-----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, JHIT5Vluz50oiOFDPGnIREUHmdTRnc6umGK0IPHw7VrY9SO/qDGgVohkjAWoaN+l 35XxxKcMghjkIL0Hu2oNYQ== 0000875192-96-000002.txt : 19960515 0000875192-96-000002.hdr.sgml : 19960515 ACCESSION NUMBER: 0000875192-96-000002 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960514 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: SUMMIT CARE CORP CENTRAL INDEX KEY: 0000875192 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-SKILLED NURSING CARE FACILITIES [8051] IRS NUMBER: 953656297 STATE OF INCORPORATION: CA FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-19411 FILM NUMBER: 96562391 BUSINESS ADDRESS: STREET 1: 2600 W MAGNOLIA BLVD CITY: BURBANK STATE: CA ZIP: 91505-3031 BUSINESS PHONE: 8189724035 MAIL ADDRESS: STREET 1: 2600 W MAGNOLIA BLVD CITY: BURBANK STATE: CA ZIP: 91505-3031 10-Q 1 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 period ended March 31, 1996 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from: Commission file number 0-19411 SUMMIT CARE CORPORATION (Exact name of Registrant as specified in its charter) California 95-3656297 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 2600 W. Magnolia Blvd. Burbank, California 91505-3031 (address of principal executive offices) (818) 841-8750 (Registrant's telephone number, including area code) Indicate by checkmark whether the Registrant (1) has filed all reports requir- ed 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 Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS Indicate by checkmark whether the Registrant (1) has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes No APPLICABLE ONLY TO CORPORATE ISSUERS Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Shares of Registrant's common stock outstanding at March 31, 1996 -- 6,765,800 SUMMIT CARE CORPORATION FORM 10-Q Quarter Ended March 31, 1996 TABLE OF CONTENTS Page of Form 10-Q --------- Part I - Financial Information Item 1. Financial Statements Consolidated Statements of Income 3 Consolidated Balance Sheets 4 Consolidated Statements of Cash Flows 6 Notes to Consolidated Financial Statements 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9 Part II - Other Information Item 6. Exhibits and Reports on Form 8-K 14 Signatures 15 PART I SUMMIT CARE CORPORATION CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (In thousands, except per share data)
Three Months Ended Nine Months Ended March 31, March 31, 1996 1995 1996 1995 -------- -------- ------- -------- Net revenues $ 45,232 $ 37,077 $129,303 $ 97,921 Expenses: Salaries and benefits 19,934 17,195 57,651 45,525 Supplies 4,443 4,057 13,432 11,122 Purchased services 10,713 5,983 26,679 15,751 Provision for doubtful accounts 694 357 1,445 901 Other expenses 3,154 2,626 9,073 7,272 Rental 664 601 1,977 1,601 Depreciation and amortization 1,634 1,482 4,714 3,776 Interest (net of interest income, $142 and $405 in 1996 and $94 and $401 in 1995, respectively) 1,919 1,613 4,931 3,247 -------- -------- -------- -------- 43,155 33,914 119,902 89,195 -------- -------- -------- -------- Income before provision for income taxes 2,077 3,163 9,401 8,726 Provision for income taxes 750 1,262 3,672 3,482 -------- -------- -------- -------- Net income $ 1,327 $ 1,901 $ 5,729 $ 5,244 ======== ======== ======== ======== Earnings per share $ .19 $ .28 $ .83 $ .77 ======== ======== ======== ======== Weighted average number of shares of common stock outstanding 6,849 6,849 6,886 6,836 ======== ======== ======== ========
See accompanying notes SUMMIT CARE CORPORATION CONSOLIDATED BALANCE SHEETS (In thousands)
March 31, 1996 June 30, 1995 -------------- ------------- (Unaudited) (Note) ASSETS Current assets: Cash and cash equivalents $ 958 $ 3,101 Accounts receivable, less allowance for doubtful accounts: March 1996 - $1,281; June 1995 - $989 29,463 20,336 Supplies inventory, at cost 2,052 2,176 Other current assets 9,772 4,570 ------ ------ Total current assets 42,245 30,183 Property and equipment, at cost: Land and land improvements 15,480 13,653 Buildings and leasehold improvements 133,468 123,723 Furniture and equipment 17,280 14,967 Construction in progress 11,686 8,868 ------- ------- 177,914 161,211 Less accumulated depreciation and amortization 20,358 16,999 ------- ------- 157,556 144,212 Notes receivable 3,930 4,460 Other assets 8,639 5,625 -------- -------- $212,370 $184,480 ======== ========
NOTE: The balance sheet at June 30, 1995 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. See accompanying notes (Continued) SUMMIT CARE CORPORATION CONSOLIDATED BALANCE SHEETS (Continued) (In thousands)
March 31, 1996 June 30, 1995 -------------- ------------- (Unaudited) (Note) LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Payable to bank $ 3,855 $ 2,972 Accounts payable 16,681 10,972 Employee compensation and benefits 2,647 4,008 Deferred income taxes, current 1,086 1,061 Long-term debt due within one year 2,983 1,009 ------- ------- Total current liabilities 27,252 20,022 Long-term debt 103,628 88,779 Deferred income taxes 1,866 1,866 -------- -------- Total liabilities 133,374 110,667 Commitments and contingencies Shareholders' equity: Preferred stock, no par value; 2,000 authorized shares, none issued -- -- Common stock, no par value, 100,000 authorized shares; 6,766 and 6,759 issued and outstanding, respectively 51,404 51,322 Retained earnings 28,220 22,491 -------- -------- Total shareholders' equity 79,624 73,813 -------- -------- $212,370 $184,480 ======== ========
NOTE: The balance sheet at June 30, 1995 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. See accompanying notes SUMMIT CARE CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (Dollars in thousands)
Nine Months Ended March 31, 1996 1995 ---- ---- Operating activities: Net income $5,729 $5,244 Adjustments to reconcile net income to net cash provided by operating activities Depreciation and amortization 4,714 3,776 (Increase) in accounts receivable, net ( 9,127) (4,984) Decrease (increase) in supplies inventory 124 ( 665) (Increase) in other assets ( 8,411) (3,289) Increase in accounts payable 5,709 2,760 (Decrease) increase in employee compensation and benefits ( 1,361) 594 Increase in deferred income tax liability 25 93 ------- ------- Total adjustments ( 8,327) ( 1,715) ------- ------- Net cash (used) provided by operating activities ( 2,598) 3,529 ------- ------- Investing activities: Principal payments of notes receivable, net 503 7 Additions to property and equipment (17,836) ( 6,208) Acquisitions of nursing centers -- (69,660) Additions to other assets -- ( 3,279) ------- ------- Net cash (used) in investing activities (17,333) (79,140) Financing activities: Increase in payable to bank 883 1,582 Principal payments on long-term debt (49,677) ( 341) Proceeds from long-term debt 66,500 58,332 Expenses on sale of common stock -- ( 186) Proceeds from exercise of stock options 82 44 ------- ------- Net cash provided by financing activities 17,788 59,431 ------- ------- (Decrease) in cash and cash equivalents ( 2,143) (16,180) Cash and cash equivalents at beginning of year 3,101 21,613 ------- ------- Cash and cash equivalents at end of the period $ 958 $ 5,433 ======== =======
SUMMIT CARE CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued) (Unaudited) (Dollars in thousands)
Nine Months Ended March 31, 1996 1995 ---- ---- Supplemental disclosures of cash flow information: Cash paid during the period for: Interest $ 4,553 $ 3,080 Income taxes 3,653 3,575
See accompanying notes SUMMIT CARE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (In thousands) 1. The unaudited financial information included herein, in the opinion of management, reflects all adjustments (all of which are of a normal recurring nature), which are considered necessary to fairly state the Company's financial position, its cash flows and the results of operations. These statements do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements and should be read in conjunction with the Company's annual report filed on Form 10-K for the year ended June 30, 1995. The interim financial information herein is not necessarily representative of that to be expected for a full year. 2. Certain amounts have been reclassified to conform with fiscal 1996 presentations. 3. Earnings per share are based on the weighted average number of shares of common stock outstanding, which was 6,886 for the nine months ended March 31, 1996 and 6,836 for the nine months ended March 31, 1995. 4. Other current assets consist of the following:
March 31, 1996 June 30, 1995 -------------- ------------- Prepaid expenses $ 1,735 $ 1,008 Due from third-party payor 5,257 804 Notes receivable 667 640 Other receivables 2,113 2,118 ------- ------- $ 9,772 $ 4,570 ======= =======
SUMMIT CARE CORPORATION FORM 10-Q MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Dollars in thousands) Results of Operations Quarter Ended March 31, 1996 Compared to Quarter Ended March 31, 1995 Revenues increased by $8,155, or 22.0%, from $37,077 for the quarter ended March 31, 1995 to $45,232 for the quarter ended March 31, 1996. This increase occurred due to increases in census days and rates (35.1%), to increased use of rehabilitative and other specialty services (60.0%) and to increased pharmacy operations (4.9%). Average occupancy decreased to 84.7% in the quarter ended March 31, 1996, from 85.8% in the quarter ended March 31, 1995. Average occupancy was 86.0% excluding the effect of newly constructed beds added during the quarter ended March 31, 1996. The Company's quality mix (revenues from Medicare, managed care and private pay patients as a percentage of gross revenues excluding pharmacy revenues) was 68.6% in the quarter ended March 31, 1996 and 62.1% in the quarter ended March 31, 1995. Expenses, consisting of salaries and benefits, supplies, purchased services, provision for doubtful accounts and other as a percent of revenues increased from 81.5% of revenues in the quarter ended March 31, 1995 to 86.1% in the quarter ended March 31, 1996. Total salaries and employee related benefits were 44.1% of revenues in the quarter ended March 31, 1996 compared to 46.4% of revenues in the quarter ended March 31, 1995. Expenses increased $8,720 or 28.9% from $30,218 in the quarter ended March 31, 1995 to $38,938 in the quarter ended March 31, 1996. Of the increase in expenses in the quarter ended March 31, 1996 compared with the same period a year ago, salaries and benefits represent 31.4%, rehabilitative and other specialty service costs represent 54.6%, this increase being due to greater utilization of such services and other expenses represent 14.0%. Income before rental, depreciation and amortization and interest expense, net of interest income, decreased $565 or 8.2% from $6,859 in the quarter ended March 31, 1995 to $6,294 in the quarter ended March 31, 1996 and was 13.9% of revenues in the quarter ended March 31, 1996 compared to 18.5% in the quarter ended March 31, 1995. Rental, depreciation and amortization and interest expense, net of interest income, increased by $521 or 14.1% from $3,696 in the quarter ended March 31, 1995 to $4,217 in the quarter ended March 31, 1996. Of this increase, interest expense represents 58.7% and is due to an increase in the average outstanding long-term debt during the three months ended March 31, 1996 compared to the same period last year. The Company's effective tax rate was 36.1% of income in the quarter ended March 31, 1996 compared to 39.9% for the quarter ended March 31, 1995. Net income after taxes decreased $574 or 30.2% from $1,901 in the quarter ended March 31, 1995 to $1,327 in the quarter ended March 31, 1996. SUMMIT CARE CORPORATION FORM 10-Q MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Dollars in thousands) Results of Operations Nine Months Ended March 31, 1996 Compared to Nine Months Ended March 31, 1995 Revenues increased $31,382 or 32.1% from $97,921 for the nine months ended March 31, 1995 to $129,303 for the nine months ended March 31, 1996. This increase occurred primarily due to acquisitions (42.2%), increases in census days and rate increases (24.7%), increased use of rehabilitative and other specialty services (28.7%) and increased pharmacy operations (4.4%). Average occupancy was 86.2% in the nine months ended March 31, 1996, as compared to 85.5% in the nine months ended March 31, 1995 including acquisitions. Excluding acquisitions and newly constructed beds, the average occupancy was 89.8% in the nine months ended March 31, 1996. The company's quality mix (revenues from Medicare, managed care and private pay patients as a percentage of gross revenues excluding pharmacy revenues) was 66.0% in the nine months ended March 31, 1996 and 62.7% in the nine months ended March 31, 1995. Expenses, consisting of salaries and benefits, supplies, purchased services, provision for doubtful accounts and other as a percent of revenues increased from 82.3% of revenues in the nine months ended March 31, 1995 to 83.7% in the nine months ended March 31, 1996. Total salaries and employee related benefits were 44.6% of revenues in the nine months ended March 31, 1996 compared to 46.5% of revenues in the nine months ended March 31, 1995. Expenses increased $27,709 or 34.4% from $80,571 in the nine months ended March 31, 1995 to $108,280 in the nine months ended March 31, 1996. Acquisitions represent 37.7% of this increase, salaries and benefits represent 21.2%, rehabilitative and other specialty service costs represent 30.3% this increase being due to greater utilization of such services and other expenses increased 10.8%. Income before rental, depreciation and amortization and interest expense, net of interest income, increased $3,673 or 21.2% from $17,350 in the nine months ended March 31, 1995 to $21,023 in the nine months ended March 31, 1996 and was 16.3% of revenues in the nine months ended March 31, 1996 compared to 17.7% in the nine months ended March 31, 1995. Rental, depreciation and amortization and interest expense, net of interest income, increased by $2,998 or 34.8% from $8,624 in the nine months ended March 31, 1995 to $11,622 in the nine months ended March 31, 1996. Substantially all of this increase was due to depreciation and amortization, rent and interest expense related to new acquisitions. The Company's effective tax rate was 39.1% of income in the nine months ended March 31, 1996 and 39.9% of income in the nine months ended March 31, 1995. Net income after taxes increased $485 or 9.25% from $5,244 in the nine months ended March 31, 1995 to $5,729 in the nine months ended March 31, 1996. SUMMIT CARE CORPORATION FORM 10-Q MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Cont.) Selected Statistics are Shown Below:
Fiscal Increase 1996 1995 (Decrease) ---- ---- ---------- Facilities in Operation at: September 30 37 25 12 December 31 37 37 0 March 31 38 37 1 Total beds at: September 30 4,762 3,258 1,504 December 31 4,762 4,688 74 March 31 4,886 4,688 198 Total occupancy: First quarter 87.2% 84.4% 2.8 % Second quarter 86.8% 85.9% .9 % Third quarter 84.7% 85.8% (1.1)% Nursing center occupancy: First quarter 88.2% 85.7% 2.5 % Second quarter 87.6% 86.9% .7 % Third quarter 85.5% 86.6% (1.1)% Assisted living center occupancy: First quarter 78.7% 76.5% 2.2 % Second quarter 79.3% 78.0% 1.3 % Third quarter 77.6% 78.7% (1.1)% Percentage of revenues from Private and Medicare: First quarter 64.0% 64.3% (.3)% Second quarter 65.0% 62.2% 2.8 % Third quarter 68.6% 62.1% 6.5 % Percentage of revenues from Medicaid: First quarter 36.0% 35.7% .3 % Second quarter 35.0% 37.8% (2.8)% Third quarter 31.4% 37.9% (6.5)%
SUMMIT CARE CORPORATION FORM 10-Q MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Cont.) (Dollars in thousands) Liquidity and Capital Resources At March 31, 1996, the Company had $958 in cash and cash equivalents and working capital of $15,093. During the nine months ended March 31, 1996, the Company's cash and cash equivalents decreased by $2,143. Net cash provided by operating activities decreased $6,127 from $3,529 in the nine months ended March 31, 1995 to a negative $2,598 in the nine months ended March 31, 1996. Net cash provided by loan proceeds of $55,000, coupled with an $11,500 draw on the line of credit, offset by loan repayments of $49,677 during the nine months ended March 31, 1996 was used principally for capital expenditures of $17,836 for existing centers. Accounts receivable increased $9,127 primarily as a result of increased rehabilitative and other specialty medical services, lower collection activity results and increased billings to slow paying managed care organizations and to Medicare. At March 31, 1996, the Company's average accounts receivable days outstanding were 39 as compared to 30 days outstanding at March 31, 1995. Long-term debt consisted of mortgage indebtedness of $8,776, $15,835 on six capitalized leases and $82,000 in senior secured notes totaling $106,611 as of March 31, 1996. The Company believes that it has sufficient capital resources and cash flow from its existing operations to service long-term debt due within one year of $2,983, to make normal recurring capital additions and improvements (approximately $7,500 is planned over the next 12 months), to develop properties (approximately $14,000 is planned over the next 12 months) and to meet other working capital needs for the next 24 months. The Company expects, on a selective basis, to pursue expansion of its existing centers and the acquisition or development of additional centers in markets where demo- graphics and competitive factors are favorable. The Company with a group of private investors and its banks has amended the indenture for its $25,000 Senior Secured Notes ("Current Notes") to allow the Company to sell $70,000 in Senior Secured Notes ("New Notes") and amended its bank line of credit to reduce the line to $40,000. Holders of the Current Notes and the New Notes and the Company's bank lenders have entered into a collateral sharing agreement providing a security interest in certain real estate on a pari passu basis and a negative pledge on accounts receivable and on shares in the Company's wholly-owned subsidiary, Skilled Care Pharmacy. Proceeds of $55,000 were received in December 1995 from the issuance of the New Notes. The proceeds were used to pay issuance costs of $1,714 and to pay off bank debt of $49,000. The balance of the proceeds, along with another $15,000 of New Notes to be issued in July 1996, will be used to finance future acquisitions and constructions projects. SUMMIT CARE CORPORATION FORM 10-Q MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Cont.) (Dollars in thousands) The New Notes are payable at the end of the fifth year ($7,000), the end of the sixth year ($5,000), semi-annually from the eighth year through the twelfth year ($48,000) and at the end of the fifteenth year ($10,000). The annual interest rate on the New Notes is fixed ranging from 7.4% on the earliest maturing New Note to 8.1% on the last New Note to mature and averages 7.8% when weighted. The terms of the bank credit agreement remain essentially the same except the term period after the two year revolving period is reduced from four years to three years and the interest rate margin over the Eurodollar rate has been lowered. Impact of Inflation The health care industry is labor intensive. Wages and other expenses increase more rapidly during periods of inflation and when shortages in the labor market occur. In addition, suppliers pass along rising costs in the form of higher prices. Increases in reimbursement rates under Medicaid generally lag behind actual cost increases, so that the Company may have difficulty covering them in a timely fashion. PART II SUMMIT CARE CORPORATION OTHER INFORMATION Quarter Ended March 31, 1996 Item 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits NONE (b) Reports on Form 8-K NONE SUMMIT CARE CORPORATION SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned there unto duly authorized. SUMMIT CARE CORPORATION Date: May 13, 1996 By: S/DERWIN L. WILLIAMS -------------------- Derwin L. Williams Sr.Vice President-Finance Chief Financial Officer Date: May 13, 1996 By: S/MELODYE STOK -------------------- Melodye Stok Vice President-Controller Chief Accounting Officer -----END PRIVACY-ENHANCED MESSAGE-----