SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the quarterly period ended June 30, 1997
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the transition period from _______ to _______.
Commission File Number: 0-19815
CAREMATRIX CORPORATION
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(Exact name of Registrant as specified in its charter)
Delaware 04-3069586
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(State of other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
197 First Avenue, Needham, MA 02194
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(Address of principal executive offices) (Zip Code)
(617) 433-1000
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(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X
---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at July 31, 1997
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Common Stock, $.05 par value 17,148,711 shares
<PAGE>
CAREMATRIX CORPORATION
Table of Contents
PART I - FINANCIAL INFORMATION
FINANCIAL STATEMENTS Page
Consolidated Balance Sheets as of June 30, 1997
and December 31, 1996 3
Statements of Operations for the three and six month
periods ended June 30, 1997 and June 30, 1996 4
Statements of Cash Flows for the six month periods
ended June 30, 1997 and June 30, 1996 5
Notes to Consolidated Financial Statements 6
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 10
PART II - OTHER INFORMATION
ITEM 1: LEGAL PROCEEDINGS 15
ITEM 4: SUBMISSION OF MATTERS TO A VOTE
OF SECURITY HOLDERS 15
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K 16
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<PAGE>
CAREMATRIX CORPORATION
CONSOLIDATED BALANCE SHEETS
as of June 30, 1997 and December 31, 1996
<TABLE>
<CAPTION>
June 30, 1997 December 31, 1996
------------- -----------------
S (unaudited) (audited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 49,564,096 $ 57,966,360
Restricted cash 1,577,490 836,745
Receivables:
Accounts receivable, net 5,044,207 3,959,233
Accounts receivable-related party 3,119,211 938,910
Other receivables 1,115,000 309,613
Prepaid expenses and other current assets 1,282,235 1,772,995
Assets held for sale 903,633 576,573
------------ ------------
Total current assets 62,605,872 66,360,429
Lease acquisition costs, net 4,493,371 2,753,332
Property and equipment, net 9,957,394 9,503,011
Due from stockholder 964,007 356,740
Deposits and other assets 4,738,637 3,129,974
Goodwill, net 25,442,232 25,961,658
------------ ------------
Total assets $108,201,513 $108,065,144
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 2,716,750 $ 2,776,522
Accounts payable 971,599 1,346,140
Accrued compensation 780,757 693,120
Accrued liabilities 4,553,635 4,565,503
Other current liabilities 1,514,534 539,265
------------ ------------
Total current liabilities 10,537,275 9,920,550
Long-term debt 6,619,840 8,903,156
Other long-term liabilities 748,506 1,152,960
Minority interest -- 52,921
Commitments and contingencies -- --
Stockholders' equity 90,295,892 88,035,557
------------ ------------
Total liabilities and stockholders' equity $108,201,513 $108,065,144
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
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<PAGE>
CAREMATRIX CORPORATION
STATEMENTS OF OPERATIONS (unaudited)
for the three and six month periods ended June 30, 1997 and June 30, 1996
<TABLE>
<CAPTION>
Consolidated Combined Consolidated Combined
------------ -------- ------------ --------
Three Months Three Months Six Months Six Months
Ended Ended Ended Ended
June 30, 1997 June 30, 1996 June 30, 1997 June 30, 1996
-------------- -------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenue:
Resident operations $ 10,493,644 $ 1,201,678 $ 19,948,745 $ 2,389,070
Resident operations---related party 477,804 -- 884,472 --
Development fee income 150,101 -- 1,544,779 --
Development fee income---related party 3,808,930 -- 5,644,001 --
-------------- -------------- ------------- -------------
Total revenue 14,930,479 1,201,678 28,021,997 2,389,070
-------------- -------------- ------------- -------------
Expenses:
Facility operating expenses 7,955,907 1,211,935 14,567,296 2,254,711
Facility lease expense 634,757 270,532 1,199,677 544,776
Facility lease expense---related party 833,332 -- 1,715,702 --
General and administrative 3,522,020 -- 7,170,954 --
General and administrative---related party -- 972,970 -- 2,726,515
Depreciation and amortization 468,693 38,403 978,515 65,164
-------------- -------------- ------------- -------------
Total expenses 13,414,709 2,493,840 25,632,144 5,591,166
-------------- -------------- ------------- -------------
Income (loss) from operations 1,515,770 (1,292,162) 2,389,853 (3,202,096)
Interest income (expense):
Interest income 793,893 24,372 1,567,551 24,372
Interest expense (245,801) -- (521,243) --
Interest expense --- related party -- (261,001) -- (559,051)
-------------- -------------- ------------- -------------
Total interest income (expense) 548,092 (236,629) 1,046,308 (534,679)
-------------- -------------- ------------- -------------
Earnings (loss) before income taxes and 2,063,862 (1,528,791) 3,436,161 (3,736,775)
preferred dividends
Income taxes 829,673 -- 1,381,146 --
-------------- -------------- ------------- -------------
Earnings (loss) before preferred dividends 1,234,189 (1,528,791) 2,055,015 (3,736,775)
Preferred dividends 5,825 -- 12,051 --
-------------- -------------- ------------- -------------
Net earnings (loss) applicable to common $ 1,228,364 $ (1,528,791) $ 2,042,964 $ (3,736,775)
stockholders ============== ============== ============= =============
Primary earnings (loss) per share applicable to $ 0.07 $ (0.15) $ 0.12 $ (0.37)
common stockholders ============== ============== ============= =============
Weighted average shares outstanding 17,432,963 10,000,000* 17,372,096 10,000,000*
============== ============== ============= =============
</TABLE>
* Reflects pro forma shares outstanding prior to combination of entities
under common control (see Note 1)
The accompanying notes are an integral part of the financial statements.
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<PAGE>
CAREMATRIX CORPORATION
STATEMENTS OF CASH FLOWS (unaudited)
for the six month periods ended June 30, 1997 and June 30, 1996
<TABLE>
<CAPTION>
Consolidated Combined
Six Month Period Six Month Period
Ended Ended
June 30, 1997 June 30, 1996
---------------- ----------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings (loss) $ 2,042,964 $ (3,736,775)
Noncash items included in net earnings (loss):
Depreciation of fixed assets 321,305 65,164
Amortization of intangible assets 657,210 --
Accretion of deferred rent liability 32,994 --
Accretion of bargain purchase option 170,217 --
Changes in current assets (2,223,083) (101,444)
Changes in current liabilities (1,236,605) 18,238
Changes in other assets 9,028 (143,292)
------------ ------------
Net cash used by operating activities (225,970) (3,898,109)
------------ ------------
Cash flows from investing activities:
Purchase of working capital note (300,000) --
Additions to property and equipment (775,688) (779,582)
Net change in assets held for sale (327,060) --
Change in other long-term assets (531,160) --
Increase in notes receivable (1,907,367) (769,904)
Change in restricted cash (98,396) --
Increase in lease acquisition costs (1,881,706) --
Lease acquisitions, net of cash acquired (331,973) --
------------ ------------
Net cash used by investing activities (6,153,350) (1,549,486)
------------ ------------
Cash flows from financing activities:
Net increase in amounts due from stockholder 189,620 7,330,715
Repayment of debt (2,429,935) --
Other, net 217,371 --
------------ ------------
Net cash provided (used) by financing activities (2,022,944) 7,330,715
------------ ------------
(Decrease) Increase in cash and cash equivalents (8,402,264) 1,883,120
Cash and cash equivalents, beginning of period 57,966,360 144,643
------------ ------------
Cash and cash equivalents, end of period $49,564,096 $ 2,027,763
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
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<PAGE>
CAREMATRIX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
CareMatrix Corporation (the "Company") develops, manages and operates
assisted living facilities and various other health care facilities.
Prior to the Merger (as described herein), the Company consisted of
business entities which were operated since their date of inception (June 24,
1994) under common control by Abraham D. Gosman ("Mr. Gosman"), who serves as
both the Company's Chairman and is, as trustee, the Company's principal
stockholder.
On October 4, 1996, twelve wholly-owned subsidiaries of The Standish
Care Company, Inc. ("Standish") were merged into certain business entities (the
"CareMatrix Affiliates") controlled by Mr. Gosman with the stockholders of the
CareMatrix Affiliates receiving approximately 92% (10,000,000 shares) of
Standish common stock then outstanding (the "Merger"). Following the Merger,
Standish changed its name to CareMatrix Corporation. The Merger was accounted
for as a reverse acquisition, whereby the CareMatrix Affiliates were treated as
the acquiror for accounting purposes. Accordingly, the financial information for
the three and six month periods ended June 30, 1996 is that of the CareMatrix
Affiliates prior to the Merger.
The accompanying interim unaudited financial statements have been
prepared by the Company pursuant to the rules and regulations of the Securities
and Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been omitted pursuant to such regulations. The
financial statements reflect all adjustments and disclosures which are, in the
opinion of management, necessary for a fair presentation of the financial
position and results of operations for the periods presented. All such
adjustments are of a normal recurring nature. The interim financial statements
should be read in conjunction with the Company's Form 10-K and Form 10-K/A for
the fiscal year ended December 31, 1996, for additional disclosures. The results
of operations for the interim periods presented are not necessarily indicative
of the results that may be achieved for the full year. Certain reclassifications
have been made on the prior quarter's financial statements to conform to current
quarter presentations.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the
Company and its subsidiaries. All significant intercompany balances and
transactions have been eliminated in consolidation.
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CAREMATRIX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
1. BASIS OF PRESENTATION (continued)
PRINCIPLES OF CONSOLIDATION (continued)
Effective January 1, 1997, the Company entered into management
contracts with a related party for two long-term care facilities. In addition,
on January 1, 1997, the Company exercised its options to lease from a related
party two facilities that it had been managing. In February 1997, the Company
entered into a lease with a third party to operate an assisted living facility
in Maryland. On April 1, 1997, the Company exercised its option to lease from a
related party a senior facility that it had been managing.
2. ASSETS HELD FOR SALE
In connection with the Merger, the Company initiated a plan to dispose
of certain of the acquired Standish facilities. The net assets associated with
these facilities and the estimated costs to dispose of the facilities have been
separately recorded on the balance sheet.
The assets held for sale are comprised of two operating facilities
containing 142 beds which were previously owned by Standish. The net assets
include fixed assets and various other operating assets and current liabilities
and long-term debt associated with the facilities. The Company estimated the
fair market value of the facilities assuming an orderly disposal, less costs to
sell the facilities as well as an estimate of the results of the facilities'
operations through the expected date of disposition. The Company expects to
dispose of the facilities during 1997. During the second quarter and six months
of fiscal 1997, the facilities generated $75,318 and $164,184 of losses,
respectively, which have been excluded from the Company's consolidated statement
of operations and accounted for as an adjustment to the carrying amount of the
assets.
3. RELATED PARTY TRANSACTIONS
As used herein, a "related party" is Chancellor Senior Housing Group,
Inc. or a company in which Mr. Gosman and/or members of the Company's senior
management and/or stockholders have an ownership interest in excess of 90%.
During the first quarter of 1997, the Company exercised its option, at
a cost of $1.8 million, to lease from a joint venture, of which Mr. Gosman is a
partner, a senior living facility which it had been managing.
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<PAGE>
CAREMATRIX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
3. RELATED PARTY TRANSACTIONS (continued)
In January 1997, the Company purchased, for $2.1 million, a
subordinated working capital loan related to a facility that it is managing. The
loan has a face value of $2.4 million, bears interest at 8.5% and matures
November 2024. Payment of accrued interest on the note is subordinated to the
facility achieving certain financial performance measures.
The Company subleases a portion of its principal office space in
Needham, Massachusetts to Meditrust, a publicly traded real estate investment
trust company, of which Mr. Gosman is the Chairman of the Board and Chief
Executive Officer. Accordingly, general and administrative expenses for the
second quarter and first six months of fiscal 1997 has been reduced by $44,814
and $89,628, respectively, to reflect the Meditrust portion of rent.
4. DEBT
In April, approximately $1.8 million of debt related to the Company's
facility in New Hampshire matured and was repaid. In connection with the
repayment of this debt, the Company also purchased from the 49% minority partner
in the joint venture its remaining interest in the partnership at the book value
of the partners' debt.
5. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, "Earnings Per Share" (FAS
128). FAS 128 establishes standards for computing and presenting earnings per
share (EPS) and supersedes APB Opinion No. 15, "Earnings per Share." FAS 128
replaces primary earnings per share with basic earnings per share and requires
dual presentation of basic and diluted earnings per share on the face of the
income statement. The Company does not expect the adoption of FAS 128 to have a
material impact.
FAS 128 is effective for financial statements issued for periods ending after
December 15, 1997 and requires restatement of all prior period EPS data
presented.
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<PAGE>
CAREMATRIX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
6. SUBSEQUENT EVENTS
In early July, the Company announced a lease agreement, subject to HUD
approval, for a 324-unit senior living facility in Florida. The agreement
provides for a three year lease with a fair market value put/sell option at the
end of the three year period.
On August 1, 1997, the Company announced its intention, subject to
market and other conditions, to raise $100 million through a private offering of
convertible subordinated notes (the "Notes"). It is contemplated that the Notes
will be convertible into Common Stock of the Company and will have a seven year
term. The Company intends to use the proceeds of the offering for general
corporate purposes, including, but not limited to, capital expenditures, working
capital, and future acquisitions.
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
The Company is a provider of assisted living services to the elderly.
At June 30, 1997, the Company operated 20 facilities in 7 states with a capacity
of approximately 1,700 residents, including 15 facilities owned or leased by the
Company or in which it has ownership interests and five facilities which it
manages. In addition, at June 30, 1997, the Company had 49 facilities under
development with a capacity of approximately 5,800 residents. The Company
provides assistance with the activities of daily living and other personalized
support services in a residential setting for elderly residents who cannot live
independently but who do not need the level of medical care provided in a
skilled nursing facility. The Company also provides additional specialized care
and services to residents with certain low acuity medical needs and residents
with Alzheimer's disease or other forms of dementia. By offering this full range
of services, the Company is able to accommodate the changing needs of residents
as they age within a facility and develop further physical or cognitive
frailties.
The Company derives its revenues from three primary sources: (i)
resident fees for the delivery of assisted living services (including revenues
for services provided at skilled nursing facilities which are dependent, in
part, on reimbursement from Medicare, state Medicaid programs and private
insurers); (ii) management services income for management of facilities; and
(iii) fee income from the development and construction of facilities. Resident
fees typically are paid monthly by residents, their families or other
responsible parties. Resident fees and management fees are recognized as
revenues when services are provided. Development fee revenue is recognized on
the percentage of completion basis.
The Company classifies its operating expenses into the following
categories: (i) facility operating expenses; (ii) facility lease expense; (iii)
general and administrative expenses, which primarily include headquarters and
regional staff expenses and other overhead costs; and (iv) depreciation and
amortization. In anticipation of its growth plans, the Company has made
significant investments in its infrastructure through the addition of
headquarters and regional staff.
On October 4, 1996, twelve wholly-owned subsidiaries of The Standish
Care Company, Inc. ("Standish") were merged into certain business entities (the
"CareMatrix Affiliates") controlled by Mr. Gosman with the stockholders of the
CareMatrix Affiliates receiving approximately 92% (10,000,000 shares) of
Standish common stock then outstanding (the "Merger"). Following the Merger,
Standish changed its name to CareMatrix Corporation. The Merger was accounted
for as a reverse acquisition, whereby the CareMatrix Affiliates were treated as
the acquiror for accounting purposes. Accordingly, the financial information for
the three and six month periods ended June 30, 1996 is that of the CareMatrix
Affiliates prior to the Merger.
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
The following discussion, as well as other portions of this document,
includes certain statements which are or may be construed as forward looking
about the Company's business, sales and expenses, and operating and capital
requirements. Any such statements are subject to risks that could cause the
actual results or requirements to vary materially.
The quarter ended June 30, 1997 compared to the quarter ended June 30, 1996
REVENUES. Net revenues for the second quarter of 1997 increased $13.7
million compared to the same period in 1996.
Resident operations revenue increased $9.7 million in the second
quarter of fiscal 1997 compared to the same period in 1996. New facilities
operations and management services contributed $9.1 million of this increase.
During the quarter ended June 30, 1996, the Company's resident operations
revenues were derived from the operation of a long term care facility in
Maryland.
Development services revenue was $4.0 million in the second quarter of
fiscal 1997 versus none in the same period in 1996 as the Company did not begin
development activity until the fourth quarter of 1996.
FACILITY EXPENSES. Facility expenses, including lease expense, for the
second quarter of 1997 increased by $7.9 million compared to the same period in
fiscal 1996. New facilities contributed $7.7 million of this increase.
GENERAL AND ADMINISTRATIVE. General and administrative expenses for the
second quarter of 1997 increased to $3.5 million from $1.0 million in the same
period of fiscal 1996. As a percentage of operating revenue, general and
administrative expenses in the second quarter of 1997 declined to 23.6% from
81.0% in the second quarter of 1996. The increase in expense is primarily due to
an increase in salary and benefits expenses relating to the hiring of additional
corporate staff in anticipation of the Company's growth plans.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization for the
second quarter of 1997 increased $0.4 million compared to the same period in
fiscal 1996. The increase is due primarily to $260,000 of amortization of
goodwill incurred as a result of the Merger, $94,000 related to new facilities,
and $47,000 from the amortization of lease acquisition costs.
INTEREST INCOME. Interest income for the second quarter of 1997 was
$0.8 million compared to $24,000 for the same period in fiscal 1996. The
increase in interest income was primarily due to higher average cash balances
as a result of the Company's secondary offering of
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
The quarter ended June 30, 1997 compared to the quarter ended June 30, 1996
(continued)
common stock in October 1996 (see Note 9 of the Notes to Financial Statements
contained in the Company's 1996 Annual Report on Form 10-K).
INTEREST EXPENSE. Interest expense for the second quarter of 1997
decreased to $246,000 from $261,000 for the same period in 1996. The decrease is
primarily due to a $1.9 million decrease in average borrowings during 1997
compared to 1996.
INCOME TAXES. The Company's effective tax rate during the second
quarter of 1997 was 40.2%. During the same period in 1996, the entities included
in these financial statements were S corporations or partnerships; accordingly,
any income tax liabilities were the responsibility of the respective owners or
partners. Provisions for income taxes and deferred assets and liabilities of the
taxable entities were not reflected since there was no taxable income on a
combined basis.
The six months ended June 30, 1997 compared to the six months ended June 30,
1996
REVENUES. Net revenues for the first six months of 1997 increased
$25.6 million compared to the same period in 1996.
Resident operations revenue increased $18.4 million in the first six
months of fiscal 1997 compared to the same period in 1996. New facilities
operations and management services contributed $17.5 million of this increase.
During the same period in 1996, the Company's resident operations revenues were
derived from the operation of a long term care facility in Maryland.
Development fee income was $7.2 million in the first six months of
fiscal 1997 versus none in the same period in 1996 as the Company did not begin
development activity until the fourth quarter of 1996.
FACILITY EXPENSES. Facility expenses, including lease expense, for the
first six months of 1997 increased by $14.7 million compared to the same period
in fiscal 1996. New facilities contributed $14.2 million of this increase.
GENERAL AND ADMINISTRATIVE. General and administrative expenses for
the first six months of 1997 increased to $7.2 million from $2.7 million in the
same period of fiscal 1996. As a percentage of operating revenue, general and
administrative expenses in the period
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
The six months ended June 30, 1997 compared to the six months ended June 30,
1996 (continued)
declined to 25.6% from 114.1% in the same period of 1996. The increase in
expense is primarily due to an increase in salary and benefits expenses relating
to the hiring of additional corporate staff in anticipation of the Company's
growth plans.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization for the
first six months of 1997 increased $0.9 million compared to the same period in
fiscal 1996. The increase is due primarily to $519,000 of amortization of
goodwill incurred as a result of the Merger, $185,000 from new facilities, and
$142,000 from the amortization of lease acquisition costs.
INTEREST INCOME. Interest income for the first six months of 1997 was
$1.6 million compared to $24,000 for the same period in fiscal 1996. The
interest income was primarily due to higher average cash balances as a result of
the Company's secondary offering of common stock in October 1996 (see Note 9 of
the Notes to Financial Statements contained in the Company's 1996 Annual Report
on Form 10-K).
INTEREST EXPENSE. Interest expense for the first six months of 1997
decreased to $521,000 from $559,000 for the same period in 1996. The decrease is
primarily due to a $2.4 million decrease in average borrowings during 1997
compared to 1996.
INCOME TAXES. The Company's effective tax rate during the first six
months of 1997 was 40.2%. During the same period in 1996, the entities included
in these financial statements were S corporations or partnerships; accordingly,
any income tax liabilities were the responsibility of the respective owners or
partners. Provisions for income taxes and deferred assets and liabilities of the
taxable entities were not reflected since there was no taxable income on a
combined basis.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents at June 30, 1997 were $49.6 million
compared to $58.0 million at December 31, 1996, a decrease of approximately
$8.4 million.
Cash used by operations was $0.2 million in the first six months of
fiscal 1997 compared to a use of $3.9 million for the same period in fiscal
1996. The decrease in the use of cash is due primarily to increased earnings
offset by increases in accounts receivable due to new facilities and an increase
in development fees receivable of $2.2 million.
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
LIQUIDITY AND CAPITAL RESOURCES (continued)
Cash used in investing activities was $6.2 million in the first six
months of fiscal 1997 compared to a use of $1.5 million for the same period in
fiscal 1996. The increase in the use of cash is due primarily to the payment of
$1.8 million to acquire the lease rights to a facility, $1.9 million of
advances, and $0.8 million of capital expenditures for the remodeling of
existing facilities.
Cash used for financing activities were $2.0 million in the first six
months of fiscal 1997 compared to a source of cash of $7.3 million in the same
period in fiscal 1996. The $2.0 million use of cash in fiscal 1997 is primarily
due to the repayment of debt. The $7.3 million source of cash in the prior year
reflected an increase in the net obligation owed to the Company's principal
stockholder for funding the Company's start-up losses, capital expenditures and
investments.
The Company will require resources in the future to fund the planned
acquisition and development of additional assisted living, supportive
independent and extended care facilities as well as its working capital
requirements. The Company expects to partially fund these resource requirements
with its cash on hand as well as related party or third-party financing of
assisted living facilities to be developed. The Company and certain related
parties are presently in discussions with a number of third parties to secure
commitments regarding sources of additional financing. Furthermore, the Company
intends to seek bank borrowings and other debt or equity financings to provide
additional sources of capital in the future.
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<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is a party to litigation in the ordinary course of
business. The Company does not believe that any such litigation will have a
material adverse effect on its business, financial position or results of
operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Annual Meeting of the Stockholders of the Company on June 16, 1997
On June 16, 1997, the Company held its annual meeting of shareholders
(the "Annual Meeting") at which it submitted to a vote of its shareholders the
following matters:
Election of Directors.
The following nominees were elected directors of the Company at the
Annual Meeting to serve until the 1998 annual meeting of shareholders and
thereafter until their successors are duly elected and qualified. The following
table sets forth a summary with respect to the results of the shareholder vote.
Nominee For Against Withheld
- ------- --- ------- --------
Abraham D. Gosman 13,084,663 -- 13,260
Andrew D. Gosman 13,085,513 -- 12,410
Michael M. Gosman 13,085,513 -- 12,410
Donald J. Amaral 13,085,518 -- 12,405
H. Loy Anderson, Jr. 13,086,013 -- 11,910
Bedros Baharian 13,083,268 -- 14,655
Robert Cataldo 13,034,454 -- 62,469
Stephen E. Ronai 13,085,878 -- 12,045
Amendment and Restatement of the Restated 1991 Combination Stock
Option Plan.
The shareholders were asked to approve and adopt the amendment and
restatement of the Company's Restated 1991 Combination Stock Option Plan (the
"1991 Plan") in order to (i) limit the number of shares of Common Stock
available for issuance to any participant in any one year to 120,000 shares,
(ii) change certain language relating to the composition of the Compensation
Committee and (iii) update references to sections of the Internal Revenue Code
of 1986, as amended (the "Code"), which have been revised since the 1991 Plan
was originally drafted.
The number of votes in favor of the amendment and restatement of the
1991 Plan was 12,681,618, the number of votes against was 89,691, the number of
abstentions was 23,889 and the number of shares not voted was 302,725.
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<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS (continued)
Adoption of 1996 Equity Incentive Plan.
The shareholders were asked to consider and approve the 1996 Equity
Incentive Plan (the "1996 Plan"), which had been previously adopted by the Board
of Directors in October 1996, so that the 1996 Plan would meet the requirements
of Section 162(m) and the incentive stock options granted pursuant thereto would
meet the requirements of Code Section 422.
The number of votes in favor of the 1996 Plan was 9,436,203, the number
of votes against was 2,304,003, the number of abstentions was 23,743, and the
number of shares not voted was 1,333,974.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a). The following documents are filed as part of this report:
11. Statement re computation of per share earnings
27. Financial Data Schedule
(b). Reports on Form 8-K
No report on Form 8-K was filed by the Registrant during the quarter
ended June 30, 1997.
-16-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or Section 15(d) of the
Securities and Exchange Act of 1934, as amended, the Registrant has duly caused
this Report to be signed on its behalf by the undersigned, thereunto duly
authorized.
CAREMATRIX CORPORATION
By: /s/ Robert M. Kaufman
------------------------
Robert M. Kaufman
Chief Executive Officer
and Principal Accounting Officer
-17-
Exhibit 11
CAREMATRIX CORPORATION
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
Quarter Ended
-------------
June 30, 1997 June 30, 1996
------------- -------------
<S> <C> <C>
Weighted average primary shares outstanding
- -------------------------------------------
Weighted average number of common shares
assumed to be outstanding during the period 17,114,292 10,000,000
Assumed conversion of preferred stock 23,327 --
Assumed exercise of stock options 295,344 --
Assumed conversion of debt -- --
Assumed exercise of warrants -- --
---------- ----------
17,432,963 10,000,000
========== ==========
Weighted average fully-diluted shares outstanding
- -------------------------------------------------
Weighted average number of common shares
assumed to be outstanding during the period 17,114,292 10,000,000
Assumed conversion of preferred stock 23,327 --
Assumed exercise of stock options 410,291 --
Assumed conversion of debt 133,333 --
Assumed exercise of warrants -- --
---------- ----------
17,681,243 10,000,000
========== ==========
</TABLE>
Note: This calculation is presented in accordance with Item 602 of Regulation
S-K although it is not required by APB Opinion No. 15.
<PAGE>
Exhibit 11
CAREMATRIX CORPORATION
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
Six Months Ended
----------------
June 30, 1997 June 30, 1996
------------- -------------
<S> <C> <C>
Weighted average primary shares outstanding
- -------------------------------------------
Weighted average number of common shares
assumed to be outstanding during the period 17,112,135 10,000,000
Assumed conversion of preferred stock 24,157 --
Assumed exercise of stock options 235,804 --
Assumed conversion of debt -- --
Assumed exercise of warrants -- --
---------- ----------
17,372,096 10,000,000
========== ==========
Weighted average fully-diluted shares outstanding
- -------------------------------------------------
Weighted average number of common shares
assumed to be outstanding during the period 17,112,135 10,000,000
Assumed conversion of preferred stock 24,157 --
Assumed exercise of stock options 383,524 --
Assumed conversion of debt 66,666 --
Assumed exercise of warrants -- --
---------- ----------
17,586,482 10,000,000
========== ==========
</TABLE>
Note: This calculation is presented in accordance with Item 602 of Regulation
S-K although it is not required by APB Opinion No. 15.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 51,141,586
<SECURITIES> 0
<RECEIVABLES> 10,512,562
<ALLOWANCES> (1,234,144)
<INVENTORY> 0
<CURRENT-ASSETS> 62,605,872
<PP&E> 10,528,932
<DEPRECIATION> (571,538)
<TOTAL-ASSETS> 108,201,513
<CURRENT-LIABILITIES> 10,537,275
<BONDS> 6,619,840
0
233,000
<COMMON> 856,587
<OTHER-SE> 89,206,305
<TOTAL-LIABILITY-AND-EQUITY> 108,201,513
<SALES> 28,021,997
<TOTAL-REVENUES> 28,021,997
<CGS> 0
<TOTAL-COSTS> 17,482,675
<OTHER-EXPENSES> 7,975,628
<LOSS-PROVISION> 173,841
<INTEREST-EXPENSE> 521,243
<INCOME-PRETAX> 3,436,161
<INCOME-TAX> 1,381,146
<INCOME-CONTINUING> 2,042,964
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,042,964
<EPS-PRIMARY> 0.12
<EPS-DILUTED> 0.12
</TABLE>
