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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K/A
(AMENDMENT NO. 2)
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): JUNE 30, 1994
---------------------
CHARTER MEDICAL CORPORATION
(Exact name of Registrant as Specified in its Charter)
DELAWARE 1-6639 58-1076937
(State or Other (Commission (I.R.S. Employer
Jurisdiction of File Number) Identification
Incorporation No.)
or Organization)
577 MULBERRY STREET 31298
MACON, GEORGIA
(Address of Principal (Zip Code)
Executive Offices)
Registrant's Telephone Number, Including Area Code: (912) 742-1161
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On June 30, 1994, Charter Medical Corporation, a Delaware corporation (the
"Company"), completed the acquisition of substantially all the assets of 18
psychiatric hospitals, seven chemical-dependency treatment facilities, one
residential treatment facility and one physician outpatient practice (the
"Selected Psychiatric Hospitals") from National Medical Enterprises, Inc., a
Nevada corporation ("NME"). The Company presently intends to use or operate the
assets acquired from NME for the purposes NME operated such assets. The purchase
price for the assets was approximately $88.7 million in cash, plus $2 million in
cash for a covenant not to complete, plus an additional amount of cash equal to
the net working capital of the facilities acquired, amounting to approximately
$38.4 million. The amount paid for the net working capital of the facilities
acquired is subject to adjustment. In addition, the Company assumed certain
liabilities related to the acquired assets. The purchase price for the
facilities acquired was determined by NME following its solicitation of bids for
the facilities and arm's-length negotiations with the Company. NME and the
Company are not related to each other.
Approximately $98.5 million of the purchase price of the facilities acquired
was financed by the Company from the proceeds of the Company's issuance on May
2, 1994, of $375 million aggregate principal amount of 11 1/4% Senior
Subordinated Notes due 2004 (the "Senior Subordinated Notes"). Approximately
$11.1 of the purchase price was financed by the Company from borrowings pursuant
to the Second Amended and Restated Subsidiary Credit Agreement, dated May 2,
1994, among certain subsidiaries of the Company, Bankers Trust Company, as
Agent, First Union National Bank of North Carolina, as Co-Agent, and the
financial institutions participating therein. The remaining approximately $19.5
million of the purchase price was provided by cash on hand.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Businesses Acquired.
1
Independent Auditors' Report
The Boards of Directors
National Medical Enterprises, Inc. and
Charter Medical Corporation:
We have audited the accompanying combined balance sheets of the Selected
Psychiatric Hospitals of National Medical Enterprises, Inc. (the "Selected
Psychiatric Hospitals") as of May 31, 1994 and 1993, and the related combined
statements of operations, owners' equity and cash flows for each of the years in
the three-year period ended May 31, 1994. These combined financial statements
are the responsibility of the management of National Medical Enterprises, Inc.
("NME"). Our responsibility is to express an opinion on these combined financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
As discussed in Note 9 to the combined financial statements, NME and certain
of its subsidiaries at May 31, 1993 were engaged in various lawsuits and were
the subject of governmental investigations concerning possible improper
practices, some of which may have involved practices at certain of the Selected
Psychiatric Hospitals. Subsequent to May 31, 1993, the majority of these
lawsuits were settled, and on June 29, 1994, NME entered into a settlement
agreement with certain Federal government agencies which finalized all of its
open investigations of NME. While NME agreed to pay substantial amounts as part
of these settlements and agreements, no settlement amounts have been
specifically attributed to individual facilities.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the combined financial position of Selected
Psychiatric Hospitals of National Medical Enterprises, Inc. as of May 31, 1994
and 1993 and the results of their combined operations and their cash flows for
each of the years in the three-year period ended May 31, 1994 in conformity with
generally accepted accounting principles.
KPMG Peat Marwick LLP
Long Beach, California
August 11, 1994
2
SELECTED PSYCHIATRIC HOSPITALS OF
NATIONAL MEDICAL ENTERPRISES, INC.
COMBINED BALANCE SHEETS
MAY 31, 1993 AND 1994
(DOLLARS IN THOUSANDS)
1993 1994
----------- -----------
ASSETS
Current assets:
Cash and cash equivalents............................................................. $ 5,726 $ 3,624
Accounts receivable, net of allowance for bad debts................................... 39,472 38,568
Inventories of supplies, at cost...................................................... 1,214 1,257
Property, plant and equipment held for sale........................................... -- 88,303
Prepaid expenses and other assets..................................................... 1,462 982
----------- -----------
Total current assets.............................................................. 47,874 132,734
Other long term assets.................................................................. 8,266 --
Due from owners and affiliates.......................................................... -- 5,937
Property, plant and equipment, net...................................................... 169,050 --
Preopening costs and other intangible assets, at cost, net of accumulated amortization
of $23,770 at May 31, 1993............................................................. 10,576 --
----------- -----------
$ 235,766 $ 138,671
----------- -----------
----------- -----------
LIABILITIES AND OWNERS' EQUITY
Current liabilities:
Current portion of long-term debt..................................................... $ 46 $ 529
Accounts payable...................................................................... 7,430 4,962
Employee compensation and benefits.................................................... 6,865 5,601
Allowance for loss on sale of Selected Psychiatric Hospitals.......................... 2,202 --
Other current liabilities............................................................. 7,161 16,602
----------- -----------
Total current liabilities......................................................... 23,704 27,694
Long-term debt, net of current portion.................................................. 4,456 3,385
Minority interest....................................................................... 4,390 4,925
Other long-term liabilities............................................................. 333 30
Due to owners and affiliates............................................................ 132,728 --
Commitments and contingencies
Owners' equity.......................................................................... 70,155 102,637
----------- -----------
$ 235,766 $ 138,671
----------- -----------
----------- -----------
See accompanying notes to combined financial statements.
3
SELECTED PSYCHIATRIC HOSPITALS OF
NATIONAL MEDICAL ENTERPRISES, INC.
COMBINED STATEMENTS OF OPERATIONS
YEARS ENDED MAY 31, 1992, 1993 AND 1994
(DOLLARS IN THOUSANDS)
1992 1993 1994
----------- ----------- ------------
Net operating revenues.................................................... $ 310,561 $ 239,869 $ 214,210
----------- ----------- ------------
Salaries, general and administrative expenses............................. 250,242 209,678 185,974
Intercompany fees and allocations......................................... 37,000 30,079 26,808
Depreciation and amortization............................................. 19,700 13,134 5,974
Provision for loss on sale of Selected Psychiatric Hospitals.............. 2,202 -- 94,109
Minority interest in earnings of certain hospitals........................ 1,651 1,185 535
Interest, net of capitalized portion of $169 in 1992, $60 in 1993, and $36
in 1994.................................................................. 10,770 11,765 11,710
----------- ----------- ------------
Total costs and expenses.............................................. 321,565 265,841 325,110
----------- ----------- ------------
Loss before income tax benefit............................................ (11,004) (25,972) (110,900)
Income tax benefit........................................................ (4,143) (9,270) (40,201)
----------- ----------- ------------
Net loss.................................................................. $ (6,861) $ (16,702) $ (70,699)
----------- ----------- ------------
----------- ----------- ------------
See accompanying notes to combined financial statements.
4
SELECTED PSYCHIATRIC HOSPITALS OF
NATIONAL MEDICAL ENTERPRISES, INC.
COMBINED STATEMENTS OF CASH FLOWS
YEARS ENDED MAY 31, 1992, 1993 AND 1994
(DOLLARS IN THOUSANDS)
1992 1993 1994
---------- ---------- ------------
Cash flows from operating activities:
Net loss................................................................. $ (6,861) $ (16,702) $ (70,699)
Adjustments to reconcile net loss to net cash provided by operating
activities:
Depreciation and amortization.......................................... 19,700 13,134 5,974
Provisions for losses on accounts receivable........................... 20,799 12,881 14,677
Provision for minority interest........................................ 1,651 1,185 535
Provision for loss on sale of selected psychiatric hospitals........... 2,202 -- 94,109
Non-cash income tax benefit............................................ (4,143) (9,270) (40,201)
Changes in operating assets and liabilities:
Accounts and notes receivable........................................ 5,683 (6,964) (13,773)
Inventories of supplies.............................................. 141 87 (183)
Other current assets................................................. (2,841) 2,736 (332)
Pre-opening costs.................................................... 2,454 (2,722) --
Accounts payable and other accrued expenses.......................... 1,575 714 (3,732)
Other current liabilities............................................ 1,892 (5,457) 9,639
Other long term liabilities.......................................... (1,543) (833) (327)
---------- ---------- ------------
Net cash provided by (used in) operating activities...................... 40,709 (11,211) (4,313)
---------- ---------- ------------
Cash flows from investing activities:
Purchases of property, plant and equipment............................... (12,637) (15,879) --
---------- ---------- ------------
Net cash used in investing activities.................................... (12,637) (15,879) --
---------- ---------- ------------
Cash flows from financing activities:
Proceeds from borrowings................................................. 2,551 -- --
Principal payments on long term debt and capitalized leases.............. -- (505) (563)
Net change in amounts due from parent and affiliates..................... (21,883) 30,930 (100,407)
Dividends paid to owners................................................. (7,287) (3,030) (13,619)
Capital contributions.................................................... -- -- 116,800
---------- ---------- ------------
Net cash provided by (used in) financing activities...................... (26,619) 27,395 2,211
---------- ---------- ------------
Net increase (decrease) in cash and cash equivalents....................... 1,453 305 (2,102)
Cash and cash equivalents at beginning of period........................... 3,968 5,421 5,726
---------- ---------- ------------
Cash and cash equivalents at end of period................................. $ 5,421 $ 5,726 $ 3,624
---------- ---------- ------------
---------- ---------- ------------
See accompanying notes to combined financial statements
5
SELECTED PSYCHIATRIC HOSPITALS OF
NATIONAL MEDICAL ENTERPRISES, INC.
COMBINED STATEMENTS OF OWNERS' EQUITY
YEARS ENDED MAY 31, 1992, 1993 AND 1994
(DOLLARS IN THOUSANDS)
TOTAL
OWNERS'
EQUITY
-----------
Balance, May 31, 1991................................................................................ $ 104,035
Net loss............................................................................................. (6,861)
Dividends paid....................................................................................... (7,287)
-----------
Balance, May 31, 1992................................................................................ $ 89,887
Net loss............................................................................................. (16,702)
Dividends paid....................................................................................... (3,030)
-----------
Balance, May 31, 1993................................................................................ $ 70,155
Net loss............................................................................................. (70,699)
Dividends paid....................................................................................... (13,619)
Capital contribution................................................................................. 116,800
-----------
Balance, May 31, 1994................................................................................ $ 102,637
-----------
-----------
See accompanying notes to combined financial statements.
6
SELECTED PSYCHIATRIC HOSPITALS OF
NATIONAL MEDICAL ENTERPRISES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
MAY 31, 1992, 1993 AND 1994
1. SIGNIFICANT ACCOUNTING POLICIES
The combined financial statements have been prepared in connection with the
acquisition by certain subsidiaries of Charter Medical Corporation (Charter) of
substantially all of the assets of the 18 psychiatric hospitals, seven
chemical-dependency treatment facilities, one residential treatment center and
one physician outpatient practice, including related outpatient facilities and
other associated assets, (collectively the "Selected Psychiatric Hospitals")
from various subsidiaries of National Medical Enterprises, Inc. ("NME"), which
transaction is described in more detail in Note 10.
The combined financial statements present the historical combined financial
position and results of operations of the Selected Psychiatric Hospitals and, as
a result, include certain assets and liabilities of the Selected Psychiatric
Hospitals that Charter will not acquire or assume as part of the transaction
described in Note 10.
One of the Selected Psychiatric Hospitals is owned and operated by a
partnership in which NME currently owns a controlling interest. It is
anticipated that NME's interest in this partnership will be transferred as part
of the transaction described in Note 10. This Selected Psychiatric Hospital has
been consolidated in the financial statements with the respective minority
interest being recorded. Significant intercompany accounts and transactions
between the Selected Psychiatric Hospitals have been eliminated.
NET OPERATING REVENUES
Net operating revenues consist primarily of net patient service revenues
which are based on the hospitals' established billing rates less allowances and
discounts principally for patients covered by Medicare, Medicaid and other
contractual programs. These allowances and discounts were $174,617,000 in 1992,
$147,925,000 in 1993 and $171,346,000 in 1994. Payments under these programs are
based on either predetermined rates or the costs of services. Settlements for
retrospectively determined rates are estimated in the period in which the
related services are rendered and are adjusted in future periods as final
settlements are determined. Management believes that adequate provision has been
made for adjustments that may result from final determination of amounts earned
under these programs. Such amounts, however, are necessarily based upon
estimates and the amounts ultimately realized may vary substantially from these
estimates. Approximately 15%, 26% and 35% of net operating revenues in 1992,
1993 and 1994 respectively is from the participation of the Selected Psychiatric
Hospitals in Medicare and Medicaid programs.
The Selected Psychiatric Hospitals provide care without charge or at amounts
substantially less than their established rates to patients who meet certain
financial or economic criteria. Because the Selected Psychiatric Hospitals do
not pursue collection of amounts determined to qualify as charity care, they are
not reported as gross revenue and are not included in deductions from revenue or
in operating and administrative expenses.
Bad debt expense for estimated uncollectible accounts receivable, net of
recoveries, is included in operating and administrative expenses and was
$20,798,000 in 1992, $12,881,000 in 1993, and $14,677,000 in 1994.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are recorded at cost, net of accumulated
depreciation. The Selected Psychiatric Hospitals principally use the
straight-line method of depreciation for buildings, improvements and equipment
over their estimated useful lives as follows: buildings and improvements --
generally 20 to 50 years; equipment -- 3 to 15 years.
7
SELECTED PSYCHIATRIC HOSPITALS OF
NATIONAL MEDICAL ENTERPRISES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
MAY 31, 1992, 1993 AND 1994
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INTANGIBLE ASSETS
Preopening costs are generally amortized over 3 to 5 years. Costs in excess
of the fair value of identifiable net assets of purchased businesses are
generally amortized over 40 years. The straight-line method is used to amortize
most intangible assets. During 1994 the remaining preopening costs and other
intangible assets net of accumulated amortization were written off as part of
the provision for loss on sale of Selected Psychiatric Hospitals.
CASH EQUIVALENTS
The Selected Psychiatric Hospitals treat highly liquid investments with an
original maturity of three months or less as cash equivalents.
INCOME TAXES
The operations of the Selected Psychiatric Hospitals are included in the NME
consolidated Federal income tax return and in various unitary and consolidated
State income tax returns. NME charges or credits the Selected Psychiatric
Hospitals for amounts from applicable separate State income tax returns, if any,
and allocates to such hospitals a charge or credit for current and deferred
income tax expense attributable to consolidated and unitary Federal and State
income taxes. These allocations approximate income tax expense which would be
calculated on a stand alone basis. Such allocations are recorded as Due to
Owners and Affiliates.
Deferred tax assets and liabilities attributable to temporary differences of
the Selected Psychiatric Hospitals are recorded on the books of an affiliate.
2. DISCLOSURE ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount of cash, cash equivalents, accounts receivable, accounts
payable, interest payable and due to owners and affiliates approximates fair
value because of the short maturity of these instruments. The fair value of the
Selected Psychiatric Hospitals' long-term debt, (1) calculated by discounting
scheduled cash flows through the estimated maturity using estimated market
discount rates that reflect the credit and interest rate risk inherent in the
loans, or (2) based on current rates available for debt of the same remaining
maturities available to NME, also approximates carrying value.
3. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following at May 31, 1993 (in
thousands):
1993
-----------
Land................................................................... $ 15,553
Buildings and improvements............................................. 160,638
Constructions in progress.............................................. 1,910
Equipment.............................................................. 42,496
Facilities under capital leases........................................ 1,539
-----------
222,136
Less accumulated depreciation.......................................... 53,086
-----------
$ 169,050
-----------
-----------
On November 30, 1993, NME decided to discontinue its psychiatric hospital
business and adopted a plan to dispose of the psychiatric hospitals within one
year. As a result of this decision, NME wrote
8
SELECTED PSYCHIATRIC HOSPITALS OF
NATIONAL MEDICAL ENTERPRISES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
MAY 31, 1992, 1993 AND 1994
3. PROPERTY, PLANT AND EQUIPMENT (CONTINUED)
down the carrying value of the assets by approximately $94,000,000 to the amount
of the expected sales proceeds and has classified the property, plant and
equipment as current assets held for sale. See further discussion in Note 10. No
depreciation on property, plant and equipment has been recorded subsequent to
November 30, 1993, the date the selected facilities were determined to be held
for sale.
4. RELATED PARTY TRANSACTIONS
Certain Selected Psychiatric Hospitals participate in the NME cash
management program which requires that cash deposits be transferred to
NME-controlled bank accounts. In this system, generally all cash accounts are
zero-balance accounts. Increases and decreases in the NME due to/from owners and
affiliates account are principally a function of cash flow and accrued interest
(10% in 1992, 1993 and 1994) and noncash entries for certain overhead and
expense transfers. Intercompany charges reflected in the combined financial
statements are summarized as follows (in thousands):
1992 1993 1994
--------- --------- ---------
Interest expense on intercompany borrowings.......................... $ 10,626 $ 11,296 $ 11,277
Insurance premiums................................................... 4,291 5,494 4,938
Hospital management salaries, bonuses and data processing costs
allocated from parent............................................... 6,950 6,352 3,234
Other corporate overhead allocations................................. 37,000 30,079 26,808
--------- --------- ---------
$ 58,867 $ 53,221 $ 46,257
--------- --------- ---------
--------- --------- ---------
Total interest expense was calculated monthly at a rate of 10% on due
to/from owners and affiliates account balances for the years ended May 31, 1992,
1993 and 1994.
Salaries, general and administrative expenses include gross insurance
premiums paid to Health Facilities Insurance Corporation, Ltd. (HFIC), a wholly
owned subsidiary of NME, for professional and other insurance coverage. NME also
provides certain management and administrative services to the Selected
Psychiatric Hospitals for which it charges a fee. Each of the Selected
Psychiatric Hospitals is allocated a portion of the fee based on a specified
percentage of gross revenues earned, which is included in salaries, general and
administrative expenses in the accompanying combined statements of operations.
During the fiscal year ended May 31, 1994, capital contributions totalling
approximately $117 million were made to the Selected Psychiatric Hospitals by
decreasing the amount due to owners and affiliates.
9
SELECTED PSYCHIATRIC HOSPITALS OF
NATIONAL MEDICAL ENTERPRISES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
MAY 31, 1992, 1993 AND 1994
5. LONG-TERM DEBT
Long-term debt of the Selected Psychiatric Hospitals at May 31, 1993 and
1994 is as follows (in thousands):
1993 1994
--------- ---------
Notes secured by property, plant and equipment at rates ranging
from 6% to 11.25%............................................. $ 3,540 $ 3,045
Obligations under capital leases at rates ranging from 4.8% to
14.71%........................................................ 962 869
--------- ---------
4,502 3,914
Less current portion........................................... 46 529
--------- ---------
$ 4,456 $ 3,385
--------- ---------
--------- ---------
Minimum principal payments on long-term debt subsequent to May 31, 1994 are
as follows (in thousands):
1995....................................................... $ 529
1996....................................................... 607
1997....................................................... 658
1998....................................................... 719
1999....................................................... 663
Thereafter................................................. 738
---------
$ 3,914
---------
---------
Interest paid to third parties totaled $455,000, $717,000 and $577,000
during the years ended May 31, 1992, 1993 and 1994, respectively.
6. INCOME TAX BENEFIT
Income tax expense (benefits) allocated by NME for the years ended May 31
consist of the following amounts (in thousands):
1992 1993 1994
--------- ---------- ----------
Current
Federal....................................... $ (1,472) (10,394) (7,692)
State......................................... 536 (1,630) (162)
--------- ---------- ----------
(936) (12,024) (7,854)
--------- ---------- ----------
Deferred taxes:
Federal....................................... (2,417) 2,094 (26,244)
State......................................... (790) 660 (6,103)
--------- ---------- ----------
(3,207) 2,754 (32,347)
--------- ---------- ----------
Total tax benefit........................... $ (4,143) (9,270) (40,201)
--------- ---------- ----------
--------- ---------- ----------
The main difference between the Federal statutory rate of 34% and the
effective tax rate is attributable to state income taxes, net of Federal income
tax benefit.
Effective June 1, 1993, NME adopted Statement of Financial Accounting
Standard No. 109, "Accounting for Income Taxes" (SFAS 109). Among other
provisions, this standard requires deferred
10
SELECTED PSYCHIATRIC HOSPITALS OF
NATIONAL MEDICAL ENTERPRISES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
MAY 31, 1992, 1993 AND 1994
6. INCOME TAX BENEFIT (CONTINUED)
tax balances to be determined using enacted tax rates for the years in which the
taxes will actually be paid or refunds received. At May 31, 1993, deferred tax
accounts recorded by an affiliate applicable to the Selected Psychiatric
Hospitals' timing differences reflect the statutory rates that were in effect
when the deferrals were initiated. Upon adoption, such deferred tax accounts
applicable to the temporary differences of Selected Psychiatric Hospitals were
adjusted and the affiliate recognized an income tax benefit on account of the
change of method. Selected Psychiatric Hospitals continue to receive an
allocation of current and deferred income tax expense, modified to reflect the
principles contained in SFAS 109.
Deferred tax assets and liabilities relating to the assets and liabilities
of the Selected Psychiatric Hospitals are recorded on the books of an affiliate.
As of June 1, 1993 and May 31, 1994, these amounts were as follows (in
thousands):
JUNE 1, 1993 MAY 31, 1994
-------------------- --------------------
ASSETS LIABILITIES ASSETS LIABILITIES
--------- --------- --------- ---------
Depreciation and fixed asset basis differences...................... $ -- $ 12,921 $ 18,456 $ --
Receivables -- adjustments and allowances........................... 1,798 -- 2,231 --
Cash basis accounting charge........................................ -- 5,804 -- 4,559
Intangible assets................................................... -- 3,220 -- --
Deferred Compensation............................................... 392 -- 38 --
Other accrued assets and liabilities................................ 1,294 -- 44 346
--------- --------- --------- ---------
$ 3,484 $ 21,945 $ 20,769 $ 4,905
--------- --------- --------- ---------
--------- --------- --------- ---------
7. LEASE OBLIGATIONS
Future minimum lease payments for operating leases are as follows (in
thousands):
1995...................................................... $ 1,878
1996...................................................... 1,108
1997...................................................... 901
1998...................................................... 646
1999...................................................... 665
Thereafter................................................ 9,650
---------
$ 14,848
---------
---------
Rental expense under operating leases, including contingent rent expense and
short-term leases, was $5,855,000 in 1992, $5,829,000 in 1993, and $4,316,000 in
1994.
8. PROFESSIONAL AND GENERAL LIABILITY INSURANCE
The professional and comprehensive general liability risks of the Selected
Psychiatric Hospitals are insured by HFIC. The coverage provided is limited to
$25,000,000 per occurrence with an annual aggregate limit of $25,000,000. HFIC
reinsures risks in excess of $500,000 per occurrence with major insurance
carriers.
The Selected Psychiatric Hospitals also have umbrella coverage with major
insurance carriers for losses above the limits provided by HFIC. The excess
coverage provided is limited to $75,000,000 per occurrence with an annual
aggregate limit of $75,000,000.
Insurance coverage on the Selected Psychiatric Hospitals is effective
through June 30, 1994.
11
SELECTED PSYCHIATRIC HOSPITALS OF
NATIONAL MEDICAL ENTERPRISES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
MAY 31, 1992, 1993 AND 1994
9. OTHER CONTINGENCIES
UNUSUAL LEGAL PROCEEDINGS
Beginning in its fiscal year ending May 31, 1992, NME became involved in
significant legal proceedings and investigations of an unusual nature related
principally to its psychiatric business which are further described below. At
May 31, 1993, neither the ultimate disposition of the unusual lawsuits,
investigations and claims nor the amount of liabilities or losses arising from
them could be determined. Furthermore, at May 31, 1993, NME expected to incur
substantial legal charges until these matters could be disposed of, for which
NME established a reserve at the parent Company level of the Selected
Psychiatric Hospitals.
1. INSURANCE LITIGATION -- Beginning in July, 1992, various insurance
companies filed three lawsuits against NME and certain of its subsidiaries
alleging that NME's psychiatric hospitals engaged in certain fraudulent
practices. The suits did not allege a specific dollar amount of damages, but
sought the return of alleged overpayments, punitive and treble damages, and
attorney fees. NME settled these lawsuits in November, 1993 and February, 1994
and paid an aggregate of approximately $215,000,000. In return, the insurers
agreed, on an individual basis, to resume standard business relations with NME.
2. INVESTIGATIONS -- During the fiscal year ending May 31, 1993, NME
became aware that certain government agencies were investigating whether some of
NME's psychiatric facilities engaged in improper practices. The Federal
Government was seeking documents by subpoena from certain facilities, hospitals
and regional offices and interviewing and seeking testimony from present and
former employees. In addition, on August 26, 1993, the Psychiatric Division's
headquarters in Santa Monica, California, the Psychiatric Division's regional
offices in Dallas, Texas and Fairfax, Virginia and nine psychiatric facilities
unexpectedly were served with search warrants, issued by the Department of
Justice, for various categories of documents.
On June 29, 1994, NME entered into a settlement with various federal
agencies which became effective on July 12, 1994 when it was approved by a
federal judge. Pursuant to the terms of the agreement, NME agreed to pay
approximately $362,700,000 to conclude the federal investigations. In addition,
NME reached agreements-in-principle with 27 states and the District of Columbia
to pay an additional $16,300,000 to resolve their potential claims related to
certain of its psychiatric hospitals.
3. SHAREHOLDERS' LAWSUITS -- In October and November, 1991, shareholder
derivative actions and federal class actions were filed against NME. The
derivative action was dismissed by the court in May, 1993, but the dismissal is
being appealed by the plaintiffs. On December 20, 1993, shareholders' lawsuits
were consolidated into one action. The federal class action alleges violations
of the Federal Securities law against NME and certain of its executive officers.
The factual allegations underlying these suits are similar to those allegations
referred to above. Through a mediation process, the parties to both lawsuits
have reached an agreement-in-principle for the settlement of these lawsuits,
including contributions to the settlement by certain insurance companies.
4. PSYCHIATRIC MALPRACTICE CASES INVOLVING FRAUD AND CONSPIRACY
CLAIMS -- In addition, NME and certain of its officers and directors are
defendants in a number of lawsuits filed on behalf of patients making various
claims including conspiracy, false imprisonment, fraud and gross negligence. NME
has now settled approximately two-thirds of these lawsuits for $20,500,000.
The aggregate amount of the reserves recorded by NME in connection with
these settlements and agreements as of May 31, 1994 amounted to approximately
$740,000,000 including $65,000,000 which was accrued as of May 31, 1993 for an
estimate of the costs of defending itself through the trial phase
12
SELECTED PSYCHIATRIC HOSPITALS OF
NATIONAL MEDICAL ENTERPRISES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
MAY 31, 1992, 1993 AND 1994
9. OTHER CONTINGENCIES (CONTINUED)
of the cases listed above. These settlements and agreements were reached in the
aggregate and were not allocated or apportioned to individual facilities, and
management believes that any allocation to facilities would be arbitrary and
therefore inappropriate. Accordingly, none of these reserves have been reflected
in the accompanying combined financial statements, nor has any provision or any
liability resulting from the ultimate disposition of these matters been
recognized in such financial statements.
10. DISPOSAL OF PSYCHIATRIC FACILITIES
On November 30, 1993, NME adopted a plan to discontinue its psychiatric
business and dispose of substantially all of its psychiatric hospitals and
substance abuse facilities. Accordingly, the Selected Psychiatric Hospitals
included in these financial statements have been written down by approximately
$94,000,000 to their estimated realizable value as of November 30, 1993.
NME entered into two separate Asset Sale Agreements, each dated as of March
29, 1994, to sell 47 psychiatric hospitals to certain subsidiaries of Charter
for approximately $147 million. One Asset Sale Agreement ("First Facilities
Agreement") provides for the sale of 30 facilities for an approximate sales
price of $92 million in cash, plus $2 million in cash for a covenant not to
compete, plus an additional amount of cash equal to certain components of net
working capital of the facilities. The second Asset Sale Agreement ("Subsequent
Facilities Agreement") provides for the sale of 17 facilities for an approximate
sales price of $55 million in cash, plus $1 million in cash for a covenant not
to compete, plus an additional amount of cash equal to certain components of net
working capital of the facilities. NME and Charter received a request for
additional information related to the sale from the Federal Trade Commission
("FTC") in connection with obtaining approval pursuant to the Hart-Scott-Rodino
Anti-Trust Improvements Act of 1976, as amended. The FTC issued approval on June
24, 1994 to the sale of those 30 facilities covered by the First Facilities
Agreement. The facilities covered by the Subsequent Facilities Agreement are
still subject to the FTC's request for additional information, which is being
responded to by NME and Charter.
On June 30, 1994, NME closed the sale of 27 Selected Psychiatric Hospitals
of the 30 facilities covered by the First Facilities Agreement for an
approximate aggregate purchase price of $88 million plus $2 million for a
covenant not to compete plus an additional amount for certain components of net
working capital. The remaining 3 facilities covered by the First Facilities
Agreement are expected to be closed in the near future. Based on discussions
with the FTC, NME believes that the FTC will not approve the sale of 5
facilities (including a residential treatment center that is leased to a third
party) out of the 17 facilities covered by the Subsequent Facilities Agreement.
The aggregate purchase price for substantially all of the assets (excluding
working capital) of the 42 facilities Charter expects to acquire is
approximately $132 million. No specific date has been set to close these sales
or the sale of the remaining 3 facilities covered by the First Facilities
Agreement, except that all closings under the sales agreements must occur prior
to September 30, 1994, unless mutually extended under certain conditions.
13
(b) Pro Forma Financial Information
The Company entered into two separate Asset Sale Agreements with NME, each
dated March 29, 1994, providing for the purchase of substantially all of the
assets of 36 psychiatric hospitals, eight chemical-dependency treatment
facilities, two residential treatment centers and one physician outpatient
practice. On June 30, 1994, the Company purchased 27 of the facilities covered
by the Asset Sale Agreements from NME. The Company believes that it will not
obtain a regulatory approval required for it to acquire five of the facilities
(including a residential treatment center that is leased to a third party). The
facilities acquired on June 30, 1994, along with the 15 facilities the Company
expects to acquire from NME are referred to as the "Target Hospitals."
The unaudited Pro Forma Condensed Consolidated Statements of Operations for
the year ended September 30, 1993, and the nine months ended June 30, 1994, and
the unaudited Pro Forma Condensed Consolidated Balance Sheet as of June 30,
1994, set forth below, have been prepared by combining the Company's audited
consolidated statement of operations for the year ended September 30, 1993 with
the Target Hospitals' unaudited combined condensed statement of operations for
the twelve months ended August 31, 1993; combining the Company's unaudited
condensed consolidated statement of operations for the nine months ended June
30, 1994 with the Target Hospitals' unaudited combined condensed statement of
operations for the nine months ended May 31, 1994; combining the Company's
unaudited condensed consolidated balance sheet as of June 30, 1994 with the
assets and liabilities of the remaining 15 Target Hospitals; and giving effect
to the issuance of the Senior Subordinated Notes, the borrowings pursuant to its
amended and restated credit agreements with a group of financial institutions
(the "New Credit Agreement"), the application of the proceeds thereof to the
repayment of certain debt and to finance the acquisition of the Target Hospitals
(the "Financing Transactions") and the payment of the estimated related
expenses.
The unaudited Pro Forma Condensed Consolidated Statements of Operations for
the year ended September 30, 1993, and the nine months ended June 30, 1994, were
prepared as if the Financing Transactions had occurred on October 1, 1992 and
1993, respectively. The unaudited Pro Forma Condensed Consolidated Balance Sheet
as of June 30, 1994, was prepared giving effect to the Financing Transactions,
to the extent of the acquisition of 27 Target Hospitals on such date, and the
assumption of certain debt of such Target Hospitals and as if the acquisition of
the remaining Target Hospitals and related borrowings had occurred on such date.
For purposes of presenting pro forma results, no changes in revenues and
expenses have been made to reflect the result of any modification to operations
that might have been made had the Financing Transactions been consummated on the
assumed effective dates of such transactions. The pro forma expenses include the
recurring costs which are directly attributable to such transactions, such as
interest expense, and the related tax effects. The pro forma financial
information does not purport to be indicative of the results which would
actually have been attained had such transactions been completed as of the date
and for the periods presented or which may be attained in the future.
14
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
AS OF JUNE 30, 1994
(IN THOUSANDS)
ASSETS
TOTAL
CONTINUING
CHARTER AS PRO FORMA PRO FORMA
REPORTED ADJUSTMENTS CONSOLIDATED
---------- ------------ ------------
Current assets
Cash and cash equivalents........................................... $ 103,547 $ (52,012)(a) $ 54,961
3,426(b)
Accounts receivable, net............................................ 173,327 13,188(a) 186,515
Supplies............................................................ 6,470 824(a) 7,294
Other current assets................................................ 16,411 488(a) 16,899
---------- ------------
Total current assets.............................................. 299,755 265,669
Property and equipment
Land................................................................ 97,804 3,635(a) 101,439
Buildings and improvements.......................................... 378,808 29,223(a) 408,031
Equipment........................................................... 88,351 8,093(a) 96,444
---------- ------------
564,963 605,914
Accumulated depreciation............................................ (49,631) (49,631)
---------- ------------
515,332 556,283
Construction in progress............................................ 3,263 44(a) 3,307
---------- ------------
518,595 559,590
Other long-term assets................................................ 115,177 1,000(a) 116,264
87(a)
Reorganization value in excess of amounts allocable to identifiable
assets, net.......................................................... 33,801 33,801
---------- ------------ ------------
$ 967,328 $ 7,996 $ 975,324
---------- ------------ ------------
---------- ------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable.................................................... $ 49,730 $ 2,202(a) $ 51,932
Accrued expenses.................................................... 85,659 2,113(a) 87,772
Other accrued liabilities........................................... 52,352 52,352
Current income taxes payable........................................ 4,987 4,987
Current maturities of long-term debt and capital lease
obligations........................................................ 2,999 2,999
---------- ------------
Total current liabilities......................................... 195,727 200,042
Long-term debt and capital lease obligations.......................... 534,232 3,426(b) 537,658
Deferred income tax liabilities....................................... 33,665 33,665
Reserve for unpaid claims............................................. 97,695 97,695
Deferred credits and other long-term liabilities...................... 20,359 255(a) 20,614
Stockholders' equity
Common stock........................................................ 6,723 6,723
Other stockholders' equity
Additional paid-in capital........................................ 240,648 240,648
Accumulated deficit............................................... (72,672) (72,672)
Unearned compensation under ESOP.................................. (85,826) (85,826)
Warrants outstanding.............................................. 182 182
Cumulative foreign currency adjustments........................... (3,405) (3,405)
---------- ------------
Stockholders' equity............................................ 85,650 85,650
Commitments and contingencies
---------- ------------ ------------
$ 967,328 $ 7,996 $ 975,324
---------- ------------ ------------
---------- ------------ ------------
<FN>
- ------------------------------
See Notes to Pro Forma Condensed Consolidated Financial Statements (Unaudited)
15
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
FOR THE YEAR ENDED SEPTEMBER 30, 1993
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
FOR THE 12 MONTHS PRO FORMA
ENDED 8/31/93 ADJUSTMENTS
---------------------- -------------------------
15 TARGET 15 TARGET
TOTAL 27 TARGET HOSPITALS 27 TARGET HOSPITALS
CONTINUING HOSPITALS REMAINING HOSPITALS REMAINING
CHARTER AS PURCHASED TO BE PURCHASED TO BE PRO FORMA
REPORTED ON 6/30/94 PURCHASED ON 6/30/94 PURCHASED CONSOLIDATED
---------- ----------- --------- ------------ ---------- ------------
Net revenue...................................... $ 897,907 $ 226,727 $ 117,314 $ 1,241,948
---------- ----------- --------- ------------
Salaries, general and administrative expenses.... 640,847 190,344 91,955 $ 2,500(c) $ 1,500(c) 927,539
958(d) (565)(d)
Bad debt expense................................. 67,300 9,236 5,131 81,667
Intercompany fees and
allocations..................................... -- 29,999 15,224 (29,999)(e) (15,224)(e) --
Depreciation and amortization.................... 26,382 13,253 6,232 (8,225)(f) (3,845)(f) 33,797
Amortization of reorganization value in excess of
amounts allocable to identifiable assets........ 42,678 -- -- 42,678
Interest, net.................................... 74,156 12,239 2,462 (21,061)(g) 312(g) 53,919
(11,727)(h) (2,462)(h)
ESOP expense..................................... 45,874 -- -- 45,874
Stock option expense............................. 38,416 -- -- 38,416
Minority interest in earnings of certain
hospitals....................................... -- 958 (565) (958)(d) 565(d) --
---------- ----------- --------- ------------
935,653 256,029 120,439 1,223,890
---------- ----------- --------- ------------
Income (Loss) from continuing operations before
income
taxes........................................... (37,746) (29,302) (3,125) 68,512 19,719 18,058
Provision (Benefit) for income taxes............. 1,874 (10,603) 2,493 25,503(j) 3,813(j) 23,080
---------- ----------- --------- ------------ ---------- ------------
Loss from continuing
operations...................................... $ (39,620) $ (18,699) $ (5,618) $ 43,009 $ 15,906 $ (5,022)
---------- ----------- --------- ------------ ---------- ------------
---------- ----------- --------- ------------ ---------- ------------
Average number of common
shares outstanding.............................. 24,875 24,875
---------- ------------
---------- ------------
Loss from continuing operations per common
share........................................... $ (1.59) $ (.20)
---------- ------------
---------- ------------
<FN>
- ------------------------
See Notes to Pro Forma Condensed Consolidated Financial Statements (Unaudited)
16
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
FOR THE NINE MONTHS ENDED JUNE 30, 1994
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
PRO FORMA
FOR THE 9 MONTHS ADJUSTMENTS
ENDED 5/31/94 ---------------------
---------------------- 15
15 TARGET TARGET
TOTAL 27 TARGET HOSPITALS 27 TARGET HOSPITALS
CONTINUING HOSPITALS REMAINING HOSPITALS REMAINING
CHARTER AS PURCHASED TO BE PURCHASED TO BE PRO FORMA
REPORTED ON 6/30/94 PURCHASED ON 6/30/94 PURCHASED CONSOLIDATED
---------- ----------- --------- ------------ ------ ------------
Net revenue............................ $ 642,284 $ 161,812 $ 84,011 $ 888,107
---------- ----------- --------- ------------
Salaries, general and administrative
expenses.............................. 463,788 129,543 66,100 $ 1,875(c) $1,125(c) 662,832
396(d) 5(d)
Bad debt expense....................... 48,822 11,828 6,571 67,221
Intercompany fees and
allocations........................... -- 19,071 12,318 (19,071)(e) (12,318)(e) --
Depreciation and amortization.......... 20,371 2,659 1,541 1,112(f) 250(f) 25,933
Amortization of reorganization value in
excess of amounts allocable to
identifiable assets................... 23,400 -- -- 23,400
Interest, net.......................... 27,064 8,616 2,692 12,828(g) 159(g) 40,397
(8,270)(h) (2,692)(h)
ESOP expense........................... 36,898 -- -- 36,898
Stock option expense................... 6,936 -- -- 6,936
Minority interest in earnings of
certain hospitals..................... -- 396 5 (396)(d) (5)(d) --
Provision for loss on sale of
assets................................ -- 94,109 46,907 (94,109)(i) (46,907)(i) --
---------- ----------- --------- ------------
627,279 266,222 136,134 863,617
---------- ----------- --------- ------------
Income (Loss) before income
taxes................................. 15,005 (104,410) (52,123) 105,635 60,383 24,490
Provision (Benefit) for income taxes... 15,638 (37,604) (19,139) 38,094(j) 22,443(j) 19,432
---------- ----------- --------- ------------ ------ ------------
Net income (loss) from continuing
operations............................ $ (633) $ (66,806) $ (32,984) $ 67,541 $37,940 $ 5,058
---------- ----------- --------- ------------ ------ ------------
---------- ----------- --------- ------------ ------ ------------
Average number of common shares
outstanding (k)....................... 26,225
----------
----------
Loss per common share (k).............. $ (.02)
----------
----------
Earnings per common share and common
equivalent share (k).................. $ .19
------------
------------
Earnings per common share assuming full
dilution (k).......................... $ .19
------------
------------
<FN>
- ------------------------
See Notes to Pro Forma Condensed Consolidated Financial Statements (Unaudited)
17
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(a) To record the purchase of the property and equipment, the working capital
and the covenant not to compete for the 15 Target Hospitals remaining to be
acquired, as detailed below, using the purchase method of accounting.
Accounts receivable............................................... $ 13,188
Supplies.......................................................... 824
Other current assets.............................................. 488
Other long-term assets............................................ 87
Accounts payable.................................................. (2,202)
Accrued expenses.................................................. (2,113)
Other long-term liabilities....................................... (255)
---------
Working capital purchased....................................... 10,017
---------
Land.............................................................. 3,635
Buildings and improvements........................................ 29,223
Equipment......................................................... 8,093
Construction in progress.......................................... 44
---------
Property and equipment purchased................................ 40,995
---------
Covenant not to compete........................................... 1,000
---------
Total purchase price............................................ $ 52,012
---------
---------
(b) To record proceeds from issuance of new debt under the New Credit Agreement
utilized in acquiring the 15 Target Hospitals remaining to be acquired.
(c) To record estimated incremental overhead related to the Target Hospitals.
This amount was calculated by preparing a detailed zero based budget and
included the following functions: data processing, cost report preparation,
tax, accounting, payroll, accounts payable, risk management, division
management, treasury and internal audit.
(d) To reclassify to operating expenses the minority interests in certain
hospitals.
(e) To eliminate intercompany management fees and corporate overhead allocated
to the Target Hospitals by their parent corporations.
(f) To remove the historical depreciation and amortization of the Target
Hospitals and record depreciation expense on buildings and equipment
purchased and amortization expense related to intangibles as follows:
FOR THE YEAR ENDED FOR THE NINE MONTHS
SEPTEMBER 30, 1993 ENDED JUNE 30, 1994
------------------------ ------------------------
15 TARGET 15 TARGET
27 TARGET HOSPITALS 27 TARGET HOSPITALS
HOSPITALS REMAINING HOSPITALS REMAINING
PURCHASED TO BE PURCHASED TO BE
ON 6/30/94 PURCHASED ON 6/30/94 PURCHASED
----------- ----------- ----------- -----------
Depreciation expense -- buildings...................... $ 2,767 $ 1,128 $ 2,075 $ 846
Depreciation expense -- equipment...................... 1,580 973 1,185 730
Amortization expense................................... 681 286 511 215
----------- ----------- ----------- -----------
$ 5,028 $ 2,387 $ 3,771 $ 1,791
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Pro forma depreciation and amortization are less than historical Target
Hospital amounts for the year ended September 30, 1993 because the values
assigned to property, plant and equipment and intangibles are less than the
historical values.
Pro forma depreciation and amortization exceed historical Target Hospital
amounts for the nine months ended June 30, 1994 because depreciation and
amortization had not been recorded since November 30, 1993 due to NME's
decision to sell the facilities.
18
(g) Interest expense related to the refinancing of the Company's existing
indebtedness and the borrowings under the New Credit Agreement and the
Senior Subordinated Notes was determined reflecting the Company's pro forma
capitalization as if it were outstanding during the entire period as
follows:
FOR THE YEAR
ENDED FOR THE NINE
INTEREST SEPTEMBER 30, MONTHS ENDED
AMOUNT RATE 1993 JUNE 30, 1994
----------- --------- ------------- -------------
New Credit Agreement................................... $ 76,010 6.625% $ 5,106 $ 3,819
Senior Subordinated Notes.............................. 375,000 11.25% 42,187 31,641
Letter of credit fees.................................. 72,974 0.25% 185 138
Revolver availability fees............................. 151,015 0.50% 765 572
Debt issue cost amortization........................... 19,064 2,645 1,972
Old debt remaining interest.................................................... 6,054 4,481
Historical interest income..................................................... (3,535) (2,572)
------------- -------------
Subtotal....................................................................... 53,407 40,051
Historical Charter interest.................................................... 74,156 27,064
------------- -------------
Adjustment..................................................................... $ (20,749) $ 12,987
------------- -------------
------------- -------------
(h) To remove historical interest expense of the Target Hospitals other than
interest on long-term debt and capital lease obligations to be assumed by
the Company.
(i) To remove the provision for loss on sale of assets recorded by the Target
Hospitals related to the sale of assets and working capital to the Company.
(j) To adjust the income tax provision resulting from the losses of the Target
Hospitals and the pro forma adjustments, based on the historical combined
federal and state statutory rate of 38% and 40% for the year ended September
30, 1993 and the nine months ended June 30, 1994, respectively, as shown
below:
FOR THE YEAR ENDED FOR THE NINE MONTHS
SEPTEMBER 30, 1993 ENDED JUNE 30, 1994
------------------ --------------------
Income from continuing operations before income taxes.............. $ 18,058 $ 24,490
Add nondeductible expenses:
Amortization of reorganization value in excess of amounts
allocable to indentifiable assets............................... 42,678 23,400
Other nondeductible expenses..................................... -- 691
-------- --------
60,736 48,581
Tax Rate........................................................... 38% 40%
-------- --------
Pro forma income tax provision..................................... $ 23,080 $ 19,432
-------- --------
-------- --------
(k) Loss per common share for the nine months ended June 30, 1994 was calculated
by dividing net loss by the weighted average number of common shares
outstanding during the period. Common equivalent shares would have been
antidilutive and were therefore not included in the calculation of loss per
common share. Pro forma earnings per common share and common equivalent
share were calculated by dividing net income by the total weighted average
common shares outstanding during the period (26,225,316) increased by the
number of shares issuable on the exercise of options and warrants
outstanding, reduced by the number of common shares that are assumed to have
been purchased with the proceeds from the exercise of the options and
warrants (1,052,443). Those purchases were assumed to have been made at the
average price of the common stock during the period. Pro forma earnings per
common share assuming full dilution were calculated in the same manner.
However, purchases assumed in the computation of pro forma earnings per
common share assuming full dilution were computed using the common stock
price at the end of the period, which was higher than the average price. The
net increase resulting from the exercise of options and warrants outstanding
would have been 1,062,739.
19
(c) Exhibits
2(a) Asset Sale Agreement (First Facilities), dated March 29, 1994, between
National Medical Enterprises, Inc., as Seller, and Charter Medical
Corporation, as Buyer, which was filed as Exhibit 2(d) to the
Company's Registration Statement on Form S-4 (File No. 33-53701), and
which is incorporated herein by reference.
2(b) Asset Sale Agreement (Subsequent Facilities), dated March 29, 1994,
between National Medical Enterprises, Inc., as Seller, and Charter
Medical Corporation, as Buyer, which was filed as Exhibit 2(e) to the
Company's Registration Statement on Form S-4 (File No. 33-53701), and
which is incorporated herein by reference.
Exhibits 2(a) and 2(b) do not contain copies of the exhibits and
schedules to such agreements. Such agreements describe such exhibits
and schedules. The Company agrees to furnish supplementally to the
Commission, upon request, a copy of any omitted exhibit or schedule to
such agreements.
23(a) Consent of KPMG Peat Marwick.
20
SIGNATURES
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 hereunto duly authorized.
Date: September 20, 1994
Charter Medical Corporation
By /s/ John R. Day
--------------------------------------
John R. Day,
Vice President -- Controller
(Chief Accounting Officer)