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Surgical Care Affiliates Inc · 10-Q · For 6/30/95

Filed On 8/2/95   ·   Accession Number 722692-95-4   ·   SEC File 0-13364

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  As Of                Filer                Filing    For/On/As Docs:Size

 8/02/95  Surgical Care Affiliates Inc      10-Q        6/30/95    2:22K

Quarterly Report   —   Form 10-Q
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10-Q        Surgical Care Form 10 Q                               12     49K 
 2: EX-27       Article 5 FDS for 2nd Quarter 10-Q                     1      8K 


10-Q   —   Surgical Care Form 10 Q
Document Table of Contents

Page (sequential) | (alphabetic) Top
 
11st Page   -   Filing Submission
2Item 1. Financial Statements
7Item 2. Management's Discussion and Analysis of Its Financial Condition and Results of Operations:
10Item 1. Legal Proceedings. - None
"Item 2. Changes in Securities. - None
"Item 3. Defaults Upon Senior Securities. - None
"Item 4. Submission of Matters to a Vote of Security Holders
"Item 5. Other Information. - None
"Item 6. Exhibits and Reports on Form 8-K. - None
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SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-Q QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarter Ended June 30, 1995, commission file number 0-13364 SURGICAL CARE AFFILIATES, INC. (Exact name of registrant as specified in its charter) DELAWARE (State or other jurisdiction of incorporation or organization) 62-1149229 (I. R. S. Employer Identification No.) Registrant's telephone number, including area code (615) 385-3541 102 Woodmont Blvd, Suite 610, Nashville, TN 37205 Former name, former address and former fiscal year, if changed since last report. Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No The condensed financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. All adjustments necessary to a fair statement of the results of this period reported have been included. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. It is suggested that these condensed financial statements be read in conjunction with the financial statements and the notes thereto included in the Company's latest annual report on Form 10-K. Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the close of the period covered by this report. Common stock, par value $.25 per share, shares outstanding 38,983,037 at June 30, 1995.
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PART I -- FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS SURGICAL CARE AFFILIATES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS [Download Table] JUNE 30, DECEMBER 31, 1995 1994 ----------- ------------ ASSETS Current assets: Cash $35,085,200 $31,222,963 Marketable securities 294,639 294,639 Accounts receivable, less allowance for doubtful accounts of $4,566,651 in 1995 and $4,160,260 in 1994 32,293,000 34,801,079 Other receivables 516,327 701,965 Supplies 5,266,575 4,562,518 Prepaid expenses and other current assets 1,635,354 742,911 Deferred income taxes 9,260,259 9,260,259 ----------- ----------- Total current assets 84,351,354 81,586,334 Property & equipment, including leased properties: Land & improvements 34,782,525 31,972,686 Building 70,055,721 66,289,162 Equipment, furniture and fixtures 113,988,977 106,690,800 Construction in progress 3,688,427 1,998,495 ----------- ----------- 222,515,650 206,951,143 Less: accumulated depreciation and amortization (65,080,253) (57,969,075) Net property & equipment 157,435,397 148,982,068 Other assets: Excess of cost over fair value of net assets acquired 126,244,961 109,149,364 Other assets 710,956 625,828 ----------- ----------- $368,742,668 $340,343,594 =========== =========== The notes to consolidated financial statements are an integral part of these statements.
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SURGICAL CARE AFFILIATES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS [Download Table] JUNE 30, DECEMBER 31, 1995 1994 ----------- ------------ LIABILITIES & SHAREHOLDERS' EQUITY Current liabilities: Accounts payable - trade $5,492,442 $5,889,642 Accrued liabilities 14,641,301 15,658,612 Accrued loss on disposal of surgery centers 744,083 5,629,000 Current portion of long-term obligations and notes payable 728,944 10,119,162 Income taxes payable 13,941,956 14,737,873 Distributable to minority interests 7,000,000 4,500,000 ------------ ------------ Total current liabilities 42,548,726 56,534,289 Long-term obligations: Notes payable & other long-term debt 67,160,889 42,269,224 Capital lease obligations - related parties 4,798,301 7,447,761 ------------ ------------ Total long-term obligations 71,959,190 49,716,985 Deferred income taxes 3,845,939 3,845,939 Minority interests 30,502,636 33,623,872 Shareholders' equity: Common stock, par value $.25, 100,000,000 shares authorized, 39,455,437 and 39,110,622 shares issued, and 38,983,037 and 38,638,222 shares outstanding in 1995 and 1994, respectively 9,863,859 9,777,656 Treasury stock at cost,472,400 shares in 1995 and 1994, respectively (6,074,863) (6,114,778) Additional paid in capital 96,089,534 91,159,880 Retained earnings 120,007,647 101,799,751 ----------- ----------- Total shareholders' equity 219,886,177 196,622,509 ----------- ----------- $368,742,668 $340,343,594 =========== =========== The notes to consolidated financial statements are an integral part of these statements.
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SURGICAL CARE AFFILIATES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME [Enlarge/Download Table] THREE MONTHS THREE MONTHS SIX MONTHS SIX MONTHS ENDED ENDED ENDED ENDED JUNE 30, JUNE 30, JUNE 30, JUNE 30, 1995 1994 1995 1994 ------------ ------------ ----------- ----------- Net revenue $65,681,896 $58,522,606 $130,788,247 $110,670,926 Operating costs: Costs of providing healthcare services (33,460,889) (30,564,439) (67,629,226) (58,807,209) Depreciation and amortization (4,328,678) (4,260,168) (8,667,656) (8,060,069) Provision for doubtful accounts (755,208) (304,769) (1,677,191) (1,284,786) ------------ ------------ ----------- ----------- Operating income 27,137,121 23,393,230 52,814,174 42,518,862 General, administrative and development expenses (1,506,056) (1,530,298) (3,067,187) (2,684,070) Interest and other expenses (1,142,159) (2,453,099) (2,304,443) (4,510,643) Interest and other income 982,969 682,489 1,460,551 1,530,397 Gain on sale of MCA stock 0 1,742,199 0 5,161,811 ------------ ------------ ----------- ----------- Income before minority interests and income taxes 25,471,875 21,834,521 48,903,095 42,016,357 Minority interests in (earnings) of partnerships (6,554,020) (5,236,013) (12,654,461) (9,652,559) ------------ ------------ ----------- ----------- Income before income taxes and cumulative effect of change in accounting principle 18,917,855 16,598,508 36,248,634 32,363,798 Income tax provision (7,567,142) (6,965,403) (14,499,454) (14,651,519) ------------ ------------ ----------- ----------- Income before cumulative effect of change in accounting principle 11,350,713 9,633,105 21,749,180 17,712,279 Cumulative effect of change in accounting principle 0 0 0 (2,105,155) ------------ ------------ ----------- ----------- Net income $11,350,713 $9,633,105 $21,749,180 $15,607,124 ============ ============ =========== =========== Net Income Per Common & Common Equivalent Share Before cumulative effect of change in accounting principle $0.29 $0.25 $0.56 $0.46 Cumulative effect of change in accounting principle 0.00 0.00 0.00 (0.05) ------------ ------------ ----------- ----------- $0.29 $0.25 $0.56 $0.41 ============ ============ =========== =========== Weighted average number of common and common equivalent shares outstanding 39,275,951 39,003,178 39,183,698 38,908,438 ============ ============ =========== =========== The notes to consolidated financial statements are an integral part of these statements.
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SURGICAL CARE AFFILIATES, INC. AND SUBSIDIA CONSOLIDATED STATEMENTS OF CASH FLOWS [Enlarge/Download Table] SIX MONTHS ENDED JUNE 30, JUNE 30, 1995 1994 ----------- ------------ Cash Flows From Operating Activities: Net Income $21,749,180 $15,607,124 Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: Cumulative Effect of Change in Accounting Principle 0 2,105,155 Depreciation and Amortization 8,667,656 8,060,069 Provisions for Losses on Accounts Receivable 1,677,191 1,284,786 Minority Interests in Earnings of Partnerships 12,654,461 9,652,559 Deferred Income Taxes 0 858,127 Changes in Assets and Liabilities Net of Effect of Acquisitions: Decrease in Accounts Receivable 2,992,846 865,030 Decrease in Other Receivables 346,692 4,081,732 (Increase) Decrease in Supplies (121,297) 72,977 Increase in Prepaid Expenses and Other Current Assets (279,995) (851,757) (Increase) Decrease in Other Assets (85,128) 24,327 Increase in Excess of Cost over Fair Value of Net Assets Acquired (3,234,648) (4,129,826) Decrease in Accounts Payable - Trade (509,706) (446,768) Decrease in Accrued Liabilities (3,718,695) (177,784) Decrease in Accrued Loss on Disposal of Surgery Centers (4,884,917) 0 (Decrease) Increase in Income Taxes Payable (795,917) 2,458,273 ----------- ----------- Net Cash Provided by Operating Activities 34,457,723 39,464,024 Cash Flows From Investing Activities: Increase in Temporary Investments 0 (1,968,892) Decrease in Marketable securities 0 9,929,119 Capital Expenditures (9,012,218) (17,250,246) Acquisitions less Cash Acquired of $450,000 in 1995, $550,213 in 1994 (16,981,251) (16,568,406) ----------- ----------- Net Cash Used in Investing Activities (25,993,469) (25,858,425) ----------- ----------- Cash Flows From Financing Activities: Net Borrowings Under Line-of-Credit Agreement 59,398,986 2,712,362 Payments on Long-Term Obligations (47,766,854) (3,717,266) Proceeds From Long-Term Obligations 0 5,176,163 Proceeds From Issuance of Common Stock 922,329 1,290,653 Dividends on (Acquisition of) Common Stock for the Treasury 39,915 (4,800,840) Dividends Paid (3,541,284) (3,112,476) Distributions to Minority Interests (7,017,197) (9,926,654) Increase (Decrease) in Distributable to Minority Interests 2,500,000 (261,219) Decrease in Minority Interests (9,137,912) (634,646) ----------- ----------- Net Cash Used in Financing Activities (4,602,017) (13,273,923) Net Increase in Cash & Cash Equivalents 3,862,237 331,676 Cash & Cash Equivalents at Beginning of Period 31,222,963 23,877,186 ----------- ----------- Cash & Cash Equivalents at End of Period $35,085,200 $24,208,862 =========== =========== For purposes of the statements of cash flows, the Company considers all certificates of deposits and highly liquid marketable securities with a maturity of three months or less to be cash equivalents. Cash & Cash Equivalents at End of Period $35,085,200 $24,208,862 Temporary Investments 0 7,254,675 ----------- ----------- Cash and Temporary Investments $35,085,200 $31,463,537 =========== =========== The notes to consolidated financial statements are an integral part of these statements.
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SURGICAL CARE AFFILIATES, INC. NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS Note 1 - Basis of Financial Statements The accompanying unaudited consolidated financial statements have been prepared in accordance with Rule 10-01 of Regulation S-X, "Interim Financial Statements," and do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. The financial statements have been prepared in conformity with accounting principles and practices (including consolidation practices) reflected in the Company's Annual Report on Form 10-K for the year ended December 31, 1994, and in the opinion of management, include all adjustments (consisting only of normal recurring adjustments), necessary for a fair presentation of the Company's financial position as of June 30, 1995, and results of its operations and cash flows for the three months and six months ended June 30, 1995 and 1994. The results of operations for the six months ended June 30, 1995 are not necessarily indicative of the results that can be expected for the year ending December 31, 1995. All significant intercompany balances and transactions have been eliminated in the consolidated financial statements. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 1994. Note 2 - Reclassifications Reclassifications of certain amounts in the 1994 consolidated financial statements have been made to conform to the 1995 presentation of accounts.
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Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF ITS FINANCIAL CONDITION AND RESULTS OF OPERATIONS: Surgical Care Affiliates, Inc. operates 67 outpatient surgery centers. The Company began the year with 65 centers; two were closed at the end of the first quarter, and four were purchased on June 1, 1995. Results of Operations - Second Quarter Revenue for the second quarter increased 12% to $65.7 million. Earnings per share increased 16% to $.29 compared to $.25 in 1994. Same center revenue increased 7% in the second quarter. The Company experienced a 4% increase in same center case volume and a 3% increase in pricing and intensity. These results are consistent with the results achieved over the past five quarters. Same center revenue increased 16% in the first quarter, largely due to the low surgical volume experienced in the first quarter of 1994. The results in 1994 were affected by poor weather which closed several centers. The cost of providing healthcare services increased 9%. The increase is due to the net addition of 4 new centers since the second quarter of 1994, as well as the 7% increase in same center revenues. Depreciation and amortization increased 2% due to the net addition of 4 new surgery centers since June 30, 1994. General and administrative expenses remained flat during the quarter. In previous quarters, the Company increased its corporate staff to manage its growth. Interest and other expenses decreased in the second quarter primarily due to a $1.2 million charge in the second quarter of 1994 to write down assets held for sale to their net realizable value. Interest and other income increased primarily due to the Company's joint venturing activity and gains recognized from selling minority interest positions in centers to joint venture partners. During the second quarter of 1994, the Company sold approximately 170,000 shares of stock in Medical Care America at a gain of $1.7 million. All of this stock was sold in 1994. Minority interest expense increased in the second quarter and the first six months of 1995 compared to the same periods in 1994. During 1994 and 1995, the Company executed joint ventures with hospitals to jointly own its surgery centers. As a result, the Company's share of profits from these centers is lower, and the minority interest is higher.
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Results of Operations - Six Months Revenue for the six months ended June 30, 1995, increased 18% compared to the same period in 1994. The increase is due to an 11% increase in same center revenue and the contributions from new centers. Earnings per share increased 22% during the six months. The cost of providing health care services increased 15%, or roughly in line with the increase in revenue. Depreciation and amortization expenses increased due to the net addition of 4 new surgery centers since June 30, 1994. General and administrative expenses increased 14% due to increased staffing expenses at the corporate office to manage the Company's growth. All of the increase occurred in the first quarter of 1995. Interest and other expenses decreased from $4.5 million to $2.3 million primarily due to charges of $2.2 million in 1994 to provide for the relocation of surgery centers and to write assets held for sale down to their net realizable value. In the six month period of 1994, the Company realized a gain of $5.2 million from the sale of stock of Medical Care America. No gains were reported in 1995 since all of the stock was sold in 1994. Balance Sheet The Company's working capital increased from $25 million at December 31, 1994, to $42 million at June 30, 1995. The increase is due to a $4 million increase in cash and a decline in the amount of debt payable in the next twelve months. The Company refinanced its debt in the second quarter, and no principal payments are due for a five year period. Accounts receivable decreased since December 31, 1994, due to seasonal fluctuations. The Company's receivables typically rise before year end due to the high volume of surgery in the fourth quarter. Property and equipment increased from $148 million to $157 million during the period. The increase is due to funds spent to renovate and expand existing centers, to construct new centers, and to acquire centers. Excess of cost over fair value of net assets acquired (goodwill) increased by $17 million primarily due to the acquisition of four centers in 1995. Long-term obligations increased due to funds required to purchase four centers in June, 1995.
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Liquidity and Capital Resources The Company's current ratio was approximately 2.0 to 1 at June 30, 1995, and its debt to equity ratio was .33 to 1. The ratios are consistent with management's philosophy to maintain a strong balance sheet and financial position. The Company is actively looking to grow through the development of new surgery centers and the acquisition of existing centers. The Company is negotiating to purchase a number of surgery centers from a third party. If the Company is successful, the transaction will require approximately $50 million in cash. The Company expects to increase its bank line of credit to finance this transaction. As in previous periods, the principle source of the Company's cash is generated from its operations. The Company believes that it has ready access to third party resources (primarily banks) to finance its growth to the extent that the growth requirements exceed cash generated from operations.
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SURGICAL CARE AFFILIATES, INC. AND SUBSIDIARIES FOR THE THREE MONTHS ENDED JUNE 30, 1995 Part II. Other Information Item 1. Legal Proceedings. - None. Item 2. Changes in Securities. - None. Item 3. Defaults Upon Senior Securities. - None. Item 4. Submission of Matters to a Vote of Security Holders. (a) The Annual Meeting of Shareholders of the Corporation was held on May 11, 1995. (b) N/A (c) The following matters were voted upon by the Shareholders at the Annual Meeting held on May 11, 1995: (i) The following directors were elected to serve on the Board of Directors of the Corporation for a term of one year or until their successors are elected. Against/ Broker Director For Withheld Abstain Non-votes Joel C. Gordon 29,898,464 377,424 - - William J. Hamburg 29,899,590 376,298 - - Dan E. Bruhl, M.D. 29,563,893 711,995 - - Lucius E. Burch III 29,895,819 380,069 - - Robert J. Fraiman 29,559,832 716,056 - - Kenneth J. Melkus 29,722,022 553,866 - - Andrew W. Miller 29,897,914 377,974 - - Edwin J. Nighbert, M.D. 29,899,269 376,619 - - Sister Josepha Schaeffer 29,896,568 379,320 - - (ii) The shareholders voted on a motion to ratify the appoin- ments of Deloitte and Touche as the Company's Independent Public Accountants, with 30,127,848 shares voting for ratification and 73,393 voting against. The motion passed. Item 5. Other Information. - None. Item 6. Exhibits and Reports on Form 8-K. - None
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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. SURGICAL CARE AFFILIATES, INC. (Registrant) /s/ Tarpley B. Jones -------------------- Tarpley B. Jones Senior Vice President and Chief Financial Officer (Principal Financial and Duly Authorized Officer) On behalf of Registrant Date: August 2, 1995
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Dates Referenced Herein   and   Documents Incorporated By Reference

Referenced-On Page
This 10-Q Filing   Date First   Last      Other Filings
6/30/9468
12/31/946810-K405, 11-K
5/11/951010-Q, DEF 14A
6/1/957
For The Period Ended6/30/95110
Filed On / Filed As Of8/2/9511
12/31/956
 
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Filing Submission 0000722692-95-000004   –   Alternative Formats (Word / Rich Text, HTML, Plain Text, et al.)

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