<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
_______________________
For the quarterly period ended March 31, 1995
Commission File Number 33-31020
SIERRA TUCSON COMPANIES, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware 86-0589712
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
16500 N. Lago Del Oro Parkway; Tucson, Arizona 85737
(Address of Principal Executive Offices) (Zip Code)
(520) 624-4000
(Registrant's Telephone Number, including Area Code)
Indicate by X whether the Registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the Registrant was required
to file such reports), and (2) has been subject to such filing requirements
for the past 90 days.
[ X ] YES [ ] NO
As of May 5, 1995, 8,546,884 shares of Common Stock ($.01 par value) were
outstanding.
<PAGE> 2
PART I -- FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS.
Sierra Tucson Companies, Inc.
Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
March 31, 1995 Dec. 31, 1994
(Unaudited)
-------------- -------------
<S> <C> <C>
Assets
Current Assets
Cash and investments $11,870,131 $11,741,278
Accounts receivable, net 923,125 1,115,941
Accounts receivable in settlement - 1,667,055
Deferred income taxes 315,000 315,000
Income taxes receivable 4,539,401 4,507,575
Prepaid and other 735,890 563,210
----------- ----------
Total current assets 18,383,547 19,910,059
----------- ----------
Property and equipment, net 21,875,892 22,075,192
Long-term investments 9,872,242 8,799,363
Long-term receivables, net 333,698 185,277
Other assets and deposits 279,354 1,986
----------- -----------
$50,744,733 $50,971,877
=========== ===========
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable and accrued expenses $ 1,415,165 $ 1,603,689
Deposits 293,279 231,175
----------- -----------
Total current liabilities 1,708,444 1,834,864
Long-term debt and financing obligation 1,120,268 1,181,714
Stockholders' Equity
Common stock 85,469 84,969
Additional paid-in capital 43,418,677 43,262,927
Retained earnings 4,597,682 5,006,457
Accumulated unrealized investment losses (185,807) (399,054)
----------- -----------
Total stockholders' equity 47,916,021 47,955,299
----------- -----------
$50,744,733 $50,971,877
=========== ===========
</TABLE>
<PAGE> 3
Sierra Tucson Companies, Inc.
Condensed Consolidated Statements of Operations
<TABLE>
<CAPTION>
Three months ended
March 31
(Unaudited)
---------------------------
1995 1994
----------- -----------
<S> <C> <C>
Revenue
Net Revenue - Sierra Tucson, Inc. $2,955,856 $2,440,534
Net Revenue - Onsite at Sierra Tucson, Inc. 312,129 -
Other 666,654 371,114
----------- -----------
Total Revenue 3,934,639 2,811,648
Operating Expenses
Salaries and Related Benefits 1,952,339 2,097,573
General and Administrative 1,975,994 1,681,990
Interest 27,736 3,803
Depreciation and Amortization 387,345 349,019
----------- -----------
Total Operating Expenses 4,343,414 4,132,385
----------- -----------
Loss Before Income Taxes (408,775) (1,320,737)
Income Tax Benefit - (517,304)
----------- -----------
Net Loss $(408,775) $(803,433)
=========== ===========
Weighted Average Common Shares 8,540,217 8,496,884
=========== ===========
Net Loss Per Common Share $ (0.05) $ (0.09)
=========== ===========
</TABLE>
<PAGE> 4
Sierra Tucson Companies, Inc.
Consolidated Statement of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Three months ended
March 31
(Unaudited)
-----------------------------
1995 1994
------------ ------------
<S> <C> <C>
Operating Activities:
Net loss $ (408,775) $ (803,433)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization 387,345 349,019
Provision for bad debts 71,628 202,759
Changes in operating assets and liabilities:
Accounts receivable and long-term receivables 1,639,822 1,131,463
Prepaid and other assets (138,975) 167,753
Accounts payable and accrued expenses (227,353) (715,008)
Reserve for litigation charges - (5,500,000)
Income taxes receivable (31,826) (396,401)
------------ ------------
Net Cash Provided by (Used in) Operating Activities 1,291,866 (5,563,848)
------------ ------------
Investing Activities:
Purchases of property and equipment, net (165,179) (193,204)
Purchase of Onsite Training & Consulting,
net of cash acquired (66,238) -
Sale of long-term investments 140,368 4,539,770
Purchase of long-term investments (1,000,000) (2,523,672)
------------ ------------
Net Cash (Used in) Provided by Investing Activities (1,091,049) 1,822,894
------------ ------------
Financing Activities:
Reduction of long-term debt and financing obligation (71,964) (914)
------------ ------------
Net Cash Used in Financing Activities (71,964) (914)
------------ ------------
Increase (Decrease) in Cash and Short-term Investments 128,853 (3,741,868)
Cash and Short-term Investments, Beginning of Period 11,741,278 13,990,245
------------ ------------
Cash and Short-term Investments, End of Period $11,870,131 $10,248,377
============ ============
</TABLE>
<PAGE> 5
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS:
Note 1. The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the three month period
ended March 31, 1995 are not necessarily indicative of the results that may be
expected for the year ended December 31, 1995. For further information, refer
to the consolidated financial statements and footnotes thereto included in the
Sierra Tucson Companies, Inc. annual report on Form 10-K for the year ended
December 31, 1994.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
GENERAL
Sierra Tucson Companies, Inc. (the "Company") conducts its operations through
separate operating divisions and wholly owned subsidiaries. A subsidiary,
Sierra Tucson, Inc.,operates an inpatient program business specializing in
treating substance abuse and a broad range of mental health disorders,
including eating disorders. Onsite Training and Consulting, Inc., a subsidiary
acquired in January 1995, offers short-term therapeutic workshops. Each line of
business offers safe, expertly staffed treatment experiences. Each
integrates philosophies and methodologies from psychological, family systems
and self-help approaches into comprehensive and effective treatment
experiences. Each emphasizes a non-judgmental, non-blaming approach to the
healing process which encourages patients and clients to recognize and break
through their denial in an atmosphere conducive to long-term recovery.
Sierra Tucson, Inc. and its patients continue to experience significant pressure
from third party payors and managed care organizations to restrict access to and
payment for treatment services offered. The Company expects this trend to
continue throughout 1995. The results of the first quarter do reflect, however,
a positive trend to attract and retain a higher percentage of cash paying
customers. In the first quarter of 1995 approximately 62% of patient revenue
was derived from individual patient payments, while only 38% of patient revenue
was derived from insurance companies and other third party payors.
Onsite Training and Consulting, Inc. ("Onsite") offers short-term, intensive,
experienced-based programs designed to provide a range of services including
professional development, life-enhancing workshops, and family issues treatment.
Onsite receives all of its revenues directly from its participants and not from
third party payors. The Company's existing Quality of Life WorkshopsTM were
incorporated into the Onsite menu of programs during the first quarter of 1995.
As announced on April 25, 1995, the Company is establishing a new line of
business which will provide a unique life enhancing experience combining
elements of stress management, self discovery and recreational choices offered
in a leisure destination environment. This new line of business is expected to
open during the fourth quarter of 1995. It is unknown at this time what specific
financial impact this new line of business will have on the Company's results
for the year ended December 31, 1995 (see "Liquidity and Capital Resources").
<PAGE> 6
RESULTS OF OPERATIONS
QUARTER ENDED MARCH 31, 1995 COMPARED TO QUARTER ENDED MARCH 31, 1994
The significant changes in financial results for the three months ended March
31, 1995, as compared to the corresponding quarter of 1994 are as follows:
- - - - - - Average daily census increased by 7 or 15%.
- - - - - - Total revenue increased by $1,122,991 or 40%.
- - - - - - Total operating expenses increased by $211,029 or 5%.
- - - - - - Salaries and related benefits decreased by $145,234 or 7%.
- - - - - - General and administrative costs increased by $294,004 or 17%.
- - - - - - The net loss decreased by $394,658 or 49%.
Total revenue increased 40% in the first quarter of 1995 to $3.9 million, up
$1.1 million over the first quarter of 1994. Approximately 46% of the revenue
increase was due to a 15% increase in patient census levels. Activity related
to the recent Onsite acquisition accounted for approximately 28% of the revenue
increase. The remaining increase was primarily due to the combination of higher
investment yields, resulting in an increase in investment income of $134,144,
and a negotiated settlement of disputed receivables which resulted in excess
collections of $233,282. The excess collections relates to reimbursement of
collection costs for settling the disputed accounts.
Salaries and related benefits have declined as a percentage of total revenues as
a result of the management of professional staffing levels in response to
changing census levels. Salaries and related benefits were approximately 50% of
total revenue for the three month period ended March 31, 1995, as compared to
75% for the comparable period of 1994.
General and administrative expenses have continued to decline as a percentage of
total revenues as a result of the Company's cost control programs. General and
administrative expenses as a percentage of total revenues were approximately 50%
for the three month period ended March 31, 1995 as compared to 60% for the
comparable period of 1994. Most of the $294,004 increase in general and
administrative expenses is attributed to normal operating expenses incurred by
Onsite, which was acquired in January, 1995.
Depreciation and amortization increased $38,326, or 11%, as a result of the
Onsite acquisition in the first quarter of 1995 and the acquisition of computer
equipment and software in the second half of 1994.
The loss before taxes decreased $911,962 from the corresponding quarter in 1994
to $408,775, and the net loss decreased from the corresponding quarter in 1994
by $394,658 or 49%.
LIQUIDITY & CAPITAL RESOURCES
The Company continues to preserve its capital resources and liquidity position.
On March 31, 1995, the Company had a working capital ratio of 10.8:1 and working
capital of $16.7 million. The total cash and investments balance (including
short and long term investments) is $21,742,373 at March 31, 1995. This
represents an increase of $1,201,732 (6%) over the amount at December 31, 1994.
Cash flows provided by operations was $1,291,866 for the three month period
ended March 31, 1995 as compared to ($5,563,848) used in operations in the first
quarter of 1994, which included the $5.5 million to fund the class action
settlement.
<PAGE> 7
On April 25, 1995, the Company announced plans for an initial $5.5 million
capital expenditure commitment for the establishment of a new wellness and life
enhancement line of business. While the Company anticipates additional
significant and as yet undetermined pre-opening costs in connection with the
establishment of the new line of business, it is expected that available cash
and investments will be sufficient to meet the Company's existing normal
operating requirements as well as research and development, pre-opening costs,
and capital expenditures related to the establishment of this and other new
lines of businesses over the near term.
PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
NONE
ITEM 2. CHANGES IN SECURITIES.
NOT APPLICABLE
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
NOT APPLICABLE
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
NOT APPLICABLE
ITEM 5. OTHER INFORMATION.
NOT APPLICABLE
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
Financial Data Schedule - See Exhibit Index
(b) Reports on Form 8-K. No reports on Form 8-K were filed during
the quarter for which this report is filed.
<PAGE> 8
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DATED: May 15, 1995 SIERRA TUCSON COMPANIES, INC.
BY: /s/ John H. Schmitz
----------------------------
JOHN H. SCHMITZ,
President and Chief
Executive Officer
BY: /s/ Julie S. McBride
----------------------------
JULIE S. McBRIDE
Director of Accounting and
Principal Accounting Officer
<PAGE> 9
EXHIBIT INDEX
Exhibit No. Description
- - - - - ----------- -----------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED BALANCE SHEET AT MARCH 31, 1995 (UNAUDITED) AND THE
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH
31, 1995 (UNAUDITED) AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000855272
<NAME> SIERRA TUCSON COMPANIES, INC.
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 5,135,686
<SECURITIES> 6,734,445
<RECEIVABLES> 1,543,140
<ALLOWANCES> 620,015
<INVENTORY> 138,657
<CURRENT-ASSETS> 18,383,547
<PP&E> 29,138,747
<DEPRECIATION> 7,262,855
<TOTAL-ASSETS> 50,744,733
<CURRENT-LIABILITIES> 1,708,444
<BONDS> 1,120,268
<COMMON> 85,469
0
0
<OTHER-SE> 47,830,552
<TOTAL-LIABILITY-AND-EQUITY> 50,744,733
<SALES> 3,267,985
<TOTAL-REVENUES> 3,934,639
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 4,244,050
<LOSS-PROVISION> 71,628
<INTEREST-EXPENSE> 27,736
<INCOME-PRETAX> (408,775)
<INCOME-TAX> 0
<INCOME-CONTINUING> (408,775)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (408,775)
<EPS-PRIMARY> (.05)
<EPS-DILUTED> (.05)
</TABLE>
