UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES AND EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): April 15, 1999
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)
2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
Paracelsus Healthcare Corporation ("the Company")entered into a stock
purchase agreement (the "Stock Purchase Agreement"), dated March 12, 1999 and
as amended on March 31, 1999, for the sale of Paracelsus Bledsoe County
General Hospital, Inc.("Bledsoe"), which operated a 32 licensed-bed facility
located in Pikeville, Tennessee, to Associates Capital Group, LLC, a Georgia
limited liability company (the "Buyer"). The transaction, which was effective
on March 31, 1999, was completed on April 15, 1999. The sales price of
approximately $2.2 million resulted on arms-length negotiation and included
the sale of net working capital. The sales price was paid by a combination of
$100,000 in cash and the issuance by the Buyer of a $494,000 secured
promissory note("Note A"), a $1.0 million secured promissory note ("Note B")
and a $642,000 thirty-day promissory note. The notes are secured by all
outstanding common stock and assets of Bledsoe. Note A may be adjusted for any
increase or decrease from a final adjustment of net working capital as of the
effective date. The Company recorded no material gain or loss on the sale.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
In addition to reflecting the sale of Bledsoe, the pro forma financial
information required by Item 7b also reflects the Company's sale of Chico
Community Hospital and Chico Community Rehabilitation Hospital
(collectively "Chico") on June 30, 1998, and the Company's acquisition of
Dakota Medical Foundation's (the "Foundation") 50% partnership interest in a
general partnership operating as Dakota Heartland Health System ("DHHS")
on July 1, 1998 and the sale of eight hospitals located in metropolitan Los
Angeles ("LA Metro") on September 30, 1998.
(b) Unaudited Pro Forma Financial Information (attached following signature
page):
Unaudited Pro Forma Condensed Combining Statement of Operations -
For the year ended December 31, 1998
Unaudited Pro Forma Condensed Combining Balance Sheet - December 31,
1998
Notes to Unaudited Pro Forma Condensed Combining Financial Statements
(c) Exhibits
10.12 Stock Purchase Agreement for Bledsoe County General Hospital,
dated March 12, 1999, among Paracelsus Healthcare Corporation, Paracelsus
Bledsoe County General Hospital, Inc., and Associates Capital Group, LLC.
10.13 First Amendment to Stock Purchase Agreement for Bledsoe County
General Hospital, dated March 31, 1999, among Paracelsus Healthcare
Corporation, Paracelsus Bledsoe County General Hospital, Inc., and Associates
Capital Group, LLC.
PAGE> 3
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 HealthcareCorporation
(Registrant)
Dated: April 28, 1999 By: /S/ JAMES G. VANDEVENDER
-----------------------------
James G. VanDevender
Senior Executive Vice President,
Chief Financial Officer
& Director
4
ITEM 7(b)
PARACELSUS HEALTHCARE CORPORATION
UNAUDITED PRO FORMA CONDENSED COMBINING FINANCIAL STATEMENTS
The following table presents the Unaudited Pro Forma Condensed Combining
Statements of Operations for the year ended December 31, 1998 to illustrate
the effect of the sales of Bledsoe effective on March 31, 1999, LA Metro on
September 30, 1998 and Chico on June 30, 1998 and the acquisition of DHHS on
July 1, 1998. The Unaudited Pro Forma Condensed Combining Statements of
Operations assume the above transactions occurred on January 1, 1998. The Pro
Forma Condensed Combining Balance Sheet assumes the sale of Bledsoe occurred
on December 31, 1998.
On April 15, 1999, the Company completed the sale of Bledsoe for the sales
price of approximately $2.2 million, which included the purchase of net
working capital and was paid by a combination of $100,000 in cash and the
issuance by the Buyer of a $494,000 secured promissory note("Note A"), a $1.0
million secured promissory note ("Note B") and a $642,000 thirty-day promissory
note. The notes are secured by all outstanding common stock and assets of
Bledsoe. Note A may be adjusted for any increase or decrease of net working
capital and certain other adjustments.
These Unaudited Pro Forma Condensed Combining Financial Statements do not
purport to present the financial position or results of operations of the
Company had the above transactions occurred on the dates specified, nor are
they necessarily indicative of results of operations that may be expected in
the future. The Unaudited Pro Forma Condensed Combining Financial Statements
are qualified in their entirety by reference to, and should be read in
conjunction with, the Company's audited consolidated financial statements for
the year ended December 31, 1998, included in the Company's Annual Report on
Form 10-K.
5
PARACELSUS HEALTHCARE CORPORATION UNAUDITED PRO FORMA CONDENSED
COMBINING STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
(Dollars in thousands, except per share data)
Paracelsus Chico Pro Forma DHHS Pro Forma
Healthcare Pro Forma Chico Pro Forma Chico/
Corporation Adjustments Rf Disposition Adjustments Rf DHHS
----------- ----------- -- ----------- ----------- -- ----------
(1)
Net revenue $ 664,058 $(18,873) (2) $645,185 $645,185
Costs and expenses:
Salaries and
benefits 276,200 (8,217) (2) 267,983 267,983
Other operating
expense 265,735 (6,475) (2) 259,260 259,260
Provision for
bad debts 42,659 (355) (2) 42,304 42,304
Interest 51,859 (1,257) (3) 50,602 $ 2,983 (3) 53,585
Depreciation &
amortization 38,330 (758) (2) 37,572 486 (5) 38,058
Impairment charges 1,417 1,417 1,417
Unusual items (6,637) (6,637) (6,637)
(Gain)losson sale of
facilities (6,825) 7,100 (2) 275 275
--------- ------- --------- ------- -------
Total costs &
expenses 662,738 (9,962) 652,776 3,469 656,245
--------- ------- --------- ------- -------
Income (loss) before
minority interest
and income taxes 1,320 (8,911) (7,591) (3,469) (11,060)
Minority interest (3,180) (3,180) 4,141 (6) 961
--------- ------- --------- ------- -------
Loss before
income taxes (1,860) (8,911) (10,771) 672 (10,099)
Provision for
income taxes 693 (3,653) (4) (2,960) 275 (4) (2,685)
--------- ------- --------- ------- -------
Loss from continuing
operations (2,553) (5,258) (7,811) 397 (7,414)
========= ======== ========= ======= =========
Net loss per share
- - basic and
assuming
dilution $ (0.5) $ (0.14) $ (0.13)
========== ========= =========
Weighted average
number of common
and common
equivalent
shares 55,108 55,108 55,108
========= ========= ==========
See notes to Unaudited Pro Forma Condensed Combining Financial Statements
6
PARACELSUS HEALTHCARE CORPORATION UNAUDITED PRO FORMA CONDENSED
COMBINING STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
(Dollars in thousands, except per share data)
LA Metro Pro Forma Bledsoe
Pro Froma Pro Forma Chico/DHHS/ Pro Forma Pro Forma
Chico/DHHS Adjustments RF LA Metro Adjustments Rf Paracelsus
----------- ----------- ---- ----------- ----------- -- ----------
Net revenue $645,185 $(58,000) (7)(8) $587,185 $ (9,717) (9)(10) $577,468
Costs and expenses:
Salaries and
benefits 267,983 (25,672) (7) 242,311 (7,465) (9) 234,846
Other operating
expense 259,260 (31,333) (7) 227,927 (3,737) (9) 224,190
Provision for
bad debts 42,304 (1,915) (7) 40,389 (403) (9) 39,986
Interest 53,585 (733) (3)(7) 52,852 52,852
Depreciation &
amortization 38,058 38,058 (275) (9) 37,783
Impairment charges 1,417 1,417 (1,104) (9) 313
Unusual items (6,637) (233) (7) (6,870) (6,870)
(Gain) loss on sale
of facilities 275 275 275
--------- ------- --------- ------- -------
Total costs &
expenses 656,245 (59,886) 596,359 (12,984) 583,375
--------- ------- --------- ------- -------
Loss before minority
interest and
income taxes (11,060) 1,886 (9,174) 3,267 (5,907)
Minority interest 961 (961) (7)
--------- ------- --------- ------- -------
Loss before
income taxes (10,099) 925 (9,174) 3,267 (5,907)
Provision for
income taxes (2,685) 379 (4) (2,306) 1,340 (4) (966)
-------- ------- --------- ------- -------
Loss from continuing
operations (7,414) 546 (6,868) 1,927 (4,941)
======== ======== ========= ======= =========
Loss per share
- - basic and
assuming
dilution $ (0.13) $ (0.12) $ (0.09)
========= ======== =========
Weighted average
number of common
and common
equivalent
shares 55,108 55,108 55,108
========= ========= =========
See notes to Unaudited Pro Forma Condensed Combining Financial Statements.
7
PARACELSUS HEALTHCARE CORPORATION UNAUDITED PRO FORMA CONDENSED COMBINING
BALANCE SHEET
DECEMBER 31, 1998
(Dollars in thousands)
Paracelsus Bledsoe
Healthcare Pro Forma Pro Forma
Corporation Adjustments Rf Paracelsus
----------- ----------- -- ----------
ASSETS: (1)
Current assets:
Cash and cash equivalents $ 11,944 $ 70 (9)(11) $ 12,014
Restricted cash 1,029 1,029
Accounts receivable, net 67,332 (1,630) (9) 65,702
Deferred income taxes 9,641 9,641
Other 38,923 450 (9)(12) 39,373
-------- --------- ---------
Total current assets 128,869 (1,110) 127,759
-------- --------- ---------
Property and equipment, net 363,899 (991) (9) 362,908
Goodwill 136,994 136,994
Other assets 86,340 1,485 (9)(12) 87,825
-------- --------- ---------
Total assets $716,102 $ (616) $ 715,486
======== ========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current liabilities:
Accounts payable $ 41,301 $ (399) (9) $ 40,902
Accrued liabilities
and other 58,758 (217) (9) 58,541
Current maturities
of long-term debt 6,284 6,284
-------- --------- ---------
Total current liabilities 106,343 (616) 105,727
-------- --------- ---------
Long term debt 533,048 533,048
Other long-term liabilities 42,370 42,370
Stockholders' equity
Common stock 222,977 222,977
Additional paid-in capital 390 390
Accumulated deficit (189,026) (189,026)
-------- --------- ---------
Total stockholders'
equity 34,341 34,341
-------- --------- ---------
Total liabilities
& shareholders' equity $716,102 $ (616) $ 715,486
======== ========= =========
See notes to Unaudited Pro Forma Condensed Combining Financial Statements.
8
PARACELSUS HEALTHCARE CORPORATION
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINING FINANCIAL STATEMENTS
The following is a summary of the pro forma adjustments by line item.
Reference to
Notes to
Pro Forma
Financial
Statements Explanations
- ----------- -------------------------------------------------------------------
(1) The statements of operations and balance sheet for Paracelsus
Healthcare Corporation are summarized from its 1998 Annual Report on Form 10-K.
(2) To remove Chico's historical results of operations and the gain on sale
of the Chico facilities.
(3) To record interest expense on (i) the net pro forma increase in the
Credit Facility resulting from the Company's acquisition of the Foundation's
50% interest in DHHS, less net proceeds from the sale of Chico and LA Metro,
and (ii) the pro forma decrease in amounts outstanding under the Company's off
balance sheet receivable financing program as a result of the sale of Chico and
LA Metro accounts receivable, certain accounts of which served as collateral
under the program.
With respect to the Chico sale, the Unaudited Pro Forma Condensed
Combining Statements of Operations assume $24.6 million in net sales proceeds
were used to reduce amounts outstanding under the Credit Facility and $3.1
million in net sales proceeds were used to reduce amounts outstanding under the
Company's off balance sheet receivable financing program. The average interest
rate in effect under the Credit Facility was 9.2% for the six months ended June
30, 1998. The average interest rate in effect under the commercial paper
program was 6.7% for the six months ended June 30, 1998.
With respect to sale of LA Metro, the Unaudited Pro Forma Condensed
Combining Statements of Operations assume $4.2 million in net sales proceeds
were used to reduce amounts outstanding under the Credit Facility and a $9.3
million in net sales proceeds were used to reduce amounts outstanding under the
Company's off balance sheet receivable financing program. The average interest
rate in effect under the Credit Facility was 9.1% for the nine months ended
September 30, 1998. The average interest rate in effect under the commercial
paper program was 6.7% for the nine months ended September 30, 1998.
With respect to DHHS, the Unaudited Pro Forma Condensed Combining
Statements of Operations assume the Company increased the principal amount
outstanding under the Credit Facility by $65.0 million. The interest rate in
effect under the Credit Facility was 9.2% for the six months ended June 30,
1998.
(4) To record the pro forma provision for income taxes after taking into
effect the sale of LA Metro and Chico and the consolidation of DHHS pursuant to
the Company's acquisition of DHHS. The income tax provision on the pro forma
adjustments was calculated using the statutory tax rate of 41.0%. The
effective tax rate on historical income from continuing operations
was 37.3% for the year ended December 31, 1998.
9
PARACELSUS HEALTHCARE CORPORATION
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINING FINANCIAL STATEMENTS
The following is a summary of the pro forma adjustments by line item.
Reference to
Notes to
Pro Forma
Financial
Statements Explanations
- ----------- -------------------------------------------------------------------
- -
(5) To adjust depreciation and amortization expense for the step up in basis
for the depreciable assets of DHHS and the increase in goodwill in connection
with the allocated purchase price. The acquired assets have an average
remaining useful life of approximately 20 years based on the Company's
depreciation policy (35 years, 20 years and 10 years for buildings,
improvements and equipment, respectively). Goodwill, which represents cost in
excess of fair market value of net assets acquired, of $24.7 million is
amortized on a straight line basis over a 20-year period.
(6) To remove minority interest in DHHS for the six months ended June 30,
1998.
(7) To remove LA Metro's historical results of operations (including an
unusual charge of $233,000). The Company did not record any gain or loss on the
sale of LA Metro.
(8) To record pro forma interest income of $1.4 million for the year ended
December 31, 1998 on $9.9 million of secured promissory notes and a secured
second lien subordinated note of $3.8 million issued by the purchaser in
conjunction with the LA Metro sale. The $3.8 million note is subject to
adjustment based on a final working capital settlement. The principal amounts
and terms of the notes are discussed in a previously filed current report on
Form 8-K dated September 30, 1998, which is incorporated herein by reference.
(9) To remove Bledsoe's historical results of operations (including an
impairment charge of $1.1 million relating to the write-down of certain assets
in the fourth quarter of 1998), assets sold, liabilities assumed by the Buyer
in connection with the sale of Bledsoe. Working capital balances are as of
December 31, 1998. Actual working capital proceeds are to be based on balances
as of March 31, 1999, which are subject to adjustments and final settlement.
The Company recorded no material gain or loss on the sale of Bledsoe.
(10) To record pro forma interest income of $120,000 for the year ended
December 31, 1998 on $494,000 of Note A and $1.0 million of Note B issued by
the Buyer in conjunction with the Bledsoe sale. The thirty-day promissory note
of $642,000 is payable on May 15, 1999 and bears no interest rate. The terms
of Notes A and B are as followed:
(a) Secured Promissory Note A in the principal sum of $494,000,
which is subject to further adjustment for final settlement of working capital,
bears interest at a per annum rate of 8.0%. Interest payments are payable
annually beginning April 15, 2000 through maturity date, April 15, 2002.
Principal payments are payable monthly commencing on May 1, 2001 through
maturity date. Note A is secured by all assets of Bledsoe.
10
PARACELSUS HEALTHCARE CORPORATION
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINING FINANCIAL STATEMENTS
The following is a summary of the pro forma adjustments by line item.
Reference to
Notes to
Pro Forma
Financial
Statements Explanations
- ----------- -------------------------------------------------------------------
- -
(b) Secured Promissory Note B in the principal sum of $1.0 million
bears interest at a per annum rate of 8.0%. Interest is due and payable
annually beginning April 15, 2000 through maturity date, April 15, 2004.
Principal payments are payable monthly beginning on May 1, 2002 through
maturity date. Note B is secured by all outstanding common stock of Bledsoe.
(11) To reflect cash received from the sale of Bledsoe net of estimated
transaction costs.
(12) To record notes receivable issued by the Buyer of Bledsoe as summarized
below:
Current portion $ 642,000
Long term portion 1,494,000
----------
$2,136,000
=========