1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Date of Report ( Date of earliest event reported):
August 16, 1996
PARACELSUS HEALTHCARE CORPORATION
(Exact name of registrant as specified in its charter)
California 1-12055 95-3565943
(State or other ( Commission (IRS Employer
Jurisdiction File Number) Identification No.)
515 W. Greens Road, Suite 800, Houston, Texas 77067
(Address of principal executive offices)
Registrant's telephone number, including area code:
(713) 873-6623
155 North Lake Avenue, Suite 1100, Pasadena, California 91101
(Former name or former address, if changed since last report
This report contains 44 pages.
The exhibit index is included at page 12 of this report.
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On August 16, 1996, Paracelsus Healthcare Corporation (the
"Company") completed its acquisition of Champion Healthcare
Corporation ("Champion) and all its subsidiaries, pursuant
to an Amended and Restated Agreement and Plan of Merger,
dated as of May 29, 1996, by and among the Company, PC
Merger Sub, Inc., a wholly owned subsidiary of the Company,
and Champion. The acquisition was effected through the
merger (the "Merger") of PC Merger Sub, Inc. with and into
Champion, pursuant to which Champion, as the successor
company, became a wholly owned subsidiary of the Company,
and the shares of Champion's common and preferred stock were
converted into an aggregate of approximately 19,755,009
shares of the Company's common stock. In addition, the
Company assumed all of Champion's outstanding stock options,
subscription rights, warrants and convertible securities,
which as of August 16, 1996, represented the right to
acquire approximately 1,337,204 shares, 80,000 shares,
422,286 shares and 60,067 shares of the Company's common
stock, respectively. As a result of the Merger, the Company
also assumed approximately $173.9 million in debt,
consisting primarily of $94.3 million of Champion's 11%
Senior Subordinated Notes and $59.7 million of amount
borrowed under Champion's Revolving Credit Facility.
For additional information concerning the business and
acquisition of Champion, see the Company's Registration
Statement on Form S-4 (Commission File No. 333-8521) filed
on July 19, 1996.
ITEM 5. OTHER EVENTS.
On August 16, 1996, simultaneously with the consummation of
the merger transaction as described under Item 2, the
Company completed its public equity offering of 5,200,000
shares of its common stock, including 600,000 over-alloted
shares, at $8.50 per share, realizing net proceeds to the
Company of approximately $41.6 million. On such date, the
Company also completed a public debt offering of $325.0
million of its 10% Senior Subordinated Notes due 2006,
realizing net proceeds to the Company of approximately
$316.9 million. The Company has also commenced a tender
offer to purchase up to $75.0 million aggregate principal
amount of the outstanding 9.875% Senior Subordinated Notes
(the "Notes") for $1,027.50 per $1,000 principal amount. The
debt tender offer expired on August 22, 1996, with all Notes
having been tendered.
For additional information concerning the equity and debt
offerings and the tender offer, see the Company's
Registration Statements on Form S-1 (Commission File No.
333-07289 and 333-06713).
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial statements of business acquired.
The following financial statements of Champion are incorporated
herein by reference to the Company's Registration Statement on
Form S-4 (Commission File No. 333-8521):
- Report of independent public accountants, dated
February 27, 1996
- Consolidated balance sheet at December 31, 1994 and
1995
- Consolidated statement of operations for the years
ended December 31, 1993, 1994 and 1995
- Consolidated statement of stockholders' equity for the
years ended December 31, 1993, 1994 and 1995
- Consolidated statement of cash flows for the years
ended December 31, 1993, 1994 and 1995
- Notes to consolidated financial statements
The following financial statements of Champion are filed with
this report:
- Condensed consolidated balance sheet as of June 30,
1996 (Unaudited)
- Condensed consolidated statement of operations for the
six months ended June 30, 1996 and 1995 (Unaudited)
- Condensed consolidated statement of cash flows for the
six months ended June 30, 1996 and 1995 (Unaudited)
- Notes to condensed consolidated financial statements
(Unaudited)
(b) Pro forma financial information.
As of the date of filing this Current Report on Form 8-K, it
is impracticable for the Company to provide the pro forma
financial information required by this Item 7(b). Such
financial statements shall be filed by amendment to this
Form 8-K no later than 60 days after August 31, 1996.
(c) Exhibits.
2.1(a) Amended and Restated Agreement and Plan of Merger,
dated as of May 29, 1996, by and among Paracelsus,
PC Merger Sub, Inc. and Champion.
99.1 Audited financial statements of Champion for the three
years ended December 31, 1995.
___________________
(a) Incorporated herein by reference to Exhibit 2.1 to the
Company's Registration Statement on Form S-4( Commission
File No. 333-8521).
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CHAMPION HEALTHCARE CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
As of June 30, 1996
(Dollars in thousands)
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 13,273
Patient accounts receivable, net of
allowance for doubtful accounts 34,725
Supplies 3,906
Other current assets 7,741
------
Total current assets 59,645
Property and equipment 182,014
Less: Accumulated depreciation and amortization (14,272)
------
Net property and equipment 167,742
Investment in Dakota Heartland Health System 52,469
Other assets 34,983
------
Total assets $ 314,839
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt
and capital lease obligations $ 2,581
Accounts payable 10,216
Other current liabilities 22,045
-----
Total current liabilities 34,842
Long-term debt and capital lease obligations 175,710
Other long-term liabilities 10,135
Redeemable preferred stock 46,127
Stockholders' equity:
Common stock 144
Common stock subscribed 40
Common stock subscription receivable (40)
Paid in capital 61,403
Accumulated deficit (13,522)
------
Total stockholders' equity 48,025
Total liabilities and stockholders' equity $314,839
=======
See notes to condensed consolidated financial statements.
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CHAMPION HEALTHCARE CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(Dollars in thousands, except per share data)
(Unaudited)
Six Months Ended June 30,
--------------------------
1996 1995
------ ----
Net patient service revenue $ 99,968 $ 69,561
Other revenue 1,525 2,485
------- ------
Net revenue 101,493 72,046
------- ------
Cost and expenses:
Salaries and benefits 43,693 31,260
Other operating expenses 37,849 28,316
Provision for bad debts 6,886 5,753
Interest 9,164 5,917
Depreciation and amortization 6,290 3,614
Equity in earnings of Dakota Heartland
Health System (7,762) (3,745)
Merger costs 1,122 -
------ ------
Total costs and expenses 97,242 71,115
------ ------
Income before income taxes and extraordinary loss 4,251 931
Provision (benefit) for income taxes 1,880 (75)
------ ------
Income before extraordinary loss 2,371 1,006
Extraordinary loss on early extinguishment of debt - (1,118)
------ -----
Net income (loss) $ 2,371 $ (112)
====== =====
Income (loss) applicable to common stock $ 2,273 $(3,092)
====== =====
Income (loss)per common share:
Primary -
Before extraordinary loss $ 0.16 $ (0.47)
Extraordinary loss - (0.26)
------ -----
$ 0.16 $ (0.73)
====== =====
Fully Diluted -
Before extraordinary loss $ 0.12 n/a
Extraordinary loss - n/a
------ -----
$ 0.12 n/a
====== =====
Weighted average common and common equivalent shares outstanding:
Primary 13,778 4,236
Fully Diluted 19,089 n/a
See notes to condensed consolidated financial statements.
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CHAMPION HEALTHCARE CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
Six Months Ended June 30,
------------------------
1996 1995
------- -----
Operating activities:
Net income $ 2,371 $ (112)
Equity in Dakota Heartland Health System's
earnings, net of partnership distributions (4,324) (3,745)
Non-cash expenses and changes in operating
assets and liabilities (194) 11,383
------- ------
Net cash provided by (used in)
operating activities (2,147) 7,526
------- -----
Investing activities:
Additions to property and equipment,
net of disposition (5,937) (17,389)
Purchase of facilities (10,746) (58,768)
Investment in Dakota Heartland Health System - (2,000)
Other (624) (1,252)
------- -------
Net cash used in investing activities (17,307) (79,409)
------- -------
Financing activities:
Proceeds from exercise of stock
warrants and options 9,034 696
Proceeds from issuance of long-term debt 29,900 117,905
Payments on long-term debt and capital
lease obligations (13,489) (93,096)
Release of restricted funds - 5,000
Other (301) -
------ ------
Net cash provided by financing activities 25,144 30,505
------ ------
Increase (decrease) in cash and cash equivalents 5,690 (41,378)
Cash and cash equivalents at beginning of year 7,583 48,424
------ ------
Cash and cash equivalents at end of period $ 13,273 $ 7,046
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See notes to condensed consolidated financial statements.
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CHAMPION HEALTHCARE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 -- BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements of the
Company have been prepared in accordance with generally accepted accounting
principles for interim financial statements and with the instructions to Form
10-Q. Accordingly, they do not include all of the information and notes
required by generally accepted accounting principles for annual financial
statements. In the opinion of management, all adjustments (consisting of
normal recurring accruals) considered necessary for a fair presentation have
been included. The Company's business is seasonal in nature and subject to
general economic conditions and other factors. Accordingly, operating results
for the six months ended June 30, 1996, are not indicative of the results
that may be expected for the year ended December 31, 1996. These financial
statements should be read in conjunction with the Company's audited
consolidated financial statements for the year ended December 31, 1995,
included in the Company's Annual Report on Form 10-K, as amended, for such
period.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
The Company's adoption of Statement of Financial Accounting Standards No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be disposed of" on January 1, 1996 did not have a material effect
on its financial statements.
NOTE 2 -- PARACELSUS MERGER
On August 9, 1996, the Company's stockholders, at a special meeting of
stockholders (the "Special Meeting"), adopted and approved an Amended and
Restated Agreement and Plan of Merger dated May 29, 1996 (the "Merger
Agreement") between the Company and Paracelsus Healthcare Corporation
("Paracelsus"), pursuant to which a wholly owned subsidiary of Paracelsus
will be merged into the Company, resulting in the Company becoming a wholly
owned subsidiary of Paracelsus. The Company expects the merger to be
consummated on or about August 16, 1996, after satisfying certain other terms
and conditions of the Merger Agreement. The Company expensed approximately
$1.1 million in merger costs during the second quarter of 1996.
Upon the consummation of the merger, each share of the Company's common stock
and preferred stock will convert into one share and two shares of Paracelsus'
common stock, respectively. Dr. Manfred George Krukemeyer, currently the
Chairman of the Board and sole shareholder of Paracelsus, and members of
Paracelsus' management will own approximately 60% of the combined company,
with current Company's security holders owning the remaining 40%.
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CHAMPION HEALTHCARE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 3 -- FINANCIAL INFORMATION OF EQUITY AFFILIATE
The Company, through a wholly owned subsidiary, owns 50% of a partnership
operated as Dakota Heartland Health System ("DHHS"). DHHS owns and operates
two general acute care hospitals with a total of 341 beds in Fargo, North
Dakota. The Company accounts for its investment in DHHS under the equity
method. The following table summarizes certain income statement information
of DHHS (in thousands).
Six Months Ended June 30,
-----------------------------
1996 1995
------- ------
Net revenue $55,204 $ 53,665
Operating margin 16,258 8,719
Net income 14,113 6,810
NOTE 4 -- LONG-TERM DEBT
On April 12, 1996, in contemplation of the merger between the Company and
Paracelsus, holders of the Company's 11% Senior Subordinated Notes (the
"Notes") entered into an agreement with the Company, among other things, to
(i) waive any rights to cause the Company to purchase the Notes from such
holders as a result of a change in control caused by the merger and
(ii) tender the Notes to the Company for prepayment at certain specified
premium amounts.
NOTE 5 -- ACQUISITIONS
On March 1, 1996, the Company acquired the 50-bed Jordan Valley Hospital
("Jordan") in West Jordan, Utah, from Columbia/HCA Healthcare Corporation
("Columbia"). In exchange, Columbia received the Company's 85-bed Autauga
Medical Center and adjacent skilled nursing facility in Prattville, Alabama,
plus approximately $10,750,000 in cash. Cash consideration included
approximately $3,750,000 for a net working capital differential, which is
subject to final settlement, and reimbursement of certain capital expenditures
made previously by Columbia.
The following unaudited pro forma consolidated results of operations for
the six months ended June 30, 1996 and 1995, assumes that the acquisition of
Jordan and Salt Lake Regional Medical Center ("SLRMC"), which was acquired
on April 13, 1995, occurred on January 1, 1995. The pro forma financial
information does not purport to be indicative of the results that would have
been attained had the transactions described above occurred on January 1, 1995.
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CHAMPION HEALTHCARE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Six months ended
--------------------
June 30
----------
1996 1995
------ -----
(Dollars in thousands,
except per share data)
Net revenue $102,731 $97,890
Income before extraordinary loss 2,291 2,031
Net income 2,291 913
Income (loss) applicable to common stock 2,193 (2,067)
Income (loss) per common share:
Primary-
Before extraordinary loss $ 0.16 $(0.23)
Extraordinary loss - (0.26)
----- -----
$ 0.16 $(0.49)
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Fully diluted-
Before extraordinary loss $ 0.12 n/a
Extraordinary loss - n/a
----- -----
$ 0.12 n/a
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NOTE 6 -- INCOME (LOSS) PER SHARE
Primary income (loss) per common share is computed by dividing income (loss)
applicable to common stock (net income less preferred stock dividend
requirements and accretion of preferred stock issuance costs) by the weighted
average number of common and common equivalent shares outstanding. Fully
diluted income (loss) per common share is computed by dividing net income
(loss) by the weighted average number of common and common equivalent shares
outstanding, including additional shares of common stock resulting from the
assumed conversion of shares of convertible preferred stock.
NOTE 7 -- STOCKHOLDERS' EQUITY
During the six months ended June 30, 1996, warrants were exercised to
purchase approximately 2,458,000 shares of common stock, resulting in cash
proceeds to the Company of approximately $8,717,000 and the tender of
approximately $4,895,000 of the Notes in lieu of cash.
At the Special Meeting held on August 9, 1996, the Company's stockholders
approved certain amendments to the various stock option plans. With respect
to the Directors' Stock Option Plan, the authorized shares for issuance was
increased from 60,000 to
10
CHAMPION HEALTHCARE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
100,000. The plan provisions now allow options held by directors whose
services cease after a merger of the Company to remain exercisable until the
date specified in such options, rather than expiring 90 days following such
merger. With respect to the Selected Executive Stock Option Plan No. 5, the
plan was amended to allow stock options or rights granted thereunder to be
assumed by the surviving company to a merger or consolidation with the
Company. With respect to certain stock option agreements between the Company
and each of Messrs. Charles R. Miller and James G. VanDevender, a cashless
exercise procedure was added to allow the Company to withhold shares issuable
upon exercise of options outstanding thereunder as a means for such option
holder to pay the option exercise price and/or any tax withholding
obligations incurred upon such exercise.
NOTE 8 -- SUBSEQUENT EVENT
On July 23, 1996, the Company's common stock commenced trading on the New
York Stock Exchange ("NYSE") under the symbol "CHC". Prior to that, its
shares had been traded on the American Stock Exchange. Upon the consummation
of the merger with Paracelsus (see Note 2), the Company will delist from the
NYSE and cease to be a separate public reporting entity.
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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
thereunto duly authorized.
Paracelsus Healthcare Corporation
(Registrant)
/s/ JAMES G. VANDENDER
Dated: August 29, 1996 By: ____________________________
James G. VanDevender
Executive Vice President,
Chief Financial Officer
& Director
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INDEX TO EXHIBITS
EXHIBIT DESCRIPTION
- ------- -----------
2.1(a) Amended and Restated Agreement and Plan of
Merger, dated as of May 29, 1996, by and among
Paracelsus, PC Merger Sub, Inc. and Champion.
99.1 Audited financial statements of Champion for the
three years ended December 31, 1995.
_________________
(a) Incorporate herein by reference to Exhibit 2.1 to the
Company's Registration Statement on Form S-4 (Commission File
No. 333-8521).