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, 2001 Commission file number 0-2751
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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
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(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
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(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
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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
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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 (222,615 at June 30,2001).
Total number of pages, including cover - 41
-2-
PART 1
Item 1. Business
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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.
As a result of area growth, the merger of two competing Hospitals in
Eureka, and as part of a strategic plan, the Company has expanded the
scope of services offered by the Hospital. 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 one acute care facility is 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 facility 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. A new medical building is under construction
adjacent to the Hospital and major renovation has started for Radiology
and the I.C.U. unit. The Hospital is improving landscaping and the
overall appearance of the facility every year.
Another positive factor supporting Hospital use is community
involvement. As the largest private employer in Arcata, the Hospital
provides employment to approximately 500 local residents and, through
its Home Health and recently expanded 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
collaborating with other health care professionals to establish a
community health care plan that could compete with the various outside
managed care plans.
-3-
Item 2. Properties
- ------- ----------
The main facility operated by the Company is Mad River Community
Hospital in Arcata, California. This single story structure is licensed
as a 80-bed acute hospital, providing 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 and
future strategic use.
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.
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 was expanded. This entity will continue to lease the
facility from the Hospital.
-4-
Item 3. Legal Proceedings
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None.
Item 4. Submission of Matters to Vote of Security Holders
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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
386 shareholders at June 30, 2001. No dividends were paid on common
stock during the three years ended June 30, 2001. The Company is
current on paying all cumulative preferred stock dividends.
-6-
Item 6. Selected Financial Data
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Year ended June 30
-----------------------------------------------------------------------
2001 2000 1999 1998 1997
---------- ---------- ---------- ---------- ----------
Total operating
revenue, net $ 27,663,529 $ 24,759,228 $ 24,089,600 $ 22,992,958 $ 22,096,357
Net income (loss) 382,507 541,259 (164,824) 350,874 200,588
Basic earnings
per share 1.30 2.00 (1.15) 1.12 .45
Diluted
earnings per share 1.21 1.71 (1.15) 1.09 .62
Cash dividends per
common share -- -- -- -- --
Total assets 24,862,687 22,409,022 22,302,627 22,411,941 20,342,679
Long-term debt 1,266,888 676,132 741,865 206,265 206,932
Working capital 8,312,317 8,861,853 8,553,820 8,905,761 8,542,725
Redeemable
preferred stock 46,487 46,829 47,442 47,690 48,334
Stockholders'
equity 15,641,209 15,690,291 15,416,989 15,891,443 15,060,535
-7-
Item 7 Management's Discussion and Analysis of
- ------ ---------------------------------------
Financial Condition and Results of Operations
---------------------------------------------
2001
----
Results of Operations
---------------------
Hospital revenues increased during 2001 as the Hospital continues to
expand services to encourage use. Use of inpatient and outpatient
services increased, and there was a rate increase. Patient revenue
totaled $56,889,000 in 2001 compared to $50,615,000 in 2000, a 12.3%
increase of $6,274,000.
Contractual allowances totaled $30,449,000 in 2001 compared to
$27,579,000 in 2000, a 10.4% 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 three years ended June 30, 2001, contractual allowances and
provisions for bad debts have amounted to approximately $77,700,000 or
50% 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 $27,895,000 compared to $24,908,000
in 2000, a 11.9% increase. The main cause of the increase is caused by
an increase in salaries and related cost to health care providers
within the facility. These increases were necessary to keep the
Hospital's wage scale more in line with industry standards. The
health-care industry is experiencing a serious shortage in nurses and
ancillary care technicians. In order to stay competitive within the
market the Hospital must continue to maintain a wage scale that in
comparable to other facilities in rural areas. The continued reduction
in third-party reimbursement is the major contributing factor to the
increase in contractual allowances. 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 income before income taxes is $557,000 in 2001
compared to $696,000 in 2000. Even though the Hospital continues to be
negatively impacted by poor reimbursement contracts with third party
payers, if the required daily census can be maintained and costs are
controlled, management anticipates continued profitable operations.
-8-
2001 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 $41,000, while total investment income was
$772,000. 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 $5,781,000
in cash and short-term investments. Included in this amount are
$2,502,000 in unrealized holding gains. The short-term investments are
collateral for the $2,322,000 line of credit at June 30, 2001
Cash from operating and investing activities continue to fund investing
activities, the largest of which is the purchase of real estate,
property and equipment, which totaled $2,153,000 in 2001. As the
long-term debt relates only to the acquisition of major equipment, cash
required for financing activities remains relatively low. The Hospital
is currently evaluating the need for additional long-term financing to
finance major renovation and construction projects.
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-
Item 7 Management's Discussion and Analysis of
- ------ ---------------------------------------
Financial Condition and Results of Operations
---------------------------------------------
2000
----
Results of Operations
---------------------
Hospital revenues increased during 2000 as the Hospital continues to
expand services to encourage use. Use of outpatient services increased,
and there was a rate increase. Patient revenue totaled $50,615,000 in
2000 compared to $46,721,000 in 1999, a 8.3% increase of $3,894,000.
Contractual allowances totaled $27,579,000 in 2000 compared to
$23,808,000 in 1999, a 15.8% 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 three years ended June 30, 2000, contractual allowances and
provisions for bad debts have amounted to approximately $74,200,000 or
52% 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 $24,908,000 compared to $25,459,000
in 1999, a 2.2% decrease. Operating costs actually decreased $1,098,000
while the provision for bad debts increased by $547,000, resulting in
the combined decrease of $551,000. The increase in accounts written off
is indicative of the industry wide difference between standard rates
and the amount actually collected. The decrease in operating cost is
mainly attributable to a decrease in employee health and welfare
benefits paid, caused by not incurring a number of catastrophic claims
that result in maximum reimbursement, as incurred in 1999.
The continued reduction in third-party reimbursement is the major
contributing factor to the increase in contractual allowances. 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
income, after investment income was $541,259 in 2000 compared to net
loss of $164,824 in 1999. Even though the Hospital continues to be
negatively impacted by poor reimbursement contracts with third party
payers, if the required daily census can be maintained and costs are
controlled, management anticipates continued profitable operations.
-10-
2000 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 $168,000, while total investment income was
$773,000. 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 $6,727,000
in cash and short-term investments. Included in this amount are
$3,457,000 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 $768,647 in 2000. 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' Reports 14
Financial Statements:
Balance Sheets - June 30, 2001 and 2000 15-16
Statements of Operations
Years ended June 30, 2001, 2000 and 1999 17
Statements of Comprehensive Income
Years ended June 30, 2001, 2000 and 1999 18
Statements of Stockholders' Equity
Years ended June 30, 2001, 2000 and 1999 19
Statements of Cash Flows -
Years ended June 30, 2001, 2000 and 1999 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, 2001 and 2000
Financial Statements,
Supplementary Data and Auditors' Report
-13-
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
American Hospital Management Corporation
We have audited the accompanying balance sheets of American Hospital Management
Corporation as of June 30, 2001 and 2000 and the related statements of
operations, comprehensive income and loss, stockholders' equity and cash flows
for each of the three years ended June 30, 2001. Our audits also included the
financial statement schedules listed in the Index at Item 14. These financial
statements and financial statement schedules are the responsibility of the
Corporation'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 auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of American Hospital Management Corporation as
of June 30, 2001 and 2000, and the results of its operations and its cash flows
for each of the three years ended June 30. 2001, in conformity with accounting
principles generally accepted in the United States of America. Also, in our
opinion, such financial statement schedules, when considered in relation to the
basic financial statements taken as a whole, present fairly, in all material
respects, the information set forth therein
Hurley & Company
Granada Hills, California
October 15, 2001
-14-
AMERICAN HOSPITAL MANAGEMENT CORPORATION
Balance Sheets
June 30, 2001 and 2000
Assets
------
2001 2000
----------- -----------
Current assets:
Cash and cash equivalents $ 256,995 $ 769,953
Marketable securities 5,524,003 5,957,315
Receivables:
Patients, net of estimated uncollectibles of $4,769,817
and $3,709,870, in 2001 and 2000, respectively 8,196,500 6,716,586
Other 115,904 236,216
Estimated third-party payor settlements 1,259,087 336,129
Supplies, at lower of cost (first-in, first-out) or market 1,012,915 913,690
Prepaid expenses 101,203 87,750
----------- -----------
Total current assets 16,466,607 15,017,639
Property and equipment, net 5,801,022 4,443,847
Real estate held for investment, net 1,954,241 1,999,909
Deferred income taxes 97,007 354,705
Other assets 543,810 592,922
----------- -----------
$24,862,687 $22,409,022
=========== ===========
(continued)
The accompanying notes are an integral part of these financial statements
-15-
AMERICAN HOSPITAL MANAGEMENT CORPORATION
Balance Sheets
June 30, 2001 and 2000
Liabilities and Stockholders' Equity
------------------------------------
2001 2000
----------- -----------
Current Liabilities:
Current maturities of long-term debt $ 199,700 $ 113,187
Line of credit 2,321,587 654,363
Accounts payable and accrued expenses:
Trade 2,086,732 1,596,078
Accrued liabilities 2,121,092 1,704,211
Estimated third-party payor settlements -- 323,364
Income taxes:
Current 224,506 77,226
Deferred 1,200,673 1,687,357
----------- -----------
Total current liabilities 8,154,290 6,155,786
----------- -----------
Long-term debt, less current maturities 1,067,188 562,945
----------- -----------
Stockholders' equity:
$2cumulative preferred stock, par value $1
per share; authorized 100,000 shares;
issued 65,270.82 shares; reacquired
18,784.20 and 18,442.26 shares; outstanding
46,486.62 and 46,828.56 shares; aggregate
redemption and liquidating value of $1,278,382
and $1,287,778 at June 30, 2000 and 1999, respectively 46,487 46,829
Common stock, par value $1.00 per share;
authorized 400,000 shares, issued
249,051 shares, reacquired 26,436 and 25,483
shares; outstanding - 222,615 and 223,568 shares
at June 30, 2000 and 1999, respectively 222,615 223,568
Additional paid-in capital 106,554 122,384
Accumulated other comprehensive income 1,353,762 1,681,714
Retained earnings 13,911,791 13,615,796
----------- -----------
Total Stockholders' equity 15,641,209 15,690,291
----------- -----------
$24,862,687 $22,409,022
=========== ===========
(concluded)
The accompanying notes are an integral part of these financial statements.
-16-
AMERICAN HOSPITAL MANAGEMENT CORPORATION
Statements of Operations
Years ended June 30, 2001, 2000, and 1999
2001 2000 1999
------------ ------------ ------------
Net patient service revenue $ 27,663,529 $ 24,759,228 $ 24,089,600
Other revenue 393,155 346,071 389,879
------------ ------------ ------------
Total operating revenue 28,056,684 25,105,299 24,479,479
------------ ------------ ------------
Operating costs and expenses:
Professional care of patients 17,161,899 15,160,791 14,819,559
General services 2,527,309 2,357,961 2,456,966
Administrative services 3,506,466 3,304,688 3,583,756
Employee health and welfare 2,104,678 1,132,846 2,084,133
Medical malpractice insurance 415,790 296,639 323,546
Interest 113,714 104,938 74,966
Depreciation and amortization 841,117 827,340 939,858
Provision for bad debts 1,223,545 1,723,497 1,176,463
------------ ------------ ------------
Total operating costs and expenses 27,894,518 24,908,700 25,459,247
------------ ------------ ------------
Income (loss) from operations 162,166 196,599 (979,768)
------------ ------------ ------------
Other income:
Investment income 418,911 487,129 627,759
Other 15,586 12,642 12,385
------------ ------------ ------------
434,497 499,771 640,144
------------ ------------ ------------
Income (loss) before income taxes 596,663 696,370 (339,624)
Provision for income tax expense (benefit) 214,156 155,111 (174,800)
------------ ------------ ------------
Net income (loss) $ 382,507 $ 541,259 $ (164,824)
============ ============ ============
Basic earnings (loss) per common share $ 1.30 $ 2.00 $ (1.15)
============ ============ ============
Diluted earnings (loss) per common share $ 1.21 $ 1.71 $ (1.15)
============ ============ ============
The accompanying notes are an integral part of these financial statements.
-17-
AMERICAN HOSPITAL MANAGEMENT CORPORATION
Statements of Comprehensive Income and Loss
Years ended June 30, 2001, 2000, and 1999
2001
- ----
Net income $ 382,507
Other comprehensive income, net of tax:
Unrealized losses on securities:
Unrealized holding losses arising during tax period $(286,678)
Less: reclassification adjustment for gains realized
in net income (41,274) (327,952)
--------- ---------
Comprehensive income $ 54,555
2000
- ----
Net income $ 541,259
Other comprehensive income, net of tax:
Unrealized losses on securities:
Unrealized holding gains arising during tax period $ 10,799
Less: reclassification adjustment for gains realized
in net income (167,590) (156,791)
--------- ---------
Comprehensive income $ 384,468
=========
1999
- ----
Net loss
$(164,824)
Other comprehensive income, net of tax:
Unrealized gains on securities:
Unrealized holding gains arising during tax period $ 216,142
Less: reclassification adjustment for gains realized
in net income (432,691) (216,549)
--------- ---------
Comprehensive loss $(381,373)
=========
The accompanying notes are an integral part of these financial statements.
-18-
AMERICAN HOSPITAL MANAGEMENT CORPORATION
Statements of Stockholders' Equity
Years ended June 30, 2001, 2000 and 1999
2001 2000 1999
------------ ------------ ------------
Stockholders' Equity:
Cumulative Preferred Stock
Beginning balance $ 46,829 $ 47,442 $ 47,690
Reacquired stock 342 613 248
------------ ------------ ------------
Ending balance 46,487 46,829 47,442
------------ ------------ ------------
Common Stock
Beginning balance 223,568 225,027 226,157
Reacquired stock 953 1,459 1,130
------------ ------------ ------------
Ending balance 222,615 223,568 225,027
------------ ------------ ------------
Additional paid-in-capital
Beginning balance 122,384 148,783 163,769
Reacquired stock 15,830 26,399 14,986
------------ ------------ ------------
Ending balance 106,554 122,384 148,783
------------ ------------ ------------
Accumulated other comprehensive income
Beginning balance 1,681,714 1,838,505 2,055,054
Change in unrealized holdings gains, net (327,952) (156,791) (216,549)
------------ ------------ ------------
Ending balance 1,353,762 1,681,714 1,838,505
------------ ------------ ------------
Retained Earnings
Beginning balance 13,615,796 13,157,232 13,398,773
Net income (loss) 382,507 541,259 (164,824)
Cash dividends paid on preferred stock (86,512) (82,695) (76,717)
------------ ------------ ------------
Ending balance 13,911,791 13,615,796 13,157,232
------------ ------------ ------------
Total Stockholders' equity $ 15,641,209 $ 15,690,291 $ 15,416,989
============ ============ ============
The accompanying notes are an integral part of these financial statements.
-19-
AMERICAN HOSPITAL MANAGEMENT CORPORATION
Statements of Cash Flows
Years ended June 30, 2001, 2000 and 1999
2001 2000 1999
------------ ------------ ------------
Cash flows from operating activities:
Cash received from patients
and third-party payors $ 24,106,903 $ 23,172,826 $ 21,394,707
Cash paid to employees and suppliers (24,921,285) (22,638,608) (22,010,456)
Investment income received 415,137 344,897 232,119
Interest paid (113,714) (104,938) (74,966)
Income taxes, net change (77,227) 147,720 (116,602)
------------ ------------ ------------
Net cash (used in) provided by
operating activities (590,186) 921,897 (575,198)
------------ ------------ ------------
Cash flows from investing activities:
Purchase of property and equipment, net (2,152,623) (768,647) (1,380,999)
Proceeds from sale of short-term investments 1,030,918 1,844,750 3,719,964
Cash received from partnership investment 27,197 -- --
Purchase of short-term investments (1,102,919) (1,919,742) (2,247,503)
Other 120,312 110,987 (65,191)
------------ ------------ ------------
Net cash (used in) provided by
investing activities (2,077,115) (732,652) 26,271
------------ ------------ ------------
Cash flows from financing activities:
Proceeds from issuance of long-term debt 703,071 41,522 679,699
Principal reductions of long-term debt (112,315) (107,255) (144,099)
Net proceeds from line of credit 1,667,224 654,363 --
Dividends paid (86,512) (82,695) (76,717)
Payments for reacquired stock (17,125) (28,471) (16,364)
------------ ------------ ------------
Net cash provided by
financing activities 2,154,343 477,464 442,519
------------ ------------ ------------
Net (decrease) increase in cash and cash equivalents (512,958) 666,709 (106,408)
Cash and cash equivalents, beginning of year 769,953 103,244 209,652
------------ ------------ ------------
Cash and cash equivalents, end of year $ 256,995 $ 769,953 $ 103,244
============ ============ ============
Supplemental schedule of non-cash investing
activities:
Decrease in fair value of investments $ (546,587) $ (251,889) $ (360,915)
Change in deferred taxes 218,635 95,098 144,366
------------ ------------ ------------
Decrease in unrealized holding gains $ (327,952) $ (156,791) $ (216,549)
============ ============ ============
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, 2001, 2000 and 1999
2001 2000 1999
----------- ----------- -----------
Reconciliation of net income to net cash
(used in) provided by operating
activities:
Net income (loss) $ 382,507 $ 541,259 $ (164,824)
Adjustments to reconcile net income to net
cash (used in) provided by operating activities:
Depreciation and amortization 864,128 844,241 964,524
Partnership income (1,097) (4,185) --
Gain on sale of investments (41,274) (167,590) (432,691)
Change in assets and liabilities:
(Increase) decrease in patient receivables, net (1,479,914) 381,362 (724,760)
Increase in third-party payors, net (1,246,322) (590,337) (1,183,549)
Change in income taxes, net 136,929 302,831 (291,402)
(Increase) decrease in supplies (99,225) 117,360 (56,484)
(Increase) decrease in prepaid expenses (13,453) (11,313) 651
Increase (decrease) in trade accounts payable 490,654 (472,004) 1,257,343
Increase (decrease) in accrued expenses, net 416,881 (19,727) 55,994
----------- ----------- -----------
Net cash (used in) provided by
operating activities $ (590,186) $ 921,897 $ (575,198)
=========== =========== ===========
The accompanying notes are an integral part of these financial statements.
-21-
AMERICAN HOSPITAL MANAGEMENT CORPORATION
Notes to Financial Statements
June 30, 2001, 2000 and 1999
(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." 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, 1998.
* Medicaid. Inpatient 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 the cost effect
of the reclassification of revenue, as required by Medicaid,
in its financial statements. 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, 1998.
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:
2001 2000 1999
---- ---- ----
Gross patient service revenue $56,889,189 $50,615,111 $46,721,019
Less contractual allowances 29,225,660 25,855,883 22,631,419
----------- ----------- -----------
Net patient service revenue $27,663,529 $24,759,228 $24,089,600
=========== =========== ===========
At June 30, 2001 and 2000, 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, 2001, contractual allowances and
provisions for bad debts has totaled $77,712,962, approximately 50% of
gross revenue.
(3) Marketable Securities
---------------------
Cost and fair value of marketable equity securities at June 30, 2001
and 2000, are as follows:
2001 2000
---- ----
Available for sale:
Cost $3,267,733 $2,500,094
Fair Value 5,524,003 5,957,315
Unrealized Gain 2,501,927 3,637,800
Unrealized Loss (245,657) (180,579)
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 $(327,952), $(156,791) and $(216,549) for the years ended June 30,
2001, 2000 and 1999 have been charged to comprehensive income. For the
years ended June 30, 2001, 2000 and 1999, realized gains and realized
losses were $276,863 and $(235,589), $343,889 and $(176,299), and
$606,848 and $(174,157), respectively.
The Company has a line of credit with the Wells Fargo Bank, secured by
the investment portfolio. The maximum amount available under the line
of credit at June 30, 2001 is $2,500,000, of which $2,321,587 is
outstanding. The interest rate at June 30, 2001 was 6.75%.
-25-
AMERICAN HOSPITAL MANAGEMENT CORPORATION
Notes to Financial Statements, continued
(4) Property and Equipment
----------------------
At June 30, 2001 and 2000, property and equipment is comprised of the
following:
2001 2000
----------- -----------
Land and improvements $ 44,500 $ 44,500
Buildings 5,832,326 5,575,593
Equipment 9,527,590 8,302,909
Construction in progress 875,916 204,707
----------- -----------
16,280,332 14,127,709
Accumulated depreciation and amortization 10,479,310 9,683,862
----------- -----------
Net property and equipment $ 5,801,022 $ 4,443,847
=========== ===========
Capitalized interest of $58,535 is included in construction in progress
for the year ended June 30, 2001
Property and equipment include certain capitalized leases, as follows:
2001 2000
----------- -----------
Equipment $ 1,678,984 $ 975,913
Less accumulated amortization 415,360 223,218
----------- -----------
$ 1,263,624 $ 752,695
=========== ===========
Amortization expense on capitalized leases for the years ended June 30,
2001, 2000 and 1999 totaled $192,142, $138,957 and $136,087,
respectively.
Annual future minimum lease payments under capitalized leases at June
30, 2001 are as follows:
2002 $ 296,430
2003 462,906
2004 144,635
2005 136,373
2006 135,656
Thereafter 271,311
---------
Total minimum lease payments 1,447,311
Less amount representing interest (6.75% to 19.46%) 312,046
----------
Present value of minimum lease payments 1,135,265
Less current maturity 197,518
----------
$ 937,747
===========
-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 their lots. 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 487,018
----------
$1,954,241
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, 2001 and 2000, other assets include cash surrender value of
four life insurance polices totaling $449,570, investment in
partnerships of $70,202, and $24,038 in other investments.
(7) Long-Term Debt
--------------
Long-term debt at June 30, 2001 and 2000, consists of the following:
2001 2000
---- ----
Bank note, secured by investment property,
interest rate of 2.25% above bank index
(7.448% at June 30, 2001), payable in monthly
installments, maturing in 2021 $ 131,623 $133,705
Lease obligations, payable in installments
through 2004 with a weighted average
interest rate of 9.48% 1,135,265 542,427
--------- --------
1,266,888 676,132
Less current maturities 199,700 113,187
---------- ---------
$1,067,188 $562,945
========== ========
The maturities of long-term debt for each of the succeeding five years
subsequent to June 30, 2001, are as follows: 2002-$199,700;
2003-$385,959; 2004-$101,311; 2005-$102,025; 2006-$110,682,and
beyond-$367,211.
-27-
AMERICAN HOSPITAL MANAGEMENT CORPORATION
Notes to Financial Statements, continued
(8) Income Taxes
------------
At June 30, income tax expense (benefit) consisted of the following:
2001
-----------------------------------------------
Federal California Total
--------- ---------- ---------
Current $ 173,020 $ 51,486 $ 224,506
Deferred (8,271) (2,079) (10,350)
--------- --------- ---------
$ 164,749 $ 49,407 $ 214,156
========= ========= =========
2000
-----------------------------------------------
Federal California Total
--------- ---------- ---------
Current $ 69,120 $ 9,564 $ 78,684
Deferred 61,486 14,941 76,427
--------- --------- ---------
$ 130,606 $ 24,505 $ 155,111
========= ========= =========
1999
-----------------------------------------------
Federal California Total
--------- ---------- ---------
Current $(175,600) $ 800 $(174,800)
========= ========= =========
Deferred tax expenses (credits) for 2001, 2000, and 1999 result from
the following temporary differences:
2001 2000 1999
-------- -------- --------
California franchise tax $(15,590) $ (7,167) $(11,750)
Depreciation and amortization 92,708 84,089 (13,667)
Allowance for bad debts (30,623) 29,221 (26,571)
Vacation accrual (31,992) (32,700) (2,692)
Correction of deferred tax liability (14,996) -- 54,680
Other (9,857) 2,984 --
-------- -------- --------
$(10,350) $ 76,427 $ 0
======== ======== ========
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, 2001 and
2000 was $(218,635) and $(239,465), respectively.
-28-
AMERICAN HOSPITAL MANAGEMENT CORPORATION
Notes to Financial Statements, continued
(8) Income Taxes continued
----------------------
Recorded income tax expense (benefit) differs from that computed by
applying the statutory income tax rates for the following reasons:
2001 2000 1999
--------- --------- ---------
Computed tax at statutory rate $ 255,610 $ 298,325 $(115,472)
Increases (decreases) resulting from:
California franchise tax (18,498) (8,108) (272)
Domestic dividend exclusion allo (18,740) (18,165) (22,361)
Cash surrender value -- (112,833) (4,321)
Entertainment deduction 10,016 11,093 9,649
Net operating loss carryover -- (18,043) --
Other (14,232) 2,842 (42,023)
--------- --------- ---------
$ 214,156 $ 155,111 $(174,800)
========= ========= =========
(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, 2001 and 2000, was
$1,278,382 and $1,287,778, 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
-----------------------
Basic income per common share was computed by dividing the net income
after deduction of preferred stock dividend requirements of $92,973,
$93,657 and $94,884, by the weighted average number of common shares
outstanding (223,092, 224,298 and 225,592) for 2001, 2000 and 1999,
respectively.
Diluted income per common share was computed by dividing net income by
the weighted average number of common shares outstanding, after
redemption of preferred stock, (315,588 and 317,255) for 2001 and 2000,
respectively. For 1999, there was an anti-dilutive effect for all
shares.
-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 employer contribution was made for any of the
three years ended June 30, 2001.
(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, 2001 and 2000, was as follows:
2001 2000
---- ----
Medicare 38.8% 33.4%
Medi-Cal 11.6 18.4
Other third-party payors 39.0 41.0
Patients 10.6 7.2
------ -------
100.0% 100.0%
===== =====
-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,
2001. 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 $1,739,750.
Health care benefit expense was approximately $1,498,230, $830,022 and
$2,084,133 for the years ended June 30, 2001, 2000 and 1999,
respectively.
(15) Commitments and Contingencies
-----------------------------
Total rental expense for the years ended June 30, 2001, 2000, and 1999,
was $386,346, $388,708 and $380,325, respectively
The Company has entered into an agreement for approximately $1,140,000
to construct a medical office building adjacent to the Hospital. There
will be additional cost, depending on the final occupants' of the
buildings needs. As of June 30, 2001, approximately $400,000 has been
paid on the contract.
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 and
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, 2001, 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 75 Director President of
Freight For-
warding Co.
Charles F. Forbes, Attorney 1968 71 Secretary & Retired
Director
Attorney
Allen E. Shaw, President 1960 83 President & President of
of the Company Director Company
Douglas A. Shaw, Vice President 1981 50 Vice President Hospital
Administrator & Director Administrator
Richard J. Stanczak 1977 75 Director Business
Business Consultant Consultant
Michael Young, Controller 1978 53 Treasurer Hospital
Administrator Controller
Donald J. Krpan, D.O. 1988 65 Director President of
the American
Osteopath
Association
John Aryanpur, M.D. 1998 41 Director Neurosurgeon
-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, 2000, 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 $ 122,802
the Board
Douglas A. Shaw Vice President, Administrator 52,000
Michael Young Treasurer and Controller of 75,954
Mad River Community Hospital
All other directors
and officers as a
group (5 persons) 24,131
--------
(8 persons) $ 274,887
==========
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 2001 was $24,131. 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 52.80%
San Clemente, California Preferred 1,970 4.20%
Arcata Hospital Corporation* Common 20,898 9.38%
Palos Verdes Estates, California Preferred 11,481 24.51%
Security ownership of management as a group
- -------------------------------------------
All directors and officers as Common 120,579 53.92%
a group
All directors and officers Preferred 1,970 4.20%
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:
Reports of Independent Auditors'
Financial Statements:
Balance Sheets
June 30, 2001 and 2000
Statements of Operations
Years ended June 30, 2001, 2000 and 1999
Statements of Comprehensive Income
Years ended June 30, 2001, 2000 and 1999
Statements of Stockholders' Equity
Years ended June 30, 2001, 2000 and 1999
Statements of Cash Flows
Years ended June 30, 2001, 2000 and 1999
Notes to Financial Statements
(2) The following financial schedules for the Years 2001, 2000 and
1999 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, 2001.
-38-
Schedule II
AMERICAN HOSPITAL MANAGEMENT CORPORATION
Valuation and Qualifying Accounts
Years ended June 30, 2001, 2000 and 1999
Balance, Charged Charged Balance,
beginning to to other end
of year income accounts Deductions of year
------- --------- --------- ------- -------
Allowance for
doubtful receivables:
2001 $ 157,532 $1,223,545 $1,152,064 $ 229,013
2000 230,699 1,723,497 1,796,664 157,532
1999 292,723 1,176,463 1,238,487 230,699
-39-
Schedule III
AMERICAN HOSPITAL MANAGEMENT CORPORATION
Real Estate and Accumulated Depreciation
Years ended June 30, 2001, 2000 and 1999
Related Accumulated Useful
Description debt Land Buildings Total Depreciation Life
- ----------- ---- ---- --------- ----- ------------ ----
Rental property $131,623 $482,346 $1,126,725 $1,609,071 $487,018 25
Investment None 832,189 832,189
---------------------------------------------------------------------------
$131,623 $1,314,535 $1,126,725 $2,441,260 $487,018
===========================================================================
Cost:
Balance at June 30, 2000, 1999 and 1998 $2,241,260
Accumulated Depreciation:
Balance at June 30, 1998 $ 395,682
Depreciation during period 45,669
-----------
Balance at June 30, 1999 441,351
Depreciation during period 45,667
-----------
Balance at June 30, 2000 $ 487,018
==========
-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, hereunto duly authorized:
AMERICAN HOSPITAL MANAGEMENT CORPORATION
By: /s/ Allen E. Shaw
------------------------------------
Allen E. Shaw, President
Date: November 15, 2001
----------------------------------
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 November 15, 2001
- ----------------------------
Allen E. Shaw
/s/ Michael J. Young Treasurer and Chief November 15, 2001
- ---------------------------- Accounting Officer
Michael J. Young Director
/s/ Donald J. Krpan Director November 15, 2001
- ----------------------------
Donald J. Krpan
/s/ Doug Shaw Director November 15, 2001
- ----------------------------
Doug Shaw
41