<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Quarterly Period Ended March 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Transition Period from ___________ to ___________
Commission File Number: 0-17969
NEXTHEALTH, INC.
(Exact Name of Registrant as Specified in its Charter)
<TABLE>
<S> <C>
Delaware 86-0589712
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
16600 N. Lago Del Oro Parkway, Tucson, Arizona 85739
(Address of Principal Executive Offices) (Zip Code)
</TABLE>
(520) 792-5800
(Registrant's Telephone Number, including Area Code)
N/A
(Former name, former address and former fiscal year, if changed since last
report).
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 reports), and (2)has been subject to such filing
requirements for the past 90 days. [X] YES [ ] NO
On May 1, 1997, there were 8,554,938 shares of the registrant's Common Stock
outstanding.
Reference is made to the listing beginning on page 14 of all exhibits filed as a
part of this report.
1
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NEXTHEALTH, INC.
FORM 10-Q
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION PAGE
- ------------------------------ ----
<S> <C>
Item 1. Financial Statements
Consolidated Balance Sheets as of March 31, 1997 (unaudited) and December
31, 1996........................................................................... 3
Unaudited Consolidated Statements of Operations for the three months ended
March 31, 1997 and 1996............................................................ 4
Unaudited Consolidated Statements of Cash Flows for the three months ended
March 31, 1997 and 1996 ........................................................... 5
Unaudited Consolidated Statements of Changes in Stockholders' Equity for the
three months ended March 31, 1997 ................................................. 6
Unaudited Notes to the Consolidated Financial Statements ............................... 7
Item 2. Management's Discussion and Analysis of Financial Condition and Results of
Operations ........................................................................ 9
PART II - OTHER INFORMATION
- ---------------------------
Item 1. Legal Proceedings ....................................................................... 14
Item 4. Submission of Matters to a Vote of Security Holders ..................................... 14
ITEM 6. Exhibits and Reports on Form 8-K ........................................................ 14
Signatures ........................................................................................ 15
</TABLE>
2
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
NEXTHEALTH, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(000s, except share and per share amounts)
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
--------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash and equivalents .................................................... $ 589 $ 1,373
Accounts receivable, less allowance for doubtful accounts
of $483 and $457, respectively ....................................... 980 928
Prepaid expenses ........................................................ 202 387
Other current assets .................................................... 659 902
-------- --------
Total current assets ................................................. 2,430 3,590
Property and equipment, net ................................................. 36,887 37,417
Long-term receivables, less allowance for doubtful accounts
of $68 and $56, respectively ........................................... 205 167
Intangible assets, less amortization of $62 and $29, respectively ........... 419 451
Other assets ................................................................ 31 41
-------- --------
Total assets ......................................................... $ 39,972 $ 41,666
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable, trade ................................................. $ 1,192 $ 2,050
Accrued expenses and other liabilities .................................. 4,610 4,828
-------- --------
Total current liabilities ............................................ 5,802 6,878
Long-term debt and financing obligation ................................... 8,376 8,359
-------- --------
Total liabilities .................................................... 14,178 15,237
-------- --------
Mandatorily Redeemable Preferred Stock:
Series A, $.01 par value, 46,065 shares authorized,
17,109 shares outstanding at Dec. 31, 1996 ........................... -- 1,578
Series B, $.01 par value, 28,956 shares authorized,
28,956 shares outstanding at Dec. 31, 1996 ........................... -- 2,672
Stockholders' Equity:
Preferred stock - undesignated, $.01 par value, 3,953, 935 and
3,924,979 shares authorized at March 31, 1997 and Dec. 31,
1996, respectively; no shares outstanding ............................ -- --
Preferred stock, Series A, $.01 par value, 46,065 shares
authorized; 46,065 shares outstanding at March 31, 1997 .............. 4,250 --
Common stock, $.01 par value, 16,000,000 shares
authorized; 8,554,938 shares outstanding ............................. 86 86
Additional paid-in capital .............................................. 43,747 43,747
Accumulated deficit ..................................................... (22,289) (21,654)
-------- --------
Total stockholders' equity ........................................... 25,794 22,179
-------- --------
Total liabilities and stockholders' equity ........................... $ 39,972 $ 41,666
======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
3
<PAGE> 4
NEXTHEALTH, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(000s, except share and per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------------------
1997 1996
----------- -----------
<S> <C> <C>
Revenue:
Net operating revenue ......... $ 5,730 $ 4,501
Other revenue ................. 68 126
----------- -----------
Total net revenue ....... 5,798 4,627
Operating expenses:
Salaries and related
benefits .................... 3,091 3,789
General and administrative .... 2,418 2,957
Depreciation and
amortization ................ 656 652
Interest expense .............. 268 65
----------- -----------
Total operating
expenses............... 6,433 7,463
----------- -----------
Loss before income taxes ......... (635) (2,836)
Income tax provision (benefit) ... -- --
----------- -----------
Net loss ......................... $ (635) $ (2,836)
=========== ===========
Weighted average shares of common
stock outstanding ............. 8,554,938 8,554,938
=========== ===========
Net loss per share of
common stock .................. $ ( .07) $ (.33)
=========== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
4
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NEXTHEALTH, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(000s)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
----------------------
1997 1996
------- -------
<S> <C> <C>
Cash flows from operating activities:
Net loss .................................................................. $ (635) $(2,836)
Adjustments to reconcile net loss to cash
used in operating activities:
Depreciation and amortization ....................................... 681 652
Provision (benefit) for bad debts ................................... 123 (110)
Minority Interest ................................................... 14 --
Changes in operating assets and liabilities net of effects from acquisitions:
Decrease (increase) in assets:
Accounts receivable ................................................. (212) 662
Other assets ........................................................ 436 (169)
Increase (decrease) in liabilities:
Accounts payable, accrued expenses
and other liabilities ............................................. (1,090) (833)
------- -------
Net cash used in operating activities ....................................... (683) (2,634)
Cash flows from investing activities:
Purchase of property and equipment ..................................... (94) (1,483)
Business acquisitions, net of cash
acquired .......................................................... -- (88)
------- -------
Net cash used in investing activities ....................................... (94) (1,571)
Cash flows from financing activities:
Proceeds from long-term borrowings ..................................... -- 15
Reduction of long-term borrowings and
financing obligation .............................................. (7) (43)
------- -------
Net cash used in financing activities ....................................... (7) (28)
------- -------
Net decrease in cash and
equivalents ....................................................... (784) (4,233)
Cash and equivalents at beginning of period ................................. 1,373 4,499
------- -------
Cash and equivalents at end of period ....................................... $ 589 $ 266
======= =======
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
5
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NEXTHEALTH, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(000s, except share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Preferred Stock Common Stock Additional Total
--------------------- ---------------- Paid-in Accumulated Stockholder's
Cost Shares Cost Shares Capital Deficit Equity
------- ------- --- --------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at
Dec. 31, 1996 ........... -- -- $86 8,554,938 $43,747 $(21,654) $22,179
Removal of Mandatory
redemption provisions
on previously-issued
Preferred Stock ........ $4,250 46,065 -- -- -- -- 4,250
Net loss for the three
months ended
March 31, 1997 ........ -- -- -- -- -- (635) (635)
------ ------ --- --------- ------- -------- ----------
Balance at
March 31, 1997 ........ $4,250 46,065 $86 8,554,938 $43,747 $(22,289) $25,794
====== ====== === ========= ======= ======== ==========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
6
<PAGE> 7
NEXTHEALTH, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(000s)
(Unaudited)
NOTE 1 - ORGANIZATION
NextHealth, Inc. is a leading provider of wellness and preventive health care
services in diverse retail markets. For over ten years, the Company has
developed effective treatment models which address individual wellness and
quality of life issues through a whole person, mind-body approach.
The Company operates in two distinct business segments. The Treatment segment,
Sierra Tucson, LLC ("Sierra Tucson"), is an inpatient, state licensed
psychiatric hospital and behavioral health care center for the treatment of
substance abuse and a broad range of mental health and behavioral health
disorders. The Health and Leisure segment, Sierra Healthstyles, Inc. d/b/a
Miraval(TM) ("Miraval"), is a unique vacation experience blending stress
management and self-discovery programs in a luxury health resort environment. In
1996, the Treatment and Health and Leisure segments included Onsite (which
offered short-term therapeutic treatment experiences and workshops), and Hilton
Head Health Institute ("HHHI", a provider of weight management programs,
acquired on March 1, 1996), respectively. Onsite and HHHI were divested on
November 30, 1996 and October 1, 1996, respectively.
NOTE 2 - BASIS OF PRESENTATION
The unaudited consolidated financial statements presented herein should be read
in conjunction with the consolidated financial statements and notes thereto
included in the Company's Annual Report on Form 10-K for the year ended December
31, 1996. The accompanying interim consolidated financial statements as of March
31, 1997 and for the three-month periods ended March 31, 1997 and 1996 included
herein are unaudited, but reflect, in the opinion of management, all adjustments
(consisting of normal recurring adjustments) considered necessary to fairly
present the results for such periods. Operating results for the three-month
period ended March 31, 1997 are not necessarily indicative of the results that
may be expected for the year ended December 31, 1997.
NOTE 3 - STOCKHOLDER'S EQUITY
The Company received shareholder approval for conversion of the Series B
Preferred Stock to Series A Preferred Stock at a Special Meeting of Stockholders
held on January 29, 1997. As a result, each share of Series B Preferred Stock
outstanding was automatically converted into one share of Series A Preferred
Stock. The holders of preferred stock had the right to require the Company to
redeem both Series A and Series B Preferred Stock as long as any Series B
Preferred Stock was outstanding. As no Series B Preferred Stock remained
outstanding as of March 31, 1997, and thus the Preferred Stock was no longer
mandatorily redeemable, amounts attributable to Series A Preferred Stock have
been classified as equity in the accompanying unaudited balance sheet.
NOTE 4 - EARNINGS (LOSS) PER SHARE
Earnings (loss) per share is based on the weighted average shares outstanding,
as exercisable stock options, outstanding warrants and convertible preferred
stock are anti-dilutive (decrease the loss per share amount).
In February, 1997, the Financial Accounting Standards Board issued Statement No.
128, Earnings per share, which is required to be adopted on December 31, 1997.
At that time, the Company will be required to change the method currently used
to compute earnings per share and to restate all prior periods. The new
requirements will not impact the primary earnings per share for either the
quarter ended March 31, 1997 or March 31, 1996. The Company has not yet
determined what the impact of Statement 128 will be on the calculation of fully
diluted earnings per share.
7
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NOTE 5 - RECLASSIFICATIONS
Certain prior period amounts in the unaudited consolidated financial statements
have been reclassified to conform to the presentation used in 1997.
8
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis relates to factors which have affected the
consolidated financial condition and results of operations of the Company for
the three-month period ended March 31, 1997. Certain prior year amounts have
been reclassified to conform to the presentation used in 1997. Reference should
also be made to the Company's unaudited consolidated financial statements and
related notes thereto included elsewhere in this document.
GENERAL
NextHealth, Inc. is a leading provider of wellness and preventive health care
services in diverse retail markets. For over ten years, the Company has
developed effective treatment models which address individual wellness and
quality of life issues through a whole person, mind-body approach.
The Company operates in two distinct business segments. The Treatment segment,
Sierra Tucson, LLC ("Sierra Tucson") is a state licensed, special psychiatric
hospital and behavioral health care center for the treatment of substance abuse
and a broad range of mental health and behavioral health disorders. The Health
and Leisure segment, Sierra Healthstyles, Inc. d/b/a Miraval(TM), is a unique
vacation experience blending stress management and self-discovery programs in a
luxury health resort environment. In 1996, the Treatment and Health and Leisure
segments included Onsite (which offered short-term therapeutic treatment
experiences and workshops), and Hilton Head Health Institute ("HHHI", a provider
of weight management programs acquired on March 1, 1996), respectively. Onsite
and HHHI were divested on November 30, 1996 and October 1, 1996, respectively.
The Company, as part of its long range plan, believes that it has positioned
itself to capitalize on the newly emerging health and leisure segment of the
health care services industry by developing Miraval, a luxury health resort
providing a full range of self-discovery, stress management and recreational
activities. The Company is also seeking additional opportunities to increase
market share for its existing Treatment segment. For the three-month period
ended March 31, 1997, the Treatment segment accounted for approximately 50% of
the Company's operating revenues and approximately 34% of operating expenses
while the Health and Leisure segment accounted for approximately 50% of the
Company's operating revenue and approximately 53% of operating expenses. The
Company believes that the Health and Leisure segment will make significant
contributions to the Company's operating results in the future.
9
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RESULTS OF OPERATIONS
THREE-MONTH PERIOD ENDED MARCH 31, 1997 COMPARED TO THREE-MONTH PERIOD ENDED
MARCH 31, 1996
The significant changes in results of operations and net cash provided by (used
in) operating activities for the three-month period ended March 31, 1997,
compared to the same period in 1996 are discussed below.
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------------------------
1997 1996 % Change
------- ------- --------
<S> <C> <C> <C>
FINANCIAL RESULTS: (000s, except per share amounts)
Total net revenue ................................. $ 5,798 $ 4,627 25.3%
Total operating expenses .......................... 6,433 7,463 (13.8)
Net loss .......................................... (635) (2,836) (77.6)
Net loss per share of common stock ................ (.07) (.33) (78.8)
Net cash provided by (used in)
operating activities ............................ (683) (2,634) --
OPERATING DATA:
Patient days - STI ................................ 4,379 4,146 5.6
Average daily census - STI ........................ 49 46 6.5
Participant days - Onsite(1) ...................... -- 1,892 --
Average daily census - Onsite(1) .................. -- 21 --
Participant days - HHHI(2) ........................ -- 1,127 --
Average daily census - HHHI(2) .................... -- 36 --
Guest days - Miraval(3) ........................... 7,518 4,022 86.9
Average daily guest count - Miraval(3) ............ 84 44 90.9
</TABLE>
(1) Onsite was divested on November 30, 1996.
(2) HHHI was acquired March 1, 1996 and divested on October 1, 1996. The
operating data disclosed for HHHI is for the period from March 1, 1996
to March 31, 1996.
(3) Guest stays include both paying and complimentary stays.
For the three-month period ended March 31, 1997, loss before income tax benefit
and net loss decreased $2.2 million to $635,000 and net cash provided by
operating activities increased $2.0 million resulting in net cash used in
operating activities of $683,000 compared to the same period in 1996.
Total net revenue increased $1.2 million to $5.8 million, an increase of 25%
when compared to the same period in 1996. Results reflect increased revenues
from the operations of Miraval as well as improved average daily census at
Sierra Tucson. These increases in revenue were partially offset by a loss of
revenue associated with the divestiture of the Onsite Workshops and Hilton Head
Health Institute.
Salaries and related benefits decreased $698,000 to $3.1 million, a decrease of
18% when compared to the same period in 1996. The decrease was a result of
Company-wide reductions, with an emphasis on the corporate entity.
General and administrative expense decreased $539,000 to $2.4 million, a
decrease of 18% when compared to the same period in 1996. The decrease was
related to Company-wide cost reductions. This decrease was partially offset by
an increase in the provision for bad debt relative to the increase in census
level at Sierra Tucson.
The Company recognized a pre-tax loss of $635,000 for the three-month period
ended March 31, 1997. No provision or benefit for income taxes was recorded
during this period. The Company will be able to carry forward the current period
loss to offset future tax liabilities.
10
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LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of liquidity and capital resources have typically
been cash provided by the Treatment segment's operating activities, funds
generated from the sale of investments and proceeds from public equity offerings
and short-term borrowings. Historically, these sources have been sufficient to
meet the needs and finance the operations and growth of the Company's business.
Net cash provided by the Treatment segment's operating activities are primarily
affected by census levels and net revenue per patient day. This segment
contributed positive cash flow to the Company's operations during the
three-month period ended March 31, 1997.
For the three-month period ended March 31, 1997, the Company had capital
expenditures of approximately $94,000. Primarily as a result of operating
expenditures required to support the Health and Leisure segment, the Company's
cash reserves have decreased significantly. At March 31, 1997, the Company's
cash and investments were $589,000.
The Treatment segment's operational results for the three-month period ended
March 31, 1997 reflect the segment's focus on attracting a high percentage of
retail patients. During this period, 62.4% of patient revenue was derived from
retail payments and the remaining 37.6% from third party payors. STI continues
to experience pressure from third party payors and managed care organizations to
restrict patient access to and payment for treatment services. Based on current
census levels and operating expenses, STI believes that it will generate
adequate cash flows to sustain the Treatment segment's ongoing operational
requirements.
Miraval, the Company's Health and Leisure segment's remaining line of business,
commenced operations in December 1995. Its results are primarily affected by
occupancy, average room rates and the ability to manage costs. Miraval believes
that it operates in a unique niche in the emerging health and leisure market,
one which will take time to fully develop. Marketing and advertising
initiatives for creating marketplace awareness and demand for Miraval's
services resulted in a room occupancy rate of approximately 54.2% through March
31, 1997 of which 96.3% were paying guests and 3.7% non-paying guests. As part
of the Miraval's marketing strategy, media, travel and trade representatives as
well as other key influencers have been invited to experience Miraval in an
effort to further promote its position in the market place. Management believes
the Health and Leisure segment will ultimately make a significant contribution
to the Company's financial condition.
To meet its current liquidity requirements, the Company entered into debt and
equity financing transactions which closed on November 15, 1996. The proceeds
from the transactions were approximately $12,340,000. The debt financing
transaction contains certain provisions related to a stand-by commitment for an
additional $5,000,000, subject to compliance with certain conditions and the
lender's good faith discretion. To the extent that cash on hand is not
sufficient to meet future operating cash requirements, management believes that
the stand-by funds will be available to provide the cash necessary to fund
future operating cash requirements.
Management believes the stand-by commitment for $5 million, if available, will
provide sufficient liquidity to allow the Company to operate through 1997.
However, it is necessary for the Company to increase occupancy levels in its
lines of business, and to implement additional cost controls to ensure 1997
operating losses do not exceed an amount sustainable by the stand-by commitment,
if available. Insufficient occupancy levels at Miraval or any significant
decrease in Sierra Tucson's patient levels would adversely affect the Company's
financial position, results of operations and cash flows.
BUSINESS OUTLOOK
Performance in the Treatment segment (STI) will be driven by continued
aggressive implementation of cost controls and new marketing initiatives.
Particular emphasis will be placed on increasing the number of self-pay patients
through a combination of innovative treatment programs and focused advertising,
direct mail, field sales and outbound telemarketing campaigns.
Recently developed programs such as Recovery Plus(TM) and Sierra Care(TM) will
be promoted to major referent
11
<PAGE> 12
and retail market sectors, and will likewise be introduced to the corporate
marketplace. STI will also continue its traditional marketing efforts to the
referent therapist community, and look for the continued growth of prospective
patients which characterized the first quarter of 1997.
Miraval, the Company's initial entry in the Health and Leisure category, has now
been in operation for sixteen months and looks for improved performance in 1997.
The resort has received extensive press coverage in such diverse media as CNN,
InStyle, Gourmet, and Vogue magazine, and has likewise gained a high level of
awareness among consumers and travel professionals.
Management's primary objective for Miraval in 1997 is to build short and
long-term occupancy levels while maintaining its unique program structure and
operational excellence. Marketing initiatives will be aimed primarily at upscale
consumers and top-echelon travel agents as well as corporate and incentive
groups. The Miraval message will be delivered through a blend of direct sales
and advertising -- including print, data base-driven direct mail, and public
relations activities.
Cost containment measures will continue to be a critical management objective in
1997. Variable staffing relative to seasonal occupancy fluctuations, a more
structured program format, and self-directed internal work teams focusing on all
aspects of operational quality should further improve efficiencies and cash
flow.
FACTORS THAT MAY AFFECT FUTURE RESULTS
Management's Discussion and Analysis of Results of Operations and Financial
Condition contains forward looking statements within the meaning of Private
Securities Litigation Reform Act of 1995 that involve a number of risks and
uncertainties. While management believes that such forward looking statements
are accurate as of the date hereof, the actual results and conditions could
differ materially from the statements contained herein. The information below
should be read in conjunction with the Company's unaudited consolidated
financial statements and related notes thereto included elsewhere and in other
portions of this document.
In addition, the following other factors could cause actual results and
conditions relating to liquidity and capital resources to differ materially.
The Company's Treatment segment participates in the highly competitive mental
and behavioral health industry, and faces intense competition for market share
resulting from aggressive pricing practices and increasing competition from
companies with greater resources. Some of these competitors have tax exempt,
non-profit status, government subsidized or endowment-related financial support
which may provide lower costs of capital.
Miraval represents a new and significant line of business for the Company. It is
the Company's initial entry into a unique niche in an emerging health and
leisure market for which there is little, if any, industry market data
available. Its products and services are different than those of traditional
destination resorts or destination "spa" facilities. The Company has little
experience in the marketing, management or operation of a facility of this
nature, although it has hired qualified and experienced personnel from related
operations.
The Company is unable to project with any degree of accuracy the future
occupancy levels or revenues of Miraval because the facility is in its second
year of operation. The Company has minimal operating data for projecting
occupancy levels during peak and non-peak periods, marketing, operating or
maintenance costs and expenses. Although the Company believes that there is
strong consumer demand for Miraval's products and services because it offers a
unique vacation alternative, the Company cannot be certain that its current
marketing strategy will successfully attract the targeted clientele.
The Company cannot be certain that Miraval will generate sufficient revenues to
cover its operating expenses. Management believes that the existing capital
resources of the Company and the $5 million stand-by commitment from the
November 15, 1996 debt transaction, if available, are sufficient to meet its
short-term
12
<PAGE> 13
capital needs. Advances on the stand-by commitment are subject to the
lender's good faith discretion.
Miraval competes in the competitive resort hotel/spa industry. In many
instances, its competitors have greater name recognition and financial resources
as well as long-standing relationships with travel agents and tour and trip
planners. Management cannot anticipate what impact this will have on future
occupancy levels.
While the Company anticipates continued growth in revenues and is committed to a
return to profitability, operating results could be adversely impacted if the
business is unable to anticipate customer demand accurately, is unable to
differentiate its products from those of its competitors, is unable to offer
services expeditiously in response to customer demand, or is negatively impacted
by managed care restrictions on payor reimbursement.
13
<PAGE> 14
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is involved in various litigation and administrative proceedings
arising in the normal course of business. In the opinion of management, any
liabilities that may result from these claims will not, individually or in the
aggregate, have a material adverse effect on the Company's financial position,
results of operations or cash flows.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company received shareholder approval for conversion of the Series B
Preferred Stock to Series A Preferred Stock at a Special Meeting of Stockholders
held on January 29, 1997. As a result, each share of Series B Preferred Stock
outstanding was automatically converted into one share of Series A Preferred
Stock.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
NONE
b) Reports on Form 8-K
NONE
14
<PAGE> 15
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.
NextHealth, Inc.
Registrant
DATE: May 13, 1997 BY: /s/ William T. O'Donnell, Jr.
------------------------------
WILLIAM T. O'DONNELL, JR.
President and Chief Executive Officer
DATE: May 13, 1997 BY: /s/ Jose Acosta
-----------------
JOSE ACOSTA
(Financial and Accounting Officer)
DATE: May 13, 1997 BY: /s/ Michelle O. Culver
-----------------------
MICHELLE O. CULVER
(Financial and Accounting Officer)
15
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED CONSOLIDATED BALANCE SHEET AS OF MARCH 31, 1997 AND THE UNAUDITED
CONSOLIDATED STATEMENT OF OPERATIONS AS OF MARCH 31, 1997, AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<EXCHANGE-RATE> 1
<CASH> 589
<SECURITIES> 0
<RECEIVABLES> 1,514
<ALLOWANCES> (534)
<INVENTORY> 643
<CURRENT-ASSETS> 2,430
<PP&E> 46,424
<DEPRECIATION> (9,537)
<TOTAL-ASSETS> 39,972
<CURRENT-LIABILITIES> 5,802
<BONDS> 8,376
0
4,250
<COMMON> 86
<OTHER-SE> 21,458
<TOTAL-LIABILITY-AND-EQUITY> 39,972
<SALES> 5,730
<TOTAL-REVENUES> 5,798
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 6,433
<LOSS-PROVISION> 123
<INTEREST-EXPENSE> 268
<INCOME-PRETAX> (635)
<INCOME-TAX> 0
<INCOME-CONTINUING> (635)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (635)
<EPS-PRIMARY> (.07)
<EPS-DILUTED> (.07)
</TABLE>
