<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
AMENDMENT No. 1
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
SECURITIES EXCHANGE ACT OF 1934
Date of Report: June 10, 1996
Health Management Associates, Inc.
------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Delaware 000-18799 61-0963645
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
5811 Pelican Bay Blvd., Suite 500, Naples, Florida 34108
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (941) 598-3131
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(Former name or former address, if changed since last report)
This report consists of 47 pages.
The Index to Exhibits is located on page 44 of this Report
<PAGE>
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
- ----------------------------------------------------------------------------
[a] and [b] Financial Statements and Pro Forma Financial Information
The audited financial statements and unaudited pro forma financial
information related to the Company's acquisition of Midwest City Regional
Hospital, as disclosed in the Company's current Report on Form 8-K dated June
10, 1996, are included beginning at page 3 of this Report.
[c] Exhibits
See Index to Exhibits
2
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Midwest City Memorial Hospital Authority
d/b/a Midwest City Regional Hospital
Independent Accountants' Report on Financial Statements ............... 5
Balance Sheets - December 31, 1995 and 1994 ........................... 7
Consolidated Statements of Operations - for the years ended
December 31, 1995 and 1994 ......................................... 9
Consolidated Statements of Changes in Unrestricted Fund Balance -
for the years ended December 31, 1995 and 1994 ..................... 10
Consolidated Statements of Cash Flows - for the years ended
December 31, 1995 and 1994 ......................................... 11
Notes to Consolidated Financial Statements ............................ 13-30
Midwest City Memorial Hospital Authority
d/b/a Midwest City Regional Hospital
Condensed Balance Sheet - May 31, 1996 ................................ 32
Condensed Statement of Operations - for the five months
ended May 31, 1996 ................................................. 33
Condensed Statement of Cash Flows - for the five months
ended May 31, 1996 ................................................. 34
Notes to Financial Statements ......................................... 35
Health Management Associates, Inc.
Pro Forma Combined Condensed Consolidated Balance Sheet -
September 30, 1995 ................................................. 36
Pro Forma Combined Condensed Consolidated Statement of
Income - for the year ended September 30, 1995 ..................... 39
Pro Forma Combined Condensed Consolidated Statement of
Income - for the six months ended March 31, 1996 ................... 41
3
<PAGE>
Midwest City Memorial Hospital Authority
d/b/a Midwest City Regional Hospital
Accountants' Report and
Consolidated Financial Statements
December 31, 1995 and 1994
4
<PAGE>
MIDWEST CITY MEMORIAL HOSPITAL AUTHORITY
d/b/a MIDWEST CITY REGIONAL HOSPITAL
DECEMBER 31, 1995 AND 1994
CONTENTS
--------
Page
----
INDEPENDENT ACCOUNTANTS' REPORT
ON FINANCIAL STATEMENTS................................................. 6
CONSOLIDATED FINANCIAL STATEMENTS
Balance Sheets.................................................... 7
Statements of Operations.......................................... 9
Statements of Changes in Unrestricted Fund Balance................ 10
Statements of Cash Flows.......................................... 11 - 12
Notes to Financial Statements..................................... 13 - 30
5
<PAGE>
Independent Accountants' Report
-------------------------------
on Financial Statements
-----------------------
Board of Trustees
Midwest City Memorial Hospital Authority
d/b/a Midwest City Regional Hospital
Midwest City, Oklahoma
We have audited the accompanying consolidated balance sheets of MIDWEST
CITY MEMORIAL HOSPITAL AUTHORITY d/b/a MIDWEST CITY REGIONAL HOSPITAL as of
December 31, 1995 and 1994, and the related consolidated statements of
operations, changes in unrestricted fund balance, and cash flows for the years
then ended. These financial statements are the responsibility of the Authority's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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 financial position of MIDWEST CITY
MEMORIAL HOSPITAL AUTHORITY d/b/a MIDWEST CITY REGIONAL HOSPITAL as of December
31, 1995 and 1994, and the results of its operations and its cash flows for the
years then ended in conformity with generally accepted accounting principles.
As discussed in Note 14, the Authority changed its method of accounting
for certain investments in debt and equity securities in 1994.
BAIRD, KURTZ & DOBSON
March 8, 1996
6
<PAGE>
MIDWEST CITY MEMORIAL HOSPITAL AUTHORITY
d/b/a MIDWEST CITY REGIONAL HOSPITAL
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
ASSETS
------
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 1,777,072 $ 2,135,357
Assets limited as to use - current 3,480,814 2,878,095
Accounts receivable, less allowance for
uncollectible accounts: 1995 - $5,200,000,
1994 - $2,800,000 12,269,675 11,553,683
Accounts receivable - other 105,600 64,055
Supplies 1,309,974 1,096,625
Prepaid expenses 478,618 434,524
Estimated amount due from Medicare 800,000
----------- -----------
Total Current Assets 19,421,753 18,962,339
----------- -----------
ASSETS LIMITED AS TO USE
Held by Trustees 5,549,579 5,314,134
Internally designated for capital improvements 8,760,935 1,821,839
Internally designated under workers'
compensation agreement 269,898 2,130
Internally designated under self-insured
malpractice liability trust 1,000,000 1,839,134
Internally designated under employee
benefit agreement and held by trustee 404,529
----------- -----------
15,984,941 8,977,237
Less amount required to meet current
obligations 3,480,814 2,878,095
----------- -----------
12,504,127 6,099,142
----------- -----------
INVESTMENTS 109,000 44,591
----------- -----------
PROPERTY AND EQUIPMENT, Net 43,464,992 45,859,550
----------- -----------
OTHER ASSETS 1,563,374 1,293,312
----------- -----------
$77,063,246 $72,258,934
=========== ===========
</TABLE>
See Notes to Consolidated Financial Statements
7
<PAGE>
LIABILITIES AND FUND BALANCE
----------------------------
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
CURRENT LIABILITIES
Current maturities of long-term debt $ 1,770,805 $ 1,653,292
Accounts payable 1,763,086 1,730,877
Accrued payroll and other expenses 6,031,345 4,533,132
Accrued interest payable 1,066,825 1,089,969
Estimated amount due to Medicare 865,000
----------- -----------
Total Current Liabilities 11,497,061 9,007,270
----------- -----------
LONG-TERM DEBT 39,632,487 41,119,531
----------- -----------
MINORITY INTEREST 23,118 16,341
----------- -----------
UNRESTRICTED FUND BALANCE 25,910,580 22,115,792
----------- -----------
$77,063,246 $72,258,934
=========== ===========
</TABLE>
See Notes to Consolidated Financial Statements
8
<PAGE>
MIDWEST CITY MEMORIAL HOSPITAL AUTHORITY
d/b/a MIDWEST CITY REGIONAL HOSPITAL
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1995 AND 1994
1995 1994
------------ ------------
REVENUES, GAINS, AND OTHER SUPPORT
Net patient service revenue $ 71,185,871 $ 61,222,491
Other 1,268,784 1,213,049
------------ ------------
72,454,655 62,435,540
------------ ------------
EXPENSES
Salaries and wages 24,322,834 22,863,432
Employee benefits 5,927,574 6,248,136
Purchased services 8,968,305 8,065,320
Medical supplies and drugs 10,374,864 9,940,800
Supplies and other 5,592,687 5,088,136
Interest 3,197,439 3,035,795
Depreciation and amortization 5,072,299 4,476,680
Provision for uncollectible accounts 6,097,334 3,851,089
------------ ------------
69,553,336 63,569,388
------------ ------------
OPERATING INCOME (LOSS) 2,901,319 (1,133,848)
------------ ------------
OTHER INCOME (EXPENSE)
Loss on sale of equipment (18,124) (3,530)
Unrestricted contributions 3,100
Income from investments 525,072 381,766
Gain on settlement of lawsuit 546,845
------------ ------------
506,948 928,181
------------ ------------
EXCESS (DEFICIT) OF REVENUES OVER
(UNDER) EXPENSES BEFORE MINORITY
INTEREST 3,408,267 (205,667)
MINORITY INTEREST IN NET INCOME OF
AFFILIATE (46,115) (16,341)
------------ ------------
EXCESS (DEFICIT) OF REVENUES
OVER (UNDER) EXPENSES $ 3,362,152 $ (222,008)
============ ============
See Notes to Consolidated Financial Statements
9
<PAGE>
MIDWEST CITY MEMORIAL HOSPITAL AUTHORITY
d/b/a MIDWEST CITY REGIONAL HOSPITAL
STATEMENTS OF CHANGES
IN UNRESTRICTED FUND BALANCE
YEARS ENDED DECEMBER 31, 1995 AND 1994
BALANCE, DECEMBER 31, 1993 $ 22,460,782
------------
Adoption of SFAS 115 135,986
Excess (deficit) of revenues over
(under) expenses (222,008)
Changes in unrealized losses on
available-for-sale securities (258,968)
------------
(344,990)
------------
BALANCE, DECEMBER 31, 1994 22,115,792
------------
Excess of revenues over expenses 3,362,152
Changes in unrealized gains on
available-for-sale securities 371,875
Contributions for equipment purchases 60,761
------------
3,794,788
------------
BALANCE, DECEMBER 31, 1995 $ 25,910,580
============
See Notes to Consolidated Financial Statements
10
<PAGE>
MIDWEST CITY MEMORIAL HOSPITAL AUTHORITY
d/b/a MIDWEST CITY REGIONAL HOSPITAL
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Operating income (loss) $ 2,901,319 $ (1,133,848)
Interest expense considered financing activity 3,197,439 3,035,795
Gain on settlement of lawsuit 546,845
Items not requiring (providing) cash:
Depreciation and amortization 5,072,299 4,476,680
Gain on reversion of pension plan assets (154,600)
Changes in:
Patient and other accounts receivable, net (711,937) 472,824
Estimated third-party settlement 1,665,000 (1,036,886)
Supplies and prepaid expenses 142,131 884,381
Accounts payable and accrued expenses 751,618 618,602
Other (6,777) 9,223
------------ ------------
Net cash provided by operating activities 12,856,492 7,873,616
------------ ------------
CASH FLOWS FROM NONCAPITAL
FINANCING ACTIVITIES
Unrestricted donations 3,100
Payment of organizational costs (59,196)
------------
Net cash used in noncapital financing
activities (56,096)
------------
CASH FLOWS FROM CAPITAL AND RELATED
FINANCING ACTIVITIES
Principal payments on long-term debt (1,710,504) (1,473,531)
Interest paid on long-term debt (3,220,583) (3,206,777)
Purchase of property and equipment (2,106,709) (5,991,789)
Proceeds from issuance of long-term debt 2,079,611
Proceeds from sale of equipment 7,590
Proceeds from contributions for equipment
purchases 60,761
------------ ------------
Net cash used in capital and related
financing activities (6,969,445) (8,592,486)
------------ ------------
</TABLE>
See Notes to Consolidated Financial Statements
11
<PAGE>
MIDWEST CITY MEMORIAL HOSPITAL AUTHORITY
d/b/a MIDWEST CITY REGIONAL HOSPITAL
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Continued)
YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in Renaissance Women's Center,
L.L.C., net of cash acquired $ (583,695) $(1,107,079)
Proceeds from sales of investments 1,279,805 2,704,192
Income from investments 585,043 555,156
Net change in bond trustee funds (235,445) 321,298
Purchases of available-for-sale securities (8,888,038) (682,174)
Net change in internally designated funds 2,311,626 (1,450,312)
----------- -----------
Net cash provided by (used in) investing
activities (5,530,704) 341,081
----------- -----------
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 356,343 (433,885)
CASH AND CASH EQUIVALENTS, BEGINNING
OF YEAR 2,671,959 3,105,844
----------- -----------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 3,028,302 $ 2,671,959
=========== ===========
RECONCILIATION OF CASH AND CASH
EQUIVALENTS TO THE BALANCE SHEETS:
Cash and cash equivalents $ 1,777,072 $ 2,135,357
Cash in assets limited as to use
Internally designated for capital improvements 577,037 534,472
Internally designated under workers'
compensation agreement 269,898 2,130
Internally designated under employee benefit
agreement and held by trustee 404,295
----------- -----------
$ 3,028,302 $ 2,671,959
=========== ===========
SUPPLEMENTAL CASH FLOW INFORMATION:
Capital lease obligation incurred for equipment $ 340,973 $ 1,356,791
Fixed asset purchases in accounts payable $ 235,906 $ 261,205
Insurance premiums financed $ 399,574
</TABLE>
See Notes to Consolidated Financial Statements
12
<PAGE>
MIDWEST CITY MEMORIAL HOSPITAL AUTHORITY
d/b/a MIDWEST CITY REGIONAL HOSPITAL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
NOTE 1: NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
Nature of Operations
- --------------------
Midwest City Memorial Hospital Authority (the Authority) was created under
a trust indenture as a public trust under provisions of Title 60 of the Oklahoma
Statutes for the benefit of Midwest City, Oklahoma.
The Authority operates Midwest City Regional Hospital under a bargain
lease agreement with the city of Midwest City, Oklahoma. Under generally
accepted accounting principles, the Authority constitutes a component unit of
the city of Midwest City, Oklahoma, for financial reporting purposes. The
Authority is a discretely presented component unit for financial reporting
purposes of the city of Midwest City.
The Authority primarily earns revenue by providing inpatient, outpatient,
and emergency care services to patients in Midwest City, Oklahoma. The Authority
also operates a geriatric psychiatric unit, a skilled nursing unit, as well as a
home health agency, and provides ambulance services in the same geographic area.
Principles of Consolidation
- ---------------------------
The consolidated financial statements include the accounts of the
Authority and its 99% owned affiliate, Renaissance Women's Center, L.L.C. (LLC).
The LLC owns a free-standing obstetrics facility in Midwest City, Oklahoma, and
leases space in the facility to the Authority and other tenants. All significant
intercompany accounts and transactions have been eliminated in consolidation.
Cash Equivalents
- ----------------
The Authority considers all liquid investments, other than those limited
as to use, with original maturities of three months or less to be cash
equivalents. At December 31, 1995 and 1994, cash equivalents consisted primarily
of money market mutual funds.
13
<PAGE>
MIDWEST CITY MEMORIAL HOSPITAL AUTHORITY
d/b/a MIDWEST CITY REGIONAL HOSPITAL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
NOTE 1: NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (Continued)
Supplies
- --------
All supply inventories are stated at the lower of cost or market with cost
determined using the FIFO (first-in, first-out) method.
Use of Estimates
- ----------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Proprietary Fund Accounting
- ---------------------------
The Authority utilizes the propriety fund method of accounting whereby
revenues and expenses are recognized on the accrual basis. Pursuant to
Governmental Accounting Standards Board (GASB) Statement No. 20, Accounting and
Financial Reporting for Proprietary Funds and Other Governmental Entities That
Use Proprietary Fund Accounting, the Authority has elected to apply the
provisions of all relevant pronouncements of the Financial Accounting Standards
Board (FASB).
Assets Limited as to Use
- ------------------------
Assets limited as to use are (1) assets held by trustees and (2)
internally designated unrestricted assets set aside by the Board of Trustees for
future capital improvements, malpractice claim payments, and employee benefit
payments over which the Board retains control and may at its discretion
subsequently use for other purposes. Amounts required to meet current
obligations of the Authority are included in current assets.
14
<PAGE>
MIDWEST CITY MEMORIAL HOSPITAL AUTHORITY
d/b/a MIDWEST CITY REGIONAL HOSPITAL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
NOTE 1: NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (Continued)
Property and Equipment
- ----------------------
Property and equipment are carried at cost and are depreciated on a
straight-line basis over the estimated useful life of each asset following
guidelines of the American Hospital Association. Assets under capital lease
obligations are amortized over the shorter of the lease term or their respective
estimated useful lives. Amortization of assets subject to leases is reported as
part of depreciation expense.
The Authority capitalizes interest costs as a component of construction in
progress based on the weighted average rates paid for long-term borrowing. Total
interest incurred each year was:
1995 1994
----------- ----------
Interest costs capitalized $ $ 116,839
Interest costs charged to expense 3,197,439 3,035,795
----------- ----------
Total interest incurred $ 3,197,439 $3,152,634
=========== ==========
Donated property and equipment is reported at fair market value as an increase
in unrestricted fund balance unless use of the assets is restricted by the
donor. Monetary gifts that must be used to acquire property and equipment are
reported as restricted support. The expiration of such restrictions is reported
as an increase in unrestricted fund balance when the donated asset is placed in
service.
Investments
- -----------
Available-for-sale securities, which include any security for which the
Authority has no immediate plan to sell but which may be sold in the future, are
carried at fair value. Realized gains and losses, determined on an individual
security basis, are included in income from investments. Unrealized gains and
losses are recorded in the unrestricted fund balance.
Trading securities, which include any security held primarily for
near-term sale, are carried at fair value. Gains and losses on trading
securities, both realized and unrealized, are included in income from
investments.
Interest and dividends on investment securities are included in income
from investments when earned.
15
<PAGE>
MIDWEST CITY MEMORIAL HOSPITAL AUTHORITY
d/b/a MIDWEST CITY REGIONAL HOSPITAL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
NOTE 1: NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (Continued)
Income Taxes
- ------------
The Authority is exempt from income taxes under Section 115 of the
Internal Revenue Code as a political subdivision of the state of Oklahoma.
Debt Issuance Costs
- -------------------
Debt issuance costs, which are included in other assets, are being
amortized using the effective interest method over the term of the related debt.
Net Patient Service Revenue
- ---------------------------
The Authority has agreements with third-party payors that provide for
payments to the Authority at amounts different from its established rates. Net
patient service revenue is reported at the estimated net realizable amounts from
patients, third-party payors, and others for services rendered, including
estimated retroactive adjustments under reimbursement agreements with
third-party payors. Retroactive adjustments are accrued on an estimated basis in
the period the related services are rendered and adjusted in future periods as
final settlements are determined.
Estimated Malpractice Costs
- ---------------------------
An annual estimated provision is accrued for the self-insured portion of
medical malpractice claims and includes an estimate of the ultimate costs for
both reported claims and claims incurred but not reported.
Reclassifications
- -----------------
Certain reclassifications have been made to the 1994 financial statements
to conform to the 1995 presentation. The reclassifications had no effect on net
operations.
16
<PAGE>
MIDWEST CITY MEMORIAL HOSPITAL AUTHORITY
d/b/a MIDWEST CITY REGIONAL HOSPITAL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
NOTE 1: NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (Continued)
Charity Care
- ------------
The Authority provides care without charge or at amounts less than its
established rates to patients meeting certain criteria under its charity care
policy. Charity care is not reported as net patient service revenue.
NOTE 2: NET PATIENT SERVICE REVENUE
The Authority has agreements with third-party payors that provide for
payments to the Authority at amounts different from its established rates. These
payment arrangements include:
o Medicare - Inpatient acute care services rendered to Medicare
program beneficiaries are paid at prospectively determined rates per
discharge. These rates vary according to a patient classification
system that is based on clinical, diagnostic, and other factors.
Inpatient nonacute services and certain outpatient services provided
to Medicare beneficiaries are paid based on a cost reimbursement
methodology. The Authority is reimbursed for cost reimbursable items
at a tentative rate with final settlement determined after
submission of annual cost reports by the Authority and audits
thereof by the Medicare Fiscal Intermediary. The Authority's
Medicare cost reports have been audited by the Medicare Fiscal
Intermediary through December 31, 1992.
o Medicaid - The Authority has also been reimbursed for services
rendered to patients covered by the state Medicaid program on a
prospective basis at set per diem rates with no retroactive
adjustment.
The Authority has also entered into payment agreements with certain
commercial insurance carriers, health maintenance organizations, and preferred
provider organizations. The basis for payment to the Authority under these
agreements includes prospectively determined rates per discharge, discounts from
established charges, and prospectively determined daily rates.
17
<PAGE>
MIDWEST CITY MEMORIAL HOSPITAL AUTHORITY
d/b/a MIDWEST CITY REGIONAL HOSPITAL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
NOTE 3: ASSETS LIMITED AS TO USE
Assets limited as to use are stated at approximate fair value. The
composition of assets limited as to use at December 31, 1995 and 1994, is set
forth in the following table:
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Held by Trustee under Bond Indenture Agreement:
U.S. Treasury Notes $2,160,188 $
Guaranteed Investment Contract 1,570,349 1,570,349
U.S. Governmental Securities Mutual Funds 1,767,142 3,698,545
Interest receivable 51,900 45,240
---------- ----------
$5,549,579 $5,314,134
========== ==========
Internally designated for capital improvements:
U.S. Treasury Notes $7,879,481 $
Mortgage-Backed Securities 410,488
Interest Only Securities 695,269
Certificates of Deposit 506,677 397,000
U.S. Governmental Securities Mutual Fund 81,886 127,646
Money Market Mutual Funds 53,964
Cash 70,360 137,472
Interest receivable 222,531
---------- ----------
$8,760,935 $1,821,839
========== ==========
Internally designated under workers' compensation
agreement:
Cash $ 269,898 $ 2,130
========== ==========
Internally designated under self-insured malpractice liability
trust:
U.S. Treasury Notes $1,000,000 $
U.S. Governmental Securities Mutual Fund 1,138,019
Money Market Mutual Fund 701,115
---------- ----------
$1,000,000 $1,839,134
========== ==========
Internally designated under employee benefit agreement and
held by trustee:
Cash $ 404,295
==========
</TABLE>
18
<PAGE>
MIDWEST CITY MEMORIAL HOSPITAL AUTHORITY
d/b/a MIDWEST CITY REGIONAL HOSPITAL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
NOTE 4: DEPOSITS AND INVESTMENTS
At December 31, 1995 and 1994, the Authority had bank balances as follows:
1995 1994
---------- ----------
Insured (FDIC) $ 364,491 $ 730,146
Collateralized by securities held by
the financial institutions' agent
in the Authority's name 3,025,262 1,699,060
Uncollateralized 176,647 102,091
---------- ----------
Total $3,566,400 $2,531,297
========== ==========
Carrying Value $2,624,009 $1,907,604
========== ==========
At December 31, 1995 and 1994, the Authority had investments in money
market mutual funds held at investment brokers, whose cost approximates fair
value, as follows:
1995 1994
---------- ----------
Cash and cash equivalents $ 78,385 $ 714,312
Assets limited as to use 755,079
---------- ----------
$ 78,385 $1,469,391
========== ==========
The cost or amortized cost and approximate fair value of
available-for-sale equity and debt securities are as follows:
<TABLE>
<CAPTION>
December 31, 1995
---------------------------------------------------------
Cost or Gross Gross Approximate
mortized Unrealized Unrealized Fair
Cost Gains (Losses) Value
----------- ----------- --------- -----------
<S> <C> <C> <C> <C>
U.S. Treasury Notes $10,790,773 $ 248,893 $ $11,039,666
U.S. Governmental
Securities Mutual Funds 1,850,445 1,850,445
Guaranteed Investment
Contract (GIC) 1,570,349 1,570,349
----------- ----------- --------- -----------
$14,211,567 $ 248,893 $ $14,460,460
=========== =========== ========= ===========
</TABLE>
19
<PAGE>
MIDWEST CITY MEMORIAL HOSPITAL AUTHORITY
d/b/a MIDWEST CITY REGIONAL HOSPITAL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
NOTE 4: DEPOSITS AND INVESTMENTS (Continued)
<TABLE>
<CAPTION>
December 31, 1994
---------------------------------------------------------
Cost or Gross Gross Approximate
Amortized Unrealized Unrealized Fair
Cost Gains (Losses) Value
----------- ----------- --------- -----------
<S> <C> <C> <C> <C>
U.S. Governmental
Securities Mutual Funds $ 5,181,409 $ $(122,982) $ 5,058,427
Guaranteed Investment
Contract (GIC) 1,570,349 1,570,349
----------- ----------- --------- -----------
$ 6,751,758 $ $(122,982) $ 6,628,776
=========== =========== ========= ===========
</TABLE>
Approximate
Maturities of available-for-sale debt securities Amortized Fair
at Dece7ber 31, 1995: Cost Value
----------- -----------
One year or less $ 2,808,640 $ 2,817,171
After one through five years 6,021,942 6,088,151
After five through ten years 1,960,191 2,134,344
After ten years 1,570,349 1,570,349
----------- -----------
$12,361,122 $12,610,015
=========== ===========
Gross realized gains of $1,596 and $15,220 and gross realized losses of
$61,567 and $298,144 resulting from sales of available-for-sale securities were
realized during the years ended December 31, 1995 and 1994, respectively.
Proceeds from the sale of available-for-sale securities was $1,279,805 and
$2,704,192 for the years ended December 31, 1995 and 1994, respectively.
At December 31, 1994, the Authority's trading securities consisted of
mortgage-backed securities and interest only securities not due on a single
maturity date. These investments were sold during 1995.
At December 31, 1994, Authority management determined various
available-for-sale securities should be liquidated as soon as possible and began
actively marketing the securities for sale. At that time, those securities were
transferred from the available-for-sale category to the trading category which
resulted the net unrealized loss of $145,588 being recognized and included in
the income from investment on the accompanying 1994 statement of operations.
These investments were sold during 1995.
All securities are held in the Authority's name by a custodial bank that
is the agent of the Authority.
20
<PAGE>
MIDWEST CITY MEMORIAL HOSPITAL AUTHORITY
d/b/a MIDWEST CITY REGIONAL HOSPITAL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
NOTE 5: LONG-TERM DEBT
1995 1994
----------- -----------
Hospital Revenue Refunding
Bonds, Series 1987 (A) $19,495,000 $19,975,000
Hospital Revenue Bonds, Series 1992 (B) 17,270,000 17,500,000
Note payable, bank (C) 2,338,850 2,545,550
Capital lease obligations (D) 2,299,442 2,752,273
----------- -----------
41,403,292 42,772,823
Less current maturities 1,770,805 1,653,292
----------- -----------
$39,632,487 $41,119,531
=========== ===========
Aggregate annual maturities of long-term debt and payments on capital
lease obligations at December 31, 1995, are:
Long-Term Capital Lease
Debt Obligations
----------- -----------
1996 $ 1,770,805 $ 956,258
1997 1,840,081 919,030
1998 3,216,769 475,409
1999 1,121,640 219,769
2000 973,997 4,035
Thereafter 32,480,000
----------- -----------
$41,403,292 2,574,501
===========
Less amount representing interest 275,059
-----------
Present value of future minimum
lease payments 2,299,442
Less current maturities 809,105
-----------
Noncurrent portion $ 1,490,337
===========
21
<PAGE>
MIDWEST CITY MEMORIAL HOSPITAL AUTHORITY
d/b/a MIDWEST CITY REGIONAL HOSPITAL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
NOTE 5: LONG-TERM DEBT (Continued)
(A) Due July 1, 2014; principal payable annually in varying amounts plus
semi-annual interest payments at interest rates between 6.4% and
7.5%; secured by a pledge of the gross revenue of the Authority and
investments held by Bond Trustee.
In March 1987, the Authority issued $22,650,000 of Series 1987
Hospital Revenue Refunding Bonds with an average interest rate of
7.3% of which a portion of the proceeds was used to advance refund
the outstanding Series 1984A Hospital Revenue Bonds. Those proceeds
were used to purchase U.S. government securities. Those securities
were deposited in an irrevocable trust with an escrow agent to
provide for all future debt service payments on the Series 1984A
Hospital Revenue Bonds. As a result, the Series 1984A Hospital
Revenue Bonds are considered to be defeased, and the liability for
those bonds has been removed from the Authority's balance sheets. At
December 31, 1995 and 1994, the principal amount outstanding of the
Series 1984A Hospital Revenue Bonds was $1,855,000 and $2,225,000,
respectively.
(B) Due April 1, 2022; principal payable annually in varying amounts plus
semi-annual interest payments at interest rates between 7% to 10%;
secured by a pledge of the gross revenue of the Authority and
investments held by Bond Trustee.
(C) Due November 1998; payable in monthly principal installments of
$17,225 plus interest at 8.75%; secured by first mortgage on the
LLC's property and improvements, assignment of rents, and a guarantee
by the Authority.
(D) Capital lease obligations at varying rates of imputed interest from
7.1% to 11.5% maturing through 2000 are collateralized by equipment.
Property and equipment include the following property under capital
leases:
1995 1994
----------- -----------
Equipment $ 4,051,963 $ 3,930,512
Less accumulated depreciation 1,650,756 943,123
----------- -----------
$ 2,401,207 $ 2,987,389
=========== ===========
22
<PAGE>
MIDWEST CITY MEMORIAL HOSPITAL AUTHORITY
d/b/a MIDWEST CITY REGIONAL HOSPITAL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
NOTE 6: RISK MANAGEMENT
The Authority is exposed to various risks of loss from torts; theft of,
damage to, and destruction of assets; business interruption; errors and
omissions; employee injuries and illnesses; natural disasters; and employee
health, dental, and accident benefits. Commercial insurance coverage is
purchased for claims arising from such matters other than those related to
employee health benefits, workers' compensation, and medical malpractice claims.
In 1995, the Authority acquired a claims-made insurance policy for medical
malpractice claims incurred after June 30, 1995, and filed subsequently. Settled
claims have not exceeded this commercial coverage in any of the three preceding
years.
Pending Litigation
- ------------------
Certain malpractice claims, other lawsuits, and threatened claims have
been asserted against the Authority by various claimants. Some of the claims may
ultimately be brought to trial. Authority management and legal counsel are
presently unable to conclude about the ultimate outcome of the claims.
Management and legal counsel believe the Authority has strong defenses against
these claims and intend to vigorously defend these suits.
Workers' Compensation and Health Care Coverages
- -----------------------------------------------
The Authority's employees are covered for workers' compensation and health
care benefits under self-insured plans. The plans are self-insured by the
Authority to the extent of the deductible amounts under the excess risk
insurance policies the Authority has purchased.
Coverage limits under the plans are currently as follows:
Workers' Compensation - First $250,000 per individual per year.
Health care - First $75,000 per person per year.
The Authority provides health care coverage for its employees through a
Voluntary Employees' Beneficiary Association (VEBA) Trust. The VEBA is funded
through contributions made by the Authority and its employees. At December 31,
1995, the VEBA was underfunded. Therefore, an accrual for the underfunding of
the VEBA is recorded on the Authority's 1995 balance sheet. At December 31,
1994, there was no underfunding of the VEBA.
23
<PAGE>
MIDWEST CITY MEMORIAL HOSPITAL AUTHORITY
d/b/a MIDWEST CITY REGIONAL HOSPITAL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
NOTE 6: RISK MANAGEMENT (Continued)
Workers' Compensation and Health Care Coverages (Continued)
- -----------------------------------------------
The Authority accrues the expense of its share of workers' compensation
claim costs based on claims filed subsequent to year end and an estimate for
anticipated unfiled claims based on past experience. At December 31, 1995 and
1994, an accrual for workers' compensation claim costs of $575,000 and $440,000,
respectively, is included in the accompanying consolidated balance sheets. Based
on historical experience, the Authority estimates these claims to be settled
currently and thus, the liability is shown as current.
Medical Malpractice Claims
- --------------------------
The Authority is self-insured with respect to medical malpractice risks
for incidents occurring on or before June 30, 1995, to the extent of the
deductible amounts under a stop-loss policy. The stop-loss coverage is
maintained on an occurrence basis for individual and aggregate covered claims in
excess of $1,000,000 and $3,000,000, respectively. Effective July 1, 1995, the
Authority purchased medical malpractice insurance under a claims-made policy for
liability arising from claims made on or after July 1, 1995. Under the policy,
only claims made and reported to the insurer during the policy term are covered.
The Authority accrues the expense of its share of covered claims, if any, plus
unasserted claims and unreported incidents occurring during the year by
estimating the probable ultimate cost of any related claims. Such estimates are
based on the Authority's own claims experience. To supplement the above
insurance coverage, the Authority has purchased an umbrella excess liability
policy to cover aggregate annual claim costs which are in excess of the
individual and aggregate coverages. The assets of the self-insured plan are
maintained in the Midwest City Regional Hospital Self-Insurance Trust and are
included in assets limited as to use on the consolidated balance sheets. At
December 31, 1995 and 1994, an accrual for malpractice claim costs of $1,400,000
and $1,200,000, respectively, is included in the accompanying consolidated
balance sheets.
During 1994, the Authority received a lawsuit settlement of $546,845 (net
of attorney costs) related to prior years' insurance premiums misappropriated by
the Hospital's insurance broker.
Accrued expenses on the consolidated balance sheets include an accrual for
claims which have been incurred but not reported. Claims liabilities are
reevaluated periodically to take into consideration recently settled claims,
frequency of claims, and other economic and social factors.
24
<PAGE>
MIDWEST CITY MEMORIAL HOSPITAL AUTHORITY
d/b/a MIDWEST CITY REGIONAL HOSPITAL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
NOTE 6: RISK MANAGEMENT (Continued)
Medical Malpractice Claims (Continued)
Changes in the balance of claims liabilities during 1995 and 1994 are
summarized as follows:
<TABLE>
<CAPTION>
Workers' Compensation
---------------------------
1995 1994
----------- -----------
<S> <C> <C>
Balance, beginning of year $ 440,000 $ 341,305
Current year provision for claims payments
and plan expenses 546,548 478,783
Claim payments and plan expenses (411,548) (380,088)
----------- -----------
Balance, end of year $ 575,000 $ 440,000
=========== ===========
<CAPTION>
Medical Malpractice Claims
---------------------------
1995 1994
----------- -----------
<S> <C> <C>
Balance, beginning of year $ 1,200,000 $ 967,827
Current year provision for claims payments
and plan expenses 280,000 409,336
Claim payments and plan expenses (80,000) (177,163)
----------- -----------
Balance, end of year $ 1,400,000 $ 1,200,000
=========== ===========
</TABLE>
NOTE 7: OPERATING LEASES
Noncancellable operating leases for medical equipment expire in various
years through 2000. Future minimum lease payments at December 31, 1995, were:
<TABLE>
<S> <C>
1996 $ 220,143
1997 88,110
1998 72,047
1999 39,456
2000 3,000
-----------
$ 422,756
===========
</TABLE>
Equipment rental expense under the above noncancellable leases and other
operating lease agreements totaled approximately $685,000 and $630,000 for the
years ended December 31, 1995 and 1994, respectively.
25
<PAGE>
MIDWEST CITY MEMORIAL HOSPITAL AUTHORITY
d/b/a MIDWEST CITY REGIONAL HOSPITAL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
NOTE 8: SIGNIFICANT ESTIMATES AND CONCENTRATIONS
Generally accepted accounting principles require disclosure of certain
significant estimates and current vulnerability due to certain concentrations.
Estimates of allowances for adjustments included in net patient revenues
are described in Note 2. Estimates related to the accrual for medical
malpractice claims are described in Notes 1 and 6. Estimates related to the
accrual for workers' compensation and employee health care claims are described
in Note 6.
NOTE 9: PROPERTY AND EQUIPMENT
Property and equipment at December 31, 1995 and 1994, consist of the
following:
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Land and land improvements $ 2,047,722 $ 1,223,880
Building, improvements, and fixed equipment 45,184,755 44,720,075
Construction in progress 35,720 97,493
Major moveable equipment 28,766,196 27,768,977
----------- -----------
76,034,393 73,810,425
Less accumulated depreciation 32,569,401 27,950,875
----------- -----------
$43,464,992 $45,859,550
=========== ===========
</TABLE>
NOTE 10: PENSION PLANS
Defined Benefit Plan
- --------------------
The Authority had a noncontributory defined benefit pension plan covering
all employees who meet the Plan eligibility requirements. To be eligible, an
employee must have been 21 years of age and be a full-time employee completing
1,040 hours of service during the year. The Plan provided benefits based on the
employee's years of service and compensation over the highest five consecutive
years subject to certain reductions if the employee retired before reaching age
65. The Authority's funding policy was based on actuarially determined service
costs.
26
<PAGE>
MIDWEST CITY MEMORIAL HOSPITAL AUTHORITY
d/b/a MIDWEST CITY REGIONAL HOSPITAL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
NOTE 10: PENSION PLANS (Continued)
Defined Benefit Plan (Continued)
- --------------------
Net pension cost for the Authority's defined benefit pension plan
consisted of the following components for the year ended December 31, 1994:
Service cost $ 1,138,730
Interest cost on projected benefit obligation 860,004
Actual return on plan assets (218,832)
Net amortization and deferral (288,090)
-----------
1,491,812
Gain on curtailment of pension plan (517,951)
-----------
Net pension cost $ 973,861
===========
Assumptions used by the Authority in the determination of net pension cost
consisted of the following as of December 31, 1994:
Discount rate 7.5%
Rate of increase in compensation levels 4.0%
Expected long-term rate of return on plan assets 8.0%
During 1994, the Authority's board elected to curtail the pension plan
effective August 15, 1994, at which time all participants became fully vested.
The Authority board then determined to terminate the pension plan effective
September 6, 1994. The vested benefits due to Plan participants when benefit
accruals were frozen at the curtailment date was approximately $9,247,000 which
resulted in a net gain of approximately $518,000 which was recognized by the
Authority in the accompanying 1994 consolidated financial statements.
In 1995, the Plan trustee liquidated and distributed the assets of the
Plan. The fair value of the assets upon liquidation was approximately $559,000
greater than the estimated fair value at December 31, 1994. The Authority has
elected to distribute $404,529 of these excess funds, net of expenses, to the
qualifying participants of the Plan. Accordingly, a liability for this amount is
included in the accompanying 1995 consolidated balance sheet. The remaining
assets reverted to the Authority and a gain of $154,900 was recognized by the
Authority in 1995. The funds to be distributed to employees are included on the
Authority's 1995 consolidated balance sheet in assets limited as to use.
27
<PAGE>
MIDWEST CITY MEMORIAL HOSPITAL AUTHORITY
d/b/a MIDWEST CITY REGIONAL HOSPITAL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
NOTE 10: PENSION PLANS (Continued)
Defined Contribution Plan
- -------------------------
The Authority also has a defined contribution pension plan, the Midwest
City Regional Hospital Employees' Incentive Plan (Incentive Plan), which covers
all full-time employees who have at least one year of service and are age 21 or
older. Contributions to the plan are at the sole discretion of the Incentive
Plan's Trustees. Employees become vested in the plan on a seven year graduated
vesting schedule. Pension expense for the Incentive Plan for the years ended
December 31, 1995 and 1994, was approximately $1,090,000 and $354,000,
respectively.
On March 7, 1996, the Authority elected to terminate the Incentive Plan on
or before September 30, 1996, dependent upon the execution of the proposed lease
agreement with Health Management Associates, Inc. (See Note 16.)
NOTE 11: CHARITY CARE
Charges excluded from net patient service revenue under the Authority's
charity care policy were approximately $1,000,000 and $1,804,000 for the years
ended December 31, 1995 and 1994, respectively.
NOTE 12: FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used by the Authority in
estimating the fair value of its financial instruments at December 31, 1995:
Cash and Cash Equivalents - The carrying amount reported in the balance
sheet for cash and cash equivalents approximates its fair value.
Assets Limited as to Use - Fair values are based on quoted market prices,
if available, or estimated using quoted market prices for similar
securities.
Investments - Fair value is estimated using discounted cash flow analyses
based on an interest rate commensurate with the risk of the investment.
Accounts Payable and Accrued Expenses - The carrying amounts reported in
the balance sheet for accounts payable and accrued expenses approximates
their fair value.
Estimated Amount Due To Medicare - The carrying amount reported in the
balance sheet for estimated amount due to Medicare approximates its fair
value.
28
<PAGE>
MIDWEST CITY MEMORIAL HOSPITAL AUTHORITY
d/b/a MIDWEST CITY REGIONAL HOSPITAL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
NOTE 12: FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)
Long-Term Debt - The fair values of the Authority's revenue bonds are
based on current traded value. The fair value of the Authority's remaining
long-term debt is estimated using discounted cash flow analyses based on
the Authority's current incremental borrowing rates for similar types of
borrowing arrangements.
The carrying amounts and estimated fair values of the Authority's
financial instruments at December 31, 1995, are as follows:
Carrying Fair
Amount Value
----------- -----------
Cash and cash equivalents $1,777,072 $1,777,072
Assets limited as to use $15,984,941 $15,984,941
Investments $109,000 $109,000
Accounts payable and accrued expenses $8,864,256 $8,864,256
Estimated amounts due to Medicare $865,000 $865,000
Long-term debt $39,103,850 $40,948,732
NOTE 13: CONCENTRATION OF CREDIT RISK
The Authority grants credit without collateral to its patients, most of
whom are local residents and are insured under third-party payor agreements. The
mix of net patient accounts receivable at December 31, 1995 and 1994, is as
follows:
1995 1994
---- ----
Medicare and Medicaid 25% 31%
Other Third-Party Payors 56 53
Patients 19 16
--- ---
100% 100%
=== ===
NOTE 14: CHANGE IN ACCOUNTING PRINCIPLE
As of January 1, 1994, the Authority adopted Statement of Financial
Accounting Standards (SFAS) No. 115, "Accounting for Certain Investments in Debt
and Equity Securities." SFAS No. 115 requires the classification of securities
into one of three categories: trading, available-for- sale, or held-to-maturity.
The adoption of SFAS No. 115 resulted in a net increase in beginning 1994
unrestricted fund balance of $135,986. All securities of the Authority were
deemed by management to be included in the available-for-sale category at the
date SFAS No. 115 was adopted.
29
<PAGE>
MIDWEST CITY MEMORIAL HOSPITAL AUTHORITY
d/b/a MIDWEST CITY REGIONAL HOSPITAL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
NOTE 15: BUSINESS ACQUISITION
On October 6, 1995, the Authority acquired the remaining units of the
Renaissance Women's Center, LLC for approximately $580,000. Concurrent with the
acquisition of the remaining units, the Authority donated one unit to the City
of Midwest City, Oklahoma, making the Authority a 99% owner of the LLC. The
acquisition has been accounted for as a purchase. The excess of cost over fair
value of assets acquired in connection with this transaction, of approximately
$521,000, is being amortized using the straight-line method over a five-year
period.
NOTE 16: SUBSEQUENT EVENT
On February 27, 1996, the Authority signed a memorandum of intent with
Health Management Associates, Inc. (HMA), to enter a 30-year lease of
substantially all of the Authority's property, plant, and equipment. In addition
to the lease, HMA will purchase the working capital of the Authority. This
transaction is scheduled to become effective on or before the closing date of
May 31, 1996.
30
<PAGE>
MIDWEST CITY MEMORIAL HOSPITAL AUTHORITY
d/b/a MIDWEST CITY REGIONAL HOSPITAL
FINANCIAL STATEMENTS
(Unaudited)
May 31, 1996
31
<PAGE>
MIDWEST CITY MEMORIAL HOSPITAL AUTHORITY
d/b/a MIDWEST CITY REGIONAL HOSPITAL
CONDENSED BALANCE SHEET
May 31, 1996
(Unaudited)
ASSETS
------
<TABLE>
<S> <C>
Current assets:
Cash and cash equivalents ................................... $ 1,505,087
Receivables, net ........................................ 12,584,884
Supplies and prepaid expenses ........................... 1,673,225
-----------
Total current assets ........................... 15,763,196
Property, plant and equipment ............................... 77,313,698
Less accumulated depreciation and amortization .......... 34,421,795
-----------
Net property, plant and equipment .............. 42,891,903
Other assets:
Funds held by trustee ................................... 18,761,757
Other noncurrent assets ................................. 1,467,955
-----------
Total .......................................... 20,229,712
-----------
$78,884,811
===========
LIABILITIES AND FUND BALANCE
----------------------------
Current liabilities:
Accounts payable ........................................ $ 3,292,712
Accrued expenses and other liabilities .................. 6,437,436
Current maturities of long-term debt .................... 1,801,245
-----------
Total current liabilities ...................... 11,531,393
Long-term debt .............................................. 38,941,045
Minority interest ........................................... 23,118
Unrestricted fund balance ................................... 28,389,255
-----------
$78,884,811
===========
</TABLE>
See accompanying notes.
32
<PAGE>
MIDWEST CITY MEMORIAL HOSPITAL AUTHORITY
d/b/a MIDWEST CITY REGIONAL HOSPITAL
CONDENSED STATEMENT OF OPERATIONS
Five months ended May 31, 1996
(Unaudited)
Revenue:
Net patient service revenue ......................... $32,413,104
Other revenue ....................................... 811,247
-----------
Net revenue ................................ 33,224,351
Expenses:
Operating expenses .................................. 27,444,851
Depreciation and amortization ....................... 2,023,994
Interest ............................................ 1,276,831
-----------
Total expenses ............................. 30,745,676
-----------
Excess of revenues over expenses ........................ $ 2,478,675
===========
See accompanying notes.
33
<PAGE>
MIDWEST CITY MEMORIAL HOSPITAL AUTHORITY
d/b/a MIDWEST CITY REGIONAL HOSPITAL
CONDENSED STATEMENT OF CASH FLOWS
Five months ended May 31, 1996
(Unaudited)
<TABLE>
<S> <C>
Cash flows from operating activities:
Excess of revenues over expenses ......................... $ 2,478,675
Adjustments to reconcile excess of revenues over
expenses to net cash provided by operating activities:
Depreciation and amortization ........................ 2,023,994
Loss on sale of fixed assets ......................... 39,359
Changes in assets and liabilities:
Receivables--net ................................ 3,271,205
Supplies and prepaid expenses ................... 115,367
Other noncurrent assets ......................... (6,053,211)
Accounts payable ................................ 1,529,626
Accrued expenses and other liabilities .......... (1,525,734)
-----------
Net cash provided by operating activities .. 1,879,281
Cash flows from investing activities:
Additions to property, plant and equipment ............... (1,492,879)
Proceeds from sale of fixed assets ....................... 2,615
-----------
Net cash used in investing activities ...... (1,490,264)
Cash flows from financing activities:
Principal payments on debt ............................... (661,002)
-----------
Net cash used in financing activities ...... (661,002)
-----------
Net decrease in cash .................. (271,985)
Cash and cash equivalents at beginning of period ............. 1,777,072
-----------
Cash and cash equivalents at end of period ................... $ 1,505,087
===========
</TABLE>
See accompanying notes
34
<PAGE>
MIDWEST CITY MEMORIAL HOSPITAL AUTHORITY
d/b/a MIDWEST CITY MEMORIAL HOSPITAL
NOTES TO CONDENSED FINANCIAL STATEMENTS
1. Accounting Policies
-------------------
The Midwest City Memorial Hospital Authority (Authority) is an Oklahoma
public trust for the benefit of Midwest City, Oklahoma. The Authority operates
Midwest City Regional Hospital under a bargain lease agreement with the city of
Midwest City, Oklahoma. The condensed financial statements at May 31, 1996 and
for the five months then ended are unaudited; however, such interim statements
reflect all adjustments (con sisting only of a normal recurring nature) which
are, in the opinion of management, necessary for a fair presentation of the
financial position and results of operations for the interim period presented.
The results of operations for the interim period presented are not necessarily
indicative of the results to be expected for the full year. The interim
financial statements should be read in conjunction with the audited financial
statements of the Authority for the year ended December 31, 1995.
2. Lease of Hospital
-----------------
Effective June 1, 1996 the Authority executed a Definitive Agreement and
Lease Agreement, both dated May 21, 1996, among the Authority, Midwest City HMA,
Inc. and Health Management Associates, Inc. (HMA). The transaction includes a
thirty year lease of substantially all of the Authority's property, plant and
equipment to HMA. In addition to the lease, HMA purchased the Authority's
working capital as of May 31, 1996, which is subject to post-closing settlement
upon completion of an independent audit. The prepaid lease cost and estimated
working capital paid at closing was approximately $67,991,000.
35
<PAGE>
HEALTH MANAGEMENT ASSOCIATES, INC.
PRO FORMA COMBINED CONDENSED CONSOLIDATED BALANCE SHEET
September 30, 1995
The unaudited pro forma condensed consolidated balance sheet gives effect
to the financial position at September 30, 1995, as if the acquisition of
Midwest City Regional Hospital, effective as of June 1, 1996 had occurred as of
September 30, 1995. Such financial position is not necessarily indicative of the
financial position of the combined entity as it may be in the future, or as it
might have been had this transaction been effective as of September 30, 1995.
The pro forma information should be read in con junction with the financial
statements of the acquired facility contained elsewhere herein.
<TABLE>
<CAPTION>
Midwest City
Health Regional
Management Hospital Pro Forma
Associates, Inc. Assets Combined
Balance Sheet Acquired Balance Sheet
September 30, June 1, September 30,
1995 1996 1995
---------------- ------------- -------------
(In thousands)
<S> <C> <C> <C>
ASSETS
- ------
[A]
Current assets:
Cash and investments .................................. $ 75,326 $ (69,401) $ 5,925
Receivables--net ...................................... 77,050 11,793 88,843
Funds held by trustee ................................. 1,479 -- 1,479
Other ................................................. 19,523 1,398 20,921
--------- --------- ---------
Total current assets ......................... 173,378 (56,210) 117,168
Property, plant and equipment ............................. 365,419 64,078 429,497
Less depreciation
and amortization ...................................... 82,140 -- 82,140
--------- --------- ---------
Net property, plant
and equipment .............................. 283,279 64,078 347,357
Other assets:
Funds held by trustee ................................. 72 -- 72
Deferred charges and
other assets ........................................ 10,269 -- 10,269
--------- --------- ---------
Total ........................................ 10,341 -- 10,341
--------- --------- ---------
$ 466,998 $ 7,868 $ 474,866
========= ========= =========
</TABLE>
36
<PAGE>
HEALTH MANAGEMENT ASSOCIATES, INC.
PRO FORMA COMBINED CONDENSED CONSOLIDATED BALANCE SHEET
(Continued)
September 30, 1995
(Unaudited)
<TABLE>
<CAPTION>
Midwest City
Health Regional
Management Hospital Pro Forma
Associates, Inc. Assets Combined
Balance Sheet Acquired Balance Sheet
September 30, June 1, September 30,
1995 1996 1995
---------------- ------------- -------------
(In thousands)
<S> <C> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
[A]
Current liabilities:
Accounts payable ....................................... $ 21,545 $ 2,969 $ 24,514
Accrued expenses and
other liabilities .................................... 22,515 2,947 25,462
Current maturities of long
term debt ............................................ 6,571 812 7,383
-------- -------- --------
Total current liabilities ........................... 50,631 6,728 57,359
Deferred income taxes ...................................... 18,399 -- 18,399
Long term debt ............................................. 12,297 1,140 13,437
Other liabilities .......................................... 67,721 -- 67,721
Stockholders' equity:
Preferred stock ........................................ -- -- --
Common stock ........................................... 692 -- 692
Additional paid-in capital ............................. 133,853 -- 133,853
Retained earnings ...................................... 183,405 -- 183,405
-------- -------- --------
Total stockholders' equity .......................... 317,950 -- 317,950
-------- -------- --------
$466,998 $ 7,868 $474,866
======== ======== ========
</TABLE>
37
<PAGE>
HEALTH MANAGEMENT ASSOCIATES, INC.
PRO FORMA COMBINED CONDENSED CONSOLIDATED BALANCE SHEET
(continued)
September 30, 1995
Pro forma adjustments at September 30, 1995 are as follows:
[A] Based upon analysis of the information available at the time of
acquisition, the transaction has been accounted for as a capitalized
lease. The following pro forma adjustment reflects the estimated values to
be recorded for the assets acquired and liabilities assumed, and the
financing of the transaction on the Company's September 30, 1995 balance
sheet. The net amount below, shown as a reduction of cash, represents the
net cost of the transaction which was paid for using available cash on
hand of the Company.
Accounts receivable, net.............................. $ 11,793,000
Supplies and prepaid expenses ........................ 1,398,000
Plant and equipment .................................. 64,078,000
Accounts payable...................................... (2,969,000)
Accrued liabilities .................................. (2,947,000)
Debt assumed ......................................... (1,952,000)
------------
$ 69,401,000
============
38
<PAGE>
HEALTH MANAGEMENT ASSOCIATES, INC.
PRO FORMA COMBINED CONDENSED CONSOLIDATED STATEMENT OF INCOME
For the year ended September 30, 1995
(Unaudited)
The unaudited pro forma combined condensed consolidated statement of
income gives effect to the results of operations for the year ended September
30, 1995, as if the acquisition of Midwest City Memorial Hospital, effective as
of June 1, 1996, had occurred as of October 1, 1994. These results are not
necessarily indicative of the financial results of the combined entity as it may
be in the future, or as it might have been had this trans action been effective
as of October 1, 1994. The pro forma information should be read in conjunction
with the financial statements of the acquired facility contained elsewhere
herein.
<TABLE>
<CAPTION>
Health Midwest City
Management Regional Pro Forma
Associates, Inc. Hospital Combined
Year Ended Year Ended Year Ended
September 30, December 31, Pro Forma September 30,
1995 1995 Adjustments 1995
---------------- ------------ ----------- -------------
(In thousands, except per share data)
<S> <C> <C> <C> <C>
Net revenue ........................................ $531,094 $ 72,915 $ (525)[C] $603,484
Costs and expenses:
Salaries, benefits, supplies
and expenses .................................. 402,662 61,284 -- 463,946
Depreciation and amortization ................... 20,562 5,072 (1,077)[A] 24,557
Interest expense ................................. 3,621 3,197 88 [B] 6,906
-------- -------- -------- --------
Total costs and expenses ................. 426,845 69,553 989 495,409
-------- -------- -------- --------
Income before income taxes ......................... 104,249 3,362 464 108,075
Provision for income taxes ......................... 40,918 -- 1,502 [D] 42,420
-------- -------- -------- --------
Net income ......................................... $ 63,331 $ 3,362 $ (1,038) $ 65,655
======== ======== ======== ========
Net income per share ............................... $ .59 $ .61
======== ========
Weighted average number
of shares ...................................... 108,084 108,084
======== ========
</TABLE>
39
<PAGE>
HEALTH MANAGEMENT ASSOCIATES, INC.
PRO FORMA COMBINED CONDENSED CONSOLIDATED STATEMENT OF INCOME
(Continued)
For the year ended September 30, 1995
(Unaudited)
Pro forma adjustments for the year ended September 30, 1995 are as follows (in
thousands):
[A] Based upon an analysis of the information available at the time of
acquisition, the transaction has been accounted for as a capitalized
lease. The following pro forma adjustment reflects the estimated effect on
depreciation expense that would have been required had the acquisition
occurred October 1, 1994.
Depreciation and amortization expense as reported ............... $ 5,072
Depreciation and amortization expense as adjusted ............... 3,995
-------
$(1,077)
=======
[B] Adjustments of interest expense to reflect the following:
Interest income foregone on cash used to
complete transaction .......................................... $ 3,082
Less interest expense on debt of acquired facility
not assumed by Company ....................................... 2,994
-------
$ 88
=======
[C] Represents the elimination of investment income on Authority funds not
acquired by the Company.
[D] Increase in income taxes.
40
<PAGE>
HEALTH MANAGEMENT ASSOCIATES, INC.
PRO FORMA COMBINED CONDENSED CONSOLIDATED STATEMENT OF INCOME
For the six months ended March 31, 1996
(Unaudited)
The unaudited pro forma combined condensed consolidated statement of
income gives effect to the results of operations for the six months ended March
31, 1996, as if the acquisition of Midwest City Regional Hospital effective as
of June 1, 1996 had occurred as of October 1, 1995. These results are not
necessarily indicative of the financial results of the combined entity as it may
be in the future, or as it might have been had this trans action been effective
as of October 1, 1995. The pro forma information should be read in conjunction
with the financial statements of the acquired facility contained elsewhere
herein.
<TABLE>
<CAPTION>
Health Midwest City
Management Regional Pro Forma
Associates, Inc. Hospital Combined
Six Months Five Months Six Months
Ended Ended Ended
March 31, May 31, Pro Forma March 31,
1996 1996 Adjustments 1996
---------------- ------------- ----------- ----------
(In thousands, except per share data)
<S> <C> <C> <C> <C>
Net revenue ........................................ $336,769 $ 33,224 $ (161)[C] $369,832
Costs and expenses:
Salaries, benefits, supplies
and expenses ................................... 257,144 27,444 -- 284,588
Depreciation and amortization ..................... 12,408 2,024 (359)[A] 14,073
Interest expense .................................. 1,342 1,277 93 [B] 2,712
-------- -------- ------ --------
Total costs and expenses .................. 270,894 30,745 (266) 301,373
-------- -------- ------ --------
Income before income taxes ......................... 65,875 2,479 105 68,459
Provision for income taxes ......................... 25,856 -- 1,014 [D] 26,870
-------- -------- ------ --------
Net income ......................................... $ 40,019 $ 2,479 $ (909) $ 41,589
======== ======== ====== ========
Net income per share ............................... $ .37 $ .38
======== ========
Weighted average number
of shares ........................................ 109,946 109,946
======== ========
</TABLE>
41
<PAGE>
HEALTH MANAGEMENT ASSOCIATES, INC.
PRO FORMA COMBINED CONDENSED CONSOLIDATED STATEMENT OF INCOME
(Continued)
For the six months ended March 31, 1996
(Unaudited)
Pro forma adjustments for the six months ended March 31, 1996 are as follows (in
thousands):
[A] Based upon an analysis of the information available at the time of
acquisition, the transaction has been accounted for as a capitalized
lease. The following pro forma adjustment reflects the estimated effect on
depreciation expense that would have been required had the acquisition
occurred October 1, 1995:
Depreciation and amortization expense as reported ................ $2,024
Depreciation and amortization expense as adjusted ................ 1,665
------
$ 359
======
[B] Adjustments of interest expense to reflect the following:
Interest income foregone on cash used
to complete transaction ........................................ $1,284
Less interest expense on debt of acquired facility
not assumed by Company ......................................... 1,191
------
$ 93
======
[C] Represents the elimination of investment activity (i.e., income, gains and
losses) on Authority funds not acquired by the Company.
[D] Increase in income taxes.
42
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Health Management Associates, Inc.
----------------------------------
(Registrant)
By:/s/ Stephen M. Ray
-------------------------------
Stephen M. Ray
Senior Vice President - Finance
(Duly authorized officer and
Principal Financial Officer)
Date: August 9, 1996
43
<PAGE>
INDEX TO EXHIBITS
(1) Underwriting agreement.
Not applicable.
(2) Plan of acquisition, reorganization, arrangement, liquidation or
succession.
Not applicable.
(4) Instruments defining the rights of security holders, including indentures.
The Fourth Restated Certificate of Incorporation, previously filed and
included as Exhibit 3.4 to the Company's Registration Statement on Form
S-1, Amendment No. 2 (Registration No. 33-36406), is incorporated herein
by reference.
The Certificate of Amendment of the Fourth Restated Certificate of
Incorporation, previously included as Exhibit 3.2 to the Company's Annual
Report on Form 10-K for the fiscal year ended September 30, 1992, is
incorporated herein by reference.
By-laws, as amended, previously filed and included as Exhibit 3.2 to the
Company's Quarterly Report on Form 10-Q for the quarter ended December 31,
1995, is incorporated herein by reference.
Amended and Restated Credit Agreement, dated September 29, 1998, between
Liberty National Bank and Trust Company of Louisville, the Company, HMA
Holding Corp. and certain subsidiaries, including subsequent Amendments
One through Five thereto, previously filed and included as Exhibits 4.7
through 4.11 and 4.15 to the Company's Registration Statement on Form S-1
(Registration No. 33-36406), is incorporated herein by reference.
Sixth Amendment to Amended and Restated Credit Agreement, dated June 10,
1991, between the Company and Liberty National Bank and Trust Company of
Louisville, previously filed and included as Exhibit 4.17 to the Company's
Registration Statement on Form S-1 (Registration No. 33-43193), is
incorporated herein by reference.
Seventh Amendment to Amended and Restated Credit Agreement, dated June 16,
1992, between the Company and Liberty National Bank and Trust Company of
Louisville, previously filed and included as Exhibit 4.1 to the Company's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1992, is
incorporated herein by reference.
Eighth Amendment to Amended and Restated Credit Agreement, dated November
30, 1992, between the Company and Liberty National Bank and Trust Company
of Louisville, previously filed and included as Exhibit 4.10 to the
Company's Annual Report on Form 10-K for the fiscal year ended September
30, 1992, is incorporated herein by reference.
<PAGE>
INDEX TO EXHIBITS (Continued)
Ninth Amendment to Amended and Restated Credit Agreement, dated October
18, 1993, between the Company and Liberty National Bank and Trust Company
of Louisville, previously filed and included as Exhibit 4.14 to the
Company's Annual Report on Form 10-K for the fiscal year ended September
30, 1993, is incorporated herein by reference.
Term Loan Agreement among Riverview Regional Medical Center, Inc. and NCNB
National Bank of Florida, the Bank of Nova Scotia and the Banks named
therein, dated July 6, 1992, Parent Guaranty Agreement made as of July 6,
1992, and Interest Rate Swap transaction, effective July 15, 1992,
previously filed and included as Exhibit 4.1 to the Company's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1992, is incorporated
herein by reference.
Fourth Amended and Restated Credit and Reimbursement Agreement among the
Company and NationsBank of Florida National Association and the Banks
named therein, dated December 1, 1994, previously filed and included as
Exhibit 4.12 to the Company's Annual Report on Form 10-K for the year
ended September 30, 1994, is incorporated herein by reference.
Amended and Restated Parent Guaranty Agreement of Health Management
Associates, Inc. related to a Term Loan agreement made July 6, 1992 among
Riverview Regional Medical Center, Inc., NationsBank of Florida, National
Association, and the Banks named therein, made as of December 1, 1994,
previously filed and included as Exhibit 4.1 to the Company's Quarterly
Report on Form 10-Q for the quarter ended March 31, 1995, is incorporated
herein by reference.
Credit Agreement between Gaffney HMA, Inc. and First Union National Bank
of North Carolina, dated September 2, 1993, and Guaranty Agreement between
Health Management Associates, Inc. and First Union National Bank of North
Carolina, made as of September 2, 1993, previously filed and included as
Exhibit 4.2 to the Company's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1995, are incorporated herein by reference.
Modification Agreement (to the Guaranty Agreement between Health
Management Associates, Inc. and First Union National Bank of North
Carolina related to the Credit Agreement dated September 2, 1993 between
Gaffney HMA, Inc. and First Union National Bank of North Carolina) between
Health Management Associates, Inc. and First Union National Bank of North
Carolina, made as of December 16, 1994, previously filed and included as
Exhibit 4.3 to the Company's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1995, is incorporated herein by reference.
Modification Agreement (to the Guaranty Agreement dated November 20, 1987
for a Mortgage Construction Loan to Orlando HMA, Inc.) by and between
Health Management Associates, Inc. and First Union National Bank of
Florida, made as
<PAGE>
INDEX TO EXHIBITS (Continued)
of April 10, 1995, previously filed and included as Exhibit 4.1 to the
Company's Quarterly Report on Form 10-Q for the quarter ended June 30,
1995, is incorporated herein by reference.
Modification Agreement (to the Guaranty Agreement dated August 19, 1988
for a Mortgage Construction Loan to Martin HMA, Inc.) by and between
Health Management Associates, Inc. and First Union National Bank of
Florida, made as of April 10, 1995, previously filed and included as
Exhibit 4.2 to the Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1995 is incorporated herein by reference.
(16) Letter re change in certifying accountant.
Not applicable.
(17) Letter re director resignation.
Not applicable.
(20) Other documents of statements to security holders.
Not applicable.
(23) Consents of experts and counsel.
Consent of Baird, Kurtz & Dobson is included herein as Exhibit 23.1 at
page 47 of this report.
(24) Power of Attorney.
Not applicable.
(27) Financial Data Schedule.
Not applicable.
(99) Additional exhibits.
Not applicable.
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation of our report dated March 8, 1996, with
respect to the consolidated financial statements of Midwest City Memorial
Hospital Authority d/b/a Midwest City Regional Hospital for the years ended
December 31, 1995 and December 31, 1994, included in the Form 8-K/A Amendment
No. 1 of Health Management Associates, Inc., and incorporated by reference into
Forms S-8 filed previous to this date under registration numbers 33-43290,
33-65382, 33-65380, and 33-80433.
BAIRD, KURTZ & DOBSON
August 8, 1996
