-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, F6ax0MIkbpOYA+ZT5OsJxfTkNo2uN3y+XlzNrFLgm7pX6eRtc4+ZuLrSX2gcye0L mDowuK93N/I9qwt+TyMgsA== 0000758722-97-000025.txt : 19970815 0000758722-97-000025.hdr.sgml : 19970815 ACCESSION NUMBER: 0000758722-97-000025 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970814 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: PARACELSUS HEALTHCARE CORP CENTRAL INDEX KEY: 0000758722 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-GENERAL MEDICAL & SURGICAL HOSPITALS, NEC [8062] IRS NUMBER: 953565943 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-12055 FILM NUMBER: 97664027 BUSINESS ADDRESS: STREET 1: 515 W GREENS RD STREET 2: STE 800 CITY: HOUSTON STATE: TX ZIP: 77067 BUSINESS PHONE: 7138736623 MAIL ADDRESS: STREET 1: 515 W GREENS RD STREET 2: STE 800 CITY: HOUSTON STATE: TX ZIP: 77067 10-Q 1 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES AND EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1997 Commission file number 1-12055 PARACELSUS HEALTHCARE CORPORATION (Exact name of registrant as specified in its charter) CALIFORNIA 95-3565943 (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 515 W. GREENS ROAD, SUITE 800, HOUSTON, TEXAS (Address of principal executive offices) 77067 (281) 774-5100 (Zip Code) (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: COMMON STOCK, NO STATED VALUE NEW YORK STOCK EXCHANGE (Title of Class) (Name of each exchange on which registered) 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[ ] As of August 14, 1997, there were outstanding 55,013,417 shares of the Registrant's Common Stock, no stated value. 2 PARACELSUS HEALTHCARE CORPORATION FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1997 INDEX PAGE REFERENCE FORM 10-Q --------------
PRELIMINARY STATEMENT 3 FORWARD-LOOKING STATEMENTS 3 PART I. Item 1. FINANCIAL INFORMATION Financial Statements-- (Unaudited) Condensed Consolidated Balance Sheets-- June 30, 1997 and December 31, 1996 5 Consolidated Statements of Operations-- Three Months and Six Months Ended June 30, 1997 and 1996 6 Condensed Consolidated Statements of Cash Flows-- Six Months Ended June 30, 1997 and 1996 7 Notes to Interim Condensed Consolidated Financial Statements 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 14 PART II. OTHER INFORMATION 22 SIGNATURE 24
3 PRELIMINARY STATEMENT In October 1996, the Board of Directors appointed a Special Committee consisting of non-management members, to supervise and direct the conduct of an inquiry by outside legal counsel regarding, among other things, the Company's accounting and financial reporting practices and procedures for the periods prior to the quarter ended September 30, 1996. As a result of the inquiry, the Company restated its financial information for periods commencing with January 1, 1992 through the nine months ended September 30, 1996, as reflected in the Company's Annual Report on Form 10-K for the year ended December 31, 1996 (the "1996 Form 10-K"), filed with the Securities and Exchange Commission (the "Commission") on April 15, 1997. Adjustments and reclassifications were necessary to correct errors and irregularities relating to (i) receivables due from Medicare and other government programs (ii) use of corporate reserves, (iii) provisions for bad debt expense relating principally to two of the Company's psychiatric hospitals in the Los Angeles area and (iv) deferral of facility closure costs which only affected the 1996 quarterly information (collectively, the "restatement entries"). The following financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, 1996 included in the Company's 1996 Form 10-K. On August 12, 1997, the Company filed amended quarterly reports on Form 10-Q/A for the transition period ending December 31, 1995 and each of the first two calendar quarters of 1996 to reflect the restated results for each respective period. The Company intends to file an amended report on Form 10-Q/A for the quarter ended September 30, 1996 after the filing of this report. As a result of a change in fiscal year end from September 30 to December 31 and the reclassification of the psychiatric hospitals to discontinued operations effective September 30, 1996, the restated results as filed on the amended Form 10-Q/A for the quarterly period ended June 30, 1996 do not agree with the amounts reflected in this report. To show the impact of the restatement entries, giving effect further to the above changes, the Company has provided a reconciliation of historical results for the quarter and six months ended June 30, 1996, as originally reported in the filed quarterly report on Form 10-Q, to the restated results as reflected in this report. Historical results for the six months ended June 30, 1996 represent the sum of the quarterly results as originally reported in the Form 10-Q for the quarterly periods ended March 31, 1996 and June 30, 1996. FORWARD-LOOKING STATEMENTS Certain statements in this Form 10-Q are "forward-looking statements" made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve a number of risks and uncertainties. Factors which may cause the Company's actual results in future periods to differ materially from forecast results include, but are not limited to: the outcome of litigation pending against the Company and certain affiliated persons; continued satisfactory relations with the Company's Senior Lenders; general economic and business conditions, both nationally and in the regions in which the Company operates; industry capacity; demographic changes; existing government regulations and changes in, or the failure 4 to comply with government regulations; legislative proposals for healthcare reform; the ability to enter into managed care provider arrangements on acceptable terms; changes in Medicare and Medicaid reimbursement levels; liability and other claims asserted against the Company; competition; the loss of any significant customer; changes in business strategy or development plans; the ability to attract and retain qualified personnel, including physicians; the significant indebtedness of the Company; and the availability and terms of capital to fund the expansion of the Company's business, including the acquisition of additional facilities. 5 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS PARACELSUS HEALTHCARE CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS ($ in 000's) JUNE 30, DECEMBER 31, 1997 1996 -------- ----------- (Unaudited) (Note 1)
ASSETS Current assets: Cash and cash equivalents $ 20,766 $ 17,771 Restricted cash 3,016 2,358 Accounts receivable, net 71,137 64,687 Deferred income taxes 28,601 28,739 Refundable income taxes 31,003 31,003 Other current assets 33,578 53,072 ------ ------- Total current assets 188,101 197,630 Property and equipment 430,682 420,697 Less:Accumulated depreciation and amortization (121,109) (109,862) ------- ------- 309,573 310,835 Long-term assets of discontinued operations 7,063 18,499 Assets held for sale 22,988 22,095 Goodwill 116,286 118,168 Other assets 110,718 105,605 ------- ------- Total assets $754,729 $772,832 ======= ======= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 47,109 $ 40,408 Accrued liabilities and other 108,413 118,781 Current maturities of long-term debt 4,660 4,679 ------- ------- Total current liabilities 160,182 163,868 Long-term debt 480,959 491,057 Other long-term liabilities 63,136 69,420 Stockholders' Equity: Common stock 224,472 224,472 Additional paid-in capital 390 390 Unrealized (losses) gains on marketable securities (86) 100 Accumulated deficit (174,324) (176,475) ------- ------- Total stockholders' equity 50,452 48,487 ------- ------- Total Liabilities and Stockholders' Equity $754,729 $772,832 ======= =======
See accompanying notes. 6 PARACELSUS HEALTHCARE CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS ($ in 000's, except per share data) (Unaudited) THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, ------------------- ------------------ 1997 1996 1997 1996 -------- --------- -------- -------- (Restated - (Restated - See Note 2) See Note 2)
Net revenue $167,256 $ 119,863 $ 335,746 $ 235,186 Costs and expenses: Salaries and benefits 68,248 52,992 137,260 106,505 Other operating expenses 69,041 51,220 135,473 100,808 Provision for bad debts 10,597 7,053 20,761 13,964 Interest 10,624 5,195 21,479 9,014 Depreciation and amortization 8,276 4,490 15,980 8,279 Equity in earnings of Dakota Heartland Health System (2,667) - (5,226) - Unusual charges 5,978 - 5,978 2,438 ------- ------ ------ ------ Total costs and expenses 170,097 120,950 331,705 241,008 Income (loss) from continuing operations before minority interest and income taxes (2,841) (1,087) 4,041 (5,822) Minority interests (640) (1,065) (981) (1,405) ------- ------ ----- ------ Income (loss) from continuing operations before income taxes (3,481) (2,152) 3,060 (7,227) Provision (benefit)for income taxes (464) (915) 909 (3,063) ------- ------ ----- ------ Income (loss) from continuing operations (3,017) (1,237) 2,151 (4,164) Loss from operations of discontinued operations, net - (3,925) - (15,347) ------- ----- ----- ------ Net income (loss) $ (3,017) $ (5,162) $ 2,151 $ (19,511) ======= ===== ===== ====== Income (loss) per share: Continuing operations $ (0.05) $ (0.04) $ 0.04 $ (0.14) Discontinued operations - (0.13) - (0.52) ------- ----- ---- ----- Income (loss) per share $ (0.05) $ (0.17) $ 0.04 $ (0.66) ======= ===== ==== ===== Weighted average common and common equivalent shares outstanding 54,879 29,772 56,274 29,772
See accompanying notes. 7 PARACELSUS HEALTHCARE CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS ($ in 000's) (Unaudited) Six Months Ended June 30, ---------------------- 1997 1996 --------- ---------- (Restated - See Note 2)
CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $ 2,151 $ (19,511) Non-cash expenses and changes in operating assets and liabilities (10,572) (10,630) ------ ------ Net cash used in operating activities (8,421) (30,141) ------ ------ CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from sales of facilities 12,201 - Acquisitions of facilities, net - (109,385) Sale (purchase) of marketable securities 19,284 (3,147) Additions to property and equipment, net (8,352) (3,474) Increase in other assets, net (954) (5,055) ------ ------ Net cash provided by (used in) investing activities 22,179 (121,061) ------ ------ CASH FLOWS FROM FINANCING ACTIVITIES: Borrowings under Revolving Credit Facility - 215,500 Repayments under Revolving Credit Facility (10,000) (59,000) Repayments of debt, net (763) (5,143) Dividends to stockholder - (2,670) ------ ------ Net cash (used in) provided by financing activities (10,763) 148,687 ------ ------- Increase (decrease) in cash and cash equivalents 2,995 (2,515) Cash and cash equivalents at beginning of year 17,771 4,418 ------ ------ Cash and cash equivalents at end of period $ 20,766 $ 1,903 ====== ====== Supplemental Cash Flow Information: Interest paid $ 22,995 $ 8,236 Income taxes paid 702 4,577
See accompanying notes. 8 PARACELSUS HEALTHCARE CORPORATION NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) June 30, 1997 NOTE 1. ORGANIZATION AND BASIS OF PRESENTATION ORGANIZATION - Paracelsus Healthcare Corporation (the "Company") was incorporated in November 1980 for the principal purpose of owning and operating acute care hospitals and related healthcare businesses in selected markets. The Company presently operates 28 hospitals with 2,915 licensed beds in nine states (including two psychiatric hospitals with 113 licensed beds), of which 21 are owned, including two through a 50% owned partnership interest, and seven are leased. BASIS OF PRESENTATION - The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q. Accordingly, they do not include all of the information and notes required by generally accepted accounting principles for annual financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included (see Note 2). The balance sheet at December 31, 1996 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. The Company's business is seasonal in nature and subject to general economic conditions and other factors. Accordingly, operating results for the three months and six months ending June 30, 1997 are not necessarily indicative of the results that may be expected for the year ending December 31, 1997. These financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, 1996 included in the Company's 1996 Form 10-K. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Certain account balances for the three months and six months ended June 30, 1996 have been reclassified to conform to the Company's current presentation, including the reclassification of operating results of the discontinued psychiatric hospitals to "Loss from operations of discontinued operations, net" in the Consolidated Statements of Operations. NET INCOME (LOSS) PER SHARE - Net income (loss) per share is computed by dividing net income (loss) by the weighted average number of common and common equivalent shares outstanding. Fully diluted net income (loss) per share is not presented because it was anti-dilutive or approximated primary income (loss) per share. Weighted average number of common shares outstanding for the three months and six months ended June 30, 1996 have 9 been adjusted to reflect the 66,159.426-for-one stock split in conjunction with the merger with Champion Healthcare Corporation ("Champion") in August 1996. In February 1997, the Financial Accounting Standards Board issued Statement of Accounting Standards ("SFAS") No. 128, "Earnings per Share," which is required to be adopted on December 31, 1997. At that time, the Company will be required to change the method currently used to compute earnings per share and to restate all prior periods. Under the new requirements for calculating primary earnings per share, the dilutive effect of stock options will be excluded. The impact will not result in a material change in primary earnings (loss) per share for the three months and six months ended June 30, 1997 and 1996. The impact of SFAS No. 128 on the calculation of fully diluted earnings (loss) per share for these periods is also not expected to be material. NOTE 2. RESTATEMENT OF FINANCIAL STATEMENTS In October 1996, the Board of Directors appointed a Special Committee consisting of non-management members, to supervise and direct the conduct of an inquiry by outside legal counsel regarding, among other things, the Company's accounting and financial reporting practices and procedures for the periods prior to the quarter ended September 30, 1996. Such inquiry resulted in the Company restating its financial statements for the periods commencing January 1, 1992 through the nine months ended September 30, 1996, as reflected in the Company's 1996 Form 10-K, filed with the Commission on April 15, 1997. The need for prior period restatements was the result of accounting errors and irregularities at pre-merger Paracelsus in four areas: (i) overstatement of receivables due from Medicare and other government programs; (ii) use of corporate reserves; (iii) provisions for bad debt expense relating principally to two of the Company's psychiatric hospitals in the Los Angeles area; and (iv) deferral of facility closure costs which only affected the 1996 quarterly information. On August 12, 1997, the Company filed amended quarterly reports on Form 10-Q/A for the transition period ending December 31, 1995 and each of the first two calendar quarters of 1996 to reflect the restated results for each respective period. The Company intends to file an amended report on Form 10-Q/A for the quarter ended September 30, 1996 after the filing of this report. As a result of a change in fiscal year end from September 30 to December 31 and the reclassification of the psychiatric hospitals to discontinued operations effective September 30, 1996, the restated results as filed on the amended Form 10-Q/A for the quarterly period ended June 30, 1996 do not agree with the amounts reflected in this report. To show the impact of the restatement entries, giving effect further to the above changes, the Company has provided a reconciliation of historical results for the quarter and six months ended June 30, 1996, as originally reported in the filed quarterly report on the Form 10-Q, to the restated results as reflected in this report. Historical results for the six months ended June 30, 1996 represent the sum of the quarterly results originally reported for the quarterly periods ended March 31, 1996 and June 30, 1996. 10
Quarter Ended June 30, 1996 ----------------------------------------------------------------------------- (In 000's, except As Originally (a) Reclassified As Reclassified per share data Reported Adjustments As Restated Disc. Oper. and Restated ----------- ----------- ----------- ----------- --------------- Net revenue $ 133,136 $ (2,606) $ 130,530 $ (10,667) $ 119,863 Costs and expenses: Salaries and benefits 56,772 56,772 (3,780) 52,992 Other operating expenses 51,916 4,803 56,719 (5,499) 51,220 Provision for bad debts 8,994 5,885 14,879 (7,826) 7,053 Interest 5,216 5,216 (21) 5,195 Depreciation and amortization 4,684 4,684 (194) 4,490 -------- ------- ------- ------ -------- Total costs and expenses 127,582 10,688 138,270 (17,320) 120,950 Income (loss) from continuing operations before minority interests and income taxes 5,554 (13,294) (7,740) 6,653 (1,087) Minority interests (1,144) 79 (1,065) - (1,065) ----- ------ ----- ----- ------ Income (loss) from continuing operations before income taxes 4,410 (13,215) (8,805) 6,653 (2,152) Provision (benefit) for income taxes 1,808 (5,451) (3,643) 2,728 (915) ----- ----- ------ ------ ------- Income (loss) from continuing operations 2,602 (7,764) (5,162) 3,925 (1,237) Loss from operations of discontinued operations, net - - - (3,925) (3,925) ------ ----- ------ ------ ----- Net income (loss) $ 2,602 $ (7,764) $ (5,162) $ - $ (5,162) ====== ===== ====== ====== ===== Income (loss) per share: Continuing operations $ 0.09 $ (0.26) $ (0.17) $ 0.13 $ (0.04) Discontinued operations - - - (0.13) (0.13) ------ ------- ----- ----- ------- Income (loss) per share $ 0.09 $ (0.26) $ (0.17) $ - $ (0.17) ====== ======= ======= ====== ======== Weight.aver.shares outstanding 29,772 29,772 29,772 29,772 29,772 - ------------------------------ (a) Reflects impact of restatement entries before reclassification of discontinued operations.
11
Six Months Ended June 30, 1996 ----------------------------------------------------------------------------- (In 000's, except As Originally (b) Reclassified As Reclassified per share data Reported (a) Adjustments As Restated Disc. Oper. and Restated ----------- ----------- ----------- ----------- --------------- Net revenue $ 265,052 $ (6,038) $ 259,014 $ (23,828) $ 235,186 Costs and expenses: Salaries and benefits 114,389 114,389 (7,884) 106,505 Other operating expenses 100,795 10,132 110,927 (10,119) 100,808 Provision for bad debts 19,573 5,885 25,458 (11,494) 13,964 Interest 9,050 9,050 (36) 9,014 Depreciation and amortization 8,668 8,668 (389) 8,279 Unusual charge 22,356 22,356 (19,918) 2,438 ------- ------ ------- ------ ------ Total costs and expenses 274,831 16,017 290,848 (49,840) 241,008 Loss from continuing operations before minority interests and income taxes (9,779) (22,055) (31,834) 26,012 (5,822) Minority interests (1,647) 242 (1,405) - (1,405) ------ ------ -------- ------ --------- Loss from continuing operations before income taxes (11,426) (21,813) (33,239) 26,012 (7,227) Income tax benefit (4,685) (9,043) (13,728) 10,665 (3,063) ------ ------ ------- ----- --------- Loss from continuing operations (6,741) (12,770) (19,511) 15,347 (4,164) Loss from operations of discontinued operations, net - - - (15,347) (15,347) ------ ------ ------- ------ --------- Net loss $(6,741) $(12,770) $ (19,511) $ - $ (19,511) ====== ====== ======= ====== ========= Loss per share: Continuing operations $ (0.23) $ (0.43) $ (0.66) $ 0.52 $ (0.14) Discontinued operations - - - (0.52) (0.52) ------- ------ ------- ------- ---------- Loss per share $ (0.23) $ (0.43) $ (0.66) $ - $ (0.66) ======= ======= ====== ======= ========= Weighted aver.shares outstanding 29,772 29,772 29,772 29,772 29,772 - ---------------------- (a) Represents the sum of previously reported amounts for the quarters ended March 31, 1996 and June 30, 1996 in original filed Form 10-Q for each respective period. (b) Reflects impact of restatement entries before reclassification of discontinued operations.
12 NOTE 2. UNUSUAL CHARGES In May 1997, the Company recognized unusual charges totaling $6.0 million, consisting of $3.5 million relating to the closure of the 125-bed PHC Regional Hospital and Medical Center ("PHC Regional Hospital") in Salt Lake City, Utah and $2.5 million relating to a corporate reorganization. Such charges consisted primarily of employee severance and related costs, and to a lesser extent, certain other contract termination costs. In March 1996, the Company recognized a charge for settlement costs totaling $22.4 million in connection with two lawsuits, of which $19.9 million was related to a case involving the operation of its psychiatric programs. The $19.9 million is reflected, after giving effect to income tax benefit, as "Loss from operations of discontinued operations, net," with the remaining $2.5 million reflected as an unusual charge in the Consolidated Statement of Operations. NOTE 3. DISPOSITION AND CLOSURE OF HOSPITALS On January 31, 1997, the Company closed the 104-bed Orange County Community Hospital of Orange and consolidated services into the 53-bed Orange County Hospital of Buena Park ("Buena Park"). On May 15, 1997, the Company entered into a joint venture with a group of physicians, in which the Company leased Buena Park and the 85-bed Bellwood General Hospital in Bellflower, California to a limited liability company formed by the joint venture. On April 28, 1997, the Company completed the sale of two of its six psychiatric facilities, the 149-bed Lakeland Regional Hospital in Springfield, Missouri and the 70-bed Crossroads Regional Hospital in Alexandria, Louisiana. No gain or loss was recognized in connection with such divestiture. On May 15, 1997, the Company closed the inpatient services at PHC Regional Hospital and all remaining services in June 1997. NOTE 4. LONG-TERM DEBT On April 14, 1997 and August 14, 1997, the Company entered into the First Amendment and the Second Amendment, respectively, to the existing five-year Reducing Revolving Credit Facility (the "Credit Facility")(the "Credit Agreement"), which provides among other things: (i) a reduction in the credit commitment from $400.0 million to $200.0 million effective April 14, 1997 and to $165.0 million effective August 14, 1997; (ii) interest rates which (a) effective April 14, 1997 through August 13, 1997, increased by .50% on a monthly basis as compared to rates otherwise in effect prior to April 14, 1997, (b) effective August 14, 1997 through June 30, 1998, at the Company's option, equal to LIBOR plus a margin of 3.25% or the prime rate plus a margin of 2.25% and (c) effective July 1, 1998 and thereafter, equal to LIBOR plus a margin of 3.75% or the prime rate plus a margin of 2.75%; (iii) all proceeds from the sale of any collateralized assets, except the Los Angeles metropolitan area ("LA metro") facilities (60% of the sale proceeds in the event of a disposition of non-collateralized assets and the LA metro facilities) and 60% of income tax refunds received after August 14, 1997 are to be applied as a permanent reduction of the debt outstanding under the Credit Agreement; (iv) a first priority lien in certain of the Company's real and personal properties; and (v) additional restrictive financial covenants as compared to those at December 31, 1996. At June 30, 1997, the Company had $136.0 million 13 outstanding under its Credit Facility and approximately $14.0 million committed under letter of credit arrangements. Upon closing of the Second Amendment, the Company had approximately $15.0 million in additional borrowing capacity under the Credit Agreement, as amended. NOTE 5. CONTINGENCIES The Company is a party to pending litigation in connection with several stockholder related matters. See "Item 2 - Pending Litigation." 14 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESTATEMENT OF FINANCIAL INFORMATION FOR QUARTER AND SIX MONTHS ENDED JUNE 30, 1996 As a result of the Special Committee's investigation of the accounting and financial reporting practices and procedures in periods prior to September 30, 1996, the Company restated its financial information for periods commencing with January 1, 1992 through the nine months ended September 30, 1996, as reflected in the Company's 1996 Form 10-K, filed with the Commission on April 15, 1997. The need for the restatement of prior period financial statements was the result of accounting errors and irregularities at pre-merger Paracelsus as discussed in Item 1 - Note 2. The following table presents a summary of the impact of the restatement before reclassification of discontinued operations. See Item 1 - Note 2 for a more expanded presentation of the impact of the restatement and the reclassification of operating results of the discontinued psychiatric hospitals to "Loss from operations of discontinued operations, net." The restated financial information should be read in conjunction with the Company's 1996 Form 10-K. QUARTER ENDED JUNE 30, 1996 - ---------------------------- As Originally Reported As Restated Quarter Ended Quarter Ended June 30, June 30, 1996 Adjustments 1996 ------------- ----------- ------------- (IN 000'S, EXCEPT PER SHARE DATA)
Net revenue $ 133,136 $ (2,606) $ 130,530 Income (loss) from continuing operations before minority interests and income taxes 5,554 (13,294) (7,740) Net income (loss) 2,602 (7,764) (5,162) Income (loss) per share $ 0.09 $ (0.26) $ (0.17)
15 SIX MONTHS ENDED JUNE 30, 1996 - ------------------------------ (a) As Originally Reported As Restated Six Months Ended Six Months Ended June 30, June 30, 1996 Adjustments 1996 ------------- ----------- ------------- (IN 000'S, EXCEPT PER SHARE DATA)
Net revenue $ 265,052 $ (6,038) $ 259,014 Loss from continuing operations before minority interests and income taxes (9,779) (22,055) (31,834) Net loss (6,741) (12,770) (19,511) Loss per share $ (0.23) $ (0.43) $ (0.66)
- ---------------- (a) Represents the sum of previously reported amounts for the quarters ended March 31, 1996 and June 30, 1996 in original filed Form 10-Q for each respective period. The adjustments consisted primarily of: THREE MONTHS SIX MONTHS ENDED ENDED JUNE 30, JUNE 30, 1996 1996 ------------- ------------
(i) Increase in deductions from revenue for receivables from Medicare and other government program $ (1,924) $ (4,205) (ii) Increase in operating expenses from the reversal of corporate reserves (3,003) (7,635) (iii) Recording of bad debt expense that was deferred at two of the psychiatric hospitals - Increase in deductions from net revenue (682) (1,833) - Increase in provision for bad debts (5,885) (5,885) (iv) Increase in operating expenses for deferred facility closure costs (1,800) (2,497) ------- ------ Total pre-tax adjustments before minority interests $ (13,294) $ (22,055) ====== ======
The Company does not believe that the adjustments regarding the Medicare receivables resulted from improper patient billing procedures under that program. 16 RESULTS OF OPERATIONS The Company made numerous acquisitions and divestitures since April 1996, including the merger with Champion. Additionally, in August 1996, the Company completed its public offering of the $325.0 million senior subordinated notes (the "Notes") and a sale of 5.2 million shares of its common stock and entered into a new Credit Agreement. Accordingly, the Company's financial position and portfolio of operating hospitals during the quarter and six months ended June 30, 1997 were significantly different from those of the comparable 1996 periods. "Same hospitals" as used in the following discussion, where appropriate, consist of acute care hospitals owned throughout the periods for which comparative operating results are presented. Operating results of the Company's psychiatric hospitals have been segregated from those of the acute care hospitals and are reflected under the caption "Loss from operations of discontinued operations, net" in the Consolidated Statements of Operations. RESULTS OF OPERATIONS - QUARTER ENDED JUNE 30, 1997 COMPARED WITH QUARTER ENDED JUNE 30, 1996 Net revenue for the quarter ended June 30, 1997 was $167.3 million, an increase of $47.4 million, or 39.5%, from $119.9 million for the same period of 1996. The $47.4 million increase was primarily attributable to hospitals acquired, net of divested hospitals, since May 1996. The Company's acute care volumes experienced a 39.4% increase in inpatient admissions from 12,749 in 1996 to 17,773 in 1997. Patient days increased from 61,360 in 1996 to 83,235 in 1997. Outpatient visits (including home health) increased 39.5% from 283,844 in 1996 to 396,011 in 1997. Admissions in "same hospitals" increased slightly from 9,373 in 1996 to 9,385 in 1997. Expressed as a percentage of net revenue, operating expenses (salaries and benefits, other operating expenses and provision for bad debts) decreased from 92.8 % in 1996 to 88.4 % in 1997 as operating margin increased from 7.2% to 11.6%. The increase in operating margin was due to (i) incremental contributions by hospitals exchanged in May 1996, (ii) higher operating margins at former Champion hospitals, and (iii) improved operating margins at hospitals located in the Los Angeles metropolitan ("LA metro") area. General factors contributing to the improvement in operating margin percentage include (i) management's efforts to control costs, including a corporate reorganization to reduce corporate overhead costs in May 1997, (ii) efficiency and productivity gains resulting from the implementation of Champion's operating standards and benchmarks and (iii) divestiture or closure of underperforming facilities. Interest expense increased $5.4 million from $5.2 million in 1996 to $10.6 million in 1997, primarily due to (i) an increase in outstanding indebtedness from the issuance of the Notes in August 1996 and additional borrowings under the Credit Facility to finance acquisitions and to fund certain lawsuit settlement costs, Champion merger costs, working capital requirements and capital expenditures, (ii) an increase in interest rate on the Credit Facility during 1997, net of (iii) the redemption in August 1996 of $75.0 million of senior subordinated notes. Approximately $1.4 million of interest expense incurred in 1997, which related to borrowings to finance the acquisition of PHC Regional Hospital, was charged to the loss contract accrual previously established at December 31, 1996. Accordingly, such amount was not reflected as interest expense in the 1997 Consolidated Statement of Operations. 17 Depreciation and amortization increased to $8.3 million in the second quarter of 1997 from $4.5 million for the same period of 1996. The increase consisted of $4.7 million primarily attributable to the facilities acquired, net of divested facilities, since May 1996, offset by a decrease of $867,000 at the acute care LA metro hospitals held for sale, as a result of recording these facilities at their net realizable value as of September 30, 1996, in accordance with Statement of Financial Accounting Standards ("SFAS") No. 121 "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." Loss from continuing operations before income taxes for the quarter ended June 30, 1997 included $6.0 million in unusual charges, consisting of $3.5 million relating to the closure of PHC Regional Hospital and $2.5 million relating to a corporate reorganization completed in May 1997 (see Note 2). It excluded a loss of $5.2 million attributable to PHC Regional Hospital, which was charged to the loss contract accrual previously established at December 31, 1996. Loss before income taxes of the discontinued psychiatric hospitals was $239,000 in 1997, as compared to $6.7 million for the comparable period of 1996. The loss recorded in 1996 was primarily attributable to additional provision for bad debts recorded on uncollectible accounts receivable. After income taxes, the loss from operations of discontinued operations for the quarter ended June 30, 1996 was $3.9 million. In accordance with Accounting Principles Board Opinion ("APB") No. 30, the operating loss from discontinued operations during 1997 was charged to the disposal loss accrual previously established in September 1996. Accordingly, such amount was not reflected in the 1997 Consolidated Statement of Operations. The Company's effective tax rate was 13.3% for 1997, as compared to 42.5% for the comparable period in 1996. The reduced income tax benefit rate for 1997 resulted primarily from a $600,000 increase in the valuation allowance related to the revaluation of unused deferred tax assets at June 30, 1997 and nondeductible goodwill amortization expense recorded during the quarter then ended. Net loss for the quarter ended June 30, 1997 was $3.0 million, or $0.05 per share, compared to net loss of $5.2 million, or $0.17 per share, for the same period of 1996. Weighted average common and common equivalent shares outstanding increased 84.3% from 29.8 million in 1996 to 54.9 million in 1997, primarily from the issuance of 19.8 million shares in connection with the merger with Champion and from the public offering of 5.2 million shares of the Company's common stock, both completed in August 1996. Included in the 1997 loss before income taxes, net loss and net loss per share were unusual charges of $6.0 million, $5.2 million and $0.09 per share, respectively. Included in the 1996 loss before income taxes, net loss and net loss per share were losses associated with the discontinued operations of $6.7 million, $3.9 million and $0.13 per share, respectively. RESULTS OF OPERATIONS - SIX MONTHS ENDED JUNE 30, 1997 COMPARED WITH SIX MONTHS ENDED JUNE 30, 1996 Net revenue for the six months ended June 30, 1997 was $335.7 million, an increase of $100.5 million, or 42.8%, from $235.2 million for the same period of 1996. The $100.5 million increase was primarily attributable to hospitals acquired, net of divested hospitals, since May 1996. 18 The Company's acute care volumes experienced a 48.2% increase in inpatient admissions from 24,936 in 1996 to 36,951 in 1997. Patient days increased from 128,098 in 1996 to 172,959 in 1997. Outpatient visits (including home health) increased 41.5% from 555,734 in 1996 to 786,291 in 1997. Admissions in "same hospitals" increased slightly from 19,020 in 1996 to 19,098 in 1997. Expressed as a percentage of net revenue, operating expenses (salaries and benefits, other operating expenses and provision for bad debts) decreased from 94.1 % in 1996 to 87.4 % in 1997 as operating margin increased from 5.9% to 12.6%. Such increase was due to (i) incremental contributions by hospitals exchanged in May 1996, (ii) higher operating margins at former Champion hospitals, and (iii) improved operating margins at hospitals located in the LA metro area. General factors contributing to the improvement in operating margin percentage include (i) management's efforts to control costs, including a corporate reorganization to reduce corporate overhead costs in May 1997, (ii) efficiency and productivity gains resulting from the implementation of Champion's operating standards and benchmarks, (iii) divestiture or closure of underperforming facilities and (iv) closing underperforming operating units and eliminating or reducing unprofitable services at certain hospitals. Interest expense increased $12.5 million from $9.0 million in 1996 to $21.5 million in 1997, primarily due to (i) an increase in outstanding indebtedness from the issuance of the Notes in August 1996 and additional borrowings under the Credit Facility to finance acquisitions and to fund certain lawsuit settlement costs, Champion merger costs, working capital requirements and capital expenditures, (ii) an increase in interest rate on the Credit Facility during 1997, net of (iii) the redemption in August 1996 of $75.0 million of senior subordinated notes. Approximately $2.7 million of interest expense incurred in 1997, which related to borrowings to finance the acquisition of PHC Regional Hospital, was charged to the loss contract accrual previously established at December 31, 1996. Accordingly, such amount was not reflected as interest expense in the 1997 Consolidated Statement of Operations. Depreciation and amortization increased to $16.0 million in 1997 from $8.3 million for the same period of 1996. The increase consisted of $9.4 million primarily attributable to the facilities acquired, net of divested facilities, since May 1996, offset by a decrease of $1.7 million at the acute care LA metro hospitals held for sale, as a result of recording these facilities at their net realizable value as of September 30, 1996 in accordance with SFAS No. 121. Income from continuing operations before income taxes for the six months ended June 30, 1997 included $6.0 million in unusual charges, consisting of $3.5 million relating to the closure of PHC Regional Hospital and $2.5 million relating to a corporate reorganization completed in May 1997 (see Note 2). It excluded a loss of $10.9 million attributable to PHC Regional Hospital, which was charged to the loss contract accrual previously established at December 31, 1996. Income from continuing operations before income taxes for the comparable 1996 period included an unusual charge of $2.4 million relating to the settlement of a lawsuit. Income before income taxes of the discontinued psychiatric hospitals was $35,000 in 1997, as compared to a loss of $6.1 million (excluding a charge of $19.9 million for settlement costs related to a lawsuit settled in March 1996) for the comparable period of 1996. The loss recorded in 1996 was primarily attributable to additional provision for bad debts recorded on uncollectible accounts receivable. In accordance with APB No. 30, operating income from 19 discontinued operations during 1997 was charged to the disposal loss accrual previously established in September 1996. Accordingly, such amount was not reflected in the 1997 Consolidated Statement of Operations. After income taxes, loss from operations of discontinued operations for the six months ended June 30, 1996 was $15.3 million, of which $11.8 million was related to a lawsuit settlement charge. The Company's effective tax rate was 29.7% for 1997, as compared to 42.4% for the comparable period in 1996. The reduced tax rate for 1997 resulted primarily from a $1.1 million reduction in the valuation allowance on deferred tax assets established at December 31, 1996, offset by nondeductible goodwill amortization expense recorded during the six months ended June 30, 1997. Net income for the six months ended June 30, 1997 was $2.2 million, or $0.04 per share, compared to a net loss of $19.5 million, or $0.66 per share, for the same period of 1996. Weighted average common and common equivalent shares outstanding increased 88.9% from 29.8 million in 1996 to 56.2 million in 1997, primarily from the issuance of 19.8 million shares in connection with the merger with Champion and from the public offering of 5.2 million shares of the Company's common stock, both completed in August 1996. Included in 1997 income before income taxes, net income and net income per share were nonrecurring charges of $6.0 million, $4.2 million and $0.07 per share, respectively, relating to the unusual charges described above. Included in 1996 loss before income taxes, net loss and net loss per share were nonrecurring charges of $28.5 million, $16.8 million and $0.56 per share, respectively, of which $15.4 million ($0.52 per share) of the net loss was attributable to the discontinued operations (including a charge of $11.8 million for settlement costs related to a lawsuit), with the remaining $1.4 million ($0.05 per share) related to the settlement of another lawsuit. LIQUIDITY AND CAPITAL RESOURCES Net cash used in operating activities for the six months ended June 30, 1997 was $8.4 million, compared to $30.1 million for the same period of 1996. The $21.7 million decrease in net cash used in operating activities was mainly attributable to (i) the reduction in losses recorded for the six months ended June 30, 1997, as compared to losses recorded for the six months ended June 30, 1996, primarily attributable to a settlement charge for certain lawsuits and a deterioration in the operating condition at the LA metro hospitals and (ii) a related increase in deferred tax assets at June 30, 1996 resulting from such losses, offset by (iii) payments made in 1997 for (a) increased interest expense, (b) the loss contract at PHC Regional Hospital, (c) the Special Committee's investigation and (d) merger related expenses associated with the Champion acquisition. Net cash provided by investing activities was $22.2 million during 1997, as compared to net cash used in investing activities of $121.0 million during 1996. The $143.2 million increase was primarily attributable to (i) a use of cash of $109.4 million to acquire hospitals during 1996, as compared to $12.2 million in cash received from a sale of certain hospitals during 1997 and (ii) cash of $19.3 million received from the liquidation of marketable securities held by the Company's wholly- owned subsidiary, Hospital Assurance Company Ltd., during 1997, as compared to purchases of marketable securities of $3.1 million made during 1996, offset by (iii) an increase in capital expenditures during 1997. Net cash used in financing activities during 1997 was $10.8 million, compared to net cash provided by financing activities of $148.7 million during 1996. The $159.5 20 million decrease was primarily attributable to net incremental borrowings of $162.2 million during 1996 to purchase hospitals and to pay for the settlement costs of certain lawsuits, offset by cash dividends of $2.7 million paid to the former sole stockholder. Net working capital was $27.9 million at June 30, 1997, a decrease of $5.9 million from $33.8 million at December 31, 1996. The decrease in working capital was primarily attributable to payments made during the six months ended June 30, 1997 for cost and expenses accrued at December 31, 1996 for interest expense, the loss contract at PHC Regional Hospital, the Special Committee's investigation and the merger with Champion, using proceeds from the liquidation of the Company's marketable securities and earnings generated in 1997. The Company's long-term debt as a percentage of total capitalization was 90.5% at June 30, 1997, compared to 91.0% at December 31, 1996. On April 14, 1997 and August 14, 1997, the Company entered into the First Amendment and the Second Amendment, respectively, to the Credit Agreement, which provides among other things: (i) a reduction in the credit commitment from $400.0 million to $165.0 million effective August 14, 1997; (ii) a revision in the borrowing rates as disclosed at Note 4; (iii) all proceeds from the sale of any collateralized assets, except the LA metro facilities (60% of the sale proceeds in the event of a disposition of non- collateralized assets and the LA metro facilities) and 60% of income tax refunds received after August 14, 1997 are to be applied as a permanent reduction of the debt outstanding under the Credit Agreement; (iv) a first priority lien in certain of the Company's real and personal properties; and (v) additional restrictive financial covenants as compared to those at December 31, 1996. In July 1997, the Company received approximately $24.6 million in refunds of previously paid Federal and state income taxes. Such refunds will be used to pay interest costs and for general working capital needs. The Company expects to receive additional Federal and state income tax refunds of approximately $6.4 million in 1998. Upon closing of the Second Amendment to the Credit Agreement on August 14, 1997, the Company had approximately $15.0 million available under its Credit Facility to fund future capital expenditures, working capital requirements and the issuance of letters of credit. The Company anticipates that internally generated cash flows from earnings, proceeds from the sale of hospital accounts receivable under the Company's commercial paper program, the Federal and state income taxes refunds received in July 1997, and available borrowings under its Credit Agreement will be sufficient to meet present operating requirements through 1998. There can be no assurance that future developments in the hospital industry or general economic trends will not adversely affect the Company's operations or its ability to meet such funding requirements. See "Pending Litigation" of this Item for a discussion regarding certain pending litigation, the resolution of which could adversely affect the Company's liquidity and its future operating results. OPERATING PERFORMANCE OF SALT LAKE CITY, UTAH HOSPITALS With respect to the Utah hospitals, the Company recorded earnings before interest, income taxes, depreciation and amortization ("EBITDA") of $8.0 million and $16.4 million, or 35.6% and 32.8% of the Company's consolidated hospitals' EBITDA, for the three months and six months ended June 30, 1997, respectively, after excluding operating losses of $3.7 million and $8.1 21 million associated with the loss contract at PHC Regional Hospital during each respective period and closure costs of $3.5 million in connection with the closing of that hospital in May 1997. Operating losses relating to the loss contract, in addition to interest expense of $1.4 million and $2.7 million for the three months and six months ended June 30, 1997, respectively, attributable to borrowings to finance the acquisition of PHC Regional Hospital, were charged to the loss contract accrual previously established in 1996. Excluding the impact of the loss contract at PHC Regional Hospital and associated closure costs, the performance of the Salt Lake area hospitals for the three months and six months ended June 30, 1997 was as expected. The Company is actively engaged in discussions with PacifiCare to renegotiate an amendment of the FHP capitation contract. The company believes that it will ultimately reach a favorable agreement with PacifiCare and does not expect to have to litigate in order to resolve this dispute. The Company is presently considering possible uses for PHC Regional Hospital and is working with local physicians in evaluating the transfer of medical/surgical services from Salt Lake Regional Medical Center to PHC Regional Hospital. OPERATING PERFORMANCE OF LA METRO HOSPITALS As a result of actions taken by management subsequent to the merger with Champion to stabilize the operating conditions and curtail losses at the LA metro hospitals, including closing underperforming operating units and eliminating or reducing unprofitable services, the Company recorded EBITDA of $1.4 million and $3.9 million on the LA metro acute care hospitals for the three months and six months ended June 30, 1997, as compared to a loss of $2.0 million and $2.7 million for the comparable 1996 periods. Losses for the LA metro psychiatric hospitals, which were charged to the disposal loss accrual previously established in September 1996, were $142,000 and $175,000 for the three months and six months ended June 30, 1997, respectively. Management expects the LA metro hospitals to generate positive cash flows through their disposition date. PENDING LITIGATION Since the Company filed its 1996 Form 10-K with the Commission on April 15, 1997, there have been two amended complaints filed in the stockholder class and derivative litigation described in that Form 10-K. A Consolidated Class Action Complaint, captioned IN RE PARACELSUS CORP. SECURITIES LITIGATION, Master File No. H-96-3464, was filed which consolidates and amends several class action complaints described in the 1996 Form 10-K. A First Amended Derivative Complaint was filed which amends the previously filed class and derivative action captioned CAVEN V. MILLER No. H-96-4291. Both complaints now reflect certain facts disclosed in the 1996 Form 10-K that were not alleged in the previous complaints. The class action complaint asserts claims against the Company under sections 11 and 12(a)(2) of the Securities Act of 1933, and claims against certain existing and former officers and directors of the Company under sections 11 and 15 of the Securities Act of 1933. The derivative action, which purports to be filed on behalf of Champion Healthcare Corporation, asserts various state law claims against the Company, certain of its existing and former officers and directors or their affiliates and the lead underwriter for various securities offerings. As discussed in the Company's 1996 Form 10-K, the Company believes that the outcome of certain of the claims will probably be unfavorable to the 22 Company. The Company also believes that the stockholder class actions asserted against the Company are likely to settle rather than to proceed to trial, judgment, and appeal and that, given the circumstances of these cases, the terms of a settlement would be structured in a manner to avoid causing the Company to seek protection under the Federal bankruptcy reorganization laws. In any circumstances where the Company could not structure a settlement of all claims within its financial resources, it would vigorously defend any attempt to establish the amount of liability or to require payment beyond its resources. Many factors will ultimately affect and determine the results of the litigation, however, and the Company can provide no assurance that the results will not have a significant adverse effect on it. REGULATORY MATTERS Healthcare reform legislation has been proposed at both Federal and state levels. The Company cannot predict the effect that such reforms may have on its business and there can be no assurance that any such reforms will not have a material adverse effect on the Company's future revenues or liquidity. PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS See Part I - Item 2 "Pending Litigation" for an update of developments on the pending stockholders' litigation previously disclosed in the Company's 1996 Form 10-K. ITEM 2. CHANGE IN SECURITIES None. ITEM 3. DEFAULTS UPON SENIOR SECURITIES None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS At the Company's Annual Meeting of Stockholders on May 28, 1997, the stockholders approved the following: 1. The election of Messrs. James A. Conroy and L. Stanton Tuttle to serve as Class I directors for a three-year term expiring at the date of the Annual Meeting of Stockholders in 2000. Each nominee received the following votes: VOTES ---------- For 42,105,058 Withheld 51,327 23 2. The ratification of the appointment of Ernst & Young LLP as the Company's auditors for 1997. VOTES ---------- For 42,143,009 Against 3,934 Abstain 9,442 ITEM 5. OTHER INFORMATION None. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits 11.1 Statement regarding computation of per share earnings of Paracelsus. 27 Financial Data Schedule. (b) Reports on Form 8-K - The Company filed on July 7, 1997 a Current Report on Form 8-K, dated June 27, 1997, reporting pursuant to Item 6 thereof, that a director, Mr. James A. Conroy, had resigned from the Company's Board of Directors as a result of his disagreement with other Special Committee members and board members on certain matters relating to the Special Committee's investigation. - The Company filed on July 8, 1997 an Amendment No. 1 to the Current Report on Form 8-K, dated July 27, 1997, to include a response letter from the Company regarding the resignation of Mr. James A. Conroy as a director of the Company. 24 SIGNATURE 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 thereunto duly authorized. Paracelsus Healthcare Corporation (Registrant) /s/ James G. VanDevender Dated: August 14, 1997 By: ___________________________ James G. VanDevender Senior Executive Vice President, Chief Financial Officer & Director EX-11 2 EXHIBIT 11.1 PARACELSUS HEALTHCARE CORPORATION COMPUTATION OF EARNINGS (LOSS) PER SHARE (In thousands, except per share data)
Three Months Ended Six Months Ended June 30, June 30, --------------------- ---------------- 1997 1996 1997 1996 ---------- -------- ------- -------- PRIMARY: (1) Net income (loss) $(3,017) $(5,162) $2,151 $(19,511) ===== ===== ===== ====== Shares used in this computation: Weighted average common shares outstanding 54,879 29,772 54,847 29,772 Shares applicable to stock options and warrants, net of shares assumed to be purchased from proceeds at average market price - - 1,427 - ------ ------ ------ ------ (2) Total shares for net income per share computation 54,879 29,772 56,274 29,772 ====== ====== ====== ====== Income (loss) per share: Continuing operations $ (0.05) $ (0.04) $ 0.04 $ (0.14) Discontinued operations - (0.13) - (0.52) ----- ----- ---- ----- Net income (loss) per share (1 divided by 2) $ (0.05) $ (0.17) $ 0.04 $ (0.66) ==== ===== ==== ===== FULLY DILUTED: (3) Net income (loss) (1) $(3,017) $(5,162) $ 2,151 $(19,511) ===== ===== ===== ====== Shares used in this computation: Total primary shares (2) 54,879 29,772 56,274 29,772 Shares applicable to stock options and warrants in addition to those used in primary computation, using period-end market price when higher than average - - - - ----- ------ ------ ------ (4) Total fully diluted shares 54,879 29,772 56,274 29,772 Income (loss) per share: Continuing operations $ (0.05) $ (0.04) $ 0.04 $ (0.14) Discontinued operations - (0.13) - (0.52) ----- ---- ---- ----- Net income (loss) per share (3 divided by 4) $ (0.05) $ (0.17) $ 0.04 $ (0.66) ===== ==== ==== =====
EX-27 3
5 1000 6-MOS DEC-31-1997 JUN-30-1997 20,766 2,685 106,196 35,059 14,004 188,101 430,682 121,109 754,729 160,182 480,959 0 0 224,472 (174,020) 754,729 0 335,749 0 137,260 135,473 20,761 21,479 3,060 909 2,151 0 0 0 2,151 0.04 0.04
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