<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------------------
FORM 10-Q/A
AMENDMENT NO. 3
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
For Quarter Ended: FEBRUARY 28, 1995
Commission File Number: 1-9369
------------------------------------
HORIZON HEALTHCARE CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 91-1346899
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification Number)
6001 INDIAN SCHOOL ROAD, N.E., SUITE 530, ALBUQUERQUE, NEW MEXICO 87110
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (505) 881-4961
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 report(s), and (2) has been subject to such filing
requirements for the past 90 days. Yes XX No
------ ------
Shares of the registrant's Common Stock, $.001 par value, outstanding exclusive
of treasury stock, was 29,466,140 shares at April 6, 1995.
<PAGE>
Part 1 - FINANCIAL INFORMATION
Item 1. Financial Statements
HORIZON HEALTHCARE CORPORATION
CONSOLIDATED BALANCE SHEETS
FEBRUARY 28, 1995 AND MAY 31, 1994
(IN THOUSANDS)
<TABLE>
<CAPTION>
February 28, 1995 May 31, 1994
(unaudited)
------------------- ------------------
<S> <C> <C>
ASSETS:
Current assets:
Cash and cash equivalents $ 14,135 $ 6,522
Patient care accounts receivable, net 115,500 76,862
Estimated Medicare and Medicaid Settlements 17,796 6,702
Current portion of notes receivable 363 535
Prepaid and other current assets 26,038 17,071
------------------ ------------------
Total current assets 173,832 107,692
------------------ ------------------
Land, buildings and equipment
Land and land improvements 42,389 21,605
Buildings and improvements 280,866 144,213
Equipment 59,270 39,377
------------------ ------------------
382,525 205,195
Less accumulated depreciation 22,029 11,769
------------------ ------------------
Net land, buildings and equipment 360,496 193,426
Notes receivable, excluding current portion 19,690 22,436
Lease purchase costs, net 9,123 6,507
Lease, utility and other deposits 16,170 11,870
Deferred income taxes 7,359 7,271
Goodwill, net 75,182 41,673
Other intangible assets, net 8,843 7,609
Other assets 13,006 7,967
------------------ ------------------
Total assets $ 683,701 $ 406,451
------------------ ------------------
------------------ ------------------
</TABLE>
(continued)
See accompanying notes to consolidated financial statements.
<PAGE>
HORIZON HEALTHCARE CORPORATION
CONSOLIDATED BALANCE SHEETS
FEBRUARY 28, 1995 AND MAY 31, 1994
(IN THOUSANDS)
<TABLE>
<CAPTION>
February 28, 1995 May 31, 1994
(unaudited)
------------------ ------------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $ 1,765 $ 1,697
Current portion of obligations under capital leases 597 0
Accounts payable 13,473 14,200
Accrued payroll 11,927 10,680
Accrued property and payroll taxes 16,342 14,318
Other accrued liabilities 7,195 8,157
------------------ ------------------
Total current liabilities 51,299 49,052
------------------ ------------------
Long-term debt, excluding current portion 140,815 76,673
Obligations under capital leases, excluding current portion 47,728 0
Deferred lease credit, net 19,170 20,494
Convertible subordinated notes 26,620 30,906
------------------ ------------------
Total liabilities 285,632 177,125
------------------ ------------------
Stockholders' equity:
Preferred stock of $.001 par value, authorized
500,000 shares, none issued
Common stock of $.001 par value, authorized
150,000,000 shares; 29,027,527 shares issued with
28,523,752 shares outstanding at February 28, 1995
and 22,738,073 shares issued with 22,409,927
shares outstanding at May 31, 1994 29 22
Additional paid-in capital 351,073 200,273
Retained earnings 52,554 29,771
Treasury stock held (5,587) (740)
-------------------- ------------------
Total stockholders' equity 398,069 229,326
-------------------- ------------------
Total liabilities and stockholders' equity $ 683,701 $ 406,451
-------------------- ------------------
-------------------- ------------------
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
HORIZON HEALTHCARE CORPORATION
CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE THREE MONTHS AND NINE MONTHS ENDED
FEBRUARY 28, 1995 AND FEBRUARY 28, 1994
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Three months ended Nine months ended
February 28, February 28,
1995 1994 1995 1994
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net patient care revenues $ 163,505 $ 87,243 $ 450,939 $ 238,513
Other operating revenues 3,018 1,359 8,518 3,987
---------- ---------- ---------- ----------
Total operating revenues 166,523 88,602 459,457 242,500
---------- ---------- ---------- ----------
Routine expenses:
Nursing services 48,768 27,187 137,934 75,216
Ancillary services 38,007 18,651 100,030 50,108
Dietary services 10,195 6,058 28,705 17,183
Facility operations and maintenance 8,369 3,670 17,524 9,909
Housekeeping services 3,617 2,109 10,007 5,899
Laundry services 2,015 1,192 5,696 3,397
Administrative and general 16,967 8,634 47,163 25,376
Other services 4,563 2,861 13,308 7,607
---------- ---------- ---------- ----------
Total routine expenses 130,501 70,362 360,367 194,695
---------- ---------- ---------- ----------
Property expenses:
Facility lease expense 10,250 6,586 29,387 18,085
Interest expense 4,440 1,287 13,335 4,051
Depreciation and amortization 4,473 1,795 13,063 4,681
Other 2,108 1,267 5,916 3,388
---------- ---------- ---------- ----------
Total property expenses 21,271 10,935 61,701 30,205
---------- ---------- ---------- ----------
Total operating expenses 151,772 81,297 422,068 224,900
---------- ---------- ---------- ----------
Earnings before income taxes 14,751 7,305 37,389 17,600
Income taxes 5,605 2,821 14,555 6,800
---------- ---------- ---------- ----------
Net earnings $ 9,146 $ 4,484 $ 22,834 $ 10,800
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Earnings per common and
common equivilant share $ 0.31 $ 0.24 $ 0.88 $ 0.74
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Earning per share - assuming full dilution $ 0.31 $ 0.23 $ 0.88 $ 0.66
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
HORIZON HEALTHCARE CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
NINE MONTHS ENDED FEBRUARY 28, 1995 AND FEBRUARY 28, 1994
(IN THOUSANDS, UNAUDITED)
<TABLE>
<CAPTION> Nine Months ended February 28,
1995 1994
------------ -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 22,834 $ 10,800
Adjustments to reconcile net earnings to net cash
provided by (used for) operating activities:
Depreciation and amortization 13,063 4,681
Gain on sale of assets (1,791) 0
Deferred lease credit amortization (1,324) 0
Provision for losses on patient care
receivables 1,262 75
Changes in assets and liabilities:
Patient care and settlement receivables (44,318) (5,963)
Prepaid and other current assets (11,303) (6,209)
Lease, utility and other deposits (3,069) (2,088)
Accounts payable (3,326) (2,679)
Accrued payroll (2,852) 4,121
Other current liabilities 2,949 25
Deferred income taxes (88) 0
------------ -----------
Net cash provided by (used for)
operating activities (27,963) 2,763
------------ -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments received on notes receivable 271 46
Capital expenditures (28,553) (29,788)
Proceeds from sale of land, building and equipment 6,966 0
Lease purchase cost expenditures (60) 5
Cash used for the acquisition of peopleCARE
Heritage Group (62,152) 0
Cash used for the acquisition of Greenery
Rehab. Group, Inc. 0 (7,704)
Cash used for other acquisitions (34,537) 0
Additions to other intangible assets (8,122) (6,021)
Change in other assets (2,053) 50
------------ -----------
Net cash used by investing activities (128,240) (43,412)
------------ -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of debt 47,365 6,038
Repayment of debt (3,379) (8,121)
Repayment of convertible subordinated notes (3,395) 0
Net proceeds from issuance of common stock 123,275 59,190
Distribution to subsidiary shareholder (50) 0
------------ -----------
Net cash provided by financing
activities 163,816 57,107
------------ -----------
Net increase in cash and cash equivalents 7,613 16,458
Cash and cash equivalents at beginning of period 6,522 5,928
------------ -----------
Cash and cash equivalents at end of period $ 14,135 $ 22,386
------------ -----------
------------ -----------
</TABLE>
<PAGE>
HORIZON HEALTHCARE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
February 28, 1995
(unaudited)
(1) BASIS OF PRESENTATION
The consolidated financial statements included herein have been prepared by
Horizon Healthcare Corporation and its subsidiaries (collectively the Company)
without audit, pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations, although the Company believes the disclosure contained in the
consolidated financial statements are adequate to make the information presented
not misleading. In the opinion of management, all adjustments necessary for a
fair presentation of the financial position, results of operations and cash
flows for the periods presented have been made and are of a normal recurring
nature.
These consolidated financial statements should be read in conjunction with the
Company's consolidated financial statements and the notes thereto included in
the Company's 1994 Annual Report on Form 10-K filed with the Securities and
Exchange Commission. The results of operations for the interim periods
presented are not necessarily indicative of the results to be expected for the
entire year.
(2) LONG-TERM DEBT
Subsequent to February 28, 1995, the Company completed a $250 million revolving
credit loan agreement (the Credit Facility) which replaced the then existing
$200 million revolving credit loan agreement. The terms of the Credit Facility
agreement are substantially the same as those of the credit agreement disclosed
in the Company's 1994 Annual Report on Form 10-K, except that certain accounts
receivable of the Company have been pledged as additional security pursuant to
the Credit Facility. The value of this security at February 28, 1995 is
approximately $97 million.
(3) FACILITY ACQUISITIONS
On July 29, 1994, the Company acquired peopleCARE Heritage Group (peopleCARE), a
13 facility long-term care company located in Texas. Consideration given for
the acquisition included the issuance of 449,438 shares of the Company's common
stock, valued at approximately $10 million, assumption of capital lease
obligations of approximately $48.6 million for six facilities, and cash payment
of approximately $56 million for fee simple title to seven facilities. Results
of operations of peopleCARE for the seven months ended February 28, 1995 are
included in the Company's Consolidated Statement of Earnings for the nine months
ended February 28, 1995.
During fiscal year 1994, the Company completed its previously announced merger
with Greenery Rehabilitation Group, Inc. (Greenery) into the Company. Pursuant
to the merger, the Company exchanged approximately 2,050,000 shares of its
common stock, valued at approximately $48 million, And assumed approximately $58
million in debt for all of the outstanding shares of Greenery common stock,
resulting in the recording of goodwill of approximately $43 million. This
merger added the operations of 17 rehabilitation and skilled nursing facilities
and 3 managed facilities to the Company's current operations.
<PAGE>
The Company had other acquisitions during the nine months ended February 28,
1995 and 1994 which in the aggregate were insignificant.
The Company has accounted for these acquisitions using the purchase method. The
following unaudited proforma condensed consolidated statements of earnings
reflects the combined results of operations for the nine months ended February
28, 1995 and 1994 as if the peopleCARE and Greenery acquisitions had been
consummated on June 1, 1993.
<TABLE>
<CAPTION>
Nine months ended February 28,
------------------------------
1995 1994
---- ----
(In thousands, except per share amounts)
<S> <C> <C>
Total operating revenues .......................... $ 510,524 $ 446,503
Total operating expenses .......................... 472,825 442,897
---------- ----------
Operating income ............................... 37,699 3,606
Income taxes ...................................... 14,891 1,424
---------- ----------
Net earnings ................................... $ 22,808 $ 2,182
---------- ----------
---------- ----------
Earnings per common and common equivalent share ... $ .85 $ .12
---------- ----------
---------- ----------
Earnings per common share assuming full dilution .. $ .85 $ .12
---------- ----------
---------- ----------
</TABLE>
<PAGE>
(4) CAPITAL STOCK
In November and December 1994, the Company completed the sale of 5,558,790
shares of its common stock, which included the sale of 643,333 shares held by
certain stockholders, through a public offering. The change in the Company's
stockholders' equity for the nine months ended February 28, 1995 was as follows:
<TABLE>
<CAPTION>
Common Stock
------------ Additional
Paid-In Retained
Shares Amount Capital Treasury Stock Earnings Total
------ ------ ------- -------------- -------- -----
<S> <C> <C> <C> <C> <C> <C>
Balance at May 31, 1994 22,738,073 $22,738 $200,272,997 ($740,333) $29,770,807 $229,326,209
Common stock issued in connection with
purchase of peopleCARE 449,438 449 9,999,547 ____ ____ 9,999,996
Common stock issued in
connection with purchase of Professional
Rehabilitation Services, Inc. 221,606 222 5,999,778 ____ ____ 6,000,000
Common stock issued in connection
with other insignificant acquisitions 344,161 344 9,174,656 ____ ____ 9,175,000
Exercise of stock options, warrants
and issuance of shares under the
employee stock purchase plan 358,792 359 5,545,053 ____ ____ 5,545,412
Common stock offering, net of
issue costs 4,915,457 4,916 120,080,880 ____ ____ 120,085,796
Treasury stock acquired in payment for
stockholder's note ____ ____ ____ (4,846,885) ____ (4,846,885)
Distribution to subsidiary shareholder ____ ____ ____ ____ (50,000) (50,000)
Net earnings ____ ____ ____ ____ 22,833,570 22,833,570
---------- ------- ------------ ------------ ----------- ------------
Balance at February 28, 1995 29,027,527 $29,028 $351,072,911 $(5,587,218) $52,554,377 $398,069,098
---------- ------- ------------ ------------ ----------- ------------
---------- ------- ------------ ------------ ----------- ------------
</TABLE>
<PAGE>
(5) SUPPLEMENTARY INFORMATION RELATING TO CONSOLIDATED STATEMENTS OF CASH FLOWS
For the nine months ended February 28, 1995, the following are considered non-
cash items for purposes of the consolidated statement of cash flows:
a) The issuance of 449,438 shares of common stock for the purchase of
certain assets net of liabilities of peopleCARE,
b) The issuance of 221,606 shares of common stock for the purchase of
Professional Rehabilitation Services, Inc.,
c) The issuance of 344,161 shares of common stock for other acquisitions
which in the aggregate were insignificant,
d) The acceptance of a $200,000 note in connection with the sale of a
facility, and
e) The acceptance of 175,041 shares of treasury stock for payment of a
note receivable from a director/shareholder.
(6) SUBSEQUENT EVENTS
On March 31, 1995, the Company entered into an Agreement and Plan of Merger (the
Merger Agreement), dated as of March 31, 1995, by and among the Company, CMS
Merger Corporation (Merger Sub), a wholly owned subsidiary of the Company, and
Continental Medical Systems, Inc. (CMS), pursuant to which Merger Sub would
merge with and into CMS (the Merger). CMS would be the surviving corporation in
the Merger and become a wholly owned subsidiary of the Company.
In connection with the Merger Agreement and the transactions contemplated
thereby, the Company also entered into a Stock Option Agreement, dated as of
March 31, 1995, by and among the Company and CMS, and a Voting Agreement, dated
as of March 31, 1995, between the Company and certain stockholders of CMS named
therein.
CMS is a diversified provider of medical rehabilitation and physician services.
CMS operates 37 free standing rehabilitation hospitals, provides outpatient
rehabilitation services at more than 125 locations and manages 13 inpatient
rehabilitation units for general acute care hospitals in 20 states. CMS also
provides contract physical, occupational and speech therapy services in more
than 30 states and provides physician staffing services to hospitals and
physician groups in all 50 states.
The Company will issue its common stock to acquire CMS and is currently
preparing a registration statement on Form S-4 to be filed with the Securities
and Exchange Commission. The Merger requires approval of both companies'
stockholders, as well as governmental and regulatory approval. It is
anticipated that the Merger will be consummated during the first quarter of
1996.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Company is a leading provider of long-term care and specialty health care
services. Such specialty health care services include licensed specialty
hospital services and subacute units, rehabilitation and other therapies,
institutional pharmacy services, Alzheimer's care, non-invasive medical
diagnostic testing services, home respiratory care service and clinical
laboratory services.
The Company's strategic business plan emphasizes operating and expanding its
long-term care and specialty programs and services in regionally concentrated
areas, including the Midwest, Southwest and Northeast. Further, the Company's
strategic business plan also includes the objective of increasing its specialty
health care services as a percent of total operating revenues. The Company is
accomplishing the latter objective through the development of institutional
pharmacies; acquisition and development of therapy companies, home respiratory
care companies and medical diagnostic companies; the conversion and renovation
or acquisition of specialty hospitals; and by offering its broad range of
specialty health care services to third parties. Further, the acquisition of
long-term care facilities in certain geographic areas has enhanced the Company's
expansion of its specialty health care programs and services. Specifically, in
certain geographic areas, the Company's long-term care presence is a platform
from which it can vertically integrate its specialty health care programs and
services.
As a result of the Company's strategic business plan, the Company's operating
revenues have grown over the last three years from $158.9 million in fiscal
1992 to $375.1 million in fiscal 1994, and to $459.5 million for the nine months
ending February 28, 1995. Moreover, specialty health care services revenues
have grown from $35.6 million, or 22% of operating revenues, in fiscal 1992 to
$141.7 million, or 38% of operating revenues, in fiscal 1994, and to $202.8
million, or 44% of operating revenues, for the nine months ending
February 28, 1995.
These growth objectives have been, and will continue to be, the basis of the
Company's strategic business plan which has resulted in the growth of net
earnings from $5.0 million in fiscal 1992 to $16.6 million in fiscal 1994,
and to $22.8 million for the nine months ending February 28, 1995.
RESULTS OF OPERATIONS
The following table sets forth certain statement of earnings data expressed
as a percentage of total operating revenues:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------ -----------------
February 28, February 28,
------------ -----------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Total operating revenues . . . . . 100.0% 100.0% 100.0% 100.0%
-------- -------- -------- --------
Total routine expenses (1) . . . . 78.3 79.4 78.4 80.3
Total property expenses (2). . . . 12.8 12.3 13.4 12.5
-------- -------- -------- --------
Total operating expenses . . 91.1 91.7 91.8 92.8
-------- -------- -------- --------
Earnings from operations . . . . . 8.9 8.3 8.2 7.2
Income taxes . . . . . . . . . . . 3.4 3.2 3.2 2.8
-------- -------- -------- --------
Net earnings . . . . . . . . 5.5% 5.1% 5.0% 4.4%
-------- -------- -------- --------
-------- -------- -------- --------
<FN>
___________
(1) Includes the cost of nursing services, all other direct service costs and
general and administrative costs.
(2) Includes facility leases, interest, depreciation, amortization and other
property related costs.
</TABLE>
<PAGE>
The following table sets forth a summary of the Company's total operating
revenues by type of service and the percentage of total operating revenues
that each such service represented for each period indicated:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
FEBRUARY 28, FEBRUARY 28,
------------ ------------
(In thousands, except for statistical data)
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Long-term care
services $ 89,961 54% $ 52,904 60% $ 248,111 54% $ 154,792 64%
Specialty health care
services (1) 73,544 44% 34,339 39% 202,828 44% 83,721 35%
Other operating
revenues (2) 3,018 2% 1,359 1% 8,518 2% 3,987 1%
---------- ---- --------- ---- ---------- ---- ---------- ----
Total operating revenues $ 166,523 100% $ 88,602 100% $ 459,457 100% $ 242,500 100%
---------- ---- --------- ---- ---------- ---- ---------- ----
---------- ---- --------- ---- ---------- ---- ---------- ----
<FN>
___________
(1) Includes revenues derived from subacute care, rehabilitation and other
therapies, institutional pharmacy operations, Alzheimer's care,
non-invasive medical diagnostic testing services, home respiratory care
services, clinical laboratory services and sleep diagnostic services.
(2) Includes revenues derived from management fees, interest income, rental
income and other miscellaneous services.
</TABLE>
The following table sets forth the number of facilities operated by the Company
at the end of each period indicated, the aggregate number of licensed beds
contained in such facilities and average occupancy of such beds during the
periods indicated:
<TABLE>
<CAPTION>
FEBRUARY 28,
------------
1995 1994
---- ----
<S> <C> <C>
Number of facilities (end of period) (1) . . . . . . 144 104
Number of licensed beds (end of period) (2). . . . . 17,059 11,917
Average occupancy (3). . . . . . . . . . . . . . . . 89% 90%
<FN>
___________
(1) Includes the Company's long-term care facilities and specialty hospitals,
in the latter case including those located within discrete areas of
long-term care facilities.
(2) "Licensed beds" refers to the number of beds for which a license has been
issued, which may vary in some instances from beds available for use.
(3) Average occupancy is computed by dividing the total bed days occupied by
the total licensed bed days available for the last month of the period
indicated.
</TABLE>
<PAGE>
NINE MONTHS ENDED FEBRUARY 28, 1995 COMPARED TO NINE MONTHS ENDED FEBRUARY 28,
1994
Total operating revenues increased approximately $217.0 million or 89% for the
nine months ended February 28, 1995, as compared to the comparable nine month
period of the prior year and approximately $77.9 million or 88% for the three
months ended February 28, 1995, as compared to the comparable quarter of the
prior year. Operational factors which contributed to the increase in operating
revenues are summarized as follows:
a. The Company operated 37 more long-term care facilities with an
aggregate of 5,060 beds at February 28, 1995 than it did at February
28, 1994. Revenues from such acquisitions represent an increase of
approximately 72% over the comparable period of the prior year.
b. The Company operated 16 specialty hospitals and specialty centers and
15 subacute care units with an aggregate of 1,413 beds at February 28,
1995, as compared to 13 specialty hospitals and specialty centers and
15 subacute care units with an aggregate of 1,331 beds at February 28,
1994.
c. The Company expanded its institutional pharmacy services to long-term
care facilities through its wholly owned subsidiary, National
Institutional Pharmacy Services, Inc. (NIPSI). Approximately 36,400
long-term care beds are now served by NIPSI as compared to
approximately 28,700 beds at February 28, 1994.
d. The Company received higher Medicare and Medicaid reimbursement rates
and increased its private pay rates charged. Overall the Company's
rate per patient day increased approximately 9.4% during the nine
months ended February 28, 1995 as compared to the comparable nine
month period of the prior year. This represents revenue growth of
approximately 5.2% over the comparable period of the prior year.
e. The Company continued its expansion of rehabilitation therapy services
through its subsidiaries in Ohio, Nevada, Texas, Connecticut and
Colorado, as well as the acquisition of another subsidiary in
Missouri. Our rehabilitation therapy subsidiaries now service
approximately 41,200 beds as compared to approximately 25,000 at
February 28, 1994.
f. The Company continued its expansion of its clinical laboratory
services in Texas.
g. The Company began providing medical diagnostic services through
subsidiaries in New Mexico, Texas and Georgia.
h. The Company began providing home respiratory care services and
supplies through its subsidiaries in Texas, Oklahoma, Arkansas and
Louisiana.
Routine service expenses increased approximately $165.7 million or 85% for the
nine months ended February 28, 1995, over the comparable nine month period of
the prior year. This increase is due primarily to the increase in the number of
long-term care centers, specialty hospitals and subacute care units operated by
the Company, as well as the costs associated with the expansion of specialty
services programs.
Total property expenses excluding interest expense increased approximately $22.2
million or 85% for the nine months ended February 28, 1995 as compared to the
comparable nine month period of the prior year. This increase is directly
related to the additional number of facilities operated. Interest expense
increased approximately 229% during this same nine month period. This increase
was due to increased use of the revolving credit agreement to fund the
acquisition and expansion of long-term care facilities and specialty health care
services and programs, increase in the number of mortgages on properties
acquired this year, assumption of certain convertible subordinated notes in
conjunction with the Greenery acquisition, and new capital lease obligations
entered into in conjunction with the peopleCARE acquisition.
Routine service expenses, total property expenses excluding interest expense,
and interest expense increased approximately 85%, 74%, and 245%, respectively
for the three months ended February 28, 1995 over the comparable quarter of the
prior year. These increases are directly related to the increased number of
facilities operated by the Company, the
<PAGE>
Company's expansion of its specialty services and programs, and the financing
mechanisms used by the Company in its acquisition of long-term care centers and
expansion of its specialty services and programs.
As a result of the foregoing factors, net earnings increased to $22.8 million or
$.88 per share and $9.1 million or $.31 per share for the nine months and three
months ended February 28, 1995, respectively. This compares to net earnings of
$10.8 million or $.66 per share and $4.5 million or $.23 per share for the nine
months and three months ended February 28, 1994, respectively.
LIQUIDITY AND CAPITAL RESOURCES
OPERATIONS. At February 28, 1995, the Company's working capital was $122.5
million including cash and cash equivalents of $14.1 million, as compared to
working capital of $58.6 million at May 31, 1994 including cash and cash
equivalents of $6.5 million. During the nine months ended February 28, 1995,
the Company used $27.9 million in net cash in its operations. During the first
nine months of fiscal 1995, patient care and settlement receivables increased by
$44.3 million, substantially all of which represents increases generated by
existing facilities or by new facilities after the date of acquisition.
EXPANSION PROGRAM. The net cash used by the Company's investing activities was
$128.2 million for the nine months ended February 28, 1995. The primary uses of
cash from investment activities has been the acquisition of peopleCARE during
the first quarter of fiscal 1995, other individually insignificant acquisitions
during the nine months ended February 28, 1995, and capital expenditures. The
principal purpose of capital expenditures during this period has been to fund
the Company's internal and external expansion program. During the nine months
ended February 28, 1995, the Company's capital expenditures were $28.6 million.
The amount expended during the nine months ended February 28, 1995 included
approximately $9.3 million of routine capital improvements and the balance is
attributable to facility acquisitions and additions at sites acquired for
specialty hospitals, laboratory and pharmacy equipment, and computer equipment.
The Company's expansion program requires funds (i) to acquire assets and to
expand and improve existing and newly acquired facilities, (ii) to discharge
debt obligations assumed or otherwise acquired in connection with the
acquisitions of facilities and properties; and (iii) to finance the increase in
patient care and other accounts receivable resulting from the acquisitions
effected pursuant to the Company's expansion program. The funds necessary to
meet these capital expenditures and debt repayment obligations have been
provided principally by the Company's financing activities. During the nine
months ended February 28, 1995, proceeds from the issuance of debt (principally
net draws on the Company's Credit Facility), net of debt repayments and
repurchases of convertible subordinated notes, amounted to $40.6 million.
Proceeds from issuance of the Company's common stock were approximately $123.3
million for this same period. Proceeds from the issuance of the Company's
common stock offering in November 1994 were used primarily to repay borrowings
under the Company's Credit Facility and to finance the increase in patient care
receivables and other operating assets during the period.
SOURCES. At February 28, 1995, the aggregate revolving credit commitment under
the Credit Facility, subject to reduction through application of certain
financial ratios, was $200 million, of which the Company has borrowed $88.25
million. At February 28, 1995, the remaining credit available to the Company
under the Credit Facility was $100.9 million. Subsequent to February 28, 1995,
the Company increased its aggregate revolving credit commitment under the Credit
Facility to $250 million. At April 5, 1995, the remaining credit available to
the Company under the Credit Facility was $157.9 million.
To the extent that the Company's operations and expansion program require cash
expenditures in excess of the amounts available to it under the Credit Facility,
management of the Company believes that the Company can obtain the necessary
funds through other financing activities, including the issuance and sale of
debt and equity securities in public and private markets.
<PAGE>
RECENT REIMBURSEMENT POLICY CHANGES
In the recently enacted Federal Budget Deficit Reduction Bill (the "Budget
Agreement"), various reimbursement rules and regulations were adopted by the
federal government which pertain to the Company. The Company has analyzed these
and other reimbursement rules and regulations and does not believe they will
have a material adverse impact on future operating results. The Budget
Agreement also contained a number of changes affecting corporate income tax.
The changes contained in the Budget Agreement resulted in the Company's
effective tax rate increasing approximately 1% in the first three quarters of
fiscal 1994.
<PAGE>
HORIZON HEALTHCARE CORPORATION
PART II - Other Information
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
10.1 Amended and Restated Revolving Credit Loan Agreement, dated
March 16, 1995, by and between Horizon Healthcare Corporation,
The Boatmen's National Bank of St. Louis, as Agent, and the
Lenders named therein (excluding all exhibits thereto except
Exhibits 1.1 and 2).
11. Statement Re Computation of Per Share Earnings
27. Financial Data Schedule
b. Reports on Form 8-K
A report on Form 8-K was filed on April 10, 1995 under "Item 5. Other
Events" reporting the Company entered into: (i) an Agreement and Plan
of Merger, dated as of March 31, 1995, by and among the Company, CMS
Merger Corporation, a wholly owned subsidiary of the Company, and
Continental Medical Systems, Inc. (CMS); (ii) a Stock Option Agreement,
dated as of March 31, 1995, by and among the Company and CMS; and
(iii) a Voting Agreement, dated as of March 31, 1995, between the
Company and certain stockholders of CMS named therein.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this Amendment to be signed on its behalf by the
undersigned, thereunto duly authorized.
HORIZON HEALTHCARE CORPORATION
Date: June 2, 1995 By/s/ Ernest A. Schofield
------------ ------------------------------------
Ernest A. Schofield
Chief Financial Officer and
Senior Vice President
*Ernest A. Schofield is signing in the dual capacities as Chief Financial
Officer and as a duly authorized officer of the Company.
<PAGE>
INDEX TO EXHIBITS
Sequentially
Exhibit Numbered
Number Description of Exhibits Page
------ ----------------------- ----
10.1 Amended and Restated Revolving Credit Loan
Agreement, dated March 16, 1995, by and
between Horizon Healthcare Corporation, The
Boatmen's National Bank of St. Louis, as
Agent, and the Lenders named therein
(excluding all exhibits thereto except
Exhibits 1.1 and 2).
11. Statement Re Computation of Per Share Earnings
27. Financial Data Schedule
<PAGE>
HORIZON HEALTHCARE CORPORATION
EXHIBIT 11.1
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
(IN THOUSANDS, EXCEPT PER SHARE EARNINGS)
Common and Common Equivalents:
<TABLE>
<CAPTION>
Three months ended Nine months ended
February 28, February 28,
1995 1994 1995 1994
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net Earnings $ 9,146 $ 4,484 $ 22,834 $ 10,800
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Applicable Common Shares:
Weighted average outstanding
shares during the period 28,923 17,920 25,248 14,062
Weighted average shares
issuable upon exercise of
common stock equivalents
outstanding (principally stock
options and warrants using the
treasury stock method) 644 629 684 589
---------- ---------- ---------- ----------
Total 29,567 18,549 25,932 14,651
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
NET EARNINGS PER SHARE $ 0.31 $ 0.24 $ 0.88 $ 0.74
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
<PAGE>
HORIZON HEALTHCARE CORPORATION
EXHIBIT 11.1
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
(IN THOUSANDS, EXCEPT PER SHARE EARNINGS)
Assuming Full Dilution:
<TABLE>
<CAPTION>
Three months ended Nine months ended
February 28, February 28,
1995 1994 1995 1994
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net Earnings $ 9,146 $ 4,484 $ 22,834 $ 10,800
Interest on subordinated convertible
notes, net of income taxes 0 308 0 1,428
---------- ---------- ---------- ----------
Earnings used for computation of
per share earnings $ 9,146 $ 4,792 $ 22,834 $ 12,228
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Applicable Common Shares:
Weighted average outstanding
shares during the period 28,923 20,436 25,248 14,901
Weighted average shares
issuable upon exercise of
common stock equivalents
outstanding (principally stock
options and warrants using the
treasury stock method and
subordinated convertible notes in 1994) 644 690 684 3,638
---------- ---------- ---------- ----------
Total 29,587 21,126 25,932 18,539
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
NET EARNINGS PER SHARE $ 0.31 $ 0.23 $ 0.88 $ 0.66
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FEBRUARY 28, 1995 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAY-31-1995
<PERIOD-START> JUN-1-1994
<PERIOD-END> FEB-28-1995
<EXCHANGE-RATE> 1
<CASH> 14,135
<SECURITIES> 0
<RECEIVABLES> 140,142
<ALLOWANCES> (6,846)
<INVENTORY> 7,050
<CURRENT-ASSETS> 173,832
<PP&E> 382,525
<DEPRECIATION> 22,029
<TOTAL-ASSETS> 683,701
<CURRENT-LIABILITIES> 51,299
<BONDS> 215,163
<COMMON> 29
0
0
<OTHER-SE> 398,040
<TOTAL-LIABILITY-AND-EQUITY> 683,701
<SALES> 0
<TOTAL-REVENUES> 459,457
<CGS> 0
<TOTAL-COSTS> 422,068
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 348
<INTEREST-EXPENSE> 13,335
<INCOME-PRETAX> 37,389
<INCOME-TAX> 14,555
<INCOME-CONTINUING> 22,834
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 22,834
<EPS-PRIMARY> .88
<EPS-DILUTED> .88
</TABLE>
