increased depreciation and amortization of
$500,000 attributable to the same facilities (approximately $200,000 of which
was due to the Three Rivers Hospital facility, which incurred this expense for a
full year in
28
<PAGE>
fiscal 1994), (b) $400,000 related to managed care businesses acquired during
fiscal 1994 and (c) a decrease of $900,000 in depreciation and amortization
attributable to the sold/leased facilities. See "Item 1. Business--Acquisitions
and Sales."
Interest and other financing charges decreased from $9.5 million for
fiscal 1993 to $8.9 million for fiscal 1994. The decrease is attributable to
reduced levels of debt during fiscal 1994.
In the fourth quarter of fiscal 1994, the Company decided to terminate
its development activities related to its day treatment division and to close
certain of these centers due to the poor operating performance of this division.
In addition, the Company also decided to close four outpatient clinics related
to its Heartland Hospital facility during this quarter. Finally, certain
adjustments were made which resulted in gain recognition on the sale of its
Atlantic Shores Hospital facility, which was sold in February 1994. The total
net losses related to these closures and sale was $802,000.
During the first quarter of fiscal 1993, the Company recorded a loss
of $1,109,000 due to the closure of its leased facility, Oak Grove Hospital.
The loss included provisions for severance expense and other expenses incurred
in connection with the termination of this lease. During the fourth quarter of
fiscal 1993, the Company signed a letter of intent to sell its Cumberland
Hospital facility for approximately $12.3 million. In connection with this
decision, the Company recorded a provision for loss relating primarily to the
unamortized amount of cost in excess of net asset value of purchased businesses
of $3.6 million. In addition, the terms and conditions of a lease agreement
pursuant to which the Company agreed to lease its Harbor Oaks Hospital facility
to a third party were satisfied during the fourth quarter of fiscal 1993. As a
result, the Company recorded a loss of $2.8 million, which amount represented
the excess of the facility's net book value over the purchase option price
contained in the lease. Finally, during this quarter the Company decided to
terminate its efforts to develop psychiatric facilities in certain markets and
write-off certain deferred loan costs in connection with the consummation of the
Company's new credit agreement in May 1993. The total losses related to these
decisions ($1,367,000) is included under "Restructuring and other charges" in
the Company's Consolidated Statement of Operations for fiscal 1993. See "Item
1. Business--Acquisitions and Sales."
29
<PAGE>
Minority interests reflects the limited partners of Three Rivers
Hospital's share of income before income taxes at that facility. See "Item 1.
Business--Ownership Arrangements and Operating Agreements."
The Company recognized an after-tax loss of $155,000 in 1994 from
early extinguishment of the industrial revenue bonds in connection with the sale
of Atlantic Shores Hospital. The Company recognized a loss of $1,580,000 on
early extinguishment of a 16.1% subordinated note in fiscal 1993. These losses
are reflected as extraordinary items in the consolidated statements of
operations. See "Liquidity and Capital Resources" below.
1993 COMPARED TO 1992
Net revenues for fiscal 1993 were $136.4 million, compared to $136.9
million in fiscal 1992. Same facility patient days remained constant between
years as an overall 10% increase in same facility admissions was offset by a
reduction in same facility average length of stay from 19.8 days to 18.3 days.
A decrease in net inpatient revenues between years of $5.9 million (5%) was
offset by a corresponding increase in net outpatient revenues of $5.9 million.
The decrease in net inpatient revenues was due to (a) a $6.7 million decrease in
net inpatient revenues at the Cumberland Hospital facility, which management
elected to sell in the fourth quarter of fiscal 1993, (b) a $2.2 million
decrease in net inpatient revenues at the Oak Grove Hospital facility, which
management elected to close in late fiscal 1992, (c) a $3.5 million decrease in
net inpatient revenues at the Harbor Oaks Hospital facility, which was closed
and the assets leased to an independent party in mid fiscal 1993, (d) fiscal
1993 revenues of $5.3 million attributable to the Three Rivers Hospital
facility, which was opened in January 1993 and fully operational in February
1993, and (e) an increase of approximately $1.0 million in same facility net
inpatient revenues in fiscal 1993. In addition, contractual adjustment benefits
from prior years totalling $2.3 million and $2.4 million are reflected in net
inpatient revenues for fiscal 1993 and fiscal 1992, respectively, to reflect the
combined effects of intermediary audits and the routine evaluation of prior year
estimated settlements. There can be no assurance that any future adjustments
will be favorable or of a comparable magnitude.
The increase in net outpatient revenues between periods was due to the
same facilities, which opened a number of new outpatient clinics and began or
expanded
30
<PAGE>
partial hospitalization day programs, and the opening of three day treatment
centers in July and December 1992. Total same facility net outpatient revenues
were $9.4 million in fiscal 1993 (compared to $4.9 million in fiscal 1992) and
net outpatient revenues attributable to the day treatment centers opened in
fiscal 1993 totalled approximately $1.3 million.
Total salaries, wages and benefits in fiscal 1993 were $63.8 million,
compared to $60.6 million in fiscal 1992. The material changes in this expense
item consisted of a $6.1 million increase in same facility salaries, wages and
benefits (from $46.5 million in fiscal 1992 to $52.6 million in fiscal 1993)
offset by a $3.5 million decrease attributable to the Cumberland, Oak Grove and
Harbor Oaks Hospital facilities. Additional salaries were also incurred in
fiscal 1993 at the day treatment centers opened during the year. The increase
in same facility salaries, wages and benefits was attributable to the Three
Rivers Hospital facility ($1.4 million), the Mission Vista Hospital facility,
which was opened in mid fiscal 1992 ($2.2 million), and staffing increases and
merit raises at the Company's remaining inpatient facilities ($2.5 million, or a
5.5% expense increase over fiscal 1992 levels).
Other operating expenses in fiscal 1993 were $40.5 million, compared
to $40.2 million in fiscal 1992. The change in this expense item was due to a
$2.3 million increase in same facility other operating expenses (from $28.3
million in fiscal 1992 to $30.5 million in fiscal 1993) offset by a $2.3 million
decrease attributable to the Cumberland, Oak Grove and Harbor Oaks Hospital
facilities. Additional other operating expenses incurred in fiscal 1993 at the
day treatment centers were substantially offset by a reduction in expenses at
the Company's corporate office.
The provision for doubtful accounts in fiscal 1993 was $8.1 million,
compared to $8.6 million in fiscal 1992. The increase in same facility provision
for doubtful accounts in fiscal 1993 of $500,000 was offset by a $1.0 million
decrease attributable to the Cumberland, Oak Grove and Harbor Oaks Hospital
facilities.
Depreciation and amortization in fiscal 1993 totalled $6.6 million,
compared to $5.4 million in fiscal 1992. The material changes in this expense
item between years consisted of (a) $200,000 of depreciation and amortization
expense attributable to the Three Rivers Hospital facility in fiscal 1993, (b) a
full year's depreciation expense of $200,000 attributable to the Mission
31
<PAGE>
Vista Hospital facility in fiscal 1993, (c) $200,000 of depreciation and
amortization expense attributable to the day treatment centers in fiscal 1993,
(d) $300,000 of depreciation and amortization expense attributable to the
Company's purchase of a new information system at the end of fiscal 1992 and (e)
additional depreciation of $300,000 on property additions during fiscal 1992 and
fiscal 1993 at the same facilities. Depreciation at the Oak Grove Hospital
facility was not material as this facility was leased during the time that it
was in operation and, since the Company continued to own the Harbor Oaks and
Cumberland Hospital facilities at June 30, 1993, depreciation expense on these
facilities was comparable between years.
Interest and other financing charges were $9.5 million for fiscal 1993
as compared to $10.5 million for fiscal 1992. The decrease is attributable to
reduced levels of debt during fiscal 1993.
During the first quarter of fiscal 1993, the Company recorded a loss
of $1,109,000 due to the closure of its leased facility, Oak Grove Hospital.
The loss included provisions for severance expense and other expenses incurred
in connection with the termination of this lease. During the fourth quarter of
fiscal 1993, the Company signed a letter of intent to sell its Cumberland
Hospital facility for approximately $12.3 million. In connection with this
decision, the Company recorded a provision for loss relating primarily to the
unamortized amount of cost in excess of net asset value of purchased businesses
of $3.6 million. In addition, the terms and conditions of a lease agreement
pursuant to which the Company agreed to lease its Harbor Oaks Hospital facility
to a third party were satisfied during the fourth quarter of fiscal 1993. As a
result, the Company recorded a loss of $2.8 million, which amount represented
the excess of the facility's net book value over the purchase option price
contained in the lease. Finally, during this quarter the Company decided to
terminate its efforts to develop psychiatric facilities in certain markets and
write-off certain deferred loan costs in connection with the consummation of the
Company's new credit agreement in May 1993. The total losses related to these
decisions ($1,367,000) is included under "Restructuring and other charges" in
the Company's Consolidated Statements of Operations for fiscal 1993. See "Item
1. Business--Acquisitions and Sales."
During the second quarter of fiscal 1992, the Company recorded a non-
recurring restructuring charge of $2,283,000. This amount consisted primarily
of severance
32
<PAGE>
expenses to former employees, including the Company's former chief executive
officer, and a $1,020,000 reserve against the potentially uncollectible portion
of receivables related to the Company's investment in a hospital joint venture.
See "Item 1. Business--Ownership Arrangements and Operating Agreements."
Minority interests reflect the limited partners of Three Rivers
Hospital's share of income before income taxes at that facility for the 1993
fiscal year.
The Company recognized a loss of $1,580,000 on the early
extinguishment of a 16.1% subordinated note in fiscal 1993, which is reflected
as an extraordinary item in the consolidated statements of operations. In
fiscal 1992, the Company wrote off deferred loan costs of $678,000 ($366,000
after applicable income tax benefit) which is reflected as an extraordinary item
in the consolidated statements of operations. The write-off resulted from the
early retirement of the Company's $34 million bank term debt. See "Liquidity
and Capital Resources" below. The Company realized income tax benefits of
$953,000 in fiscal 1992 relating to the utilization of net operating loss
carryovers of prior years, which is also reflected as an extraordinary item in
the consolidated statements of operations.
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". The cumulative effect of
adopting Statement No. 109 as of July 1, 1992 was to increase net income for the
fiscal year ended June 30, 1993 by $2,353,000.
IMPACT OF INFLATION
The psychiatric hospital industry is labor intensive, and wages and
related expenses increase in inflationary periods. Additionally, suppliers
generally seek to pass along rising costs to the Company in the form of higher
prices. The Company monitors the operations of its facilities to mitigate the
effect of inflation and the increase in costs of health care. To the extent
possible, the Company seeks to offset increased costs through increased rates,
new programs, and operating efficiencies. However, changes in reimbursement
patterns may hinder the Company's ability to realize the full effect of rate
increases. To date, inflation has not had a significant impact on operations.
33
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
On February 10, 1994, the Company sold its Atlantic Shores Hospital
for $4.8 million. The $4.3 million outstanding balance of the industrial
revenue bonds associated with that facility was repaid with the proceeds from
such sale.
On August 31, 1993, the Company sold its Cumberland Hospital for $12.3
million. Of the total proceeds, $10.9 million was restricted for the repayment
of debt as such amounts become due. At June 30, 1994, $5.3 million was still
available and is included in restricted cash on the consolidated balance sheet.
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 Preferred Stock,
Series 1987, the Company's $2 million 16.1% Subordinated Promissory Note and
$500,000 in cash. The Series C Preferred Stock has ten votes per share and is
convertible at the option of the holder into ten shares of the Company's common
stock. It pays a 5% per annum dividend and has a $50.84 liquidation preference.
On May 21, 1993, the Company finalized a credit facility for letters
of credit (to support the Company's outstanding variable rate industrial revenue
bonds) and working capital (the "1993 Credit Facility"). The 1993 Credit
Facility includes $27.5 million in letters of credit and a $4 million working
capital facility, which replace similar components of the 1990 Credit Facilities
described below. The 1993 Credit Facility expires on May 15, 1996. There were
no amounts outstanding under the working capital facility at June 30, 1994 or
1993.
On July 30, 1991, the Company completed a public offering (the "Public
Offering") of 2,700,000 shares of Common Stock from which it received net
proceeds (after payment of expenses) of $31,038,000 (including proceeds received
by the Company from the exercise of certain warrants by certain of the selling
stockholders in such offering). The net proceeds from this offering, together
with approximately $1,250,000 of the Company's internally generated funds, were
used to repay in full the remaining unpaid principal of the Bank Term Debt
referred to below.
34
<PAGE>
On April 30, 1990, the Company completed the refinancing of its then
existing senior debt and a portion of its subordinated debt and entered into new
credit agreements (the "1990 Credit Facilities") with a group of insurance
companies and with a group of banks. The 1990 Credit Facilities included
$56,500,000 in senior secured notes, $34,000,000 in bank term debt (the "Bank
Term Debt"), approximately $31,000,000 in letters of credit (the "Bank Letters
of Credit"), $3,000,000 in subordinated secured notes and $5,000,000 in a
working capital facility (the "Bank Working Capital Facility"). The senior
secured notes bear interest at 11.6% and are due in semi-annual installments
beginning March 31, 1993 and ending on March 31, 2000. The Bank Term Debt bore
interest at a variable rate, which at June 30, 1991 was 9.75%, and was due in
quarterly installments beginning March 31, 1991 with the balance due on April
30, 1998. The Bank Term Debt was repaid with the Company's net proceeds from the
Public Offering and the Company's internally generated funds. The subordinated
secured notes bear interest at 15.6% and are due in semi-annual installments
beginning March 31, 1994 and ending on March 31, 2000.
The Company's current primary cash requirements relate to its normal
operating and debt service expenses, routine capital improvements at its
facilities and the expansion of its outpatient programs. In addition, at the
current time, the Company's specific development projects include ongoing
expansion of its subacute ventures, its management contract operations and its
network of affiliations with medical/surgical hospitals and other healthcare
providers. At the current time, the Company does not have any commitments to
make any material capital expenditures. In connection with any future
acquisitions, the Company may determine to make capital improvements at the
acquired facilities, although it is the Company's intention to acquire
facilities requiring low capital investment. 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.
The Company is also considering various options regarding the
expansion of its managed care operations. Additional sources of capital would be
required to undertake
35
<PAGE>
this expansion. There can be no assurances that the Company will expand its
managed care operations.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Financial statements of the Company and its consolidated subsidiaries
are set forth herein beginning on page F-1.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS AND FINANCIAL
DISCLOSURE.
Not applicable.
36
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Information with respect to the Company's executive officers is
contained in Part I under "Item 1. Business -- Executive Officers of the
Registrant." The information required by this Item with respect to directors is
contained in the Company's definitive Proxy Statement dated October 24, 1994
("Proxy Statement") for its 1994 Annual Meeting of Stockholders held on November
28, 1994 and is incorporated herein by reference. Such Proxy Statement has been
filed with the Securities and Exchange Commission not later than 120 days
subsequent to June 30, 1994.
ITEM 11. EXECUTIVE COMPENSATION.
Except as provided below under this Item 11, the information required
with respect to this Item is contained in the Proxy Statement, and such
information is incorporated herein by reference.
The table entitled "Stock Option Grants in Fiscal 1994" incorporated
by reference to the Company's Proxy Statement dated October 24, 1994 is amended
and restated in full as follows:
STOCK OPTION GRANTS IN FISCAL 1994
<TABLE>
<CAPTION>
Potential Realizable Value
at Assumed Annual Rates of
Stock Price Appreciation
Individual Grants(4) for Option Term
--------------------------------------------------------- ---------------------------
<S> <C> <C> <C> <C> <C> <C>
% of Total
Options
Granted to Exercise
Options Employees or Base
Granted in Fiscal Price Expiration
Name (#) Year ($/Sh) Date 5%($) 10%($)
----------------- ------------ ------------- ------------ ----------- --------- ------------
Gregory H. Browne None -- -- -- -- --
Reynold J. Jennings 100,000 23.3% $6.875 2003 $379,000 $934,000
(1)(4)
Bruce R. Soden 7,500 1.8% $6.875 2004 32,500 82,200
(2)(4)
Wallace E. Smith 5,000 1.2% $6.875 2004 21,600 54,800
(2)(4)
Rea A. Oliver (3) None -- -- -- -- --
</TABLE>
37
<PAGE>
<TABLE>
<CAPTION>
Potential Realizable Value
at Assumed Annual Rates of
Stock Price Appreciation
Individual Grants(4) for Option Term
------------------------------------------------ -------------------------
<S> <C> <C> <C> <C> <C> <C>
John A. Quinn 5,000 1.2% $6.875 2004 21,600 54,800
(2)(4)
</TABLE>
(1) Options for 100,000 shares were granted to Mr. Jennings on November 9, 1993
at $7.785 per share and were repriced to $6.875 per share on May 26, 1994.
Options are exercisable in increments of 25% beginning November 9, 1993.
(2) Options are exercisable beginning May 26, 1994.
(3) Mr. Oliver resigned from the Company in March 1994.
(4) The options include a reload feature. The reload feature provides that if
upon exercise of an option the optionee pays the purchase price of such
option in shares of Common Stock owned by the optionee for at least 6
months, the Company shall grant such optionee on the date of such exercise
an additional option to purchase a number of shares of Common Stock equal
to the number of shares of Common Stock transferred to the Company in
payment of the purchase price.
The table entitled "Ten-Year Option Repricings" and the paragraph of
text immediately preceding that table both incorporated by reference to the
Company's Proxy Statement dated October 24, 1994 are amended and restated in
full as follows:
As noted previously, the stock options granted to Mr. Jennings in
November 1993 were repriced in May 1994. In accordance with applicable
Securities and Exchange Commission regulations, the following table sets forth
information as to the repricing of all options held by each executive officer of
the Company during the past ten fiscal years.
TEN-YEAR OPTION REPRICINGS
<TABLE>
<CAPTION>
Length of
Original
Market Option
Number Price of Exercise Term
of Stock at Price at Remaining
Options Time of Time of at Date of
Repriced Repricing Repricing New Repricing
or or or Exercise or
Name Date Amended Amendment Amendment Price Amendment
--------------- ----------------- ---------- ---------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Gregory Browne November 16, 1992 6,666 $5.00 $ 7.50 $5.00 3 years
8,334 5.00 7.00 5.00 8 years
200,000 5.00 7.00 5.00 9 years
April 7, 1992 8,334 7.00 9.75 7.00 9 years
100,000 7.00 8.75 7.00 10 years
November 11, 1991 8,334 9.75 14.13 9.75 10 years
</TABLE>
38
<PAGE>
<TABLE>
<CAPTION>
Length of
Original
Market Option
Price of Exercise Term
Number of Stock at Price at Remaining
Options Time of Time of at Date of
Repriced Repricing Repricing New Repricing
or or or Exercise or
Name Date Amended Amendment Amendment Price Amendment
------------------- ----------------- --------- --------- --------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Reynold J. Jennings May 26, 1994 100,000 6.88 7.88 6.88 9 years
Bruce R. Soden November 16, 1992 6,666 5.00 7.50 5.00 3 years
18,334 5.00 7.00 5.00 8 years
15,000 5.00 7.00 5.00 9 years
April 7, 1992 18,334 7.00 9.75 7.00 9 years
15,000 7.00 8.75 7.00 10 years
November 11, 1991 18,334 9.75 14.56 9.75 10 years
Wallace E. Smith November 16, 1992 16,666 5.00 7.00 5.00 3 years
23,334 5.00 7.00 5.00 9 years
April 7, 1992 16,666 7.00 9.75 7.00 4 years
23,334 7.00 9.75 7.00 9 years
November 11, 1991 23,334 9.75 14.13 9.75 10 years
Rea A. Oliver (1) November 16, 1992 15,000 5.00 7.00 5.00 9 years
5,000 5.00 7.00 5.00 9 years
April 7, 1992 5,000 7.00 9.75 7.00 10 years
5,000 7.00 8.75 7.00 10 years
5,000 7.00 9.75 7.00 9 years
November 11, 1991 5,000 9.75 14.13 9.75 10 years
John A. Quinn November 16, 1992 15,000 5.00 7.00 5.00 9 years
10,000 5.00 7.00 5.00 9 years
April 7, 1992 15,000 7.00 9.75 7.00 10 years
10,000 7.00 9.75 7.00 9 years
November 11, 1991 10,000 9.75 14.13 9.75 10 years
Curtis L. Dosch November 16, 1992 5,000 $5.00 $ 7.00 $5.00 5 years
2,000 5.00 7.00 5.00 9 years
5,000 5.00 7.00 5.00 9 years
April 7, 1992 5,000 7.00 9.75 7.00 5 years
2,000 7.00 9.75 7.00 9 years
5,000 7.00 8.75 7.00 10 years
November 11, 1991 5,000 9.75 14.00 9.75 6 years
2,000 9.75 14.13 9.75 10 years
William N. Nyman November 16, 1992 5,000 $5.00 $ 7.00 $5.00 5 years
2,000 5.00 7.00 5.00 9 years
5,000 5.00 7.00 5.00 9 years
April 7, 1992 5,000 7.00 9.75 7.00 5 years
2,000 7.00 9.75 7.00 9 years
5,000 7.00 8.75 7.00 10 years
November 11, 1991 5,000 9.75 14.00 9.75 6 years
2,000 9.75 14.13 9.75 10 years
</TABLE>
___________________
(1) Mr. Oliver resigned from the Company in March 1994.
39
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information required with respect to this Item is contained in the
Proxy Statement, and such information is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Except as provided below under this Item 13, the information required
with respect to this Item is contained in the Proxy Statement, and such
information is incorporated herein by reference.
The information under the caption "Certain Relationships and Related
Transactions" incorporated by reference to the Proxy Statement is amended by
adding the following three paragraphs to such information:
"On June 30, 1993, the interests in the Company controlled by Paul J.
Ramsay, the Company's Chairman, were recapitalized (the "Recapitalization"). As
part of the Recapitalization, a total of 142,486 shares of the Company's Class B
Convertible Preferred Stock, Series C, par value $1.00 (the "Series C Preferred
Stock"), were issued to entities controlled by Mr. Ramsay in exchange for
333,333 shares of Class B Convertible Preferred Stock, Series 1987, par value
$1.00 per share (the "Class B Preferred Stock"), the Subordinated Debenture (as
defined below) and $500,000 in cash. The shares of Series C Preferred Stock
issued as part of the Recapitalization included an aggregate liquidation
preference of $7,243,988, a 5% per annum dividend (an aggregate of $362,199 per
annum), the right to convert each share into ten shares of common stock of the
Company and the right to vote on an as converted basis (i.e., ten votes per each
share of Series C Preferred Stock). The shares of Class B Preferred Stock
exchanged in the Recapitalization had an aggregate liquidation preference of
$2,500,000, were mandatorily redeemable for $2,500,000 in September 1997,
included a 6% per annum dividend (an aggregate of $150,000 per annum) and
"supervoting rights" (i.e., each two shares of Class B Preferred Stock were
convertible into one share of common stock, but each one share of Class B
Preferred Stock included the right to 9.2 votes).
As part of the Recapitalization, Ramsay Holdings HSA Limited ("Ramsay
Holdings") paid $500,000 in cash for 9,835 shares of the Series C Preferred
Stock, constituting a
40
<PAGE>
purchase price per share of Series C Preferred Stock equal to $50.84 per share
(i.e., the per share liquidation preference). The other shares of Series C
Preferred Stock issued as part of the Recapitalization were also valued at
$50.84 per share. This value per share (and the value of the securities
exchanged therefor) were based upon a valuation analysis performed by The
Ulysses Group Advisors, Inc., an independent investment banking firm. As part
of the Recapitalization, Ramsay Holdings also exchanged 333,333 shares of Class
B Preferred Stock for 61,468 shares of Series C Preferred Stock (valued based
upon the independent valuation). In addition, Paul Ramsay Holdings Pty. Limited
("PRHP") exchanged a $2,000,000, 16.1% subordinated debenture due April 1, 2000
(the "Subordinated Debenture"), for 71,183 shares of Series C Preferred Stock
(valued based upon the independent valuation). The Company paid $322,000 in
annual interest expense on the Subordinated Debenture.
The Company's Board of Directors determined that a number of important
business objectives would be achieved as a result of the Recapitalization. The
Board believed that the Recapitalization would improve the Company's cash flow
and net income as a result of the elimination of the mandatory redemption of the
Class B Preferred Stock for $2,500,000 in cash and the elimination of the
Subordinated Debenture and its expensive 16.1% annual interest rate. As a
result of the Recapitalization, there was a reduction of approximately $110,000
in annual dividend and interest expense. In addition, the $500,000 investment
made by Ramsay Holdings improved the cash position of the Company at the time of
the Recapitalization. Also, the outstanding shares of Class B Preferred Stock,
all of which were exchanged in the Recapitalization, included supervoting rights
which management believed were confusing to investors and accordingly adversely
affected the market value of the Company's Common Stock. By eliminating the
Class B Preferred Stock and eliminating the Subordinated Debenture, the Board
believed that the Recapitalization would improve the financial position of the
Company and also result in a more attractive investment opportunity to investors
in the Company's Common Stock. Finally, at the time the Recapitalization was
approved, the Board also believed that the Recapitalization, by reducing the
overall voting power of Mr. Ramsay's indirect interests in the Company from 41%
to 31%, would facilitate the refinancing of the Company's bank credit facility.
This refinancing was consummated in May 1993 following the approval of the
Recapitalization by an independent committee of the Board of Directors. The
Company believes that the Recapitalization was on terms no
41
<PAGE>
less favorable to the Company than terms that could have been obtained from an
unaffiliated third party."
In addition, the information under the caption "Certain Relationships
and Related Transactions" incorporated by reference to the Proxy Statement is
amended by amending and restating in full the third paragraph under such caption
as follows:
"In June 1992, the Company renewed its management agreement (the
"Management Agreement") with Ramsay Health Care Pty. Limited, an affiliate of
Paul J. Ramsay (the "Manager"). The renewal term commenced on November 1, 1992
and will terminate upon the earlier of (i) October 31, 1997 or (ii) one year
after written notice of termination is given by either party. Pursuant to the
Management Agreement, the Manager provides managerial services to the Company
including, but not limited to (a) participation in overall strategic planning of
the Company, (b) strategic and operational discussions with the chief executive
and other officers of the Company, (c) review and evaluation of possible
merger/acquisition candidates, (d) review of material contracts and commitments
entered into by the Company and (e) participation in bank refinancing
negotiations. In addition, the Manager has provided a pool of management
standby resources (on both a part-time and full-time basis) to mitigate the
impact of executive and senior management turnover. The Management Agreement
provided for the payment of an initial annual management fee of $677,422,
subject to increases based on increases in the Consumer Price Index and subject
to certain restrictions set forth in certain loan agreements to which the
Company is party. For services under the Management Agreement, the Manager
received approximately $698,000 for the year ended June 30, 1994. The
management fee payable to the Manager under the Management Agreement has been
set forth on the basis of a negotiated amount based on the time spent and out-
of-pocket costs incurred by personnel of the Manager in performing its duties
pursuant to the Management Agreement, including expenses for travel by the
Manager's personnel to and from the Company's annual management conference and
all other meetings at which representatives of the Manager are present. There
is no separate reimbursement for such travel and other out-of-pocket costs, all
of which are paid from the annual management fee. In addition, directors of the
Company who reside in Australia and who incur travel expenses and other out-of-
pocket costs in their capacities as directors, including in connection with
their attendance at Board of Director and other meetings of the Company, do not
receive separate reimbursement for such costs but are
42
<PAGE>
instead reimbursed out of the annual management fee paid to the Manager."
43
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(A) DOCUMENTS FILED AS PART OF THE REPORT:
1. FINANCIAL STATEMENTS
Information with respect to this Item is contained
on Pages F-1 to F-24 of this Annual Report on Form 10-K.
2. FINANCIAL STATEMENT SCHEDULES
Information with respect to this Item is contained
on Pages S-1 to S-5 of this Annual Report on Form 10-K.
3. EXHIBITS
Information with respect to this Item is contained
in the attached Index to Exhibits.
(B) REPORTS ON FORM 8-K:
There were no reports on Form 8-K filed by the
Company for the quarter ended June 30, 1994.
(C) EXHIBITS REQUIRED BY ITEM 601 OF REGULATION
S-K:
Exhibits required to be filed by the Company pursuant to Item 601 of
Regulation S-K are contained in Exhibits listed in response to Item 14(a)3, and
are incorporated herein by reference. The management contracts and compensatory
plans and arrangements required to be filed as an Exhibit to this Form 10-K are
listed in Exhibits 10.71, 10.72, 10.73, 10.74, 10.75, 10.81, 10.82 and 10.83.
44
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this amended report to be
signed on its behalf by the undersigned thereunto fully authorized.
Dated:
RAMSAY HEALTH CARE, INC.
By /s/ Gregory H. Browne
-------------------------
GREGORY H. BROWNE
CHIEF EXECUTIVE OFFICER,
PRINCIPAL FINANCIAL AND
ACCOUNTING OFFICER AND
DIRECTOR
Pursuant to the requirements of the Securities and Exchange Act of
1934, this amended report has been signed below by the following persons on
behalf of the registrant and in the capacities and on the dates indicated.
SIGNATURE/TITLE
---------------
DATED:
By Paul J. Ramsay/*/
---------------------
PAUL J. RAMSAY
CHAIRMAN OF THE BOARD
AND DIRECTOR
SIGNATURE/TITLE
---------------
DATED:
By /s/ Gregory H. Browne
------------------------
GREGORY H. BROWNE
CHIEF EXECUTIVE OFFICER,
PRINCIPAL FINANCIAL AND
ACCOUNTING OFFICER AND
DIRECTOR
DATED:
By Aaron Beam, Jr./*/
----------------------
AARON BEAM, JR.
DIRECTOR
45
<PAGE>
DATED:
By
-----------------------
PETER J. EVANS
DIRECTOR
DATED:
By Robert E. Galloway/*/
-----------------------
ROBERT E. GALLOWAY
DIRECTOR
DATED:
By Thomas M. Haythe/*/
-----------------------
THOMAS M. HAYTHE
DIRECTOR
DATED:
By Steven J. Shulman/*/
------------------------
STEVEN J. SHULMAN
DIRECTOR
DATED:
By Michael S. Siddle/*/
------------------------
MICHAEL S. SIDDLE
DIRECTOR
DATED:
By
------------------------
BRUCE R. SODEN
SENIOR VICE PRESIDENT AND
DIRECTOR
/*/ By /s/ Gregory H. Browne
----------------------------
Gregory H. Browne
Attorney-in-Fact
46
<PAGE>
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULES
The following consolidated financial statements of the Registrant and its
subsidiaries are submitted herewith in response to Item 8 and Item 14(a)(1):
<TABLE>
<CAPTION>
PAGE
NUMBER
------
<S> <C>
Report of Independent Auditors............................... F-3
Consolidated Balance Sheets -- June 30, 1994 and 1993........ F-4
Consolidated Statements of Operations-- For the Years Ended..
June 30, 1994, 1993 and 1992............................... F-6
Consolidated Statements of Stockholders' Equity -- For
the Years Ended June 30, 1994, 1993 and 1992............... F-7
Consolidated Statements of Cash Flows -- For the Years
Ended June 30, 1994, 1993 and 1992......................... F-8
Notes to Consolidated Financial Statements................... F-9
</TABLE>
The following Financial Statement Schedules of the Registrant and its
subsidiaries are submitted herewith in response to Item 14(a)(2):
<TABLE>
<S> <C> <C>
IV -- Indebtedness of and to Related Parties -- Not Current..... S-1
V -- Property and Equipment..................................... S-2
VI -- Accumulated Depreciation, Depletion and Amortization of
Property and Equipment.................................... S-3
VIII -- Valuation and Qualifying Accounts.......................... S-4
X -- Supplementary Income Statement Information................. S-5
</TABLE>
All other schedules have been omitted because they are inapplicable or the
information is provided in the consolidated financial statements including the
notes thereto.
F-1
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
F-2
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Stockholders
RAMSAY HEALTH CARE, INC.
We have audited the accompanying consolidated balance sheets of Ramsay
Health Care, Inc. and Subsidiaries as of June 30, 1994 and 1993, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
each of the three years in the period ended June 30, 1994. 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 Ramsay Health Care, Inc. and Subsidiaries at June 30, 1994 and 1993,
and the consolidated results of their operations and their cash flows for each
of the three years in the period ended June 30, 1994, 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.
As discussed in the Note on Income Taxes on page F-13 to the
consolidated financial statements, the Company changed its method of accounting
for income taxes in 1993.
ERNST & YOUNG LLP
New Orleans, Louisiana
September 1, 1994
F-3
<PAGE>
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30
--------------------------
1994 1993
------------ ------------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents.......................... $ 6,207,000 $ 10,682,000
Restricted cash.................................... 5,311,000 ---
Patient accounts receivable, less allowances for
doubtful accounts of $3,925,000 and $4,955,000
at June 30, 1994 and 1993, respectively........... 23,019,000 26,696,000
Amounts due from third-party contractual agencies.. 6,604,000 4,971,000
Other accounts receivable.......................... 2,139,000 1,356,000
Other current assets............................... 3,040,000 3,385,000
------------ ------------
Total current assets.............................. 46,320,000 47,090,000
Other assets
Cash held in trust................................. 1,805,000 2,611,000
Cost in excess of net asset value of purchased
businesses........................................ 12,042,000 4,699,000
Unamortized preopening and loan costs.............. 3,731,000 3,664,000
Other intangible assets............................ 3,048,000 ---
Real estate held for sale.......................... 1,150,000 1,150,000
Other non-current assets........................... 4,911,000 4,141,000
------------ ------------
26,687,000 16,265,000
Property and equipment
Land............................................... 9,009,000 9,995,000
Building and improvements.......................... 118,555,000 134,468,000
Equipment, furniture and fixtures.................. 20,626,000 18,419,000
------------ ------------
148,190,000 162,882,000
Less accumulated depreciation...................... 38,029,000 35,867,000
------------ ------------
110,161,000 127,015,000
------------ ------------
$183,168,000 $190,370,000
============ ============
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-4
<PAGE>
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30
--------------------------
1994 1993
----------- -----------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable................................................... $ 2,306,000 $ 4,790,000
Accrued salaries and wages......................................... 4,291,000 3,760,000
Other accrued liabilities.......................................... 4,386,000 1,467,000
Amounts due to third-party contractual agencies.................... 4,729,000 6,114,000
Current portion of long-term debt.................................. 9,460,000 7,148,000
------------ ------------
Total current liabilities........................................ 25,172,000 23,279,000
Deferred income taxes............................................... 4,932,000 6,120,000
Liabilities for unpaid self-insurance claims,
less current portion................................................ 1,341,000 2,419,000
Long-term debt, less current portion................................ 67,707,000 77,429,000
Minority interests.................................................. 3,548,000 1,126,000
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, $1 par value, authorized
152,321 shares--Series C, issued 142,486 shares
(liquidation value of $7,244,000) including accrued
dividends of $91,000 at June 30, 1994............................ 233,000 142,000
Common stock, $.01 par value--authorized 20,000,000
shares; issued 8,200,760 shares at June 30, 1994 and
8,087,926 shares at June 30, 1993................................ 82,000 81,000
Additional paid-in capital........................................ 100,048,000 99,847,000
Retained earnings (deficit)....................................... (16,483,000) (17,805,000)
Treasury stock--481,750 common shares at June 30, 1994
and 321,750 common shares at June 30, 1993, at cost.............. (3,435,000) (2,291,000)
------------ ------------
Total stockholders' equity................................... 80,468,000 79,997,000
------------ ------------
$183,168,000 $190,370,000
============ ============
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-5
<PAGE>
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30
-------------------------------------------
1994 1993 1992
------------- ------------- -------------
<S> <C> <C> <C>
NET REVENUES......................................................... $137,002,000 $136,354,000 $136,946,000
Operating expenses:
Salaries, wages and benefits............................. 64,805,000 63,810,000 60,626,000
Other operating expenses................................. 42,907,000 40,454,000 40,161,000
Provision for doubtful accounts.......................... 5,846,000 8,148,000 8,628,000
Depreciation and amortization............................ 6,836,000 6,605,000 5,439,000
Interest and other financing charges..................... 8,906,000 9,494,000 10,488,000
Loss on sales and closure of facilities.................. 802,000 7,524,000 ---
Restructuring and other charges.......................... --- 1,367,000 2,283,000
------------ ------------ ------------
TOTAL OPERATING EXPENSES............................................. 130,102,000 137,402,000 127,625,000
------------ ------------ ------------
INCOME (LOSS) BEFORE MINORITY INTERESTS, INCOME TAXES, EXTRAORDINARY
ITEMS AND CUMULATIVE EFFECT OF ACCOUNTING CHANGE......... 6,900,000 (1,048,000) 9,321,000
Minority interests................................................... 4,824,000 1,126,000 ---
------------ ------------ ------------
INCOME (LOSS) BEFORE INCOME TAXES, EXTRAORDINARY ITEMS AND CUMULATIVE
EFFECT OF ACCOUNTING CHANGE.............................. 2,076,000 (2,174,000) 9,321,000
Provision for income taxes........................................... 599,000 159,000 3,974,000
------------ ------------ ------------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEMS AND CUMULATIVE EFFECT OF
ACCOUNTING CHANGE........................................ 1,477,000 (2,333,000) 5,347,000
Extraordinary items:
Loss from early extinguishment of debt, less applicable
income tax benefit of $103,000 in 1994 and
$312,000 in 1992....................................... (155,000) (1,580,000) (366,000)
Reduction in federal and state income taxes from
utilization of net operating loss carryovers........... --- --- 953,000
------------ ------------ ------------
(155,000) (1,580,000) 587,000
Cumulative effect of change in accounting for income taxes........... --- 2,353,000 ---
------------ ------------ ------------
NET INCOME (LOSS).................................................... $ 1,322,000 $ (1,560,000) $ 5,934,000
============ ============ ============
Income (loss) per common and dilutive common equivalent share:
Primary:
Before extraordinary items and cumulative effect of
accounting change...................................... $ 0.15 $(0.29) $ 0.68
Extraordinary items:
Loss from early extinguishment of debt........... (0.01) (0.20) (0.05)
Utilization of net operating loss carryovers..... --- --- 0.12
------ ------ ------
(0.01) (0.20) 0.07
Cumulative effect of change in accounting for
income taxes..................................... --- 0.29 ---
------ ------ ------
$ 0.14 $(0.20) $ 0.75
====== ====== ======
Fully diluted:
Before extraordinary items and cumulative effect of
accounting change...................................... $ 0.15 $(0.29) $ 0.66
Extraordinary items:
Loss from early extinguishment of debt........... (0.01) (0.20) (0.05)
Utilization of net operating loss carryovers..... --- --- 0.12
------ ------ ------
(0.01) (0.20) 0.07
Cumulative effect of change in accounting for
income taxes..................................... --- 0.29 ---
------ ------ ------
$ 0.14 $(0.20) $ 0.73
====== ====== ======
Weighted average number of shares outstanding:
Primary.................................................. 9,641,000 7,932,000 7,886,000
Fully diluted............................................ 9,679,000 7,932,000 8,159,000
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-6
<PAGE>
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
CLASS B
CLASS A CONVERTIBLE
CONVERTIBLE PREFERRED ADDITIONAL RETAINED
PREFERRED STOCK COMMON PAID-IN EARNINGS TREASURY
STOCK SERIES C STOCK CAPITAL (DEFICIT) STOCK
------------ ----------- -------- ------------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT JULY 1, 1991...................... $ 313,000 $ --- $50,000 $ 62,366,000 $(22,179,000) $ ---
Exercise of stock options (28,833 shares).... --- --- --- 281,000 --- ---
Dividends accrued on Class B redeemable
convertible preferred stock.............. --- --- --- (150,000) --- ---
Purchase of treasury stock (201,750
shares)................................... --- --- --- --- --- (1,585,000)
Issuance of common stock (2,700,000
shares)................................... --- --- 27,000 30,158,000 --- ---
Exercise of warrants (90,832 shares)......... --- --- 1,000 852,000 --- ---
Conversion of Class A convertible
preferred stock (290,590 shares).......... (290,000) --- 3,000 287,000 --- ---
Net income................................... --- --- --- --- 5,934,000 ---
--------- -------- ------- ------------ ------------ -----------
BALANCE AT JUNE 30, 1992..................... 23,000 --- 81,000 93,794,000 (16,245,000) (1,585,000)
Dividends accrued on Class B redeemable
convertible preferred stock............... --- --- --- (150,000) --- ---
Purchase of treasury stock (120,000 shares).. --- --- --- --- --- (706,000)
Issuance of Class B preferred stock,
Series C (142,486 shares)................. --- 142,000 --- 6,203,000 --- ---
Net loss..................................... --- --- --- --- (1,560,000) ---
--------- -------- ------- ------------ ------------ -----------
BALANCE AT JUNE 30, 1993..................... 23,000 142,000 81,000 99,847,000 (17,805,000) (2,291,000)
Exercise of stock options (112,834 shares)... --- --- 1,000 565,000 --- ---
Dividends accrued on Class B
convertible preferred stock, Series C..... --- 91,000 --- (364,000) --- ---
Purchase of treasury stock (160,000 shares).. --- --- --- --- (1,144,000)
Net income................................... --- --- --- --- 1,322,000 ---
--------- -------- ------- ------------ ------------ -----------
BALANCE AT JUNE 30, 1994..................... $ 23,000 $233,000 $82,000 $100,048,000 $(16,483,000) $(3,435,000)
========= ======== ======= ============ ============ ===========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-7
<PAGE>
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30
-------------------------------------------
1994 1993 1992
------------- ------------- -------------
<S> <C> <C> <C>
Cash flows from operating activities
Net income (loss)............................................................ $ 1,322,000 $(1,560,000) $ 5,934,000
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Cumulative effect of change in accounting for
income taxes........................................................... --- (2,353,000) ---
Depreciation and amortization............................................ 7,638,000 7,173,000 5,955,000
Loss on early extinguishment of debt..................................... 258,000 1,580,000 678,000
Write-off of development and other costs................................. --- 1,367,000 ---
(Gain) loss on disposal of assets........................................ 722,000 (121,000) ---
Provision for deferred income taxes...................................... (1,188,000) (696,000) 1,890,000
Provision for doubtful accounts.......................................... 5,846,000 8,148,000 8,628,000
Provision for loss on sales and closure of facilities.................... --- 6,415,000 ---
Minority interests....................................................... 4,824,000 1,126,000 ---
Cash flows from (increase) decrease in operating assets:
Patient accounts receivable............................................ (2,169,000) (8,833,000) (8,690,000)
Other current assets................................................... (2,071,000) 1,233,000 (150,000)
Other non-current assets............................................... (554,000) 164,000 257,000
Cash flows from increase (decrease) in operating liabilities:
Accounts payable....................................................... (2,484,000) 940,000 (814,000)
Accrued salaries, wages and other liabilities.......................... 3,150,000 (674,000) (2,664,000)
Unpaid self-insurance claims........................................... (1,078,000) (456,000) 203,000
Amounts due to third-party contractual agencies........................ (1,385,000) 724,000 (1,580,000)
------------ ----------- ------------
Total adjustments.................................................... 11,509,000 15,737,000 3,713,000
------------ ----------- ------------
Net cash provided by operating activities.......................... 12,831,000 14,177,000 9,647,000
------------ ----------- ------------
Cash flows from investing activities
Proceeds from sale of assets............................................. 16,422,000 300,000 ---
Acquisitions of businesses............................................... (6,022,000) --- ---
Expenditures for property and equipment.................................. (5,070,000) (3,569,000) (5,206,000)
Purchase of facilities................................................... --- (2,000,000) (2,100,000)
Development project costs................................................ (388,000) (1,878,000) ---
Preopening costs......................................................... (2,195,000) (905,000) (661,000)
Restricted cash.......................................................... (5,311,000) --- ---
Cash held in trust....................................................... 806,000 166,000 329,000
------------ ----------- ------------
Net cash used in investing activities.................................. (1,758,000) (7,886,000) (7,638,000)
------------ ----------- ------------
Cash flows from financing activities
Loan costs............................................................... (222,000) (1,619,000) (711,000)
Proceeds from sale/leaseback of equipment................................ --- 1,857,000 ---
Distribution to minority interests....................................... (2,741,000) --- ---
Proceeds from exercise of options and warrants........................... 566,000 --- 1,134,000
Payment on debt.......................................................... (11,734,000) (3,884,000) (34,317,000)
Payment of preferred stock dividends..................................... (273,000) (150,000) (187,000)
Issuance of Class B Preferred Stock, Series C............................ --- 265,000 ---
Issuance of common stock................................................. --- --- 30,185,000
Purchase of treasury stock............................................... (1,144,000) (706,000) (1,585,000)
------------ ----------- ------------
Net cash used in financing activities.................................. (15,548,000) (4,237,000) (5,481,000)
------------ ----------- ------------
Net increase (decrease) in cash and
cash equivalents......................................................... (4,475,000) 2,054,000 (3,472,000)
Cash and cash equivalents at beginning of year............................. 10,682,000 8,628,000 12,100,000
------------ ----------- ------------
Cash and cash equivalents at end of year................................... $ 6,207,000 $10,682,000 $ 8,628,000
============ =========== ============
Supplemental disclosures of cash flow information
Cash paid during the year for:
Interest (net of amount capitalized)..................................... $ 8,064,000 $ 8,788,000 $ 11,740,000
Income taxes............................................................. 398,000 1,780,000 1,096,000
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-8
<PAGE>
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The consolidated financial statements include the accounts of the
Company and its majority-owned subsidiaries. All significant intercompany
accounts and transactions have been eliminated in consolidation.
INDUSTRY
The Company is a provider of a full continuum of behavioral health
services. Its facilities division operates private, free-standing acute care
psychiatric hospitals as well as outpatient day hospitals, freestanding day
treatment centers, subacute units, and residential treatment centers. Its
managed care division provides managed mental health care services.
AFFILIATED COMPANIES
Ramsay Holdings HSA Limited ("Holdings") owns approximately 18% of the
outstanding Common Stock of the Company and 50% of the outstanding Class B
Convertible Preferred Stock, Series C of the Company. Paul Ramsay Holdings Pty.
Limited owns the remaining 50% of the outstanding Class B Convertible Preferred
Stock, Series C. Together, these two entities affiliated with Paul J. Ramsay own
common stock and preferred stock in the Company which in total represents an
approximate 31% voting interest.
MEDICARE AND OTHER CONTRACTED REIMBURSEMENT PROGRAMS
Net revenues include estimated reimbursable amounts from Medicare and
other contracted reimbursement programs. Amounts received by the Company for
treatment of patients covered by such programs, which may be based on the cost
of services provided or predetermined rates, are generally less than the
established billing rates of the Company's hospitals. Final determination of
amounts earned under contracted reimbursement programs is subject to review and
audit by the appropriate agencies. See Note on Reimbursement from Third-Party
Contractual Agencies.
F-9
<PAGE>
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
CHARITY CARE
The Company provides care to patients who meet certain criteria under
its charity care policy without charge or at amounts less than its established
rates. Because the Company does not pursue collection of amounts determined to
qualify as charity care, they are not reported as revenue.
INTANGIBLE ASSETS
Cost in excess of net asset value of purchased businesses is amortized
on a straight-line basis, over periods ranging from 15 to 40 years. Other
intangible assets, principally the value assigned to acquired clinical
protocols, established provider networks, and existing contracts related to the
managed care division, on a straight-line basis over periods ranging from 4 to
20 years.
The carrying value of cost in excess of net asset value of purchased
businesses will be reviewed if the facts and circumstances suggest that it may
be impaired. If this review indicates that these costs will not be recoverable,
as determined based on the undiscounted cash flows of the entity acquired over
the remaining amortization period, the Company's carrying value of these costs
is reduced by the estimated shortfall of cash flows.
Preopening costs, principally salaries and other costs incurred prior
to opening a new facility or program, are deferred and amortized on a straight-
line basis over two years.
Loan costs are amortized ratably over the life of the loan and are
included in interest expense. In fiscal 1994, the Company wrote off $258,000 of
deferred loan costs ($155,000 after applicable income tax benefit) in connection
F-10
<PAGE>
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
with the early retirement of the bonds associated with Atlantic Shores Hospital
which was sold in February 1994. In fiscal 1993, the Company incurred
approximately $1,573,000 in deferred loan costs in connection with the
refinancing of its debt under the 1993 Credit Facilities. In fiscal 1992, the
Company wrote off $678,000 of deferred loan costs ($366,000 after applicable
income tax benefit) in connection with the early retirement of its $34 million
bank term debt.
Accumulated amortization of the Company's intangible assets as of June
30, 1994 and 1993 was $9,896,000 and $10,311,000, respectively.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. The Company capitalizes
interest, salaries and other costs for site selection and design incurred during
the construction period. Upon sale or retirement of property or equipment, the
cost and related accumulated depreciation are removed from the accounts and the
resulting gain or loss is included in operations.
Depreciation is computed substantially on the straight-line method for
financial reporting purposes and on accelerated methods for income tax purposes.
The general range of estimated useful lives is twenty to forty years for
buildings and five to twenty years for equipment.
PROFESSIONAL AND GENERAL LIABILITY INSURANCE
The Company maintains a self-insurance program for its hospital
professional liability insurance and commercial and general liability insurance.
The Company and its facilities are insured for professional and general
liability in the aggregate amount of $25 million with self-insured retentions of
$500,000 per claim. The Company records the liability for uninsured
professional and general liability losses related to previous years' asserted
and unasserted claims arising from reported incidents based on an independent
valuation, generally performed in the third quarter of the fiscal year, which
applies development factors to these claims. The development factors are based
on a blending of the Company's actual experience with industry standards.
Losses related to the period from the valuation date through the applicable
fiscal year end are recorded based on estimates which utilize the Company's
actual experience and industry rating models.
F-11
<PAGE>
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
INCOME TAXES
The Company recognizes deferred income taxes on significant temporary
differences between financial statement and income tax reporting. The Company
adopted FASB Statement No. 109 as of July 1, 1992 (See note on Income Taxes on
page F-17).
RESTRUCTURING AND OTHER CHARGES
In the fourth quarter of fiscal 1993, the Company recorded a non-
recurring charge of $1,367,000, of which approximately $800,000 is attributable
to the Company's decision to terminate certain development projects primarily
related to inpatient facilities. In addition, upon consummation of the
Company's new credit agreement in the fourth quarter of fiscal 1993, the Company
determined that approximately $500,000 of deferred loan costs should be written
off.
In the second quarter of fiscal 1992, the Company recorded a non-
recurring charge of $2,283,000. This amount consisted primarily of severance
expenses (totalling $1,058,000) to former employees, including the Company's
former chief executive officer, and a $1,020,000 reserve against the potentially
uncollectible portion of receivables related to the Company's investment in a
hospital joint venture.
All amounts recorded as restructuring and other charges, except for
the severance expenses noted above, were noncash charges.
LOSS ON SALES AND CLOSURE OF FACILITIES
During the fourth quarter of fiscal 1994, the Company terminated its
plan to develop additional outpatient treatment centers and closed or made the
decision to close certain of these centers already in operation. The losses
associated with this termination and with closures, which totalled approximately
$1.3 million, were offset by a $500,000 gain recognized on the sale of its
Atlantic Shores Hospital facility. During fiscal 1993, the Company terminated
operations in a leased facility in California, leased its Harbor Oaks Hospital
facility in Fort Walton Beach, Florida to a third party, and agreed to sell its
Cumberland Hospital facility in Fayetteville, North Carolina. As a result of
these transactions, the Company
F-12
<PAGE>
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
recorded a charge against earnings of $7,524,000 in fiscal 1993 (See
Acquisitions and Sales below).
EARNINGS PER SHARE
Primary earnings per share are calculated by dividing income before
extraordinary items and cumulative effect of accounting change and net income by
the weighted average number of common and dilutive common equivalent shares
outstanding during each period. The Company's common stock equivalents include
Class A Convertible Preferred Stock, Class B Convertible Preferred Stock, Series
C and stock options and warrants to purchase Common Stock. Fully diluted
earnings per share are calculated assuming the conversion of the Class B
redeemable convertible preferred stock prior to its exchange on June 30, 1993;
see note on Related Party Transactions.
MINORITY INTERESTS
The equity of minority shareholders or partners in Company
subsidiaries is reported on the balance sheet as minority interests. Minority
interests reflect changes for the respective share of income of the subsidiaries
attributable to the minority shareholders or partners, the effect of which is
also reflected in the results of operations of the Company, and for
distributions made to the minority shareholders or partners.
CASH EQUIVALENTS
Cash equivalents include short-term, highly liquid interest-bearing
investments, consisting primarily of certificates of deposit, commercial paper
and money market mutual funds. The carrying values of these cash equivalents
approximate fair value.
RESTRICTED CASH
Restricted cash represents the remaining proceeds from the sale of
Cumberland Hospital that are held in trust for the repayment of debt. The
carrying value of restricted cash approximates fair value.
CASH HELD IN TRUST
Cash held in trust is revocable by the Company under certain
circumstances and includes cash and short-term investments for payment of self-
insurance losses. The
F-13
<PAGE>
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
carrying value of this cash held in trust approximates fair value.
ACQUISITIONS AND SALES
In August 1991, the Company purchased a 72-bed hospital facility in
San Antonio, Texas and other personal property for a cash purchase price of
$2,100,000. After refurbishments and renovations totaling approximately
$1,800,000, the facility, Mission Vista Hospital, opened as a 66-bed facility in
November 1991.
In December 1991, the Company entered into a one-year lease for a 36-
bed facility in Concord, California. The Company had an option to purchase this
facility for $1,050,000, which expired in December 1992. The Company did not
exercise this option, terminated operations at this facility in September 1992,
and recognized a loss of $1,109,000 on closure.
In November 1992, the Company purchased a 64-bed facility in
Covington, Louisiana for $2,000,000. The facility, Three Rivers Hospital,
opened in January 1993.
In January 1993, the Company terminated operations at its facility in
Fort Walton Beach, Florida and subsequently leased that facility to another
health care provider. That lease gives the lessee the option to purchase the
facility at a fixed price. The Company recognized a provision for loss on
potential sale of this facility of approximately $2.8 million in 1993. This
amount is included in the Company's Consolidated Statements of Operations for
the fiscal year ended June 30, 1993 under the line item "Loss on sales and
closure of facilities." The cost and accumulated depreciation relating to this
facility are approximately $8,900,000 and $4,800,000, respectively, at June 30,
1994.
In June 1993, the Company signed a letter of intent to sell its
Cumberland Hospital in Fayetteville, North Carolina for approximately $12.3
million. In connection with this sale, the Company wrote off approximately $4
million of costs in excess of net asset value of purchased businesses and
recorded an overall provision for loss of approximately $3.6 million in 1993.
The sale of the facility was completed in August 1993.
In October 1993, the Company purchased the stock of Florida
Psychiatric Management, Inc. ("FPM"), a regional
F-14
<PAGE>
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
provider of mental health care cost management services based in Orlando,
Florida for a cash payment of $4.0 million, the issuance of an aggregate of $2.5
million of three-year 7% debentures, and a contingent earn-out payment based on
the attainment of certain earnings and revenue levels over the ensuing two years
ending June 30, 1995. The earn-out payment is an aggregate amount (in no event
to exceed $2.0 million in the aggregate) equal to the product of (i) 25%,
multiplied by (ii) the positive excess, if any, of the average consolidated
gross revenues of FPM and its subsidiaries for the fiscal years ended June 30,
1994 and ending June 30, 1995 over $6.8 million, multiplied by (iii) the change
in operating income factor (as defined), a formula-based factor which will
increase or decrease the aggregate earn-out payment based upon the increase or
decrease in the average operating margin (consolidated net income or loss
divided by consolidated gross revenues) of FPM and its subsidiaries for the
fiscal years ended June 30, 1994 and ending June 30, 1995 over the 1993
operating margin. In connection with this acquisition, the Company recorded
cost in excess of net asset value of purchased businesses and other intangible
assets of approximately $3.9 million and $3 million, respectively.
In February 1994, the Company sold its 50-bed Atlantic Shores Hospital
in Daytona Beach, Florida for $4.8 million.
In June 1994, the Company purchased the assets and assumed certain
liabilities of Human Dynamics Institute ("HDI"), a Phoenix Arizona-based managed
mental health business for a cash payment of $1.0 million, a three-year, $1.0
million note bearing interest at 8.25%, 172,850 shares of common stock of Ramsay
Managed Care, Inc., a subsidiary of the Company, and a contingent earn-out
payment based upon the attainment of certain revenue levels over the ensuing two
years ending June 30, 1996. The earn-out payment is an aggregate amount (in no
event to exceed $750,000 in the aggregate) equal to the sum of (i) the positive
excess (in no event to exceed $400,000), if any, of the average gross revenues
of HDI for the fiscal years ending June 30, 1995 and June 30, 1996 over, the
gross revenues of HDI for the fiscal year ended June 30, 1994 less $400,000 and
(ii) an aggregate amount (in no event to exceed $350,000) equal to the product
of (a) 2.5% multiplied by (b) the positive excess, if any, of the average gross
revenues of HDI for the fiscal years ending June 30, 1995 and June 30, 1996 over
the gross revenues of HDI for the fiscal year ended June 30, 1994. In
connection with this acquisition, the Company
F-15
<PAGE>
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
recorded cost in excess of net asset value of purchased businesses totalling
approximately $3 million.
The operations of Florida Psychiatric Management, Inc. and Human
Dynamics Institute are included in the consolidated statements of operations
from the dates of acquisition. Unaudited pro forma consolidated operating
results of the Company as if the acquisitions had occurred as of July 1, 1992,
are as follows:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30
---------------------------
1994 1993
------------ -------------
<S> <C> <C>
Net revenues.................................... $142,970,000 $145,818,000
Income (loss) before extraordinary items and
cumulative effect of accounting change......... 797,000 (2,691,000)
Net income (loss)............................... 642,000 (1,918,000)
Per share amounts (primary and fully diluted):
Income (loss) before extraordinary
items and cumulative effect of
accounting change............................. $0.08 $(.034)
Net income (loss)............................... 0.07 (.024)
</TABLE>
LONG-TERM DEBT
The Company's long-term debt is as follows:
<TABLE>
<CAPTION>
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% debentures due quarterly through October 31,
1996............................................ 2,292,000 ---
8.25% note payable due monthly through June 30,
1997............................................ 1,000,000 ---
Capital lease obligation......................... 1,318,000 1,700,000
Other notes payable.............................. 763,000 2,000
------------ ------------
77,167,000 84,577,000
Less amounts due within one year................. 9,460,000 7,148,000
------------ ------------
$ 67,707,000 $ 77,429,000
============ ============
</TABLE>
The aggregate scheduled maturities of long-term debt during the five
years subsequent to June 30, 1994 follow: 1995 -- $9,460,000; 1996 --
$10,610,000; 1997 -- $9,383,000; 1998 -- $8,325,000; and 1999 -- $10,443,000.
F-16
<PAGE>
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
The Company has pledged as collateral substantially all of its real
property.
On May 21, 1993, the Company finalized a credit facility (the "1993
Credit Facility") for letters of credit (to support the variable rate revenue
bonds) and working capital with a group of banks. The 1993 Credit Facility
includes approximately $27.5 million in letters of credit and $4.0 million in a
working capital facility which replaced the $31.0 million in letters of credit
and the $5.0 million working capital facility included in the 1990 Credit
Facilities. The 1993 Credit Facility expires on May 15, 1996. There were no
amounts outstanding under the working capital facility at June 30, 1994 or 1993.
On April 30, 1990, the Company entered into credit facilities (the
"1990 Credit Facilities") with a group of insurance companies and banks. The
1990 Credit Facilities included $56.5 million in Senior Secured Notes, $34.0
million in bank term debt (the "Bank Term Debt"), approximately $31.0 million in
letters of credit, $3.0 million in Subordinated Secured Notes and $5.0 million
in a working capital facility. The Senior Secured Notes bear interest at 11.6%
and are due in semi-annual installments through March 31, 2000. The Bank Term
Debt was paid out in September 1991 from the proceeds of the Company's stock
offering and internally generated funds. The Bank Term Debt bore interest at a
variable rate and was due in quarterly installments that began on March 31, 1991
with the balance due on April 30, 1998. The Subordinated Secured Notes bear
interest at 15.6% and are due in semi-annual installments through March 31,
2000.
Under the 1993 and 1990 Credit Facilities, the Company is required to
meet certain covenants, including: (1) the maintenance of a minimum level of
consolidated tangible net worth; (2) the maintenance of a working capital ratio;
and (3) the maintenance of certain fixed charge coverage and debt service
ratios. At June 30, 1994 the Company was in compliance with each such covenant.
The Company has entered into loan agreements with various state and
local governmental agencies for the purpose of financing or providing
reimbursement for the construction costs of certain of the Company's psychiatric
hospitals or treatment facilities within respective states. Each state
governmental agency funded its loan with proceeds of tax-exempt variable rate
demand revenue bonds in the same amount as its loan. These loans, which have a
term generally
F-17
<PAGE>
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
of 30 years, have an outstanding balance at June 30, 1994 totalling $21 million.
The interest rate will be the same as the applicable revenue bonds which ranged
from 2.5% to 5.5% at June 30, 1994. The Company is required to deliver an
irrevocable standby letter of credit for each bond in an amount equal to the
total principal payments due under the bond, plus a stipulated number of days
interest. Such letters of credit are provided in the 1993 Credit Facility.
In December 1992, the Company completed a sale and leaseback of its
management information systems, with a cost of $1,857,000 and accumulated
depreciation of $185,000 at the time of the transaction, with net proceeds from
the transaction approximating $1,857,000. The lease was accounted for as a
capital lease.
FASB Statement No. 107, "Disclosures about Fair Value of Financial
Instruments", requires disclosure of fair value information about financial
instruments. The fair values of the Company's long-term debt (excluding capital
lease obligations) are estimated using discounted cash flow analyses, based on
the Company's estimated current incremental borrowing rates for similar types of
borrowing arrangements. The carrying amounts of all long-term debt are the same
as the estimated fair values with the exception of the $48,025,000 and
$2,769,000 borrowings. The fair values of these two notes are estimated to be
$51,463,000 and $3,227,000, respectively, at June 30, 1994 and $56,319,000 and
$3,500,000, respectively, at June 30, 1993.
INCOME TAXES
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, prior years' financial
statements were not restated. The cumulative effect of adopting Statement No.
109 as of July 1, 1992 was to increase net income in 1993 by $2,353,000.
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 liabilities and assets are as follows:
F-18
<PAGE>
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
<TABLE>
<CAPTION>
JUNE 30
-------------------------
1994 1993
----------- -----------
<S> <C> <C>
Deferred tax liabilities:
Tax over book depreciation.............................. $ 9,494,000 $ 9,154,000
Change in tax accounting methods........................ 1,435,000 1,753,000
Other--net.............................................. 999,000 647,000
----------- ------------
Total deferred tax liabilities......................... 11,928,000 11,554,000
Deferred tax assets:......................................
Allowance for doubtful accounts......................... 723,000 630,000
General and professional liability insurance............ 584,000 908,000
Estimated losses on development projects................ --- 678,000
Accrued employee benefits............................... 312,000 180,000
Investment in nonconsolidated subsidiaries.............. 460,000 ---
Net operating loss carryovers........................... 5,752,000 6,333,000
Alternative minimum tax credit carryovers............... 1,668,000 1,205,000
----------- ------------
Total deferred tax assets.............................. 9,499,000 9,934,000
Valuation allowance for deferred tax assets............. (2,503,000) (4,500,000)
----------- ------------
Net deferred tax assets................................ 6,996,000 5,434,000
----------- -----------
Net deferred tax liabilities........................... $ 4,932,000 $ 6,120,000
=========== ===========
</TABLE>
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30
----------------------------------------
1994 1993 1992
----------- ------------ -----------
<S> <C> <C> <C>
Income taxes currently payable:
Federal...................................................... $ 810,000 $ 686,000 $ 344,000
State........................................................ 874,000 169,000 475,000
Deferred income taxes:
Federal...................................................... (1,196,000) (621,000) 1,722,000
State........................................................ 8,000 (75,000) 168,000
----------- ------------ -----------
$ 496,000 $ 159,000 $ 2,709,000
=========== ============ ===========
</TABLE>
The provision for income taxes is reported in the consolidated statements of
operations as follows:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30
----------------------------------
1994 1993 1992
--------- -------- ----------
<S> <C> <C> <C>
Provision for income taxes.................. $ 599,000 $159,000 $3,974,000
Income tax benefit from loss on early
extinguishment of debt.............. (103,000) --- (312,000)
Income tax benefit from net operating loss
carryovers.......................... --- --- (953,000)
--------- -------- ----------
$ 496,000 $159,000 $2,709,000
========= ======== ==========
</TABLE>
F-19
<PAGE>
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
The provision for income taxes included in the consolidated statements
of operations differs from the amounts computed by applying the statutory rate
to income before income taxes, as follows:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30
-----------------------------------------
1994 1993 1992
-------------- ------------ -----------
<S> <C> <C> <C>
Income (loss) before income taxes, extraordinary
items and cumulative effect of accounting
change..................................... $2,076,000 $(2,174,000) $9,321,000
Federal statutory income tax rate.................. 34% 34% 34%
---------- ----------- ----------
706,000 (739,000) 3,169,000
Benefit of net operating loss recognized........... (921,000) (944,000) (953,000)
Write-off of cost in excess of net asset value
of purchased businesses.................... --- 1,357,000 ---
Income tax benefit from loss on early
extinguishment of debt..................... (103,000) --- (312,000)
Amortization of cost in excess of net asset
value of purchased businesses.............. 327,000 264,000 231,000
State income taxes................................. 582,000 175,000 526,000
Other.............................................. (95,000) 46,000 48,000
---------- ----------- ----------
$ 496,000 $ 159,000 $2,709,000
========== =========== ==========
</TABLE>
The sources of timing differences on which deferred taxes have been
provided and the related income tax effects for the year ended June 30, 1992 are
as follows:
<TABLE>
<S> <C>
Depreciation.................................. $ 799,000
Allowance for doubtful accounts............... (587,000)
General and professional liability insurance.. (125,000)
Cash to accrual method of accounting.......... (477,000)
Preopening costs.............................. 163,000
Employee termination accruals................. (136,000)
Accrued employee benefits..................... (14,000)
Net operating loss carryover.................. 2,157,000
Other, net.................................... 110,000
----------
Deferred income tax expense.............. $1,890,000
==========
</TABLE>
F-20
<PAGE>
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
At June 30, 1994, net operating loss carryovers of approximately $17 million,
which expire from 2000 to 2003, and alternative minimum tax credit carryovers of
approximately $1,668,000, are available to reduce future federal income taxes
subject to certain annual limitations.
STOCKHOLDERS' EQUITY
The Class A Convertible Preferred Stock is not entitled to receive
dividends, is not redeemable, does not have any liquidation preference, has no
voting rights and is convertible at any time into Common Stock on a share-for-
share basis. The conversion rate of the Class A Convertible Preferred Stock may
be adjusted if the Company effects diluting issues such as share dividends,
combinations and reclassifications, as well as if the Company sells Common Stock
for an effective price of less than $6.06 per share.
The Certificate of Incorporation of the Company, as amended, authorizes the
issuance of 1,000,000 shares of Class B Convertible Preferred Stock, $1.00 par
value.
In March 1993, the Board of Directors authorized 152,321 shares of the
Class B Convertible Preferred Stock as Class B Preferred Stock, Series C. These
shares are entitled to cumulative dividends at a rate of 5% per annum payable
quarterly in arrears. These shares are entitled to a liquidation preference of
$50.84 per share under certain circumstances. The shares are convertible into
that number of fully paid and nonassessable shares of Common Stock that results
from dividing the conversion price in effect at conversion into $50.84 and
multiplying the quotient obtained by the number of shares of Series C Preferred
Stock being converted. The current conversion price is $5.084 per share. Each
share of Series C Preferred Stock is entitled to ten (10) votes on all matters
put to a vote of the shareholders of the Company and otherwise has voting rights
and powers equal to the voting rights and powers of the Common Stock.
On June 30, 1993, the Company issued 142,486 shares of Class B Preferred
Stock, Series C in a recapitalization of the interests of Paul J. Ramsay, the
F-21
<PAGE>
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Company's chairman. (See note on Related Party Transactions.)
On July 30, 1991, the Company completed a public offering (the "Offering")
of 2,700,000 shares of its Common Stock. An additional 405,000 shares of Common
Stock were sold by selling stockholders upon the exercise of the underwriters'
over-allotment option, including 90,832 shares issued upon the exercise by
certain selling stockholders of warrants to purchase Common Stock and 4,590
shares issued upon the conversion of Class A Preferred Stock by a selling
stockholder. The net proceeds from the Offering (after expenses and including
amounts received from the exercise of warrants by certain selling stockholders)
of $31,038,000, together with internally generated funds, were used to pay off
the unpaid portion of the Bank Term Debt.
During the fiscal years ended June 30, 1994 and 1992, total options
exercised under the Company's various stock option plans were 112,834 and
28,833, respectively. No options were exercised during fiscal 1993. The
exercise prices associated with these options were $5.00 and $5.31 per share in
1994 and $9.75 per share in 1992.
At June 30, 1994 and June 30, 1993, an aggregate 1,675,672 and 1,393,502
options, respectively, were outstanding under the Company's various option
plans. These are set forth below:
<TABLE>
<CAPTION>
JUNE 30, 1994 JUNE 30, 1993
------------------- ------------------
EXPIRATION NUMBER OF OPTION NUMBER OF OPTION
TYPE OF OPTION DATE SHARES PRICE SHARES PRICE
---------------- ------------ -------- ------- --------- ------
<S> <C> <C> <C> <C> <C>
Employee stock options..... May 1995 21,164 $5.00 33,494 $5.00
Employee stock options..... August 1995 --- --- 6,666 $5.00
Employee stock options..... May 1997 10,000 $5.00 15,000 $5.00
Employee stock options..... August 2001 60,834 $5.00 94,668 $5.00
Employee stock options..... February 2002 60,000 $5.00 105,000 $5.00
Employee stock options..... June 2002 4,667 $5.00 18,667 $5.00
Employee stock options..... March 2003 168,669 $5.31 235,003 $5.31
Employee stock options..... November 2003 113,000 $7.88 --- ---
Employee stock options..... May 2004 101,500 $6.88 --- ---
Employee stock options..... November 2003 140,000 $6.88 --- ---
Director stock options..... August 1995 80,000 $5.00 80,000 $5.00
Director stock options..... September 1995 26,666 $5.00 26,666 $5.00
Director stock options..... August 2001 91,672 $5.00 88,338 $5.00
Director stock options..... August 2001 100,000 $5.00 100,000 $5.00
Director stock options..... February 2002 225,000 $5.00 210,000 $5.00
Director stock options..... March 2002 250,000 $5.00 250,000 $5.00
Director stock options..... March 2003 140,000 $5.31 130,000 $5.31
Director stock options..... April 2003 15,000 $6.25 --- ---
Director stock options..... May 2004 67,500 $6.88 --- ---
--------- ---------
1,675,672 1,393,502
========= =========
</TABLE>
F-22
<PAGE>
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
At June 30, 1994 and June 30, 1993, 1,034,334 and 621,779 shares,
respectively, were exercisable under the terms of the plans. At June 30, 1994
and June 30, 1993, 1,774,338 and 1,580,498 shares, respectively, were reserved
for issuance under the Company's stock option plans.
In connection with a 1988 refinancing, the Company issued to Citibank,
N.A. warrants to purchase 166,667 shares of the Company's Common Stock at $10.50
per share. The warrants contain an antidilution provision requiring adjustment
to the purchase price and the number of shares upon occurrence of certain
transactions. The issuance of the Class B Preferred Stock Series C and the
granting and repricing of stock options resulted in an adjustment in the
Purchase Price to $9.30. Warrants for a total of 138,417 shares are still
outstanding. These warrants are exercisable on or before April 1, 1995. As
part of the 1990 refinancing, the Company issued warrants to Aetna Life
Insurance Company and Monumental Life Insurance Company to purchase an aggregate
of 113,301 shares of the Company's Common Stock at $9.61 per share. As a result
of antidilution provision adjustments, the Purchase Price is currently $8.39 per
share and warrants for a total of 106,986 shares are still outstanding. These
warrants are exercisable on or before March 31, 2000.
On January 8, 1992, in consideration of the release of certain rights
by the Company's former President and Chief Executive Officer, the Company
issued non-transferable five-year warrants to purchase 200,000 shares of Common
Stock at an exercise price per share of $9.50. These warrants were surrendered
in December, 1992 at a cash amount equal to $2.00 times the number of warrants
surrendered.
The Company's credit documents governing its credit facilities include
provisions which prohibit the payment of dividends unless the sum of (i) all
dividends, redemptions and all other distributions in respect of its capital
stock and (ii) all restricted investments (as defined) during the applicable
fiscal year would not exceed an amount equal to 50% of the consolidated net
income of the Company for the immediately preceding fiscal year and provided
that, at the time of such dividend and after giving effect thereto, certain
specified financial ratio covenants would not be violated and no other default
or event of default would occur. Notwithstanding the foregoing restrictions,
those provisions expressly permit the payment of regular fixed dividends from
time to time on the Company's issued and outstanding Class B Convertible
F-23
<PAGE>
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Preferred Stock, Series C, provided that such dividends may not exceed $387,200
in each 12-month period. Under these provisions, the Company is permitted to
pay the full amount of the regular fixed dividends on its issued and outstanding
Class B Convertible Preferred Stock, Series C.
REIMBURSEMENT FROM THIRD-PARTY CONTRACTUAL AGENCIES
---------------------------------------------------
The Company records amounts due to or from third-party contractual
agencies based on its best estimates of amounts to be ultimately received or
paid under cost reports filed with the appropriate intermediaries. Final
determination of amounts earned under contractual reimbursement programs is
subject to review and audit by the appropriate intermediaries. Differences
between amounts recorded as estimated settlements and the audited amounts are
reflected as adjustments to net revenues in the period the final determination
is made. During the years ended June 30, 1994, 1993 and 1992, the Company
recorded contractual reimbursement benefits of approximately $1,400,000,
$2,300,000 and $2,400,000, respectively, for the combined effects of
intermediary audits and the routine evaluation of prior year estimated
settlements. Management believes that adequate provision has been made for any
adjustments that may result from future intermediary reviews or audits.
LITIGATION
----------
The Company is subject to claims and suits arising in the ordinary
course of business. In the opinion of management, the ultimate resolution of
such pending legal proceedings will not have a material adverse effect on the
Company's financial position, results of operations or liquidity.
PENSION PLAN
------------
On December 1, 1985, the Company established a 401(k) tax deferred
savings plan, administered by an independent trustee, covering substantially all
employees over age twenty-one meeting a one-year minimum service requirement.
The plan was adopted for the purpose of supplementing employees' retirement,
death and disability benefits. The Company may, at its option, contribute to the
plan through an Employer Matching Account, but is under no obligation to do so.
An employee becomes vested in his Employer Matching Account over a four-year
period.
F-24
<PAGE>
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
The Company contributed $160,000, $175,000, and $195,000 to the plan
during the years ended June 30, 1994, 1993 and 1992, respectively.
RELATED PARTY TRANSACTIONS
--------------------------
In connection with the Paul Ramsay Group's cash investment in 1987,
the Company issued 333,333 shares of Class B Convertible Preferred Stock, Series
1987. Dividends were at an annual rate of 6%, were cumulative and payable
quarterly in arrears.
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 in exchange for all outstanding
shares of the Company's Class B Convertible Preferred Stock, Series 1987, the
Company's $2 million 16.1% subordinated promissory note to affiliate and
$500,000 in cash. The early extinguishment of the $2 million 16.1% subordinated
promissory note resulted in an extraordinary loss of $1,580,000 in 1993.
The Company expensed $698,000, $678,000, and $657,000 in management
fees to Holdings during the years ended June 30, 1994, 1993 and 1992,
respectively. There were no significant amounts due to or from related parties
at June 30, 1994 or 1993.
F-25
<PAGE>
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
QUARTERLY RESULTS OF OPERATIONS AND OTHER SUPPLEMENTAL INFORMATION (UNAUDITED)
Following is a summary of the Company's quarterly results
of operations for the years ended June 30, 1994 and 1993.
<TABLE>
<CAPTION>
QUARTER ENDED
-----------------------------------------------------
SEPTEMBER 30 DECEMBER 31 MARCH 31 JUNE 30
------------ ----------- ------------ ------------
1994
----
<S> <C> <C> <C> <C>
Net revenues............................................ $31,983,000 $32,561,000 $36,179,000 $36,279,000
Income (loss) before income taxes and
extraordinary items................................... 844,000 563,000 1,163,000 (494,000)
Income (loss) before extraordinary items................ 608,000 475,000 822,000 (428,000)
Net income (loss)....................................... 608,000 475,000 667,000 (428,000)
Income (loss) per common and dilutive common
equivalent share(1)
Primary:
Before extraordinary items.......................... $ 0.06 $ 0.05 $ 0.09 ($0.04)
Extraordinary items................................. --- --- (0.02) ---
----------- ----------- ----------- -----------
Income (loss) per common share...................... $ 0.06 $ 0.05 $ 0.07 ($0.04)
=========== =========== =========== ===========
Fully diluted:
Before extraordinary items.......................... $ 0.06 $ 0.05 $ 0.09 ($0.04)
Extraordinary items................................. --- --- (0.02) ---
----------- ----------- ----------- -----------
Income (loss) per common share...................... $ 0.06 $ 0.05 $ 0.07 ($0.04)
=========== =========== =========== ===========
1993
----
Net revenues............................................ $31,413,000 $31,281,000 $35,827,000 $37,833,000
Income (loss) before income taxes, extraordinary items
and cumulative effect of accounting change........... 294,000 544,000 2,167,000 (5,179,000)
Income (loss) before extraordinary items and
cumulative effect of accounting change............... 248,000 467,000 1,765,000 (4,813,000)
Net income (loss)....................................... 2,601,000 467,000 1,765,000 (6,393,000)
Income (loss) per common and dilutive common
equivalent share(1)
Primary:
Before extraordinary items and
cumulative effect of accounting change.......... $ 0.03 $ 0.06 $ 0.23 ($0.62)
Extraordinary items and cumulative effect of
accounting change............................... 0.30 --- --- (0.20)
----------- ----------- ----------- -----------
Income (loss) per common share..................... $ 0.33 $ 0.06 $ 0.23 ($0.82)
=========== =========== =========== ===========
Fully diluted:
Before extraordinary items and
cumulative effect of accounting change.......... $ 0.03 $ 0.06 $ 0.23 ($0.62)
Extraordinary items and cumulative effect of
accounting change............................... 0.30 --- --- (0.20)
----------- ----------- ----------- -----------
Income (loss) per common share..................... $ 0.33 $ 0.06 $ 0.23 ($0.82)
=========== =========== =========== ===========
</TABLE>
(1) The quarterly earnings per share amounts may not equal the annual amounts
due to changes in the average common and dilutive common equivalent shares
outstanding during the year.
In the quarter ended June 30, 1993, the Company recorded provisions
for losses on sales and closure of hospitals and restructuring and other charges
totaling $7,782,000.
F-26
<PAGE>
SCHEDULE IV
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
INDEBTEDNESS OF AND TO RELATED PARTIES--NOT CURRENT
<TABLE>
<CAPTION>
BALANCE AT BALANCE AT
BEGINNING END
NAME OF PERSON OF PERIOD ADDITIONS DEDUCTIONS OF PERIOD
-------------- --------- --------- ---------- ----------
<S> <C> <C> <C> <C>
Year ended June 30, 1994: NONE --- --- ---
Year ended June 30, 1993:
Ramsay Holdings HSA Limited (1)..... $2,000,000 $ --- $2,000,000 $ ---
========== ========== ========== ==========
Year ended June 30, 1992:
Ramsay Holdings HSA Limited (1)..... $2,000,000 $ --- $ --- $2,000,000
========== ========== ========== ==========
</TABLE>
________________________
(1) Represents a 16.1% Subordinated Promissory Note due April 1, 2000. The
Note was subordinated to bank and investor obligations. On June 30, 1993, the
Note was eliminated in conjunction with the recapitalization of the interests of
Paul J. Ramsay.
S-1
<PAGE>
SCHEDULE V
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
PROPERTY AND EQUIPMENT
<TABLE>
<CAPTION>
BALANCE AT OTHER CHANGES BALANCE
BEGINNING ADDITIONS ADD (DEDUCT) AT END
CLASSIFICATION OF PERIOD AT COST RETIREMENTS DESCRIBE OF PERIOD
-------------- -------------- ---------- ----------- ------------- ---------
<S> <C> <C> <C> <C> <C>
Year ended June 30, 1994:
Land............................... $ 9,995,000 $ --- $ --- $ (986,000)(1) $ 9,009,000
Building and improvements.......... 134,468,000 1,626,000 (152,000)(2) (17,387,000)(1) 118,555,000
Equipment, furniture and fixtures.. 18,419,000 3,095,000 (199,000)(2) (1,748,000)(1) 20,626,000
------------ ---------- --------- ------------
1,059,000 (5)
------------
Total............................ $162,882,000 $4,721,000 $(351,000) $(19,062,000) $148,190,000
============ ========== ========= ============ ============
Year ended June 30, 1993:
Land............................... $ 9,867,000 $ 22,000 $ --- $ 106,000 (3) $ 9,995,000
Building and improvements.......... 131,363,000 1,554,000 --- (213,000)(4) 134,468,000
1,764,000 (3)
Equipment, furniture and fixtures.. 16,296,000 2,051,000 (58,000)(2) 130,000 (3) 18,419,000
------------ ---------- --------- ------------ ------------
Total............................ $157,526,000 $3,627,000 $ (58,000) $ 1,787,000 $162,882,000
============ ========== ========= ============ ============
Year ended June 30, 1992:
Land............................... $ 8,983,000 $ --- $ --- $ 884,000 (3) $ 9,867,000
Building and improvements.......... 127,789,000 2,358,000 --- 1,216,000 (3) 131,363,000
Equipment, furniture and fixtures.. 13,448,000 2,865,000 (17,000)(2) --- 16,296,000
------------ ---------- --------- ------------ ------------
Total............................ $150,220,000 $5,223,000 $ (17,000) $ 2,100,000 $157,526,000
============ ========== ========= ============ ============
</TABLE>
_______________
(1) Sale of hospitals.
(2) Routine retirements.
(3) Purchase of hospital.
(4) Write-off of certificate of need (CON) costs.
(5) Original cost of assets on acquisitions.
S-2
<PAGE>
SCHEDULE VI
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION OF
PROPERTY AND EQUIPMENT
<TABLE>
<CAPTION>
ADDITIONS OTHER
BALANCE AT CHARGED TO CHANGES BALANCE AT
BEGINNING COSTS AND ADD (DEDUCT) END
DESCRIPTION OF PERIOD EXPENSES RETIREMENTS DESCRIBE OF PERIOD
----------- ----------- ---------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Year ended June 30, 1994:
Building and improvements........... $27,079,000 $3,653,000 $ (118,000)(1) $(2,939,000)(3) $27,675,000
Equipment, furniture and fixtures.. 8,788,000 2,143,000 (199,000)(1) (1,054,000)(3) 10,354,000
--- --- --- 676,000 (4) ---
----------- ---------- ---------- ----------- -----------
Total............................. $35,867,000 $5,796,000 $ (317,000) $(3,317,000) $38,029,000
=========== ========== ========== =========== ===========
Year ended June 30, 1993:
Building and improvements........... $21,119,000 $3,783,000 $ --- $ 2,177,000 (2) $27,079,000
Equipment, furniture and fixtures... 6,857,000 1,966,000 (35,000)(1) --- 8,788,000
----------- ---------- ---------- ----------- -----------
Total............................. $27,976,000 $5,749,000 $ (35,000) $ 2,177,000 $35,867,000
=========== ========== ========== =========== ===========
Year ended June 30, 1992:
Building and improvements........... $17,566,000 $3,553,000 $ --- $ --- $21,119,000
Equipment, furniture and fixtures... 5,618,000 1,251,000 (12,000)(1) --- 6,857,000
----------- ---------- ---------- ----------- -----------
Total............................. $23,184,000 $4,804,000 $ (12,000) $ --- $27,976,000
=========== ========== ========== =========== ===========
</TABLE>
_______________
(1) Routine retirements.
(2) Allowance for loss on potential sale of hospital.
(3) Sale of hospitals.
(4) Accumulated depreciation on acquisitions.
S-3
<PAGE>
SCHEDULE VIII
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO CHARGED TO BALANCE
BEGINNING COST AND OTHER ACCOUNTS DEDUCTIONS END OF
OF PERIOD EXPENSES --DESCRIBE --DESCRIBE PERIOD
------------ ---------- -------------- ---------- -------
<S> <C> <C> <C> <C> <C>
Year ended June 30, 1994:
Allowance for doubtful
accounts............. $4,955,000 $5,846,000 $ --- $6,876,000(1) $3,925,000
========== ========== ========== ========== ==========
Year ended June 30, 1993:
Allowance for doubtful
accounts............. $4,459,000 $8,148,000 $ --- $7,652,000(1) $4,955,000
========== ========== ========== ========== ==========
Year ended June 30, 1992:
Allowance for doubtful
accounts.............. $3,204,000 $8,628,000 $ --- $7,373,000(1) $4,459,000
========== ========== ========== ========== ==========
</TABLE>
_______________
(1) Write-offs of uncollectible patient accounts receivable.
S-4
<PAGE>
SCHEDULE X
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
SUPPLEMENTARY INCOME STATEMENT INFORMATION
<TABLE>
<CAPTION>
CHARGED TO COSTS AND EXPENSES
-------------------------------------
YEAR ENDED JUNE 30
-------------------------------------
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Taxes, other than payroll and
income taxes......................... $2,040,000 $1,789,000 $1,934,000
Advertising............................ 2,112,000 2,264,000 1,907,000
</TABLE>
Amounts for amortization of intangible assets, maintenance and repairs and
royalties are not presented, as such amounts are less than 1% of net revenues.
S-5
<PAGE>
INDEX OF EXHIBITS
<TABLE>
<CAPTION>
Page
Number
------
<S> <C>
2. Agreement and Plan of Merger dated as of June 27, 1991 among the Company,
New Ramcorp Inc. and Ramsay Corporation (incorporated by reference to
Exhibit 2 to the Company's Registration Statement on Form S-2, Registration
No. 33-40762)................................................................. --
2.1 Certificate of Merger of New Ramcorp Inc. into the Company filed on June 27,
1991 (incorporated by reference to Exhibit 2.1 to the Company's Registration
Statement on Form S-2, Registration No. 33-40762)............................. --
2.2 Recapitalization Agreement dated as of June 30, 1993 by and among the
Company, Ramsay Holdings HSA Limited and Paul Ramsay Holdings Pty.
Limited (incorporated by reference to Exhibit 2.2 to the Company's Annual
Report on Form 10-K for the year ended June 30, 1994)......................... --
2.3 Asset Purchase Agreement dated as of August 25, 1993 among the Company
and Cumberland County Hospital System, Inc. and Cumberland Mental Health,
Inc. Pursuant to Reg. S-K, Item 601(b)(2), the Company agrees to furnish a
copy of the Schedules to such Agreement to the Commission upon request
(incorporated by reference to Exhibit 2.3 to the Company's Annual Report on
Form 10-K for the year ended June 30, 1994)................................... --
2.4 Asset Purchase Agreement dated as of October 22, 1992 among Louisiana
Psychiatric Company, Inc., HCA Psychiatric Company and Ramsay Louisiana,
Inc. Pursuant to Reg. S-K, Item 601(b)(2), the Company agrees to furnish a
copy of the Disclosure Schedule to such Agreement to the Commission upon
request (incorporated by reference to Exhibit 2.4 to the Company's Annual
Report on Form 10-K for the year ended June 30, 1994)......................... --
2.5 Agreement dated as of October 12, 1993 by and among Florida Psychiatric
Management, Inc., the stockholders of Florida Psychiatric Management, Inc.,
Ramsay Health Care, Inc. and Ramsay Managed Mental Health Services, Inc....... --
2.6 Asset Purchase Agreement dated as of January 14, 1994 between Halifax
Hospital Medical Center and Atlantic Treatment Center, Inc. Pursuant to Reg.
S-K, Item 601(b)(2), the Company agrees to furnish a copy of the Schedules
and Exhibits to such Agreement to the Commission upon request (incorporated
by reference to Exhibit 2 to the Company's Quarterly Report on Form 10-Q for
the quarter ended December 31, 1993).......................................... --
3.1 Restated Certificate of Incorporation of the Company, as amended (incorporated
by reference to Exhibit 3.1 to the Company's Annual Report on Form 10-K for
the year ended June 30, 1990)................................................. --
3.2 Certificate of Amendment of Restated Certificate of Incorporation of the
Company filed on April 17, 1991 (incorporated by reference to Exhibit 3.2 to
the Company's Registration Statement on Form S-2, Registration No. 33-40762) --
</TABLE>
E-1
<PAGE>
<TABLE>
<CAPTION>
Page
Number
------
<S> <C>
3.3 Certificate of Correction to Certificate of Amendment of Restated Certificate of
Incorporation of the Company filed on April 18, 1991 (incorporated by
reference to Exhibit 3.3 to the Company's Registration Statement on Form
Registration No. 33-40762)........................................................ --
3.4 By-Laws of the Company, as amended to date........................................ --
3.5 Certificate of Designation of Preferred Stock of the Company filed on June 27,
1991 (incorporated by reference to Exhibit 3.5 to the Company's Registration
Statement on Form S-2, Registration No. 33-40762)................................. --
3.6 Certificate of Designation of Preferred Stock of the Company filed on July 9,
1991 (incorporated by reference to Exhibit 3.6 to the Company's Registration
Statement on Form S-2, Registration No. 33-40762)................................. --
3.7 Certificate of Designation of Preferred Stock of the Company filed on
June 29, 1993 (incorporated by reference to Exhibit 3.7 to the Company's
Annual Report on Form 10-K for the year ended June 30, 1994)...................... --
4.1 Trust Indenture dated as of March 31, 1990, between the Company, Bountiful
Psychiatric Hospital, Inc., Cumberland Mental Health, Inc., East Carolina
Psychiatric Services Corporation, Havenwyck Hospital, Inc., Mesa Psychiatric
Hospital, Inc., Psychiatric Institute of West Virginia, Inc., and The Citizens and
Southern National Bank and Susan L. Adams (incorporated by reference to
Exhibit 4.1 to the Company's Annual Report on Form 10-K for the year ended
June 30, 1990).................................................................... --
4.2 First Supplemental Trust Indenture dated as of June 15, 1991 between the
Company, Bountiful Psychiatric Hospital, Inc., Cumberland Mental Health,
Inc., East Carolina Psychiatric Services Corporation, Havenwyck Hospital,
Inc., Mesa Psychiatric Hospital, Inc. and Psychiatric Hospital of West Virginia,
Inc. and The Citizens and Southern National Bank, a national banking
association, and an individual trustee, as Trustees (incorporated by reference to
Exhibit 4.4 to the Company's Registration Statement on Form S-2, Registration
No.33-40762)...................................................................... --
4.3 Second Supplemental Trust indenture dated as of May 15, 1993 between the
Company, Bountiful Psychiatric Hospital, Inc., Cumberland Mental Health,
Inc., East Carolina Psychiatric Services Corporation, Havenwyck Hospital,
Inc., Mesa Psychiatric Hospital, Inc. and Psychiatric Hospital of West Virginia,
Inc. and NationsBank of Georgia, National Association and Susan L. Adams
(incorporated by reference to Exhibit 4.3 to the Company's Annual Report on
Form 10-K for the year ended June 30, 1994)....................................... --
4.4 Revolving Credit Note of the Company dated May 21, 1993 in the principal
amount of $4,000,000 payable to Societe Generale, New York Branch
(incorporated by reference to Exhibit 4.4 to the Company's Annual Report on
Form 10-K for the year ended June 30, 1994)....................................... --
4.5 Subsidiary Borrower Note of Atlantic Treatment Center, Inc. dated May 21,
1993 in the principal amount of $4,607,945 payable to the order of Societe
Generale, New York Branch (incorporated by reference to Exhibit 4.5 to the
Company's Annual Report on Form 10-K for the year ended June 30, 1994)............ --
</TABLE>
E-2
<PAGE>
<TABLE>
<CAPTION>
Page
Number
------
<S> <C>
4.6 Subsidiary Borrower Note of Carolina Treatment Center, Inc. dated May 21,
1993 in the principal amount of $5,030,000 payable to the order of Societe
Generale, New York Branch (substantially identical to Exhibit 4.5)................ --
4.7 Subsidiary Borrower Note of Greenbrier Hospital, Inc. dated May 21, 1993 in
the principal amount of $5,973,125 payable to the order of Societe Generale,
New York Branch (substantially identical to Exhibit 4.5).......................... --
4.8 Subsidiary Borrower Note of Gulf Coast Treatment Center, Inc. dated May 21,
1993 in the principal amount of $4,392,500 payable to the order of Societe
Generale, New York Branch (substantially identical to Exhibit 4.5)................ --
4.9 Subsidiary Borrower Note of Houma Psychiatric Hospital, Inc. dated May 21,
1993 in the principal amount of $3,979,589 payable to the order of Societe
Generale, New York Branch (substantially identical to Exhibit 4.5)................ --
4.10 Subsidiary Borrower Note of HSA of Oklahoma, Inc. dated May 21, 1993 in
the principal amount of $3,445,562 payable to the order of Societe Generale,
New York Branch (substantially identical to Exhibit 4.5).......................... --
10.1 Asset Purchase Agreement, effective April 27, 1990, among the Company, The
Haven Hospital, Inc., The Ramsay Hospital Corporation of Texas, and Ramsay
Hospitals (Texas) Limited (incorporated by reference to Exhibit 10.1 to the
Company's Annual Report on Form 10-K for the year ended June 30, 1990)............ --
10.2 Note Purchase Agreement dated as of March 31, 1990, among the Company,
Bountiful Psychiatric Hospital, Inc., Cumberland Mental Health, Inc., East
Carolina Psychiatric Services Corporation, Havenwyck Hospital, Inc., Mesa
Psychiatric Hospital, Inc., Psychiatric Institute of West Virginia, Inc., and
Aetna Life Insurance Company regarding the purchase by Aetna Life Insurance
Company of $26,000,000 principal amount of 11.6% Senior Secured
$1,000,000 principal amount of 15.6% Subordinated Secured Notes, and
Warrants to Purchase Common Stock of the Company (incorporated by
reference to Exhibit 10.2 to the Company's Annual Report on Form 10-K the
year ended June 30, 1990)......................................................... --
10.3 Note Purchase Agreement pursuant to which Monumental Life Insurance
Company purchased $15,500,000 principal amount of 11.6% Senior Secured
Notes, $2,000,000 principal amount of 15.6% Subordinated Secured Notes, and
Warrants to Purchase Common Stock of the Company (substantially identical to
Exhibit 10.2)..................................................................... --
10.4 Note Purchase Agreement pursuant to which Connecticut Mutual Life Insurance
Company purchased $15,000,000 principal amount of 11.6% Senior Secured
Notes (substantially identical to Exhibit 10.2)................................... --
10.5 Pledge and Security Agreement dated as of March 31, 1990, between the
Company and The Citizens and Southern National Bank (incorporated by
reference to Exhibit 10.5 to the Company's Annual Report on Form 10-K for
the year ended June 30, 1990)..................................................... --
10.6 Pledge and Security Agreement between Michigan Psychiatric Services, Inc.
and The Citizens and Southern National Bank (substantially identical to Exhibit
10.5)............................................................................. --
</TABLE>
E-3
<PAGE>
<TABLE>
<CAPTION>
Page
Number
------
<S> <C>
10.7 Pledge and Security Agreement between Americare of Galax, Inc. and The
Citizens and Southern National Bank (substantially identical to Exhibit 10.5)..... --
10.8 Pledge and Security Agreement between Bountiful Psychiatric Hospital, Inc. and
The Citizens and Southern National Bank (substantially identical to Exhibit 10.5). --
10.9 Deed of Trust, Security Agreement, and Financing Statement dated as of March
31, 1990 from Bountiful Psychiatric Hospital, Inc. to Merrill Title Company for
the benefit of The Citizens and Southern National Bank and Susan L. Adams
covering certain property in Woods Cross, Utah (incorporated by reference to
Exhibit 10.9 to the Company's Annual Report on Form 10-K for the year ended
June 30, 1990).................................................................... --
10.10 Deed of Trust and Security Agreement from Cumberland Mental Health, Inc. to
First American Title Insurance Company for the benefit of The Citizens and
Southern National Bank and Susan L. Adams covering certain property in
Fayetteville, North Carolina (substantially identical to Exhibit 10.9)............ --
10.11 Deed of Trust and Security Agreement from East Carolina Psychiatric Services
Corporation to First American Title Insurance Company for the benefit of The
Citizens and Southern National Bank and Susan L. Adams covering certain
property in Jacksonville, North Carolina (substantially identical to Exhibit 10.9) --
10.12 Mortgage and Security Agreement dated as of March 31, 1990 from
Havenwyck Hospital, Inc. to The Citizens and Southern National Bank and
Susan L. Adams covering certain property in Auburn Hills, Michigan
(incorporated by reference to Exhibit 10.12 to the Company's Annual Report on
Form 10-K for the year ended June 30, 1990)....................................... --
10.13 Leasehold Deed of Trust, Assignment of Rents and Security Agreement with
Financing Statement dated as of March 31, 1990 from Mesa Psychiatric
Hospital, Inc. to Transamerica Title Insurance Company for the benefit of The
Citizens and Southern National Bank and Susan L. Adams covering certain
property in Mesa, Arizona (incorporated by reference to Exhibit 10.13 to the
Company's Annual Report on Form 10-K for the year ended June 30, 1990)............ --
10.14 Leasehold Deed of Trust and Security Agreement from Psychiatric Institute of
West Virginia, Inc. to J. Nicholas Barth, Esq., for the benefit of The Citizens
and Southern National Bank and Susan L. Adams covering certain property in
Morgantown, West Virginia (substantially identical to Exhibit 10.13).............. --
10.15 Obligor Subrogation and Contribution Agreement dated as of April 30, 1990
among The Citizens and Southern National Bank, Susan L. Adams, the
Company, Bountiful Psychiatric Hospital, Inc., Cumberland Mental Health,
Inc., East Carolina Psychiatric Services Corporation, Havenwyck Hospital,
Inc., Mesa Psychiatric Hospital, Inc., and Psychiatric Institute of West
Virginia, Inc. (incorporated by reference to Exhibit 10.15 to the Company's
Annual Report on Form 10-K for the year ended June 30,1990)....................... --
</TABLE>
E-4
<PAGE>
<TABLE>
<CAPTION>
Page
Number
------
<S> <C>
10.16 Credit Agreement dated as of May 15, 1993 among the Company and certain of
its subsidiaries named therein, Societe Generale, New York Branch, First Union
National Bank of North Carolina and Hibernia National Bank, as lenders, and
Societe Generale, as issuing bank and agent (incorporated by reference to
Exhibit 10.16 to the Company's Annual Report on Form 10-K for the year
ended June 30, 1994).............................................................. --
10.17 Security Agreement dated as of May 15, 1993 by Atlantic Treatment Center,
Inc. in favor of Societe Generale, as agent for the lenders which are parties to
that certain Credit Agreement described in Exhibit 10.16 above, and covering
certain property in Daytona Beach, Florida (incorporated by reference to
Exhibit 10.17 to the Company's Annual Report on Form 10-K for the year
ended June 30, 1994).............................................................. --
10.18 Security Agreement dated as of May 15, 1993 by Carolina Treatment Center,
Inc. in favor of Societe Generale, as agent for the lenders which are parties to
that certain Credit Agreement described in Exhibit 10.16 above (substantially
identical to Exhibit 10.17)........................................................ --
10.19 Security Agreement dated as of May 15, 1993 by Great Plains Hospital, Inc. in
favor of Societe Generale, as agent for the lenders which are parties to that
certain Credit Agreement described in Exhibit 10.16 above (substantially
identical to Exhibit 10.17)........................................................ --
10.20 Security Agreement dated as of May 15, 1993 by Greenbrier Hospital, Inc. in
favor of Societe Generale, as agent for the lenders which are parties to that
certain Credit Agreement described in Exhibit 10.16 above (substantially
identical to Exhibit 10.17)........................................................ --
10.21 Security Agreement dated as of May 15, 1993 by Gulf Coast Treatment Center,
Inc. in favor of Societe Generale, as agent for the lenders which are parties to
that certain Credit Agreement described in Exhibit 10.16 above (substantially
identical to Exhibit 10.17)........................................................ --
10.22 Security Agreement dated as of May 15, 1993 by Houma Psychiatric Hospital,
Inc. in favor of Societe Generale, as agent for the lenders which are parties to
that certain Credit Agreement described in Exhibit 10.16 above (substantially
identical to Exhibit 10.17)........................................................ --
10.23 Security Agreement dated as of May 15, 1993 by HSA of Oklahoma, Inc. in
favor of Societe Generale, as agent for the lenders which are parties to that
certain Credit Agreement described in Exhibit 10.16 above (substantially
identical to Exhibit 10.17)........................................................ --
10.24 Security Agreement dated as of May 15, 1993 by The Haven Hospital, Inc. in
favor of Societe Generale, as agent for the lenders which are parties to that
certain Credit Agreement described in Exhibit 10.16 above (substantially
identical to Exhibit 10.17)........................................................ --
10.25 Security Agreement dated as of May 15, 1993 by the Company in favor of
Societe Generale, as agent for the lenders which are parties to that certain
Credit Agreement described in Exhibit 10.16 above (substantially identical to
Exhibit 10.17)..................................................................... --
</TABLE>
E-5
<PAGE>
<TABLE>
<CAPTION>
Page
Number
------
<S> <C>
10.26 Accounts Receivable Security Agreement dated as of May 15, 1993 by
Americare of Galax, Inc. in favor of Societe Generale, as agent for the lenders
which are parties to that certain Credit Agreement described in Exhibit 10.16
above (incorporated by reference to Exhibit 10.26 to the Company's Annual
Report on Form 10-K for the year ended June 30, 1994)............................. --
10.27 Accounts Receivable Security Agreement dated as May 15, 1993 by Bountiful
Psychiatric Hospital, Inc. in favor of Societe Generale, as agent for the lenders
which are parties to that certain Credit Agreement described in Exhibit 10.16
above (substantially identical to Exhibit 10.26).................................. --
10.28 Accounts Receivable Security Agreement dated as of May 15, 1993 by
Cumberland Mental Health, Inc. in favor of Societe Generale, New York
Branch, as agent for the lenders which are parties to that certain Credit
Agreement described in Exhibit 10.16 above (substantially identical to Exhibit
10.26)............................................................................ --
10.29 Accounts Receivable Security Agreement dated as of May 15, 1993 by East
Carolina Psychiatric Services Corporation in favor of Societe Generale, New
York Branch, as agent for the lenders which are parties to that certain Credit
Agreement described in Exhibit 10.16 above (substantially identical to Exhibit
10.26)............................................................................ --
10.30 Accounts Receivable Security Agreement dated as of May 15, 1993 by
Havenwyck Hospital, Inc. in favor of Societe Generale, New York Branch as
agent for the lenders which are parties to that certain Credit Agreement
described in Exhibit 10.16 above (substantially identical to Exhibit 10.26)....... --
10.31 Accounts Receivable Security Agreement dated as of May 15, 1993 by Mesa
Psychiatric Hospital, Inc. in favor of Societe Generale, New York Branch, as
agent for the lenders which are parties to that certain Credit Agreement
described in Exhibit 10.16 above (substantially identical to Exhibit 10.26)....... --
10.32 Accounts Receivable Security Agreement dated as of May 15, 1993 by
Michigan Psychiatric Services, Inc. in favor of Societe Generale, New York
Branch, as agent for the lenders which are parties to that certain Credit
Agreement described in Exhibit 10.16 above (substantially identical to Exhibit
10.26)............................................................................ --
10.33 Accounts Receivable Security Agreement dated as of May 15, 1993 by
Psychiatric Institute of West Virginia, Inc. in favor of Societe Generale, New
York Branch, as agent for the lenders which are parties to that certain Credit
Agreement described in Exhibit 10.16 above (substantially identical to Exhibit
10.26)............................................................................ --
10.34 Stock Pledge Agreement dated as of May 15, 1993, among the Company in
favor of Societe Generale, New York Branch, as agent for the lenders which
are parties to that certain Credit Agreement described in Exhibit 10.16 above
(incorporated by reference to Exhibit 10.34 to the Company's Annual Report on
Form 10-K for the year ended June 30, 1994)....................................... --
</TABLE>
E-6
<PAGE>
<TABLE>
<CAPTION>
Page
Number
------
<S> <C>
10.35 Revolving Credit Guarantee dated as of May 15, 1993 by Americare of Galax,
Inc. in favor of Societe Generale, New York Branch, as agent for the lenders
which are parties to that certain Credit Agreement described in Exhibit 10.16
above (incorporated by reference to Exhibit 10.35 to the Company's Annual
Report on Form 10-K for the year ended June 30, 1994)............................. --
10.36 Revolving Credit Guarantee dated as of May 15, 1993 by Bethany Psychiatric
Hospital, Inc. in favor of Societe Generale, New York Branch, as agent for the
lenders which are parties to that certain Credit Agreement described in Exhibit
10.16 above (substantially identical to Exhibit 10.35)............................ --
10.37 Revolving Credit Guarantee dated as of May 15, 1993 by Bountiful Psychiatric
Hospital, Inc. in favor of Societe Generale, New York Branch, as agent for the
lenders which are parties to that certain Credit Agreement described in Exhibit
10.16 above (substantially identical to Exhibit 10.35)............................ --
10.38 Revolving Credit Guarantee dated as of May 15, 1993 by Cumberland Mental
Health, Inc. in favor of Societe Generale, New York Branch, as agent for the
lenders which are parties to that certain Credit Agreement described in Exhibit
10.16 above (substantially identical to Exhibit 10.35)............................ --
10.39 Revolving Credit Guarantee dated as of May 15, 1993 by East Carolina
Psychiatric Services Corporation in favor of Societe Generale, New York
Branch, as agent for the lenders which are parties to that certain Credit
Agreement described in Exhibit 10.16 above (substantially identical to Exhibit
10.35)............................................................................ --
10.40 Revolving Credit Guarantee dated as of May 15, 1993 by Havenwyck Hospital,
Inc. in favor of Societe Generale, New York Branch, as agent for the lenders
which are parties to that certain Credit Agreement described in Exhibit 10.16
above (substantially identical to Exhibit 10.35).................................. --
10.41 Revolving Credit Guarantee dated as of May 15, 1993 by Mesa Psychiatric
Hospital, Inc. in favor of Societe Generale, New York Branch, as agent for the
lenders which are parties to that certain Credit Agreement described in Exhibit
10.16 above (substantially identical to Exhibit 10.35)............................ --
10.42 Revolving Credit Guarantee dated as of May 15, 1993 by Michigan Psychiatric
Services, Inc. in favor of Societe Generale, New York Branch, as agent for the
lenders which are parties to that certain Credit Agreement described in Exhibit
10.16 above (substantially identical to Exhibit 10.35)............................ --
10.43 Revolving Credit Guarantee dated as of May 15, 1993 by Psychiatric Institute
of West Virginia, Inc. in favor of Societe Generale, New York Branch, as agent
for the lenders which are parties to that certain Credit Agreement described in
Exhibit 10.16 above (substantially identical to Exhibit 10.35).................... --
10.44 Management Fee Subordination Agreement dated May 15, 1993, among Paul J.
Ramsay and Ramsay Health Care Pty. Ltd. in favor of Societe Generale, New
York Branch, as agent for the lenders which are parties to that certain Credit
Agreement described in Exhibit 10.16 above (incorporated by reference to
Exhibit 10.44 to the Company's Annual Report on Form 10-K for the year
ended June 30, 1994).............................................................. --
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10.45 Mortgage and Fixture Filing and Assignment of Leases and Rents dated as of
May 15, 1993 granted by Atlantic Treatment Center, Inc. to Societe Generale,
individually and as agent for the lenders which are parties to that certain Credit
Agreement described in Exhibit 10.16 above, with respect to certain real
property located in Volusia County, Florida (incorporated by reference to
Exhibit 10.45 to the Company's Annual Report on Form 10-K for the year
ended June 30, 1994).............................................................. --
10.46 Mortgage and Fixture Filing and Assignment of Leases and Rents dated as of
May 15, 1993 granted by Carolina Treatment Center, Inc. to Societe Generale,
individually and as agent for the lenders which are parties to that certain Credit
Agreement described in Exhibit 10.16 above, with respect to certain real
property located in Horry County, South Carolina (substantially identical to
Exhibit 10.45).................................................................... --
10.47 Deed of Trust and Fixture Filing and Assignment of Leases and Rents dated as
of May 15, 1993 granted by Great Plains Hospital, Inc. to Jacob W. Bayer, Jr.
as Trustee for the benefit of Societe Generale, individually and as agent for the
lenders which are parties to that certain Credit Agreement described in Exhibit
10.16 above, with respect to certain real property located in Vernon County,
Missouri (substantially identical to Exhibit 10.45)............................... --
10.48 Mortgage, Security and Assignment of Leases and Rents dated as of May 15,
1993 by Greenbrier Hospital, Inc. to Societe Generale individually and as agent
for the lenders which are parties to that certain Credit Agreement described in
Exhibit 10.16 above, with respect to certain real property located in St.
Tammany Parish, Louisiana (substantially identical to Exhibit 10.45).............. --
10.49 Mortgage and Fixture Filing and Assignment of Leases and Rents dated as of
May 15, 1993 granted by Gulf Coast Treatment Center, Inc. to Societe
Generale, individually and as agent for the lenders which are parties to that
certain Credit Agreement described in Exhibit 10.16 above, with respect to
certain real property located in Okaloosa County, Florida (substantially identical
to Exhibit 10.45)................................................................. --
10.50 Mortgage, Security Agreement and Assignment of Leases and Rents dated as of
May 15, 1993 granted by Houma Psychiatric Hospital, Inc. to Societe Generale,
individually and as agent for the lenders which are parties to that certain Credit
Agreement described in Exhibit 10.16 above, with respect to certain real
property located in the City of Houma, Parish of Terrebonne, Louisiana
(substantially identical to Exhibit 10.45)........................................ --
10.51 Mortgage with Power of Sale and Fixture Filing and Assignment of Leases and
Rents dated as of May 15, 1993 granted by HSA of Oklahoma, Inc. to Societe
Generale, individually and as agent for the lenders which are parties to that
certain Credit Agreement described in Exhibit 10.16 above, with respect to
certain real property located in Garfield County, Oklahoma (substantially
identical to Exhibit 10.45)....................................................... --
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10.52 Deed of Trust and Fixture Filing and Assignment of Leases and Rents dated as
of May 15, 1993 granted by The Haven Hospital, Inc. to Societe Generale,
individually and as agent for the lenders which are parties to that certain Credit
Agreement described in Exhibit 10.16 above, with respect to certain real
property located in the City of DeSoto, Dallas County, Texas (substantially
identical to Exhibit 10.45)....................................................... --
10.53 Loan Agreement between Okaloosa County, Florida and Gulf Coast Treatment
Center, Inc. dated October 1, 1984, relating to the issuance of bonds for Gulf
Coast Treatment Center, Inc. (incorporated by reference to Exhibit 10.16 to the
Company's Registration Statement on Form S-1, Registration No. 2-9892)............ --
10.54 Loan Agreement between Louisiana Public Facilities Authority and Greenbrier
Hospital, Inc. dated November 1, 1984, relating to the issuance of bonds for
Greenbrier Hospital, Inc. (incorporated by reference to Exhibit 10.17 to the
Company's Registration Statement on Form S-1, Registration No. 2-98921)........... --
10.55 Loan Agreement between Horry County, South Carolina and Carolina
Treatment Center, Inc. dated December 1, 1984, relating to the issuance of
bonds for Carolina Treatment Center, Inc. (incorporated by reference to Exhibit
10.18 to the Company's Registration Statement on Form S-1, Registration No.
2-98921).......................................................................... --
10.56 Loan Agreement between Louisiana Public Facilities Authority and Houma
Psychiatric Hospital, Inc. dated as of September 1, 1985, relating to the
issuance of bonds for HSA Bayou Oaks Hospital..................................... --
10.57 Ground Lease between Facilities Management Corporation, as landlord, and
Psychiatric Institute of West Virginia, Inc., as tenant, dated as of September 30,
1985.............................................................................. --
10.58 Lease Agreement between Houma Psychiatric Hospital, Inc. and Hospital
Service District No. 1 of the Parish of Terrebonne, State of Louisiana, effective
February 1, 1985 (incorporated by reference to Exhibit 10.38 to the Company's
Registration Statement on Form S-1, Registration No. 2-98921)..................... --
10.59 Lease among Bethany Psychiatric Hospital, Inc., Bethany General Hospital, the
City of Bethany, Oklahoma and the Bethany General Hospital Trust dated
December 9, 1985 (ground lease) (incorporated by reference to Exhibit 10.47.3
to the Company's Annual Report on Form 10-K for the year ended December
31, 1985)......................................................................... --
10.60 Loan Agreement between The Enid Development Authority and HSA of
Oklahoma, Inc. dated as of October 1, 1985, relating to The Enid Development
Authority Variable Rate Demand Revenue Bonds (Meadowlake Hospital
Project).......................................................................... --
10.61 Option Agreement dated September 11, 1989, between the Company and The
Ramsay Hospital Corporation of Texas (incorporated by reference to Exhibit
10.44 to the Company's Annual Report on Form 10-K for the year ended June
30, 1989)......................................................................... --
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10.62 Ramsay Health Care, Inc. 1990 Stock Option Plan, as amended to date
(incorporated by reference to Exhibit 4.3 to the Company's Registration
Statement on Form S-8 filed on March 6, 1991)..................................... --
10.63 Lease Agreement dated August 30, 1988 between the Company and Ayshire
Land Dome Joint Venture relating to office space at One Poydras Plaza, New
Orleans, Louisiana (incorporated by reference to Exhibit 10.78 to the
Company's Registration Statement on Form S-2, Registration No. 33-40762).......... --
10.64 Ramsay Health Care, Inc. Deferred Compensation and Retirement Plan
(incorporated by reference to Exhibit 10.79 to the Company's Registration
Statement on Form S-2, Registration No. 33-40762)................................. --
10.65 Personnel and Facility Sharing Agreement dated as of June 27, 1991 between
the Company and Ramsay Holdings HSA Limited (incorporated by reference to
Exhibit 10.83 to the Company's Registration Statement on Form S-2,
Registration No. 33-40762)........................................................ --
10.66 Indemnity Agreement dated as of June 1991 between the Company and Ramsay
Holdings HSA Limited (incorporated by reference to Exhibit 10.84 to the
Company's Registration Statement on Form S-2, Registration No. 33-40762).......... --
10.67 Agreement dated January 7, 1992 between the Company and Ralph J. Watts
(incorporated by reference to Exhibit 10(a) to the Company's Quarterly Report
on Form 10-Q for the quarter ended December 31, 1991)............................. --
10.68 Warrant Certificate dated January 8, 1992 issued to Ralph J. Watts
(incorporated by reference to Exhibit 10(b) to the Company's Quarterly Report
on form 10-Q for the quarter ended December 31, 1991)............................. --
10.69 Management Agreement dated as of June 25, 1992 between the Company and
Ramsay Health Care Pty. Limited (incorporated by reference to Exhibit 10.90
to the Company's Annual Report on Form 10-K for the year ended June 30,
1992)............................................................................. --
10.70 Ramsay Health Care, Inc. 1991 Stock Option Plan (incorporated by reference to
Exhibit 10.91 to the Company's Annual Report on Form 10-K for the year
ended June 30, 1992).............................................................. --
10.71 Employment Agreement dated as of January 7, 1992 between the Company and
Gregory H. Browne (incorporated by reference to Exhibit 10.92 to the
Company's Annual Report on Form 10-K for the year ended June 30, 1992)............ --
10.72 Employment Agreement dated as of July 7, 1992 between the Company and
Bruce R. Soden (incorporated by reference to Exhibit 10.93 to the Company's
Annual Report on Form 10-K for the year ended June 30, 1992)...................... --
10.73 Employment Agreement dated January 23, 1992 between the Company and
Wallace E. Smith (incorporated by reference to Exhibit 10.94 to the Company's
Annual Report on Form 10-K for the year ended June 30, 1992)...................... --
10.74 Employment Agreement dated January 23, 1992 between the Company and
John A. Quinn (incorporated by reference to Exhibit 10.95 to the Company's
Annual Report on Form 10-K for the year ended June 30, 1992)...................... --
</TABLE>
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10.75 Employment Agreement dated as of October 7, 1992 between the Company and
Rea A. Oliver (incorporated by reference to Exhibit 10.79 to the Company's
Annual Report on Form 10-K for the year ended June 30, 1994)...................... --
10.76 Lease dated April 4, 1992 between The Union Labor Life Insurance Company
and the Company (incorporated by reference to Exhibit 10.98 to the Company's
Annual Report on Form 10-K for the year ended June 30, 1992)...................... --
10.77 Lease dated May 27, 1992 between Gail Buy and Bountiful Psychiatric Hospital
(incorporated by reference to Exhibit 10.99 to the Company's Annual Report on
Form 10-K for the year ended June 30, 1992)....................................... --
10.78 Lease Agreement dated as of February 12, 1993 by and between Gulf Coast
Treatment Center, Inc and Vendell of Florida, Inc. (incorporated by reference
to Exhibit 10.82 to the Company's Annual Report on Form 10-K for the year
ended June 30, 1994).............................................................. --
10.79 Ramsay Health Care, Inc. 1993 Stock Option Plan (incorporated by reference to
Exhibit 10.83 to the Company's Quarterly Report on Form 10Q for the quarter
ended December 31, 1993).......................................................... --
10.80 Ramsay Health Care, Inc. 1993 Employee Stock Purchase Plan (incorporated by
reference to Exhibit 10.84 to the Company's Quarterly Report on Form 10Q for
the quarter ended December 31, 1993).............................................. --
10.81 Employment Agreement dated as of October 2, 1993 between the Company and
Reynold Jennings.................................................................. --
10.82 Letter Agreement dated May 26, 1994 between the Company and Reynold Jennings
amending Mr. Jennings' Employment Agreement....................................... --
10.83 Letter Agreement dated June 3,1994 between the Company and Reynold Jennings
amending Mr. Jennings' Employment Agreement....................................... --
10.84 Fourth Modification, Extension and Amendment of Lease Agreement dated
November 15, 1993 between the Company and One Poydras Plaza Venture
relating to the Company's office space at One Poydras Plaza, New Orleans,
Louisiana......................................................................... --
11 Computation of Net Income Per Share............................................... --
21 Subsidiaries of the Company....................................................... --
23 Consent of Ernst & Young LLP...................................................... --
27 Financial Data Schedule........................................................... --
</TABLE>
Copies of exhibits filed with this Annual Report on Form 10-K or incorporated
herein by reference do not accompany copies hereof for distribution to
stockholders of the Company. The Company will furnish a copy of any of such
exhibits to any stockholder requesting it.
E-11
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EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statements
(Forms S-8 No. 33-52991, No. 33-47997, No. 33-44697 and No. 33-39260) of Ramsay
Health Care, Inc. of our report dated September 1, 1994, with respect to the
consolidated financial statements and schedules of Ramsay Health Care, Inc.,
included in this Annual Report (Form 10-K/A-1) for the year ended June 30, 1994.
ERNST & YOUNG LLP
New Orleans, Louisiana
September 13, 1995
