<PAGE> 1
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 JUNE 30, 1998
--------------
or
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES ACT
For the transition period from __________ to ___________
Commission File Number: 0-19283
OMEGA HEALTH SYSTEMS, INC.
- --------------------------------------------------------------------------------
(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.)
5350 Poplar Avenue, Suite 900, Memphis, Tennessee 38119
- --------------------------------------------------------------------------------
(Address of principal executive offices)
901-683-7868
- --------------------------------------------------------------------------------
(Issuer's telephone number)
- --------------------------------------------------------------------------------
(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 PRECEDING 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 July 31, 1998
- ------------------------------ -----------------------------
Common Stock, $0.06 par value 8,867,251
<PAGE> 2
OMEGA HEALTH SYSTEMS, INC. AND SUBSIDIARIES
FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 1998
PART 1 - FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Page
-------
<S> <C> <C>
Index to Financial Information:
Item 1:
Condensed Consolidated Balance Sheets
as of June 30, 1998 and December 31,
1997 3
Condensed Consolidated Statements of
Operations for the Three Months Ended
June 30, 1998 and 1997 4
Condensed Consolidated Statements of
Operations for the Six Months Ended
June 30, 1998 and 1997 5
Condensed Consolidated Statements of
Cash Flows for the Three Months Ended
June 30, 1998 and 1997 6
Notes to Condensed Consolidated
Financial Statements 7
Item 2:
Management's Discussion and Analysis of
Financial Condition and Results of
Operations 9
</TABLE>
2
<PAGE> 3
OMEGA HEALTH SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
JUNE 30, 1998 AND DECEMBER 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
1998 1997
ASSETS
<S> <C> <C>
Current Assets:
Cash $ 5,784,743 5,608,645
Accounts receivable, net of allowances
for contractual adjustments and
doubtful accounts 16,550,654 12,498,685
Prepaid expenses and other assets 2,301,587 1,327,331
------------ -----------
TOTAL CURRENT ASSETS 24,636,984 19,434,661
Equipment, furniture and fixtures 19,115,275 18,179,934
Less: Accumulated depreciation (7,896,247) (6,990,662)
------------ -----------
NET EQUIPMENT, FURNITURE AND FIXTURES 11,219,028 11,189,272
Management service agreements and other
intangible assets, net of accumulated amortization 31,177,466 29,260,811
Deferred tax asset 843,000 1,356,000
Other assets 1,096,682 1,287,455
------------ -----------
TOTAL ASSETS $ 68,973,160 62,528,199
============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses 9,732,028 7,645,740
Eye care clams payable 2,004,361 2,471,935
Current instalments of obligations under capital
lease and long-term debt 1,299,050 1,428,477
------------ -----------
TOTAL CURRENT LIABILITIES 13,035,439 11,546,152
Obligations under capital lease, excluding
current installments 1,221,369 1,365,448
Long-term debt, excluding current
installments 24,431,406 21,693,712
------------ -----------
TOTAL LIABILITIES 38,688,214
34,605,312
Minority Interest 585,872 523,065
Stockholders' equity:
Common stock 522,803 513,991
Additional paid in capital 32,431,229 31,562,383
Accumulated deficit (3,254,958) (4,676,552)
------------ -----------
TOTAL STOCKHOLDERS' EQUITY 29,699,074 27,399,822
------------ -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 68,973,160 62,528,199
============ ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE> 4
OMEGA HEALTH SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1998 AND 1997
(UNAUDITED)
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Ophthalmic center net revenues $ 12,692,935 9,181,783
Managed eye care revenues 5,821,962 4,383,259
Optometric practice services 10,570,317 6,388,790
Mobile surgical and other 637,472 492,731
------------ ------------
TOTAL REVENUES 29,722,686 20,446,563
Center operating expenses 10,143,339 7,476,451
Eye care claims 4,256,648 3,474,367
Cost of sales 10,444,275 6,273,218
Provision for doubtful accounts 259,530 251,918
Selling, general, administrative and
development expenses 2,692,100 1,849,264
------------ ------------
EARNINGS FROM OPERATIONS 1,926,794 1,121,345
Non-operating revenue (expenses):
Interest and other income 118,404 21,586
Interest expense (667,838) (272,209)
------------ ------------
EARNINGS BEFORE MINORITY INTEREST 1,377,360 870,722
Minority interest in net income of partnerships (194,167) (136,514)
------------ ------------
EARNINGS BEFORE INCOME TAXES 1,183,193 734,208
Income tax expense (440,000) 0
------------ ------------
NET EARNINGS 743,193 734,208
Preferred dividends, principally imputed 0 (6,650)
------------ ------------
EARNINGS AVAILABLE TO COMMON
SHAREHOLDERS $ 743,193 $ 727,558
============ ============
Earnings per common share:
Basic $ 0.09 $ 0.10
============ ============
Diluted $ 0.08 $ 0.10
============ ============
Weighted average number of common shares
Basic 8,715,994 7,312,859
============ ============
Diluted 8,892,415 7,516,502
============ ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE> 5
OMEGA HEALTH SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1998 AND 1997
(UNAUDITED)
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Ophthalmic center net revenues $ 24,908,315 16,742,896
Managed eye care revenues 11,341,720 8,688,147
Optometric practice services 20,494,400 6,388,790
Mobile surgical and other 1,252,897 953,432
------------ ------------
TOTAL REVENUES 57,997,332 32,773,265
Center operating expenses 19,975,146 13,789,704
Eye care claims 8,430,263 6,779,845
Cost of sales 20,153,097 6,573,787
Provision for doubtful accounts 444,567 376,014
Selling, general, administrative and
development expenses 5,359,337 3,464,232
------------ ------------
EARNINGS FROM OPERATIONS 3,634,922 1,789,683
Non-operating revenue (expenses):
Interest and other income 198,347 121,968
Interest expense (1,258,087) (442,021)
------------ ------------
EARNINGS BEFORE MINORITY INTEREST 2,575,182 1,469,630
Minority interest in net income of partnerships (298,588) (183,126)
------------ ------------
EARNINGS BEFORE INCOME TAXES 2,276,594 1,286,504
Income tax expense (855,000) 0
------------ ------------
NET EARNINGS 1,421,594 1,286,504
Preferred dividends, principally imputed 0 (17,149)
------------ ------------
EARNINGS AVAILABLE TO COMMON
SHAREHOLDERS $ 1,421,594 $ 1,269,355
============ ============
Earnings per common share:
Basic $ 0.16 $ 0.18
============ ============
Diluted $ 0.16 $ 0.17
============ ============
Weighted average number of common shares
Basic 8,715,408 7,124,569
============ ============
Diluted 8,899,485 7,321,679
============ ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE> 6
OMEGA HEALTH SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1998 AND 1997
(UNAUDITED)
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
CASH FLOWS FROM OPERATIONS:
Net earnings $ 1,421,594 1,286,504
Adjustments to reconcile net earnings to net cash
Provided by operating activities:
Depreciation and amortization 1,487,533 896,806
Deferred tax asset 513,000 0
Provision for doubtful accounts 444,567 376,014
Minority interest in partnerships 298,588 183,126
(Increase) decrease in:
Receivables (4,654,484) (1,136,373)
Other receivables 157,948 (218,878)
Prepaids and other assets (808,032) (908,629)
Increase (decrease) in:
Accounts payable and accrued expenses 2,166,447 815,282
Eye care claims payable (467,574) 1,028,251
----------- ----------
NET CASH PROVIDED BY
OPERATING ACTIVITIES 559,587 2,322,103
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (584,541) (645,361)
Acquisition of assets net of cash acquired (2,027,355) (5,005,617)
----------- ----------
NET CASH USED IN INVESTING ACTIVITIES (2,611,896) (5,650,978)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 0 201,001
Net change in long-term debt and capital lease obligations 2,464,188 5,067,166
Distributions to minority interest (235,781) (82,471)
Other 0 (20,628)
----------- ----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 2,228,407 5,165,068
----------- ----------
NET INCREASE IN CASH 176,098 1,836,193
CASH AT BEGINNING OF PERIOD 5,608,645 2,943,617
----------- ----------
CASH AT END OF PERIOD $ 5,784,743 4,779,810
=========== ==========
</TABLE>
See accompanying notes to condensed consolidated financial statements
6
<PAGE> 7
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,
1997, 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 1998 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 six month
period ended June 30, 1998 and 1997 are not necessarily indicative of the
results to be expected for the full year.
2. EARNINGS PER SHARE
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, "Earnings Per Share" (SFAS 128), which
changes the computation and presentation of earnings per share, replacing
primary and fully diluted earnings per share previously required. Earnings per
share for all prior years presented have been presented in accordance with SFAS
128.
Basic and diluted earnings per common share for 1998 and 1997 were computed by
dividing the earnings or losses by the weighted average number of common shares
outstanding during the quarter (8,715,994 and 7,312,859, respectively) and the
six month period (8,715,408 and 7,124,569, respectively). Diluted earnings per
common share for 1998 and 1997 were computed by dividing the earnings by the
weighted average number of common shares and common equivalent shares
outstanding during the quarter (8,892,415 and 7,516,502, respectively) and the
six month period (8,899,485 and 7,321,679, respectively).
3. ACQUISITIONS
On January 2, 1998, the Company completed the acquisition of the assets of
Hunter, Schulz and Horton, O.D., P.A. of New Port Richey, Florida.
Simultaneously with the acquisition, the Company entered into a long-term
management agreement to manage the practice. In connection with the merger, the
Company issued 130,718 shares of the Company's common stock and $1,000,000 in
cash. The cash portion of the transaction was financed under the Company's
revolving credit facility with NationsCredit.
In May 1998, the Company acquired fourteen retail optical locations on military
facilities. The facilities are located principally in existing center markets.
On July 11, 1998, the Company completed the acquisition of the assets of the
ophthalmology practice of Mitchell L. Levin, MD and a 50% interest in the
associated ambulatory surgery center. Simultaneously with the acquisition, the
Company entered into a long-term management agreement to manage the practice. In
connection with the merger, the Company issued 151,257 shares of the Company's
common stock and $91,802,500 in cash. The cash portion of the transaction was
financed under the Company's revolving credit facility with NationsCredit.
4. REVOLVING CREDIT AGREEMENT
In February 1997, the Company entered into a $15,000,000 Credit Facility with
NationsCredit Commercial Corporation, an affiliate of NationsBank, for the
purpose of refinancing certain existing debt, providing working capital and
financing acquisitions. The Credit Facility is a $15 million committed facility,
comprised of a $13 million acquisition facility (the "Acquisition Facility") and
a $2 million working capital facility (the "Working Capital Facility"). The
Credit Facility is fully revolving for the first two years and
7
<PAGE> 8
matures in equal installments over the next four years. The Credit Facility
bears interest at a variable rate equal to the 30-day commercial paper rate
quoted in The Wall Street Journal plus 4.25%. In December 1997, the Credit
Facility was updated to $30,000,000.
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
As of January 1, 1998, the Company adopted Statement 130, "Reporting
Comprehensive Income." Statement 130 establishes new rules for the reporting and
display of comprehensive income and its components. The adoption of this
Statement had no impact on the Company's net income or shareholder's equity.
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information." SFAS No. 131 reqires that the Company
report financial and descriptive information about its reportable segments.
Financial information is required to be reported on the basis that is used
internally for evaluating segment performance and deciding how to allocate
resources to segments. This statement also requires that the Company report
descriptive information about the way the operating segments were determined,
the products and services provided by the operating segments, differences
between the measurements used in reporting segment information and those used in
the Company's financial statements, and changes in the measurement of segment
amounts from period to period. SFAS No. 131 is effective for financial
statements for periods beginning after December 15, 1997. The adoption of this
statement will provide additional disclosures in the financial statements for
the year ended December 31, 1998.
8
<PAGE> 9
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
Six Months
Ended June 30
1998 1997
------ ------
<S> <C> <C>
Revenues
Center net revenues 42.9% 51.1%
Managed Care revenues 19.6 26.5
Optometric practice services 35.3 19.5
Mobile surgical and other 2.2 2.9
------ ------
Total revenues 100.0 100.0
Center operating expenses 34.4 42.1
Eye care claims 14.5 20.7
Selling, general and administrative expenses 9.2 10.6
Cost of sales 34.7 20.1
Provision for doubtful accounts 0.8 1.1
Earnings from operations 6.3% 5.5%
</TABLE>
SIX MONTHS ENDED JUNE 30, 1998 COMPARED TO SIX MONTHS ENDED JUNE 30, 1997
Total Revenues. Total revenues increased from $32,773,000 for the six
months ended June 30, 1997 to $57,997,000 for the six months ended June 30,
1998, an increase of $25,224,000 or 77.0%.
Center net revenues increased from $16,743,000 for the 1997
period to $24,908,000 for the 1998 period, an increase of $8,165,000,
or 48.8%. The increase resulted primarily from the additions of Centers
in Birmingham, Alabama; Marion, Indiana; Danville, Illinois; Chicago,
Illinois; Newport Richey, Florida; San Antonio, Texas; and Circleville,
Ohio during the 1998 period as well as the addition of an ASC in the
San Antonio and Circleville Centers. In addition, same-center revenue
increased 5% for the 1998 period.
Managed care revenues increased from $8,688,000 for the 1997
period to $11,342,000 for the 1998 period, an increase of $2,654,000,
or 30.5%. The increase reflected the continued growth experienced by
the Company's managed care operations.
Optometric practice service revenues increased from $6,389,000
for the 1997 period to $20,494,000 for the 1998 period, an increase of
$14,105,000, or 220.8%. Optometric practice services provides products
and services to independent optometrists, including purchasing,
education, training, management, and publications and is related to the
acquisition of Primary Eyecare Network, Inc. (PEN) in May 1997.
Mobile surgical and other revenues increased from $953,000 for
the 1997 period to $1,253,000 for the 1998 period, an increase of
$300,000 or 31.5%. The increase resulted primarily from higher margin
mobile surgical revenues.
9
<PAGE> 10
Center Operating Expenses. Center operating expenses increased from
$13,790,000 for the six months ended June 30, 1997 to $19,975,000 for the six
months ended June 30, 1998, an increase of $6,185,000 or 44.9%. The increase
reflected the additions of the practices in Birmingham, Marion, Danville,
Chicago, Newport Richey, San Antonio and Circleville as well as 7% same-center
operating expense increase during the 1998 period. As a percentage of center net
revenues, center operating expenses decreased from 82.4% in the 1997 period to
80.2% in the 1998 period, reflecting improved performance in certain Centers and
the impact of the added Centers.
Eye Care Claims. Eye care claims increased from $6,780,000 for the six
months ended June 30, 1997 to $8,430,000 for the six months ended June 30, 1998,
an increase of $1,650,000, or 24.3%. 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 78.0% in the 1997 period to 74.3% in
the 1998 period.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased from $3,464,000 for the six months ended June
30, 1997 to $5,359,000 for the six months ended June 30, 1998, an increase of
$1,895,000, or 54.7%. 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 and Providers Optical during the 1998 period. As a percentage of
total revenues, selling, general, and administrative expenses decreased from
10.6% in the 1997 period to 9.2% in the 1998 period.
Cost of Sales. Cost of sales increased from $6,574,000 for the six
months ended June 30, 1997 to $20,153,000 for the six months ended June 30,
1998, an increase of $13,579,000 or 206.6%. This increase primarily reflected
the acquisition of PEN in May 1997 and Providers Optical in December 1997 and
the increase in higher margin mobile surgical sales. As a percentage of total
revenues, cost of sales increased from 20.1% in the 1997 period to 34.7% in the
1998 period, primarily as a result of the acquisition.
Provision for Doubtful Accounts. Provision for doubtful accounts
increased from $376,000 for the six months ended June 30, 1997 to $445,000 for
the six months ended June 30, 1998, an increase of $69,000, or 18.4%. As a
percentage of total revenues, provision for doubtful accounts marginally
decreased from 1.1% in the 1997 period to 0.8% in the 1998 period.
Interest Income (Expense), Net. Interest expense increased from
$320,000 for the six months ended June 30, 1997 to $1,060,000 for the six months
ended June 30, 1998, an increase of $740,000, or 231.3%. This increase related
to the increase in borrowings in late 1997 and the 1998 period used to finance
acquisitions.
Preferred Dividends. Preferred dividends were $17,000 for the three
months ended June 30, 1997. This decrease resulted from the conversion of Series
A Convertible Preferred Stock into Common Stock by preferred stockholders
subsequent to June 30, 1997.
ACQUISITIONS
On January 2, 1998, the Company completed the acquisition of the assets of
Hunter, Schulz and Horton, O.D., P.A. of New Port Richey, Florida.
Simultaneously with the acquisition, the Company entered into a long-term
management agreement to manage the practice. In connection with the merger, the
Company issued 130,718 shares of the Company's common stock and $1,000,000 in
cash. The cash portion of the transaction was financed under the Company's
revolving credit facility with NationsCredit.
10
<PAGE> 11
In May 1998, the Company acquired fourteen retail optical locations on military
facilities. The facilities are located principally in existing center markets.
On July 11, 1998, the Company completed the acquisition of the assets of the
ophthalmology practice of Mitchell L. Levin, MD and a 50% interest in the
associated ambulatory surgery center. Simultaneously with the acquisition, the
Company entered into a long-term management agreement to manage the practice. In
connection with the merger, the Company issued 151,257 shares of the Company's
common stock and $1,802,500 in cash. 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 six months ended June 30, 1998, the operating activities of the Company
generated $560,000. The Company used $2,612,000 in investing activities and
generated $2,228,000 in financing activities.
Cash flows from operations included significant adjustments for depreciation and
amortization ($1,488,000) as well as provision for doubtful accounts ($445,000).
Cash flows from operations were significantly affected by working capital
requirements of acquisitions completed in the fourth quarter of 1997 and first
quarter of 1998 and income tax payments. Investing activities during the period
included $585,000 in capital expenditures for equipment as well as acquisitions
of the assets of optometric practices in Florida. Financing activities included
an increase in debt and distributions to minority interest.
Year 2000
The Company is continuing its efforts to address operational concerns raised by
the so-called year 2000 issue. The principal areas of concern include ensuring
that the systems used in practice management, managed care administration and
accounting are year 2000 compliant, addressing issues related to "imbedded
systems" in equipment, including medical equipment and assessing and addressing
the potential impact of year 2000 problems with other entities with which the
Company has business relationships.
The Company is in the process of upgrading all of its internal systems,
including practice management, managed care administration and accounting. This
is a complex project with many aspects, but addressing the year 2000 issue is a
significant part of the project. The overall cost of this systems project will
be in excess of $1 million, but a relatively small part is exclusively related
to the Year 2000 issue.
The Company is in the process of inventorying equipment which have imbedded
systems which may be affected by the year 2000 issue and contacting the
appropriate vendors to ascertain risks and solutions. The cost of this project
is not expected to be material to the Company's financial statements at this
time.
The Company is also corresponding with other entities with which it has
business relationships to assess their progress in addressing the year 2000
issue for the purpose of assessing the risks to the Company which may result
from this problem.
Although the cost of bring systems and equipment into compliance has not been
and is not expected to be material to the Company's consolidated financial
statements, failure to comply could have a material adverse effect on the
Company's business and financial results.
11
<PAGE> 12
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.
None.
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 (for SEC use only)
(b) Reports on Form 8-K:
None.
12
<PAGE> 13
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
August 14, 1998 By \s\ Ronald L. Edmonds
----------------------------------------
Ronald L. Edmonds
Executive Vice President and
Chief Financial Officer
13
<PAGE> 1
EXHIBIT 11
OMEGA HEALTH SYSTEMS, INC. AND SUBSIDIARIES
Computation of Earnings Per Common Share
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
-------------------------- ---------------------------
1998 1997 1998 1997
---------- --------- ---------- ----------
<S> <C> <C> <C> <C>
Basic:
Net earnings $ 743,193 734,208 $1,421,594 $1,286,504
Preferred stock dividends 0 6,650 0 17,149
---------- --------- ---------- ----------
Net earnings to common shareholders 743,193 727,558 1,421,594 1,269,355
Shares:
Weighted average number of shares outstanding 8,715,994 7,312,859 8,715,408 7,124,569
---------- --------- ---------- ----------
Basic earnings per common share and common equivalent share:
Net earnings $ 0.09 $ 0.10 $ 0.16 $ 0.18
========== ========= ========== ==========
Diluted:
Net earnings $ 743,193 734,208 1,421,594 1,286,504
Preferred stock dividends 0 6,650 0 17,149
---------- --------- ---------- ----------
Net earnings to common shareholders 743,193 727,558 1,421,594 1,269,355
Shares:
Weighted average number of shares outstanding 8,715,994 7,312,859 8,715,408 7,124,569
Assuming exercise of warrants and options,
net of number of shares which could have been
purchased with the exercise of such options
(using average market price) 176,421 203,643 184,077 197,110
---------- --------- ---------- ----------
Weighted average number of shares, adjusted 8,892,415 7,516,502 8,899,485 7,321,679
---------- --------- ---------- ----------
Diluted earnings per common share and common equivalent share:
Net earnings $ 0.08 $ 0.10 $ 0.16 $ 0.17
========== ========= ========== ==========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF OMEGA HEALTH SYSTEMS, INC. FOR THE SIX MONTHS ENDED JUNE
30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
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