<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): DECEMBER 18, 1997
OMEGA HEALTH SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of incorporation)
0-19283 63-0858713
(Commission File Number) (I.R.S. Employer Identification No.)
5100 POPLAR AVENUE, SUITE 2100, MEMPHIS, TENNESSEE 38137
(Address of principal executive offices, including Zip Code)
(901) 683-7868
(Registrant's telephone number, including Area Code)
NOT APPLICABLE
(Former name or former address, if changed since last report)
<PAGE> 2
INFORMATION TO BE INCLUDED IN THE REPORT
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On December 18, 1997, Omega Health Systems of Ohio, Inc. (Omega-Ohio), a
wholly-owned subsidiary of the Registrant, acquired the outstanding stock of
Central Ohio Eye Institute, Inc., an Ohio professional corporation which had
practiced ophthalmology and operated an ambulatory surgery center. Subsequent to
the merger, Omega-Ohio entered into a long-term management agreement with a new
professional corporation owned by Harmeet S. Chawla, M.D. to carry on the
practice formerly conducted by Central Ohio Eye Institute and to managed the
ambulatory surgery center. The consideration for the merger consisted of 463,000
shares of the Registrant's common stock and cash of approximately $5,000,000.
The Registrant financed the cash portion of this transaction with borrowings
under its Revolving Credit Facility with NationsCredit Commercial Corporation.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements of the Business Acquired
Central Ohio Eye Institute, Inc.
Independent Auditors' Report
Balance Sheet, December 31, 1996
Statement of Operations, Year ended December 31, 1996
Statement of Stockholder's Equity, Year ended December 31,
1996
Statement of Cash Flows, Year ended December 31, 1996
Notes to Financial Statements, December 31, 1996
Condensed Balance Sheet, September 30, 1997 (unaudited)
Condensed Statement of Operations, Nine months ended September
30, 1997 (unaudited)
Condensed Statement of Cash Flows, Nine months ended
September 30, 1997 (unaudited)
Notes to Condensed Financial Statements, September 30, 1997
(unaudited)
Unaudited Pro Forma Consolidated Financial Statements
Unaudited Pro Forma Consolidated Balance Sheet, September 30, 1997
Unaudited Pro Forma Consolidated Statement of Operations, Nine
months ended September 30, 1997
Unaudited Pro Forma Consolidated Statement of Operations, Year
ended December 31, 1996
(b) Exhibits
2.1 Press Release dated December 22, 1997 *
2.2 Stock Purchase Agreement *
2.3 Stock Pledge and Escrow Agreement *
2.4 Stock Restriction and Registration Rights Agreement *
* Previously filed.
<PAGE> 3
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
OMEGA HEALTH SYSTEMS, INC.
Dated: March 3, 1998 By: /s/ Ronald L. Edmonds
-------------------------------
Ronald L. Edmonds
Executive Vice President and
Chief Financial Officer
<PAGE> 4
CENTRAL OHIO EYE INSTITUTE, INC.
Financial Statements
December 31, 1996
(With Independent Auditors' Report Thereon)
<PAGE> 5
Independent Auditors' Report
The Stockholder
Central Ohio Eye Institute, Inc.:
We have audited the accompanying balance sheet of Central Ohio Eye Institute,
Inc. as of December 31, 1996, and the related statements of operations,
stockholder's equity and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Central Ohio Eye Institute,
Inc. as of December 31, 1996, and the results of its operations and its cash
flows for the year then ended in conformity with generally accepted accounting
principles.
KPMG Peat Marwick LLP
Memphis, Tennessee
December 12, 1997
<PAGE> 6
CENTRAL OHIO EYE INSTITUTE, INC.
Balance Sheet
December 31, 1996
<TABLE>
<S> <C>
Assets
Current assets:
Cash and cash equivalents $ 17,676
Accounts receivable, less allowance for uncollectible accounts
of $200,000 (note 2) 530,105
Inventories 50,610
Prepaid expenses 4,844
--------
Total current assets 603,235
Furniture, fixtures and equipment, net (note 3) 202,699
--------
$805,934
========
Liabilities and Stockholder's Equity
Current liabilities:
Accounts payable $ 43,315
Accrued payroll costs 68,543
Other accrued expenses 13,962
Current portion of capital lease obligations (note 4) 24,369
--------
Total current liabilities 150,189
Capital lease obligations, less current portion (note 4) 41,446
--------
Total liabilities 191,635
--------
Stockholder's equity:
Common stock, no par value, 750 shares authorized,
100 shares issued and outstanding --
Additional paid-in capital 500
Retained earnings 613,799
--------
Total stockholder's equity 614,299
--------
Commitments and contingencies (notes 4 and 6)
$805,934
========
</TABLE>
See accompanying notes to financial statements.
<PAGE> 7
CENTRAL OHIO EYE INSTITUTE, INC.
Statement of Operations
Year ended December 31, 1996
<TABLE>
<S> <C>
Net patient service revenue (note 5) $4,349,859
Expenses:
Compensation to stockholder 119,967
Salaries, wages and benefits 596,785
General and administrative 310,676
Pharmaceuticals and supplies 61,109
Depreciation 46,458
Interest 5,017
----------
Total expenses 1,140,012
----------
Net income $3,209,847
==========
</TABLE>
See accompanying notes to financial statements.
<PAGE> 8
CENTRAL OHIO EYE INSTITUTE, INC.
Statement of Stockholder's Equity
Year ended December 31, 1996
<TABLE>
<CAPTION>
Additional Total
Common paid-in Retained stockholder's
stock capital earnings equity
------ ---------- -------- -------------
<S> <C> <C> <C> <C>
Balances at beginning of year $ - 500 723,240 723,740
Net income - - 3,209,847 3,209,847
Distributions to stockholder - - (3,319,288) (3,319,288)
----- --- ---------- ----------
Balances at end of year $ - 500 613,799 614,299
===== === ========== ==========
</TABLE>
See accompanying notes to financial statements.
<PAGE> 9
CENTRAL OHIO EYE INSTITUTE, INC.
Statement of Cash Flows
Year ended December 31, 1996
<TABLE>
<S> <C>
Cash flows from operating activities:
Net income $ 3,209,847
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 46,458
Changes in operating assets and liabilities:
Accounts receivable 35,832
Accounts payable and accrued expenses 68,782
-----------
Net cash provided by operating activities 3,360,919
-----------
Cash flows from investing activities - capital expenditures (33,539)
-----------
Cash flows from financing activities:
Principal payments on capital lease obligations (22,046)
Distributions to stockholder (3,319,288)
-----------
Net cash used in financing activities (3,341,334)
-----------
Decrease in cash and cash equivalents (13,954)
Cash and cash equivalents at beginning of year 31,630
-----------
Cash and cash equivalents at end of year $ 17,676
===========
Supplemental disclosure:
Interest paid $ 4,900
===========
</TABLE>
See accompanying notes to financial statements.
<PAGE> 10
CENTRAL OHIO EYE INSTITUTE, INC.
Notes to Financial Statements
December 31, 1996
(1) Summary of Significant Accounting Policies
(a) Description of Business
Central Ohio Eye Institute, Inc. (the Company), the ophthalmology
practice of Harmeet S. Chawla, M.D., is a medical and surgical
practice specializing in ophthalmological services. Dr. Chawla is
the sole stockholder of the Company.
On December 16, 1997, Omega Health Systems, Inc. (Omega) acquired
all of the issued and outstanding common stock of the Company.
Simultaneously with the acquisition, Omega entered into a long-term
management agreement with the Company.
The accompanying financial statements have been prepared
principally to accompany Omega's filing on Form 8-K.
(b) Cash Equivalents
The Company considers investments in highly liquid debt instruments
with an original maturity of three months or less to be cash
equivalents.
(c) Inventories
Inventories, consisting primarily of medical supplies, are stated
at the lower of cost (first in, first out method) or replacement
market.
(d) Statement of Operations
For purposes of presentation, transactions deemed by management to
be ongoing, major or central to the provision of health care
services are reported as revenue and expenses. Peripheral or
incidental transactions are reported as gains and losses.
(e) Net Patient Service Revenue
Net patient service revenue is reported at the estimated net
realizable amounts from patients, third-party payors and others for
services rendered, including estimated retroactive adjustments, if
any, under reimbursement agreements with third-party payors.
(Continued)
2
<PAGE> 11
CENTRAL OHIO EYE INSTITUTE, INC.
Notes to Financial Statements
Retroactively calculated contractual adjustments arising under
reimbursement agreements with third-party payors, if any, are
accrued on an estimated basis in the period the related services
are rendered and adjusted as final settlements are determined.
(f) Charity Care
The Company provides care to patients who meet certain criteria
under its charity care policy without charge or at amounts less
than its established rates. Because the Company does not pursue
collection of amounts determined to qualify as charity care, such
amounts are not reported as revenue. Charity care provided by the
Company in 1996 was not significant.
(g) Furniture, Fixtures and Equipment
Owned furniture, fixtures and equipment are stated at cost.
Furniture, fixtures and equipment held under capital leases are
stated at the lower of the present value of minimum lease payments
at the beginning of the lease term or fair value at the inception
of the lease.
Depreciation for owned furniture, fixtures and equipment is
calculated using the straight-line method over the estimated useful
lives of the assets, as follows:
Estimated useful lives
----------------------
Furniture and fixtures 5 years
Medical equipment 10 years
Furniture, fixtures and equipment held under capital leases are
amortized using the straight-line method over the shorter of the
respective lease term or estimated useful life of the asset, which
is generally three to five years.
(h) Income Taxes
The Company has elected for its earnings to be taxed directly to
its stockholder under the S Corporation provisions of the Internal
Revenue Code and similar provisions of Ohio laws and regulations.
Accordingly, the accompanying financial statements contain no
provision for income taxes related to the Company's earnings.
(Continued)
3
<PAGE> 12
CENTRAL OHIO EYE INSTITUTE, INC.
Notes to Financial Statements
(i) Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires that management
make estimates and assumptions affecting the reported amounts of
assets, liabilities, revenues and expenses, as well as disclosure
of contingent assets and liabilities. Actual results could differ
from those estimates.
(2) Business and Credit Concentrations
The Company grants credit to patients, substantially all of whom reside in
the Company's service area of Columbus, Ohio. The Company generally does
not require collateral or other security in extending credit to patients;
however, it routinely obtains assignment of (or is otherwise entitled to
receive) patients' benefits payable under their health insurance programs,
plans or policies (e.g., Medicare, Medicaid, Blue Cross, preferred
provider arrangements and commercial insurance policies).
The mix of receivables from patients and third-party payors follows:
Medicare 48%
Commercial insurance 32
Patient 10
Medicaid 5
Other third-party payors 5
---
100%
===
(3) Furniture, Fixtures and Equipment
A summary of furniture, fixtures and equipment follows:
Medical equipment $246,652
Furniture and fixtures 9,210
Equipment held under capital leases (note 4) 115,196
--------
371,058
Less accumulated depreciation and amortization 168,359
--------
$202,699
========
(Continued)
4
<PAGE> 13
CENTRAL OHIO EYE INSTITUTE, INC.
Notes to Financial Statements
(4) Leases
The Company is obligated under two capital leases for equipment. The
gross amount of such assets held under capital lease was $115,196, with
related accumulated amortization of $48,143.
The Company also is obligated under certain noncancelable operating
leases. Total lease expense for all operating leases was approximately
$36,000 in 1996.
Future minimum lease payments under noncancelable operating leases and
the present value of minimum capital lease payments follow:
<TABLE>
<CAPTION>
Capital Operating
leases leases
--------- ---------
<S> <C> <C>
1997 $24,369 40,355
1998 22,281 38,137
1999 22,281 32,225
2000 7,427 19,037
2001 - 11,760
Thereafter - 38,220
------- --------
76,358 $179,734
========
Less amount representing interest at 6.0% 10,543
-------
65,815
Less current portion 24,369
-------
Capital lease obligations, less current portion $41,446
=======
</TABLE>
(5) Net Patient Service Revenue
The Company has agreements with governmental and other third-party payors
that provide for reimbursement to the Company at amounts different from
its established rates. Contractual adjustments under third-party
reimbursement programs represent the difference between the Company's
billings at established rates for services and amounts reimbursed by
third-party payors. Third-party payor activity for the Company
principally involves the Medicare and Medicaid programs. Services
rendered to beneficiaries under these programs are generally paid at
prospectively determined procedural rates.
The Company has historically not maintained records to segregate
write-offs of uncollectible accounts from contractual and other
adjustments, and therefore the separate provision for uncollectible
accounts is not determinable.
(Continued)
5
<PAGE> 14
CENTRAL OHIO EYE INSTITUTE, INC.
Notes to Financial Statements
(6) Professional and General Liability Insurance
The Company maintains professional and general liability coverage under
the provisions of certain claims-made policies. 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 believes, based
on incidents identified through the Company's incident reporting system,
that any such claims would not have a material effect on the Company's
operations or financial position. In any event, 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.
<PAGE> 15
CENTRAL OHIO EYE INSTITUTE, INC.
Condensed Balance Sheet
(unaudited)
September 30, 1997
<TABLE>
<S> <C>
Assets
Current assets:
Cash and cash equivalents $ 143,197
Accounts receivable, less allowance for uncollectible accounts
of $272,000 594,844
Other current assets 60,833
-----------
Total current assets 798,874
Furniture, fixtures and equipment, net 231,529
-----------
$ 1,030,403
===========
Liabilities and Stockholder's Equity
Current liabilities:
Accounts payable and accrued expenses $ 210,752
Current portion of capital lease obligations 22,281
-----------
Total current liabilities 233,033
Capital lease obligations, less current portion 27,323
-----------
Total liabilities 260,356
-----------
Stockholder's equity:
Common stock, no par value, 750 shares authorized,
100 shares issued and outstanding -
Additional paid-in capital 500
Retained earnings 769,547
-----------
Total stockholder's equity 770,047
-----------
Commitments and contingencies
$ 1,030,403
===========
</TABLE>
See accompanying notes to condensed financial statements.
<PAGE> 16
CENTRAL OHIO EYE INSTITUTE, INC.
Condensed Statement of Operation
(unaudited)
Nine months ended September 30, 1997
<TABLE>
<S> <C>
Net patient service revenue $ 2,406,693
Expenses:
Operating expenses 1,153,983
Depreciation 14,003
Interest (7,740)
-----------
Total expenses 1,160,246
-----------
Net income $ 1,246,447
===========
</TABLE>
See accompanying notes to condensed financial statements.
<PAGE> 17
CENTRAL OHIO EYE INSTITUTE, INC.
Condensed Statement of Cash Flows
(unaudited)
Nine months ended September 30, 1997
<TABLE>
<S> <C>
Cash flows from operating activities:
Net income $ 1,246,447
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 14,003
Changes in operating assets and liabilities:
Accounts receivable (64,739)
Other current assets (5,379)
Accounts payable and accrued expenses 84,932
------------
Net cash provided by operating activities 1,275,264
------------
Cash flows from investing activities - capital expenditures (42,833)
------------
Cash flows from financing activities:
Principal payments on capital lease obligations (16,211)
Distributions to stockholder (1,090,699)
------------
Net cash used in financing activities (1,106,910)
------------
Increase in cash and cash equivalents 125,521
Cash and cash equivalents at beginning of year 17,676
------------
Cash and cash equivalents at end of year $ 143,197
============
</TABLE>
See accompanying notes to condensed financial statements.
<PAGE> 18
CENTRAL OHIO EYE INSTITUTE, INC.
Notes to Condensed Financial Statements
(unaudited)
September 30, 1997
1. BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements for the nine months
ended September 30, 1997 have been prepared on a basis substantially consistent
with the financial statements for the year ended December 31, 1996. In the
opinion of management, all adjustments necessary for a fair presentation in
conformity with generally accepted accounting principles have been made. The
unaudited condensed financial statements should be read in conjunction with the
financial statements for the year ended December 31, 1996 and notes thereto.
2. CONTINGENCIES
The Company maintains professional and general liability coverage under the
provisions of certain claims-made policies. 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 believes, based on incidents identified through the
Company's incident reporting system, that any such claims would not have a
material effect on the Company's operations or financial position. In any event,
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.
<PAGE> 19
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
OF OMEGA HEALTH SYSTEMS, INC.
The following unaudited pro forma consolidated financial statements give effect
to the following affiliation and acquisition transactions (collectively, the
"Transactions"), on the dates indicated, of Omega Health Systems, Inc. as if
each had occurred at the beginning of the applicable periods presented in the
accompanying pro forma consolidated financial statements of operations and on
September 30, 1997 for purposes of the accompanying pro forma consolidated
balance sheet:
- Paul E. Garland, M.D., P.A. and Capital Eye Surgery Center, Inc.
on March 13, 1996
- EyeCare and Surgery Center of North Texas, P.A. and Surg EyeCare,
Inc. on September 10, 1996
- Sarah Jablecki Hays, M.D., P.C. and Refractive Surgery Center of
Birmingham, A Professional Corporation ("Hays") on March 1, 1997
- Primary Eyecare Network and P.E.N. Resources, Inc. ("PEN") on
April 30, 1997
- Faust Eye Center, P.C. and The Outpatient Surgery Center of
Indiana, Inc. ("Faust") on May 1, 1997
- Dillman Eye Care Associates, Inc. and Dillman Eye Care Optical
Department, Inc. ("Dillman") on August 29, 1997
- Eye Surgeons and Consultants, Inc. and Golden Eye Surgeons and
Consultants, Ltd. ("Golden") on September 26, 1997
- Alan D. Baribeau, M.D., P.A. and South Texas Outpatient Surgical
Center, Inc. ("Baribeau") on November 26, 1997
- Central Ohio Eye Institute, Inc. ("Chawla") on December 18, 1997
The unaudited pro forma consolidated financial statements have been prepared by
the Company based on the historical financial statements of the Company and
Chawla included elsewhere in this Prospectus, the historical financial
statements of Hays, PEN, Faust, Dillman, Golden and Baribeau which are not
included herein, as well as certain preliminary estimates and assumptions deemed
appropriate by management of the Company. The pro forma consolidated financial
statements may not be indicative of actual results as if the transactions had
occurred on the dates indicated or which may be realized in the future.
<PAGE> 20
OMEGA HEALTH SYSTEMS, INC.
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
BARIBEAU CHAWLA
HISTORICAL TRANSACTION TRANSACTION PRO FORMA
----------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
Cash 5,643,986 -- -- 5,643,986
Accounts receivables, net of allowances 11,858,079 327,871 -- 12,185,950
Prepaid expenses and other current assets 923,190 11,491 -- 934,681
----------- --------- --------- -----------
Total current assets 18,425,255 339,362 -- 18,764,617
Equipment, furniture and fixtures 14,506,491 1,400,000 300,000 15,906,491
Accumulated depreciation (6,609,279) -- -- (6,609,279)
----------- --------- --------- -----------
Net equipment, furniture and fixtures 7,897,212 1,400,000 300,000 9,297,212
Management service agreements 19,194,725 -- -- 19,194,725
Other assets 3,066,832 1,184,071 7,408,750 4,250,903
----------- --------- --------- -----------
Total assets 48,584,024 2,923,433 7,708,750 51,507,457
=========== ========= ========= ===========
Accounts payable and accrued expenses 8,292,878 160,049 -- 8,452,927
Eye care claims payable 2,086,829 -- -- 2,086,829
Current installments of long-term debt and
capital lease obligations 1,221,192 -- -- 1,221,192
----------- --------- --------- -----------
Total current liabilities 11,600,899 160,049 -- 11,760,948
Long-term debt and capital lease obligations,
excluding current installments 14,528,847 1,975,884 5,065,000 16,504,731
----------- --------- --------- -----------
Total liabilities 26,129,746 2,135,933 5,065,000 28,265,679
Minority interest 54,254 54,254
Stockholders' equity:
Preferred stock
Common stock 462,686 7,875 27,792 470,561
Additional paid-in capital 27,174,345 779,625 2,615,958 27,953,970
Accumulated deficit (5,237,007) -- -- (5,237,007)
----------- --------- --------- -----------
Total stockholders' equity 22,400,024 787,500 2,643,750 23,187,524
----------- --------- --------- -----------
Total liabilities and
stockholders' equity 48,584,024 2,923,433 7,708,750 51,507,457
=========== ========= ========= ===========
</TABLE>
<PAGE> 21
OMEGA HEALTH SYSTEMS, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
ACQUIRED
HISTORICAL OPERATIONS ELIMINATIONS ADJUSTMENTS PRO FORMA
---------- ---------- ------------ ----------- ----------
(1) (2) (3) (3)
<S> <C> <C> <C> <C> <C>
Center net revenues 26,557,752 8,472,039 -- -- 35,029,791
Managed care revenues 13,694,044 -- -- -- 13,694,044
Optometric practice services 16,305,115 12,553,629 -- -- 28,858,744
Mobile surgical and other 1,485,309 469,715 -- -- 1,955,024
----------- ---------- ---------- ---------- -----------
Total revenues 58,042,220 21,495,383 -- -- 79,537,603
Center operating expenses 22,268,837 8,299,061 (2,777,723) 2,072,890 29,863,065
Eye care claims 10,546,856 -- -- -- 10,546,856
Selling, general and administrative expenses 5,364,528 -- -- -- 5,364,528
Cost of sales 16,226,988 12,068,019 -- -- 28,295,007
Provision for doubtful accounts 579,760 -- -- -- 579,760
----------- ---------- ---------- ---------- -----------
Earnings from operations 3,055,251 1,128,303 2,777,723 (2,072,890) 4,888,387
Nonoperating revenue (expense) 214,577 -- -- -- 214,577
Interest expense 816,502 86,086 (86,086)(4) 776,841(4) 1,593,343
Earnings before minority interest 2,453,326 1,042,217 2,863,809 (2,849,730) 3,509,622
Minority interest 310,849 -- -- 168,939(5) 479,788
----------- ---------- ---------- ---------- -----------
Net earnings before income taxes 2,142,477 1,042,217 2,863,809 (3,018,669) 3,029,834
Income tax expense (6) (820,000) 22,000 (22,000) (330,000) (1,150,000)
----------- ---------- ---------- ---------- -----------
Net earnings 1,322,477 1,020,217 2,885,809 (2,688,669) 1,879,834
=========== ========== ========== ========== ===========
Weighted average shares outstanding 8,192,778(7)
===========
Earnings per share 0.22
===========
</TABLE>
- ------------
(8) Reflects the Company's actual results of operations for the nine months
ended September 30, 1997.
(9) Reflects the Transactions as if they had been completed on January 1, 1997.
(10) Reflects the effect of (i) reduced operating expenses that would have been
duplicative or unnecessary under the Company's management, (ii) the
elimination of physicians' compensation recognized in the historical
financial statements of the practices with which the Company affiliated in
the Transactions, (iii) the Company's obligation for the physician
compensation under the related Management Agreements, (iv) nine months
amortization of cost in excess of acquired net assets' fair value
attributable to the Company's Management Agreements, and (v) additional
depreciation expense for acquired equipment, furniture and fixtures.
(11) Reflects the effect of (i) an increase in interest expense due to long-term
debt related to the Transaction and (ii) reduction in interest expense due
to the repayment of long-term debt recognized in the historical financial
statements of the practice with which the Company affiliated in the
transactions.
(12) Reflects the recognition of minority interest related to components of
Faust and Baribeau as if it had been completed January 1, 1997.
(13) The Company recognized a net income tax benefit of $1,180,000 during the
third quarter of 1997 related to establishing certain deferred tax assets,
which assets were previously fully reserved through related valuation
allowances. These assets relate to the Company's projected ability to
utilize net operating loss carryforwards. This net benefit has been
excluded from the pro forma data for the nine months ended September 30,
1997 and income tax expense has been recognized at an assumed rate of 38%
in the pro
<PAGE> 22
forma data for both the year ended December 31, 1996 and the nine months
ended September 30, 1997. No income tax expense was recognized by the
Company in years prior to 1997 because of the availability of net operating
loss carryforwards.
(14) Reflects the actual weighted average number of shares outstanding
(exclusive of the Transactions) for the nine months ended September 30,
1997 plus (i) 108,081 shares issued in conjunction with Hays, (ii) 195,365
shares issued in conjunction with PEN, (iii) 169,186 shares issued in
conjunction with Faust, (iv) 66,667 shares in conjunction with Dillman, (v)
89,694 shares issued in conjunction with Golden, (vi) 131,250 shares issued
in conjunction with Baribeau and (vii) 463,206 shares in conjunction with
Chawla.
<PAGE> 23
OMEGA HEALTH SYSTEMS, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
ACQUIRED
HISTORICAL OPERATIONS ELIMINATIONS ADJUSTMENTS PRO FORMA
---------- ----------- ------------ ----------- -----------
(1) (2) (3) (3)
<S> <C> <C> <C> <C> <C>
Center net revenues 25,576,743 19,230,494 -- -- 44,807,237
Managed care revenues 14,642,992 -- -- -- 14,642,992
Optometric practice services -- 35,745,042 -- -- 35,745,042
Mobile surgical and other 2,517,458 657,539 -- -- 3,174,997
---------- ---------- ---------- ---------- ----------
Total revenues 42,737,193 55,633,075 -- -- 98,370,268
Center operating expenses 21,675,900 17,303,137 (5,121,868) 5,166,884 39,024,053
Eye care claims 11,932,085 -- -- -- 11,932,085
Selling, general and administrative expenses 5,593,414 -- -- -- 5,593,414
Cost of sales 1,415,800 34,113,597 -- -- 35,529,397
Provision for doubtful accounts 367,037 -- -- -- 367,037
---------- ---------- ---------- ---------- ----------
Earnings from operations 1,752,957 4,216,341 5,121,868 (5,166,884) 5,924,282
Nonoperating revenue (expense) 168,197 (9,223) -- -- 158,974
Interest expense 568,730 185,266 (154,543) 1,663,368(4) 2,262,821
Earnings before minority interest 1,352,424 4,021,852 5,276,411 (6,830,252) 3,820,435
Minority interest 49,308 -- -- 283,409(5) 332,717
---------- ---------- ---------- ---------- ----------
Net earnings before income taxes 1,303,116 4,021,852 5,276,411 (7,113,661) 3,487,718
Income tax expense (6) -- 112,000 (112,000) 1,290,456 1,290,456
---------- ---------- ---------- ---------- ----------
Net earnings 1,303,116 3,909,852 5,388,411 (8,404,117) 2,197,262
========== ========== ========== ========== ==========
Weighted average shares outstanding 6,822,375(7)
==========
Earnings per share 0.32
==========
</TABLE>
- -----------------
(1) Reflects the Company's actual results of operations for the nine months
ended December 31, 1996.
(2) Reflects the Transactions as if they had been completed on January 1, 1996.
(3) Reflects the effect of (i) reduced operating expenses that would have been
duplicative or unnecessary under the Company's management, (ii) the
elimination of physicians' compensation recognized in the historical
financial statements of the practices with which the Company affiliated in
the Transactions, (iii) the Company's obligation for the physician
compensation under the related Management Agreements, (iv) twelve months
amortization of cost in excess of acquired net assets' fair value
attributable to the Company's Management Agreements, and (v) additional
depreciation expense for acquired equipment, furniture and fixtures.
(4) Reflects the effect of (i) an increase in interest expense due to long-term
debt related to the Transaction and (ii) reduction in interest expense due
to the repayment of long-term debt recognized in the historical financial
statements of the practice with which the Company affiliated in the
transactions.
(5) Reflects the recognition of minority interest related to components of
Faust and Baribeau as if it had been completed January 1, 1996.
(6) No income tax expense was recognized by the Company in its historical
financial statements because of the availability of net operating loss
carryforwards, however, the above statements include an income tax
provision at an assumed rate of 37% for pro forma purposes.
<PAGE> 24
(7) Reflects the actual weighted average number of shares outstanding
(exclusive of the Transactions) for the twelve months ended December 31,
1997 plus (i) 108,081 shares issued in conjunction with Hays, (ii) 195,365
shares issued in conjunction with PEN, (iii) 169,186 shares issued in
conjunction with Faust, (iv) 66,667 shares in conjunction with Dillman, (v)
89,694 shares issued in conjunction with Golden, (vi) 131,250 shares issued
in conjunction with Baribeau and (vii) 463,206 shares in conjunction with
Chawla.
