001-10315 | 63-0860407 |
(Commission File Number) | (IRS Employer Identification No.) |
¨ | Written communication pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
(a) | Financial Statements of Business Acquired |
(b) | Pro Forma Financial Information |
(d) | Exhibits |
By: | /S/ JOHN P. WHITTINGTON | |
Name: | John P. Whittington | |
Title: | Executive Vice President, General Counsel and Corporate Secretary |
Exhibit Number | Description of Exhibit |
23.1 | Consent of BKD, LLP. |
99.1 | Audited consolidated balance sheet of Reliant as of December 31, 2014 and the related audited consolidated statements of operations, members' deficit, and cash flows for the year ended December 31, 2014, together with the notes thereto and the auditor’s report thereon. |
99.2 | Unaudited consolidated balance sheet of Reliant as of September 30, 2015 and the related unaudited interim condensed consolidated statements of operations, members' (deficit) equity, and cash flows for the nine months ended September 30, 2015 and 2014. |
99.3 | Unaudited pro forma condensed combined balance sheet of HealthSouth as of September 30, 2015 and the unaudited pro forma condensed combined statements of operations for the year ended December 31, 2014 and the nine months ended September 30, 2015. |
INDEPENDENT AUDITOR’S REPORT | 1 | |
CONSOLIDATED FINANCIAL STATEMENTS | ||
Balance Sheet | 3 | |
Statement of Operations | 5 | |
Statement of Members’ Deficit | 6 | |
Statement of Cash Flows | 7 | |
Notes to Consolidated Financial Statements | 8 |
ASSETS | |||
Currents assets | |||
Cash | $ | 29,314,883 | |
Patient accounts receivable, net of allowance; 2014 - $3,755,046 | 29,985,411 | ||
Estimated amounts due from third-party payers | 972,145 | ||
Prepaid expenses | 3,715,579 | ||
Supply inventory and other | 1,036,469 | ||
Total current assets | 65,024,487 | ||
Property and Equipment, At cost | |||
Buildings and land recorded under capital leases | 194,142,528 | ||
Facility equipment and furniture | 22,609,351 | ||
Construction in progress | 39,994 | ||
216,791,873 | |||
Less accumulated depreciation and amortization | 38,639,126 | ||
178,152,747 | |||
Other Assets | |||
Deferred financing costs, net | 3,356,709 | ||
Goodwill | 60,223,270 | ||
Intangible assets, net | 7,067,000 | ||
Due from affiliates | 868,003 | ||
Other long-term assets | 1,078,096 | ||
72,593,078 | |||
Total assets | $ | 315,770,312 |
Liabilities And Members’ Deficit | |||
Current liabilities | |||
Current maturities of long-term debt | $ | 3,862,500 | |
Current maturities of capital lease obligations | 2,363,175 | ||
Accounts payable | 2,401,627 | ||
Accrued bonuses | 1,298,316 | ||
Accrued benefits | 2,985,431 | ||
Accrued property taxes | 3,213,956 | ||
Other accrued expenses | 4,962,167 | ||
Estimated amounts due to third-party payors | 979,017 | ||
Total current liabilities | 22,066,189 | ||
Long-term Debt, Less Current Maturities | 150,637,500 | ||
Capital Lease Obligations, Less Current Maturities | 186,238,796 | ||
Other Long-term Liabilities | 6,981,679 | ||
365,924,164 | |||
Commitments and Contingencies | |||
Members’ Deficit | |||
Reliant Hospital Partners, LLC’s deficit | (53,416,858 | ) | |
Noncontrolling interests | 3,263,006 | ||
Total members’ deficit | (50,153,852 | ) | |
Total liabilities and members’ deficit | $ | 315,770,312 |
Revenue | |||
Net patient service revenue | $ | 247,676,520 | |
Other | 1,400,036 | ||
Total revenue | 249,076,556 | ||
Expenses | |||
Salaries, wages, and benefits | 108,826,751 | ||
Purchased services and professional fees | 16,160,077 | ||
Other operating expenses | 27,005,812 | ||
Rent expense | 11,812,386 | ||
Depreciation and amortization | 13,066,173 | ||
Management fees to affiliates | 1,000,000 | ||
Provision for doubtful accounts | 3,437,563 | ||
Total expenses | 181,308,762 | ||
Operating income | 67,767,794 | ||
Interest expense | (22,605,000 | ) | |
Net income | $ | 45,162,794 | |
Amounts Attributable to Noncontrolling Interests | |||
Net Income | $ | 45,162,794 | |
Less net income attributable to noncontrolling interests | 4,184,072 | ||
Net income attributable to Reliant Hospital Partners, LLC | $ | 40,978,722 |
Reliant Hospital Partners, LLC | Noncontrolling Interests | Total Members’ Equity (Deficit) | |||||||||
Balance, January 1, 2014 | $ | 33,807,301 | $ | 6,976,493 | $ | 40,783,794 | |||||
Unit-based compensation | 350,927 | — | 350,927 | ||||||||
Member distributions | (127,824,491 | ) | (7,432,499 | ) | (135,256,990 | ) | |||||
Reliant Hospital Partners, LLC purchase of noncontrolling interests and other redemption of interests | (729,317 | ) | (465,060 | ) | (1,194,377 | ) | |||||
Net income | 40,978,722 | 4,184,072 | 45,162,794 | ||||||||
Balance, December 31, 2014 | $ | (53,416,858 | ) | $ | 3,263,006 | $ | (50,153,852 | ) |
Operating activities | |||
Net income | $ | 45,162,794 | |
Items not requiring cash | |||
Depreciation and amortization of property and equipment | 12,581,598 | ||
Amortization of intangible assets | 484,575 | ||
Amortization of deferred financing costs | 1,747,670 | ||
Provision for doubtful accounts | 3,437,563 | ||
Unit-based compensation | 350,927 | ||
Changes in | |||
Patient accounts receivable | (20,149,864 | ) | |
Estimated amounts due from third-party payers | 1,425,222 | ||
Inventory, prepaid expenses and other | (1,111,568 | ) | |
Accounts payable | (2,162,387 | ) | |
Accrued expenses and other | 223,847 | ||
Net cash provided by operating activities | 41,990,377 | ||
Investing activities | |||
Purchase of property and equipment | (1,228,990 | ) | |
Net cash used in investing activities | (1,228,990 | ) | |
Financing activities | |||
Distributions to members | (135,256,990 | ) | |
Reliant Hospital Partners, LLC purchase of noncontrolling interests and other redemption of interests | (1,194,377 | ) | |
Proceeds from issuance of long-term debt | 124,667,621 | ||
Payment of deferred financing costs | (3,533,321 | ) | |
Payments on line of credit | (11,000,000 | ) | |
Payments on long-term debt | (15,993,538 | ) | |
Payments on capital lease obligations | (2,504,192 | ) | |
Net cash used in financing activities | (44,814,797 | ) | |
Decrease in Cash | (4,053,410 | ) | |
Cash, Beginning of Year | 33,368,293 | ||
Cash, End of Year | $ | 29,314,883 | |
Supplemental Cash Flows Information | |||
Interest paid | $ | 20,998,582 | |
Supplemental Disclosures of Noncash Investing Activities | |||
Payables incurred for property and equipment | $ | 29,028 |
Note 1: | Nature of Operations and Summary of Significant Accounting Policies |
Buildings and land recorded under capital leases | 20 - 25 years |
Facility equipment and furniture | 3 - 20 years |
Note 2: | Net Patient Service Revenue |
Note 3: | Concentration of Credit Risk |
Medicare | 76 | % |
Medicaid | 7 | % |
Blue Cross Blue Shield | 10 | % |
Other third-party payers | 7 | % |
100 | % |
Note 4: | Acquired Intangible Assets and Goodwill |
Gross Carrying Amount | Accumulated Amortization | Net | |||||||||
2014 | |||||||||||
Trade names | $ | 5,881,500 | $ | (1,124,500 | ) | $ | 4,757,000 | ||||
Certificates of need | 2,310,000 | — | 2,310,000 | ||||||||
$ | 8,191,500 | $ | (1,124,500 | ) | $ | 7,067,000 |
2015 | $ | 484,575 | |
2016 | 484,575 | ||
2017 | 484,575 | ||
2018 | 484,575 | ||
2019 | 230,575 | ||
Thereafter | 2,588,125 | ||
$ | 4,757,000 |
Note 5: | Professional Liability Claims |
Note 6: | Lines of Credit |
Note 7: | Long-term Debt |
Credit facility | $ | 154,500,000 | |
Less current maturities | (3,862,500 | ) | |
$ | 150,637,500 |
2015 | $ | 3,862,500 | |
2016 | 3,862,500 | ||
2017 | 7,725,000 | ||
2018 | 7,725,000 | ||
2019 | 131,325,000 | ||
$ | 154,500,000 |
Note 8: | Capital Lease Obligations |
2015 | $ | 16,879,767 | |
2016 | 18,478,579 | ||
2017 | 18,770,450 | ||
2018 | 19,083,339 | ||
2019 | 19,240,915 | ||
Thereafter | 299,219,818 | ||
391,672,868 | |||
Less amount representing interest | (203,070,897 | ) | |
Present value of future minimum lease payments | 188,601,971 | ||
Less current maturities | (2,363,175 | ) | |
Long-term portion | $ | 186,238,796 |
Buildings and land | $ | 194,142,528 | |
Less accumulated depreciation | (29,936,057 | ) | |
$ | 164,206,471 |
Note 9: | Sale-leaseback Transaction and Operating Leases |
2015 | $ | 7,966,033 | |
2016 | 8,698,913 | ||
2017 | 8,860,513 | ||
2018 | 8,921,531 | ||
2019 | 9,077,241 | ||
Thereafter | 83,369,837 | ||
Future minimum lease payments | $ | 126,894,068 |
Note 10: | Retirement Plan |
Note 11: | Related Party Transactions |
Note 12: | Fair Value of Financial Instruments |
Note 13: | Significant Estimates and Concentrations |
Note 14: | Incentive Units |
Expected volatility | 42.16 | % |
Expected dividend yield | 0 | % |
Expected term (in years) | 5 | |
Risk-free rate | 1.68 | % |
Units | Weighted-Average Grant-Date Fair Value | |||||
Outstanding, beginning of year | 3,313,419 | $ | 0.45 | |||
Granted | ||||||
Class C-1 | 94,694 | $ | 1.11 | |||
Forfeited | — | $ | — | |||
Outstanding, end of year | 3,408,113 | $ | 0.47 | |||
Vested, beginning of year | 1,573,298 | $ | 0.44 | |||
Class B | 20,000 | $ | 0.42 | |||
Class C-1 | 672,322 | $ | 0.51 | |||
Forfeited | — | $ | — | |||
Vested, end of year | 2,265,620 | $ | 0.46 | |||
Nonvested, end of year | 1,142,493 | $ | 0.50 |
Units | Weighted-Average Grant-Date Fair Value | |||||
Outstanding, beginning of year | 6,344,442 | $ | 0.21 | |||
Granted | ||||||
Class C-2 | 94,694 | $ | 0.68 | |||
Class C-3 | 94,694 | $ | 0.44 | |||
Forfeited | ||||||
Class C-2 | — | $ | — | |||
Class C-3 | — | $ | — | |||
Outstanding, end of year | 6,533,830 | $ | 0.22 |
Note 15: | Subsequent Event (Unaudited) |
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) | ||
Balance Sheet | 1 | |
Statement of Operations | 3 | |
Statement of Members’ Deficit | 4 | |
Statement of Cash Flows | 5 | |
Notes to Consolidated Financial Statements | 6 |
September 30, 2015 | December 31, 2014 | ||||||
ASSETS | |||||||
Currents assets | |||||||
Cash | $ | 45,006,669 | $ | 29,314,883 | |||
Patient accounts receivable, net of allowance; 2015 - $3,628,029 and 2014 - $3,755,046 | 27,574,945 | 29,985,411 | |||||
Estimated amounts due from third-party payers | 23,318 | 972,145 | |||||
Prepaid expenses | 8,935,451 | 3,715,579 | |||||
Supply inventory and other | 1,044,263 | 1,036,469 | |||||
Total current assets | 82,584,646 | 65,024,487 | |||||
Property and Equipment, At cost | |||||||
Buildings and land recorded under capital leases | 194,142,528 | 194,142,528 | |||||
Facility equipment and furniture | 25,232,837 | 22,609,351 | |||||
Construction in progress | 135,645 | 39,994 | |||||
219,511,010 | 216,791,873 | ||||||
Less accumulated depreciation and amortization | 47,582,990 | 38,639,126 | |||||
171,928,020 | 178,152,747 | ||||||
Other Assets | |||||||
Deferred financing costs, net | 2,826,658 | 3,356,709 | |||||
Goodwill | 60,223,270 | 60,223,270 | |||||
Intangible assets, net | 6,703,569 | 7,067,000 | |||||
Due from affiliates | 868,003 | 868,003 | |||||
Other long-term assets | 995,075 | 1,078,096 | |||||
71,616,575 | 72,593,078 | ||||||
Total assets | $ | 326,129,241 | $ | 315,770,312 |
September 30, 2015 | December 31, 2014 | ||||||
Liabilities And Members’ Deficit | |||||||
Current liabilities | |||||||
Current maturities of long-term debt | $ | 3,862,500 | $ | 3,862,500 | |||
Current maturities of capital lease obligations | 2,532,378 | 2,363,175 | |||||
Accounts payable | 1,885,697 | 2,401,627 | |||||
Accrued bonuses | 26,680 | 1,298,316 | |||||
Accrued benefits | 3,458,540 | 2,985,431 | |||||
Accrued property taxes | 2,438,170 | 3,213,956 | |||||
Other accrued expenses | 6,218,799 | 4,962,167 | |||||
Estimated amounts due to third-party payors | 1,369,718 | 979,017 | |||||
Total current liabilities | 21,792,482 | 22,066,189 | |||||
Long-term Debt, Less Current Maturities | 147,740,625 | 150,637,500 | |||||
Capital Lease Obligations, Less Current Maturities | 184,143,306 | 186,238,796 | |||||
Other Long-term Liabilities | 7,413,710 | 6,981,679 | |||||
361,090,123 | 365,924,164 | ||||||
Commitments and Contingencies | |||||||
Members’ Deficit | |||||||
Reliant Hospital Partners, LLC’s deficit | (38,931,093 | ) | (53,416,858 | ) | |||
Noncontrolling interests | 3,970,211 | 3,263,006 | |||||
Total members’ deficit | (34,960,882 | ) | (50,153,852 | ) | |||
Total liabilities and members’ deficit | $ | 326,129,241 | $ | 315,770,312 |
2015 | 2014 | ||||||
Revenue | |||||||
Net patient service revenue | $ | 193,257,183 | $ | 182,498,952 | |||
Other | 1,176,148 | 1,294,670 | |||||
Total revenue | 194,433,331 | 183,793,622 | |||||
Expenses | |||||||
Salaries, wages, and benefits | 75,380,870 | 83,078,351 | |||||
Purchased services and professional fees | 15,594,872 | 11,781,746 | |||||
Other operating expenses | 19,916,774 | 20,932,357 | |||||
Rent expense | 8,860,538 | 8,933,623 | |||||
Depreciation and amortization | 9,318,562 | 9,774,290 | |||||
Fees to affiliates | 750,000 | 750,000 | |||||
Provision for doubtful accounts | 1,854,744 | 2,426,105 | |||||
Total expenses | 131,676,360 | 137,676,472 | |||||
Operating income | 62,756,971 | 46,117,150 | |||||
Interest expense | (19,229,338 | ) | (16,094,804 | ) | |||
Net income | $ | 43,527,633 | $ | 30,022,346 | |||
Amounts Attributable to Noncontrolling Interests | |||||||
Net income | $ | 43,527,633 | $ | 30,022,346 | |||
Less net income attributable to noncontrolling interests | 4,420,409 | 2,970,239 | |||||
Net income attributable to Reliant Hospital Partners, LLC | $ | 39,107,224 | $ | 27,052,107 |
Reliant Hospital Partners, LLC | Noncontrolling Interests | Total Members’ Deficit | |||||||||
Balance, January 1, 2015 | $ | (53,416,858 | ) | $ | 3,263,006 | $ | (50,153,852 | ) | |||
Unit-based compensation | 237,109 | — | 237,109 | ||||||||
Member distributions | (24,858,568 | ) | (2,608,920 | ) | (27,467,488 | ) | |||||
Reliant Hospital Partners, LLC purchase of noncontrolling interests and other redemption of interests | — | (1,104,284 | ) | (1,104,284 | ) | ||||||
Net income | 39,107,224 | 4,420,409 | 43,527,633 | ||||||||
Balance, September 30, 2015 | $ | (38,931,093 | ) | $ | 3,970,211 | $ | (34,960,882 | ) |
Reliant Hospital Partners, LLC | Noncontrolling Interests | Total Members’ Equity | |||||||||
Balance, January 1, 2014 | $ | 33,807,301 | $ | 6,976,493 | $ | 40,783,794 | |||||
Unit-based compensation | 263,195 | — | 263,195 | ||||||||
Member distributions | (33,917,906 | ) | (3,269,218 | ) | (37,187,124 | ) | |||||
Reliant Hospital Partners, LLC purchase of noncontrolling interests and other redemption of interests | (729,317 | ) | (474,605 | ) | (1,203,922 | ) | |||||
Net income | 27,052,107 | 2,970,239 | 30,022,346 | ||||||||
Balance, September 30, 2014 | $ | 26,475,380 | $ | 6,202,909 | $ | 32,678,289 |
2015 | 2014 | ||||||
Operating activities | |||||||
Net income | $ | 43,527,633 | $ | 30,022,346 | |||
Items not requiring cash | |||||||
Depreciation and amortization of property and equipment | 8,955,131 | 9,410,859 | |||||
Amortization of intangible assets | 363,431 | 363,431 | |||||
Amortization of deferred financing costs | 530,051 | 1,571,058 | |||||
Provision for doubtful accounts | 1,854,744 | 2,426,105 | |||||
Unit-based compensation | 237,109 | 263,195 | |||||
Changes in | |||||||
Patient accounts receivable | 555,722 | (16,234,203 | ) | ||||
Estimated amounts due from third-party payers | 1,339,528 | 1,748,220 | |||||
Inventory, prepaid expenses and other | (5,144,644 | ) | (256,683 | ) | |||
Accounts payable | (515,930 | ) | (1,954,203 | ) | |||
Accrued expenses and other | 120,146 | 2,113,985 | |||||
Net cash provided by operating activities | 51,822,921 | 29,474,110 | |||||
Investing activities | |||||||
Purchase of property and equipment | (2,736,201 | ) | (913,916 | ) | |||
Net cash used in investing activities | (2,736,201 | ) | (913,916 | ) | |||
Financing activities | |||||||
Distributions to members | (27,467,488 | ) | (37,187,124 | ) | |||
Reliant Hospital Partners, LLC purchase of noncontrolling interests and other redemption of interests | (1,104,284 | ) | (1,203,922 | ) | |||
Proceeds from issuance of long-term debt | — | 124,667,621 | |||||
Payment of deferred financing costs | — | (3,449,024 | ) | ||||
Payments on line of credit | — | (11,000,000 | ) | ||||
Payments on long-term debt | (2,896,875 | ) | (15,167,621 | ) | |||
Payments on capital lease obligations | (1,926,287 | ) | (1,828,422 | ) | |||
Net cash (used in) provided by financing activities | (33,394,934 | ) | 54,831,508 | ||||
Increase in Cash | 15,691,786 | 83,391,702 | |||||
Cash, Beginning of Period | 29,314,883 | 33,368,293 | |||||
Cash, End of Period | $ | 45,006,669 | $ | 116,759,995 | |||
Supplemental Cash Flows Information | |||||||
Interest paid | $ | 18,731,007 | $ | 14,711,319 | |||
Supplemental Disclosures of Noncash Investing Activities | |||||||
Payables incurred for property and equipment | $ | 34,826 | $ | 219,192 |
Note 1: | Nature of Operations and Summary of Significant Accounting Policies |
Note 2: | Net Patient Service Revenue |
Note 3: | Concentration of Credit Risk |
Medicare | 76 | % |
Medicaid | 5 | % |
Blue Cross Blue Shield | 6 | % |
Other third-party payers | 13 | % |
100 | % |
Note 4: | Related Party Transactions |
Note 5: | Litigation |
Note 6: | Subsequent Event |
As of September 30, 2015 | |||||||||||||||||||
Historical | Pro Forma Adjustments | ||||||||||||||||||
HealthSouth | RHP | Adjustments for Entity Not Purchased | Allocation of Acquisition Consideration | Pro Forma Combined | |||||||||||||||
(In Millions) | |||||||||||||||||||
Assets | |||||||||||||||||||
Current assets: | |||||||||||||||||||
Cash and cash equivalents | $ | 801.6 | $ | 45.0 | $ | (2.0 | ) | $ | (772.3 | ) | $ | 72.3 | |||||||
Accounts receivable, net | 350.9 | 27.6 | — | — | 378.5 | ||||||||||||||
Deferred income tax assets | 185.9 | — | — | — | 185.9 | ||||||||||||||
Other current assets | 124.6 | 10.0 | (5.4 | ) | — | 129.2 | |||||||||||||
Total current assets | 1,463.0 | 82.6 | (7.4 | ) | (772.3 | ) | 765.9 | ||||||||||||
Property and equipment, net | 1,079.1 | 171.9 | — | 48.5 | 1,299.5 | ||||||||||||||
Goodwill | 1,105.0 | 60.2 | — | 581.0 | 1,746.2 | ||||||||||||||
Intangible assets, net | 324.7 | 6.7 | — | 59.5 | 390.9 | ||||||||||||||
Deferred income tax assets | 55.4 | — | — | (1.8 | ) | 53.6 | |||||||||||||
Other long-term assets | 222.1 | 4.7 | (0.9 | ) | — | 225.9 | |||||||||||||
Total assets | $ | 4,249.3 | $ | 326.1 | $ | (8.3 | ) | $ | (85.1 | ) | $ | 4,482.0 | |||||||
Liabilities and Shareholders’ Equity | |||||||||||||||||||
Current liabilities: | |||||||||||||||||||
Current portion of long-term debt | $ | 23.6 | $ | 6.4 | $ | — | $ | (2.3 | ) | $ | 27.7 | ||||||||
Accounts payable | 65.6 | 1.9 | (0.2 | ) | — | 67.3 | |||||||||||||
Accrued expenses and other current liabilities | 314.4 | 13.5 | (1.9 | ) | 5.0 | 331.0 | |||||||||||||
Total current liabilities | 403.6 | 21.8 | (2.1 | ) | 2.7 | 426.0 | |||||||||||||
Long-term debt, net of current portion | 2,800.7 | 331.9 | — | (126.1 | ) | 3,006.5 | |||||||||||||
Other long-term liabilities | 140.7 | 7.4 | — | — | 148.1 | ||||||||||||||
3,345.0 | 361.1 | (2.1 | ) | (123.4 | ) | 3,580.6 | |||||||||||||
Commitments and contingencies | |||||||||||||||||||
Redeemable noncontrolling interests | 114.1 | — | — | — | 114.1 | ||||||||||||||
Shareholders’ equity: | |||||||||||||||||||
HealthSouth shareholders’ equity | 630.4 | (38.9 | ) | (6.2 | ) | 42.0 | 627.3 | ||||||||||||
Noncontrolling interests | 159.8 | 3.9 | — | (3.7 | ) | 160.0 | |||||||||||||
Total shareholders’ equity | 790.2 | (35.0 | ) | (6.2 | ) | 38.3 | 787.3 | ||||||||||||
Total liabilities and shareholders’ equity | $ | 4,249.3 | $ | 326.1 | $ | (8.3 | ) | $ | (85.1 | ) | $ | 4,482.0 |
For the Year Ended December 31, 2014 | |||||||||||||||||||||||||||
Historical | Pro Forma Adjustments | ||||||||||||||||||||||||||
HealthSouth | RHP | Adjustments for Consistent Presentation | Adjustments for Entity Not Purchased | Acquisition Related Debt Transactions | Allocation of Acquisition Consideration | Pro Forma Combined | |||||||||||||||||||||
(In Millions, Except Per Share Data) | |||||||||||||||||||||||||||
Net operating revenues | $ | 2,405.9 | $ | 249.1 | $ | — | $ | — | $ | — | $ | — | $ | 2,655.0 | |||||||||||||
Less: Provision for doubtful accounts | (31.6 | ) | — | (3.4 | ) | — | — | — | (35.0 | ) | |||||||||||||||||
Net operating revenues less provision for doubtful accounts | 2,374.3 | 249.1 | (3.4 | ) | — | — | — | 2,620.0 | |||||||||||||||||||
Operating expenses: | |||||||||||||||||||||||||||
Salaries and benefits | 1,161.7 | 108.8 | — | (0.4 | ) | — | — | 1,270.1 | |||||||||||||||||||
Purchased services and professional fees | — | 16.2 | (14.2 | ) | (2.0 | ) | — | — | — | ||||||||||||||||||
Other operating expenses | 351.6 | 27.0 | 4.8 | (0.3 | ) | — | — | 383.1 | |||||||||||||||||||
Occupancy costs | 41.6 | 11.8 | — | — | — | — | 53.4 | ||||||||||||||||||||
Supplies | 111.9 | — | 9.4 | — | — | — | 121.3 | ||||||||||||||||||||
General and administrative expenses | 124.8 | — | — | — | — | 0.1 | 124.9 | ||||||||||||||||||||
Depreciation and amortization | 107.7 | 13.1 | — | — | — | 8.8 | 129.6 | ||||||||||||||||||||
Management fees to affiliates | — | 1.0 | — | (1.0 | ) | — | — | — | |||||||||||||||||||
Provision for doubtful accounts | — | 3.4 | (3.4 | ) | — | — | — | — | |||||||||||||||||||
Government, class action, and related settlements | (1.7 | ) | — | — | — | — | — | (1.7 | ) | ||||||||||||||||||
Professional fees - accounting, tax, and legal | 9.3 | — | — | — | — | — | 9.3 | ||||||||||||||||||||
Total operating expenses | 1,906.9 | 181.3 | (3.4 | ) | (3.7 | ) | — | 8.9 | 2,090.0 | ||||||||||||||||||
Loss on early extinguishment of debt | 13.2 | — | — | — | — | — | 13.2 | ||||||||||||||||||||
Interest expense and amortization of debt discounts and fees | 109.2 | 22.6 | — | — | 32.9 | — | 164.7 | ||||||||||||||||||||
Other income | (31.2 | ) | — | — | — | — | — | (31.2 | ) | ||||||||||||||||||
Equity in net income of nonconsolidated affiliates | (10.7 | ) | — | — | — | — | — | (10.7 | ) | ||||||||||||||||||
Income from continuing operations before income tax expense | 386.9 | 45.2 | — | 3.7 | (32.9 | ) | (8.9 | ) | 394.0 | ||||||||||||||||||
Provision for income tax expense | 110.7 | — | — | 1.5 | (13.1 | ) | 12.9 | 112.0 | |||||||||||||||||||
Income from continuing operations | 276.2 | 45.2 | — | 2.2 | (19.8 | ) | (21.8 | ) | 282.0 | ||||||||||||||||||
Less: Net income attributable to noncontrolling interest | (59.7 | ) | (4.2 | ) | — | — | — | 4.2 | (59.7 | ) | |||||||||||||||||
Net income from continuing operations attributable to HealthSouth | 216.5 | 41.0 | — | 2.2 | (19.8 | ) | (17.6 | ) | 222.3 | ||||||||||||||||||
Less: Convertible perpetual preferred stock dividends | (6.3 | ) | — | — | — | — | — | (6.3 | ) | ||||||||||||||||||
Net income from continuing operations attributable to HealthSouth common shareholders | $ | 210.2 | $ | 41.0 | $ | — | $ | 2.2 | $ | (19.8 | ) | $ | (17.6 | ) | $ | 216.0 | |||||||||||
Weighted average common shares outstanding: | |||||||||||||||||||||||||||
Basic | 86.8 | 86.8 | |||||||||||||||||||||||||
Diluted | 100.7 | 100.7 | |||||||||||||||||||||||||
Basic earnings per share from continuing operations attributable to HealthSouth common shareholders | $ | 2.40 | $ | 2.46 | |||||||||||||||||||||||
Diluted earnings per share from continuing operations attributable to HealthSouth common shareholders | $ | 2.24 | $ | 2.30 |
For the Nine Months Ended September 30, 2015 | |||||||||||||||||||||||||||
Historical | Pro Forma Adjustments | ||||||||||||||||||||||||||
HealthSouth | RHP | Adjustments for Consistent Presentation | Adjustments for Entity Not Purchased | Acquisition Related Debt Transactions | Allocation of Acquisition Consideration | Pro Forma Combined | |||||||||||||||||||||
(In Millions, Except Per Share Data) | |||||||||||||||||||||||||||
Net operating revenues | $ | 2,283.6 | $ | 194.4 | $ | — | $ | — | $ | — | $ | — | $ | 2,478.0 | |||||||||||||
Less: Provision for doubtful accounts | (33.2 | ) | — | (1.8 | ) | — | — | — | (35.0 | ) | |||||||||||||||||
Net operating revenues less provision for doubtful accounts | 2,250.4 | 194.4 | (1.8 | ) | — | — | — | 2,443.0 | |||||||||||||||||||
Operating expenses: | |||||||||||||||||||||||||||
Salaries and benefits | 1,204.0 | 75.4 | — | (0.2 | ) | — | — | 1,279.2 | |||||||||||||||||||
Purchased services and professional fees | — | 15.6 | (10.7 | ) | (2.1 | ) | — | (2.8 | ) | — | |||||||||||||||||
Other operating expenses | 314.1 | 19.9 | 3.6 | (0.3 | ) | — | (4.5 | ) | 332.8 | ||||||||||||||||||
Occupancy costs | 37.1 | 8.9 | — | — | — | — | 46.0 | ||||||||||||||||||||
Supplies | 94.1 | — | 7.1 | — | — | — | 101.2 | ||||||||||||||||||||
General and administrative expenses | 97.3 | — | — | — | — | 0.2 | 97.5 | ||||||||||||||||||||
Depreciation and amortization | 98.3 | 9.3 | — | — | — | 7.1 | 114.7 | ||||||||||||||||||||
Management fees to affiliates | — | 0.8 | — | (0.8 | ) | — | — | — | |||||||||||||||||||
Provision for doubtful accounts | — | 1.8 | (1.8 | ) | — | — | — | — | |||||||||||||||||||
Government, class action, and related settlements | 8.0 | — | — | — | — | — | 8.0 | ||||||||||||||||||||
Professional fees - accounting, tax, and legal | 2.7 | — | — | — | — | — | 2.7 | ||||||||||||||||||||
Total operating expenses | 1,855.6 | 131.7 | (1.8 | ) | (3.4 | ) | — | — | 1,982.1 | ||||||||||||||||||
Loss on early extinguishment of debt | 20.0 | — | — | — | — | — | 20.0 | ||||||||||||||||||||
Interest expense and amortization of debt discounts and fees | 98.3 | 19.2 | — | — | 23.1 | — | 140.6 | ||||||||||||||||||||
Other income | (4.2 | ) | — | — | — | — | — | (4.2 | ) | ||||||||||||||||||
Equity in net income of nonconsolidated affiliates | (6.3 | ) | — | — | — | — | — | (6.3 | ) | ||||||||||||||||||
Income from continuing operations before income tax expense | 287.0 | 43.5 | — | 3.4 | (23.1 | ) | — | 310.8 | |||||||||||||||||||
Provision for income tax expense | 98.4 | — | — | 1.4 | (9.3 | ) | 15.6 | 106.1 | |||||||||||||||||||
Income from continuing operations | 188.6 | 43.5 | — | 2.0 | (13.8 | ) | (15.6 | ) | 204.7 | ||||||||||||||||||
Less: Net income attributable to noncontrolling interest | (50.9 | ) | (4.4 | ) | — | — | — | 4.4 | (50.9 | ) | |||||||||||||||||
Net income from continuing operations attributable to HealthSouth | 137.7 | 39.1 | — | 2.0 | (13.8 | ) | (11.2 | ) | 153.8 | ||||||||||||||||||
Less: Convertible perpetual preferred stock dividends | (1.6 | ) | — | — | — | — | — | (1.6 | ) | ||||||||||||||||||
Net income from continuing operations attributable to HealthSouth common shareholders | $ | 136.1 | $ | 39.1 | $ | — | $ | 2.0 | $ | (13.8 | ) | $ | (11.2 | ) | $ | 152.2 | |||||||||||
Weighted average common shares outstanding: | |||||||||||||||||||||||||||
Basic | 89.1 | 89.1 | |||||||||||||||||||||||||
Diluted | 101.4 | 101.4 | |||||||||||||||||||||||||
Basic earnings per share from continuing operations attributable to HealthSouth common shareholders | $ | 1.52 | $ | 1.69 | |||||||||||||||||||||||
Diluted earnings per share from continuing operations attributable to HealthSouth common shareholders | $ | 1.43 | $ | 1.58 |
Fair value of assets acquired, net of $43.0 million of cash acquired | $ | 322.6 | |
Goodwill | 641.2 | ||
Fair value of liabilities assumed | (234.3 | ) | |
Noncontrolling interest | (0.2 | ) | |
Net cash paid for acquisition | $ | 729.3 |
Sources of funds: | |||
August 2015 issuance of 5.75% Senior Notes due 2024 | $ | 350.0 | |
September 2015 issuance of 5.75% Senior Notes due 2025 | 350.0 | ||
Term loan/revolving credit facilities and cash | 72.3 | ||
Total sources | $ | 772.3 |
Cash and cash equivalents | $ | 43.0 | |
Accounts receivable, net | 27.6 | ||
Prepaid expenses and other current assets | 4.6 | ||
Property and equipment, net | 220.4 | ||
Identifiable intangible assets: | |||
Noncompete agreements (useful life of 1 to 2 years) | 9.7 | ||
Trade names (useful life of 20 years) | 8.5 | ||
Certificates of need (useful life of 20 years) | 36.6 | ||
Licenses (useful life of 20 years) | 11.4 | ||
Goodwill | 641.2 | ||
Other long-term assets | 3.8 | ||
Total assets acquired | 1,006.8 | ||
Current portion of long-term debt | 4.1 | ||
Accounts payable | 1.7 | ||
Other current liabilities | 11.5 | ||
Long-term debt, net of current portion | 205.8 | ||
Other long-term liabilities | 7.4 | ||
Deferred tax liabilities | 3.8 | ||
Total liabilities assumed | 234.3 | ||
Noncontrolling interests | 0.2 | ||
Net assets acquired | $ | 772.3 |
Fair Value Adjustments and Elimination of Equity | Payoff of RHP Debt at Closing | Capital Lease Adjustment | HealthSouth Transaction Costs | Total Adjustments for Acquisition Consideration | |||||||||||||||
Assets | |||||||||||||||||||
Cash and cash equivalents | $ | (591.5 | ) | $ | (151.7 | ) | $ | (29.1 | ) | $ | — | $ | (772.3 | ) | |||||
Accounts receivable, net | — | — | — | — | — | ||||||||||||||
Deferred income tax assets | — | — | — | — | — | ||||||||||||||
Other current assets | — | — | — | — | — | ||||||||||||||
Total current assets | (591.5 | ) | (151.7 | ) | (29.1 | ) | — | (772.3 | ) | ||||||||||
Property and equipment, net | (3.8 | ) | — | 52.3 | — | 48.5 | |||||||||||||
Goodwill | 581.0 | — | — | — | 581.0 | ||||||||||||||
Intangible assets, net | 59.5 | — | — | — | 59.5 | ||||||||||||||
Deferred income tax assets | (3.8 | ) | — | — | 2.0 | (1.8 | ) | ||||||||||||
Other long-term assets | — | — | — | — | — | ||||||||||||||
Total assets | $ | 41.4 | $ | (151.7 | ) | $ | 23.2 | $ | 2.0 | $ | (85.1 | ) | |||||||
Liabilities and Shareholders’ Equity | |||||||||||||||||||
Current portion of long-term debt | $ | — | $ | (3.9 | ) | $ | 1.6 | $ | — | $ | (2.3 | ) | |||||||
Accounts payable | — | — | — | — | — | ||||||||||||||
Accrued expenses and other current liabilities | — | (0.1 | ) | — | 5.1 | 5.0 | |||||||||||||
Total current liabilities | — | (4.0 | ) | 1.6 | 5.1 | 2.7 | |||||||||||||
Long-term debt, net of current portion | — | (147.7 | ) | 21.6 | — | (126.1 | ) | ||||||||||||
Other long-term liabilities | — | — | — | — | — | ||||||||||||||
— | (151.7 | ) | 23.2 | 5.1 | (123.4 | ) | |||||||||||||
Commitments and contingencies | |||||||||||||||||||
Redeemable noncontrolling interests | — | — | — | — | — | ||||||||||||||
Shareholders’ equity: | |||||||||||||||||||
HealthSouth shareholders’ equity | 45.1 | — | — | (3.1 | ) | 42.0 | |||||||||||||
Noncontrolling interests | (3.7 | ) | — | — | — | (3.7 | ) | ||||||||||||
Total shareholders’ equity | 41.4 | — | — | (3.1 | ) | 38.3 | |||||||||||||
Total liabilities and shareholders’ equity | $ | 41.4 | $ | (151.7 | ) | $ | 23.2 | $ | 2.0 | $ | (85.1 | ) |
Purchased Services and Professional Fees | Supplies | Provision for Doubtful Accounts | Total Adjustments for Consistent Presentation | ||||||||||||
Net operating revenues | $ | — | $ | — | $ | — | $ | — | |||||||
Less: Provision for doubtful accounts | — | — | (3.4 | ) | (3.4 | ) | |||||||||
Net operating revenues less provision for doubtful accounts | — | — | (3.4 | ) | (3.4 | ) | |||||||||
Operating expenses: | |||||||||||||||
Salaries and benefits | — | — | — | — | |||||||||||
Purchased services and professional fees | (14.2 | ) | — | — | (14.2 | ) | |||||||||
Other operating expenses | 14.2 | (9.4 | ) | — | 4.8 | ||||||||||
Occupancy costs | — | — | — | — | |||||||||||
Supplies | — | 9.4 | — | 9.4 | |||||||||||
General and administrative expenses | — | — | — | — | |||||||||||
Depreciation and amortization | — | — | — | — | |||||||||||
Management fees to affiliates | — | — | — | — | |||||||||||
Provision for doubtful accounts | — | — | (3.4 | ) | (3.4 | ) | |||||||||
Government, class action, and related settlements | — | — | — | — | |||||||||||
Professional fees - accounting, tax, and legal | — | — | — | — | |||||||||||
Total operating expenses | — | — | (3.4 | ) | (3.4 | ) | |||||||||
Loss on early extinguishment of debt | — | — | — | — | |||||||||||
Interest expense and amortization of debt discounts and fees | — | — | — | — | |||||||||||
Other income | — | — | — | — | |||||||||||
Equity in net income of nonconsolidated affiliates | — | — | — | — | |||||||||||
Income from continuing operations before income tax expense | — | — | — | — | |||||||||||
Provision for income tax expense | — | — | — | — | |||||||||||
Income from continuing operations | — | — | — | — | |||||||||||
Less: Net income attributable to noncontrolling interests | — | — | — | — | |||||||||||
Net income from continuing operations attributable to Reliant | $ | — | $ | — | $ | — | $ | — |
Purchased Services and Professional Fees | Supplies | Provision for Doubtful Accounts | Total Adjustments for Consistent Presentation | ||||||||||||
Net operating revenues | $ | — | $ | — | $ | — | $ | — | |||||||
Less: Provision for doubtful accounts | — | — | (1.8 | ) | (1.8 | ) | |||||||||
Net operating revenues less provision for doubtful accounts | — | — | (1.8 | ) | (1.8 | ) | |||||||||
Operating expenses: | |||||||||||||||
Salaries and benefits | — | — | — | — | |||||||||||
Purchased services and professional fees | (10.7 | ) | — | — | (10.7 | ) | |||||||||
Other operating expenses | 10.7 | (7.1 | ) | — | 3.6 | ||||||||||
Occupancy costs | — | — | — | — | |||||||||||
Supplies | — | 7.1 | — | 7.1 | |||||||||||
General and administrative expenses | — | — | — | — | |||||||||||
Depreciation and amortization | — | — | — | — | |||||||||||
Management fees to affiliates | — | — | — | — | |||||||||||
Provision for doubtful accounts | — | — | (1.8 | ) | (1.8 | ) | |||||||||
Government, class action, and related settlements | — | — | — | — | |||||||||||
Professional fees - accounting, tax, and legal | — | — | — | — | |||||||||||
Total operating expenses | — | — | (1.8 | ) | (1.8 | ) | |||||||||
Loss on early extinguishment of debt | — | — | — | — | |||||||||||
Interest expense and amortization of debt discounts and fees | — | — | — | — | |||||||||||
Other income | — | — | — | — | |||||||||||
Equity in net income of nonconsolidated affiliates | — | — | — | — | |||||||||||
Income from continuing operations before income tax expense | — | — | — | — | |||||||||||
Provision for income tax expense | — | — | — | — | |||||||||||
Income from continuing operations | — | — | — | — | |||||||||||
Less: Net income attributable to noncontrolling interests | — | — | — | — | |||||||||||
Net income from continuing operations attributable to Reliant | $ | — | $ | — | $ | — | $ | — |
Term Loan Facilities | Revolving Credit Facility | 5.75% Senior Notes due 2024 | 5.75% Senior Notes due 2025 | RHP Debt | Total Adjustments for Acquisition Related Debt | ||||||||||||||||||
Interest expense and amortization of debt discounts and fees | $ | 2.8 | $ | (2.4 | ) | $ | 20.2 | $ | 19.7 | $ | (7.4 | ) | $ | 32.9 |
Term Loan Facilities | Revolving Credit Facility | 5.75% Senior Notes due 2024 | 5.75% Senior Notes due 2025 | RHP Debt | Total Adjustments for Acquisition Related Debt | ||||||||||||||||||
Interest expense and amortization of debt discounts and fees | $ | 2.0 | $ | (1.8 | ) | $ | 15.4 | $ | 15.5 | $ | (8.0 | ) | $ | 23.1 |
• | term loan facilities - 2.25% |
• | revolving credit facility - 2.25% |
• | senior notes - 6.0%, inclusive of financing costs |
Depreciation & Amortization | Income Taxes | Other | Total Adjustments for Acquisition Consideration | ||||||||||||
Operating expenses: | |||||||||||||||
Purchased services and professional fees | $ | — | $ | — | $ | — | $ | — | |||||||
Other operating expenses | — | — | — | — | |||||||||||
General and administrative expenses | — | — | 0.1 | 0.1 | |||||||||||
Depreciation and amortization | 8.8 | — | — | 8.8 | |||||||||||
Total operating expenses | 8.8 | — | 0.1 | 8.9 | |||||||||||
Loss on early extinguishment of debt | — | — | — | — | |||||||||||
Income from continuing operations before income tax expense | (8.8 | ) | — | (0.1 | ) | (8.9 | ) | ||||||||
Provision for income tax expense | (3.5 | ) | 16.4 | — | 12.9 | ||||||||||
Income from continuing operations | (5.3 | ) | (16.4 | ) | (0.1 | ) | (21.8 | ) | |||||||
Less: Net income attributable to noncontrolling interest | — | — | 4.2 | 4.2 | |||||||||||
Net income from continuing operations attributable to HealthSouth | $ | (5.3 | ) | $ | (16.4 | ) | $ | 4.1 | $ | (17.6 | ) |
Depreciation & Amortization | Transaction Costs | Income Taxes | Other | Total Adjustments for Acquisition Consideration | ||||||||||||||||
Operating expenses: | ||||||||||||||||||||
Purchased services and professional fees | $ | — | $ | (2.8 | ) | $ | — | $ | — | $ | (2.8 | ) | ||||||||
Other operating expenses | — | (4.5 | ) | — | — | (4.5 | ) | |||||||||||||
General and administrative expenses | — | — | — | 0.2 | 0.2 | |||||||||||||||
Depreciation and amortization | 7.1 | — | — | — | 7.1 | |||||||||||||||
Total operating expenses | 7.1 | (7.3 | ) | — | 0.2 | — | ||||||||||||||
Loss on early extinguishment of debt | — | — | — | — | — | |||||||||||||||
Income from continuing operations before income tax expense | (7.1 | ) | 7.3 | — | (0.2 | ) | — | |||||||||||||
Provision for income tax expense | (2.8 | ) | 2.9 | 15.6 | (0.1 | ) | 15.6 | |||||||||||||
Income from continuing operations | (4.3 | ) | 4.4 | (15.6 | ) | (0.1 | ) | (15.6 | ) | |||||||||||
Less: Net income attributable to noncontrolling interest | — | — | — | 4.4 | 4.4 | |||||||||||||||
Net income from continuing operations attributable to HealthSouth | $ | (4.3 | ) | $ | 4.4 | $ | (15.6 | ) | $ | 4.3 | $ | (11.2 | ) |
• | Depreciation and amortization - Amounts included in the above table represent adjustments to depreciation and amortization expense based upon the estimated fair values of the property and equipment, capital leases, and definite-lived intangible assets acquired in the acquisition using their estimated remaining useful lives. Total depreciation and amortization consists of the following amounts (in millions): |
For the Year Ended December 31, 2014 | For the Nine Months Ended September 30, 2015 | |||||
Identifiable intangible assets | $ | 6.7 | $ | 5.1 | ||
Property and equipment | (0.9 | ) | (0.2 | ) | ||
Capital leases | 3.0 | 2.2 | ||||
Total depreciation and amortization | $ | 8.8 | $ | 7.1 |
• | Transaction Costs - Amounts included in the above table represent adjustments for costs incurred as a direct result of the acquisition. |
• | Income Taxes - Amounts included in the above table represent adjustments to reflect HealthSouth’s income tax rate of 40%. |
• | Other - Amounts included in the above table primarily include stock awards assumed to have been granted to members of RHP management during the periods presented and the impact of noncontrolling interests. |