<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
___________________________________
FORM 10-Q/A
AMENDMENT NO. 1
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
For Quarter Ended: AUGUST 31, 1994
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 23,176,663 shares at October 7, 1994.
<PAGE>
Part 1 - FINANCIAL INFORMATION
Item 1. Financial Statements
HEALTHCARE CORPORATION
CONSOLIDATED BALANCE SHEETS
AUGUST 31, 1994 AND MAY 31, 1994
(IN THOUSANDS)
<TABLE>
<CAPTION>
August 31 May 31
(unaudited)
--------------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 12,653 $ 6,522
Patient care accounts receivable, net 97,940 76,862
Estimated Medicare and Medicaid Settlements 8,900 6,702
Current portion of notes receivable 409 535
Prepaid and other current assets 27,582 17,071
--------------- ------------
Total current assets 147,484 107,692
--------------- ------------
Land, buildings and equipment
Land and land improvements 26,226 21,605
Buildings and improvements 250,545 144,213
Equipment 52,137 39,377
--------------- ------------
328,908 205,195
Less accumulated depreciation 14,558 11,769
--------------- ------------
Net land, buildings and equipment 314,350 193,426
Notes receivable, excluding current portion 22,373 22,436
Lease purchase costs, net 7,046 6,507
Lease, utility and other deposits 14,031 11,870
Deferred income taxes 7,300 7,271
Goodwill, net 47,481 41,673
Other intangible assets, net 8,255 7,609
Other assets 8,988 7,967
--------------- ------------
Total assets $577,308 $406,451
--------------- ------------
--------------- ------------
</TABLE>
(continued)
See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
HEALTHCARE CORPORATION
CONSOLIDATED BALANCE SHEETS
AUGUST 31, 1994 AND MAY 31, 1994
(IN THOUSANDS)
August 31 May 31
(unaudited)
--------------- ------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $ 2,527 $ 1,697
Current portion of obligations under capital leases 569 0
Accounts payable 21,096 14,200
Accrued payroll 9,142 10,680
Accrued property and payroll taxes 14,422 14,318
Other accrued liabilities 8,979 8,157
--------------- ------------
Total current liabilities 56,735 49,052
--------------- ------------
Long-term debt, excluding current portion 173,789 76,673
Obligations under capial leases, excluding current portion 48,017 0
Deferred lease credit, net 20,058 20,494
Convertible subordinated notes 30,906 30,906
--------------- ------------
Total liabilities 329,505 177,125
--------------- ------------
Stockholders' equity:
Preferred stock of $.001 par value, authorized
500,000 shares, none issued
Common stock of $.001 par value, authorized
30,000,000 shares, 23,280,588 shares issued with
22,952,442 shares outstanding at August 31, 1994
and 22,738,073 shares issued with 22,409,927
shares outstanding at May 31, 1994 23 22
Additional paid-in capital 212,217 200,273
Retained earnings 36,303 29,771
Treasury stock (740) (740)
--------------- ------------
Total stockholders' equity 247,803 229,326
--------------- ------------
Total liabilities and stockholders' equity $577,308 $406,451
--------------- ------------
--------------- ------------
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
HORIZON HEALTHCARE CORPORATION
CONSOLIDATED STATEMENT OF EARNINGS
FOR THE THREE MONTHS ENDED
AUGUST 31, 1994 AND AUGUST 31, 1993
(UNAUDITED)
(in thousands, except per share data)
<TABLE>
<CAPTION>
1994 1993
--------------- ------------
<S> <C> <C>
Net patient care revenues $134,832 $73,904
Other operating revenues 2,872 1,064
--------------- ------------
Total operating revenues 137,704 74,968
--------------- ------------
Routine expenses:
Nursing services 42,694 24,022
Ancillary services 28,516 15,483
Dietary services 8,726 5,489
Facility operations and maintenance 5,355 3,097
Housekeeping services 3,095 1,875
Laundry services 1,725 1,116
Administrative and general 13,941 7,504
Other services 4,153 2,396
--------------- ------------
Total routine expenses 108,205 60,982
--------------- ------------
Property expenses:
Facility leases 9,548 5,737
Interest 3,397 1,229
Depreciation and amortization 3,851 1,388
Other 1,824 1,035
--------------- ------------
Total property expenses 18,620 9,389
--------------- ------------
Total operating expenses 126,825 70,371
--------------- ------------
Earnings before income taxes 10,879 4,597
Income taxes 4,297 1,781
--------------- ------------
Net earnings $ 6,582 $ 2,816
--------------- ------------
Earnings per common and common equivalent share $ 0.28 $ 0.24
--------------- ------------
--------------- ------------
Earnings per share - assuming full dilution $ 0.28 $ 0.21
--------------- ------------
--------------- ------------
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
HORIZON HEALTHCARE CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
THREE MONTHS ENDED AUGUST 31, 1994 AND AUGUST 31, 1993
(IN THOUSANDS, UNAUDITED)
<TABLE>
<CAPTION>
1994 1993
--------------- ------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 6,582 $ 2,816
Adjustments to reconcile net earnings to net cash
provided by (used for) operating activities:
Depreciation and amortization 3,851 1,388
Gain on sale of property (800) 0
Provision for losses on patient care receivables (262) 228
Deferred lease credit (435) 0
Changes in assets and liabilities:
Patient care and settlement receivables (17,131) (4,026)
Prepaid and other current assets (10,209) (1,867)
Lease, utility and other deposits (689) 2,178
Accounts payable 5,413 (921)
Accrued payroll (2,434) (794)
Deferred income taxes (29) 0
Other current liabilities 792 1,344
--------------- ------------
Net cash provided by (used for) operating activities (15,351) 346
--------------- ------------
Cash flows from investing activities:
Payments received on notes receivable 189 2
Capital expenditures (10,624) (17,172)
Proceeds from sale of assets 3,900 0
Lease purchase cost expenditures (758) 40
Cash used for acquisition of peopleCARE (62,152) 0
Cash used for other acquisitions (4,911) 0
Additions to other intangible assets (2,194) (3,495)
Change in other assets (1,020) (1,759)
--------------- ------------
Net cash used by investing activies (77,570) (22,384)
--------------- ------------
Cash flows from financing activities:
Proceeds from issuance of debt 98,154 15,236
Repayment of debt (247) (49)
Proceeds from issuance of stock 1,195 327
Distribution to subsidiary shareholder (50) 0
--------------- ------------
Net cash provided by financing activities 99,052 16,514
--------------- ------------
Net increase (decrease) in cash and cash equivalents 6,131 (5,524)
--------------- ------------
Cash and cash equivalents at beginning of period 6,522 5,928
Cash and cash equivalents at end of period $ 12,653 $ 404
--------------- ------------
--------------- ------------
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
HORIZON HEALTHCARE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
August 31, 1994
(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
On July 29, 1994, the Company completed a $150 million revolving credit loan
agreement (Agreement) which replaced the existing Agreement outstanding at May
31, 1994. The terms of the increased Agreement are substantially the same as
the existing credit Agreement, except that certain accounts receivable of the
Company were taken as additional security. The value of this security at August
31, 1994 is approximately $82.5 million.
Subsequent to August 31, 1994, the Company received a commitment from the lender
to increase the Agreement to $200 million. The terms of the increased Agreement
are essentially the same as the July 29, 1994 Agreement. The Company
anticipates closing the Agreement in October, 1994.
(3) ACQUISITION OF PEOPLECARE
During the three months ended August 31, 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 one month
ended August 31, 1994 are included in the Company's Consolidated Statement of
Earnings for the three months ended August 1994. This acquisition was accounted
for using the purchase method.
The Company had other acquisitions during the three months ended August 31, 1994
which in the aggregate were insignificant.
<PAGE>
(4) LEASES
In connection with the acquisition of peopleCARE discussed above, the Company
entered into a capital lease for six facilities. The lease expires October
2003. At August 31, 1994, the amount of land, buildings and equipment and
related accumulated amortization recorded under this capital lease was as
follows:
<TABLE>
<S> <C>
Land $ 2,288,940
Buildings 50,657,623
Equipment 3,550,464
-----------
56,497,027
Less accumulated amortization 133,696
-----------
$56,363,331
-----------
-----------
</TABLE>
Amortization of assets held under this capital lease is included with
depreciation expense. The present value of future minimum capital lease
payments as of August 31, 1994 is as follows:
<TABLE>
<CAPTION>
<S> <C>
Year ended August 31:
1995 $ 5,023,492
1996 5,023,492
1997 5,023,492
1998 5,023,492
1999 5,023,492
Thereafter, through 2003 61,744,412
------------
Total minimum lease payments 86,861,872
Less amounts representing interest (at 9.09%) 38,275,953
------------
Present value of net minimum capital lease payments 48,585,919
Less current portion of obligations under capital leases 569,199
------------
Obligations under capital leases, excluding current portion $48,016,720
------------
------------
</TABLE>
(5) SUPPLEMENTARY INFORMATION RELATING TO CONSOLIDATED STATEMENTS OF CASH FLOWS
For the three months ended August 31, 1994, the following are considered non-
cash items for purposes of the consolidated statements of cash flows:
a) The issuance of 449,438 shares of common stock for the purchase of
certain assets and liabilities of peopleCARE, and
b) The issuance of 44,220 shares of common stock for other acquisitions
which in the aggregate were insignificant.
<PAGE>
(6) PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
During the year ended May 31, 1994 and the three months ended August 31, 1994,
the Company implemented its strategic business plan by leasing or acquiring
long-term care facilities and related specialty service business in targeted
geographic areas. The following unaudited pro forma condensed consolidated
financial statements give effect to certain of the Company's acquisitions as if
these acquisitions had occurred at the beginning of the periods indicated.
The Unaudited Pro Forma Condensed Consolidated Statement of Earnings for the
year ended May 31, 1994, gives effect to (i) the February 10, 1994 merger of
Greenery Rehabilitation Group, Inc. ("Greenery") into the Company (the "Greenery
Merger"), including the transactions with Health and Rehabilitation Properties
Trust ("HRP") and M&P Partners Limited Partnership ("M&P"), and (ii) the July
29, 1994 acquisitions of peopleCARE Heritage Group ("peopleCARE") and Tri-State
Home Respiratory Care ("Tri-State") (the "Acquisitions") as if all such
transactions had occurred on June 1, 1993. The Unaudited Pro Forma Condensed
Consolidated Statement of Earnings for the year ended May 31, 1994 includes
historical results of operations as follows: (i) the results of operations of
the Company for its fiscal year ended May 31, 1994, (ii) the results of
operations of Greenery for the eight and one-half months ended February 10,
1994, (iii) the results of operations of peopleCARE for the twelve months ended
April 30, 1994 and (iv) the results of operations of Tri-State for the twelve
months ended June 30, 1994. The combined historical amounts have been adjusted
by giving effect to the assumptions and adjustments included in the accompanying
notes to the Unaudited Pro Forma Condensed Consolidated Financial Statements.
The Unaudited Pro Forma Condensed Consolidated Statement of Earnings for the
three months ended AUGUST 31, 1994 gives effect to the peopleCARE and Tri-State
acquisitions as if all such transaction had occurred on June 1, 1994. The
Unaudited Pro Forma Condensed Consolidated Statement of Earnings for the three
months ended August 31, 1994 includes historical results of operations as
follows: (i) the results of operations of the Company for the three months
ended August 31, 1994, (ii) the results of operations of peopleCARE for the two
months ended July 31, 1994 and (iii) the results of operation of Tri-State for
the two months ended June 30, 1994. The combined historical amounts have been
adjusted by giving effect to the assumptions and adjustments included in the
accompanying notes to the Unaudited Pro Forma Condensed Consolidated Financial
Statements.
The following pro forma financial information may not necessarily reflect the
financial condition or results of operations of the Company which would have
actually resulted had the transactions referred to above occurred as of the date
and for the periods indicated or reflect the future earnings of the Company.
The pro forma financial information should be read in conjunction with the
accompanying notes to the Unaudited Pro Forma Condensed Consolidated Financial
Statements and the financial statements of the Company, Greenery and peopleCARE
included herein or separately filed.
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENT OF EARNINGS
FOR THE YEAR ENDED MAY 31, 1994
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Greenery
Historical Merger and
---------- Related Pro Forma
Transactions Before Historical Acquisitions
Horizon Greenery Adjustments(1) Acquisitions PeopleCARE Adjustments(2) Pro Forma
------- -------- -------------- ------------ ---------- -------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Operating revenues . . . . . . . . $375,095 $129,358 $ (3,695)(a) $483,131 $50,427 $ (200)(a) $535,310
-------- -------- -------- ------- --------
(17,429)(b) 1,952 (b)
-------
1,220(b) 1,752
-------
46(c)
(1,464)(d)
---------
(21,322)
---------
Cost of services . . . . . . . . . 293,863 109,157 (2,144)(a) 384,016 35,780 (211)(a) 420,563
(16,860)(b) 978 (b)
Administrative and general . . . . 40,165 32,228 (552)(a) 65,816 1,806 52 (b) 67,374
(1,402)(b) (300)(c)
(4,747)(e)
124 (f)
Interest . . . . . . . . . . . . . 6,240 3,473 1,599 (a) 11,312 4,590 319 (b) 19,874
3,653 (d)
Depreciation and amortization. . . 8,081 2,156 1,045 (a) 11,119 1,968 140 (b) 14,048
(163)(b) 821 (e)
Non-recurring items. . . . . . . . -- 5,881 (5,881)(a) -- -- -- --
-------- -------- -------- -------- ------- ------- --------
Total operating expenses. . . . 348,349 152,895 (28,981) 472,263 44,144 5,452 521,859
-------- -------- -------- -------- ------- ------- --------
Earnings (loss) before income
taxes. . . . . . . . . . . . . 26,746 (23,537) 7,659 10,868 6,283 (3,700) 13,451
Income taxes . . . . . . . . . . . 10,140 (9,297) 3,450 4,293(g) 59 25 5,313(g)
-------- -------- -------- -------- ------- ------- --------
Net earnings (loss) . . . . . . $ 16,606 $(14,240) $ 4,209 $ 6,575 $ 6,188 $(4,625) $ 8,138
-------- -------- -------- -------- ------- ------- --------
-------- -------- -------- -------- ------- ------- --------
Earnings per common and common
equivalent share. . . . . . . . . $ 0.99 $ 0.36(3) $ 0.44(3)
-------- -------- --------
-------- -------- --------
Earnings per common share --
assuming full dilution. . . . . . $ 0.91 $ 0.36(3) $ 0.44(3)
-------- -------- --------
-------- -------- --------
(FOOTNOTES CONTINUED ON FOLLOWING PAGE)
</TABLE>
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENT OF EARNINGS
FOR THE THREE MONTHS ENDED AUGUST 31, 1994
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Acquisitions
Historical Adjustments(2)
---------- --------------
Horizon peopleCARE Pro Forma
----------------------------- -------------
<S> <C> <C> <C> <C>
Operating revenues . . . . . . . . . . . . $137,704 $9,021 $ (33)(a) $147,180
-------- ------- --------
488 (b)
------
455
------
Cost of services . . . . . . . . . . . . . 105,636 6,882 (35)(a) 112,728
245 (b)
Administrative and general . . . . . . . . 13,941 301 13 (b) 14,205
(50)(c)
Interest . . . . . . . . . . . . . . . . . 3,397 765 53 (b) 4,856
641 (d)
Depreciation and amortization. . . . . . . 3,851 320 35 (b) 4,361
155 (e)
-------- ------- ------ --------
Total operating expenses. . . . . . . . 126,825 8,268 1,057 136,150
-------- ------- ------ --------
Earnings (loss) before income taxes . . 10,879 753 (602) 11,030
Income taxes . . . . . . . . . . . . . . . 4,297 -- 60 4,357(g)
-------- ------- ------ --------
Net earnings (loss) . . . . . . . . . . $ 6,582 $ 753 $ (662) $ 6,673
-------- ------- ------ --------
-------- ------- ------ --------
Earnings per common and common
equivalent share. . . . . . . . . . . . . $ 0.28 $ 0.28(3)
-------- --------
-------- --------
Earnings per common share -- assuming
full dilution . . . . . . . . . . . . . . $ 0.28 $ 0.28(3)
-------- --------
-------- --------
(FOOTNOTES CONTINUED ON FOLLOWING PAGE)
</TABLE>
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED STATEMENTS OF EARNINGS
(IN THOUSANDS)
(1) The Company completed the Greenery Merger and related transactions on
February 10, 1994. As a result, the historical financial statements of the
Company for the year ended May 31, 1994 include approximately three and one-half
months of Greenery operations. Following are adjustments recorded to reflect the
effects of the Greenery Merger and related transactions for the approximate
eight and one-half month period ended February 10, 1994 as if the Greenery
Merger had occurred on June 1, 1993:
(a) In connection with the Greenery Merger, the Company purchased
three facilities previously leased by HRP to Greenery and incurred
additional debt related to a Greenery-owned facility to raise additional
cash. In addition, certain assets for which a write down of approximately
$3,100 was recorded by Greenery during the eight and one-half months ended
February 10, 1994 were sold to M&P, along with two office buildings owned
and operated by Greenery. Greenery also recorded a $775 loss on the sale of
one facility to HRP and expenses of $2,006 related to severance pay and
other Greenery Merger costs in preparation for the Greenery Merger during
the eight and one-half months ended February 10, 1994. The impact of the
above, as well as the additional depreciation and amortization expense for
the allocation of excess purchase price to buildings and equipment and
goodwill (assuming a 40-year amortization period for goodwill), on earnings
before income taxes is as follows:
<TABLE>
<CAPTION>
Eight and One-Half
Months Ended
February 10, 1994
-----------------
<S> <C>
Operating revenues. . . . . . . . . . . . . . . $ (3,695)
-------------
Cost of services. . . . . . . . . . . . . . . . (2,144)
Administrative and general. . . . . . . . . . . (552)
Interest. . . . . . . . . . . . . . . . . . . . 1,599
Depreciation and amortization . . . . . . . . . 1,045
Non-recurring write down to net realizable value
of assets sold to M&P and HRP and other Greenery
Merger related costs and losses. . . . . . . . (5,881)
-------------
Total operating expenses . . . . . . . . . . . (5,933)
-------------
Increase in earnings (loss) before
income taxes . . . . . . . . . . . . . . . . $ 2,238
-------------
-------------
</TABLE>
(b) Pursuant to the Greenery Merger, Greenery's obligations under three
facility leases with HRP were assumed by the former majority owners of Greenery
and the Company entered into a management agreement with such former majority
owners for such facilities. The impact on earnings before income taxes is as
follows:
<TABLE>
<CAPTION>
Eight and One-Half
Months Ended
February 10, 1994
-----------------
<S> <C>
Operating revenues. . . . . . . . . . . . . . . $(17,429)
-------------
Cost of services. . . . . . . . . . . . . . . . (16,860)
Administrative and general. . . . . . . . . . . (1,402)
Interest. . . . . . . . . . . . . . . . . . . . 1,599
Depreciation and amortization . . . . . . . . . (163)
-------------
Total operating expenses . . . . . . . . . . . (18,425)
-------------
Net increase in earnings before
income taxes . . . . . . . . . . . . . . . . 996
Pro forma management revenues . . . . . . . . . 1,220
-------------
Increase in earnings (loss) before income
taxes. . . . . . . . . . . . . . . . . . . $2,216
-------------
-------------
</TABLE>
<PAGE>
(c) Interest income has been increased to reflect the impact of the Company
financing the $20,000 sale to M&P of certain Greenery assets, including among
other assets, the office buildings discussed in (a) above and interest bearing
notes receivable, as follows:
<TABLE>
<CAPTION>
Eight and One-Half
Months Ended
February 10, 1994
-----------------
<S> <C>
Interest on the Company's $20,000 note receivable $851
Less interest on notes receivable sold (805)
---------------
$ 46
---------------
---------------
</TABLE>
(d) Operating revenues have been reduced by $1,464 to eliminate consulting
fee revenues between the Company and Greenery.
(e) As a result of the Greenery Merger, the corporate offices of Greenery
were closed and specifically identified duplicate corporate administrative and
general expenses at Greenery totaling $4,747 for the eight and one-half months
ended February 10, 1994 have been eliminated.
(f) The Company has entered into a management agreement with a director of
Greenery for a term of seven years at an annual rate of $175 ($124 for eight and
one-half months).
(g) An effective tax rate of approximately 39.5% is used to estimate
combined federal and state taxes for the twelve months ended May 31, 1994 and
three months ended August 31, 1994.
(2) The adjustments for the peopleCARE and Tri-State Acquisitions consist of the
following:
(a) The historical financial information reported for peopleCARE includes
certain de minimis amounts which were not acquired or assumed by the Company in
connection with this acquisition. Therefore, adjustments have been recorded to
eliminate interest and other operating revenues of $200 and $33 for the year
ended May 31, 1994 and the three months ended August 31, 1994, respectively, and
cost of services expense of $211 and $35 for the year ended May 31, 1994 and the
three months ended August 31, 1994, respectively, associated with the
predecessor entity operations which were not acquired by the Company.
(b) The Tri-State acquisition resulted in the payment of $4,400 in cash
drawn from the Company's line of credit. The following adjustments have been
recorded to reflect interest expense on the line of credit and Tri-State's pro
forma results of operations for the periods indicated:
<TABLE>
<CAPTION>
Year Ended Two Months Ended
May 31, 1994 July 31, 1994
------------ -------------
<S> <C> <C>
Increase in operating revenues . . . . . . $1,952 $488
Increase in cost of services expense . . . (978) (245)
Increase in administrative and general . . (52) (13)
Increase in interest expense . . . . . . . (319) (53)
Increase in depreciation and amortization. (140) (35)
------------ -------------
Increase in earnings (loss) before
income taxes . . . . . . . . . . . $ 463 $142
------------ -------------
------------ -------------
</TABLE>
(c) Adjustments of $300 and $50 have been recorded to eliminate
distributions to peopleCARE's prior owners for the year ended May 31, 1994 and
the three months ended August 31, 1994, respectively.
<PAGE>
(d) The peopleCARE acquisition purchase price included the payment of
$55,616 in cash, which was funded from the Company's line of credit, for title
to seven facilities. This acquisition also called for the Company to enter into
a capital lease for six facilities formerly owned by peopleCARE. As a result,
interest expense has been adjusted as follows for the year ended May 31, 1994
and the three months ended August 31, 1994, respectively:
<TABLE>
<CAPTION>
Year Ended Two Months Ended
May 31, 1994 August 31, 1994
------------- ----------------
<S> <C> <C>
Increase in line of credit sufficient to retire
outstanding peopleCARE debt during the period
($49,716 for the period June 1, 1993 through
September 30, 1993 and $55,716 for the period
October 1, 1993 through May 31, 1994) $ 3,840 $ 672
Increase in capital lease obligations of $48,700
Interest expense amortized based on an interest
rate 9.09% 4,403 734
Less historical peopleCARE interest expense (4,590) (765)
---------- ---------
Increase in interest expense $ 3,653 $ 641
---------- ---------
---------- ---------
</TABLE>
(e) Adjustments have been recorded to depreciation and amortization expense
to reflect the purchase of seven facilities and capital lease of six facilities
in connection with the peopleCARE acquisition for the year ended may 31, 1994
and the three months ended August 31, 1994, respectively, as follows:
<TABLE>
<CAPTION>
Year Ended Three Months Ended
May 31, 1994 August 31, 1994
------------ ---------------
<S> <C> <C> <C>
Purchase price allocated to equipment $ 5,500
Depreciable life in years 10 $ 550 $ 91
-------
Purchase price allocated to buildings 86,240
Depreciable life in years 40 2,156 370
-------
Purchase price allocated to noncompete agreements 250
Amortizable life in years 3 83 14
-------
Less historical peopleCARE depreciation expense (1,968) (320)
-------- -------
Increase in depreciation and amortization expense $ 821 $ 155
-------- -------
-------- -------
</TABLE>
<PAGE>
(3) The calculation of pro forma weighted average number of shares outstanding
is as follows:
<TABLE>
<CAPTION>
May 31, 1994
------------
Weighted Average Weighted Average
Number of Shares for Number of Shares for
Earnings per Common Earnings per Common
and Common Share - Assuming
Equivalent Share Full Dilution
---------------- -------------
<S> <C> <C>
Prior to the Greenery Merger and peopleCARE
acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . 16,136 19,110
Shares issued in connection with the Greenery Merger . . . . . . . 2,050 2,050
------ -------
Pro forma before peopleCARE Acquisition . . . . . . . . . . . 18,186 21,160
Shares issued in connection with the peopleCARE
acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . 449 449
------ -------
Pro Forma after Greenery Merger and
peopleCARE Acquisition. . . . . . . . . . . . . . . . . . . . 18,635 21,609
------ -------
------ -------
</TABLE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Company adopted a strategic business plan in 1990 to increase its
specialty health care services as a percent of operating revenues. The Company
has pursued this strategy by acquiring long-term care facilities and integrating
its specialty health care services into those facilities, by acquiring providers
of specialty health care services and by offering the Company's broad range of
specialty health care services to third parties. As a result, the Company's
operating revenues have grown from $105.7 million in fiscal 1990 to
$375.1 million in fiscal 1994. Moreover, specialty health care services have
grown from $17.4 million, or 16.5% of operating revenues, in fiscal 1990 to
$141.7 million, or 37.8% of operating revenues, in fiscal 1994, and to 44.6% of
operating revenues in the first quarter of fiscal 1995. The Company now provides
a broad range of specialty health care services including subacute care,
rehabilitation therapies, Alzheimer's care, institutional pharmacy services,
non-invasive medical diagnostic services, home respiratory care services,
clinical laboratory services and sleep diagnostic testing 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. The Company
is expanding its specialty health care programs and services through the
development of institutional pharmacies, acquisition and development of therapy
companies, home respiratory care companies and medical diagnostic companies and
the conversion and renovation or acquisition of specialty hospitals. In turn,
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.
These growth objectives have been, and will continue to be, the basis of a
strategic business plan which has resulted in net earnings of $16.6 million,
$7.7 million and $5.0 million for the fiscal years ended May 31, 1994, 1993 and
1992, respectively, and $6.6 million and $6.7 million, respectively, for the
three months ended August 31, 1994 on a historical and proforma basis.
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 August 31,
Historical Proforma 1994 Historical
1994 (1) 1993
---- --- ----
<S> <C> <C> <C>
Total operating revenue. . . . . . . 100.0% 100.0% 100.0%
-------- -------- --------
Total routine expenses (2) . . . . . 78.6 79.8 81.3
Total property expenses (3). . . . . 13.5 12.7 12.5
-------- -------- --------
Total operating expenses. . . . . 92.1 92.5 93.8
-------- -------- --------
Earnings from operations . . . . . . 7.9 7.5 6.2
Income taxes . . . . . . . . . . . . 3.1 2.9 2.4
-------- -------- --------
Net earnings. . . . . . . . . . . 4.8% 4.6% 3.8%
-------- -------- --------
-------- -------- --------
<FN>
___________
(1) Derived from and based upon the assumptions used to prepare the pro forma
results of operations of the Company. See the unaudited Pro Forma Condensed
Consolidated Financial Statements and the notes thereto included elsewhere
herein.
(2) Includes the cost of nursing services, all other direct service costs and
general and administrative costs.
(3) 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
August 31,
(In thousands, except statistical data)
Historical 1994 Proforma 1994 (1) Historical 1993
----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Long-term care services. . . . . . . . $ 73,469 53% $ 82,945 56% $50,589 68%
Specialty health care services (2) . . 61,363 45 61,363 42 23,316 31
Other operating revenues (3) . . . . . 2,872 2 2,872 2 1,063 1
--------------- -------- ------- ------- ------- ----
Total operating revenues . . . . . . $137,704 100% $147,180 100% $74,968 100%
--------------- -------- ------- ------- ------- ----
--------------- -------- ------- ------- ------- ----
<FN>
___________
(1) Derived from and based upon the assumptions used to prepare the pro forma results of operations of the Company. See the
unaudited Pro Forma Condensed Consolidated Financial Statements and the notes thereto included elsewhere herein.
(2) 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.
(3) 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>
Three Months Ended
August 31,
1994 1993
---- ----
<S> <C> <C>
Number of facilities (end of period) (1). . . . . . . . . . 130 83
Number of licensed beds (end of period) (2) . . . . . . . . 15,517 9,025
Average occupancy (3) . . . . . . . . . . . . . . . . . . . 90% 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. Excludes facilities classified as discontinued operations in
1993.
(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>
QUARTER ENDED AUGUST 31, 1994 COMPARED WITH QUARTER ENDED AUGUST 31, 1993
Total operating revenues increased to $137.7 million for the three months
ended August 31, 1994 from $74.9 million for the three months ended August 31,
1993. This 84% increase is in large part due to the Company's expansion, both
internally and through acquisitions. Acquisitions accounted for approximately
75% of the growth in revenues. Over the twelve months ended August 31, 1994,
the Company increased the number of long-term beds it owned, leased, or managed
by 6,492. This increase included the acquisitions of 17 Greenery and 13
peopleCARE facilities; the operation of an additional five long-term care
facilities, one assisted living facility consisting of 20 units and one
retirement apartment consisting of 20 units (exclusive of Greenery and
peopleCARE); the opening of three specialty hospitals and three subacute care
units; and the management of 10 additional long-term care facilities. In
addition, over the same period of time the Company also acquired several
non-invasive medical diagnostic companies, expanded its institutional pharmacy,
therapy, and clinical laboratory services, and began providing sleep diagnostic
and home respiratory care services. This increase in revenues is also due in
part to increases in Medicare, Medicaid and private pay rates. These rate
increases represent a growth of approximately 6% over the prior quarter of last
year.
Total routine expenses increased 77% to $108.2 million for the three months
ended August 31, 1994 from $61.0 million for the three months ended August 31,
1993. Substantially all of this increase is due to the additional number of
facilities operated by the Company as well as the continued growth in specialty
health care services and programs. Total property expenses increased 98% to
$18.6 million for the three months ended August 31, 1994 from $9.4 million for
the three months ended August 31, 1993, reflecting the increased number of
facilities operated during the three months ended August 31, 1994.
Interest expense increased approximately 183% to $3.4 million for the three
months ended August 31, 1994 from $1.2 million for the three months ended
August 31, 1993. This increase was primarily 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 over the twelve
months ended August 31, 1994 (the revolving credit balance at August 31, 1994
was $140.75 million as compared to $26.7 million at August 31, 1993), the
increase in the number of mortgages on properties acquired over such twelve
months, and the new capital lease obligations entered into in conjunction with
the peopleCARE acquisition.
As a result of the foregoing factors, net earnings increased to
$6.6 million or $.28 per share for the three months ended August 31, 1994 as
compared to $2.8 million or $.21 per share for the three months ended August 31,
1993.
LIQUIDITY AND CAPITAL RESOURCES
OPERATION. At August 31, 1994, the Company's working capital was $90.7
million including cash and cash equivalents of $12.7 million, as compared to
working capital of $19.9 million at August 31, 1993 including cash and cash
equivalents of $.4 million. During the three months ended August 31, 1994, the
Company used $15.3 million in net cash in its operations (as compared with the
$.3 million in net cash provided by the Company's operations for the three
months ended August 31, 1993). During the first quarter of 1995, patient care
and settlement receivables increased by $17.1 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
increased from $22.4 million for the three months ended August 31, 1993 to
$77.6 million for the three months ended August 31, 1994. The primary uses of
cash from investment activities has been capital expenditures, and the
acquisition of peopleCARE during the first quarter of 1995. The principal
purpose of the capital expenditures during each of these periods has been to
fund the Company's internal and external expansion program. During the three
months ended August 31, 1994, the Company's capital expenditures were
$10.6 million (as compared with $17.2 million for the comparable quarter of the
preceding year). The amount expended during the three months ended August 31,
1994 included approximately $2.4 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.
<PAGE>
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 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 three months ended August 31,
1994, proceeds from the issuance of Company debt (principally draws on the
Company's revolving credit agreement), net of debt repayments and purchases,
amounted to $97.9 million.
SOURCES. At August 31, 1994, the aggregate revolving credit commitment
under the Credit Facility was, subject to reduction through application of
certain financial ratios, $150 million, of which the Company had borrowed
$140.75 million. At that date, its remaining credit available to the Company
under the Credit Facility was $0.7 million. Effective October 11, 1994, the
lenders under the Credit Facility, at the request of the Company, increased
their commitment to $200 million, subject as before to the application of
certain financial ratios.
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>
HORIZON HEALTHCARE CORPORATION
PART II - Other Information
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------------------------------------------------------------
At the Company's Annual Meeting of Shareholders, held September 12, 1994,
the following actions were taken:
a. The Restated Certificate of Incorporation was amended to increase the
number of authorized shares of the Company's common stock, $.001 par
value, from 30,000,000 to 150,000,000;
b. The Restated Certificate of Incorporation was amended to (i) change the
method by which newly increased directorships resulting from any
increase in the number of directors and from certain vacancies may be
filled, (ii) provide for the election of one Class 1 director and one
Class 2 director at the Annual Meeting to fill current vacancies in
such positions and (iii) provide that the directors for the Company at
July 27, 1994, together with the Board's nominees for director elected
at the Annual Meeting, shall be Continuing Directors for the purposes
of Article X of the Restated Certificate of Incorporation; and
c. Klemett L. Belt, Jr., Charles H. Gonzales and Barry M. Portnoy were
elected as Class 1 directors to serve until the 1997 Annual Meeting of
Stockholders and Gerard M. Martin was elected as a Class 2 director to
serve until the 1995 Annual Meeting of Stockholders.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
- -----------------------------------------
a. Exhibits
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 August 12, 1994 under "Item 2.
Acquisition or Disposition of Assets" reporting the acquisition of
peopleCARE Heritage Group. In addition, a report on Form 8-K was filed
on September 16, 1994 under "Item 5. Other Events" announcing the
declaration of the Company's preferred share purchase right dividend.
<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
<TABLE>
<CAPTION>
Sequentially
Exhibit Numbered
Number Description of Exhibit Page
------ ---------------------- ----
<S> <C> <C>
11. Statement Re Computation of Per Share Earnings
27. Financial Data Schedule
</TABLE>
<PAGE>
HORIZON HEALTHCARE CORPORATION
EXHIBIT 11.1
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
(IN THOUSANDS, EXCEPT PER SHARE EARNINGS)
<TABLE>
<CAPTION>
Common and Common Equivalents: Three Months Ended
August 31, 1994 August 31, 1993
------------------- ------------------
<S> <C> <C>
Net Earnings $ 6,582 $ 2,816
------------------- ------------------
------------------- ------------------
Applicable Common Shares:
Weighted average outstanding shares during the period 22,953 11,332
Weighted average shares issuable upon exercise of
common stock equivalents outstanding (principally stock
options and warrants using the treasury stock method) 684 539
------------------- ------------------
Total 23,637 11,871
------------------- ------------------
------------------- ------------------
NET EARNINGS PER SHARE $ 0.28 $ 0.24
------------------- ------------------
------------------- ------------------
</TABLE>
<PAGE>
HORIZON HEALTHCARE CORPORATION
EXHIBIT 11.1
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
(IN THOUSANDS, EXCEPT PER SHARE EARNINGS)
<TABLE>
<CAPTION>
Assuming Full Dilution: Three Months Ended
August 31, 1994 August 31, 1993
------------------- ------------------
<S> <C> <C>
Net Earnings $ 6,582 $ 2,816
Interest on convertible debentures, net of
income taxes $ 0 $ 568
------------------- ------------------
Earnings used for computation of per share earnings $ 6,582 $ 3,384
------------------- ------------------
------------------- ------------------
Applicable Common Shares:
Weighted average outstanding shares during the period 22,953 11,332
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) 713 5,062
------------------- ------------------
------------------- ------------------
Total 23,666 16,394
------------------- ------------------
------------------- ------------------
NET EARNINGS PER SHARE $ 0.28 $ 0.21
------------------- ------------------
------------------- ------------------
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This Schedule contains summary information extracted from the August 31, 1994
10-Q and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAY-31-1995
<PERIOD-START> JUN-01-1994
<PERIOD-END> AUG-31-1994
<CASH> 12,653
<SECURITIES> 0
<RECEIVABLES> 114,846
<ALLOWANCES> (8,006)
<INVENTORY> 6,462
<CURRENT-ASSETS> 147,484
<PP&E> 328,908
<DEPRECIATION> 14,558
<TOTAL-ASSETS> 577,308
<CURRENT-LIABILITIES> 56,735
<BONDS> 252,712
<COMMON> 23
0
0
<OTHER-SE> 247,780
<TOTAL-LIABILITY-AND-EQUITY> 577,308
<SALES> 0
<TOTAL-REVENUES> 137,704
<CGS> 0
<TOTAL-COSTS> 126,825
<OTHER-EXPENSES> 0
<LOSS-PROVISION> (442)
<INTEREST-EXPENSE> 3,397
<INCOME-PRETAX> 10,879
<INCOME-TAX> 4,297
<INCOME-CONTINUING> 6,582
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,582
<EPS-PRIMARY> .28
<EPS-DILUTED> .28
</TABLE>
