SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT ON
FORM 10-Q
(MARK ONE)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
--- EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
OR
--- TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________ to __________
Commission file number 0-21512
MARINER HEALTH GROUP, INC.
(Exact name of registrant as specified in its charter)
DELAWARE No. 06-1251310
-------- --------------
(State of Incorporation) (I.R.S. Employer
Identification No.)
125 Eugene O'Neill Drive, New London, Connecticut 06320
-------------------------------------------------------
(Address of principal executive office) (Zip Code)
(860)701-2000
-------------
(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 NO
--- ---
29,031,676 shares of Common Stock, $.01 par value, were outstanding at May 13,
1997.
MARINER HEALTH GROUP, INC.
- --------------------------------------------------------------------------------
FORM 10-Q - MARCH 31, 1997
INDEX
PART I. Financial Information Page
Item 1. Financial Statements
Consolidated Balance Sheets as of
December 31, 1996 and March 31, 1997 3
Consolidated Statements of Operations for the
Three Months ended March 31, 1996 and 1997 4
Consolidated Statements of Cash Flow for the
Three Months ended March 31, 1996 and 1997 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7-11
PART II. Other Information
Item 6. Exhibits and Reports on Form 8-K 12-13
Signatures 14
2
MARINER HEALTH GROUP, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands, except share data)
(unaudited)
<TABLE>
<CAPTION>
December 31, March 31,
1996 1997
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 4,616 $ 6,942
Accounts receivable, less allowance for doubtful accounts of $11,872
and $12,595, respectively 126,938 128,724
Estimated settlements due from third-party payors 18,912 17,606
Prepaid expenses and other current assets 8,880 9,052
Deferred income tax benefit 11,008 11,346
----------- -----------
Total current assets 170,354 173,670
Property, plant, and equipment, net 386,425 393,849
Goodwill, net of accumulated amortization of $10,561 and $12,497, respectively 280,803 282,935
Intangible and other assets, net of accumulated amortization of $5,813
and $6,405 respectively 20,991 22,402
Restricted cash and cash equivalents 2,885 3,553
Deferred income tax benefit 19,775 19,609
----------- -----------
Total assets $881,233 $896,018
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt and capital lease obligations $ 8,030 $ 7,707
Accounts payable 31,024 25,482
Accrued payroll 9,944 10,321
Accrued vacation 8,235 9,226
Other accrued expenses 41,141 42,669
Deferred income taxes 25 25
Other liabilities 3,801 3,862
----------- -----------
Total current liabilities 102,200 99,292
Long-term debt and capital lease obligations,
less current portion 415,236 425,616
Deferred income taxes 18,073 19,201
Deferred gain 1,955 1,918
Other long-term liabilities 18,981 18,139
---------- -----------
Total liabilities 556,445 564,166
Commitments and contingencies
Stockholders' equity
Common stock, $.01 par value; 50,000,000 shares authorized;
28,978,225 issued and outstanding at December 31, 1996 and
29,025,216 issued and outstanding at March 31, 1997. 290 291
Additional paid-in capital 312,786 313,094
Unearned compensation ( 8) (6)
Retained earnings 11,720 18,473
----------- -----------
Total stockholders' equity 324,788 331,852
----------- -----------
Total liabilities and stockholders' equity $881,233 $896,018
=========== ===========
</TABLE>
See accompanying notes
3
MARINER HEALTH GROUP, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(In thousands, except share and per share data)
(unaudited)
<TABLE>
<CAPTION>
Three months ended March 31,
1996 1997
<S> <C> <C>
Net patient service revenue $132,629 $170,824
Other income 2,550 3,589
--------- ---------
Total operating revenue 135,179 174,413
--------- ---------
Operating expenses:
Facility operating costs 106,169 133,698
Corporate general and administrative 15,649 11,808
--------- ---------
121,818 145,506
--------- ---------
Interest expense 4,450 9,449
Interest income (58) (259)
Facility rent expense, net 474 1,112
Depreciation and amortization 5,196 6,546
--------- ---------
Total operating expenses 131,880 162,354
--------- ---------
Income before income taxes 3,299 12,059
Provision for income taxes 1,254 5,306
--------- ---------
Net income $ 2,045 $ 6,753
========= =========
Net income per common and common equivalent share:
Weighted average common and common equivalent
shares outstanding 29,235,065 29,173,580
========= =========
Net income per common and common
equivalent share $ 0.07 $ 0.23
========= =========
</TABLE>
See accompanying notes
4
MARINER HEALTH GROUP, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In thousands)
(unaudited)
<TABLE>
<CAPTION>
Three months ended March 31,
1996 1997
------------ -------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 2,045 $ 6,753
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization 5,195 6,546
Provision for losses on accounts receivable 740 1,229
Amortization of deferred gain (40) (37)
Non-cash charge for warrants issued 850 ---
Amortization of deferred financing costs 195 328
Charge for abandonment of assets 1,061 ---
Changes in operating assets and liabilities:
Increase in accounts receivable (3,579) (3,822)
(Increase) decrease in estimated settlements from third parties (8,287) 1,306
Increase in prepaid expenses and other current assets (6,343) (133)
Increase (decrease) in accounts payable 11,137 (5,586)
Increase in accrued liabilities 7,881 3,765
Increase in other current liabilities 2,576 61
------------ -------------
Net Cash Provided by Operating Activities 13,431 10,410
------------ -------------
Cash flows from investing activities:
Purchase of plant, property and equipment (3,500) (6,704)
Cash paid for acquisitions (53,746) (7,295)
Working capital deficits acquired (5,036) ---
Increase in intangible and other assets (4,130) (3,615)
------------ ------------
Net cash used by investing activities (66,412) (17,614)
------------ ------------
Cash flows from financing activities:
Drawings on line of credit borrowings 66,381 54,000
Repayments of long term debt and capital lease obligations (15,890) (44,084)
Proceeds from exercise of employee stock options 333 43
Shares issued under employee stock purchase plan 156 239
(Increase) decrease in restricted cash 99 (668)
------------ -------------
Net Cash Provided by Financing Activities 51,079 9,530
------------ -------------
Increase (decrease) in cash and cash equivalents (1,902) 2,326
Cash and cash equivalents at beginning of period 4,086 4,616
------------ -------------
Cash and cash equivalents at end of period 2,184 6,942
------------ -------------
Income Taxes Paid 1,191 1,026
Interest Paid 3,728 5,811
</TABLE>
See accompanying notes
5
MARINER HEALTH GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The consolidated financial statements as of and for the periods ended
March 31, 1996 and 1997 are unaudited. All adjustments and accruals
have been made which, in the opinion of management, are necessary for a
fair presentation. In addition to normal, recurring adjustments,
corporate general and administrative expenses for the first three
months of 1996 included a charge of $6,511,000 composed of $5,661,000
related to the pooling of interests with MedRehab and a charge of
$850,000 for warrants issued in connection with a preferred provider
agreement. Results of operations for the period ended March 31, 1997
are not necessarily indicative of those expected for any future period.
Certain 1996 financial statement balances have been reclassified to
conform with current year presentation.
During 1997, the Financial Accounting Standards Board issued FASB
Statement No. 128, "Earnings Per Share". This standard is designed to
improve the Earnings Per Share ("EPS") information provided in
financial statements by simplifying the existing computational
guidelines, revising the disclosure requirements and increasing the
comparability of EPS data on an international basis. The Company will
implement the new standard in its fiscal year ending December 31, 1997.
Management has not yet determined the impact that adoption of FAS 128
will have on the financial statements for the fiscal year ending
December 31, 1997.
The accompanying unaudited interim consolidated financial statements
have been prepared in accordance with the instructions to Form 10-Q and
the rules and regulations of the Securities and Exchange Commission.
These financial statements have been prepared with the assumption that
users of the interim financial information have either read or have
access to the Company's audited consolidated financial statements for
the year ended December 31, 1996. Accordingly, footnote disclosures
which would substantially duplicate the disclosures contained in the
Company's December 31, 1996 audited consolidated financial statements
have been omitted from these unaudited interim consolidated financial
statements. Certain information and footnote disclosures normally
included in the financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted
pursuant to such instructions rules and regulations. Although the
Company believes that the disclosures are adequate to make the
information presented not misleading, it is suggested that these
unaudited interim consolidated financial statements be read in
conjunction with the audited consolidated financial statements and the
notes thereto included in the Company's Annual Report on Form 10-K, as
amended, for the year ended December 31, 1996.
6
Item 2.
Management's Discussion and Analysis of Financial Condition and Results of
Operations.
FORWARD-LOOKING STATEMENTS AND ASSOCIATED RISKS
This Report contains forward-looking statements within the meaning of
Section 27A of the Securities Act and Section 21E of the Securities and Exchange
Act of 1934, including statements regarding, among other items, plans and
objectives of management, estimates of future financial performance, and
anticipated trends in the Company's business and financial performance. These
forward-looking statements are based largely on the Company's expectations and
are subject to a number of risks and uncertainties, certain of which are beyond
the Company's control. Actual results could differ materially from these
forward-looking statements as a result of the factors described in the section
entitled "Risk Factors" (included in Amendment No. 1 on Form 10-K/A to the
Company's Annual Report on Form 10-K filed on April 30, 1997 with respect to the
year ended December 31, 1996) including, among others (i) changes in the health
care industry as a result of political, economic or regulatory influences; (ii)
changes in regulations governing the health care industry; and (iii) changes in
the competitive marketplace. In light of these risks and uncertainties, there
can be no assurance that the forward-looking information contained in this
Report will in fact transpire. Therefore, actual results could differ materially
from expectations.
Results of Operations
The following table sets forth certain consolidated financial data as
percentages of total operating revenue for the three months ended March 31, 1996
and 1997 and the percentage changes in the dollar amounts of revenues and
expenses for the first three months of 1996 as compared to the first three
months of 1997.
<TABLE>
<CAPTION>
Three Months
Ended Percentage Increase
(Decrease)
March 31, Three Months Ended
------------------------------------ March 31,
1996 1997 1997 over 1996
--------------
---------- ------------
<S> <C> <C> <C>
Revenues:
Net patient service revenue 98.1% 97.9% 28.8%
Other revenue 1.9 2.1 40.7
---------- ------------
Total operating revenue 100.0% 100.0% 29.0
Operating and administrative expenses:
Facility operating costs 76.7% 25.9%
78.5%
Corporate general and administrative 11.6 6.8 (24.5)
Interest expense 3.2 5.3 109.2
Facility rent expense, net 0.4 0.6 134.6
Depreciation and amortization 3.8 3.8 26.0
---------- ------------
Total operating costs and administrative expense 97.5% 93.2% 23.1%
---------- ------------
Income before income tax 2.5% 6.9% 265.5%
---------- ------------
</TABLE>
7
THREE MONTHS ENDED MARCH 31, 1996 AND 1997
REVENUE. Total operating revenues increased 29% from $135,179,000
during the three months ended March 31, 1996 to $174,413,000 during the three
months ended March 31, 1997.
Net patient service revenue increased by approximately $38,195,000, or
29% from the first quarter of 1996 to the first quarter of 1997. Net patient
service revenue includes revenue from basic medical and ancillary services
provided by the Company, including rehabilitation, pharmacy and infusion therapy
services and the provision of medical equipment and supplies. The increase was
primarily the result of the inclusion in 1997 of revenues from 18 facilities
acquired after March 31, 1996. The revenue increase was partially offset by
reductions due to the cancellation or non-renewal of contracts for certain
rehabilitation programs.
Other income aggregated $3,589,000 during the quarter ended March 31,
1997. These revenues were generated from the Company's management activities
related to subacute care units and facilities and consulting fees generated from
services provided to certain rehabilitation contract clients.
FACILITY OPERATING COSTS. Facility operating costs consist primarily of
employee salaries, wages and benefits, food, ancillary supplies, pharmacy
supplies and plant operations. Most clinical staff and rehabilitation therapists
are paid an hourly wage. Salaries, wages and benefits as a percentage of
revenues are higher at newly opened facilities, which require a basic complement
of staff on the day the program opens regardless of the patient census, than at
continuing facilities. As the patient census increases and the payor mix
improves at its inpatient facilities, the Company has experienced decreases in
such expenses as a percent of revenues at those facilities. Various other types
of operating expenses, including medical supplies, pharmacy supplies,
nutritional support services and expenses associated with the provision of
ancillary services, vary more directly with patient census as well as general
rates of inflation.
Facility operating costs increased 26% from $106,169,000 in the first
quarter of 1996 to $133,698,000 in the first quarter of 1997. The increase was
principally the result of the inclusion of expenses for 18 facilities purchased
after March 31, 1996. As a percentage of total operating revenues, these costs
were 79% and 77% in the first quarters of 1996 and 1997, respectively.
CORPORATE GENERAL AND ADMINISTRATIVE EXPENSES. Corporate general and
administrative expenses include the expenses of the Company's corporate and
regional offices, which provide marketing, financial and management services,
and the expenses associated with managing subacute care units and facilities.
These expenses decreased 25% from $15,649,000 in the first quarter of 1996 to
$11,808,000 in the first quarter of 1997. Corporate general and administrative
expenses for the first three months of 1996 included a charge of $6,511,000
composed of $5,661,000 related to the pooling of interests with MedRehab and a
charge of $850,000 for warrants issued in connection with a preferred provider
agreement. Excluding these charges, corporate general and administrative
expenses increased by $2,670,000 or 29% from the first quarter of 1996 to the
first quarter of 1997 primarily as a result of incremental corporate personnel
to support the additional facilities and businesses acquired during 1996 and
1997. As a percentage of total revenues, these expenses were approximately 12%
and 7% in the first quarters of 1996 and 1997, respectively.
INTEREST EXPENSE. Interest expense increased from $4,450,000 in the
first quarter of 1996 to $9,449,000 in the first quarter of 1997. This increase
was primarily attributable to higher interest rates on outstanding debt,
especially related to the Company's Senior Subordinated Notes, as well as a
higher outstanding balances under the Company's credit facility which was used
to fund acquisitions and working capital.
FACILITY RENT EXPENSE, NET. The Company incurred $1,112,000 of rent
expense in the first quarter of 1997 related to a facility leased under a
sale/leaseback arrangement and facilities leased in connection with the CSI,
Regency and Allegis transactions.
8
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense
increased 26% from $5,196,000 in the first quarter of 1996 to $6,546,000 in the
first quarter of 1997, principally as the result of acquisitions of facilities
after the first quarter of 1996.
PROVISION FOR INCOME TAXES. The effective tax rate for the first
quarter of 1996 and 1997, was 38% and 44% respectively. During 1996, Mariner's
tax rate reflected the reversal of a valuation allowance on certain deferred tax
assets. The Company currently expects its effective tax rate will be
approximately 44% in 1997 due to certain book-tax differences, primarily
non-deductible amortization of goodwill.
LIQUIDITY AND CAPITAL RESOURCES
Mariner has financed its operations, acquisitions and capital
expenditures primarily from cash provided by operations and proceeds from stock
issuances and borrowings. As of March 31, 1997, working capital and cash and
cash equivalents were $74,378,000 and $6,942,000, respectively.
Mariner has a $250,000,000 senior secured revolving credit facility
with a syndicate of banks (the "Credit Facility"). As of December 31, 1996 and
March 31, 1997, principal balances outstanding under the Credit Facility were
approximately $132,000,000 and $143,500,000, respectively, and letters of credit
outstanding under this facility were $2,612,000 and $5,499,000, respectively.
Mariner has used, and intends to continue to use, borrowings under the Credit
Facility to finance the acquisition and development of additional subacute care
facilities and related businesses, and for general corporate purposes, including
working capital. Mariner's obligations under the Credit Facility are
collateralized by a pledge of the stock of its subsidiaries and are guaranteed
by all of the Company's subsidiaries. In addition the Credit Facility is secured
by mortgages on certain of the Company's inpatient facilities, leasehold
mortgages on certain inpatient facilities leased by the Company, and security
interests in certain other properties and assets of the Company and its
subsidiaries. The Credit Facility matures on April 30, 1999 and provides for
prime or LIBOR-based interest rate options. The borrowing availability and rate
of interest vary depending upon specified financial ratios. The Credit Facility
also contains covenants which, among other things, require the Company to
maintain certain financial ratios and impose certain limitations or prohibitions
on the Company with respect to the incurrence of indebtedness, liens and capital
leases; the payment of dividends on, and the redemption or repurchase of, its
capital stock; investments and acquisitions, including acquisitions of new
facilities; the merger or consolidation of the Company with any person or entity
and the disposition of any of the Company's properties or assets.
On April 4, 1996, the Company sold $150,000,000 aggregate principal
amount of its 9-1/2% Senior Subordinated Notes (the "Notes"). The Notes mature
on April 1, 2006. The Notes are uncollateralized senior subordinated obligations
of Mariner and, as such, are subordinated in right of payment to all existing
and future senior indebtedness of Mariner, including indebtedness under the
Credit Facility. From the net proceeds of approximately $144,456,000 from the
sale of the Notes, $131,000,000 was used to repay all then outstanding
indebtedness under the Credit Facility (including interest and certain other
fees) and the remainder was used to pay a portion of the purchase price for the
1996 Florida Acquisition (defined below). The Notes contain certain covenants,
including, among other things, covenants with respect to the following matters:
(i) limitation on indebtedness; (ii) limitation on restricted payments; (iii)
limitation on the incurrence of liens; (iv) restriction on the issuance of
preferred stock of subsidiaries; (v) limitation on transactions with affiliates;
(vi) limitation on sale of assets; (vii) limitation on other senior subordinated
indebtedness; (viii) limitation on guarantees by subsidiaries; (ix) limitation
on the creation of any restriction on the ability of the Company's subsidiaries
to make distributions; and (x) restriction on mergers, consolidations and the
transfer of all or substantially all of the assets of the Company to another
person. The Notes were issued under an Indenture dated as of April 4, 1996 by
and among the Company and State Street Bank and Trust Company, as trustee (the
"Indenture").
Accounts receivable (net of allowances) were $126,938,000 and
$128,724,000 at December 31, 1996 and March 31, 1997, respectively. Estimated
settlements due from third party payors aggregated $18,912,000 and $17,606,000
at December 31, 1996 and March 31, 1997, respectively. The number of days sales
in accounts receivable and estimated settlements due from third party payors was
approximately 78 at December 31, 1996 and 75 days March 31, 1997. This decrease
was primarily due to improved collections.
9
In January 1996 Mariner completed the merger (the "CSI Merger") of a
wholly owned subsidiary of the Company with and into Convalescent Services, Inc.
("CSI") and the acquisition of certain related assets. In the CSI Merger, all of
the issued and outstanding shares of capital stock of CSI were converted into
the right to receive an aggregate of 5,853,656 shares of the Company's Common
Stock and $7,000,000 in cash. In connection with the CSI Merger, Mariner
acquired certain assets that are related to CSI's business from affiliates of
CSI's stockholders for an aggregate of approximately $17,694,000 in cash and
loaned an aggregate of $1,619,000 to the partnerships that sold certain assets
to the Company. In addition, the Company acquired options to purchase 12 of the
facilities leased by CSI from affiliates of CSI's stockholders at fair market
value and made nonrefundable deposits of an aggregate of $13,155,000 with the
lessors of the facilities subject to such options. The options are exercisable
during specified periods between 1998 and 2010. The aggregate estimated fair
market value as of the earliest exercise date of the options, and the aggregate
purchase price for, the 12 facilities subject to the options is approximately
$59,585,000 (which includes a deposit of $13,155,000 already paid by the
Company). Mariner financed the cash consideration payable in these transactions
with borrowings under the Credit Facility.
On March 1, 1996, the Company completed its merger (the "MedRehab
Merger") with MedRehab, Inc. ("MedRehab"). Mariner issued an aggregate of
approximately 2,312,500 shares of its Common Stock for all of MedRehab's
outstanding capital stock and options to purchase MedRehab capital stock in a
merger that was accounted for as a pooling of interests. In addition, the
Company prepaid an aggregate principal amount of approximately $14,000,000 of
MedRehab's outstanding indebtedness at the closing of the MedRehab Merger. The
Company repaid this indebtedness with funds it borrowed under the Credit
Facility. Certain former MedRehab stockholders exercised the right to require
the Company to repurchase their shares of Mariner Common Stock for approximately
$1,326,000 on July 31, 1996.
In March 1996, Mariner acquired a primary care physician organization
in the Orlando, Florida area. In this transaction, Mariner issued an aggregate
of 48,722 shares of its Common Stock and paid an aggregate of $1,500,000 in cash
which was financed under the Credit Facility.
In May, 1996 the Company completed its acquisition of a company that
operates seven skilled nursing facilities and one assisted living facility with
an aggregate of 960 beds in Florida, Tennessee and Kansas (the "1996 Florida
Acquisition"). All of the issued and outstanding shares of common stock were
converted into the right to receive an aggregate of approximately $28,050,000 in
cash. The Company financed the consideration paid in the 1996 Florida
Acquisition with a portion of the net proceeds from the sale of the Notes and
borrowings under the Credit Facility.
On October 1, 1996, the Company acquired a 163-bed facility in
Jacksonville, Florida. The total purchase price was $9,850,000. Mariner funded
the purchase price in part by assuming two HUD mortgages in the aggregate
principal amount of approximately $4,236,000. The Company borrowed $6,500,000
under its Credit Facility to fund the cash portion of the purchase price and to
replace reserves required by the HUD mortgage agreements.
In a two-part closing consummated on October 1, 1996 and November 1,
1996, Mariner acquired certain assets of Allegis Health Services, Inc.
("Allegis") and certain of its affiliates. Under the terms of the acquisition
agreement, the Company purchased five inpatient facilities, assumed two
operating leases and one capital lease and purchased Allegis' institutional
pharmacy and its rehabilitation program management subsidiary. The total
purchase price of $110,000,000 consisted of the assumption of $12,000,000 in
debt, including the capital lease, and $98,000,000 in cash. Under the terms of
the agreement, $103,000,000 of the purchase price was paid at the closings
during the fourth quarter of 1996. Approximately $98,000,000 of that amount plus
certain closing costs was borrowed under the Credit Facility. The remaining
$2,000,000 was paid upon attaining certain financial performance conditions for
1996. This amount was also borrowed under the Credit Facility.
In February, 1997, the Company acquired a 143-bed facility in
Catonsville, Maryland for a purchase price of approximately $7,200,000. The
Company borrowed the full amount of the purchase price under its Credit
Facility.
In the first quarter of 1997, the Company also borrowed approximately $
46,500,000 under the Credit Facility primarily to fund working capital
requirements.
10
The Company's capital expenditures for the years ended December 31,
1996 and the quarter ended March 31, 1997 were approximately $22,502,000 and
$6,704,000, respectively. The Company's currently planned capital expenditures
of $55,000,000 include funds for upgrading the Company's information systems,
expansion of existing facilities and the construction of three new inpatient
sites. The Company currently estimates that it spends approximately $300 per bed
per year for maintenance of its inpatient facilities.
The Company intends to expand its clinical programs in strategically
selected metropolitan areas throughout the United States. The Company also
intends to expand its pharmacy, home care, physician practice management and
rehabilitation services. In addition to acquiring individual facilities, Mariner
may acquire businesses that operate multiple facilities or ancillary health care
services businesses. The Company continually identifies and evaluates potential
acquisition candidates and, in many cases, engages in discussions and
negotiations regarding potential acquisitions. There can be no assurance that
any of the Company's discussions or negotiations will result in an acquisition.
Further, if the Company makes any acquisitions, there can be no assurance that
it will be able to operate any acquired facilities or businesses profitably or
otherwise successfully implement its expansion strategy.
Mariner believes that its future capital requirements will depend upon
a number of factors, including cash generated from operations and the rate at
which it acquires additional inpatient facilities or other health care services
businesses and the rate at which it adds rehabilitation programs. Mariner
expects to fund such capital expenditures with borrowings under its Credit
Facility, its existing cash resources and cash from operations. Mariner
currently believes that the cash from operations, its existing cash resources
and borrowings under the Credit Facility will be sufficient to meet its needs
through at least December 31, 1997.
11
PART II
OTHER INFORMATION
ITEM 6. - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
The exhibits which are filed with this report, or are incorporated by
reference into this report, are set forth on the Exhibit Index which appears on
page 13 of this report.
(b) Reports on Form 8-K.
None.
12
EXHIBIT INDEX
Number Description of Exhibits
- ------ -----------------------
11 Schedule of Computation of Net Earnings Per Share
27 Financial Data Schedule
13
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 duly thereunto authorized.
MARINER HEALTH GROUP, INC.
DATE May 15, 1997 BY /s/
------------------ ----------------------------------
David N. Hansen
Executive Vice President,
Treasurer and Chief Financial Officer
(Authorized officer and principal
accounting and financial officer)
14
EXHIBIT 11
Calculation of shares used in determining net income per common and common
equivalent share (1)
<TABLE>
<CAPTION>
Three months ended March 31,
1996 1997
---- ----
<S> <C> <C>
Net income $ 2,045,000 $6,753,000
=============== ==============
Weighted average shares outstanding 28,397,175 29,017,699
Shares issuable based on the treasury stock method 837,890 155,881
=============== ==============
29,235,065 29,173,580
=============== ==============
</TABLE>
(1) Fully diluted income per share has not been separately presented, as the
amounts would not be materially different from primary net income per share.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS DATED MARCH 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1997
<CASH> 6,942
<SECURITIES> 0
<RECEIVABLES> 141,319
<ALLOWANCES> 12,595
<INVENTORY> 0
<CURRENT-ASSETS> 173,670
<PP&E> 445,799
<DEPRECIATION> 51,949
<TOTAL-ASSETS> 896,018
<CURRENT-LIABILITIES> 99,292
<BONDS> 0
0
0
<COMMON> 291
<OTHER-SE> 331,561
<TOTAL-LIABILITY-AND-EQUITY> 896,018
<SALES> 174,413
<TOTAL-REVENUES> 174,413
<CGS> 0
<TOTAL-COSTS> 145,506
<OTHER-EXPENSES> 6,429
<LOSS-PROVISION> 1,229
<INTEREST-EXPENSE> 9,190
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