FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark one)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarter ended September 30, 1997
------------------------------------------
or
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
ACT
For the transition period from to
---------------------------------
Commission File Number: 0-19283
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Omega Health Systems, Inc.
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(Exact name of small business issuer as specified in its charter)
Delaware 13-3220466
- ------------------------- -------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5100 Poplar Avenue, Suite 2100, Memphis, Tennessee 38137
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(Address of principal executive offices)
901-683-7868
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(Issuer's telephone number)
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(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15 (d) of the 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
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
DURING THE PRECEEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13, or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court [ ] Yes [ ] No
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date.
Class Outstanding at October 31, 1997
- --------------------------------------------------------------------------------
Common Stock, $0.06 par value 7,725,151
<PAGE>
OMEGA HEALTH SYSTEMS, INC. AND SUBSIDIARIES
FORM 10-Q
For the Quarter Ended September 30, 1997
PART 1 - FINANCIAL INFORMATION
Index to Financial Information: Page
-------
Item 1:
Condensed Consolidated Balance Sheets
as of September 30, 1997 and December 31,
1996 3
Condensed Consolidated Statements of
Operations for the Three Months Ended
September 30, 1997 and 1996 4
Condensed Consolidated Statements of
Operations for the Nine Months Ended
September 30, 1997 and 1996 5
Condensed Consolidated Statements of
Cash Flows for the Nine Months Ended
September 30, 1997 and 1996 6
Notes to Condensed Consolidated
Financial Statements 7
Item 2:
Management's Discussion and Analysis of
Financial Condition and Results of
Operations 9
2
<PAGE>
OMEGA HEALTH SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, 1997 and December 31, 1996
(unaudited)
<TABLE>
<CAPTION>
ASSETS 1997 1996
<S> <C> <C>
Current Assets:
Cash $ 5,643,986 2,943,617
Accounts receivable, net of allowances
for contractual adjustments and
doubtful accounts of $2,602,644 and
$1,760,091 in 1997 and 1996, respectively 11,858,079 6,475,183
Prepaid expenses and other assets 923,190 534,661
------------ ------------
Total current assets 18,425,255 9,953,461
Equipment, furniture and fixtures:
Owned 11,838,815 9,254,482
Held under lease 2,667,676 2,542,029
Less: Accumulated depreciation (6,609,279) (5,965,932)
------------ ------------
Net equipment, furniture and fixtures 7,897,212 5,830,579
Management service agreements and other
intangible
assets, net of accumulated amortization of
$887,286 and $411,536 in 1997 and 1996,
Respectively 19,194,725 10,513,937
Deferred tax asset 1,180,000 0
Other assets 1,886,832 1,141,580
------------ ------------
Total assets $ 48,584,024 27,439,557
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable 5,915,440 1,407,647
Accrued Expenses 2,377,438 1,391,549
Eye care claims payable 2,086,829 1,176,068
Current installments of obligations under capital
lease and long-term debt 1,221,192 1,205,060
------------ ------------
Total current liabilities 11,600,899 5,180,324
Obligations under capital lease, excluding
current installments 1,058,524 1,367,718
Long-term debt, excluding current
installments 13,470,323 5,837,456
------------ ------------
Total liabilities 26,129,746 12,385,498
Minority Interest 54,254 10,896
Stockholders' equity:
Common stock 462,686 411,946
Preferred stock 0 485,049
Additional paid in capital 27,174,345 22,685,778
Accumulated deficit (5,237,007) (8,539,610)
------------ ------------
Total stockholders' equity 22,400,024 15,043,163
------------ ------------
Total liabilities and stockholders' equity $ 48,584,024 27,439,557
============ ==========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE>
OMEGA HEALTH SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended September 30, 1997 and 1996
(unaudited)
1997 1996
Ophthalmic center net revenues $ 9,814,856 $ 6,683,769
Managed eye care revenues 5,005,897 3,791,035
Optometric practice services 9,916,325 0
Mobile surgical and other 531,878 631,120
------------ ------------
Total revenues 25,268,956 11,105,924
Center operating expenses 8,479,133 5,666,910
Eye care claims 3,767,011 2,971,293
Cost of sales 9,653,201 352,043
Provision for doubtful accounts 203,746 143,307
Selling, general, administrative and
development expenses 1,900,296 1,494,037
------------ ------------
Earnings from operations 1,265,569 478,334
Non-operating revenue (expenses):
Interest income 18,797 28,758
Interest expense (374,481) (125,626)
Other revenue 73,811 43,497
------------ ------------
Earnings before minority interest 983,696 424,963
Minority interest in net income of partnerships (127,723) (14,594)
------------ ------------
Earnings before income taxes 855,973 410,369
Income tax benefit 1,180,000 0
------------ ------------
Net earnings $ 2,035,973 410,369
Preferred dividends, principally imputed (2,727) (101,885)
------------ ------------
Earnings available to common
shareholders $ 2,033,246 $ 308,484
============ ============
Earnings per common share $ 0.26 $ 0.06
============ ============
See accompanying notes to condensed consolidated financial statements.
4
<PAGE>
OMEGA HEALTH SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Nine Months Ended September 30, 1997 and 1996
(unaudited)
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Ophthalmic center net revenues $ 26,557,752 $ 17,786,930
Managed eye care revenues 13,694,044 10,711,575
Optometric practice services 16,305,115 0
Mobile surgical and other 1,485,309 1,967,641
------------ ------------
Total revenues 58,042,220 30,466,146
Center operating expenses 22,268,837 15,313,165
Eye care claims 10,546,856 8,370,930
Cost of sales 16,226,988 1,130,475
Provision for doubtful accounts 579,760 321,615
Selling, general, administrative and
development expenses 5,364,528 4,250,094
------------ ------------
Earnings from operations 3,055,251 1,079,867
Non-operating revenue (expenses):
Interest income 30,939 36,447
Interest expense (816,502) (420,479)
Other revenue 183,638 148,587
------------ ------------
Earnings before minority interest 2,453,326 844,422
Minority interest in income of partnerships (310,849) (14,594)
------------ ------------
Earnings before income taxes 2,142,477 829,828
Income tax benefit 1,180,000 0
------------ ------------
Net Earnings 3,322,477 829,828
Preferred dividends, principally imputed (19,876) (1,461,256)
------------ ------------
Earnings (loss) available to
common shareholders $ 3,302,601 ($ 631,428)
============ ============
Earnings (loss) per common share $ 0.44 ($ 0.12)
============ ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE>
OMEGA HEALTH SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended September 30, 1997 and 1996
(unaudited)
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Cash flows from operations:
Net earnings $ 3,322,477 $ 829,828
Adjustments to reconcile net earnings to net cash
Provided by operating activities:
Depreciation and amortization 1,399,455 883,639
Deferred tax asset (1,180,000) 0
Provision for doubtful accounts 579,760 321,615
Minority interest in partnerships 310,849 14,594
Increase in:
Receivables (2,351,784) (1,196,106)
Other receivables (314,585) (253,491)
Prepaids and other assets (1,082,850) (373,864)
Increase (decrease) in:
Accounts payable and accrued expenses 1,977,705 (1,011,521)
Eye care claims payable 910,761 (487,767)
----------- -----------
Net cash provided by (used in)
Operating activities 3,571,788 (1,273,073)
Cash flows from investing activities:
Capital expenditures (700,634) (354,655)
Acquisition of assets of physician practices (534,086) (7,088,876)
Acquisition of Primary Eye Care Network, net
of cash acquired 499,931 0
----------- -----------
Net cash used in investing activities (734,789) (7,443,531)
Cash flows from financing activities:
Proceeds from issuance of common stock 360,994 2,500
Proceeds from issuance of preferred stock 0 6,538,413
Principal payments on long term debt (5,844,258) (6,845,815)
Principal payments on obligations under
Capital leases (514,144) (335,124)
Proceeds from issuance of debt 6,156,397 9,875,045
Distributions to minority interest (267,491) 0
Other (28,128) 0
----------- -----------
Net cash provided by (used in) financing
Activities (136,630) 9,235,019
----------- -----------
Net increase in cash 2,700,369 518,415
Cash at beginning of period 2,943,617 2,735,556
----------- -----------
Cash at end of period $ 5,643,986 3,253,971
=========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
6
<PAGE>
OMEGA HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. ACCOUNTING POLICIES
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with the accounting policies in effect as of December 31,
1996, as set forth in the annual consolidated financial statements of Omega
Health Systems, Inc. Certain prior year interim balances have been reclassified
to conform to the 1997 presentation. In the opinion of management, all
adjustments necessary for a fair presentation of the consolidated financial
statements have been included. The results of operations for the nine month
period ended September 30, 1997 and 1996 are not necessarily indicative of the
results to be expected for the full year.
2. EARNINGS PER SHARE
Earnings per common share for 1997 and 1996 were computed by dividing the
earnings or losses by the weighted average number of common and common
equivalent shares outstanding during the quarter (7,788,182 and 5,599,138,
respectively) and the nine month period (7,468,637 and 5,114,445, respectively).
3. ACQUISITIONS
On March 5, 1997, the Company completed the acquisition of the assets of the
ophthalmology practice of Sarah J. Hays, M.D., of Birmingham, AL. Simultaneously
with the acquisition, the Company entered into a long-term management agreement
with Dr. Hays' professional corporation. The assets were acquired in exchange
for 108,081 shares of the Company's common stock and $859,500 in cash. The cash
portion of the transaction was financed under the Company's revolving credit
facility with NationsCredit Commercial Corporation (NationsCredit).
On May 1, 1997, the Company completed the acquisition of the assets of the
ophthalmology practice of Joseph F. Faust, M.D., of Marion, IN and a 50%
interest in the associated ambulatory surgery center. Simultaneously with the
acquisitions, the Company entered into long-term management agreements to manage
both the practice and the surgery center. The assets were acquired in exchange
for 169,186 shares of the Company's common stock and $1.7 million in cash. The
cash portion of the transaction was financed under the Company's revolving
credit facility with NationsCredit.
On May 1, 1997, the Company completed a merger with Primary Eyecare Network,
based in San Ramon, CA. Primary Eyecare Network provides products and services
to independent optometrists, including management, purchasing, education,
training, and publications. In connection with the merger, the Company issued
195,365 shares of its common stock to the shareholders of Primary Eyecare
Network and paid $1.9 million in cash. The cash portion of the transaction was
financed under the Company's revolving credit facility with NationsCredit.
On August 29, 1997, the Company completed the acquisition of substantially all
of the net assets of Dillman Eye Care Associates, an ophthalmology practice, and
Dillman Eye Care Optical Department, Inc. in exchange for 66,667 shares of
common stock and $725,000 in cash. Simultaneously with the acquisitions, the
Company entered into a long-term management agreement to manage the practice.
The cash portion of the transaction was financed under the Company's revolving
credit facility with NationsCredit.
7
<PAGE>
On September 30, 1997, the Company completed the acquisition of substantially
all of the net assets of Eye Surgeons and Consultants and Golden Eye Surgeons,
two affiliated ophthalmology practices, in exchange for 89,694 shares of common
stock and $672,700 in cash. Simultaneously with the acquisitions, the Company
entered into a long-term management agreement to manage the practices. The cash
portion of the transaction was financed under the Company's revolving credit
facility with NationsCredit.
4. REVOLVING CREDIT AGREEMENT
On February 25, 1997, the Company entered into a $15,000,000 revolving credit
agreement with NationsCredit Commercial Corporation, an affiliate of
NationsBank. Borrowings under the credit agreement will be used to finance
acquisitions, repay existing indebtedness and provide working capital. The
credit agreement has a six-year term and is fully revolving for the first two
years.
5. CONTINGENCIES
The Company is engaged in the business of providing support and management
services to the eye care profession, which subjects it to intense federal and
state regulation. Both state and federal laws prohibit fee splitting and other
forms of compensation based on patient referral. These regulations may, in the
future, be amended or interpreted in such a fashion as to adversely affect the
business of Omega.
The Company maintains professional liability coverage on a claims made basis for
its centers, employees, and independent contractors, including center directors,
with minimum requirements of $3,000,000 per occurrence and $3,000,000 annually.
The Company also maintains general liability coverage. Additionally, the
physicians associated with the Company maintain professional liability coverage.
Providing support associated with health care services may give rise to claims
from patients or others for damages. The Company has been named in certain
professional liability claims. The Company believes that the ultimate resolution
of these matters will not have a significant effect on the Company's financial
position or results of operations. To the extent that any claims-made coverage
is not renewed or replaced with equivalent insurance, claims based on
occurrences during the term of such coverage, but reported subsequently, would
be uninsured. Management anticipates that the claims-made coverage currently in
place will be renewed or replaced with equivalent insurance as the term of such
coverage expires.
6. RECENT ACCOUNTING PRONOUNCEMENT
The Company will adopt Statement of Financial Accounting Standards No. 128 (SFAS
No. 128) Earnings per Share for the year ending December 31, 1997. SFAS No. 128
requires the calculation of basic earnings per share which is computed by
dividing net income by the weighted average number of shares of common stock
outstanding during the period and diluted earnings per common share which is
computed using the weighted average number of shares of common stock, common
stock equivalents and any other dilutive securities. As required, the Company
will restate the reported earnings per share. Basic earnings (loss) per share
would have been $.27 and $(.06) for the three months ended September 30, 1997
and 1996, respectively, and $.45 and $(.13) for the nine months ended September
30, 1997 and 1996, respectively. Diluted earnings (loss) per share would have
been $.44 and $(.12) for the nine months ended September 30, 1997 and 1996,
respectively.
8
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Nine Months
Ended September 30
---------------------
1997 1996
---- ----
Revenues 45.8% 58.4%
Center net revenues 23.6 35.2
Managed Care revenues 28.1 -
Optometric practice services 2.5 6.4
--- ---
Total revenues 100.0 100.0
Center operating expenses 38.4 50.3
Eye care claims 18.1 27.5
Selling, general and administrative expenses 9.3 13.9
Cost of sales 28.0 3.7
Provision for doubtful accounts 1.0 1.1
Earnings from operations 5.2% 3.5%
NINE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1996
TOTAL REVENUES. Total revenues increased from $30,466,000 for the nine
months ended September 30, 1996 to $58,042,000 for the nine months ended
September 30, 1997, an increase of $27,576,000 or 90.5%.
CENTER NET REVENUES increased from $17,787,000 for the 1996 period to
$26,558,000 for the 1997 period, an increase of $8,771,000, or 49.3%. The
increase resulted primarily from the additions of Centers in Tallahassee,
Florida; Dallas, Texas; Birmingham, Alabama; and Marion, Indiana during
the 1997 period as well as the addition of an ASC in the Dallas Center. In
addition, same-center revenue increased 10% for the 1997 period.
MANAGED CARE REVENUES increased from $10,712,000 for the 1996 period
to $13,694,000 for the 1997 period, an increase of $2,982,000, or 27.8%.
The increase reflected the continued growth experienced by the Company's
managed care operations.
OPTOMETRIC PRACTICE SERVICE REVENUES were $16,305,000 for the nine
months ended September 30, 1997. Optometric practice services provides
products and services to independent optometrists, including purchasing,
education, training, management, and publications and is related to the
acquisition of PEN in May 1997.
MOBILE SURGICAL AND OTHER REVENUES decreased from $1,967,000 for the
1996 period to $1,485,000 for the 1997 period, a decrease of 24.5%. The
decrease reflected the reduction in equipment sales, which have lower
margins, and was partially offset by an increase in higher margin mobile
surgical revenues.
9
<PAGE>
CENTER OPERATING EXPENSES. Center operating expenses increased from
$15,313,000 for the nine months ended September 30, 1996 to $22,269,000 for the
nine months ended September 30, 1997, an increase of $6,956,000 or 45.4%. The
increase reflected the additions of the practices in Tallahassee, Dallas,
Birmingham, and Marion as well as 8% same-center operating expense increase
during the 1997 period. As a percentage of center net revenues, center operating
expenses decreased from 86.1% in the 1996 period to 83.8% in the 1997 period,
reflecting improved performance in certain Centers and the impact of the added
Centers.
EYE CARE CLAIMS. Eye care claims increased from $8,371,000 for the nine
months ended September 30, 1996 to $10,547,000 for the nine months ended
September 30, 1997, an increase of $2,176,000, or 26.0%. The increase reflected
the continued growth experienced by the Company's managed care operations and is
directly correlated with the increase in managed care revenues. As a percentage
of managed care revenues, eye care claims decreased from 78.1% in the 1996
period to 77.0% in the 1997 period.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased from $4,250,000 for the nine months ended
September 30, 1996 to $5,365,000 for the nine months ended September 30, 1997,
an increase of $1,115,000, or 26.2%. The increase primarily reflected (i) the
expansion of operation at the EHN, (ii) development costs associated with
expansion of the Company's practice affiliation program and (iii) the
administrative expenses related to PEN during the 1997 period. As a percentage
of total revenues, selling, general, and administrative expenses decreased from
13.9% in the 1996 period to 9.2% in the 1997 period.
COST OF SALES. Cost of sales increased from $1,130,000 for the nine months
ended September 30, 1996 to $16,227,000 for the nine months ended September 30,
1997, an increase of $15,097,000, or 1336.0%. This increase primarily reflected
the acquisition of PEN in May 1997 and the increase in higher margin mobile
surgical sales partially offset by the reduction in equipment sales which have
lower margins. As a percentage of total revenues, cost of sales increased from
73.7% in the 1996 period to 28.0% in the 1997 period, primarily as a result of
the acquisition.
PROVISION FOR DOUBTFUL ACCOUNTS. Provision for doubtful accounts increased
from $322,000 for the nine months ended September 30, 1996 to $580,000 for the
nine months ended September 30, 1997, an increase of $258,000, or 80.1%. This
increase reflected the additions of the practices in Tallahassee, Dallas,
Birmingham, and Marion. As a percentage of total revenues, provision for
doubtful accounts marginally decreased from 1.1% in the 1996 period to 1.0% in
the 1997 period.
INTEREST INCOME (EXPENSE), Net. Interest expense increased from $420,000
for the nine months ended September 30, 1996 to $817,000 for the nine months
ended September 30, 1997, an increase of $397,000, or 94.5%. This increase
related to the increase in borrowings in late 1996 and the 1997 period used to
finance acquisitions.
PREFERRED DIVIDENDS. Preferred dividends decreased from $1,461,000 for the
nine months ended September 30, 1996 to $19,000 for the nine months ended
September 30, 1997, a decrease of $1,442,000, or 98.7%. This decrease resulted
from the conversion of Series A Convertible Preferred Stock into Common Stock by
preferred stockholders subsequent to September 30, 1996.
10
<PAGE>
ACQUISITIONS
On March 5, 1997, the Company completed the acquisition of the assets of the
ophthalmology practice of Sarah J. Hays, M.D., of Birmingham, AL. Simultaneously
with the acquisition, the Company entered into a long-term management agreement
with Dr. Hays' professional corporation. The assets were acquired in exchange
for 108,081 shares of the Company's common stock and $859,500 in cash. The cash
portion of the transaction was financed under the Company's revolving credit
facility with NationsCredit Commercial Corporation (NationsCredit).
On May 1, 1997, the Company completed the acquisition of the assets of the
ophthalmology practice of Joseph F. Faust, M.D., of Marion, IN and a 50%
interest in the associated ambulatory surgery center. Simultaneously with the
acquisitions, the Company entered into long-term management agreements to manage
both the practice and the surgery center. The assets were acquired in exchange
for 169,186 shares of the Company's common stock and $1.7 million in cash. The
cash portion of the transaction was financed under the Company's revolving
credit facility with NationsCredit.
On May 1, 1997, the Company completed a merger with Primary Eyecare Network,
based in San Ramon, CA. Primary Eyecare Network provides products and services
to independent optometrists, including management, purchasing, education,
training, and publications. In connection with the merger, the Company issued
195,365 shares of its common stock to the shareholders of Primary Eyecare
Network and paid $1.9 million in cash. The cash portion of the transaction was
financed under the Company's revolving credit facility with NationsCredit.
On August 29, 1997, the Company completed the acquisition of substantially all
of the net assets of Dillman Eye Care Associates, an ophthamology practice, and
Dillman Eye Care Optical Department, Inc. in exchange for 66,667 shares of
common stock and $725,000 in cash. Simultaneously with the acquisitions, the
Company entered into a long-term management agreement to manage the practice.
The cash portion of the transaction was financed under the Company's revolving
credit facility with NationsCredit.
On September 30, 1997, the Company completed the acquisition of substantially
all of the net assets of Eye Surgeons and Consultants and Golden Eye Surgeons,
two affiliated ophthalmology practices, in exchange for 89,694 shares of common
stock and $672,700 in cash. Simultaneously with the acquisitions, the Company
entered into a long-term management agreement to manage the practices. The cash
portion of the transaction was financed under the Company's revolving credit
facility with NationsCredit.
LIQUIDITY, CASH FLOW, AND CAPITAL RESOURCES
For the nine months ended September 30, 1997, the operating activities of the
Company generated $3,572,000. The Company used $735,000 in investing activities
and used $137,000 in financing activities.
Cash flows from operations included significant adjustments for depreciation and
amortization ($1,399,000) as well as provision for doubtful accounts ($580,000).
Investing activities during the period included $700,000 in capital expenditures
for equipment as well as acquisitions of the assets of ophthalmic and optometric
practices in Alabama, Texas, Indiana, Illinois, and Tennessee, net of cash
acquired in the acquisition of Primary Eye Care Network. Financing activities
included an increase in debt, distributions to minority interest and proceeds
from the issuance of common stock.
On February 25, 1997, the Company entered into a $15,000,000 revolving credit
agreement with NationsCredit Commercial Corporation, an affiliate of
NationsBank. Borrowings under the credit agreement will be used to finance
acquisitions, repay existing indebtedness and provide working capital. The
credit agreement has a six-year term and is fully revolving for the first two
years.
11
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
Not Applicable.
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.
The Company held its Annual Meeting on August 8, 1997. At the meeting,
two directors, Andrew W. Miller and Herman L. Tacker, O.D. were
re-elected to three year terms on the board of directors, by votes of
4,519,513 for, 5,333 against, and none abstaining. Other members of the
board of directors who continue to serve are Ronald L. Edmonds, Donald
A. Hood, O.D., and Thomas P. Lewis.
At the meeting, shareholders also ratified the authorization of the
Audit Committee of the Board of Directors to select the Company's
independent auditors for 1997 by votes of 4,516,753 for, 1,691 against
and 6,402 abstaining.
Item 5. Other Information.
Not Applicable.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
(11) Statement re: computation of per share earnings.
(27) Financial Data Schedule (Electronic filing only).
(b) Reports on Form 8-K:
None.
12
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
OMEGA HEALTH SYSTEMS, INC.
--------------------------------------------------
Registrant
November 14, 1997 By \s\ Ronald L. Edmonds
---------------------------------
Ronald L. Edmonds
Executive Vice President and
Chief Financial Officer
13
<TABLE>
<CAPTION>
EXHIBIT 11
OMEGA HEALTH SYSTEMS, INC. AND SUBSIDIARIES
Computation of Earnings Per Common Share
Three Months Ended Nine Months Ended
September 30 September 30
------------------------- -------------------------
1997 1996 1997 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Primary (for Statement of Operations):
Net earnings $ 2,035,973 $ 410,369 $ 3,322,477 $ 829,828
Preferred stock dividends 2,727 101,885 19,876 174,785
Imputed preferred dividends 0 0 0 1,286,471
----------- ----------- ----------- -----------
Net earnings to common shareholders 2,033,246 308,484 3,302,601 (631,428)
Shares:
Weighted average number of shares outstanding 7,549,315 5,420,710 7,268,550 4,952,682
Assuming exercise of warrants and options,net
of number of shares which could have been
purchased with the exercise of such options
(using average price for the period) 238,867 178,428 200,087 161,763
----------- ----------- ----------- -----------
Weighted average number of shares, adjusted 7,788,182 5,599,138 7,468,637 5,114,445
----------- ----------- ----------- -----------
Primary earnings per common share
and common equivalent share:
Net earnings (loss) $ 0.26 $ 0.06 $ 0.44 $ (0.12)
=========== =========== =========== ===========
Assuming full dilution (for Statement of Operations):
Net earnings $ 2,035,973 $ 410,369 3,322,477 829,828
Preferred stock dividends 2,727 101,885 19,876 174,785
Imputed preferred dividends 0 0 0 1,286,471
----------- ----------- ----------- -----------
Net earnings to common shareholders 2,033,246 308,484 3,302,601 (631,428)
Shares:
Weighted average number of shares outstanding 7,549,315 5,420,710 7,268,550 4,952,682
Assuming exercise of warrants and options,
net
of number of shares which could have been
purchased with the exercise of such options
(using closing market price) 270,255 183,837 269,194 183,712
----------- ----------- ----------- -----------
Weighted average number of shares, adjusted 7,819,570 5,604,547 7,537,744 5,136,394
----------- ----------- ----------- -----------
Primary earnings per common share
and common equivalent share:
Net earnings (loss) $0.26(a) $(0.06)(a) $0.44(a) $(0.12)(a)
=========== =========== =========== ===========
</TABLE>
(a) This calculation is submitted in accordance with Regulation S-B item
601(b)(11) although not required by footnote 2 to paragraph 14 of
APB Opinion No. 15 because it results in dilution of less than 3%.
14
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF OMEGA HEALTH SYSTEMS, INC., FOR THE NINE MONTH PERIOD
ENDED SEPTEMBER 30, 1997, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 5,644
<SECURITIES> 0
<RECEIVABLES> 11,858
<ALLOWANCES> 2,603
<INVENTORY> 0
<CURRENT-ASSETS> 18,425
<PP&E> 14,506
<DEPRECIATION> 6,609
<TOTAL-ASSETS> 48,584
<CURRENT-LIABILITIES> 11,601
<BONDS> 0
0
0
<COMMON> 463
<OTHER-SE> 21,937
<TOTAL-LIABILITY-AND-EQUITY> 48,584
<SALES> 58,042
<TOTAL-REVENUES> 58,042
<CGS> 16,227
<TOTAL-COSTS> 54,987
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 580
<INTEREST-EXPENSE> 817
<INCOME-PRETAX> 2,142
<INCOME-TAX> 0
<INCOME-CONTINUING> 3,322
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,322
<EPS-PRIMARY> .45
<EPS-DILUTED> .44
</TABLE>
