<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-Q
(MARK ONE)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 1994
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Transition period from ____________________to__________________
Commission file No. 0-13849
RAMSAY HEALTH CARE, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 63-0857352
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
ONE POYDRAS PLAZA
639 LOYOLA AVENUE, SUITE 1700
NEW ORLEANS, LOUISIANA 70113
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
Registrant's telephone number, including area code: (504) 525-2505
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--- ---
The number of shares of the Registrant's Common Stock outstanding at
February 10, 1995 follows:
Common Stock, par value $0.01 per share - 8,239,629 shares
<PAGE> 2
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
FORM 10-Q
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C>
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated balance sheets - December 31, 1994
and June 30, 1994 (unaudited) . . . . . . . . . . . . . . . . . . . . . . 1
Consolidated statements of income - quarter and six months ended
December 31, 1994 and 1993 (unaudited) . . . . . . . . . . . . . . . . . . 3
Consolidated statements of cash flows - six months ended December 31, 1994
and 1993 (unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Notes to consolidated financial statements - December 31, 1994 (unaudited) 5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations . . . . . . . . . . . . . . . . 8
Part II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders . . . . . . . . 16
Item 6. Exhibits and Current Reports on Form 8-K . . . . . . . . . . . . . . . 16
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
</TABLE>
<PAGE> 3
PART I. FINANCIAL INFORMATION
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
DECEMBER 31 JUNE 30
1994 1994
--------------- --------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and short-term investments . . . . . . . . . . . . . $ 3,264,000 $ 6,207,000
Restricted cash . . . . . . . . . . . . . . . . . . . . . 2,256,000 5,311,000
Patient accounts receivable, less allowances for doubtful
accounts of $4,524,000 and $3,925,000 at
December 31, 1994 and June 30, 1994, respectively . . . 23,808,000 23,019,000
Amounts due from third-party contractual agencies . . . . 9,499,000 6,604,000
Other accounts receivable . . . . . . . . . . . . . . . . 3,856,000 2,139,000
Other current assets . . . . . . . . . . . . . . . . . . . 2,994,000 3,040,000
---------- ----------
TOTAL CURRENT ASSETS . . . . . . . . . . . . . . . . . . 45,677,000 46,320,000
OTHER ASSETS
Cash held in trust . . . . . . . . . . . . . . . . . . . . 2,765,000 1,805,000
Cost in excess of net asset value of purchased businesses 11,614,000 12,042,000
Unamortized preopening and loan costs . . . . . . . . . . 3,549,000 3,731,000
Other intangible assets . . . . . . . . . . . . . . . . . 2,945,000 3,048,000
Real estate held for sale . . . . . . . . . . . . . . . . 1,150,000 1,150,000
Other non-current assets . . . . . . . . . . . . . . . . . 6,356,000 4,911,000
---------- ----------
28,379,000 26,687,000
PROPERTY AND EQUIPMENT
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,009,000 9,009,000
Building and improvements . . . . . . . . . . . . . . . . 118,833,000 118,555,000
Equipment, furniture and fixtures . . . . . . . . . . . . 21,582,000 20,626,000
----------- -----------
149,424,000 148,190,000
Less accumulated depreciation . . . . . . . . . . . . . . 40,631,000 38,029,000
----------- -----------
108,793,000 110,161,000
----------- -----------
$ 182,849,000 $ 183,168,000
=========== ===========
</TABLE>
See notes to consolidated financial statements.
1
<PAGE> 4
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(unaudited)
<TABLE>
<CAPTION>
DECEMBER 31 JUNE 30
1994 1994
-------------- ---------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable . . . . . . . . . . . . . . . . . . . . . $ 2,519,000 $ 2,306,000
Accrued salaries and wages . . . . . . . . . . . . . . . . 4,352,000 4,291,000
Other accrued liabilities . . . . . . . . . . . . . . . . 2,429,000 4,386,000
Amounts due to third-party contractual agencies . . . . . 5,029,000 4,729,000
Current portion of long-term debt . . . . . . . . . . . . 12,709,000 9,460,000
---------- ----------
TOTAL CURRENT LIABILITIES . . . . . . . . . . . . . . . 27,038,000 25,172,000
DEFERRED INCOME TAXES . . . . . . . . . . . . . . . . . . . . 4,742,000 4,932,000
LIABILITIES FOR SELF-INSURANCE CLAIMS, less
current portion . . . . . . . . . . . . . . . . . . . . . 1,211,000 1,341,000
LONG-TERM DEBT, less current portion . . . . . . . . . . . . 62,209,000 67,707,000
MINORITY INTERESTS . . . . . . . . . . . . . . . . . . . . . 6,225,000 3,548,000
STOCKHOLDERS' EQUITY
Class A convertible preferred stock, $1 par value--authorized
800,000 shares; issued 22,910 shares . . . . . . . . . 23,000 23,000
Class B convertible preferred stock, Series C, $1 par value
--authorized 152,321 shares; issued 142,486 shares
(liquidation value of $7,244,000) including accrued
dividends of $91,000 . . . . . . . . . . . . . . . . . 233,000 233,000
Common Stock, $.01 par value--authorized 20,000,000
shares; issued 8,230,849 shares at December 31, 1994 and
8,200,760 shares at June 30, 1994 . . . . . . . . . . . 82,000 82,000
Additional paid-in capital . . . . . . . . . . . . . . . . 100,023,000 100,048,000
Retained earnings (deficit) . . . . . . . . . . . . . . . (15,458,000) (16,483,000)
Treasury Stock, at cost--489,050 shares and 481,750
shares at December 31, 1994 and June 30, 1994,
respectively . . . . . . . . . . . . . . . . . . . . . (3,479,000) (3,435,000)
------------ ------------
81,424,000 80,468,000
----------- -----------
$ 182,849,000 $ 183,168,000
=========== ===========
</TABLE>
See notes to consolidated financial statements.
2
<PAGE> 5
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
<TABLE>
<CAPTION>
QUARTER ENDED SIX MONTHS ENDED
DECEMBER 31 DECEMBER 31
----------- -----------
1994 1993 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
NET REVENUES $ 35,634,000 $ 32,561,000 $ 71,457,000 $ 64,544,000
Operating Expenses:
Salaries, wages and benefits . . . . . . . . . . . . 18,212,000 15,696,000 35,946,000 31,156,000
Other operating expenses . . . . . . . . . . . . . . 11,232,000 10,232,000 22,243,000 19,550,000
Provision for doubtful accounts . . . . . . . . . . 1,297,000 1,313,000 2,582,000 3,028,000
Depreciation and amortization . . . . . . . . . . . 1,970,000 1,717,000 3,810,000 3,297,000
Interest and other financing charges . . . . . . . . 2,144,000 2,226,000 4,311,000 4,502,000
---------- ---------- ---------- ---------
TOTAL OPERATING EXPENSES . . . . . . . . . . . . 34,855,000 31,184,000 68,892,000 61,533,000
---------- ---------- ---------- ----------
INCOME BEFORE MINORITY INTERESTS AND
INCOME TAXES . . . . . . . . . . . . . . . . . . . 779,000 1,377,000 2,565,000 3,011,000
Minority interests . . . . . . . . . . . . . . . . . . 166,000 814,000 1,013,000 1,604,000
--------- --------- ---------- ----------
INCOME BEFORE INCOME TAXES . . . . . . . . . . . . . 613,000 563,000 1,552,000 1,407,000
Provision for income taxes . . . . . . . . . . . . . . 176,000 88,000 527,000 324,000
--------- --------- ---------- ----------
NET INCOME . . . . . . . . . . . . . . . . . . . $ 437,000 $ 475,000 $ 1,025,000 $ 1,083,000
========= ========= ========= =========
Income per common and dilutive common equivalent share:
Primary . . . . . . . . . . . . . . . . . . . . . . $0.05 $0.05 $0.11 $0.11
Fully diluted . . . . . . . . . . . . . . . . . . . $0.05 $0.05 $0.11 $0.11
Weighted average number of shares outstanding:
Primary . . . . . . . . . . . . . . . . . . . . . . 9,515,000 9,672,000 9,512,000 9,659,000
Fully diluted . . . . . . . . . . . . . . . . . . . 9,527,000 9,672,000 9,529,000 9,714,000
</TABLE>
See notes to consolidated financial statements.
3
<PAGE> 6
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED DECEMBER 31
----------------------------
1994 1993
---- ----
<S> <C> <C>
Cash Flows from Operating Activities
Net Income . . . . . . . . . . . . . . . . . . . . . . . . $ 1,025,000 $ 1,083,000
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization . . . . . . . . . . . . . 4,204,000 3,713,000
Provision (benefit) for deferred income taxes . . . . . (190,000) 47,000
Provision for doubtful accounts . . . . . . . . . . . . 2,582,000 3,028,000
Minority interests . . . . . . . . . . . . . . . . . . . 1,013,000 1,604,000
Cash flows from (increase) decrease in operating assets:
Accounts receivable . . . . . . . . . . . . . . . . . (3,371,000) (1,563,000)
Amounts due from third-party contractual agencies . . (2,895,000) 111,000
Other current and non-current assets . . . . . . . . (2,208,000) (413,000)
Cash flows from increase (decrease) in operating liabilities:
Accounts payable . . . . . . . . . . . . . . . . . . 213,000 (2,368,000)
Accrued salaries, wages and other liabilities . . . . (1,896,000) 264,000
Unpaid self-insurance claims . . . . . . . . . . . . (130,000) (948,000)
Amounts due to third-party contractual agencies . . . 300,000 1,096,000
--------- -----------
Total adjustments . . . . . . . . . . . . . . . . (2,378,000) 4,571,000
----------- -----------
Net cash provided by (used in) operating
activities . . . . . . . . . . . . . . . . . (1,353,000) 5,654,000
----------- -----------
Cash Flows from Investing Activities
Proceeds from sale of facility . . . . . . . . . . . . . --- 11,950,000
Acquisition of Florida Psychiatric Management, Inc. . . --- (4,207,000)
Expenditures for property and equipment . . . . . . . . (1,506,000) (2,359,000)
Preopening costs . . . . . . . . . . . . . . . . . . . . (346,000) (570,000)
Restricted cash (reserved) used for debt payments . . . 3,055,000 (8,239,000)
Cash held in trust . . . . . . . . . . . . . . . . . . . (960,000) 266,000
----------- -----------
Net cash provided by (used in) investing
activities . . . . . . . . . . . . . . . . . 243,000 (3,159,000)
------------ -------------
Cash Flows from Financing Activities
Loan costs . . . . . . . . . . . . . . . . . . . . . . . (230,000) (211,000)
Payment of costs related to distribution of subsidiary. (949,000) ---
Proceeds from exercise of options and employee stock purchases 157,000 27,000
Distributions to minority interests . . . . . . . . . . (1,656,000) (1,760,000)
Proceeds from private placement of shares of subsidiary 3,320,000 ---
Proceeds from working capital facility . . . . . . . . . 2,500,000 ---
Payments on debt . . . . . . . . . . . . . . . . . . . . (4,749,000) (3,847,000)
Payments of preferred stock dividends . . . . . . . . . (182,000) (91,000)
Purchase of treasury stock . . . . . . . . . . . . . . . (44,000) (544,000)
----------- -----------
Net cash used in financing activities . . . . (1,833,000) (6,426,000)
----------- -----------
Net decrease in cash and cash equivalents . . . . . . . . . (2,943,000) (3,931,000)
Cash and cash equivalents at beginning of period . . . . . 6,207,000 10,682,000
----------- ------------
Cash and cash equivalents at end of period . . . . . . . . $ 3,264,000 $ 6,751,000
=========== =============
Supplemental Disclosures of Cash Flow Information
Cash paid during the period for:
Interest . . . . . . . . . . . . . . . . . . . . . . . . $ 3,425,000 $ 3,703,000
Income taxes . . . . . . . . . . . . . . . . . . . . . . . 1,316,000 140,000
</TABLE>
See notes to consolidated financial statements.
4
<PAGE> 7
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
December 31, 1994
NOTE 1
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and notes required by generally accepted accounting principles for
complete financial statements. In the opinion of management, all adjustments
considered necessary for a fair presentation of the interim information are of
a normal recurring nature and have been included. The Company's business is
seasonal in nature and subject to general economic conditions and other
factors. Accordingly, operating results for the quarter and six months ended
December 31, 1994 are not necessarily indicative of the results that may be
expected for the year. For further information, refer to the consolidated
financial statements and notes thereto included in the Company's Annual Report
on Form 10-K for the year ended June 30, 1994.
NOTE 2
At December 31, 1994, the Company's credit facilities included
$45,200,000 in senior secured notes, approximately $22,000,000 in letters of
credit (to support the Company's variable rate demand revenue bonds),
$2,538,000 in subordinated secured notes and $4,000,000 in a working capital
facility. The senior secured notes bear interest at 11.6% and are due in
semi-annual installments that began on March 31, 1993 and end on March 31,
2000. The subordinated secured notes bear interest at 15.6% and are due in
semi-annual installments that began on March 31, 1994 and end on March 31,
2000. The variable rate demand revenue bonds were issued in 1984 and 1985,
have terms of 30 years, and require annual principal payments of $800,000
(through year 2000) and $900,000 to $1,300,000 (from years 2001 to maturity).
Amounts outstanding under the working capital facility, which bear interest at
a variable rate (currently 8.6%), totalled $2,500,000 at December 31, 1994.
There were no amounts outstanding under the working capital facility at June
30, 1994.
As part of the acquisition of Florida Psychiatric Management, Inc.
("FPM") in October 1993, a subsidiary of the Company issued 7%, three-year
debentures totalling $2,500,000. As part of the acquisition of certain of the
assets of Human Dynamics Institute ("HDI") in June 1994, a subsidiary of the
Company issued an 8.25%, $1,000,000 three-year promissory note, payable in 36
equal monthly installments. These obligations are secured by the common stock
of FPM and of a subsidiary of the Company which purchased the HDI assets.
5
<PAGE> 8
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED - Continued)
Restricted cash in the accompanying balance sheets represent remaining
proceeds from the sale of Cumberland Hospital in August 1993. These monies are
held in trust and used to pay principal amounts due on the senior secured notes
and the subordinated secured notes. Restricted cash totalling $3,055,000 was
used to satisfy the September 30, 1994 principal payment on the senior secured
notes and the subordinated secured notes.
A summary of the Company's debt obligations is as follows:
<TABLE>
<CAPTION>
DECEMBER 31 JUNE 30
1994 1994
---- ----
<S> <C> <C>
11.6% senior secured notes . . . . . . . . . . . . . . . $ 45,200,000 $ 48,025,000
Variable rate demand revenue bonds . . . . . . . . . . . 20,200,000 21,000,000
15.6% subordinated secured notes . . . . . . . . . . . . 2,538,000 2,769,000
7% debentures . . . . . . . . . . . . . . . . . . . . . . 1,875,000 2,292,000
8.25% note payable . . . . . . . . . . . . . . . . . . . 833,000 1,000,000
Capital lease obligation . . . . . . . . . . . . . . . . 1,123,000 1,318,000
Working capital facility . . . . . . . . . . . . . . . . 2,500,000 ---
Other notes payable . . . . . . . . . . . . . . . . . . . 649,000 763,000
---------- ----------
74,918,000 77,167,000
Less amounts due within one year . . . . . . . . . . . . 12,709,000 9,460,000
----------- ----------
$ 62,209,000 $ 67,707,000
========== ==========
</TABLE>
The Company has pledged as collateral substantially all of the real property
associated with its facilities, plus restricted cash.
NOTE 3
The provision for income taxes included in the consolidated statements
of income differs from the amounts computed by applying the normal statutory
rates to income before income taxes because such provision includes a) amounts
reportable as income for federal income tax purposes which are not income for
financial reporting purposes, b) amounts deducted for financial reporting
purposes that are not allowable deductions for federal and state income tax
purposes and c) amounts for state income taxes applicable to profitable
subsidiaries which do not utilize the operating losses generated by
unprofitable subsidiaries to offset taxable income. At December 31, 1994, the
Company has estimated operating loss carryforwards available to reduce future
taxable income of approximately $16 million subject to significant annual
limitations pursuant to Section 382 of the Internal Revenue Code of 1986, as
amended.
6
<PAGE> 9
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED - CONTINUED)
NOTE 4
On October 27, 1994, the Company announced plans to distribute the
stock of its subsidiary, Ramsay Managed Care, Inc. (RMCI), held by the Company,
to the holders of the Company's common and preferred stock. RMCI, which was
formed in October 1993 and manages and provides the delivery of mental health
care and substance abuse treatment, includes primarily the operations of FPM
and HDI. The distribution is subject to the declaration of effectiveness of a
registration statement filed by RMCI with the Securities and Exchange
Commission and certain other conditions. The Company anticipates that the
distribution will occur in March 1995.
For the three and six months ended December 31, 1994, net revenues of
RMCI totalled $3,493,000 and $6,955,000, respectively. Of the total cash
advances made by the Company to or on behalf of RMCI, $6,000,000 is represented
by an unsecured, interest-bearing, subordinated promissory note due from RMCI
and issued on October 25, 1994. On the effective date of the distribution, the
intangible assets and debt obligations (excluding the above-mentioned
promissory note) associated with RMCI, totalling approximately $10,000,000 and
$3,000,000, respectively, along with other assets and liabilities associated
with RMCI, will no longer be reflected on the Company's consolidated balance
sheet.
7
<PAGE> 10
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The Company pursues business expansion opportunities which are
consistent with its overall strategic plan and disposes of operations no longer
considered viable or consistent with this plan. In February 1994, the Company
sold its inpatient facility (Atlantic Shores Hospital) in Daytona Beach,
Florida due to, among other reasons, restrictive state certificate of need laws
that precluded the Company from expanding services at this location. Also, in
June 1994, two outpatient day treatment centers were closed due to poor
operating performance.
The Company's strategic plan also calls for the development of medical
subacute units in certain of its inpatient facilities. Four such units opened
between January 1994 and December 1994. In addition, to further the continuum
of care at one of these units, an outpatient rehabilitation clinic was acquired
and began operations in January 1994.
In October 1993, the Company entered the managed mental healthcare
business through its acquisition of FPM. This business subsequently expanded
through an additional acquisition in June 1994 and through on-going development
efforts. As noted elsewhere in this report, the Company has announced its
intention to distribute the common stock held by it of the subsidiary operating
this business to the holders of its common and preferred stock.
In August 1993, the Company sold its inpatient facility (Cumberland
Hospital) in Fayetteville, North Carolina. The decision to sell this facility
occurred in June 1993, at which time the facility's basis of accounting was
changed from the going concern basis to the liquidation basis. As a result,
the July and August 1993 operating results of Cumberland Hospital were recorded
as part of the loss on sale of this facility in the Company's June 1993
financial statements and the net revenues and expenses of Cumberland Hospital
were not included in the Company's operating results for the quarter and six
months ended December 31, 1993. Accordingly, the sale of this facility had no
impact on the comparison of the Company's operating results between the
quarters and six months ended December 31, 1994 and 1993.
8
<PAGE> 11
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
RESULTS OF OPERATIONS
The following table sets forth, for the period indicated, certain
items of the Company's consolidated statements of income as a percentage of the
Company's net revenues. The discussion following this table quantifies the
significant fluctuations in amounts reported in the Company's consolidated
statements of income between periods.
<TABLE>
<CAPTION>
PERCENTAGE OF NET REVENUES
QUARTER ENDED SIX MONTHS ENDED
DECEMBER 31 DECEMBER 31
1994 1993 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net revenues . . . . . . . . . . . . . . . . 100.0 % 100.0 % 100.0 % 100.0 %
----- ----- ----- -----
Operating expenses:
Salaries, wages and benefits . . . . . . 51.1 48.2 50.3 48.2
Other operating expenses . . . . . . . . 31.5 31.4 31.1 30.3
Provision for doubtful accounts . . . . 3.7 4.1 3.6 4.7
Depreciation and amortization . . . . . 5.5 5.3 5.4 5.1
Interest expense . . . . . . . . . . . . 6.0 6.8 6.0 7.0
---- ---- ---- ----
Total operating expenses . . . . . . . . . . 97.8 95.8 96.4 95.3
---- ---- ---- ----
Income before minority interest and
income taxes . . . . . . . . . . . . . . 2.2 4.2 3.6 4.7
Minority interests . . . . . . . . . . . . . 0.5 2.5 1.4 2.5
---- ---- ---- ----
Income before income taxes . . . . . . . . . 1.7 1.7 2.2 2.2
==== ==== ==== ====
</TABLE>
QUARTER ENDED DECEMBER 31, 1994
COMPARED TO QUARTER ENDED DECEMBER 31, 1993
Net revenues in the quarter ended December 31, 1994 were $35.6
million, compared to $32.6 million in the comparable quarter of the prior
fiscal year. The material changes in net revenues between these periods
consisted of (a) a $1.4 million decrease in same facility net inpatient
revenues between periods, (b) a $1.6 million increase in same facility net
outpatient revenues between periods, (c) net revenues of $1.1 million
attributable to the Company's subacute operations, (d) a $2.1 million increase
(from $1.4 million to $3.5 million) in net revenues related to managed care
businesses acquired after September 30, 1993 and (e) a $.4 million decrease in
net patient revenues due to the sale of the Atlantic Shores Hospital facility
and the closure of two outpatient day treatment centers (the "sold/closed
facilities").
Same facility net inpatient revenues decreased even though same
facility patient days increased between periods due to a decrease in net
inpatient revenue per patient day. This decrease is due to a continued shift
in patient mix from charge-based payors to cost-based and negotiated per-diem
rate payors. Net revenue per patient day on cost-based and negotiated per-diem
rate payors is generally less than that for charge-based payors. In addition,
the rates received from per-diem rate payors has declined between periods. The
percentage of the Company's net revenues related to charge-based payors
decreased from 20% in the prior year comparable quarter to 17% in the current
quarter. Same facility net outpatient revenues increased from $3.4 million in
the prior year comparable quarter to $5.0 million in the current year quarter
due to payor demands for increased outpatient
9
<PAGE> 12
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
treatment protocols, an expansion of service levels and a market focus by
facility CEOs to increase partial hospitalization day services.
Salaries, wages and benefits in the quarter ended December 31, 1994
were $18.2 million, compared to $15.7 million in the comparable quarter of the
prior fiscal year. Same facility salaries, wages and benefits increased $.5
million (from $14.3 million to $14.8 million) between periods, or 3.5%. In
addition, salaries, wages and benefits attributable to the managed care
businesses acquired and subacute operations totalled $2.3 million in the
current year quarter (approximately 50% of net revenues associated with these
businesses), compared to $.3 million in the prior year comparable quarter
(approximately 22% of net revenues associated with these businesses). Due to
the timing of these acquisitions and the maturing nature of the businesses, the
ratio of salaries, wages and benefits to net revenues fluctuated significantly
between periods. These increases were partially offset by a $.2 million
decrease in salaries, wages and benefits attributable to the sold/closed
facilities.
Other operating expenses in the quarter ended December 31, 1994 were
$11.2 million, compared to $10.2 million in the comparable quarter of the prior
fiscal year. Same facility other operating expenses increased 2.6% between
periods ($8.1 million in the current quarter compared to $7.9 million in the
prior fiscal year quarter). Also, other operating expenses attributable to
managed care businesses acquired and subacute operations totalled $1.9 million
in the current quarter, compared to $.7 million in the prior year comparable
quarter. These increases were partially offset by a decrease of $.3 million in
other operating expenses attributable to the sold/closed facilities.
The provision for doubtful accounts in the quarters ended December 31,
1994 and 1993 totalled $1.3 million, as the provision for doubtful accounts
related to the same facilities was flat, and the amounts related to the managed
care businesses, subacute operations and sold/closed facilities were not
significant.
Depreciation and amortization in the quarter ended December 31, 1994
totalled $2.0 million, compared to $1.7 million in the prior year comparable
quarter. This increase is due to the depreciation and amortization
attributable to the managed care businesses acquired and subacute operations,
which totalled $.4 million in the current year quarter and $.1 million in the
prior year comparable quarter. Total depreciation and amortization
attributable to the sold/closed facilities was not significant between periods.
Interest expense decreased from $2.2 million for the quarter ended
December 31, 1993 to $2.1 million in the comparable quarter of the current year
even though the interest rate paid on the variable rate demand revenue bonds
increased between periods. Debt levels were reduced between periods through
principal payments of $5,650,000 on the senior secured notes, $462,000 on the
subordinated secured notes and $800,000 on the variable rate demand revenue
bonds. In addition, in connection with the sale of Atlantic Shores Hospital in
February 1994, the variable rate demand revenue bonds associated with that
facility, totalling $4,300,000, were repaid.
10
<PAGE> 13
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
Minority interests reflects the limited partners' share of net income
of Three Rivers Hospital and, since October 1994, the minority shareholders'
share of net income of RMCI.
In October 1994, the Company announced plans to distribute the stock
held by it of its managed care subsidiary (RMCI) to the holders of the
Company's common and preferred stock. This distribution is subject to the
declaration of effectiveness of a registration statement filed by RMCI with the
Securities and Exchange Commission and certain other conditions. The Company
anticipates that the distribution will occur in March 1995. For the quarter
ended December 31, 1994, net revenues of RMCI totalled $3.5 million (9.8% of
total consolidated net revenues of the Company). In addition, RMCI reported
net income before income taxes for the quarter ended December 31, 1994, after
management fees payable to the Company totalling $66,000, of $12,000.
Management fees paid to the Company by all of the Company's subsidiaries,
including its managed care subsidiary, represent reimbursement to the Company
of its indirect costs for providing financial oversight by Company employees
and information systems and other support provided by the Company. The amount
of such fees are determined based upon an estimate of the amount of time spent
by Company employees in providing such services. These management fees are
eliminated upon consolidation and have no effect on the consolidated results of
operations of the Company.
SIX MONTHS ENDED DECEMBER 31, 1994
COMPARED TO SIX MONTHS ENDED DECEMBER 31, 1993
Net revenues in the six months ended December 31, 1994 were $71.5
million, compared to $64.5 million in the comparable period of the prior fiscal
year. The material changes in net revenues between these periods consisted of
(a) a $2.2 million decrease in same facility net inpatient revenues between
periods, (b) a $3.2 million increase in same facility net outpatient revenues
between periods, (c) net revenues of $1.6 million attributable to the Company's
subacute operations, (d) a $5.6 million increase (from $1.4 million to $7.0
million) in net revenues related to managed care businesses acquired after
September 30, 1993 and (e) a $1.5 million decrease in net patient revenues
related to the sold/closed facilities.
Same facility net inpatient revenues decreased even though same
facility patient days increased between periods due to a decrease in net
inpatient revenue per patient day. This decrease is due to a continued shift
in patient mix from charge-based payors to cost-based and negotiated per-diem
rate payors. Net revenue per patient day on cost-based and negotiated per-diem
rate payors is generally less than that for charge-based payors. In addition,
the rates received from per-diem rate payors has declined between periods. The
percentage of the Company's net revenues related to charge-based payors
decreased from 20% in the prior year comparable period to 18% in the current
period. Same facility net outpatient revenues increased from $6.3 million in
the prior year comparable period to $9.4 million the current year period due to
payor demands for increased outpatient treatment protocols, an expansion of
service levels and a market focus by facility CEOs to increase partial
hospitalization day services.
11
<PAGE> 14
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
Salaries, wages and benefits in the six months ended December 31, 1994
were $35.9 million, compared to $31.2 million in the comparable period of the
prior fiscal year. Same facility salaries, wages and benefits increased $1.1
million (from $28.3 million to $29.4 million) between periods, or 4%. In
addition, salaries, wages and benefits attributable to the managed care
businesses acquired and subacute operations totalled $4.3 million in the
current year period compared to $.3 million in the prior year comparable
period. These increases were partially offset by a decrease in salaries, wages
and benefits of $.8 million attributable to the sold/closed facilities.
Other operating expenses in the six months ended December 31, 1994
were $22.2 million, compared to $19.6 million in the comparable period of the
prior fiscal year. Same facility other operating expenses increased $.2
million between periods ($16.0 million in the current period compared to $15.8
million in the prior fiscal year period). Also, other operating expenses
attributable to the managed care businesses acquired and subacute operations
totalled $4.2 million in the current period, compared to $.7 million in the
prior year comparable period. These increases were partially offset by a
decrease of $.9 million in other operating expenses attributable to the
sold/closed facilities.
The provision for doubtful accounts in the six months ended December
31, 1994 totalled $2.6 million, compared to $3.0 million in the prior year
comparable period. The overall provision for doubtful accounts associated with
the same facilities decreased $.3 million while the provision for doubtful
accounts attributable to the sold/closed facilities decreased $.1 million. The
decrease in the provision for doubtful accounts attributable to the same
facilities is due to the aforementioned shift in the Company's overall payor
mix as the patient portion of billings due from cost-based and negotiated
per-diem rate payors is substantially less than those of charge-based payors.
Depreciation and amortization in the six months ended December 31,
1994 totalled $3.8 million, compared to $3.3 million in the prior year
comparable period. This increase is due to the depreciation and amortization
attributable to the managed care businesses acquired and subacute operations,
which totalled $.7 million in the current year period and $.1 million in the
prior year comparable period, net of a $.1 million decrease in depreciation and
amortization attributable to the sold/closed facilities.
Interest expense decreased from $4.5 million in the six months ended
December 31, 1993 to $4.3 million in the comparable 1994 period even though the
interest rate paid on the variable rate demand revenue bonds increased between
periods. Debt levels were reduced between periods through principal payments
of $5,650,000 on the senior secured notes, $462,000 on the subordinated secured
notes and $800,000 on the variable rate demand revenue bonds still outstanding.
In addition, in connection with the sale of Atlantic Shores Hospital in
February 1994, the variable rate demand revenue bonds associated with that
facility, totalling $4,300,000, were repaid.
Minority interests reflects the limited partners' share of net income
of Three Rivers Hospital and, since October 1994, the minority shareholders'
share of net income of RMCI.
12
<PAGE> 15
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
For the six months ended December 31, 1994, net revenues of RMCI
totalled $7.0 million (9.8% of total consolidated net revenues of the Company).
The Company intends to distribute the common stock of RMCI held by it to the
holders of the Company's common and preferred stock in March 1995. In
addition, RMCI reported net income before income taxes for the six months ended
December 31, 1994, after management fees payable to the Company totalling
$175,000, of $70,000. Management fees paid to the Company by all of the
Company's subsidiaries, including its managed care subsidiary, represent
reimbursement to the Company of its indirect costs for providing financial
oversight by Company employees and information systems and other support
provided by the Company. The amount of such fees are determined based upon an
estimate of the amount of time spent by Company employees in providing such
services. These management fees are eliminated upon consolidation and have no
effect on the consolidated results of operations of the Company.
FINANCIAL CONDITION
The Company records amounts due to or from third-party contractual
agencies (Medicare, Medicaid and Blue Cross) based on its best estimate, using
the principles of cost reimbursement, of amounts to be ultimately received or
paid under current and prior years' cost reports filed (or to be filed) with
the appropriate intermediaries. Ultimate settlements and other lump-sum
adjustments due from and paid to these intermediaries occur at various times
during the fiscal year. At December 31, 1994, amounts due from Medicare,
Medicaid and Blue Cross totalled $4.7 million, $3.3 million and $1.5 million,
respectively. Also at December 31, 1994, amounts due to Medicare, Medicaid and
Blue Cross totalled $3.8 million, $1.1 million and $.1 million, respectively.
During the six months ended December 31, 1994, amounts due from the Medicare
program increased $2.2 million as a result of cost report settlements and
current year estimates recorded by the Company. Also during the six months
ended December 31, 1994, amounts due from the Medicaid program increased $.3
million as a result of an increase in disproportionate share amounts owed the
Company from the State of Louisiana.
During the six months ended December 31, 1994, amounts owed to
minority interests increased $2.7 million. Included in minority interests are
minority stockholders of RMCI resulting from a $3.3 million private placement
of RMCI common stock made in October 1994 by RMCI to a corporate affiliate of
Paul J. Ramsay, Chairman of the Board, and three officers of RMCI. Effective
with this placement, the Company's ownership in RMCI decreased from 100% to
approximately 58%. Of the proceeds received by RMCI from the private
placement, $1 million was placed in restricted certificates of deposits in
connection with RMCI's application to obtain a license to operate a health
maintenance organization in the State of Louisiana, which license was granted
in December 1994. Accordingly, this amount is reported as "Cash Held in Trust"
in the accompanying balance sheet.
During the six months ended December 31, 1994, costs related to the
distribution of RMCI, the above mentioned private placement and the previously
announced rights offering to be effected by prospectus by RMCI, totalled
approximately $.95 million.
13
<PAGE> 16
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
These costs, which include accounting, legal, printing, investment banking and
distribution agent fees and expenses, are reported as "Other Non-current
Assets" in the accompanying balance sheet. Costs related to the distribution
will be charged to the operations of RMCI (and not the Company) on the date of
the distribution of RMCI and costs related to the private placement and rights
offering will be offset against additional paid-in capital of RMCI (and not
the Company) on the date of the distribution.
LIQUIDITY AND CAPITAL RESOURCES
The Company's credit facilities include $45,200,000 in senior secured
notes, approximately $22,000,000 in letters of credit, $2,538,000 in
subordinated secured notes and $4,000,000 in a working capital facility. The
senior secured notes bear interest at 11.6% and require semi-annual principal
payments of $3,531,000 through September 30, 1998 and semi-annual principal
payments of $5,650,000 from March 31, 1999 through March 31, 2000. The
subordinated secured notes bear interest at 15.6% and require semi-annual
principal payments of $231,000 through March 31, 2000. Required annual
principal payments on the variable rate demand revenue bonds total $800,000
through year 2000 and $900,000 to $1,300,000 in years 2001 through 2015.
Amounts outstanding under the working capital facility, which bear interest at
a variable rate, totalled $2,500,000 at December 31, 1994. The amount drawn is
structured as a revolving credit loan, which currently bears interest at 8.6%
and is renewable in 30, 60, and 90-day increments, at the option of the
Company. Under the provisions of the Credit Agreement, amounts outstanding
under the working capital facility must be reduced to no more than $1 million
for 45 consecutive days in each fiscal year.
At December 31, 1994, restricted cash included $2,256,000 held in
trust to partially pay the March 31, 1995 principal amount due on the senior
secured notes.
At December 31, 1994, the amounts outstanding on debentures and notes
payable associated with RMCI totalled approximately $2.7 million. This
liability will remain as a liability of RMCI (and not the Company) upon
distribution by the Company of the common stock held by the Company to the
Company's common and preferred stockholders in March 1995.
At the current time, the Company does not have any commitments to make
any material capital expenditures. The Company's current primary cash
requirements relate to its normal operating and debt service expenses, routine
capital improvements at its facilities and selective expansion of outpatient
programs and services. In addition, at the current time, the Company's
specific development projects include expansion of its management contract
operations and its network of affiliations with medical/surgical hospitals and
other healthcare providers. Construction costs in connection with the
Company's subacute business are complete as of December 31, 1994 and management
expects this business to generate positive cash flow from operations in the
coming months. Also, in June 1994, the Company closed two outpatient day
treatment centers which were experiencing negative cash flow.
14
<PAGE> 17
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
On the basis of its historical experience and projected cash needs,
the Company believes that its internally generated funds from operations,
together with its 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.
15
<PAGE> 18
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of Stockholders of the Company was held on November
28, 1994. At that meeting, the Board of Directors' selection of Ernst & Young
LLP as the Company's independent auditors for the fiscal year ending June 30,
1995 was ratified by a vote of 6,745,922 in favor, 10,250 against, 4,234
abstaining and 968,393 broker non-votes. The affirmative vote of a majority of
the shares of Company common stock represented and voting at the meeting was
required for approval.
During the Annual Meeting of Stockholders of the Company held on
November 28, 1994, nominees for directors of the Company were approved by a
vote of 6,754,558 in favor, 5,848 abstaining and 968,393 broker non-votes.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
The exhibits required to be filed as part of this Quarterly
Report on Form 10-Q are as follows:
Exhibit 11 Computation of Net Income per Share
Exhibit 27 Financial Data Schedule
(b) Current Reports on Form 8-K
There were no Current Reports on Form 8-K filed with the
Commission during the quarter ended December 31, 1994.
16
<PAGE> 19
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereupon duly authorized.
RAMSAY HEALTH CARE, INC.
Registrant
/s/ Gregory H. Browne
______________________________
Gregory H. Browne
Chief Executive Officer and
Principal Financial and
Accounting Officer
Date: February 14, 1995
17
<PAGE> 20
INDEX TO EXHIBITS
EXHIBIT DESCRIPTION
- - - ------- -----------
Exhibit 11 Computation of Net Income per Share
Exhibit 27 Financial Data Schedule
<PAGE> 1
Exhibit 11
RAMSAY HEALTH CARE, INC. AND SUBSIDIARIES
COMPUTATION OF NET INCOME PER SHARE
(UNAUDITED)
<TABLE>
<CAPTION>
QUARTER ENDED DECEMBER 31
-------------------------
1994 1993
------------ ------------
<S> <C> <C>
PRIMARY
Weighted average common shares outstanding . . . . . . . . 8,067,241 8,224,328
Class A convertible preferred stock . . . . . . . . . . . 22,910 22,910
Class B convertible preferred stock, Series C . . . . . . 1,424,860 1,424,860
--------- ---------
TOTAL COMMON AND DILUTIVE
COMMON EQUIVALENT SHARES . . . . . . . . . . . . . . 9,515,011 9,672,098
========= =========
Net Income Available to Common Shareholders . . . . . $ 437,000 $ 475,000
======= =======
NET INCOME PER SHARE . . . . . . . . . . . . . . . . $0.05 $0.05
==== ====
FULLY DILUTED
Weighted average common shares outstanding . . . . . . . . 8,079,176 8,224,328
Class A convertible preferred stock . . . . . . . . . . . 22,910 22,910
Class B convertible preferred stock, Series C . . . . . . 1,424,860 1,424,860
--------- ---------
TOTAL COMMON AND DILUTIVE
COMMON EQUIVALENT SHARES . . . . . . . . . . . . . . 9,526,946 9,672,098
========= =========
Net Income Available to Common Shareholders . . . . . $ 437,000 $ 475,000
======= =======
NET INCOME PER SHARE . . . . . . . . . . . . . . . . $0.05 $0.05
==== ====
SIX MONTHS ENDED DECEMBER 31
----------------------------
1994 1993
------------ ------------
PRIMARY
Weighted average common shares outstanding . . . . . . . . 8,063,747 8,211,155
Class A convertible preferred stock . . . . . . . . . . . 22,910 22,910
Class B convertible preferred stock, Series C . . . . . . 1,424,860 1,424,860
--------- ---------
TOTAL COMMON AND DILUTIVE
COMMON EQUIVALENT SHARES . . . . . . . . . . . . . . 9,511,517 9,658,925
========= =========
Net Income Available to Common Shareholders . . . . . $ 1,025,000 $ 1,083,000
========= =========
NET INCOME PER SHARE . . . . . . . . . . . . . . . . $0.11 $0.11
==== ====
FULLY DILUTED
Weighted average common shares outstanding . . . . . . . . 8,080,842 8,266,584
Class A convertible preferred stock . . . . . . . . . . . 22,910 22,910
Class B convertible preferred stock, Series C . . . . . . 1,424,860 1,424,860
--------- ---------
TOTAL COMMON AND DILUTIVE
COMMON EQUIVALENT SHARES . . . . . . . . . . . . . . 9,528,612 9,714,354
========= =========
Net Income Available to Common Shareholders . . . . . $ 1,025,000 $ 1,083,000
========= =========
NET INCOME PER SHARE . . . . . . . . . . . . . . . . $0.11 $0.11
==== ====
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1994
<PERIOD-START> OCT-01-1994
<PERIOD-END> DEC-31-1994
<CASH> 5,520,000
<SECURITIES> 0
<RECEIVABLES> 28,332,000
<ALLOWANCES> 4,524,000
<INVENTORY> 0
<CURRENT-ASSETS> 45,677,000
<PP&E> 149,424,000
<DEPRECIATION> 40,631,000
<TOTAL-ASSETS> 182,849,000
<CURRENT-LIABILITIES> 27,038,000
<BONDS> 62,209,000
<COMMON> 82,000
0
256,000
<OTHER-SE> 81,086,000
<TOTAL-LIABILITY-AND-EQUITY> 182,849,000
<SALES> 0
<TOTAL-REVENUES> 35,634,000
<CGS> 0
<TOTAL-COSTS> 29,444,000
<OTHER-EXPENSES> 2,136,000
<LOSS-PROVISION> 1,297,000
<INTEREST-EXPENSE> 2,144,000
<INCOME-PRETAX> 613,000
<INCOME-TAX> 176,000
<INCOME-CONTINUING> 437,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 437,000
<EPS-PRIMARY> 0.05
<EPS-DILUTED> 0.05
</TABLE>
