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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report June 30, 1999 Commission file number 0-2751
------------- ------
AMERICAN HOSPITAL MANAGEMENT CORPORATION
----------------------------------------
(Exact name of registrant as specified in its charter)
CALIFORNIA 95-1861243
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P.O. Box 1116
Arcata, California 95521
- ------------------------------- ----------
(Address of principal executive (Zip Code)
offices)
Registrant's telephone number, including area code: (707) 839-8474
---------------
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
------------------- ----------------
None
- --------------------------------------------------------------------------------
Securities registered pursuant to Section 12(g) of the Act:
Common Stock $1.00 par value
- --------------------------------------------------------------------------------
(Title of class)
$2.00 Cumulative Preferred Stock $1.00 par value
- --------------------------------------------------------------------------------
(Title of class)
Indicate by check mark whether the registrant (1) has filed 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 No X
--------- --------
-1-
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. Yes No X
--------- --------
State the aggregate market value of the voting stock held by nonaffiliates of
the registrant. The aggregate market value shall be computed by reference to the
price at which the stock was sold, or the average bid and asked prices of such
stock, at a specified date within 60 days prior to the date of filing. (See
definition of affiliate in Rule 405, 17 CRF 230.405.)
There is no market for the registrant's stock.
(APPLICABLE ONLY TO CORPORATE REGISTRANTS)
Indicate the number of share outstanding of each of the registrant's classes of
common stock as of the latest practicable date (224,837 at December 31,1999).
Total number of pages, including cover - 41
-2-
PART 1
Item 1. Business
- ------- --------
The primary business of the Company is the operation and
ownership of Mad River Community Hospital (the Hospital) and
satellite clinics, located in the Humboldt County area of
Northern California.
Over the last several years the Company has expanded the scope
of services offered by the Hospital to include advanced
ancillary service departments used by physicians practicing in
the rural service area. As a result of the ongoing expansion
of facilities and services, the Hospital continues to recruit
new physicians to provide the added care as well as to replace
physicians who are retiring from active practice. The
Hospital's service area on the north coast is experiencing the
highest rate of growth in the county and is especially
attractive to physicians who want to live and work in a
community with high family values.
The nearest competition to the Hospital is in Eureka
(approximately 12 miles south) where two acute care facilities
are located. Management of the Hospital feels that as long as
it maintains a strong position in providing a full scope of
health care services, the facilities located in Eureka will
have less of a negative impact on Hospital use or occupancy.
For this reason, the Hospital organized out-patient clinics in
the outlying communities thereby maintaining the Hospital's
presence in the service area. New buildings are planned for
those departments still housed in mobile facilities adjacent
to the Hospital. In addition, a cath-lab was opened in the
spring of 1998 and a M.R.I. is currently under construction.
Another positive factor supporting Hospital use is community
involvement. As the largest private employer in Arcata, the
Hospital provides employment to approximately 520 local
residents and, through its Home Health and Adult Day Health
Care departments, is highly visible in the community served.
The Hospital continues to try to build on this strength by
maintaining a strong image through the media and a helping
hand in the community, while providing personalized quality
services. The Hospital is a strong advocate for a community
health care plan involving the medical staff, employers and
the area's hospitals and health care providers wherein they
will work together to provide a locally based alternative to
out of the area managed care.
As the health care industry is dependent on government payment
of care for the elderly and indigent, the Hospital may be
negatively impacted by new Government regulations. As
mentioned above, the Hospital is working diligently to
establish a community health care plan that could compete with
the various outside managed care plans planning to enter the
Humboldt County area.
-3-
Item 2. Properties
- ------- ----------
The main facility operated by the Company is Mad River
Community Hospital in Arcata, California. This single-level
structure is licensed as a 78-bed acute hospital in Northern
Humboldt County, California, where it provides full hospital
services to a population of approximately 55,000. Since
opening in 1972, the Hospital has maintained a program of
expansion and improvements. It is located on 12 acres (part of
a 48 acre site) adjacent to an expanded medical office complex
owned by staff doctors which leaves sufficient open area for
further expansion of medical services as needed.
The Company owns 27 acres of land approximately 4 miles from
the Hospital held for future residential development. A house
and barn on the property is currently used as an office, guest
quarters and storage space for the Company. The Company owns a
personal residence adjacent to the Hospital that had been used
as a physician's office. This acquisition was made to
facilitate a continued favorable occupancy by a
hospital-related specialty and is presently being leased to an
unrelated private resident, providing a child day care service
to hospital employees. The Company also owns residences and
commercial properties in Eureka and McKinleyville, California.
From time to time, the Company acquires real estate being held
for investment purposes.
As part of its outreach program, the Company owns and operates
medical office buildings under the name of Willow Creek Six
Rivers Medical Center in Willow Creek, California (38 miles
east of the Hospital). The Company also owns and operates real
property in McKinleyville which provides laboratory and
radiology outpatient services. It also operates an after-hours
clinic at this location.
Adult Day Health Care of Mad River , a separate not-for-profit
organization, is operating an adult day health care facility
in a building adjacent to and owned by Mad River Community
Hospital. Michael Young, Controller of the Company, is
functioning as Adult Day Health Care's Administrator and
performs minimal accounting services for the organization. To
meet the growing demands for this service, the existing
building will be expanded. This entity will continue to lease
the facility from the Hospital.
-4-
Item 3. Legal Proceedings
- ------- -----------------
None.
Item 4. Submission of Matters to Vote of Security Holders
- ------- -------------------------------------------------
There were no matters submitted to a vote by the security
holders during the fourth quarter of the fiscal year covered
by this report.
-5-
PART II
Item 5. Market for the Registrant's Common Stock and Related Security
- ------- -------------------------------------------------------------
Holder Matters
--------------
There is no market for the registrant's stock. There are
approximately 400 shareholders at June 30, 1999. No dividends
were paid on common stock during the three years ended June
30, 1999. The Company is current on paying all cumulative
preferred stock dividends.
-6-
Item 6. Selected Financial Data
- ------- -----------------------
Year ended June 30
--------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
Total operating
revenue, net $ 24,089,600 $ 22,992,958 $ 22,096,357 $ 22,895,801 $ 21,148,254
Net income (164,824) 350,874 200,588 223,815 593,342
Primary earnings
per share (1.15) 1.12 .45 .52 2.06
Fully diluted
earnings per share -- 1.09 .62 .67 1.75
Cash dividends per
common share -- -- -- -- --
Total assets 22,302,627 22,411,941 20,342,679 20,557,286 19,800,615
Long-term debt 741,865 206,265 206,932 403,581 803,248
Working capital 8,553,820 8,905,761 8,542,725 7,851,133 7,165,927
Redeemable
preferred stock 47,442 47,690 48,334 50,850 51,623
Stockholders'
equity 15,416,989 15,891,443 15,060,535 14,633,038 14,077,102
-7-
Item 7 Management's Discussion and Analysis of
- ------ ---------------------------------------
Financial Condition and Results of Operations
---------------------------------------------
1999
----
Results of Operations
---------------------
Hospital revenues increased slightly during 1999 as the
Hospital continues to expand services to encourage use. Use of
outpatient services increased, and there was a small rate
increase. Patient revenue totaled $46,721,000 in 1999 compared
to $44,682,000 in 1998, a 4.6% increase of $2,039,000.
Contractual allowances totaled $23,808,000 in 1999 compared to
$21,690,000 in 1997, a 9.8% increase. Government regulatory
agencies attempt to reimburse the Hospital based on cost of
services. But, as the government continues its efforts to cut
back on rising health care payments, the actual reimbursement
to the Hospital continues to decrease as evidenced by the
large increase in contractual allowances. For the five years
ended June 30, 1999, contractual allowances and provisions for
bad debts have amounted to approximately $104,000,000 or 49%
of gross revenue. At times the Hospital is unable to even
recoup costs on Medicare patients under the current
methodology of reimbursement. Medi-Cal has also imposed
certain limitations that negatively impacted the amount the
Hospital is reimbursed for Medi- Cal patients.
Operating costs and expenses were $25,459,000 compared to
$23,984,000 in 1998, a 6.2% increase. Operating costs actually
increased $1,416,000 while the provision for bad debts
increased by $59,000, resulting in the combined increase of
$1,475,000. The increase in accounts written off is indicative
of the industry wide difference between standard rates and the
amount actually collected.
The continued reduction in third-party reimbursement is the
major contributing factor to the 1999 operating loss of
$980,000. The Hospital is still dealing with third-party
payors to finalize cost reports under audit. Management is
actively appealing various adjustments made by the
intermediary, and, even though, it appears the Hospital will
prevail on various issues, no amount will be booked as a
receivable until the ultimate outcome of the appeal is known.
Net loss, after investment income was $165,000 in 1999
compared to net income of $350,874 in 1998. In addition to the
negative impact of write offs and contractual allowances on
operations, for 1999, the Hospital, under its self insurance
program had to pay for various catastrophic claims that
resulted in maximum reimbursement. Management feels these
types of claims will not be recurring cost in the future.
-8-
1999 continued
----
Over the years, as the Company incurs more contractual
allowances and uncollectible accounts, results from operations
have suffered. The Company continues to enjoy good returns on
its investments to help maintain a net profit. For the current
year, sales of investments resulted in gains of $433,000,
while total investment income was $863,000. As discussed in
Item 1, the Company continues to expand operations to maintain
a competitive edge in a continuing ever changing health care
environment. All construction projects, considered necessary
to maintain operations, will be completed without negative
impact on the financial statements
The purpose of these projects is to keep the users of the
Hospital in their primary service area when health care is
required, thereby enhancing the Hospital's inpatient service
occupancy. By so doing, it is anticipated that operations will
improve, even though the continued burden of government
contractual agreements to provide health care, sometimes below
cost, is being further complicated by the introduction of
managed care contracts in the Humboldt County area.
Liquidity and Capital Resources
-------------------------------
The Company's financial condition remains very strong with
substantial investments, strong liquidity and minimal debt.
The cash and liquid investments are being maintained to
subsidize Hospital operations, finance needed construction and
increased services at Mad River Community Hospital. Currently,
the Company has approximately $6,070,000 in cash and
short-term investments. Included in this amount are $3,055,000
in unrealized holding gains.
Cash provided by operating and investing activities continue
to fund investing activities, the largest of which is the
purchase of real estate, property and equipment, which totaled
$1,258,000 in 1999. As the long-term debt relates only to the
acquisition of major equipment, cash required for financing
activities remains relatively low.
As discussed in Item I, government regulations, as well as
managed care contract agreements, may continue to negatively
impact operations. Management is unable to estimate any
potential negative impact of forthcoming laws or regulations.
Management believes that long-term key employees approve of
the working conditions at the Hospital and have proven their
ability to keep the Hospital staffed under difficult
conditions.
Inflation
---------
The inflation rate affecting costs has remained relatively
low, approximately 5%, over the last three years. This
moderate rate contributes to the Hospital's success in
maintaining a moderate increase in costs from year to year.
-9-
Management's Discussion and Analysis of
---------------------------------------
Financial Condition and Results of Operations
---------------------------------------------
1998
----
Results of Operations
---------------------
Hospital revenues increased slightly during 1998 as the
Hospital continues to expand services to encourage use. Use of
outpatient services increased, and there was a small rate
increase. Patient revenue totaled $44,682,000 in 1998 compared
to $41,030,000 in 1997, a 8.9% increase of $3,652,000.
Contractual allowances totaled $21,690,000 in 1998 compared to
$18,934,000 in 1997, a 14.6% increase. Government regulatory
agencies attempt to reimburse the Hospital based on cost of
services. But, as the government continues its efforts to cut
back on rising health care payments, the actual reimbursement
to the Hospital continues to decrease as evidenced by the
large increase in contractual allowances. For the five years
ended June 30, 1998, contractual allowances and provisions for
bad debts have amounted to approximately $111,000,000 or 48%
of gross revenue. At times the Hospital is unable to even
recoup costs on Medicare patients under the current
methodology of reimbursement. Medi-Cal has also imposed
certain limitations that negatively impacted the amount the
Hospital is reimbursed for Medi- Cal patients.
Operating costs and expenses were $23,984,000 compared to
$23,358,000 in 1997, a 2.7% increase. Operating costs actually
increased $219,000 while the provision for bad debts also
increased by $407,000, resulting in the combined increase of
$626,000. The increase in accounts written off is indicative
of the industry wide difference between standard rates and the
amount actually collected.
The continued reduction in third-party reimbursement is a
major contributing factor to the 1998 operating loss of
$594,000. During the current operating year, the Hospital
charged to operations approximately $967,000 of cost as a
result of the audit finalization of prior years' cost reports.
Management intends to appeal various adjustments made by the
intermediary, but no amount as been booked as a receivable for
ultimate outcome of the appeal. Net income, after investment
income was $351,000 in 1998 compared to $224,000 in 1997.
Over the years, as the Company incurs more contractual
allowances and uncollectible accounts, results from operations
have suffered. The Company continues to enjoy good returns on
its investments to help maintain a net profit. For the current
year, sales of investments resulted in gains of $517,000,
while total investment income was $1,049,000. As discussed in
Item 1, the Company continues to expand operations to maintain
a competitive edge in a continuing ever changing health care
environment. All construction projects, considered necessary
to maintain operations, will be completed without negative
impact on the financial statements.
-10-
1998 continued
----
The purpose of these projects is to keep the users of the
Hospital in their primary service area when health care is
required, thereby enhancing the Hospital's inpatient service
occupancy. By so doing, it is anticipated that operations will
improve, even though the continued burden of government
contractual agreements to provide health care, sometimes below
cost, is being further complicated by the introduction of
managed care contracts in the Humboldt County area.
Liquidity and Capital Resources
-------------------------------
The Company's financial condition remains very strong with
substantial investments, strong liquidity and minimal debt.
The cash and liquid investments are being maintained to
subsidize Hospital operations, finance needed construction and
increased services at Mad River Community Hospital. Currently,
the Company has approximately $7,251,000 in cash and
short-term investments. Included in this amount are $2,055,000
in unrealized holding gains. Subsequent to year end, the
market had an approximately 15% decrease in market value which
will affect the fair value of equity securities held by the
Company As previously noted, some of these investments, as
determined by management, will be used to fund needed
expansion.
Cash provided by operating and investing activities continue
to fund investing activities, the largest of which is the
purchase of real estate, property and equipment, which totaled
$1,258,000 in 1998. As the long-term debt relates only to the
acquisition of major equipment, cash required for financing
activities remains relatively low.
As discussed in Item I, government regulations, as well as
managed care contract agreements, may continue to negatively
impact operations. Management is unable to estimate any
potential negative impact of forthcoming laws or regulations.
Management believes that long-term key employees approve of
the working conditions at the Hospital and have proven their
ability to keep the Hospital staffed under difficult
conditions.
Inflation
---------
The inflation rate affecting costs has remained relatively
low, approximately 5%, over the last three years. This
moderate rate contributes to the Hospital's success in
maintaining a moderate increase in costs from year to year.
-11-
Item 8. Financial Statements and Supplementary Data
- ------- -------------------------------------------
FINANCIAL STATEMENTS
--------------------
Description Page
----------- ----
Independent Auditors' Report 14
Financial Statements:
Balance Sheets - June 30, 1999 and 1998 15-16
Statements of Income -
Years ended June 30, 1999, 1998 and 1997 17
Statements of Comprehensive Income
Years ended June 30, 1999, 1998 and 1997 18
Statements of Stockholders' Equity
Years ended June 30, 1999, 1998 and 1997 19
Statements of Cash Flows -
Years ended June 30, 1999, 1998 and 1997 20-21
Notes to Financial Statements 22-32
Item 14. Exhibits, Financial Statement, Schedules
and Reports on Form 8-K 38
-12-
AMERICAN HOSPITAL MANAGEMENT CORPORATION
Annual Report for Corporations - Form 10-K
Years ended June 30, 1999 and 1998
Financial Statements,
Supplementary Data and Auditors' Report
-13-
Independent Auditors' Report
----------------------------
The Board of Directors and Stockholders:
American Hospital Management Corporation
We have audited the accompanying balance sheets of American Hospital Management
Corporation as of June 30, 1999 and 1998, and the related statements of income,
comprehensive income, stockholders' equity, and cash flows and the supporting
financial statement schedules as listed in the accompanying index at Item 14,
for the years ended June 30, 1999, 1998 and 1997. These financial statements and
financial statement schedules are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and financial statement schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements and financial
statement schedules 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.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of American Hospital Management
Corporation at June 30, 1999 and 1998, and the results of its operations and its
cash flows for the years ended June 30, 1999, 1998 and 1997 in conformity with
generally accepted accounting principles, and the supporting financial statement
schedules as listed in the accompanying index at Item 14, when considered in
relation to the basic financial statements taken as a whole, in our opinion,
present fairly in all material respects, the information set forth therein.
/s/ K.C. Miller
---------------
K.C. Miller, CPA
West Covina, California
September 30, 1998
-14-
AMERICAN HOSPITAL MANAGEMENT CORPORATION
Balance Sheets
June 30, 1999 and 1998
Assets
------
1999 1998
---- ----
Current assets:
Cash and cash equivalents $ 103,244 $ 209,652
Restricted cash, held as security for letter of credit -- 326,336
Marketable securities 5,966,623 7,040,973
Receivables:
Patients, net of estimated uncollectibles of $230,699
and $292,723, in 1999 and 1998, respectively 7,097,948 6,373,188
Other 347,203 282,012
Refundable income tax 174,800 --
Supplies, at lower of cost (first-in, first-out) or market 1,031,050 974,566
Prepaid expenses 76,436 77,087
----------- -----------
Total current assets 14,797,304 15,283,814
Property and equipment, net 4,456,871 3,970,061
Real estate held for investment, net 2,045,578 2,091,247
Deferred income taxes 397,236 436,515
Other assets 605,638 630,304
----------- -----------
$22,302,627 $22,411,941
=========== ===========
(continued)
The accompanying notes are an integral part of these financial statements.
-15-
AMERICAN HOSPITAL MANAGEMENT CORPORATION
Balance Sheets
June 30, 1999 and 1998
Liabilities and Stockholders' Equity
------------------------------------
1999 1998
---- ----
Current Liabilities:
Current maturities of long-term debt $ 99,711 $ 63,820
Accounts payable and accrued expenses:
Trade 2,068,082 810,740
Accrued liabilities 1,723,938 1,667,944
Estimated third-party payor settlements 577,572 1,761,121
Income taxes:
Current -- 115,574
Deferred 1,774,181 1,958,854
----------- -----------
Total current liabilities 6,243,484 6,378,053
----------- -----------
Long-term debt, less current maturities 642,154 142,445
----------- -----------
Stockholders' equity:
$2 cumulative preferred stock, par value $1 per share;
authorized 100,000 shares; issued 65,270.82 shares;
reacquired 17,828.68 and 17,580.96 shares; outstanding
47,442.14 and 47,689.86 shares; aggregate redemption and
liquidating value of $1,304,659
and$1,311,471 at June 30, 1999 and 1998, respectively 47,442 47,690
Common stock, par value $1.00 per share;
authorized 400,000 shares, issued 249,051 shares,
reacquired 24,024 and 22,894 shares; outstanding - 225,027
and 226,157 shares at June 30, 1999 and 1998, respectively 225,027 226,157
Additional paid-in capital 148,783 163,769
Unrealized holdings gains, net, for investments 1,838,505 2,055,054
Retained earnings 13,157,232 13,398,773
----------- -----------
Total Stockholders' equity 15,416,989 15,891,443
----------- -----------
$22,302,627 $22,411,941
=========== ===========
(concluded)
The accompanying notes are an integral part of these financial statements.
-16-
AMERICAN HOSPITAL MANAGEMENT CORPORATION
Statements of Income
Years ended June 30, 1999, 1998, and 1997
1999 1998 1997
---- ---- ----
Net patient service revenue $24,089,600 $22,992,958 $22,096,357
Other revenue 389,879 396,746 456,549
------------ ------------ ------------
Total operating revenue 24,479,479 23,389,704 22,552,906
------------ ------------ ------------
Operating costs and expenses:
Professional care of patients 14,819,559 14,552,630 13,730,083
General services 2,456,966 2,485,699 2,588,394
Administrative services 3,583,756 3,227,783 3,388,734
Employee health and welfare 2,084,133 1,210,164 1,459,831
Medical malpractice insurance 323,546 395,630 382,619
Interest 74,966 16,327 48,775
Depreciation and amortization 939,858 979,028 1,050,221
Provision for bad debts 1,176,463 1,116,908 709,204
------------ ------------ ------------
Total operating costs and expenses 25,459,247 23,984,169 23,357,681
------------ ------------ ------------
Loss from operations (979,768) (594,465) (804,775)
------------ ------------ ------------
Other income:
Investment income 627,759 1,049,449 990,102
Other 12,385 13,391 36,418
------------ ------------ ------------
640,144 1,062,840 1,026,520
------------ ------------ ------------
(Loss) income before income taxes (339,624) 468,375 221,745
Provision for income tax benefit expense 174,800 117,501 21,157
------------ ------------ ------------
Net (loss) income $ (164,824) $ 350,874 $ 200,588
============ ============ ============
Primary (loss) earnings per common share $ (1.15) $ 1.12 $ .45
============ ============ ============
Fully diluted (loss) earnings per common share $ 1.09 $ .62
============ ============
The accompanying notes are an integral part of these financial statements.
-17-
AMERICAN HOSPITAL MANAGEMENT CORPORATION
Statements of Comprehensive Income
Years ended June 30, 1999, 1998, and 1997
1999
- ----
Net loss $(164,824)
Other comprehensive income, net of tax
Unrealized gains on securities
Unrealized holding gains arising during tax period $ 71,776
Less: reclassification entry for gains included
in net income (432,691) (360,915)
--------- ---------
Comprehensive loss $(525,739)
==========
1998
- ----
Net income $ 350,874
Other comprehensive income, net of tax
Unrealized gains on securities
Unrealized holding gains arising during tax period $ 987,020
Less: reclassification entry for gains included
in net income (387,510) 599,510
--------- ---------
Comprehensive income $ 950,384
=========
1997
- ----
Net income $ 350,874
Other comprehensive income, net of tax
Unrealized gains on securities
Unrealized holding gains arising during tax period $ 477,535
Less: reclassification entry for gains included
in net income (112,708) 364,827
--------- ---------
Comprehensive income $ 715,701
=========
The accompanying notes are an integral part of these financial statements.
-18-
AMERICAN HOSPITAL MANAGEMENT CORPORATION
STATEMENTS OF STOCKHOLDERS' EQUITY
Years ended June 30, 1999, 1998 and 1997
1999 1998 1997
---- ---- ----
Stockholders' Equity:
Cumulative Preferred Stock
Beginning balance $ 47,690 $ 48,334 $ 50,850
Reacquired stock 268 644 2,516
------------ ------------ -------------
Ending balance 47,422 47,690 48,334
------------ ------------ -------------
Common Stock
Beginning balance 226,157 228,057 233,213
Reacquired stock 1,130 1,900 5,156
------------ ------------ -------------
Ending balance 225,027 226,157 228,057
------------ ------------ -------------
Additional paid-in-capital
Beginning balance 163,769 194,427 296,210
Reacquired stock 14,986 30,658 101,783
------------ ------------ -------------
Ending balance 148,783 163,769 194,427
------------ ------------ -------------
Unrealized holdings gains, net, for investments
Beginning balance 2,055,054 1,455,544 1,026,809
Change in unrealized holdings gains, net (216,549) 599,510 428,735
------------ ------------ -------------
Ending balance 1,838,505 2,055,054 1,455,544
------------ ------------ -------------
Retained Earnings
Beginning balance 13,398,773 13,134,173 13,025,956
Net (loss) income (164,824) 350,874 200,588
Cash dividends paid on preferred stock (76,717) (86,274) (92,371)
Ending balance 13,157,252 13,398,773 13,134,173
------------ ------------ -------------
Total Stockholders' equity $ 15,486,989 $ 15,891,443 $ 15,060,535
============ ============ =============
The accompanying notes are an integral part of these financial statements.
-19-
AMERICAN HOSPITAL MANAGEMENT CORPORATION
Statements of Cash Flows
Years ended June 30, 1999, 1998 and 1997
1999 1998 1997
---- ---- ----
Cash flows from operating activities:
Cash received from patients
and third-party payors $ 21,394,707 $ 22,985,273 $ 20,927,495
Cash paid to employees and suppliers (22,010,456) (22,342,220) (21,256,175)
Investment income received 232,119 565,439 934,579
Interest paid ( 74,966) ( 16,327) ( 48,775)
Income taxes, net change ( 116,602) ( 52,147) 20,332
------------ ------------ ------------
Net cash (used in) provided by
operating activities ( 578,199) 1,140,018 577,456
------------ ------------ ------------
Cash flows from investing activities:
Purchase of real estate held for investment -- ( 198,387) --
Purchase of property and equipment, net ( 1,380,999) ( 1,258,401) ( 706,159)
Proceeds from sale of short-term investments 3,719,961 3,189,509 2,433,022
Purchase of short-term investments (2,247,503) (2,691,389) (2,691,259)
Other ( 65,191) 68,417 ( 60,401)
------------ ------------ ------------
Net cash provided by (used in)
investing activities 26,268 ( 890,251) (1,024,797)
------------ ------------ ------------
Cash flows from financing activities:
Proceeds from issuance of long-term debt 679,699 251,216 121,216
Principal reductions of long-term debt ( 144,099) ( 251,882) ( 317,865)
Dividends paid ( 76,713) ( 86,274) ( 92,371)
Payments for reacquired stock ( 16,364) ( 33,202) ( 109,455)
------------ ------------ ------------
Net cash provided by (used in)
financing activities 442,523 ( 120,142) 398,575)
------------ ------------ ------------
Net (decrease) increase in cash and cash equivalents ( 106,408) 129,625 ( 845,816)
Cash and cash equivalents, beginning of year 209,652 80,027 925,843
------------ ------------ ------------
Cash and cash equivalents, end of year $ 103,244 $ 209,652 $ 80,027
============ ============ =============
Supplemental schedule of non-cash investing
activities:
(Decrease ) increase in fair value of investments $ (360,915) $ 714,559 $ 714,559
Change in deferred taxes 144,366 ( 285,824) ( 285,824)
------------ ------------ ------------
(Decrease) increase in unrealized holding gains $( 216,549) $ 428,735 $ 428,735
============ ============ =============
The accompanying notes are an integral part of these financial statements.
-20-
AMERICAN HOSPITAL MANAGEMENT CORPORATION
Statements of Cash Flows (concluded)
Years ended June 30, 1999, 1998 and 1997
1999 1998 1997
---- ---- ----
Reconciliation of net income to net cash
provided by operating activities:
Net (loss) income $ (164,824) $ 350,874 $ 200,588
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 964,524 1,046,223 1,083,162
Partnership income -- ( 4,688) ( 343)
Gain on sale of investments ( 432,691) ( 517,370) ( 124,539)
Increase in cash surrender value -- ( 162,300) ( 60,000)
Change in assets and liabilities:
(Increase) decrease in patient receivables, net ( 724,760) ( 326,890) 185,008
(Decrease) increase in third-party payors, net (1,183,549) 1,039,367 ( 1,101,395)
Change in income taxes, net ( 291,402) 65,354 41,489
(Increase) decrease in supplies ( 56,484) ( 121,912) 2,680
Decrease (increase) in prepaid expenses 651 31,120 ( 23,226)
Increase (decrease) in trade accounts payable 1,257,342 ( 163,204) 411,638
Increase (decrease) in accrued expenses, net 55,994 ( 96,556) ( 37,606)
----------- ----------- -----------
Net cash (used in) provided by
operating activities $ (575,199) $ 1,140,018 $ 577,456
=========== =========== ===========
The accompanying notes are an integral part of these financial statements.
-21-
AMERICAN HOSPITAL MANAGEMENT CORPORATION
Notes to Financial Statements
June 30, 1999, 1998 and 1997
(1) Summary of Significant Accounting Policies
------------------------------------------
Organization
- ------------
The Corporation owns and operates one acute-care hospital, located in Arcata,
California. The Hospital provides inpatient, outpatient and emergency care
services for residents of Humboldt County. It also operates other health-care
related enterprises in the same location. Admitting physicians are primarily
practitioners in the local area. The Company was incorporated as a C-Corporation
in California in 1955.
Use of Estimates
- ----------------
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 the 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
Cash and Cash Equivalents
- -------------------------
Cash and cash equivalents represent cash in checking and demand savings
accounts. Cash is held in several banks with no significant concentration of
risk.
Investments
- -----------
Investments in marketable securities with readily determinable fair values and
all investments in debt securities are measured at fair value in the balance
sheets. All investments are held for sale Investment income or loss (including
realized gains and losses on investments, interest and dividends) is included in
net income. Unrealized gains and losses on investments are excluded from net
income but are reported as a separate component of stockholders' equity.
Property and Equipment
- ----------------------
Property and equipment acquisitions are recorded at cost. Depreciation is
provided over the estimated useful life of each class of depreciable asset and
is computed on the straight-line method. Equipment under capital leases is
amortized on the straight-line method over the shorter period of the lease term
or the estimated useful life of the equipment. Such amortization is included in
depreciation and amortization in the financial statements.
Statements of Income
- --------------------
Transactions deemed by management to be ongoing, major or central to the
provision of health care services are reported as revenues and expenses.
Peripheral or incidental transactions are reported as other income, net.
-22-
AMERICAN HOSPITAL MANAGEMENT CORPORATION
Notes to Financial Statements, continued
Net Patient Service Revenue
- ---------------------------
The Hospital has agreements with third-party payors that provide for payments to
the Hospital at amounts different from its established rates. Payment
arrangements include prospectively determined rates per discharge, reimbursed
costs, discounted charges and per diem payments. Net patient service revenue is
reported at the estimated net realizable amounts from patients, third-party
payors, and others for services rendered, including estimated retroactive
adjustments under reimbursement, agreements with third-party payors. Retroactive
adjustments are accrued on an estimated basis in the period the related services
are rendered and adjusted in future periods as final settlements are determined.
Income Taxes
- ------------
Deferred income taxes are provided for the estimated income tax effect of
temporary differences between financial and taxable income.
Investments in Partnership
- --------------------------
Investment in a partnership is carried at the Company's equity in the
partnership's net assets. The partnership was organized in 1968 to provide
property sites for the hospital and medical centers. The two general partners,
the Company and its president, own 26% each. The limited partners, consisting of
local doctors, own the remaining 48%.
Impairment of Long-Lived Assets
- -------------------------------
The Company adopted Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to be
Disposed Of." Historically, the Company has complied with the requirements of
SFAS No. 121. This statement requires that long-lived assets and certain
identifiable intangibles to be held and used by an entity be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Also, in general, long-
lived assets and certain identifiable intangibles to be disposed of should be
reported at the lower of carrying amount or fair market value less cost to sell.
Reclassifications
- -----------------
Certain accounts from prior years financial statements have been reclassified to
be comparable with disclosure for the current year.
-23-
AMERICAN HOSPITAL MANAGEMENT CORPORATION
Notes to Financial Statements, continued
(2) Net Patient Service Revenue
---------------------------
The Hospital has agreements with third-party payors that provide for payments to
the Hospital at amounts different from its established rates. A summary of the
payment arrangements with major third-party payors follows:
* Medicare. Inpatient acute care services rendered to Medicare program
beneficiaries are paid at prospectively determined rates per discharge.
These rates vary according to a patient classification system that is
based on clinical, diagnostic, and other factors. Inpatient nonacute
services, certain outpatient services, and defined capital and medical
education costs related to Medicare beneficiaries are paid based on a
cost reimbursement methodology. The Hospital is reimbursed for cost
reimbursable items at a tentative rate with final settlement determined
after submission of annual cost reports by the Hospital and audits
thereof by the Medicare fiscal intermediary. The Hospital's
classification of patients under the Medicare program and the
appropriateness of their admission are subject to an independent review
by a peer review organization under contract with the Hospital. The
Hospital's Medicare cost reports have been audited by the Medicare
fiscal intermediary through June 30, 1996.
* Medicaid. Inpatient and outpatient services rendered to Medicaid
program beneficiaries are reimbursed under a cost reimbursement
methodology. The Hospital is reimbursed at a tentative rate with final
settlement determined after submission of annual cost reports by the
Hospital and audits thereof by the Medicaid fiscal intermediary. The
Hospital records supplies cost acquired and used by the operating room
department as operating cost of that department. The intermediary
disagreed with the classification of cost in the operating department
and reclassified the revenue relating to the cost to Central Supply.
Therefore, the Hospital has included cost in 1998 of approximately
$967,000 relating to audit adjustments made by the intermediary for
prior years' cost reports. Management of the Hospital feels this
reclassification was made in error and is appealing the decision made
by the intermediary. Until a final decision is reached, the Hospital
will not include the effect of including the supplies cost in the
operating department as part of the revenues of the Hospital. The
Hospital's Medicaid cost reports have been audited by the Medicaid
fiscal intermediary through June 30, 1996.
The Hospital has also entered into payment agreements with certain commercial
insurance carriers, health maintenance organizations and preferred provider
organizations. The basis for payment to the Hospital under these agreements
includes prospectively determined rates per discharge, discounts from
established charges and prospectively determined daily rates.
-24-
AMERICAN HOSPITAL MANAGEMENT CORPORATION
Notes to Financial Statements, continued
(2) Net Patient Service Revenue, continued
---------------------------
Gross patient service revenue and related provision for contractual allowances
for the years ended June 30, are summarized as follows:
1999 1998 1997
---- ---- ----
Gross patient service revenue $46,721,049 $44,682,474 $41,030,222
Less contractual allowances 22,241,570 21,689,516 18,933,865
------------ ----------- -----------
Net patient service revenue $24,479,479 $22,992,958 $22,096,357
=========== =========== ===========
At June 30, 1999 and 1998, accounts receivable are primarily concentrated in
federal and state governmental entities and other patients in which the Company
does not believe there is any undue credit risk.
For the three years ended June 30, 1999, contractual allowances and provisions
for bad debts has totaled $66,257,405, approximately 50% of gross revenue.
(3) Marketable Securities
---------------------
Cost and fair value of marketable equity securities at June 30, 1999 and 1998,
are as follows:
1999 1998
---- ----
Available for sale:
Cost $2,911,876 $3,625,311
Fair Value 5,966,623 7,040,973
Unrealized Gain 3,085,653 3,459,682
Unrealized Loss (30,906) (44,020)
Gain or loss from sale of securities is based on specific
identification of the securities sold. The change in net unrealized
holding gains on securities available for sale, net of the tax effect,
of $(360,915), $599,510 and $364,827 for the years ended June 30, 1999,
1998 and 1997 have been charged to comprehensive income. For the years
ended June 30, 1999, 1998 and 1997, realized gains and realized losses
were $606,848 and $(174,157), $578,111 and $( 60,741), and $327,314 and
$(202,775), respectively.
-25-
AMERICAN HOSPITAL MANAGEMENT CORPORATION
Notes to Financial Statements, continued
(4) Property and Equipment
----------------------
At June 30, 1999 and 1998, property and equipment is comprised of the following:
1999 1998
---- ----
Land and improvements $ 44,500 $ 44,500
Buildings 4,814,668 4,678,975
Equipment 7,969,647 6,867,846
Construction in progress 562,247 418,741
----------- -----------
13,391,062 12,010,062
Accumulated depreciation and amortization 8,934,191 8,040,001
----------- -----------
Net property and equipment $ 4,456,871 $ 3,970,061
=========== ===========
Property and equipment include certain capitalized leases, as follows:
1999 1998
----------- -----------
Equipment $ 2,308,972 $ 1,629,274
Less accumulated amortization 1,499,472 1,363,655
----------- -----------
$ 809,500 $ 265,619
=========== ===========
Amortization expense on capitalized leases for the years ended June 30, 1999,
1998 and 1997 totaled $136,087, $301,767 and $287,038, respectively.
Annual future minimum lease payments under capitalized leases at June 30, 1999
are as follows:
2000 $ 152,919
2001 145,979
2002 145,979
2003 145,979
2004 184,936
-----------
Total minimum lease payments 775,792
Less amount representing interest (6.75% to 16%) ( 170,395)
-----------
Present value of minimum lease payments 605,397
Less current maturity 97,743
-----------
$ 507,654
===========
-26-
AMERICAN HOSPITAL MANAGEMENT CORPORATION
Notes to Financial Statements, continued
(5) Real Estate Held for Investment
-------------------------------
Real estate held for investment consists of 14 properties, 9 of which have a
building on its lot. These are itemized as follows:
Property Location:
McKinleyville, California $1,475,472
Willow Creek, California 335,608
Lakeport, California 333,521
Arcata, California 161,750
Eureka, California 134,908
----------
2,441,259
Less accumulated depreciation for rented property 395,681
----------
$2,045,578
==========
The properties with buildings attached are either used temporarily for Hospital
purposes, or used as rental property. All properties are valued at cost as it is
not cost effective to determine fair value. Based on the property records
available, there is no impairment of value.
(6) Other Assets
------------
At June 30, 1999 and 1998, other assets include cash surrender value of four
life insurance polices totaling $449,570, and investment in partnerships of
$92,117.
(7) Long-Term Debt
--------------
Long-term debt at June 30, 1999 and 1998, consists of the following:
1999 1998
---- ----
Bank note, secured by investment property, interest rate of 2.25%
above bank index (6.812% at June 30, 1999), payable in monthly
installments, maturing in 2021 $136,468 $138,386
Lease obligations, payable in installments
through 2004 with a weighted average
interest rate of 10.2% 605,397 67,878
-------- ---------
741,865 206,264
Less current maturities 99,711 63,820
-------- ---------
$642,154 $142,445
======== =========
The maturities of long-term debt for each of the succeeding five years
subsequent to June 30, 1999, are as follows: 2000-$99,711;
2001-$100,138; 2002-$100,988; 2003-$114,270; 2004-$183,262 and 2005 and
beyond-$122,483.
-27-
AMERICAN HOSPITAL MANAGEMENT CORPORATION
Notes to Financial Statements, continued
(8) Income Taxes
------------
At June 30, income tax expense consisted of the following:
1998
------------------------------------------------------------
Federal California Total
------- ---------- -----
Current $ 82,505 $ 33,069 $ 115,574
Deferred 4,743 ( 2,816) 1,927
-------- ---------- ---------
$ 87,248 $ 30,253 $ 117,501
======== ========== =========
1997
-------------------------------------------------------------
Federal California Total
------- ---------- -----
Current $ 48,502 $ 33,995 $ 82,497
Deferred ( 38,344) ( 22,996) ( 61,340)
--------- ----------- -----------
$ 10,158 $ 50,626 $ 21,157
========= =========== ===========
Deferred tax expenses (credits) for 1998, and 1997 result from the following
temporary differences:
1998 1997
---- ----
California franchise tax $ 8,921 $ 16,095
Depreciation and amortization (31,277) (67,878)
Allowance for bad debts ( 3,067) (35,681)
Vacation accrual 39,391 33,937
Other (12,041) ( 7,813)
----------- ----------
$ 1,927 $ (61,340)
=========== ==========
In addition, deferred tax liability is recorded in the balance sheet,
resulting from the change in unrealized holdings for investments. The change in
deferred income taxes for the years ended June 30, 1999 and 1998 was $(144,367)
and $390,246, respectively.
-28-
AMERICAN HOSPITAL MANAGEMENT CORPORATION
Notes to Financial Statements, continued
(8) Income Taxes continued
------------
Recorded income tax expense differs from that computed by applying the statutory
income tax rates for the following reasons:
1998 1997
---- ----
Computed tax at statutory rate $ 186,574 $ 95,866
Increases (decreases) resulting from:
California franchise tax ( 1,365) ( 5,691)
Domestic dividend exclusion
allowance ( 27,335) ( 37,056)
Cash surrender value ( 60,958) ( 22,260)
Entertainment deduction 11,438 6,000
Prior year (over) under accrual 9,147 ( 15,702)
---------- -----------
$ 117,501 $ 21,157
========== ===========
(9) Preferred Stock
---------------
The preferred stock provides for cumulative dividends of $2 per share per year.
The stock has a redemption and liquidating value of $27.50 per share, plus
dividends in arrears. Total redemption and liquidating value of the outstanding
shares at June 30, 1999 and 1998, was $1,304,659 and $1,311,471, respectively.
In the event of redemption, two shares of common stock can be issued for each
share of preferred stock redeemed (if option is exercised by preferred
stockholder). Redemption of the preferred stock, in total only, is at the option
of the Company.
(10) Income per Common Share
-----------------------
Income per common share, assuming no dilution, was computed by dividing the net
income after deduction of preferred stock dividend requirements of $94,884,
$95,380 and $96,667, by the weighted average number of common shares outstanding
(225,592, 227,332 and 230,635) for 1999, 1998 and 1997, respectively.
Income per common share, assuming full dilution, was computed by dividing net
income by the weighted average number of common shares outstanding, after
redemption of preferred stock, (321,537 and 324,724) for 1998 and 1997,
respectively. For 1999, there was an anti-dilutive effect for all shares,
assuming full dilution.
-29-
AMERICAN HOSPITAL MANAGEMENT CORPORATION
Notes to Financial Statements, continued
(11) Malpractice Insurance Arrangements
----------------------------------
The Hospital purchases professional and general liability insurance to cover
medical malpractice insurance claims. The coverage, through a commercial
insurance carrier, is on a claims-made basis. Under claims-made policies, all
accidents reported to the insurer are covered. On the basis of the Hospital's
current experience, neither an accrual for a potential extended period reporting
policy, which could be necessary if the Hospital ceases to purchase claims-made
coverage, nor an accrual for unreported incidents has been made.
(12) 401(k) Plan
-----------
The Plan is a defined contribution plan to which all employees are permitted to
make salary deferrals under the 401(k) provision. Such contributions are
credited directly to their accounts. Based on the Plan document, the Employer
can make discretionary contributions for the participants. No contribution was
made for any of the three years ended June 30, 1999.
(13) Concentrations of Credit Risk
-----------------------------
The Hospital grants credit without collateral to its patients, most of whom are
local residents and are insured under third-party payor agreements. The mix of
receivables from patients and third-party payors at June 30, 1999 and 1998, was
as follows:
1999 1998
---- ----
Medicare 38.4% 37.5%
Medi-Cal 15.1 16.2
Other third-party payors 33.8 33.4
Patients 12.7 12.9
------ ------
100% 100%
====== ======
-30-
AMERICAN HOSPITAL MANAGEMENT CORPORATION
Notes to Financial Statements, continued
(14) Self-insurance Program
----------------------
The Hospital has elected to self-insure for health care benefits to its
employees. Amounts charged to expense and transferred monthly to a trust fund to
cover such claims are estimated using rates comparable to actual rates in the
industry. Management believes that amounts provided are sufficient to cover
claims and costs incurred through June 30, 1999. The rates used to determine the
amounts charged to expense for claims and costs are adjusted periodically, as
appropriate, to reflect actual experience. The Hospital has 100 percent
insurance coverage for individual claim expenses in excess of $50,000 and for
aggregate claim expenses in excess of $1,365,218.
Health care benefit expense was approximately $2,084,133, $1,210,164 and
$1,459,831 for the years ended June 30, 1999, 1998 and 1997, respectively.
(15) Commitments and Contingencies
-----------------------------
Commitments.
The Company had one operating lease with monthly payments of $2,450 with a
remaining term of 23 months. Total rental expense for the years ended June 30,
1999, 1998 and 1997 was $380,325, $227,486 and $201,118, respectively
Litigation. The Hospital is involved in litigation and regulatory investigations
arising in the course of business. After consultation with legal counsel and
insurance carriers, management estimates that these matters will be resolved
without material adverse effect on the Hospital's future financial position or
results from operations.
(16) Risks and Uncertainties
-----------------------
The Company's future operating results may be affected by a number of factors.
The Hospital's operations are in part dependent on governmental reimbursement
plans. Significant changes in the level of governmental reimbursement could have
a favorable or unfavorable impact on the operating results of the Hospital.
Also, as additional managed health-care plans are introduced into the service
area, actual admissions to the Hospital could increase or decrease depending on
the Hospital's ability to contract with the health plans.
-31-
AMERICAN HOSPITAL MANAGEMENT CORPORATION
Notes to Financial Statements, concluded
(17) Fair values of Financial Instruments
------------------------------------
Fair value estimates are made at a specific point in time and are based on
relevant market information and information about the financial instrument; they
are subjective in nature and involve uncertainties, matters of judgment and,
therefore, cannot be determined with precision. These estimates do not reflect
any premium or discount that could result from offering for sale at one time the
Company's entire holdings of a particular instrument. Changes in assumptions
could significantly affect the estimates.
Since the fair value is estimated as of June 30, 1999, the amounts that will
actually be realized or paid at settlement of the instruments could be
significantly different.
The carrying amount of cash and cash equivalents is assumed to be the fair value
because of the liquidity of these instruments. Accounts receivable, accounts
payable and accrued expenses approximate fair value because of the short
maturity of these instruments. The recorded balance of notes payable are assumed
to be the fair value since the rates specified in the notes approximate current
market rates.
-32-
Item 9. Changes in and disagreements with accountants on
- ------- ------------------------------------------------
Accounting and Financial Disclosure
-----------------------------------
None.
-33-
PART III
Item 10. Directors and Executive Officers of the Registrant
- ------- --------------------------------------------------
Name and principal occupation
during last five years Since Age Office Occupation
- ---------------------- ----- --- ------ ----------
Lawrence V. Blashaw 1970 73 Director President of
Freight For-
warding Co.
Charles F. Forbes, Attorney 1968 69 Secretary & Attorney
Musick, Peeler & Garrett Director
Allen E. Shaw, President 1960 81 President & President of
of the Company Director Company
Douglas A. Shaw, Vice President 1981 48 Vice President Hospital
Administrator & Director Administrator
Richard J. Stanczak 1977 73 Director Business
Business Consultant Consultant
Michael Young, Controller 1978 51 Treasurer Hospital
Administrator Controller
Donald J. Krpan, D.O. 1988 63 Director President of
the American
Osteopath
Association
John Aryanpur, M.D. 1998 39 Director Neurosurgent
-34-
Item 11. Executive Compensation
- -------- ----------------------
The following table sets forth the aggregate direct remuneration paid
or accrued by the Company for services in all capacities for the
fiscal year ended June 30, 1999, to each director and officer of the
Company whose aggregate direct remuneration exceeded $100,000 and to
all directors and officers (as a group) who were such at any time
during the last fiscal year.
Cash and cash equivalent
forms of remuneration
---------------------
Name of individual Salaries, fees,
or number of Capacities in which directors' fees
persons in group remuneration was received and bonuses
- ---------------- ------------------------- ----------
Allen E. Shaw President and Chairman of $ 100,000
the Board
Douglas A. Shaw Vice President, Administrator 41,000
Michael Young Treasurer and Controller of 75,904
Mad River Community Hospital
All other directors
and officers as a
group (5 persons) 6,600
---------
(8 persons) $ 223,504
=========
Note: There was no contractual agreement with any directors regarding
compensation, pensions or stock options. Directors, from time to time,
are compensated for attendance at meetings for their general
administrative duties although there is no required payment. Total
director compensation for 1999 was $6,600. There have not been any
payments made to officers or directors for severance of relationship.
-35-
Item 12. Security Ownership of Certain
- -------- -----------------------------
Beneficial Owners and Management
--------------------------------
Owners of 5% or more of outstanding voting securities at June 30,
1999, were as follows:
Amount and
nature of
Title of beneficial Percent
Name of beneficial owner class ownership of class
- ------------------------ ----- --------- --------
Allen E. Shaw Family Common 118,079 52.47%
San Clemente, California Preferred 1,970 4.15%
Arcata Hospital Corporation* Common 20,898 9.28%
Palos Verdes Estates, California Preferred 11,481 24.20%
Security ownership of management as a group
- -------------------------------------------
All directors and officers as Common 120,579 53.58%
a group
All directors and officers Preferred 1,970 4.15%
a group
Security ownership of management is as follows:
Number of shares
-------------------------
Name Common Preferred
---- ------ ---------
Lawrence V. Blashaw 2,500 --
Allen E. Shaw Family 118,079 1,970
-------- ------
120,579 1,970
======== ======
* Arcata Hospital Corporation is 98% owned by shareholders of the Company.
-36-
Item 13. Certain Relations and
- -------- ---------------------
Related Transactions
--------------------
None.
-37-
PART IV
Item 14. Exhibits, Financial Statement
- -------- -----------------------------
Schedules, and Reports on Form 8-K
----------------------------------
Page
- ----
(a) (1) The following financial statements are included in
Part II, Item 8:
Report of Independent Auditors'
Financial Statements:
Balance Sheets
June 30, 1999 and 1998
Statements of Income
Years ended June 30, 1999, 1998 and 1997
Statements of Comprehensive Income
Years ended June 30, 1999, 1998 and 1997
Statements of Stockholders' Equity
Years ended June 30, 1999, 1998 and 1997
Statements of Cash Flows
Years ended June 30, 1999, 1998 and 1997
Notes to Financial Statements
(2) The following financial schedules for the Years 1999, 199
8 and 1997 are submitted herewith:
Schedule II - Valuation and Qualifying Accounts
Schedule III - Real Estate and Accumulated Depreciation
All other schedules are omitted because they are not
applicable or not required, or because the required
information is included in the financial statements
or notes hereto.
(3) Exhibits included herein:
None
(b) Registrant did not file any reports on Form 8-K during the
quarter ended June 30, 1999
-38-
Schedule II
AMERICAN HOSPITAL MANAGEMENT CORPORATION
Valuation and Qualifying Accounts
Years ended June 30, 1999, 1998 and 1997
Balance, Charged Charged Balance,
beginning to to other end
of year income accounts Deductions of year
------- ------ -------- ---------- -------
Allowance for
doubtful receivables:
1999 $ 285,055 $ 1,176,463 $ 1,230,819 $ 230,699
1998 285,055 1,116,908 1,109,240 292,723
1997 202,650 709,204 626,799 285,055
-39-
Schedule III
AMERICAN HOSPITAL MANAGEMENT CORPORATION
Real Estate and Accumulated Depreciation
Years ended June 30, 1999, 1998 and 1997
Related Accumulated Useful
Description debt Land Buildings Total Depreciation Life
- --------------------------------------------------------------------------------------------------------------------
Rental property $136,124 $482,346 $1,126,725 $1,609,071 $350,013 25
Investment None 832,189 832,189
-----------------------------------------------------------------
$136,124 $1,314,535 $1,126,725 $2,441,260 $350,013
=================================================================
Cost:
Balance at June 30, 1999, 1998 and 1997 $2,241,260
Accumulated Depreciation:
Balance at June 30, 1997 $ 307,476
Depreciation during period 42,537
----------
Balance at June 30, 1998 350,013
Depreciation during period 45,669
----------
Balance at June 30, 1999 $ 395,682
==========
-40-
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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:
AMERICAN HOSPITAL MANAGEMENT CORPORATION
By: /s/ ALLEN E. SHAW
------------------------------------
Allen E. Shaw, President
Date: Oct. 30, 1999
------------------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the principal Executive Officer, principal Financial
Officer, Secretary and majority of Board Members on behalf of the Registrant and
in the capacities and on the dates indicated:
Signature Capacity Date
--------- -------- -----
/s/ Allen E. Shaw President and Director 10-30-99
- ---------------------- ------------
Allen E. Shaw
/s/ Charles F. Forbes Secretary and Director 10-30-99
- ---------------------- -----------
Charles F. Forbes
/s/ Michael J. Young Treasurer and Chief 10-30-99
- ---------------------- Accounting Officer -----------
Michael J. Young
/s/ Donald J. Krpan Director 10-30-99
- ---------------------- -----------
Donald J. Krpan
/s/ Doug Shaw Director 10-30-99
- ---------------------- -----------
Doug Shaw
41