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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
March 13, 2000 (March 7, 2000)
CHILDREN'S COMPREHENSIVE SERVICES, INC.
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(Exact name of registrant as specified in its charter)
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<S> <C> <C>
Tennessee 0-16162 62-1240866
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(State or other jurisdiction of incorporation) (Commission File Number) (I.R.S. Employer
Identification No.)
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3401 West End Avenue, Suite 500
Nashville, Tennessee 37203
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (615) 383-0376
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(Former name or former address, if changed since last report)
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Item 5. Other Events
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Children's Comprehensive Services, Inc. issued a press release on March
7, 2000 announcing a decline in census at the Helicon Youth Center in
Riverside County, California. For information regarding the decline in
census, reference is made to the press release dated March 7, 2000,
which is attached hereto as Exhibit 99.1 and incorporated herein by
reference.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
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99.1 Press Release dated March 7, 2000.
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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 hereunto duly authorized.
CHILDREN'S COMPREHENSIVE SERVICES, INC.
Date: March 13, 2000 By: /s/ Donald B. Whitfield
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Donald B. Whitfield
Vice President Finance and Chief Financial
Officer
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EXHIBIT INDEX
No. Exhibit
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99.1 March 7, 2000 Press Release
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EXHIBIT 99.1
[CHILDREN'S COMPREHENSIVE SERVICES, INC. LOGO]
NEWS RELEASE
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FOR IMMEDIATE RELEASE Contact: Donald B. Whitfield
Chief Financial Officer
(615) 250-0000
CHILDREN'S COMPREHENSIVE SERVICES REPORTS DECLINE IN CENSUS AT
THE HELICON YOUTH CENTER IN RIVERSIDE COUNTY, CALIFORNIA
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THIRD QUARTER RESULTS TO BE AFFECTED
NASHVILLE, Tenn. (March 7, 2000) - Children's Comprehensive Services, Inc.
("CCS") (Nasdaq/NM: KIDS) today announced a licensing investigation of the
Helicon, Inc. ("Helicon") residential treatment program at the Helicon Youth
Center ("HYC"), which is managed by CCS, in Riverside County, California, (the
"County") by Community Care Licensing ("CCL"), a division of California's
Department of Social Services. This investigation has led to an unexpected and
substantial decline in the census of the HYC, which will have a significant
negative impact on CCS's results for the third quarter of fiscal 2000.
William J Ballard, Chairman and Chief Executive Officer, commented,
"CCS has been disappointed by the actions of placing agencies in a number of
California counties to reduce referrals and remove youth from the HYC due to
alleged licensing violations that were under routine investigation by CCL.
Because of the nature of the alleged violations, such actions in our experience
were unprecedented prior to the final resolution of this matter. The reduction
in census was also unexpected because CCS quickly presented to CCL, and
implemented, a plan to correct the alleged violations. Management anticipated
that the potential concerns the investigation raised with the placing agencies
would have been satisfied because of the nature of the complaints, the prompt
good faith effort to implement corrective actions and the excellent record of
the HYC since its opening in 1992.
"However, with the continued decline of the census to less than half
the aggregate capacity of the HYC and the group homes, we must consider the
possibility that the placing agencies are awaiting final resolution of this
matter or further developments before referring additional youth to the HYC.
Such a delay could threaten Helicon's ability to continue to operate the HYC at
its current licensed capacity, because, under California law, staffing for its
program at HYC must be at 90% of licensed capacity regardless of census.
"Recent developments with officials of Riverside County have made us
hopeful that a resolution to this matter can be reached in a timely fashion. In
a meeting yesterday, County
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KIDS Announces Census Decline At The Helicon Youth Center
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March 7, 2000
executives expressed a desire to begin placing youth in the HYC before the end
of the quarter, assuming the satisfaction of certain conditions. At the same
time, we are continuing efforts to work with the HYC's other placing agencies in
the state to raise the census at the HYC and are launching a broad marketing
effort directed at numerous referral sources throughout California. If our
negotiations with Riverside County and our marketing efforts are unsuccessful,
we will be forced to consider other alternatives, including reducing licensed
capacity or, in a worst-case situation, the cessation of the HYC's activities.
"The reduction in census has resulted in the average census of the
Helicon residential treatment program for the first two months of the third
quarter of fiscal 2000 declining to 66% of the average census for the second
quarter of fiscal 2000. Average census for the first two months of the third
quarter for the six six-bed group homes operated in conjunction with the HYC
declined to 21% of the average census for the second quarter. This decline
directly affects Helicon's ability to pay CCS management fees for its management
of the residential treatment programs and rent for the HYC, which CCS owns. In
addition, the decline affects the results of the educational treatment program
that CCS operates at the facility in conjunction with its management of the
residential treatment programs. CCS's revenues (including management fees and
rents) associated with the HYC totaled approximately $768,000 for the second
quarter of 2000. Based on current census levels at the HYC and group homes and
on our assessment of the collectibility of certain amounts due CCS from Helicon,
we anticipate a reduction in revenues versus plan of approximately $600,000 for
the third quarter of fiscal 2000 and a related reduction in net income of
approximately $400,000, or $0.06 per diluted share.
"While hopeful regarding our ongoing negotiations, if the Company
concludes that it is necessary to cease work at the HYC, we maintain that the
County is obligated to reimburse CCS for the remaining economic value of the HYC
facility and for damages because the County has breached an implied duty to deal
with us in good faith. The County has argued that no duties or contractual
obligations have been breached. If CCS is unsuccessful in establishing its
position, then the County will be entitled to the Helicon facility, which is
located on County-owned land, without compensating the Company. If we are paid
for the facility, we estimate that, compared with fiscal 1999, the negative
annualized operating impact on net income of ceasing our HYC operations would be
approximately $1,055,000 or $0.14 per diluted share. If we are not paid for the
facility, we estimate the negative annualized operating impact would be
approximately $1,313,000, or $0.18 per diluted share. In addition, we would be
forced to write off the HYC facility, which was carried at $6.35 million on our
balance sheet at the end of the second quarter of fiscal 2000."
Mr. Ballard concluded, "We intend to use every effort to resolve this
matter so we can continue to serve the youth of California at the HYC. And
regardless of the outcome of the current
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KIDS Announces Census Decline At The Helicon Youth Center
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March 7, 2000
situation, we believe Helicon will remain a viable operation because of its
other operations in California and Tennessee. In spite of this unexpected set
back to our outstanding programs at HYC, our ongoing experiences with other
state and municipal governmental agencies in California and many other states
support our strong belief in the great demand for services for at-risk youth and
in CCS's ability to provide the highest quality services to meet this demand."
To take advantage of the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995, you are hereby cautioned that this
release contains forward-looking statements that are based upon current
expectations and involve a number of risks and uncertainties. Actual operations
and results may differ materially from those expressed in the forward-looking
statements made by the Company. Please refer to CCS's filings with the
Securities and Exchange Commission for additional information. The Company
disclaims any intent or obligation to update these forward-looking statements.
Children's Comprehensive Services provides education, treatment and
juvenile justice services for at-risk and troubled youth either directly or
through management contracts. It currently offers these services through the
operation and management of nonresidential specialized education programs and
day treatment programs and both open and secured residential treatment centers
to approximately 3,700 youth in 14 states. More information about Children's
Comprehensive Services is available on the Company's Website at
http://www.ccskids.com.
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