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(RULE 14a-101)
EXCHANGE ACT OF 1934
o Preliminary Proxy Statement | ||
o Confidential, for Use of the Commission Only (as permitted byRule 14a-6(e)(2)) | ||
þ Definitive Proxy Statement | ||
o Definitive Additional Materials | ||
o Soliciting Material Pursuant toSection 240.14a-12 |
(1) | Title of each class of securities to which transaction applies: |
(2) | Aggregate number of securities to which transaction applies: |
(3) | Per unit price or other underlying value of transaction computed pursuant to Exchange ActRule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): |
(4) | Proposed maximum aggregate value of transaction: |
(5) | Total fee paid: |
o | Check box if any part of the fee is offset as provided by Exchange ActRule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. |
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10720 Sikes Place, Suite 200
Charlotte, North Carolina 28277
To Be Held July 26, 2011
1. | to elect two individuals to the Board of Directors to serve for a three-year term as a Class I director; | |
2. | to consider and vote upon a proposal to approve the sale of substantially all of the assets of Heart Hospital of New Mexico to Lovelace Health Services, Inc. an affiliate of Ardent Health Services, pursuant to the Asset Purchase Agreement dated May 6, 2011; | |
3. | to consider and vote upon a proposal to approve the sale of all of the Company’s equity interest in Arkansas Heart Hospital to AR-MED, LLC, which is majority owned by Dr. Bruce Murphy, a physician affiliated with Little Rock Cardiology Clinic, P.A. and a current investor in Arkansas Heart Hospital, pursuant to the Equity Purchase Agreement dated May 6, 2011; | |
4. | to cast a non-binding advisory vote on MedCath’s executive compensation as disclosed in the accompanying proxy statement; | |
5. | to cast a non-binding advisory vote on the frequency of holding a non-binding advisory vote on executive compensation; | |
6. | to cast a non-binding advisory vote on certain compensation and other payments to executives as disclosed in the accompanying proxy statement; | |
7. | to ratify the appointment of Deloitte & Touche LLP as the Company’s independent registered public accounting firm for the fiscal year ending September 30, 2011; | |
8. | to consider and vote upon a proposal to adjourn the Annual Meeting if necessary or appropriate, including to solicit additional proxies for the proposals to be acted upon at the Annual Meeting in the event there are insufficient votes at the time of the Annual Meeting or any adjournment thereof to approve one or more of the proposals; and | |
9. | to transact such other business as may properly come before the Annual Meeting and any adjournment or postponement thereof. |
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10720 Sikes Place, Suite 200
Charlotte, North Carolina 28277
(704) 815-7700
FOR
ANNUAL MEETING OF STOCKHOLDERS
To Be Held on July 26, 2011
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• | the diversion of management and employee attention from theday-to-day business of the Company; | |
• | the potential disruption to our business partners, suppliers and other service providers; | |
• | the loss of employees who may depart due to their concern about losing their jobs following the Sales; and | |
• | the potential inability to respond effectively to competitive pressures, industry developments and future opportunities. |
• | The Company may not be able to identify alternative sale transactions, and if alternative sale transactions are identified, such alternative sale transactions may not result in an equivalent price to what is proposed in the Sales; |
• | The trading price of our common stock may decline to the extent that the current market price reflects a market assumption that the Sales will be completed; | |
• | Our relationships with our physicians, suppliers, the communities in which our patients reside and employees may be damaged and our business may be harmed; and | |
• | The Company will incur significant transaction, compliance and other transaction related fees and costs which will need to be paid out of current cash on hand and cash from operations. These expenses include, but are not limited to, financial advisory, legal and accounting fees and expenses, employee expenses, filing fees, printing expenses, proxy solicitation and other related charges. |
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a. | Identified capital approval thresholds | |
b. | Rigorous business planning and capital planning processes | |
c. | Compliance and legal review for all material contracts |
d. | Policies and procedures that define culturally acceptable behaviors and performance that sets a high standard for all management and employees |
e. | Surveys to measure physician, patient, and employee engagement and satisfaction |
f. | An annual strategic plan is presented by management and introduced proximate to the budget discussions to match strategy with financial and service goals; compensation plan that align the Company strategic goals and compensation for management |
g. | Board Committee and Board of Directors’ oversight through regular financial, operations, and compliance reporting and monitoring. |
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• | The viability of the Company’s business model at present and the significant costs that would be required to alter the Company’s current business structure; |
• | The determination by the Board of Directors, after conducting a review of the Company’s financial condition, evaluation of the Company’s strategic alternatives, prospects for the sale of the Company as a whole or its remaining assets in individual sales, the results of operations and the Company’s future business prospects, that continuing to operate HHNM as a going concern is not reasonably likely to create greater value for the stockholders than the value that may be obtained for the stockholders pursuant to the New Mexico Sale; |
• | The Company’s inability to identify a potential buyer of the entire Company in a merger or similar transaction despite the Board of Directors’ publicly announced strategic review process and NCA’s efforts to locate such potential buyers, including contacting 80 such potential buyers; |
• | That the New Mexico Sale will ultimately allow the Company to distribute the maximum amount of cash to the Company’s stockholders from the sale of HHNM; |
• | The volatile state of the economy and the economic uncertainty globally as well as within the healthcare industry, including the impact of the Legislative Reforms on the Company’s business prospects; |
• | The net amounts which may be realizable by the Company from a sale of HHNM; and |
• | The fact that the Board of Directors is seeking approval of the New Mexico Sale by the affirmative vote of holders of a majority of the voting power of the shares of the Company’s common stock entitled to vote thereon, which ensures that the Board of Directors will not be taking action without the support of a significant portion of the stockholders. |
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1. | the consideration to be received by the HHNM pursuant to the terms of the New Mexico Sale is fair to HHNM from a financial point of view; | |
2. | the consideration to be received by MedCath with respect to its membership interest in HHNM combined with the repayment of the intercompany debt due from HHNM to MedCath as a result of the New Mexico Sale is not less than the fair market value; and |
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3. | the HHNM Sale Payment to be paid to the HHNM Physicians pursuant to the terms of the New Mexico Sale is reasonable from a financial point of view. |
• | Reviewed certain business and financial information relating to HHNM that SRR deemed to be relevant; | |
• | Reviewed certain information, including financial forecasts, relating to the business, earnings, cash flow, assets, liabilities and prospects of HHNM furnished to SRR by MedCath; | |
• | Concerning the two matters above, conducted discussions with members of senior management and representatives of HHNM and MedCath; | |
• | Reviewed the consideration and valuation multiples for HHNM and compared them with those of certain publicly traded companies that SRR deemed to be relevant; | |
• | Reviewed the results of operations of HHNM and compared them with those of certain publicly traded companies that SRR deemed to be relevant; | |
• | Compared the proposed financial terms of the New Mexico Sale with the financial terms of certain other transactions that SRR deemed to be relevant; | |
• | Participated in certain discussions among representatives of MedCath, the Board and the Special Committee and their financial and legal advisors; | |
• | Reviewed drafts as of May 4, 2011 of the New Mexico Purchase Agreement and certain related documents (the “New Mexico Transaction Documents”); and | |
• | Reviewed such other financial studies and analyses and took into account such other matters as SRR deemed necessary, including SRR’s assessment of general economic, market and monetary conditions. |
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EV (In millions of | EV/NFY | EV/LTM | ||||||||||
Company | U.S. Dollars) | EBITDA | EBITDA | |||||||||
MedCath Corp. | $ | 197.3 | 7.3 | x | 6.1 | x | ||||||
Community Health Systems, Inc. | 12,372.6 | 6.6 | x | 7.1 | x | |||||||
Health Management Associates Inc. | 5,422.7 | 6.8 | x | 7.1 | x | |||||||
HEALTHSOUTH Corp. | 4,170.4 | 9.3 | x | 9.2 | x | |||||||
Universal Health Services Inc. | 8,893.2 | 7.3 | x | 9.7 | x | |||||||
Tenet Healthcare Corp. | 7,581.1 | 6.4 | x | 6.7 | x | |||||||
Kindred Healthcare Inc. | 1,262.3 | 3.5 | x | 5.5 | x | |||||||
Lifepoint Hospitals Inc. | 3,401.1 | 6.4 | x | 6.4 | x | |||||||
HCA, Inc. | 43,151.2 | n/m | 7.3 | x | ||||||||
High | 43,151.2 | 9.3 | x | 9.7 | x | |||||||
Low | 197.3 | 3.5 | x | 5.5 | x | |||||||
Mean | 9,605.8 | 6.7 | x | 7.2 | x | |||||||
Median | 5,422.7 | 6.7 | x | 7.1x | ||||||||
• | All else held constant, investors are willing to pay a higher price for shares in a larger company vis-à-vis a smaller company. In this case, HHNM is smaller than the guideline companies in terms of revenue and EBITDA. | |
• | HHNM primarily focuses on cardiology and related procedures, making it less diversified compared to the guideline companies. | |
• | In addition, HHNM has a high concentration of referrals as almost all patient admissions are connected to fewer than 20 physicians. | |
• | Everything else held constant, the higher the expected growth rate for a company, the higher the applicable multiple. HHNM’s historical and projected growth rates in EBITDA are below the median growth rates indicated by the range of guideline companies. |
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Indicated Multiples | ||||||||
Date | EV/LTM | EV/LTM | ||||||
Announced | Target | Target Location | Revenue | EBITDA | ||||
1/30/08 | Gottlieb Memorial Hospital | Melrose Park, IL | 0.70x | n/a | ||||
2/1/08 | Ouachita Community Hospital | West Monroe, LA | 1.80x | 5.0x | ||||
2/14/08 | Summit Hospital | Phenix City, GA | n/a | n/a | ||||
3/2/08 | Doctors Hospital | Columbus, GA | 1.40x | n/m | ||||
3/5/08 | The Specialty Hospital | Rome, GA | 1.21x | 6.4x | ||||
3/24/08 | Dayton Heart Hospital | Dayton, OH | 0.77x | 5.5x | ||||
4/15/08 | USC University Hospital | Los Angeles, CA | 0.74x | 8.2x | ||||
4/17/08 | Hughston Orthopedic Hospital | Columbus, GA | 0.81x | 3.6x | ||||
5/13/08 | Long Term Acute Care Hospital | Southeastern, MI | 0.59x | n/a | ||||
5/14/08 | Rush North Shore Medical Center | Skokie, IL | 0.95x | n/m | ||||
5/20/08 | Condell Medical Center | Libertyville, IL | 0.58x | n/a | ||||
5/28/08 | Humphreys County Memorial Hospital | Belzoni, MS | 0.33x | n/m | ||||
6/20/08 | Moreno Valley Community Hospital | Helmet, CA | 0.47x | n/m | ||||
7/1/08 | Two California hospitals | Garden Grove, CA | 0.39x | n/a | ||||
7/1/08 | Tarzana Campus | Tarzana, CA | 1.64x | n/m | ||||
7/16/08 | Chatham Hospital | Siler City, NC | 2.42x | n/m | ||||
8/15/08 | Portneuf Medical Center | Pocatello, ID | 1.36x | n/a | ||||
8/17/08 | Pascack Valley Hospital | Westwood, NJ | 0.94x | n/m | ||||
8/20/08 | Wyoming Valley Healthcare System | Wilkes-Barre, PA | 0.79x | 7.9x | ||||
8/28/08 | Southwest Regional Medical Center | Little Rock, AR | 0.61x | n/m | ||||
9/12/08 | Massachusetts LTACs | Braintree, MA | 0.62x | n/m | ||||
10/31/08 | Three Rivers Hospital | Waverly, TN | 0.43x | 7.8x | ||||
11/4/08 | Starke Memorial Hospital | Knox, IN | n/m | 6.5x | ||||
11/6/08 | Doctors’ Hospital of Opelousas | Opelousas, LA | 0.42x | n/m | ||||
12/22/08 | Samaritan Hospital | Lexington, KY | 1.23x | n/m | ||||
1/7/09 | Presbyterian Hospital of Denton | Denton, TX | 0.71x | 6.9x | ||||
1/14/09 | Palmetto Health Baptist Easley | Easley, SC | 1.18x | n/m | ||||
2/2/09 | Siloam Springs Memorial Hospital | Siloam Springs, AR | 1.17x | 9.9x | ||||
2/2/09 | Rockdale Medical Center | Conyers, GA | 0.74x | n/m | ||||
3/27/09 | Prince William Health System | Manassas, VA | 1.09x | n/m | ||||
4/2/09 | Medina General Hospital | Medina, OH | 0.56x | 13.9x | ||||
6/1/09 | Amsterdam Memorial Hospital | Amsterdam, NY | 0.79x | n/m | ||||
6/29/09 | Shore Health Services | Nassawadox, VA | 1.07x | n/m | ||||
7/8/09 | Jewish Hospital | Cincinnati, OH | 0.79x | 3.9x | ||||
8/14/09 | Sparks Health System | Fort Smith, AR | 0.60x | n/m | ||||
11/3/09 | Triumph Healthcare | Houston, TX | 1.30x | 6.3x | ||||
12/3/09 | Long-Term Acute Care Hospital | Dallas, TX | n/a | n/a | ||||
1/28/10 | Cabrini Medical Center | New York, NY | 2.08x | n/a | ||||
4/9/10 | Mountain View Hospital, LLC | Idaho Falls, ID | 0.94x | 5.6x | ||||
4/30/10 | Sumner Regional Health Systems | Gallatin, TN | 1.04x | n/a | ||||
5/16/10 | Psychiatric Solutions, Inc. | Franklin, TN | 1.70x | 9.8x | ||||
6/18/10 | Regency Hospital Company, LLC | Alpharetta, GA | 0.56x | 7.6x |
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Indicated Multiples | ||||||||
Date | EV/LTM | EV/LTM | ||||||
Announced | Target | Target Location | Revenue | EBITDA | ||||
8/23/10 | Vista Healthcare | Sacramento, CA | 1.19x | 6.6x | ||||
10/5/10 | Center for Wound Healing | Tarrytown, NY | 1.15x | n/m | ||||
11/12/10 | Tenet Healthcare Corporation | Dallas, TX | 0.76x | 7.1x | ||||
2/7/11 | Kindred Healthcare | Louisville, KY | 0.95x | 7.7x | ||||
Low | 0.33x | 3.6x | ||||||
High | 2.42x | 13.9x | ||||||
Mean | 0.97x | 7.2x | ||||||
Median | 0.81x | 6.9x | ||||||
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Indicated Range of Value as of 5/02/11 | ||||||||
In thousands of | ||||||||
U.S. dollars | ||||||||
Concluded Enterprise Value | $ | 83,000 | $ | 98,000 | ||||
Less: Interest-Bearing Debt | (30,477 | ) | (30,477 | ) | ||||
Add: Cash and Cash Equivalents | 12,694 | 12,694 | ||||||
Total Adjustments to Enterprise Value | (17,783 | ) | (17,783 | ) | ||||
Marketable, Controlling-Interest Value of Equity | $ | 65,000 | $ | 80,000 | ||||
Multiplied by: MedCath’s Ownership in HHNM | 74.8 | % | 74.8 | % | ||||
Fair Market Value of MedCath’s Equity Ownership in HHNM | $ | 48,500 | $ | 60,000 | ||||
Add: Loans from MedCath | 24,312 | 24,312 | ||||||
Fair Market Value of Equity Interest and Loans | $ | 73,000 | $ | 84,000 | ||||
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• | All furniture and equipment; | |
• | Good and marketable title and rights in fee simple absolute to the real property owned by HHNM and all plants, buildings, structures, improvements, construction in progress, appurtenances, covenants, easements, servitudes and fixtures situated thereon; | |
• | Interest in contracts relating to leased real property; | |
• | Certain contracts in respect of the Purchased Assets and contracts representing capital lease obligations of HHNM; | |
• | All permits and approvals issued or granted by governmental entities to the extent assignable under applicable law; | |
• | All computer hardware, certain software and data processing equipment owned by HHNM or used primarily in the business or operation of HHNM or the operation of the Purchased Assets, and, to the |
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extent transferable, all rights in all warranties of any manufacturer or vendor with respect to the hardware, software and data processing equipment; |
• | All inventory; | |
• | Assumable prepaid expenses, claims for refunds and rights to offset related to prepaid assets; | |
• | To the extent assignable, all financial, patient and medical staff records held or used by HHNM primarily or exclusively in the business or operation of the hospital; | |
• | All intellectual property, including HHNM’s rights in the name Heart Hospital of New Mexico; | |
• | HHNM’s goodwill in respect of the Purchased Assets and the hospital; and | |
• | All records related to the business, operation or ownership of the hospital. |
• | All restricted and unrestricted cash and cash equivalents, including investments in marketable securities, certificates of deposit, bank accounts and promissory notes, except to the extent such assets are included in the determination of net working capital; | |
• | All group contracts entered into by MedCath for the benefit of HHNM and one or more of HHNM’s affiliates, contracts with managed care organizations, health maintenance organizations, insurers and similar third party payors, certain contracts that are not de minimis contracts that relate to the operations of the hospital and certain other scheduled contracts; | |
• | The corporate record books, minute books and corporate seals and all records of any kind that HHNM is required by law to retain; | |
• | Any claims or rights against third parties related to the Purchased Assets (including the contracts assumed by LHS), accruing or arising prior to the closing, except as otherwise included in the net working capital calculation or to the extent such claim relates to periods after the closing; | |
• | All rights to settlement and retroactive adjustments, if any, for open cost reporting periods ending on or prior to the closing date (whether open or closed) arising from or against the U.S. Government under the terms of the Medicare program or TRICARE and against any state under its Medicaid program and against any third-party payor programs that settle on a cost report basis; | |
• | All rights of HHNM under the New Mexico Purchase Agreement and related agreements; | |
• | All claims for tax refunds and all other tax assets for periods prior to the closing and the supporting tax returns and tax-related books and records; | |
• | All data processing equipment, proprietary computer software and intellectual property utilized in connection with the provision of services by affiliates of HHNM for the benefit of HHNM, and, in the case of software, all software unless specifically included as a Purchased Asset; | |
• | All accounts receivable of HHNM and other rights of payment in connection with the operation of the hospital on or prior to closing; | |
• | The names and symbols used in connection with HHNM and the Purchased Assets, including the name “MedCath” or any variants, or any other names proprietary to HHNM or its affiliates, other than “Heart Hospital of New Mexico”; | |
• | Any proprietary information contained in HHNM’s employee or operation manuals or any films or videos used by HHNM for operational or training purposes; | |
• | All intercompany accounts; | |
• | All insurance proceeds arising in connection with the operation of the hospital or the Purchased Assets prior to closing, subject to certain limitations set forth in the New Mexico Purchase Agreement; |
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• | All assets used by HHNM and its affiliates in rendering corporate services located outside of the hospital, except to the extent such assets are reflected in the net working capital calculation; | |
• | Any assets used or operated by MedCath on a company-wide or region-wide basis, unless such assets are reflected in the net working capital calculation; | |
• | All assets disposed of or exhausted prior to closing, including inventory, prepaid expenses and furniture and equipment, except to the extent such assets are reflected in the net working capital calculation; and | |
• | All provider numbers and related agreements related to any government programs and TRICARE. |
• | All obligations and liabilities that arise or accrue after closing under the contracts assumed by LHS; | |
• | Certain capital lease obligations of HHNM; | |
• | Prorated valorem and personal property taxes payable for the calendar year in which the closing occurs; | |
• | Obligations and liabilities as of the closing date in respect of (i) accrued paid time off of employees of HHNM hired by LHS following the closing and accrued extended service recognition leave (including employer FICA and any other estimated employer taxes thereon) of employees of HHNM hired by LHS having six (6) years of eligibility service with HHNM, but only to the extent such accrued paid time off is included in the determination of net working capital and (ii) COBRA obligations to current and former employees of the hospital to the extent required by applicable law; and | |
• | Any state and local transfer, sales and recording fees and similar taxes which may arise upon closing (excluding taxes measured by income or gain). |
• | Current liabilities, accounts payable, long-term liabilities and all indebtedness and obligations or guarantees of HHNM, except to the extent such liabilities are reflected in the purchase price adjustment calculations in respect of either the capital lease obligations or the net working capital calculation; | |
• | Any obligation or liability accruing or arising during the period prior to closing in connection with (i) any assumed contract (other than that which may arise from the failure to obtain the consent of the counter-party thereto), (ii) the operation of the hospital, including all malpractice and general liability claims, whether or not the same are pending, threatened, known or unknown prior to closing, or (iii) any governmental programs or other third-party payor programs, including recoupment of previously paid or reimbursed amounts, and any cost report settlement payables relating to all cost report periods ending on or prior to the closing; | |
• | Any obligation or liability accruing, arising out of or relating to any contracts retained by HHNM; | |
• | Tax obligations for periods ending on or prior to the closing and tax obligations of HHNM and its affiliates resulting from the consummation of the New Mexico Sale (other than ad valorem and personal property taxes and state and local transfer, sales and recording fees and taxes which may arise upon the consummation of the New Mexico Sale) that are not reflected in the net working capital calculation and federal, state and local income taxes resulting from the New Mexico Sale; | |
• | Any obligation or liability for claims by or on behalf of employees of HHNM and its affiliates relating to periods prior to closing, including liability for any pension, profit sharing, deferred compensation, or any other employee health and welfare benefit plans, liability for any EEOC claim, wage and hour claim, unemployment compensation claim or workers’ compensation claim, and liability for all |
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employee wages and benefits, including accrued vacation and holiday pay and taxes or other liability related thereto in respect of employees of HHNM and its affiliates, except to the extent that accruals for such obligations are included in the net working capital calculation; |
• | Any obligation or liability accruing, arising out of or relating to the New Mexico ICD Investigation; | |
• | Any obligation or liability accruing, arising out of or relating to any federal, state or local investigations of, or claims or actions against, HHNM or any of its affiliates or any of their employees, medical staff, agents, vendors or representatives which existed or occurred prior to closing; and | |
• | Any obligation or liability accruing, arising out of or relating to any violation of, or non-compliance with, law pertaining to the Purchased Assets, the hospital or the operation thereof, which existed or occurred prior to closing. |
• | Organization, qualification and capacity; | |
• | Absence of conflicts or violations under the certificate of incorporation, governing documents, governmental authorization and third party consents; | |
• | Enforceability; | |
• | Sufficiency of financial resources; | |
• | Absence of litigation that has or could affect the New Mexico Purchase Agreement or the transaction contemplated thereby; | |
• | Voluntary and independent nature of determination to enter into the New Mexico Sale; | |
• | Absence of any untrue statement of a material fact or omission to state any material fact necessary to make the statements made in the New Mexico Purchase Agreement not misleading; | |
• | No other express or implied representations or warranties; and |
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• | No agreement in connection with the HHNM Asset Sale is payment for or contingent upon any patient referrals between the parties or their affiliates or provision of any item or service, and no physician (or immediate family member of a physician) receiving any benefit from the HHNM Asset Sale has any obligation to refer patients to the parties or their affiliates and all such referrals are based upon the physician’s professional medical judgment, the medical needs of the patient, and patient choice. |
• | Incorporation, qualification and capacity; | |
• | Absence of conflicts or violations under the certificate of limited partnership or limited partnership agreement, governmental authorization and third party consents; | |
• | Subsidiaries and other interests; | |
• | Outstanding rights related to the Purchased Assets; | |
• | Enforceability; | |
• | Accuracy and completeness of certain of our financial statements and the absence of undisclosed liabilities; | |
• | Permits and approvals; | |
• | Intellectual property; | |
• | Medicare participation and accreditation, including with respect to billing practices and Joint Commission accreditation; | |
• | Regulatory compliance; | |
• | Material contracts; | |
• | Encumbrances on the Purchased Assets; | |
• | Real property and encumbrances thereon; | |
• | Title to Purchased Assets; | |
• | Insurance; | |
• | Employee benefit plans; | |
• | Hospital employees and employee relations; | |
• | Litigation; | |
• | Tax matters; | |
• | Environmental matters; | |
• | Absence of changes in connection with the hospital and the Purchased Assets since September 30, 2010; | |
• | Medical staff matters; | |
• | Sufficiency of Purchased Assets; | |
• | Absence of experimental procedures at the hospital; | |
• | Inventory; | |
• | Third party payor cost reports; | |
• | Compliance program; |
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• | Absence of any untrue statement of a material fact or omission to state any material fact necessary to make the statements made in the New Mexico Purchase Agreement not misleading; | |
• | No agreement in connection with the HHNM Asset Sale is payment for or contingent upon any patient referrals between the parties or their affiliates, or provision of any item or service, and no physician (or immediate family member of a physician) receiving any benefit from the HHNM Asset Sale has any obligation to refer patients to the parties or their affiliates and all such referrals are based upon the physician’s professional medical judgment, the medical needs of the patient, and patient choice; and | |
• | No other representations or warranties. |
• | Prior to the closing date, provide reasonable access to information to LHS and additional financial and operational information upon request, to the extent permitted by law and subject to certain limitations set forth in the New Mexico Purchase Agreement; | |
• | Use commercially reasonable efforts to (a) carry on its business related to the Purchased Assets in substantially the same manner as presently conducted and not make any material change in personnel, operations, finance, accounting policies or real or personal property pertaining to the hospital; (b) maintain the hospital and all parts thereof in accordance with HHNM’s past practices in all material respects; (c) perform all of its material obligations under agreements relating to or affecting the hospital or Purchased Assets; (d) keep in full force and effect present insurance policies or other comparable insurance on the Purchased Assets; (e) maintain and preserve its business organizations intact, retain its present employees at the hospital and maintain its relationships with physicians, suppliers, customers and others having business relations with the hospital; (f) permit and allow reasonable access by LHS to make offers of post-closing employment and to establish relationships with physicians, medical staff and others having business relations with HHNM,provided that LHS shall have complied with the limitations on its access set forth in the New Mexico Purchase Agreement; and (g) maintain all material approvals and permits relating to the hospital, Purchased Assets and Assumed Liabilities in good standing; | |
• | Not materially amend or terminate any of the contracts which are material to the operation of the hospital, enter into any material contract or commitment, or incur or agree to incur any material liability, except as provided herein or, in all material respects, in the ordinary course of business;provided that LHS’s consent shall not be required to the extent that such contract or commitment is material to the continued operation of the hospital in the manner in which the hospital was operated as of the date of execution of the New Mexico Purchase Agreement; | |
• | Not enter into any contract or commitment with physicians or other referral sources;provided that LHS’s consent shall not be required to the extent that such contract or commitment is material to the continued operation of the hospital in the manner in which the hospital was operated as of the date of the New Mexico Purchase Agreement and such contract terminates or is terminable without penalty upon no more than 90 days’ written notice; | |
• | Not increase compensation payable or to become payable or make any bonus payment to or otherwise enter into one or more bonus agreements with any hospital employee, except in the ordinary course of business in accordance with existing personnel policies; | |
• | Not acquire (whether by purchase or lease) or sell, assign, lease or otherwise transfer or dispose of any material property, plant or equipment except in the ordinary course of business with, in the case of a transfer or disposition, comparable replacement thereof if such replacement is required in order to operate the hospital in the manner it was operated as of the date of the New Mexico Purchase Agreement; |
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• | Not purchase capital assets or incur costs in respect ofconstruction-in-progress in excess of $50,000 in the aggregate; | |
• | Not take any material action outside the ordinary course of business of the hospital or its related ancillary services; | |
• | Not enter into any agreement which could reasonably be expected to have a material adverse effect; | |
• | Provide prompt written notice to LHS of (a) any event that has caused any representation or warranty contained in the New Mexico Purchase Agreement to be untrue in any material respect and (b) any failure by HHNM to comply with or satisfy, in any material respect, any covenant, condition or agreement in the New Mexico Purchase Agreement; |
• | Make timely premerger filings with the FTC and the Antitrust Division as required under the HSR Act; |
• | Provide timely financial information to LHS on a monthly basis within 15 days following the end of each calendar month; | |
• | Cooperate with LHS in its effort to cause Land Services USA, Inc. to issue and deliver to LHS a title commitment to issue an ALTA owner’s policy of title insurance, Form B, with extended coverage, for the real property owned by HHNM; | |
• | On or prior to the closing date, notify the appropriate governmental entities of HHNM’s intent to terminate as of the closing date HHNM’s provider agreements related to Medicare, Medicaid programs and TRICARE and to take all other required steps to terminate its participation in Medicare, Medicaid programs and TRICARE; and | |
• | Prior to the closing date, HHNM will (a) cooperate with LHS and take all reasonable steps to assist LHS to obtain all governmental approvals and permits required to complete the transactions contemplated by the New Mexico Purchase Agreement and in connection with LHS’s expansion of Lovelace Medical Center (“LMC”) to encompass and include the Purchased Assets and (b) provide such information and communication as is reasonably requested by LHS in connection therewith;provided that HHNM shall not be required to make any Form 855 of The Centers for Medicare and Medicaid Services filings until 10 days after the closing. |
• | Provide prompt written notice to HHNM of (a) any event that has caused any representation or warranty contained in the New Mexico Purchase Agreement to be untrue in any material respect and (b) any failure by LHS to comply with or satisfy, in any material respect, any covenant, condition or agreement; |
• | Make timely premerger filings with the FTC and the Antitrust Division as required under the HSR Act, take all commercially reasonable actions necessary to insure that the waiting period imposed under the HSR Act terminates or expires 30 days after the date of making such premerger filings and pay all application fees required in connection with any filings required under the HSR Act; |
• | Prior to the closing date, take all reasonable steps to obtain approvals and permits required to complete the transactions contemplated by the New Mexico Purchase Agreement and provide such information as may be reasonably requested in connection therewith; | |
• | Obtain a current as-built survey of the real property owned by HHNM (to be paid for by LHS); and | |
• | Obtain a Phase I environmental assessment prior to the closing (to be paid for by LHS) and provide a copy of such assessment to HHNM. |
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• | Offer for lease or sale its assets (or any material portion thereof) or any ownership interest in any entity owning any of the Purchased Assets; | |
• | Solicit offers to lease or buy all or any material portion of its assets or any ownership interest in any entity owning any of the Purchased Assets; | |
• | Hold discussions with any party (other than LHS) looking toward such an offer or solicitation or looking toward a merger or consolidation of HHNM; | |
• | Enter into any agreement with any party (other than LHS) with respect to the lease, sale or other disposition of its assets (or any material portion thereof) or any ownership interest HHNM or with respect to any merger, consolidation or similar transaction involving HHNM; or | |
• | Furnish or cause to be furnished any information with respect to HHNM or its assets to any person that HHNM or such affiliate or any such person acting for or on their behalf knows or has reason to believe is in the process of considering any such acquisition, merger, consolidation, combination or reorganization,provided the foregoing shall not prevent the Company or persons acting for or on its behalf from including any information it deems required by law in any of its filings with the SEC. |
• | Compliance by LHS in all material respects with all of its covenants in the New Mexico Purchase Agreement; | |
• | HHNM shall have complied with all waiting periods under the HSR Act; | |
• | No court or other governmental entity has issued an order (or threatened in writing to do so) restraining or prohibiting the transactions contemplated by the New Mexico Purchase Agreement; | |
• | The representations and warranties of LHS that are qualified by materiality are true in all respects and the representations and warranties of LHS that are not so qualified shall be true in all material respects when made and as of the closing date (unless made only as of a specific date in which case they shall be true as of such date); and | |
• | The Company shall have obtained any approvals of its stockholders which it has determined in its reasonable discretion are required under the DGCL to authorize HHNM to consummate the transactions contemplated under the New Mexico Purchase Agreement, as well as any other transactions the approval of which the Company elects to seek simultaneously therewith. The Company shall file this proxy statement with the SEC and, upon clearance by the SEC, shall deliver the proxy statement to its stockholders and call a meeting of the Company’s stockholders (as described herein). The Company shall use its commercially reasonable efforts to cause the meeting date specified in the proxy statement to occur on or prior to July 31, 2011. In the event that such stockholder meeting date is scheduled for a date which is after July 31, 2011, HHNM shall not be entitled to exercise certain termination rights |
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which may only be exercised to the extent the closing has occurred prior to July 31, 2011. All obligations of the Board of Directors shall be subject to the exercise of its fiduciary duties, or other comparable duties, to the stockholders of the Company. |
• | Compliance by HHNM in all material respects with all of its covenants in the New Mexico Purchase Agreement; | |
• | LHS shall have (a) obtained reasonable assurances that following closing LHS will receive all required approvals required to consummate the New Mexico Sale and to expand the operations, hospital licensure and Medicare certification of LMC to encompass and include the Purchased Assets under the hospital licensure and Medicare certification of LMC and (b) complied with all waiting periods under the HSR Act; | |
• | No court or other governmental entity has issued an order (or threatened in writing to do so) restraining or prohibiting the New Mexico Sale; | |
• | All representations and warranties of HHNM that are qualified by any type of materiality standard shall be true in all respects, and all other representations and warranties of HHNM that are not so qualified shall be true in all material respects, when made and as of the closing date, as though such representations and warranties had been made as of the closing date (unless made only as of a specific date in which case they shall be true as of such date); | |
• | LHS and an affiliate of HHNM shall have entered into the HHNM Transition Services Agreement; | |
• | LHS shall have received a pro forma of the title policy (or marked title commitment containing no additional exceptions to title to the real property owned by HHNM) from Land Services USA, Inc.; | |
• | HHNM shall have conducted the business of the hospital, in all material respects, only in the ordinary course of business and there shall have occurred no material adverse effect; | |
• | All encumbrances currently encumbering the Purchased Assets other than permitted encumbrances shall have been duly released by the secured parties and other lien holders, and UCC-3 releases or termination statements and other lien discharging documents shall have been properly recorded, the third party shall have committed in writing to promptly release its lien upon receipt of a specified payoff amount at the closing, or the recording thereof shall have been duly arranged pursuant to the relevant secured party’s written authorization allowing LHSand/or HHNM to file lien-discharging documents without the secured party’s signature; | |
• | LHS shall have received, at its sole cost and expense, a Phase I environmental assessment, prepared by a firm selected by LHS, and the scope, findings and conclusions of such report shall have been reasonably satisfactory to LHS; and | |
• | HHNM shall have delivered the ancillary closing documents required to be delivered by it pursuant to the terms of the New Mexico Purchase Agreement. |
• | By mutual written consent; | |
• | By LHS or HHNM at any time after July 31, 2011 (the “HHNM Outside Date”) if the closing has not occurred by such date;provided that the right to terminate is not available to any party whose failure to fulfill any obligation under the New Mexico Purchase Agreement has been the cause of, or resulted in, the failure of the closing to occur by such date;provided,further, that if the closing has not occurred due to or related to either (x) any formal or informal governmental action, review, investigation or |
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proceeding or (y) because the Company shall not have obtained any approvals of the stockholders of the Company which it has determined in its reasonable discretion are required under the DGCL for the Company to authorize HHNM to consummate the transactions contemplated under the New Mexico Purchase Agreement, then in either of such events, LHS or HHNM may elect, by providing written notice to the other party hereto, to extend the HHNM Outside Date to September 30, 2011 (the right to so extend the HHNM Outside Date is not available to any party whose failure to fulfill any obligation under the New Mexico Purchase Agreement has been the cause of, or resulted in, the failure of the closing to occur by July 31, 2011); |
• | By either party if there is a breach by such other party in any material respect of any of the representations, warranties, covenants or other agreements of such other party which would result in a failure of a condition to closing in the New Mexico Purchase Agreement, which breach cannot be or has not been cured within 15 days after the giving of written notice; | |
• | By either party, if any court or any other governmental entity issues an order restraining or prohibiting such party from consummating the sale and purchase of the Purchased Assets and such order becomes final and non-appealable; or | |
• | By LHS if a material adverse effect shall have occurred since the date of the New Mexico Purchase Agreement. |
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SALE OF ALL OF MEDCATH’S EQUITY INTERESTS IN ARKANSAS HEART HOSPITAL
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• | The viability of the Company’s business model at present and the significant costs that would be required to alter the Company’s current business structure; |
• | The determination by the Board of Directors, after conducting a review of the Company’s financial condition, evaluation of the Company’s strategic alternatives, prospects for the sale of the Company as a whole or its remaining assets in individual sales, the results of operations and the Company’s future business prospects, that continuing to operate AHH as a going concern is not reasonably likely to create greater value for the stockholders than the value that may be obtained for the stockholders pursuant to the Arkansas Sale; |
• | The Company’s inability to identify a potential buyer of the entire Company in a merger or similar transaction despite the Board of Directors’ publicly announced strategic review process and NCA’s efforts to locate such potential buyers, including contacting 80 such potential buyers; |
• | That the Arkansas Sale will ultimately allow the Company to distribute the maximum amount of cash to the Company’s stockholders from the sale of AHH; |
• | The volatile state of the economy and the economic uncertainty globally as well as within the healthcare industry, including the impact of the Legislative Reforms on the Company’s business prospects; |
• | The net amounts which may be realizable by the Company from a sale of AHH; and |
• | The fact that the DGCL requires that the Arkansas Sale be approved by the affirmative vote of holders of a majority of the voting power of the shares of the Company’s common stock entitled to vote which ensures that the Board of Directors will not be taking action without the support of a significant portion of the stockholders. |
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• | Reviewed certain business and financial information relating to AHH that SRR deemed to be relevant; | |
• | Reviewed certain information, including financial forecasts, relating to the business, earnings, cash flow, assets, liabilities and prospects of AHH furnished to SRR by MedCath; | |
• | Concerning the two matters above, conducted discussions with members of senior management and representatives of MedCath; | |
• | Reviewed the consideration and valuation multiples for AHH and compared them with those of certain publicly traded companies that SRR deemed to be relevant; | |
• | Reviewed the results of operations of AHH and compared them with those of certain publicly traded companies that SRR deemed to be relevant; | |
• | Compared the proposed financial terms of the Arkansas Sale with the financial terms of certain other transactions that SRR deemed to be relevant; | |
• | Participated in certain discussions among representatives of MedCath, the Board and the Committee and their financial and legal advisors; | |
• | Reviewed drafts as of May 4, 2011 of the Arkansas Purchase Agreement and certain related documents (the “Arkansas Transaction Documents”); and | |
• | Reviewed such other financial studies and analyses and took into account such other matters as SRR deemed necessary, including SRR’s assessment of general economic, market and monetary conditions. |
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EV (In millions of | EV/NFY | EV/LTM | ||||||||||
Company | U.S. Dollars) | EBITDA | EBITDA | |||||||||
MedCath Corp. | $ | 197.3 | 7.3 | x | 6.1 | x | ||||||
Community Health Systems, Inc. | 12,372.6 | 6.6 | x | 7.1 | x | |||||||
Health Management Associates Inc. | 5,422.7 | 6.8 | x | 7.1 | x | |||||||
HEALTHSOUTH Corp. | 4,170.4 | 9.3 | x | 9.2 | x | |||||||
Universal Health Services Inc. | 8,893.2 | 7.3 | x | 9.7 | x | |||||||
Tenet Healthcare Corp. | 7,581.1 | 6.4 | x | 6.7 | x | |||||||
Kindred Healthcare Inc. | 1,262.3 | 3.5 | x | 5.5 | x | |||||||
Lifepoint Hospitals Inc. | 3,401.1 | 6.4 | x | 6.4 | x | |||||||
HCA, Inc. | 43,151.2 | n/m | 7.3 | x | ||||||||
High | 43,151.2 | 9.3 | x | 9.7 | x | |||||||
Low | 197.3 | 3.5 | x | 5.5 | x | |||||||
Mean | 9,605.8 | 6.7 | x | 7.2 | x | |||||||
Median | 5,422.7 | 6.7 | x | 7.1 | x | |||||||
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• | All else held constant, investors are willing to pay a higher price for shares in a larger company vis-à-vis a smaller company. In this case, AHH is smaller than the guideline companies in terms of revenue and EBITDA. | |
• | AHH has a high degree of concentration risk, as a majority of patient admissions are indirectly related to a small group of physicians. | |
• | As experienced at other MedCath locations, AHH is susceptible to a competing hospital hiring its key physicians directly at higher compensation levels due to reimbursement allowances under the hospital provider number structure. | |
• | AHH faces significant risk that AR-MED or its affiliates could open a competing hospital. | |
• | AHH primarily focuses on cardiology and related procedures, making it less diversified compared to the reviewed guideline companies. | |
• | The potential liability related to contingent liabilities increases the risk of an equity position in AHH. | |
• | AHH expects to incur significant costs in the next several years associated with upgrading to electronic medical records. Management has not incorporated these capital outlays or expenses into their projections. | |
• | Physician investors’ influence over the capital and legal structure of AHH reduces the universe of potential buyers for AHH. | |
• | Everything else held constant, the higher the expected growth rate for a company, the higher the applicable multiple. AHH’s historical growth rate in EBITDA is below the median growth rate indicated by the guideline companies. Furthermore, given uncertainties concerning future physician relationships and heightened competition AHH’s projected growth rate in EBITDA is below the median growth rate indicated by the guideline companies. |
Indicated Multiples | ||||||||||||
Date | EV/LTM | EV/LTM | ||||||||||
Announced | Target | Target Location | Revenue | EBITDA | ||||||||
1/30/08 | Gottlieb Memorial Hospital | Melrose Park, IL | 0.70 | x | n/a | |||||||
2/1/08 | Ouachita Community Hospital | West Monroe, LA | 1.80 | x | 5.0 | x | ||||||
2/14/08 | Summit Hospital | Phenix City, GA | n/a | n/a |
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Indicated Multiples | ||||||||||||
Date | EV/LTM | EV/LTM | ||||||||||
Announced | Target | Target Location | Revenue | EBITDA | ||||||||
3/2/08 | Doctors Hospital | Columbus, GA | 1.40 | x | n/m | |||||||
3/5/08 | The Specialty Hospital | Rome, GA | 1.21 | x | 6.4 | x | ||||||
3/24/08 | Dayton Heart Hospital | Dayton, OH | 0.77 | x | 5.5 | x | ||||||
4/15/08 | USC University Hospital | Los Angeles, CA | 0.74 | x | 8.2 | x | ||||||
4/17/08 | Hughston Orthopedic Hospital | Columbus, GA | 0.81 | x | 3.6 | x | ||||||
5/13/08 | Long Term Acute Care Hospital | Southeastern, MI | 0.59 | x | n/a | |||||||
5/14/08 | Rush North Shore Medical Center | Skokie, IL | 0.95 | x | n/m | |||||||
5/20/08 | Condell Medical Center | Libertyville, IL | 0.58 | x | n/a | |||||||
5/28/08 | Humphreys County Memorial Hospital | Belzoni, MS | 0.33 | x | n/m | |||||||
6/20/08 | Moreno Valley Community Hospital | Helmet, CA | 0.47 | x | n/m | |||||||
7/1/08 | Two California hospitals | Garden Grove, CA | 0.39 | x | n/a | |||||||
7/1/08 | Tarzana Campus | Tarzana, CA | 1.64 | x | n/m | |||||||
7/16/08 | Chatham Hospital | Siler City, NC | 2.42 | x | n/m | |||||||
8/15/08 | Portneuf Medical Center | Pocatello, ID | 1.36 | x | n/a | |||||||
8/17/08 | Pascack Valley Hospital | Westwood, NJ | 0.94 | x | n/m | |||||||
8/20/08 | Wyoming Valley Healthcare System | Wilkes-Barre, PA | 0.79 | x | 7.9 | x | ||||||
8/28/08 | Southwest Regional Medical Center | Little Rock, AR | 0.61 | x | n/m | |||||||
9/12/08 | Massachusetts LTACs | Braintree, MA | 0.62 | x | n/m | |||||||
10/31/08 | Three Rivers Hospital | Waverly, TN | 0.43 | x | 7.8 | x | ||||||
11/4/08 | Starke Memorial Hospital | Knox, IN | n/m | 6.5 | x | |||||||
11/6/08 | Doctors’ Hospital of Opelousas | Opelousas, LA | 0.42 | x | n/m | |||||||
12/22/08 | Samaritan Hospital | Lexington, KY | 1.23 | x | n/m | |||||||
1/7/09 | Presbyterian Hospital of Denton | Denton, TX | 0.71 | x | 6.9 | x | ||||||
1/14/09 | Palmetto Health Baptist Easley | Easley, SC | 1.18 | x | n/m | |||||||
2/2/09 | Siloam Springs Memorial Hospital | Siloam Springs, AR | 1.17 | x | 9.9 | x | ||||||
2/2/09 | Rockdale Medical Center | Conyers, GA | 0.74 | x | n/m | |||||||
3/27/09 | Prince William Health System | Manassas, VA | 1.09 | x | n/m | |||||||
4/2/09 | Medina General Hospital | Medina, OH | 0.56 | x | 13.9 | x | ||||||
6/1/09 | Amsterdam Memorial Hospital | Amsterdam, NY | 0.79 | x | n/m | |||||||
6/29/09 | Shore Health Services | Nassawadox, VA | 1.07 | x | n/m | |||||||
7/8/09 | Jewish Hospital | Cincinnati, OH | 0.79 | x | 3.9 | x | ||||||
8/14/09 | Sparks Health System | Fort Smith, AR | 0.60 | x | n/m | |||||||
11/3/09 | Triumph Healthcare | Houston, TX | 1.30 | x | 6.3 | x | ||||||
12/3/09 | Long-Term Acute Care Hospital | Dallas, TX | n/a | n/a | ||||||||
1/28/10 | Cabrini Medical Center | New York, NY | 2.08 | x | n/a | |||||||
4/9/10 | Mountain View Hospital, LLC | Idaho Falls, ID | 0.94 | x | 5.6 | x | ||||||
4/30/10 | Sumner Regional Health Systems | Gallatin, TN | 1.04 | x | n/a | |||||||
5/16/10 | Psychiatric Solutions, Inc. | Franklin, TN | 1.70 | x | 9.8 | x | ||||||
6/18/10 | Regency Hospital Company, LLC | Alpharetta, GA | 0.56 | x | 7.6 | x | ||||||
8/23/10 | Vista Healthcare | Sacramento, CA | 1.19 | x | 6.6 | x | ||||||
10/5//2010 | Center for Wound Healing | Tarrytown, NY | 1.15 | x | n/m | |||||||
11/12/2010 | Tenet Healthcare Corporation | Dallas, TX | 0.76 | x | 7.1 | x | ||||||
2/7/2011 | Kindred Healthcare | Louisville, KY | 0.95 | x | 7.7 | x | ||||||
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Indicated Multiples | ||||||||||||
Date | EV/LTM | EV/LTM | ||||||||||
Announced | Target | Target Location | Revenue | EBITDA | ||||||||
Low | 0.33 | x | 3.6 | x | ||||||||
High | 2.42 | x | 13.9 | x | ||||||||
Mean | 0.97 | x | 7.2 | x | ||||||||
Median | 0.81 | x | 6.9x | |||||||||
• | AHH has a high degree of concentration risk, as a majority of patient admissions are indirectly related to a small group of physicians. | |
• | As experienced at other MedCath locations, AHH is susceptible to a competing hospital hiring its key physicians directly at higher compensation levels due to reimbursement allowances under the hospital provider number structure. | |
• | AHH faces significant risk that AR-MED or its affiliates could open a competing hospital. | |
• | AHH primarily focuses on cardiology and related procedures, making it less diversified compared to the reviewed target companies. | |
• | The potential liability related to the contingent liabilities increases the risk of an equity position in AHH. | |
• | AHH expects to incur significant costs in the next several years associated with upgrading to electronic medical records. Management has not incorporated these capital outlays or expenses into their projections. | |
• | Physician investors’ influence over the capital and legal structure of AHH reduces the universe of potential buyers for AHH. |
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Indicated Range of Value | ||||||||
as of 5/02/11 | ||||||||
Low | High | |||||||
In thousands of U.S. dollars | ||||||||
Guideline Company Method | $ | 71,000 | $ | 90,000 | ||||
Transaction Method | 67,000 | 89,000 | ||||||
Discounted Cash Flow Method | 68,000 | 85,000 | ||||||
Enterprise Value Range | $ | 69,000 | $ | 88,000 | ||||
Less: Interest-Bearing Debt | (28,573 | ) | (28,573 | ) | ||||
Add: Cash and Cash Equivalents | 174 | 174 | ||||||
Add: Excess Working Capital | 890 | 890 | ||||||
Add: Cash Held at MedCath on Behalf of AHH | 6,328 | 6,328 | ||||||
Total Adjustments to Enterprise Value | (21,180 | ) | (21,180 | ) | ||||
Market Value of Equity Range (Rounded) | $ | 47,800 | $ | 66,800 | ||||
Multiplied by: MedCath’s Ownership in AHH | 70.3 | % | 70.3 | % | ||||
Market Value of MedCath’s Equity Ownership in AHH (Rounded) | $ | 33,600 | $ | 47,000 | ||||
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• | Organization, qualification and capacity; | |
• | Absence of conflicts or violations under the certificate of incorporation, governing documents, governmental authorization and third party consents; | |
• | Enforceability; | |
• | Absence of litigation that has or could affect the Arkansas Purchase Agreement or the transaction contemplated thereby; | |
• | Knowledge and experience in financial and business matters; | |
• | Voluntary and independent nature of determination to enter into the AHH transaction; and | |
• | No other express or implied representations or warranties. |
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• | Accuracy and completeness of certain financial statements and information of Dr. Murphy and the absence of undisclosed liabilities of Dr. Murphy; and | |
• | No other express or implied representations or warranties. |
• | Organization, qualification and capacity; | |
• | Ownership of the AHH Equity Interest; | |
• | Absence of conflicts or violations under the operating agreement, governmental authorization and third party consents; | |
• | Enforceability; | |
• | Access to records related to certain liabilities and contracts; and | |
• | No other representations or warranties. |
• | Prior to the closing date, provide reasonable access to information to AR-MED and additional financial and operational information upon request, to the extent permitted by law and subject to certain limitations described in Article 8 of the Arkansas Purchase Agreement; | |
• | Provide prompt written notice to AR-MED of (a) any event that has caused any representation or warranty contained in the Arkansas Purchase Agreement to be untrue in any material respect and (b) any failure by AR-MED to comply with or satisfy, in any material respect, any covenant, condition or agreement in the Arkansas Purchase Agreement; and | |
• | MOA, at noout-of-pocket cost or expense, agrees to reasonably cooperate with AR-MED as necessary for AR-MED to arrange for financing in connection with the consummation of the transactions contemplated by the Arkansas Purchase Agreement,provided that obtaining such financing is not a condition to AR-MED’s obligation to consummate the transactions contemplated by the Arkansas Purchase Agreement. |
• | Provide prompt written notice to MOA and Finco of (a) any event that has caused any representation or warranty contained in the Arkansas Purchase Agreement to be untrue in any material respect, (b) any material and adverse change to any of the Purchased Assets and (c) any failure by AR-MED to comply with or satisfy, in any material respect, any covenant, condition or agreement in the Arkansas Purchase Agreement; and | |
• | Prior to the closing date, (a) take all reasonable steps to obtain (i) approvals and permits required to complete the transactions contemplated by the Arkansas Purchase Agreement and (ii) all necessary consents of any counterparties to contracts with AHH required under the terms of such contracts, provided that obtaining any such consents shall not be a condition to closing and (b) provide such information as may be reasonably requested in connection therewith. |
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• | Offer for lease or sale AHH’s material assets (or any material portion thereof) or any ownership interest in any entity owning any of AHH’s material assets or any interest in the AHH Debt; | |
• | Solicit offers to lease or buy all or any material portion of AHH’s assets or any ownership interest in any entity owning any of AHH’s material assets or any interest in the AHH Debt; | |
• | Hold discussions with any party (other than AR-MED) looking toward such an offer or solicitation or looking toward a merger or consolidation of AHH or sale or assignment of the AHH Debt; | |
• | Enter into any agreement with any party (other than AR-MED) with respect to the lease, sale or other disposition of AHH’s material assets (or any material portion thereof) or any ownership interest in AHH or with respect to any merger, consolidation or similar transaction involving AHH or any interest in the AHH Debt; or | |
• | Furnish or cause to be furnished any information with respect to AHH or its assets to any person that MOA or such affiliate or any such person acting for or on their behalf knows or has reason to believe is in the process of considering any such acquisition, merger, consolidation, combination or reorganization,provided the foregoing shall not prevent the Company or persons acting for or on its behalf from including any information it deems required by law in any of its filings with the SEC. |
• | Compliance by AR-MED in all material respects with all covenants and conditions required to be performed or complied with by it in the Arkansas Purchase Agreement at or prior to the closing date;provided that this condition will be deemed to be satisfied unless both (a) AR-MED was given written notice of such failure to perform or comply and did not or could not cure such failure to perform or comply within 15 days after receipt of such notice and (b) the respects in which such covenants and obligations have not been performed have had a material adverse effect on the ability of AR-MED to timely consummate the transactions contemplated by the Arkansas Purchase Agreement; | |
• | No court or other governmental entity has issued an order (or threatened in writing to do so) restraining or prohibiting the transactions contemplated by the Arkansas Purchase Agreement, and no governmental entity with jurisdiction over AHH or the hospital shall have commenced or threatened in writing to commence any action or suit before any court of competent jurisdiction or other governmental entity that seeks to restrain or prohibit the consummation of the transactions contemplated by the Arkansas Purchase Agreement; | |
• | The representations and warranties of AR-MED and Dr. Murphy that are qualified by materiality are true in all respects and the representations and warranties of AR-MED and Dr. Murphy that are not so qualified shall be true in all material respects when made and as of the closing date,provided that this condition will be deemed to be satisfied unless any breaches of representations and warranties byAR-MED and Dr. Murphy have had a material adverse effect on the ability of AR-MED to timely consummate the transactions contemplated by the Arkansas Purchase Agreement; |
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• | The Company shall have obtained any approvals of its stockholders which it has determined in its sole discretion are required under the DGCL to authorize MOA to consummate the transactions contemplated by the Arkansas Purchase Agreement, which approval may be subject to the stockholders of the Company approving one or more additional transactions together with the transactions contemplated by the Arkansas Purchase Agreement; | |
• | MOA shall have obtained any consents or approvals from the board of directors of AHH or AHH’s members other than MOA, which consents or approvals MOA is required to obtain in order to consummate the transactions contemplated under this Agreement; and | |
• | AHH shall have paid to MOA or the Company, as appropriate, an amount equal to (a) all amounts of management fees and related expenses due from AHH to MOA or the Company, (b) all amounts of unreimbursed costs and expenses of any type or nature advanced or paid by MOA or the Company on behalf or for the benefit of AHH, in both cases with respect to the period through and including the closing date and (c) any unpaid guarantee fee incurred by members of AHH under the terms of Section 5.16 of AHH’s operating agreement. |
• | Compliance by MOA in all material respects with all covenants and conditions required to be performed or complied with by it in the Arkansas Purchase Agreement at or prior to the closing date;provided that this condition will be deemed to be satisfied unless both (a) MOA was given written notice of such failure to perform or comply and did not or could not cure such failure to perform or comply within 15 days after receipt of such notice and (b) the respects in which such covenants and obligations have not been performed have had a material adverse effect on the ability of MOA to timely consummate the transactions contemplated by the Arkansas Purchase Agreement; | |
• | No court or other governmental entity has issued an order (or threatened in writing to do so) restraining or prohibiting the transactions contemplated by the Arkansas Purchase Agreement, and no governmental entity with jurisdiction over AHH or the hospital shall have commenced or threatened in writing to commence any action or suit before any court of competent jurisdiction or other governmental entity that seeks to restrain or prohibit the consummation of the transactions contemplated by the Arkansas Purchase Agreement; and | |
• | The representations and warranties of MOA that are qualified by materiality are true in all respects and the representations and warranties of MOA that are not so qualified shall be true in all material respects when made and as of the closing date,provided that this condition will be deemed to be satisfied unless any breaches of such representations and warranties individually or in the aggregate have had or are reasonably likely to have a material adverse effect. In the event that there are breaches of representations and warranties made by MOA hereunder that have not had or are not reasonably likely to have a material adverse effect (a) AR-MED shall not be excused from performance hereunder as a result of such breaches and shall be obligated to complete the transaction described in the Arkansas Purchase Agreement, and (b) AR-MED shall not assert the breach of such representations and warranties as a basis for not consummating the transaction contemplated by the Arkansas Purchase Agreement. |
• | By mutual written consent; | |
• | By AR-MED or MOA and Finco at any time after July 31, 2011 if the closing has not occurred by such date;provided that the right to terminate is not available to any party whose failure to fulfill any obligation under the Arkansas Purchase Agreement has been the cause of, or resulted in, the failure of the closing to occur by such date;provided,further, that if the closing has not occurred due to or |
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related to either (x) a governmental action, review, investigation or proceeding or (y) because the Company shall not have obtained any approvals of the stockholders of the Company which it has determined in its reasonable discretion are required under the DGCL for the Company to authorize MOA to consummate the transactions contemplated under the Arkansas Purchase Agreement, then in either of such events, AR-MED or MOA may elect, by providing written notice to the other party hereto, to extend the date by which the closing must occur to August 31, 2011 (the right to so extend the date by which the closing must occur is not available to any party whose failure to fulfill any obligation under the Arkansas Purchase Agreement has been the cause of, or resulted in, the failure of the closing to occur by July 31, 2011); |
• | By either party if there is a breach by such other party in any material respect of any of the representations, warranties, covenants or other agreements of such other party which would result in a failure of a condition to closing in the Arkansas Purchase Agreement, which breach cannot be or has not been cured within 15 days after the giving of written notice; or | |
• | By either party, if any court or any other governmental entity issues an order restraining or prohibiting such party from consummating the sale and purchase of the Purchased Assets or the full payment of the AHH Debt and such order becomes final and non-appealable. |
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Pension/ | ||||||||||||||||||||||||||||
Non-Qualified | ||||||||||||||||||||||||||||
Deferred | Prequisites/ | Tax | ||||||||||||||||||||||||||
Name | Cash | Equity(3) | Compensation | Benefits(8) | Reimbursement | Other | Total | |||||||||||||||||||||
O. Edwin French | $ | 1,770,313 | (1) | $ | 2,429,285 | (4)(7) | $ | — | $ | 15,797 | $ | — | $ | — | $ | 4,215,393 | ||||||||||||
President, Chief Executive Officer | ||||||||||||||||||||||||||||
James A. Parker | 901,250 | (1) | $ | 666,767 | (5)(7) | — | 21,966 | — | — | $ | 1,589,982 | |||||||||||||||||
Executive Vice President, Chief Financial Officer | ||||||||||||||||||||||||||||
David Bussone(9) | — | $ | 500,649 | (6)(7) | — | — | — | — | $ | 500,649 | ||||||||||||||||||
Executive Vice President and President Operations Division | ||||||||||||||||||||||||||||
Joan McCanless | 633,888 | (1) | $ | 283,616 | — | 8,467 | — | — | $ | 925,970 | ||||||||||||||||||
Senior Vice President and Chief Clinical and Compliance Officer | ||||||||||||||||||||||||||||
Dan Perritt | 375,435 | (2) | $ | 110,813 | — | 3,949 | — | — | $ | 490,195 | ||||||||||||||||||
Senior Vice President, Finance Operations |
(1) | Two times salary plus one times target annual incentive compensation | |
(2) | One times salary plus one times target annual incentive compensation |
(3) | Based on the average stock close price the five days subsequent May 9, 2011, which was the date of the public announcement of the Company’s plan to seek stockholder approval of liquidation and dissolution |
(4) | Includes 100,636 shares that have vested, but that contain sales restrictions that will be lifted upon a technical change in control | |
(5) | Includes 26,347 shares that have vested, but that contain sales restrictions that will be lifted upon a technical change in control | |
(6) | Includes 34,671 shares that have vested, but that contain sales restrictions that will be lifted upon a technical change in control | |
(7) | Any liquidation distributions made with respect to these shares will be paid to the holder of the shares and will not be subject to any vesting requirements or other restrictions. | |
(8) | Includes extended healthcare benefits after termination as the result of a change in control | |
(9) | Mr. Bussone’s employment with the Company was terminated in December 2010 | |
* | With respect to the Company’s named executive officers, all payments set forth above, other than equity awards, are considered “double trigger” benefits meaning that in order for these named executive officers to receive such payment there would need to be a change in control and such named executive officers would have to be terminated other than for cause or would have to resign for good reason. The equity awards for the named executive officers are “single trigger” meaning the unvested portion of the awards will be fully vested and immediately exercisable upon the occurrence of a change in control. |
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2010 | 2009 | |||||||
Audit Fees | ||||||||
Recurring audit and quarterly reviews(1) | $ | 1,270,993 | $ | 1,383,029 | ||||
Audit Related Fees(2) | 39,302 | 302,389 | ||||||
Tax Fees(3) | 84,103 | 74,405 | ||||||
All Other Fees | — | — | ||||||
Total | $ | 1,394,398 | $ | 1,759,823 |
(1) | Audit fees also include the audit of the Company’s internal control over financial reporting as required by Section 404 of the Sarbanes-Oxley Act of 2002. | |
(2) | Fiscal 2010 includes fees for work related to the Company’s Strategic Options Process. Fiscal 2009 includes fees for the Company’s third quarter internal controls assessment and the review of private placement memoranda related to the Company’s solicitation of investor members in certain subsidiaries. | |
(3) | Tax Fees are fees for tax return assistance and preparation, tax examination assistance, and professional services related to tax planning and tax strategy. |
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• | each person who is known by the Company to be the beneficial owner of more than five percent of the outstanding shares of MedCath’s common stock, | |
• | each named executive officer of the Company listed on the summary compensation table that appears elsewhere in this proxy statement, | |
• | each director and nominee for director of the Company, and | |
• | MedCath’s executive officers and directors as a group. |
Percentage of | ||||||||
Common | ||||||||
Number of Shares | Stock | |||||||
Name of Beneficial Owner | Beneficially Owned(1) | Outstanding | ||||||
Nierenberg Investment Management Company, Inc.(2) | 2,924,777 | 14 | % | |||||
Dimensional Fund Advisors LP(3) | 1,691,949 | 8 | % | |||||
PAR Capital Management, Inc.(4) | 1,650,100 | 8 | % | |||||
WS Capital Management LP(5) | 1,500,000 | 7 | % | |||||
BlackRock Fund Advisors(6) | 1,461,183 | 7 | % | |||||
O. Edwin French | 798,353 | 4 | % | |||||
James A. Parker | 125,161 | 1 | % | |||||
Joan McCanless | 56,416 | * | ||||||
David Bussone | 34,671 | * | ||||||
Paul Daniel Perritt | 8,710 | * | ||||||
Jacque J. Sokolov, MD | 49,200 | * | ||||||
John T. Casey | 48,200 | * | ||||||
Robert S. McCoy, Jr. | 44,200 | * | ||||||
Pamela G. Bailey | 33,700 | * | ||||||
Woodrin Grossman | 33,700 | * | ||||||
James A. Deal | 25,600 | * | ||||||
Directors and executive officers, as a group (11 persons) | 1,257,911 | 6 | % |
(1) | The following shares of common stock subject to options that are currently exercisable or exercisable within 60 days of June 24, 2011: O. Edwin French, 570,000; James A. Parker, 57,500; Joan McCanless, 16,000; Jacque J. Sokolov, 10,500; and Robert S. McCoy, Jr., 10,500. |
(2) | The address of this stockholder is 19605 N.E. 8th Street, Camas, Washington 98607. The Schedule 13F filed by this stockholder on March 31, 2011 indicates that this stockholder, in its capacity as investment advisor, may be deemed to have defined voting and dispositive power over 2,940,711 shares. On June 2, 2011, this stockholder filed a Form 4 to report the disposition of 15,934 shares. |
(3) | The address of this stockholder is 6300 Bee Cave Road, Building One, Austin, Texas 78746. The Schedule 13F filed by this stockholder on March 31, 2011 indicates that this stockholder, in its capacity as investment advisor, may be deemed to have defined voting and dispositive power over 1,691,949 shares. | |
(4) | The address of this stockholder is PAR Capital Management, Inc., One International Place, Suite 2401, Boston, MA 02110. The schedule 13F filed by this stockholder on March 31, 2011 indicates that this |
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stockholder, in its capacity as investment advisor, may be deemed to have sole voting and dispositive power over 1,650,100 shares. | ||
(5) | The address of this stockholder is 300 Crescent Court, Suite 1111, Dallas, Texas 75201. The Schedule 13F filed by this stockholder on March 31, 2011 indicates that this stockholder, in its capacity as investment advisor, may be deemed to have sole voting and dispositive power over 1,500,000 shares. | |
(6) | The address of this stockholder is 400 Howard Street, San Francisco, California 94105. The Schedule 13F filed by this stockholder on March 31, 2011 indicates that this stockholder, in its capacity as investment advisor, may be deemed to have sole voting and dispositive power over 1,461,183 shares. |
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• | AMN Health Care Services, Inc. | |
• | Concentra Operating Corporation | |
• | IASIS Health Care LLC | |
• | Lifepoint Hospitals, Inc. | |
• | Pediatrix Medical Group, Inc. | |
• | Psychiatric Solutions, Inc. | |
• | United Surgical Partners International | |
• | US Oncology, Inc. | |
• | Vanguard Health Systems, Inc. |
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% Payout of | ||||
% of Adjusted EBITDAP Target Achieved | Targeted Bonus | |||
<90 | 0 | |||
90 | 50 | |||
95 | 75 | |||
100 | 100 |
% Payout of | ||||
% Adjusted EBITDAP Target Achieved | Targeted Bonus | |||
104 | 130 | |||
106 | 160 | |||
108 | 200 |
Actual EBITDAP(1) | $ | 21.4 | ||||||
Adjustments to EBITDAP | ||||||||
Plus: | ||||||||
Equity in earnings of unconsolidated affiliates | $ | 4.5 | ||||||
Strategic alternatives costs | 4.2 | |||||||
Other non-recurring | 0.6 | |||||||
Compensation expense from stock awards | 0.6 | |||||||
Minus: | ||||||||
Non-controlling interest | (5.9 | ) | ||||||
Interest expense | (3.3 | ) | ||||||
Total Adjustments to EBITDAP | 0.7 | |||||||
Adjusted EBITDAP | $ | 22.1 | ||||||
(1) | Includes operations still owned that are reported in discontinued operations at September 30, 2010. |
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• | an amount equal to the sum of two times his annual base salary and one times his target annual bonus; | |
• | earned but unpaid salary (including any awarded but deferred bonus payment); | |
• | unreimbursed business expenses; and | |
• | continued coverage under the Company’s group medical insurance plan for a period ending on the earlier of (A) the date Mr. French becomes covered under comparable plans of a new employer or (B) eligibility for Medicare benefits. |
• | earned but unpaid salary (including any awarded but deferred bonus payment); and | |
• | unreimbursed business expenses. |
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• | an amount equal to (A) one times his annual base salary if termination occurs prior to a change in control or more than 12 months after a change in control or (B) if such termination occurs upon a change in control or at any time within 12 months after a change in control, the sum of two times his annual base salary and one times his target annual bonus; | |
• | earned but unpaid salary (including any awarded but deferred bonus payment); | |
• | unreimbursed business expenses; and | |
• | continued coverage under the Company’s medical, disability and life insurance plans for a period ending the earlier of (A) the second anniversary of the date of termination or (B) the date the executive becomes covered under comparable plans of a new employer. |
• | earned but unpaid salary (including any awarded but deferred bonus payment); and | |
• | unreimbursed business expenses. |
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• | an amount equal to (A) one times his annual base salary if termination occurs prior to a change in control or more than 12 months after a change in control or (B) if such termination occurs upon a change in control or at any time within 12 months after a change in control, the sum of two times his annual base salary and one times his target annual bonus; | |
• | earned but unpaid salary (including any awarded but deferred bonus payment); | |
• | unreimbursed business expenses; and | |
• | continued coverage under the Company’s medical, disability and life insurance plans for a period ending the earlier of (A) the second anniversary of the date of termination or (B) the date the executive becomes covered under comparable plans of a new employer. |
• | earned but unpaid salary (including any awarded but deferred bonus payment); and | |
• | unreimbursed business expenses. |
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• | an amount equal to (A) one times her annual base salary if termination occurs prior to a change in control or more than 12 months after a change in control or (B) if such termination occurs upon a change in control or at any time within 12 months after a change in control, the sum of two times her annual base salary and one times her target annual bonus; | |
• | earned but unpaid salary (including any awarded but deferred bonus payment); | |
• | unreimbursed business expenses; and | |
• | continued coverage under the Company’s medical, disability and life insurance plans for a period ending the earlier of (A) the second anniversary of the date of termination or (B) the date the executive becomes covered under comparable plans of a new employer. |
• | earned but unpaid salary (including any awarded but deferred bonus payment); and | |
• | unreimbursed business expenses. |
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• | an amount equal to (A) one half times his annual base salary if termination occurs prior to a change in control or (B) if such termination occurs upon a change in control or at any time within 12 months after a change in control, the sum of one times his annual base salary and one times his target annual bonus; | |
• | earned but unpaid salary; and | |
• | unreimbursed business expenses. |
• | earned but unpaid salary; and | |
• | unreimbursed business expenses. |
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Stock | Option | All Other | ||||||||||||||||||||||||||
Name and Principal | Salary | Bonus | Awards | Awards | Compensation | Total | ||||||||||||||||||||||
Position(s) | Year | ($) | ($)(2) | ($)(1) | ($)(1) | ($) | ($) | |||||||||||||||||||||
O. Edwin French | 2010 | $ | 625,000 | $ | 234,375 | $ | 854,885 | $ | — | $ | 15,275 | (4) | $ | 1,729,535 | ||||||||||||||
President, Chief Executive Officer | 2009 | $ | 618,269 | $ | — | $ | 1,499,996 | $ | — | $ | 14,938 | (3) | $ | 2,133,203 | ||||||||||||||
(principal executive officer) | 2008 | $ | 600,000 | $ | — | $ | — | $ | 805,000 | $ | 15,231 | (3) | $ | 1,420,231 | ||||||||||||||
James A. Parker | 2010 | $ | 350,000 | $ | 131,250 | $ | 284,651 | $ | — | $ | 19,502 | (3) | $ | 785,403 | ||||||||||||||
Executive Vice President, | 2009 | $ | 300,385 | $ | — | $ | 349,996 | $ | — | $ | 17,677 | (3) | $ | 668,058 | ||||||||||||||
Chief Financial Officer | 2008 | $ | 300,000 | $ | — | $ | — | $ | — | $ | 19,107 | (3) | $ | 319,107 | ||||||||||||||
(principal financial officer) | ||||||||||||||||||||||||||||
David Bussone(7) | 2010 | $ | 425,000 | $ | 85,000 | $ | 32,734 | $ | — | $ | 133,178 | (5) | $ | 675,912 | ||||||||||||||
Executive Vice President and | 2009 | $ | 22,885 | $ | — | $ | 499,999 | $ | — | $ | — | $ | 522,884 | |||||||||||||||
President Operations Division (beginning September 2009) | ||||||||||||||||||||||||||||
Joan McCanless | 2010 | $ | 246,170 | $ | 92,314 | $ | 91,004 | $ | — | $ | 10,550 | (4) | $ | 440,038 | ||||||||||||||
Senior Vice President and | 2009 | $ | 245,502 | $ | — | $ | 123,084 | $ | — | $ | 10,603 | (3) | $ | 379,189 | ||||||||||||||
Chief Clinical and Compliance Officer | 2008 | $ | 239,000 | $ | — | $ | — | $ | — | $ | 9,459 | (3) | $ | 248,459 | ||||||||||||||
Paul Daniel Perritt | 2010 | $ | 217,039 | $ | 47,250 | $ | 67,502 | $ | — | $ | 110,629 | (6) | $ | 442,420 | ||||||||||||||
Senior Vice President, | ||||||||||||||||||||||||||||
Finance Operations (beginning December 2009) |
(1) | Both Stock and Option Awards are valued based on the fair value of the award at the date of grant. The Stock Awards vest in various increments as discussed in theEquity Compensation Awardssection of theCompensation Discussion and Analysissection elsewhere in this proxy statement. The Option Awards vest immediately but are subject to sales restrictions for five years. As a result, this fair value may not be indicative of the ultimate value the executive may receive under a given grant. See Note 16 to MedCath’s Consolidated Financial Statements included in its Annual Report onForm 10-K for the year ending September 30, 2010 for the valuation assumptions used in determining the fair value of the awards. | |
(2) | Includes bonuses earned for performance in the fiscal year noted even though such amounts are payable in subsequent years. Excludes bonuses paid in the fiscal year noted but earned in prior years. See “Executive Compensation and Other Information — Compensation Discussion and Analysis” for further discussion on how bonuses were determined. | |
(3) | The perquisites include 401(k) matching contributions, gymnasium dues, and medical insurance. | |
(4) | The perquisites include 401(k) matching contributions and medical insurance. | |
(5) | The perquisites include 401(k) matching contributions, gymnasium dues, medical insurance and relocation expenses of $119,298. | |
(6) | The perquisites include 401(k) matching contributions, gymnasium dues, medical insurance and relocation expenses of $103,060. | |
(7) | Mr. Bussone’s employment with the Company was terminated in December 2010. |
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Estimated Possible Payouts | Estimated Possible Payouts | |||||||||||||||||||||||||||||||||||
Under Non-Equity Incentive | Under Equity Incentive | |||||||||||||||||||||||||||||||||||
Plan Awards | Plan Awards | |||||||||||||||||||||||||||||||||||
All Other | Grant | |||||||||||||||||||||||||||||||||||
Stock | Date | |||||||||||||||||||||||||||||||||||
Awards: | Fair | |||||||||||||||||||||||||||||||||||
Number of | Value of | |||||||||||||||||||||||||||||||||||
Shares of | Stock/ | |||||||||||||||||||||||||||||||||||
Grant | Threshold | Target | Maximum | Threshold | Target | Maximum | Stock or | Option | ||||||||||||||||||||||||||||
Name | Date(1) | ($) | ($) | ($) | (#) | (#) | (#) | Units (#) | Awards(1) | |||||||||||||||||||||||||||
O. Edwin French | 12/10/09 | (3) | — | — | — | — | — | — | 61,503 | $ | 427,446 | |||||||||||||||||||||||||
President, Chief Executive Officer | 12/10/09 | (4) | — | — | — | — | — | — | 61,502 | $ | 427,439 | |||||||||||||||||||||||||
(principal executive officer) | 117,188 | 234,375 | 468,750 | — | — | — | ||||||||||||||||||||||||||||||
James A. Parker | 12/10/09 | (3) | — | — | — | — | — | — | 20,479 | $ | 142,329 | |||||||||||||||||||||||||
Executive Vice President and | 12/10/09 | (4) | — | — | — | — | — | — | 20,478 | $ | 142,322 | |||||||||||||||||||||||||
Chief Financial Officer | 43,750 | 87,500 | 175,000 | — | — | — | ||||||||||||||||||||||||||||||
(principal financial officer) | ||||||||||||||||||||||||||||||||||||
David Bussone | 12/10/09 | (3) | — | — | — | — | — | — | 2,355 | $ | 16,367 | |||||||||||||||||||||||||
Former Executive Vice President and | 12/10/09 | (4) | — | — | — | — | — | — | 2,355 | $ | 16,367 | |||||||||||||||||||||||||
President Operations Division | 53,125 | 106,250 | 212,500 | |||||||||||||||||||||||||||||||||
(September 2009 through December 2010) | ||||||||||||||||||||||||||||||||||||
Joan McCanless | 12/10/09 | (3) | — | — | — | — | — | — | 6,547 | $ | 45,502 | |||||||||||||||||||||||||
Senior Vice President and Chief | 12/10/09 | (4) | — | — | — | — | — | — | 6,547 | $ | 45,502 | |||||||||||||||||||||||||
Clinical and Compliance Officer | 30,771 | 61,543 | 61,543 | — | — | — | ||||||||||||||||||||||||||||||
Paul Daniel Perritt | 12/1/09 | (3) | — | — | — | — | — | — | 4,605 | $ | 33,755 | |||||||||||||||||||||||||
Senior Vice President, | 12/1/09 | (4) | — | — | — | — | — | — | 4,604 | $ | 33,747 | |||||||||||||||||||||||||
Finance Operations | — | — | — | — | — | — | ||||||||||||||||||||||||||||||
16,875 | 33,750 | 33,750 |
(1) | Restricted stock awards are valued based on the closing price of the Company’s stock on the date of grant. | |
(2) | Grants were issued pursuant to the MedCath Corporation 2006 Stock Option and Award Plan. | |
(3) | Restricted stock awards vest over a three year period. | |
(4) | Performance based restricted stock awards vest over a three year period based on the Company meeting specific performance conditions in each given year. See “Executive Compensation and Other Information — Compensation Discussion and Analysis.” |
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Outstanding Equity Awards at Fiscal Year End | ||||||||||||||||||||||||||||||||
Options Awards(1) | Stock Awards | |||||||||||||||||||||||||||||||
Equity | ||||||||||||||||||||||||||||||||
Incentive | Equity Incentive | |||||||||||||||||||||||||||||||
Plan Awards: | Plan Awards: | |||||||||||||||||||||||||||||||
Number of | Market or | |||||||||||||||||||||||||||||||
Number of | Unearned | Payout Value of | ||||||||||||||||||||||||||||||
Number of | Shares or | Market Value | Shares, Units | Unearned | ||||||||||||||||||||||||||||
Securities | Units of | of Shares or | or Other | Shares, Units or | ||||||||||||||||||||||||||||
Underlying | Option | Stock That | Units of Stock | Rights That | Other Rights | |||||||||||||||||||||||||||
Unexercised | Exercise | Have Not | That Have Not | Have Not | That Have Not | |||||||||||||||||||||||||||
Award | Options (#) | Price | Option | Vested | Vested | Vested | Vested | |||||||||||||||||||||||||
Name | Grant Date | Exercisable | ($) | Expiration Date | (#) | ($)(2) | (#) | ($) | ||||||||||||||||||||||||
O. Edwin French | 2/21/2006 | 500,000 | $ | 21.49 | 2/21/2016 | — | — | — | — | |||||||||||||||||||||||
President, Chief | 3/9/2006 | (3) | — | — | — | — | $ | — | 39,063 | $ | 393,364 | |||||||||||||||||||||
Executive Officer | 11/13/2007 | 70,000 | $ | 26.50 | 11/13/2017 | — | — | — | — | |||||||||||||||||||||||
2/13/2009 | (4) | — | — | — | 53,191 | $ | 535,633 | — | $ | — | ||||||||||||||||||||||
2/13/2009 | (3) | — | — | — | — | $ | — | 79,787 | $ | 803,455 | ||||||||||||||||||||||
12/10/2009 | (4) | — | — | — | 61,503 | $ | 619,335 | — | ||||||||||||||||||||||||
12/10/2009 | (3) | — | — | — | — | — | 61,502 | $ | 619,325 | |||||||||||||||||||||||
James A. Parker | 2/26/2001 | 20,000 | $ | 19.00 | 2/26/2011 | — | — | — | — | |||||||||||||||||||||||
Executive Vice | 8/11/2004 | 16,500 | $ | 15.13 | 8/11/2014 | — | — | — | — | |||||||||||||||||||||||
President, | 2/16/2005 | 10,000 | $ | 26.46 | 2/16/2015 | — | — | — | — | |||||||||||||||||||||||
Chief Financial Officer | 6/12/2006 | 31,000 | $ | 14.89 | 6/12/2016 | — | — | — | — | |||||||||||||||||||||||
2/13/2009 | (4) | — | — | — | 5,319 | $ | 53,562 | — | $ | — | ||||||||||||||||||||||
2/13/2009 | (3) | — | — | — | $ | — | 7,978 | $ | 80,338 | |||||||||||||||||||||||
9/17/2009 | (4) | — | — | — | 7,033 | $ | 70,822 | — | $ | — | ||||||||||||||||||||||
9/17/2009 | (3) | — | — | — | — | $ | — | 10,548 | $ | 106,218 | ||||||||||||||||||||||
12/10/2009 | (4) | — | — | — | 20,479 | $ | 206,224 | — | ||||||||||||||||||||||||
12/10/2009 | (3) | — | — | — | — | — | 20,478 | $ | 206,213 | |||||||||||||||||||||||
David Bussone | 9/1/2009 | (5) | — | — | — | 22,107 | $ | 222,617 | — | $ | — | |||||||||||||||||||||
Former Executive Vice | 9/1/2009 | (5) | — | — | — | — | $ | — | 24,510 | $ | 246,816 | |||||||||||||||||||||
President, President | 12/10/2009 | (5) | — | — | — | 2,355 | $ | 23,715 | — | |||||||||||||||||||||||
Operations Division | 12/10/2009 | (5) | — | — | — | — | — | 2,355 | $ | 23,715 | ||||||||||||||||||||||
Joan McCanless | 12/12/2003 | 11,600 | $ | 9.95 | 12/12/2013 | — | — | — | — | |||||||||||||||||||||||
Senior Vice President | 1/7/2004 | 4,400 | $ | 10.58 | 1/7/2014 | — | — | — | — | |||||||||||||||||||||||
and Chief Clinical and | 2/13/2009 | (4) | — | — | — | 4,365 | $ | 43,956 | — | $ | — | |||||||||||||||||||||
Compliance Officer | 2/13/2009 | (6) | — | — | — | — | $ | — | 6,547 | $ | 65,928 | |||||||||||||||||||||
12/10/2009 | (4) | — | — | — | 6,547 | $ | 65,928 | — | ||||||||||||||||||||||||
12/10/2009 | (6) | — | — | — | — | — | 6,547 | $ | 65,928 | |||||||||||||||||||||||
Paul Daniel Perritt | 12/1/2009 | (4) | — | — | — | 4,605 | $ | 46,372 | — | |||||||||||||||||||||||
Senior Vice President, | 12/1/2009 | (6) | — | — | — | — | — | 4,604 | $ | 46,362 | ||||||||||||||||||||||
Finance Operations |
(1) | Options vest immediately upon grant but remain subject to sales restrictions for five years. | |
(2) | Market value based on September 30, 2010 closing market price of our common stock of $10.07 per share. | |
(3) | The Compensation Committee waived the performance vesting criteria for these shares and the shares became fully vested in December 2010. | |
(4) | Restricted stock awards vest over a three year period. | |
(5) | These shares became fully vested upon the termination of Mr. Bussone’s employment in December 2010. | |
(6) | Performance based restricted stock awards vest over a three year period based on the Company meeting specific performance conditions in each given year as discussed in the Equity Compensation Awards section of the Compensation Discussion and Analysis section elsewhere in this proxy statement. |
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Option Awards | Stock Awards | |||||||||||||||
Number of | Number of | |||||||||||||||
Shares | Value | Shares | Value | |||||||||||||
Acquired on | Realized on | Acquired on | Realized on | |||||||||||||
Exercise | Exercise | Vesting | Vesting | |||||||||||||
Name | (#) | ($) | (#) | ($)(1) | ||||||||||||
O. Edwin French | — | — | 26,596 | $ | 210,374 | |||||||||||
President, Chief Executive Officer | ||||||||||||||||
James A. Parker | — | — | 6,176 | $ | 48,852 | |||||||||||
Executive Vice President and | ||||||||||||||||
Chief Financial Officer | ||||||||||||||||
David Bussone | — | — | 11,053 | $ | 87,429 | |||||||||||
Former Executive Vice President and | ||||||||||||||||
President Operations Division | ||||||||||||||||
Joan McCanless | — | — | 2,182 | $ | 17,260 | |||||||||||
Senior Vice President and | ||||||||||||||||
Chief Clinical and Compliance Officer | ||||||||||||||||
Paul Daniel Perritt | — | — | — | — | ||||||||||||
Senior Vice President, | ||||||||||||||||
Finance Operations |
(1) | Represents pretax gain upon vesting. |
Involuntary | Termination | Value | Value | |||||||||||||
Termination | Related to | of | of | |||||||||||||
Name | Without Cause | Change in Control | Stock Options | Stock Awards | ||||||||||||
O. Edwin French | $ | 1,718,750 | (1) | $ | 1,734,547 | (2) | $ | — | $ | 2,971,113 | (6) | |||||
President, Chief Executive Officer | ||||||||||||||||
James A. Parker | 350,000 | (3) | 896,966 | (2) | — | 723,378 | (6) | |||||||||
Executive Vice President, | ||||||||||||||||
Chief Financial Officer | ||||||||||||||||
David Bussone | 425,000 | (3) | 1,071,872 | (2) | — | 516,863 | (6) | |||||||||
Former Executive Vice President and | ||||||||||||||||
President Operations Division | ||||||||||||||||
Joan McCanless | 246,170 | (3) | 623,892 | (2) | 1,392 | 241,740 | (6) | |||||||||
Senior Vice President and | ||||||||||||||||
Chief Clinical and Compliance Officer | ||||||||||||||||
Dan Perritt | 135,000 | (4) | 364,500 | (5) | — | 92,735 | (6) | |||||||||
Senior Vice President, Finance Operations (beginning December 2010) |
(1) | Two times salary plus one times target annual incentive compensation | |
(2) | Two times salary plus one times target annual incentive compensation and estimated healthcare subsidy | |
(3) | One times salary | |
(4) | One half times salary |
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(5) | One times salary plus one times target annual incentive compensation | |
(6) | Market value based on September 30, 2010 closing market price of our common stock of $10.07 per share. Includes all unvested time and performance based restricted shares outstanding |
Number of Securities | ||||||||||||
Remaining | ||||||||||||
Available for Future | ||||||||||||
Weighted Average | Issuance | |||||||||||
Number of Securities to be | Exercise Price of | Under Equity | ||||||||||
Issued Upon Exercise of | Outstanding | Compensation | ||||||||||
Plan Category | Outstanding Options | Options | Plans | |||||||||
Equity Compensation Plans Approved by Stockholders | 1,681,714 | $ | 22.25 | 976,319 | ||||||||
Equity Compensation Plans Not Approved by Stockholders | — | — | — |
Strategic | ||||||||||||||||||||||||
Board of | Audit | Compensation | Compliance | Options | Governance | |||||||||||||||||||
Directors | Committee | Committee | Committee | Committee | Committee | |||||||||||||||||||
Annual Retainer — Member | $ | 30,000 | $ | — | $ | — | $ | — | $ | — | ||||||||||||||
Annual Retainer — Chairman | $ | 50,000 | $ | 35,000 | $ | 35,000 | $ | 25,000 | $ | 180,000 | $ | — | ||||||||||||
Meeting | $ | 1,500 | $ | 1,500 | $ | 1,500 | $ | 1,500 | $ | 1,500 | $ | 1,500 |
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Fees Earned or | Equity | |||||||||||
Paid in Cash | Awards | Total | ||||||||||
Name | ($)(1) | ($)(2) | ($) | |||||||||
Current Directors | ||||||||||||
Robert S. McCoy, Jr. | $ | 143,000 | $ | 100,736 | (3) | $ | 243,736 | |||||
James A. Deal | 79,500 | 100,736 | (3) | 180,236 | ||||||||
Woodrin Grossman | 208,500 | 100,736 | (3) | 309,236 | ||||||||
John T. Casey | 129,500 | 100,736 | (3) | 230,236 | ||||||||
Pamela G. Bailey | 77,417 | 100,736 | (3) | 178,153 | ||||||||
Jacque J. Sokolov, MD | 82,417 | 100,736 | (3) | 183,153 | ||||||||
Former Directors | ||||||||||||
Galen D. Powers(4) | 59,250 | 100,736 | (3) | 159,986 | ||||||||
Edward R. Casas(5) | 57,500 | — | 57,500 |
(1) | The amounts shown in this column represent the aggregate amount of all fees earned or paid in cash for services as a director in fiscal year 2010. | |
(2) | Represents the dollar amount recognized for financial statement purposes with respect to the RSUs granted during fiscal 2010. See Note 16 to MedCath’s Consolidated Financial Statements included in its Annual Report onForm 10-K for the fiscal year ended September 30, 2010 for additional details. |
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(3) | The grant date fair value of these awards was based on a grant of 12,800 RSUs and a closing price of $7.87 as of March 3, 2010 (the grant date) for the Company’s common stock. | |
(4) | Termination effective June 2010. | |
(5) | Termination effective February 2010. |
Outstanding | Restricted | |||||||
Option | Stock | |||||||
Awards | Units(1) | |||||||
Robert S. McCoy, Jr. | 10,500 | 26,500 | ||||||
James A. Deal | — | 18,400 | ||||||
Woodrin Grossman | — | 26,500 | ||||||
John T. Casey | — | 26,500 | ||||||
Pamela G. Bailey | — | 26,500 | ||||||
Jacque J. Sokolov, MD | 10,500 | 26,500 |
(1) | Restricted stock units are fully vested at the date of grant and are paid in shares of common stock upon each applicable director’s termination of service on the Board of Directors. |
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CONCERNING FORWARD-LOOKING INFORMATION
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• | The Company’s Annual Report onForm 10-K for the fiscal year ended September 30, 2010 filed with the SEC on December 14, 2010 (other than the information included in Items 6 and 8 to such report, which has been superseded by the Current Report on Form 8-K filed by the Company on May 27, 2011) and amended by our Annual Report on Form10-K/A filed with the SEC on January 28, 2011. | |
• | The Company’s Quarterly Report onForm 10-Q for the fiscal quarter ended December 31, 2010 filed with the SEC on February 9, 2011. | |
• | The Company’s Quarterly Report onForm 10-Q for the fiscal quarter ended March 31, 2011 filed with the SEC on May 10, 2011. | |
• | The Company’s Current Reports onForm 8-K filed with the SEC on October 5, 2010, November 5, 2010, November 9, 2010, November 15, 2010, November 26, 2010, December 22, 2010, January 6, 2011, May 12, 2011, May 27, 2011, June 15, 2011 and June 15, 2011. |
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F-1
Page | ||||
UNAUDITED FINANCIAL STATEMENTS | ||||
F-3 | ||||
F-4 | ||||
F-5 | ||||
F-6 | ||||
F-7-F-14 |
F-2
Table of Contents
September 30, | ||||||||
2010 | 2009 | |||||||
(Unaudited) | ||||||||
(In thousands) | ||||||||
Current assets: | ||||||||
Cash | $ | 9,258 | $ | 12,542 | ||||
Accounts receivable, net | 9,198 | 7,912 | ||||||
Medical supplies | 1,932 | 1,839 | ||||||
Prepaid expenses and other current assets | 2,921 | 2,527 | ||||||
Total current assets | 23,309 | 24,820 | ||||||
Property and equipment, net | 28,246 | 25,019 | ||||||
Intangible assets, net | 253 | 285 | ||||||
Other assets | 1,766 | 1,269 | ||||||
Total assets | $ | 53,574 | $ | 51,393 | ||||
Current liabilities: | ||||||||
Accounts payable | $ | 2,605 | $ | 4,115 | ||||
Accrued compensation and benefits | 1,863 | 1,230 | ||||||
Other accrued liabilities | 3,667 | 4,082 | ||||||
Due to affiliate | 192 | 149 | ||||||
Short-term borrowings and current portion of loans payable to affiliate | 1,012 | 387 | ||||||
Current portion of obligations under capital leases | 2,072 | 1,251 | ||||||
Total current liabilities | 11,411 | 11,214 | ||||||
Loans payable to affiliate | 23,118 | 23,855 | ||||||
Obligations under capital leases | 4,870 | 3,466 | ||||||
Other long-term obligations | 1,749 | 1,252 | ||||||
Total liabilities | 41,148 | 39,787 | ||||||
Members’ capital | 12,426 | 11,606 | ||||||
Total liabilities and members’ capital | $ | 53,574 | $ | 51,393 | ||||
F-3
Table of Contents
Year Ended September 30, | ||||||||
2010 | 2009 | |||||||
(Unaudited) | ||||||||
(In thousands) | ||||||||
Net revenue | $ | 81,232 | $ | 75,425 | ||||
Operating expenses: | ||||||||
Personnel expense | 22,032 | 21,295 | ||||||
Medical supplies expense | 21,213 | 19,576 | ||||||
Bad debt expense | 5,438 | 5,303 | ||||||
Other operating expenses | 17,167 | 17,365 | ||||||
Depreciation | 2,934 | 2,824 | ||||||
Amortization | 32 | 32 | ||||||
Loss on disposal of property, equipment and other assets | 43 | 91 | ||||||
Total operating expenses | 68,859 | 66,486 | ||||||
Income from operations | 12,373 | 8,939 | ||||||
Other income (expenses): | ||||||||
Interest expense | (2,319 | ) | (2,184 | ) | ||||
Interest and other income | 66 | 21 | ||||||
Total other expenses, net | (2,253 | ) | (2,163 | ) | ||||
Net income | $ | 10,120 | $ | 6,776 | ||||
F-4
Table of Contents
New Mexico | New Mexico | Southwest | ||||||||||||||||||
Hospital | Heart | Cardiology | ||||||||||||||||||
Management, | Institute, | Associates, | Physician | |||||||||||||||||
Inc. | LLC | LLC | Members | Total | ||||||||||||||||
(Unaudited) | ||||||||||||||||||||
(In thousands) | ||||||||||||||||||||
Balance, September 30, 2008 | $ | 12,188 | $ | 2,430 | $ | 1,633 | $ | — | $ | 16,251 | ||||||||||
Distributions to members | (8,566 | ) | (1,713 | ) | (1,142 | ) | — | (11,421 | ) | |||||||||||
Net income | 5,082 | 1,016 | 678 | — | 6,776 | |||||||||||||||
Balance, September 30, 2009 | 8,704 | 1,733 | 1,169 | — | 11,606 | |||||||||||||||
Transfer of membership interest (Note 1) | (27 | ) | — | — | 27 | — | ||||||||||||||
Distributions to members | (6,956 | ) | (1,395 | ) | (949 | ) | — | (9,300 | ) | |||||||||||
Net income | 7,575 | 1,518 | 1,012 | 15 | 10,120 | |||||||||||||||
Balance, September 30, 2010 | $ | 9,296 | $ | 1,856 | $ | 1,232 | $ | 42 | $ | 12,426 | ||||||||||
F-5
Table of Contents
Year Ended September 30, | ||||||||
2010 | 2009 | |||||||
(Unaudited) | ||||||||
(In thousands) | ||||||||
Net income | $ | 10,120 | $ | 6,776 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Bad debt expense | 5,438 | 5,303 | ||||||
Depreciation | 2,934 | 2,824 | ||||||
Amortization | 32 | 32 | ||||||
Loss on disposal of property, equipment and other assets | 43 | 91 | ||||||
Change in assets and liabilities that relate to operations: | ||||||||
Accounts receivable | (6,724 | ) | (2,114 | ) | ||||
Medical supplies | (93 | ) | (272 | ) | ||||
Prepaid expenses and other assets | 71 | (6,216 | ) | |||||
Accounts payable and accrued liabilities | (1,403 | ) | 9,372 | |||||
Due to affiliate | 122 | — | ||||||
Net cash provided by operating activities | 10,540 | 15,796 | ||||||
Investing activities: | ||||||||
Purchases of property and equipment | (2,805 | ) | (1,752 | ) | ||||
Proceeds from sale of property and equipment | 3 | 2 | ||||||
Changes in restricted cash | (1 | ) | — | |||||
Net cash used in investing activities | (2,803 | ) | (1,750 | ) | ||||
Financing activities: | ||||||||
Repayments of obligations under capital leases | (1,530 | ) | (791 | ) | ||||
Proceeds from loans payable to affiliate | — | 6,515 | ||||||
Repayments of loans payable to affiliate | (191 | ) | (6,495 | ) | ||||
Distributions to members | (9,300 | ) | (11,421 | ) | ||||
Net cash used in financing activities | (11,021 | ) | (12,192 | ) | ||||
Net (decrease) increase in cash | (3,284 | ) | 1,854 | |||||
Cash: | ||||||||
Beginning of year | 12,542 | 10,688 | ||||||
End of year | $ | 9,258 | $ | 12,542 | ||||
Supplemental cash flow disclosures: | ||||||||
Interest paid | $ | 2,277 | $ | 2,184 | ||||
Supplemental schedule of non-cash investing and financing activities: | ||||||||
Equipment financed under capital leases | $ | 3,755 | $ | 3,610 | ||||
F-6
Table of Contents
1. | Organization |
2. | Summary of Significant Accounting Policies |
2010 | 2009 | |||||||||||||||
Carrying | Estimated | Carrying | Estimated | |||||||||||||
Value | Fair Value | Value | Fair Value | |||||||||||||
Fixed rate loan payable to affiliate | $ | 23,722 | $ | 26,069 | $ | 23,855 | $ | 27,427 |
F-7
Table of Contents
2010 | 2009 | |||||||
Medicare and Medicaid | 33 | % | 36 | % | ||||
Commercial and Other | 58 | % | 54 | % | ||||
Self-pay | 9 | % | 10 | % | ||||
100 | % | 100 | % | |||||
F-8
Table of Contents
F-9
Table of Contents
3. | Accounts Receivable |
2010 | 2009 | |||||||
Receivables, principally from patients and third-party payors | $ | 18,176 | $ | 17,469 | ||||
Other receivables | 130 | 193 | ||||||
18,306 | 17,662 | |||||||
Allowance for doubtful accounts | (9,108 | ) | (9,750 | ) | ||||
Accounts receivable, net | $ | 9,198 | $ | 7,912 | ||||
F-10
Table of Contents
2010 | 2009 | |||||||
Balance, beginning of year | $ | 9,750 | $ | 6,294 | ||||
Bad debt expense | 5,438 | 5,303 | ||||||
Write-offs, net of recoveries | (6,080 | ) | (1,847 | ) | ||||
Balance, end of year | $ | 9,108 | $ | 9,750 | ||||
4. | Property and Equipment |
2010 | 2009 | |||||||
Land and improvements | $ | 2,363 | $ | 2,347 | ||||
Buildings and improvements | 21,930 | 20,548 | ||||||
Equipment and software | 26,450 | 20,080 | ||||||
Construction in progress | — | 2,335 | ||||||
50,743 | 45,310 | |||||||
Less accumulated depreciation | (22,497 | ) | (20,291 | ) | ||||
$ | 28,246 | $ | 25,019 | |||||
5. | Obligations under Capital Leases |
Fiscal Year: | ||||
2011 | $ | 2,428 | ||
2012 | 1,929 | |||
2013 | 1,474 | |||
2014 | 1,327 | |||
2015 | 652 | |||
Thereafter | — | |||
Total future minimum lease payments | 7,810 | |||
Less amounts representing interest | (868 | ) | ||
Present value of capital lease obligation | 6,942 | |||
Less: current portion | (2,072 | ) | ||
$ | 4,870 | |||
F-11
Table of Contents
6. | Commitments and Contingencies |
7. | Related-Party Transactions |
F-12
Table of Contents
Fiscal year: | ||||
2011 | $ | 1,012 | ||
2012 | 642 | |||
2013 | 691 | |||
2014 | 740 | |||
2015 | 791 | |||
Thereafter | 20,254 | |||
$ | 24,130 | |||
2010 | 2009 | |||||||
Hospital management, salaries, and benefits | $ | 289 | $ | 282 | ||||
Interest expense on borrowings | 1,949 | 2,067 | ||||||
Management fees | 1,333 | 1,350 | ||||||
Hospital employee group insurance | 2,794 | 2,668 | ||||||
Other | 2,234 | 2,211 | ||||||
$ | 8,599 | $ | 8,578 | |||||
8. | Employee Benefit Plan |
F-13
Table of Contents
9. | Litigation and Related Professional Liability Insurance Coverage |
10. | Subsequent Event |
F-14
Table of Contents
Three and Six Month Periods Ended March 31, 2011 and 2010
F-15
Table of Contents
Page | ||||
UNAUDITED FINANCIAL STATEMENTS | ||||
F-17 | ||||
F-18 | ||||
F-19 | ||||
F-20 | ||||
F-21-F-24 |
F-16
Table of Contents
March 31, | September 30, | |||||||
2011 | 2010 | |||||||
(Unaudited) | ||||||||
(In thousands) | ||||||||
Current assets: | ||||||||
Cash | $ | 10,379 | $ | 9,258 | ||||
Accounts receivable, net | 10,688 | 9,198 | ||||||
Medical supplies | 1,842 | 1,932 | ||||||
Prepaid expenses and other current assets | 2,196 | 2,921 | ||||||
Total current assets | 25,105 | 23,309 | ||||||
Property and equipment, net | 26,892 | 28,246 | ||||||
Intangible assets, net | 237 | 253 | ||||||
Other assets | 1,234 | 1,766 | ||||||
Total assets | $ | 53,468 | $ | 53,574 | ||||
Current liabilities: | ||||||||
Accounts payable | $ | 3,131 | $ | 2,605 | ||||
Accrued compensation and benefits | 1,679 | 1,863 | ||||||
Other accrued liabilities | 2,497 | 3,667 | ||||||
Due to affiliate | 59 | 192 | ||||||
Short-term borrowings and current portion of loans payable to affiliate | 1,300 | 1,012 | ||||||
Current portion of obligations under capital leases | 2,070 | 2,072 | ||||||
Total current liabilities | 10,736 | 11,411 | ||||||
Loans payable to affiliate | 22,798 | 23,118 | ||||||
Obligations under capital leases | 3,850 | 4,870 | ||||||
Other long-term obligations | 1,218 | 1,749 | ||||||
Total liabilities | 38,602 | 41,148 | ||||||
Members’ capital | 14,866 | 12,426 | ||||||
Total liabilities and members’ capital | $ | 53,468 | $ | 53,574 | ||||
F-17
Table of Contents
Three Months Ended March | Six Months Ended March 31, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
(Unaudited) | ||||||||||||||||
(In thousands) | ||||||||||||||||
Net revenue | $ | 18,991 | $ | 21,031 | $ | 38,604 | $ | 41,145 | ||||||||
Operating expenses: | ||||||||||||||||
Personnel expense | 5,510 | 5,455 | 10,763 | 11,062 | ||||||||||||
Medical supplies expense | 4,986 | 5,688 | 9,386 | 10,921 | ||||||||||||
Bad debt expense | 1,071 | 1,213 | 2,817 | 2,764 | ||||||||||||
Other operating expenses | 4,260 | 4,446 | 8,495 | 8,701 | ||||||||||||
Depreciation | 794 | 604 | 1,615 | 1,211 | ||||||||||||
Amortization | 8 | 8 | 16 | 16 | ||||||||||||
Loss on disposal of property, equipment and other assets | 6 | — | 7 | 8 | ||||||||||||
Total operating expenses | 16,635 | 17,414 | 33,099 | 34,683 | ||||||||||||
Income from operations | 2,356 | 3,617 | 5,505 | 6,462 | ||||||||||||
Other income (expenses): | ||||||||||||||||
Interest expense | (486 | ) | (550 | ) | (991 | ) | (1,130 | ) | ||||||||
Interest and other income | 8 | 8 | 18 | 17 | ||||||||||||
Total other expenses, net | (478 | ) | (542 | ) | (973 | ) | (1,113 | ) | ||||||||
Net income | $ | 1,878 | $ | 3,075 | $ | 4,532 | $ | 5,349 | ||||||||
F-18
Table of Contents
New Mexico | New Mexico | Southwest | ||||||||||||||||||
Hospital | Heart | Cardiology | ||||||||||||||||||
Management, | Institute, | Associates, | Physician | |||||||||||||||||
Inc. | LLC | LLC | Members | Total | ||||||||||||||||
(Unaudited) | ||||||||||||||||||||
(In thousands) | ||||||||||||||||||||
Balance, September 30, 2010 | $ | 9,296 | $ | 1,856 | $ | 1,232 | $ | 42 | $ | 12,426 | ||||||||||
Distributions to members | (1,565 | ) | (314 | ) | (209 | ) | (4 | ) | (2,092 | ) | ||||||||||
Net income | 3,390 | 680 | 453 | 9 | 4,532 | |||||||||||||||
Balance, March 31, 2011 | $ | 11,121 | $ | 2,222 | $ | 1,476 | $ | 47 | $ | 14,866 | ||||||||||
F-19
Table of Contents
Six Months Ended March 31, | ||||||||
2011 | 2010 | |||||||
(Unaudited) | ||||||||
(In thousands) | ||||||||
Net income | $ | 4,532 | $ | 5,349 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Bad debt expense | 2,817 | 2,764 | ||||||
Depreciation | 1,615 | 1,211 | ||||||
Amortization | 16 | 16 | ||||||
Loss on disposal of property, equipment and other assets | 7 | 8 | ||||||
Change in assets and liabilities that relate to operations: | ||||||||
Accounts receivable | (4,307 | ) | (4,897 | ) | ||||
Medical supplies | 90 | (5 | ) | |||||
Prepaid expenses and other assets | (144 | ) | (201 | ) | ||||
Accounts payable and accrued liabilities | 31 | (16 | ) | |||||
Due to affiliate | 139 | 127 | ||||||
Net cash provided by operating activities | 4,796 | 4,356 | ||||||
Investing activities: | ||||||||
Purchases of property and equipment | (259 | ) | (2,301 | ) | ||||
Proceeds from sale of property and equipment | 1 | — | ||||||
Changes in restricted cash | 1 | — | ||||||
Net cash used in investing activities | (257 | ) | (2,301 | ) | ||||
Financing activities: | ||||||||
Repayments of obligations under capital leases | (1,022 | ) | (658 | ) | ||||
Repayments of loans payable to affiliate | (304 | ) | — | |||||
Distributions to members | (2,092 | ) | (9,300 | ) | ||||
Net cash used in financing activities | (3,418 | ) | (9,958 | ) | ||||
Net increase (decrease) in cash | 1,121 | (7,903 | ) | |||||
Cash: | ||||||||
Beginning of year | 9,258 | 12,542 | ||||||
End of year | $ | 10,379 | $ | 4,639 | ||||
Supplemental schedule of non-cash investing and financing activities: | ||||||||
Equipment financed under capital leases | $ | — | $ | 3,755 | ||||
F-20
Table of Contents
1. | Business and Basis of Presentation |
2. | Summary of Significant Accounting Policies |
March 31, 2011 | September 30, 2010 | |||||||||||||||
Carrying | Estimated | Carrying | Estimated | |||||||||||||
Value | Fair Value | Value | Fair Value | |||||||||||||
Fixed rate loan payable to affiliate | $ | 23,419 | $ | 24,488 | $ | 23,722 | $ | 26,069 |
F-21
Table of Contents
3. | Accounts Receivable |
March 31, | September 30, | |||||||
2011 | 2010 | |||||||
Receivables, principally from patients and third-party payors | $ | 21,770 | $ | 18,176 | ||||
Other receivables | 82 | 130 | ||||||
21,852 | 18,306 | |||||||
Allowance for doubtful accounts | (11,164 | ) | (9,108 | ) | ||||
Accounts receivable, net | $ | 10,688 | $ | 9,198 | ||||
4. | Commitments and Contingencies |
F-22
Table of Contents
5. | Related-Party Transactions |
6. | Litigation and Related Professional Liability Insurance Coverage |
F-23
Table of Contents
7. | Subsequent Event |
F-24
Table of Contents
the Years Ended September 30, 2010 and 2009
F-25
Table of Contents
Page | ||||
UNAUDITED FINANCIAL STATEMENTS | ||||
F-27 | ||||
F-28 | ||||
F-29 | ||||
F-30 | ||||
F-31-F-39 |
F-26
Table of Contents
September 30, | ||||||||
2010 | 2009 | |||||||
(Unaudited) | ||||||||
(In thousands) | ||||||||
Current assets: | ||||||||
Cash | $ | 2 | $ | 2 | ||||
Accounts receivable, net | 11,958 | 12,137 | ||||||
Medical supplies | 3,365 | 2,897 | ||||||
Due from affiliate | 10,366 | 8,124 | ||||||
Prepaid expenses and other current assets | 2,104 | 2,095 | ||||||
Total current assets | 27,795 | 25,255 | ||||||
Property and equipment, net | 41,144 | 45,382 | ||||||
Other assets | 72 | 103 | ||||||
Total assets | $ | 69,011 | $ | 70,740 | ||||
Current liabilities: | ||||||||
Accounts payable | $ | 4,408 | $ | 5,718 | ||||
Accrued compensation and benefits | 3,424 | 2,614 | ||||||
Other accrued liabilities | 3,783 | 4,018 | ||||||
Due to affiliate | 356 | 621 | ||||||
Current portion of loans payable to affiliate | 26,757 | 2,215 | ||||||
Current portion of obligation under capital lease | 53 | 51 | ||||||
Total current liabilities | 38,781 | 15,237 | ||||||
Loans payable to affiliate | 2,848 | 27,056 | ||||||
Obligation under capital lease | 174 | 228 | ||||||
Other long-term obligations | 49 | — | ||||||
Total liabilities | 41,852 | 42,521 | ||||||
Commitments and contingencies (See Note 6) | — | — | ||||||
Members’ capital | 27,159 | 28,219 | ||||||
Total liabilities and members’ capital | $ | 69,011 | $ | 70,740 | ||||
F-27
Table of Contents
Year Ended September 30, | ||||||||
2010 | 2009 | |||||||
(Unaudited) | ||||||||
(In thousands) | ||||||||
Net revenue | $ | 117,843 | $ | 117,650 | ||||
Operating expenses: | ||||||||
Personnel expense | 36,291 | 36,346 | ||||||
Medical supplies expense | 36,847 | 34,860 | ||||||
Bad debt expense | 11,355 | 13,058 | ||||||
Other operating expenses | 16,059 | 15,469 | ||||||
Depreciation | 5,334 | 5,150 | ||||||
Loss (gain) on disposal of property, equipment and other assets | 24 | (4 | ) | |||||
Total operating expenses | 105,910 | 104,879 | ||||||
Income from operations | 11,933 | 12,771 | ||||||
Other income (expenses): | ||||||||
Interest expense | (1,039 | ) | (1,334 | ) | ||||
Interest and other income | 42 | 25 | ||||||
Total other expenses, net | (997 | ) | (1,309 | ) | ||||
Net income | $ | 10,936 | $ | 11,462 | ||||
F-28
Table of Contents
Receivable | ||||||||||||||||
MedCath of | from | |||||||||||||||
Arkansas, | Physician | Physician | ||||||||||||||
Inc. | Members | Members | Total | |||||||||||||
(Unaudited) | ||||||||||||||||
(In thousands) | ||||||||||||||||
Balance, September 30, 2008 | $ | 23,437 | $ | 9,885 | $ | (63 | ) | $ | 33,259 | |||||||
Distributions to members | (11,605 | ) | (4,895 | ) | (2 | ) | (16,502 | ) | ||||||||
Net income | 8,061 | 3,401 | — | 11,462 | ||||||||||||
Balance, September 30, 2009 | 19,893 | 8,391 | (65 | ) | 28,219 | |||||||||||
Distributions to members | (8,440 | ) | (3,560 | ) | 4 | (11,996 | ) | |||||||||
Net income | 7,691 | 3,245 | — | 10,936 | ||||||||||||
Balance, September 30, 2010 | $ | 19,144 | $ | 8,076 | $ | (61 | ) | $ | 27,159 | |||||||
F-29
Table of Contents
Year Ended September 30, | ||||||||
2010 | 2009 | |||||||
(Unaudited) | ||||||||
(In thousands) | ||||||||
Net income | $ | 10,936 | $ | 11,462 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Bad debt expense | 11,355 | 13,058 | ||||||
Depreciation | 5,334 | 5,150 | ||||||
Loss (gain) on disposal of property, equipment and other assets | 24 | (4 | ) | |||||
Change in assets and liabilities that relate to operations: | ||||||||
Accounts receivable | (11,176 | ) | (13,831 | ) | ||||
Medical supplies | (468 | ) | (925 | ) | ||||
Prepaid expenses and other assets | 6 | 4,380 | ||||||
Accounts payable and accrued liabilities | (519 | ) | (4,088 | ) | ||||
Due to affiliate | (265 | ) | (23 | ) | ||||
Net cash provided by operating activities | 15,227 | 15,179 | ||||||
Investing activities: | ||||||||
Purchases of property and equipment | (1,288 | ) | (5,050 | ) | ||||
Proceeds from sale of property and equipment | 9 | 52 | ||||||
Due from affiliate | (2,242 | ) | 8,521 | |||||
Restricted cash | 8 | 3 | ||||||
Net cash provided by (used in) investing activities | (3,513 | ) | 3,526 | |||||
Financing activities: | ||||||||
Repayments of obligation under capital lease | (52 | ) | (3 | ) | ||||
Proceeds from loans payable to affiliate | 3,000 | — | ||||||
Repayments of loans payable to affiliates | (2,666 | ) | (2,200 | ) | ||||
Distributions to members | (11,996 | ) | (16,502 | ) | ||||
Net cash used in financing activities | (11,714 | ) | (18,705 | ) | ||||
Net change in cash | — | — | ||||||
Cash: | ||||||||
Beginning of year | 2 | 2 | ||||||
End of year | $ | 2 | $ | 2 | ||||
Supplemental cash flow disclosures: | ||||||||
Interest paid | $ | 1,036 | $ | 1,356 | ||||
Capital expenditures financed by capital leases | $ | — | $ | 282 | ||||
F-30
Table of Contents
1. | Organization |
2. | Summary of Significant Accounting Policies |
2010 | 2009 | |||||||||||||||
Carrying | Estimated | Carrying | Estimated | |||||||||||||
Value | Fair Value | Value | Fair Value | |||||||||||||
Fixed rate loan payable to affiliate, including current portion | $ | 3,908 | $ | 4,049 | $ | 1,844 | $ | 1,915 |
2010 | 2009 | |||||||
Medicare and Medicaid | 47 | % | 47 | % | ||||
Commercial and Other | 34 | % | 35 | % | ||||
Self-pay | 19 | % | 18 | % | ||||
100 | % | 100 | % | |||||
F-31
Table of Contents
F-32
Table of Contents
F-33
Table of Contents
3. | Accounts Receivable |
2010 | 2009 | |||||||
Receivables, principally from patients and third-party payors | $ | 32,412 | $ | 31,506 | ||||
Other receivables | 338 | 572 | ||||||
32,750 | 32,078 | |||||||
Allowance for doubtful accounts | (20,792 | ) | (19,941 | ) | ||||
Accounts receivable, net | $ | 11,958 | $ | 12,137 | ||||
2010 | 2009 | |||||||
Balance, beginning of year | $ | 19,941 | $ | 11,441 | ||||
Bad debt expense | 11,355 | 13,058 | ||||||
Write-offs, net of recoveries | (10,504 | ) | (4,558 | ) | ||||
Balance, end of year | $ | 20,792 | $ | 19,941 | ||||
4. | Property and Equipment |
2010 | 2009 | |||||||
Land and improvements | $ | 3,212 | $ | 3,212 | ||||
Buildings and improvements | 38,315 | 38,315 | ||||||
Equipment and software | 36,265 | 36,695 | ||||||
77,792 | 78,222 | |||||||
Less accumulated depreciation | (36,648 | ) | (32,840 | ) | ||||
$ | 41,144 | $ | 45,382 | |||||
F-34
Table of Contents
5. | Obligation Under Capital Lease |
Fiscal Year: | ||||
2011 | $ | 64 | ||
2012 | 64 | |||
2013 | 64 | |||
2014 | 60 | |||
Total future minimum lease payments | 252 | |||
Less amounts representing interest | (25 | ) | ||
Present value of capital lease obligation | 227 | |||
Less: current portion | (53 | ) | ||
$ | 174 | |||
6. | Commitments and Contingencies |
Fiscal year: | ||||
2011 | $ | 5 | ||
2012 | 1 | |||
Total | $ | 6 | ||
F-35
Table of Contents
7. | Related-Party Transactions |
F-36
Table of Contents
Fiscal year: | ||||
2011 | $ | 26,757 | ||
2012 | 1,109 | |||
2013 | 983 | |||
2014 | 654 | |||
2015 | 102 | |||
$ | 29,605 | |||
2010 | 2009 | |||||||
Hospital management, salaries, and benefits | $ | 854 | $ | 671 | ||||
Interest expense on borrowings, net of interest income of $7 and $14 in 2010 and 2009 on advances | 1,025 | 1,319 | ||||||
Management fees | 136 | 133 | ||||||
Hospital employee group insurance and benefits | 3,865 | 3,893 | ||||||
Other | 2,012 | 2,383 | ||||||
$ | 7,892 | $ | 8,399 | |||||
F-37
Table of Contents
8. | Employee Benefit Plan |
9. | Litigation and Related Professional Liability Insurance Coverage |
F-38
Table of Contents
10. | Subsequent Event |
F-39
Table of Contents
F-40
Page | ||||
UNAUDITED FINANCIAL STATEMENTS | ||||
F-42 | ||||
F-43 | ||||
F-44 | ||||
F-45 | ||||
F-46-F-51 |
F-41
Table of Contents
March 31, | September 30, | |||||||
2011 | 2010 | |||||||
(Unaudited) | ||||||||
(In thousands) | ||||||||
Current assets: | ||||||||
Cash | $ | 2 | $ | 2 | ||||
Accounts receivable, net | 14,079 | 11,958 | ||||||
Medical supplies | 3,454 | 3,365 | ||||||
Due from affiliate | 6,328 | 10,366 | ||||||
Prepaid expenses and other current assets | 2,696 | 2,104 | ||||||
Total current assets | 26,559 | 27,795 | ||||||
Property and equipment, net | 39,022 | 41,144 | ||||||
Other assets | 59 | 72 | ||||||
Total assets | $ | 65,640 | $ | 69,011 | ||||
Current liabilities: | ||||||||
Accounts payable | $ | 5,267 | $ | 4,408 | ||||
Accrued compensation and benefits | 3,450 | 3,424 | ||||||
Other accrued liabilities | 3,449 | 3,783 | ||||||
Due to affiliate | 155 | 356 | ||||||
Current portion of loans payable to affiliate | 25,916 | 26,757 | ||||||
Current portion of obligation under capital lease | 55 | 53 | ||||||
Total current liabilities | 38,292 | 38,781 | ||||||
Loans payable to affiliate | 2,300 | 2,848 | ||||||
Obligation under capital lease | 147 | 174 | ||||||
Other long-term obligations | 53 | 49 | ||||||
Total liabilities | 40,792 | 41,852 | ||||||
Members’ capital | 24,848 | 27,159 | ||||||
Total liabilities and members’ capital | $ | 65,640 | $ | 69,011 | ||||
F-42
Table of Contents
Three Months Ended March | Six Months Ended March | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
(Unaudited) | ||||||||||||||||
(In thousands) | ||||||||||||||||
Net revenue | $ | 32,216 | $ | 29,139 | $ | 60,435 | $ | 54,673 | ||||||||
Operating expenses: | ||||||||||||||||
Personnel expense | 9,397 | 9,067 | 18,158 | 17,912 | ||||||||||||
Medical supplies expense | 9,523 | 8,943 | 16,238 | 17,996 | ||||||||||||
Bad debt expense | 2,961 | 2,690 | 5,299 | 3,436 | ||||||||||||
Other operating expenses | 3,729 | 3,775 | 8,664 | 7,753 | ||||||||||||
Depreciation | 1,120 | 1,355 | 2,323 | 2,719 | ||||||||||||
Loss on disposal of property, equipment and other assets | — | 7 | 23 | 24 | ||||||||||||
Total operating expenses | 26,730 | 25,837 | 50,705 | 49,840 | ||||||||||||
Income from operations | 5,486 | 3,302 | 9,730 | 4,833 | ||||||||||||
Other income (expenses): | ||||||||||||||||
Interest expense | (235 | ) | (265 | ) | (480 | ) | (510 | ) | ||||||||
Interest and other income (expense), net | — | (5 | ) | 410 | — | |||||||||||
Total other expenses, net | (235 | ) | (270 | ) | (70 | ) | (510 | ) | ||||||||
Net income | $ | 5,251 | $ | 3,032 | $ | 9,660 | $ | 4,323 | ||||||||
F-43
Table of Contents
Receivable | ||||||||||||||||
MedCath of | from | |||||||||||||||
Arkansas, | Physician | Physician | ||||||||||||||
Inc. | Members | Members | Total | |||||||||||||
(Unaudited) | ||||||||||||||||
(In thousands) | ||||||||||||||||
Balance, September 30, 2010 | $ | 19,144 | $ | 8,076 | $ | (61 | ) | $ | 27,159 | |||||||
Distributions to members | (8,442 | ) | (3,562 | ) | 33 | (11,971 | ) | |||||||||
Net income | 6,794 | 2,866 | — | 9,660 | ||||||||||||
Balance, March 31, 2011 | $ | 17,496 | $ | 7,380 | $ | (28 | ) | $ | 24,848 | |||||||
F-44
Table of Contents
Six Months Ended March 31, | ||||||||
2011 | 2010 | |||||||
(Unaudited) | ||||||||
(In thousands) | ||||||||
Net income | $ | 9,660 | $ | 4,323 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Bad debt expense | 5,299 | 3,436 | ||||||
Depreciation | 2,323 | 2,719 | ||||||
Loss (gain) on disposal of property, equipment and other assets | 23 | 24 | ||||||
Change in assets and liabilities that relate to operations: | ||||||||
Accounts receivable | (7,420 | ) | (3,463 | ) | ||||
Medical supplies | (89 | ) | (699 | ) | ||||
Prepaid expenses and other assets | (181 | ) | (227 | ) | ||||
Accounts payable and accrued liabilities | 134 | (377 | ) | |||||
Due to affiliate | (201 | ) | 1 | |||||
Net cash provided by operating activities | 9,548 | 5,737 | ||||||
Investing activities: | ||||||||
Purchases of property and equipment | (195 | ) | (869 | ) | ||||
Proceeds from sale of property and equipment | — | 9 | ||||||
Due from affiliate | 4,038 | 5,403 | ||||||
Restricted cash | (6 | ) | 4 | |||||
Net cash provided by investing activities | 3,837 | 4,547 | ||||||
Financing activities: | ||||||||
Repayments of obligation under capital lease | (25 | ) | (26 | ) | ||||
Proceeds from loans payable to affiliate | — | 3,000 | ||||||
Repayments of loans payable to affiliates | (1,389 | ) | (1,290 | ) | ||||
Distributions to members | (11,971 | ) | (11,968 | ) | ||||
Net cash used in financing activities | (13,385 | ) | (10,284 | ) | ||||
Net change in cash | — | — | ||||||
Cash: | ||||||||
Beginning of year | 2 | 2 | ||||||
End of year | $ | 2 | $ | 2 | ||||
F-45
Table of Contents
1. | Organization |
2. | Summary of Significant Accounting Policies |
March 31, 2011 | September 30, 2010 | |||||||||||||||
Carrying | Estimated | Carrying | Estimated | |||||||||||||
Value | Fair Value | Value | Fair Value | |||||||||||||
Fixed rate loan payable to affiliate, including current portion | $ | 3,383 | $ | 3,465 | $ | 3,908 | $ | 4,049 |
F-46
Table of Contents
3. | Accounts Receivable |
March 31, | September 30, | |||||||
2011 | 2010 | |||||||
Receivables, principally from patients and third-party payors | $ | 36,110 | $ | 32,412 | ||||
Other receivables | 1,278 | 338 | ||||||
37,388 | 32,750 | |||||||
Allowance for doubtful accounts | (23,309 | ) | (20,792 | ) | ||||
Accounts receivable, net | $ | 14,079 | $ | 11,958 | ||||
4. | Commitments and Contingencies |
5. | Related-Party Transactions |
F-47
Table of Contents
F-48
Table of Contents
6. | Litigation and Related Professional Liability Insurance Coverage |
7. | Subsequent Event |
F-49
Table of Contents
Year Ended September 30, | ||||||||||||||||||||
2010 | 2009 | 2008 | 2007 | 2006 | ||||||||||||||||
Consolidated Statement of Operations Data: | ||||||||||||||||||||
(in thousands, except per share data) | ||||||||||||||||||||
Net revenue | $ | 376,926 | $ | 343,849 | $ | 337,769 | $ | 399,492 | $ | 378,471 | ||||||||||
Impairment of long-lived assets and goodwill | $ | 66,822 | $ | 42,000 | $ | — | $ | — | $ | 458 | ||||||||||
(Loss) income from continuing operations before income taxes | $ | (65,718 | ) | $ | (32,048 | ) | $ | 27,817 | $ | 29,402 | $ | (937 | ) | |||||||
(Loss) income from continuing operations, net of taxes | $ | (50,485 | ) | $ | (41,252 | ) | $ | 7,982 | $ | 8,433 | $ | (8,139 | ) | |||||||
Income from discontinued operations, net of taxes | $ | 2,114 | $ | (9,030 | ) | $ | 13,008 | $ | 3,094 | $ | 19,595 | |||||||||
Net (loss) income | $ | (48,371 | ) | $ | (50,282 | ) | $ | 20,990 | $ | 11,527 | $ | 12,576 | ||||||||
(Loss) earnings from continuing operations attributable to MedCath Corporation common stockholders per share, basic | $ | (2.55 | ) | $ | (2.09 | ) | $ | 0.40 | $ | 0.40 | $ | (0.44 | ) | |||||||
(Loss) earnings from continuing operations attributable to MedCath Corporation common stockholders per share, diluted | $ | (2.55 | ) | $ | (2.09 | ) | $ | 0.40 | $ | 0.39 | $ | (0.42 | ) | |||||||
(Loss) earnings per share, basic | $ | (2.44 | ) | $ | (2.55 | ) | $ | 1.05 | $ | 0.56 | $ | 0.67 | ||||||||
(Loss) earnings per share, diluted | $ | (2.44 | ) | $ | (2.55 | ) | $ | 1.04 | $ | 0.54 | $ | 0.64 | ||||||||
Weighted average number of shares, basic | 19,842 | 19,684 | 19,996 | 20,872 | 18,656 | |||||||||||||||
Weighted average number of shares, diluted | 19,842 | 19,684 | 20,069 | 21,511 | 19,555 | |||||||||||||||
Balance Sheet and Cash Flow Data: | ||||||||||||||||||||
(in thousands) | ||||||||||||||||||||
Total assets | $ | 494,538 | $ | 590,448 | $ | 653,456 | $ | 678,567 | $ | 785,849 | ||||||||||
Total long-term obligations | $ | 99,841 | $ | 115,063 | $ | 121,875 | $ | 148,484 | $ | 274,962 | ||||||||||
Net cash provided by operating activities | $ | 43,294 | $ | 63,633 | $ | 52,008 | $ | 58,225 | $ | 65,634 | ||||||||||
Net cash (used in) provided by investing activities | $ | (16,956 | ) | $ | (63,790 | ) | $ | (5,805 | ) | $ | (28,591 | ) | $ | 10,064 | ||||||
Net cash used in financing activities | $ | (41,009 | ) | $ | (50,210 | ) | $ | (78,028 | ) | $ | (80,116 | ) | $ | (22,165 | ) | |||||
Selected Operating Data (consolidated)(a): | ||||||||||||||||||||
Number of hospitals | 5 | 4 | 4 | 4 | 5 | |||||||||||||||
Licensed beds(b) | 466 | 396 | 332 | 244 | 356 | |||||||||||||||
Staffed and available beds(c) | 380 | 310 | 272 | 242 | 354 | |||||||||||||||
Admissions(d) | 18,762 | 15,836 | 17,010 | 22,494 | 23,789 | |||||||||||||||
Adjusted admissions(e) | 28,163 | 23,301 | 23,274 | 31,510 | 32,806 | |||||||||||||||
Patient days(f) | 69,956 | 60,763 | 61,259 | 75,751 | 79,651 | |||||||||||||||
Adjusted patient days(g) | 105,467 | 89,281 | 83,541 | 105,680 | 109,670 | |||||||||||||||
Average length of stay(h) | 3.73 | 3.84 | 3.60 | 3.37 | 3.35 | |||||||||||||||
Occupancy(i) | 50.4 | % | 53.7 | % | 61.7 | % | 85.8 | % | 61.6 | % | ||||||||||
Inpatient catheterization procedures(j) | 7,986 | 7,348 | 9,048 | 10,481 | 10,372 | |||||||||||||||
Inpatient surgical procedures(k) | 4,555 | 4,200 | 3,975 | 5,154 | 5,321 | |||||||||||||||
Hospital net revenue | $ | 362,552 | $ | 324,286 | $ | 316,389 | $ | 375,037 | $ | 351,669 |
F-50
Table of Contents
(a) | Selected operating data includes consolidated hospitals in operation as of the end of the period reported in continuing operations but does not include hospitals which were accounted for using the equity method or as discontinued operations in our consolidated financial statements. During the fourth quarter of fiscal 2007, Harlingen Medical Center ceased to be a consolidated subsidiary due to the sale of a portion of the hospital. | |
(b) | Licensed beds represent the number of beds for which the appropriate state agency licenses a facility regardless of whether the beds are actually available for patient use. | |
(c) | Staffed and available beds represent the number of beds that are readily available for patient use at the end of the period. | |
(d) | Admissions represent the number of patients admitted for inpatient treatment. | |
(e) | Adjusted admissions is a general measure of combined inpatient and outpatient volume. We computed adjusted admissions by dividing gross patient revenue by gross inpatient revenue and then multiplying the quotient by admissions. | |
(f) | Patient days represent the total number of days of care provided to inpatients. | |
(g) | Adjusted patient days is a general measure of combined inpatient and outpatient volume. We computed adjusted patient days by dividing gross patient revenue by gross inpatient revenue and then multiplying the quotient by patient days. | |
(h) | Average length of stay (days) represents the average number of days inpatients stay in our hospitals. | |
(i) | We computed occupancy by dividing patient days by the number of days in the period and then dividing the quotient by the number of staffed and available beds. | |
(j) | Inpatients with a catheterization procedure represent the number of inpatients with a procedure performed in one of the hospitals’ catheterization labs during the period. | |
(k) | Inpatient surgical procedures represent the number of surgical procedures performed on inpatients during the period. |
F-51
Table of Contents
F-52
Unaudited Pro Forma Financial Statements: | Page | |||
Unaudited Pro Forma Consolidated Balance Sheets as of March 31, 2011: | ||||
F-54 | ||||
F-55 | ||||
F-56 | ||||
Unaudited Pro Forma Consolidated Statements of Operations for the Year Ended September 30, 2010: | ||||
F-57 | ||||
F-58 | ||||
F-59 | ||||
Unaudited Pro Forma Consolidated Statements of Operations for the Year Ended September 30, 2009: | ||||
F-60 | ||||
F-61 | ||||
F-62 | ||||
Unaudited Pro Forma Consolidated Statements of Operations for the Year Ended September 30, 2008: | ||||
F-63 | ||||
F-64 | ||||
F-65 | ||||
Unaudited Pro Forma Consolidated Statements of Operations for the Three Months Ended March 31, 2011: | ||||
F-66 | ||||
F-67 | ||||
F-68 | ||||
Unaudited Pro Forma Consolidated Statements of Operations for the Three Months Ended March 31, 2010: | ||||
F-69 | ||||
F-70 | ||||
F-71 | ||||
Unaudited Pro Forma Consolidated Statements of Operations for the Six Months Ended March 31, 2011: | ||||
F-72 | ||||
F-73 | ||||
F-74 | ||||
Unaudited Pro Forma Consolidated Statements of Operations for the Six Months Ended March 31, 2010: | ||||
F-75 | ||||
F-76 | ||||
F-77 |
F-53
Table of Contents
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEETS
REFLECTING THE SALE OF HEART HOSPITAL OF NEW MEXICO
March 31, 2011 | ||||||||||||||||||||||||||||
Sale of | HHNM Sale | |||||||||||||||||||||||||||
Sale of | Coastal | Pro Forma | ||||||||||||||||||||||||||
Company | MedCath | Carolina | Repayment | Company | Adjustments | Company | ||||||||||||||||||||||
Historical(1) | Partners(2) | Heart(3) | of Debt(4) | Recast | (5) | Pro Forma | ||||||||||||||||||||||
(In thousands, except share data) | ||||||||||||||||||||||||||||
Current assets: | ||||||||||||||||||||||||||||
Cash and cash equivalents | $ | 119,735 | $ | 15,801 | $ | 3,064 | $ | (30,166 | ) | $ | 108,434 | $ | 51,798 | $ | 160,232 | |||||||||||||
Accounts receivable, net | 49,748 | (1,403 | ) | 509 | — | 48,345 | (10,688 | ) | 38,166 | |||||||||||||||||||
Income tax receivable | — | — | — | — | — | — | — | |||||||||||||||||||||
Medical supplies | 10,373 | (9 | ) | — | — | 10,364 | (1,842 | ) | 8,522 | |||||||||||||||||||
Deferred income tax assets | 8,500 | — | — | — | 8,500 | — | 8,500 | |||||||||||||||||||||
Prepaid expenses and other current assets | 12,949 | (61 | ) | — | — | 12,888 | (1,939 | ) | 10,949 | |||||||||||||||||||
Current assets of discontinued operations | 46,619 | 1,403 | — | — | 48,022 | 10,688 | 58,710 | |||||||||||||||||||||
Total current assets | 247,924 | 15,731 | 3,573 | (30,166 | ) | 236,553 | 48,017 | 285,079 | ||||||||||||||||||||
Property and equipment, net | 153,469 | (6,207 | ) | — | — | 147,262 | (26,892 | ) | 120,370 | |||||||||||||||||||
Other assets | 18,484 | (545 | ) | (605 | ) | — | 17,334 | (1,471 | ) | 15,863 | ||||||||||||||||||
Non-current assets of discontinued operations | 1,152 | 2,546 | — | — | 3,698 | 253 | 3,951 | |||||||||||||||||||||
Total assets | $ | 421,029 | $ | 11,525 | $ | 2,968 | $ | (30,166 | ) | $ | 404,847 | $ | 19,907 | $ | 425,263 | |||||||||||||
Current liabilities: | ||||||||||||||||||||||||||||
Accounts payable | $ | 16,633 | $ | (83 | ) | $ | — | $ | — | $ | 16,550 | $ | (3,131 | ) | $ | 13,419 | ||||||||||||
Income tax payable | 3,205 | — | — | — | 3,205 | — | 3,205 | |||||||||||||||||||||
Accrued compensation and benefits | 14,775 | (314 | ) | — | — | 14,461 | (1,679 | ) | 12,782 | |||||||||||||||||||
Other accrued liabilities | 15,503 | (150 | ) | — | — | 15,353 | (2,496 | ) | 12,857 | |||||||||||||||||||
Current portion of long-term debt and obligations under capital leases | 32,793 | (112 | ) | — | (30,166 | ) | 2,515 | (2,070 | ) | 445 | ||||||||||||||||||
Current liabilities of discontinued operations | 14,174 | 333 | — | — | 14,507 | 5,278 | 19,785 | |||||||||||||||||||||
Total current liabilities | 97,083 | (326 | ) | — | (30,166 | ) | 66,591 | (4,098 | ) | 62,493 | ||||||||||||||||||
Long-term debt | — | |||||||||||||||||||||||||||
Obligations under capital leases | 5,191 | (443 | ) | — | — | 4,748 | (3,850 | ) | 898 | |||||||||||||||||||
Other long-term obligations | 2,804 | — | — | — | 2,804 | (1,218 | ) | 1,586 | ||||||||||||||||||||
Long-term liabilities of discontinued operations | — | — | — | — | — | — | — | |||||||||||||||||||||
Total liabilities | 105,078 | (769 | ) | — | (30,166 | ) | 74,143 | (9,166 | ) | 64,977 | ||||||||||||||||||
Commitments and contingencies | ||||||||||||||||||||||||||||
Redeemable noncontrolling interest | 7,356 | — | — | — | 7,356 | — | 7,356 | |||||||||||||||||||||
Stockholders’ equity: | ||||||||||||||||||||||||||||
Preferred stock, $0.01 par value, 10,000,000 shares authorized; none issued | — | — | — | — | — | — | — | |||||||||||||||||||||
Common stock, $0.01 par value, 50,000,000 shares authorized; | ||||||||||||||||||||||||||||
22,281,828 issued and 20,327,467 outstanding at March 31, 2011 | 216 | — | — | — | 216 | — | 216 | |||||||||||||||||||||
Paid-in capital | 458,573 | — | — | — | 458,573 | — | 458,573 | |||||||||||||||||||||
Accumulated deficit | (116,247 | ) | 12,294 | 2,968 | (101,494 | ) | 32,818 | (68,167 | ) | |||||||||||||||||||
Accumulated other comprehensive loss | — | — | — | — | — | — | — | |||||||||||||||||||||
Treasury stock, at cost; | ||||||||||||||||||||||||||||
1,954,361 shares at March 31, 2011 | (44,797 | ) | — | — | — | (44,797 | ) | — | (44,797 | ) | ||||||||||||||||||
Total MedCath Corporation stockholders’ equity | 297,745 | 12,294 | 2,968 | — | 312,498 | 32,818 | 345,825 | |||||||||||||||||||||
Noncontrolling interest | 10,850 | — | — | — | 10,850 | (3,745 | ) | 7,105 | ||||||||||||||||||||
Total equity | 308,595 | 12,294 | 2,968 | — | 323,348 | 29,073 | 352,930 | |||||||||||||||||||||
Total liabilities and equity | $ | 421,029 | $ | 11,525 | $ | 2,968 | $ | (30,166 | ) | $ | 404,847 | $ | 19,907 | $ | 425,263 | |||||||||||||
(1) | As reported in the Company’s Current Report onForm 8-K on May 27, 2011. | |
(2) | Reflects the sale of MedCath Partners, which was effective on May 1, 2011, including the reclassification of retained assets and liabilities as discontinued operations and the net proceeds from the sale. | |
(3) | Reflects the net proceeds from the sale of Coastal Carolina Heart, which was effective on May 6, 2011. | |
(4) | Reflects the impact of the repayment of debt under the credit facility, which was repaid and terminated on May 9, 2011. | |
(5) | Impact of the assumed sale of Heart Hospital of New Mexico. The retained assets and liabilities are reflected as discontinued operations. |
F-54
Table of Contents
March 31, 2011 | ||||||||||||||||||||||||||||
Sale of | ||||||||||||||||||||||||||||
Sale of | Coastal | AHH Sale | ||||||||||||||||||||||||||
Company | MedCath | Carolina | Repayment | Company | Pro Forma | Company | ||||||||||||||||||||||
Historical(1) | Partners(2) | Heart(3) | of Debt(4) | Recast | Adjustments(5) | Pro Forma | ||||||||||||||||||||||
(In thousands, except share data) | ||||||||||||||||||||||||||||
Current assets: | ||||||||||||||||||||||||||||
Cash and cash equivalents | $ | 119,735 | $ | 15,801 | $ | 3,064 | $ | (30,166 | ) | $ | 108,434 | $ | 59,995 | $ | 168,429 | |||||||||||||
Accounts receivable, net | 49,748 | (1,403 | ) | 509 | — | 48,345 | (14,079 | ) | 34,775 | |||||||||||||||||||
Income tax receivable | — | — | — | — | — | — | — | |||||||||||||||||||||
Medical supplies | 10,373 | (9 | ) | — | — | 10,364 | (3,454 | ) | 6,910 | |||||||||||||||||||
Deferred income tax assets | 8,500 | — | — | — | 8,500 | — | 8,500 | |||||||||||||||||||||
Prepaid expenses and other current assets | 12,949 | (61 | ) | — | — | 12,888 | (2,524 | ) | 10,364 | |||||||||||||||||||
Current assets of discontinued operations | 46,619 | 1,403 | — | — | 48,022 | — | 48,022 | |||||||||||||||||||||
Total current assets | 247,924 | 15,731 | 3,573 | (30,166 | ) | 236,553 | 39,938 | 277,000 | ||||||||||||||||||||
Property and equipment, net | 153,469 | (6,207 | ) | — | — | 147,262 | (39,022 | ) | 108,240 | |||||||||||||||||||
Other assets | 18,484 | (545 | ) | (605 | ) | — | 17,334 | (59 | ) | 17,275 | ||||||||||||||||||
Non-current assets of discontinued operations | 1,152 | 2,546 | — | — | 3,698 | — | 3,698 | |||||||||||||||||||||
Total assets | $ | 421,029 | $ | 11,525 | $ | 2,968 | $ | (30,166 | ) | $ | 404,847 | $ | 857 | $ | 406,213 | |||||||||||||
Current liabilities: | ||||||||||||||||||||||||||||
Accounts payable | $ | 16,633 | $ | (83 | ) | $ | — | $ | — | $ | 16,550 | $ | (5,267 | ) | $ | 11,283 | ||||||||||||
Income tax payable | 3,205 | — | — | — | 3,205 | — | 3,205 | |||||||||||||||||||||
Accrued compensation and benefits | 14,775 | (314 | ) | — | — | 14,461 | (3,450 | ) | 11,011 | |||||||||||||||||||
Other accrued liabilities | 15,503 | (150 | ) | — | — | 15,353 | (3,449 | ) | 11,904 | |||||||||||||||||||
Current portion of long-term debt and obligations under capital leases | 32,793 | (112 | ) | — | (30,166 | ) | 2,515 | (55 | ) | 2,460 | ||||||||||||||||||
Current liabilities of discontinued operations | 14,174 | 333 | — | — | 14,507 | — | 14,507 | |||||||||||||||||||||
Total current liabilities | 97,083 | (326 | ) | — | (30,166 | ) | 66,591 | (12,221 | ) | 54,370 | ||||||||||||||||||
Long-term debt | — | — | — | — | — | — | — | |||||||||||||||||||||
Obligations under capital leases | 5,191 | (443 | ) | — | — | 4,748 | (147 | ) | 4,601 | |||||||||||||||||||
Other long-term obligations | 2,804 | — | — | — | 2,804 | (53 | ) | 2,751 | ||||||||||||||||||||
Long-term liabilities of discontinued operations | — | — | — | — | — | — | — | |||||||||||||||||||||
Total liabilities | 105,078 | (769 | ) | — | (30,166 | ) | 74,143 | (12,421 | ) | 61,722 | ||||||||||||||||||
Commitments and contingencies | ||||||||||||||||||||||||||||
Redeemable noncontrolling interest | 7,356 | — | — | — | 7,356 | (7,356 | ) | — | ||||||||||||||||||||
Stockholders’ equity: | ||||||||||||||||||||||||||||
Preferred stock, $0.01 par value, 10,000,000 shares authorized; none issued | — | — | — | — | — | — | — | |||||||||||||||||||||
Common stock, $0.01 par value, 50,000,000 shares authorized; 22,281,828 issued and 20,327,467 outstanding at March 31, 2011 | 216 | — | — | — | 216 | — | 216 | |||||||||||||||||||||
Paid-in capital | 458,573 | — | — | — | 458,573 | — | 458,573 | |||||||||||||||||||||
Accumulated deficit | (116,247 | ) | 12,294 | 2,968 | (101,494 | ) | 20,634 | (80,351 | ) | |||||||||||||||||||
Accumulated other comprehensive loss | — | — | — | — | — | — | — | |||||||||||||||||||||
Treasury stock, at cost; 1,954,361 shares at March 31, 2011 | (44,797 | ) | — | — | — | (44,797 | ) | — | (44,797 | ) | ||||||||||||||||||
Total MedCath Corporation stockholders’ equity | 297,745 | 12,294 | 2,968 | — | 312,498 | 20,634 | 333,641 | |||||||||||||||||||||
Noncontrolling interest | 10,850 | — | — | — | 10,850 | — | 10,850 | |||||||||||||||||||||
Total equity | 308,595 | 12,294 | 2,968 | — | 323,348 | 20,634 | 344,491 | |||||||||||||||||||||
Total liabilities and equity | $ | 421,029 | $ | 11,525 | $ | 2,968 | $ | (30,166 | ) | $ | 404,847 | $ | 857 | $ | 406,213 | |||||||||||||
(1) | As reported in the Company’s Current Report onForm 8-K on May 27, 2011. | |
(2) | Reflects the sale of MedCath Partners, which was effective on May 1, 2011, including the reclassification of retained assets and liabilities as discontinued operations and the net proceeds from the sale. | |
(3) | Reflects the net proceeds from the sale of Coastal Carolina Heart, which was effective on May 6, 2011. | |
(4) | Reflects the impact of the repayment of debt under the credit facility, which was repaid and terminated on May 9, 2011. | |
(5) | Impact of the assumed sale of Arkansas Heart Hospital. The AHH transaction is an equity sale with no retained assets or liabilities. |
F-55
Table of Contents
March 31, 2011 | ||||||||||||||||||||||||||||
Sale of | HHNM and | |||||||||||||||||||||||||||
Sale of | Coastal | AHH Sale | ||||||||||||||||||||||||||
Company | MedCath | Carolina | Repayment | Company | Pro Forma | Company | ||||||||||||||||||||||
Historical(1) | Partners(2) | Heart(3) | of Debt(4) | Recast | Adjustments(5) | Pro Forma | ||||||||||||||||||||||
(In thousands, except share data) | ||||||||||||||||||||||||||||
Current assets: | ||||||||||||||||||||||||||||
Cash and cash equivalents | $ | 119,735 | $ | 15,801 | $ | 3,064 | $ | (30,166 | ) | $ | 108,434 | $ | 111,793 | $ | 220,227 | |||||||||||||
Accounts receivable, net | 49,748 | (1,403 | ) | 509 | — | 48,345 | (24,767 | ) | 24,087 | |||||||||||||||||||
Income tax receivable | — | — | — | — | — | — | — | |||||||||||||||||||||
Medical supplies | 10,373 | (9 | ) | — | — | 10,364 | (5,296 | ) | 5,068 | |||||||||||||||||||
Deferred income tax assets | 8,500 | — | — | — | 8,500 | — | 8,500 | |||||||||||||||||||||
Prepaid expenses and other current assets | 12,949 | (61 | ) | — | — | 12,888 | (4,463 | ) | 8,425 | |||||||||||||||||||
Current assets of discontinued operations | 46,619 | 1,403 | — | — | 48,022 | 10,688 | 58,710 | |||||||||||||||||||||
Total current assets | 247,924 | 15,731 | 3,573 | (30,166 | ) | 236,553 | 87,955 | 325,017 | ||||||||||||||||||||
Property and equipment, net | 153,469 | (6,207 | ) | — | — | 147,262 | (65,914 | ) | 81,348 | |||||||||||||||||||
Other assets | 18,484 | (545 | ) | (605 | ) | — | 17,334 | (1,530 | ) | 15,804 | ||||||||||||||||||
Non-current assets of discontinued operations | 1,152 | 2,546 | — | — | 3,698 | 253 | 3,951 | |||||||||||||||||||||
Total assets | $ | 421,029 | $ | 11,525 | $ | 2,968 | $ | (30,166 | ) | $ | 404,847 | $ | 20,764 | $ | 426,120 | |||||||||||||
Current liabilities: | ||||||||||||||||||||||||||||
Accounts payable | $ | 16,633 | $ | (83 | ) | $ | — | $ | — | $ | 16,550 | $ | (8,398 | ) | $ | 8,152 | ||||||||||||
Income tax payable | 3,205 | — | — | — | 3,205 | — | 3,205 | |||||||||||||||||||||
Accrued compensation and benefits | 14,775 | (314 | ) | — | — | 14,461 | (5,129 | ) | 9,332 | |||||||||||||||||||
Other accrued liabilities | 15,503 | (150 | ) | — | — | 15,353 | (5,945 | ) | 9,408 | |||||||||||||||||||
Current portion of long-term debt and obligations under capital leases | 32,793 | (112 | ) | — | (30,166 | ) | 2,515 | (2,125 | ) | 390 | ||||||||||||||||||
Current liabilities of discontinued operations | 14,174 | 333 | — | — | 14,507 | 5,278 | 19,785 | |||||||||||||||||||||
Total current liabilities | 97,083 | (326 | ) | — | (30,166 | ) | 66,591 | (16,319 | ) | 50,272 | ||||||||||||||||||
Long-term debt | — | — | — | — | — | — | — | |||||||||||||||||||||
Obligations under capital leases | 5,191 | (443 | ) | — | — | 4,748 | (3,997 | ) | 751 | |||||||||||||||||||
Other long-term obligations | 2,804 | — | — | — | 2,804 | (1,271 | ) | 1,533 | ||||||||||||||||||||
Long-term liabilities of discontinued operations | — | — | — | — | — | — | — | |||||||||||||||||||||
Total liabilities | 105,078 | (769 | ) | — | (30,166 | ) | 74,143 | (21,587 | ) | 52,556 | ||||||||||||||||||
Commitments and contingencies | ||||||||||||||||||||||||||||
Redeemable noncontrolling interest | 7,356 | — | — | — | 7,356 | (7,356 | ) | — | ||||||||||||||||||||
Stockholders’ equity: | ||||||||||||||||||||||||||||
Preferred stock, $0.01 par value, 10,000,000 shares authorized; none issued | — | — | — | — | — | — | — | |||||||||||||||||||||
Common stock, $0.01 par value, 50,000,000 shares authorized; 22,281,828 issued and 20,327,467 outstanding at March 31, 2011 | 216 | — | — | — | 216 | — | 216 | |||||||||||||||||||||
Paid-in capital | 458,573 | — | — | — | 458,573 | — | 458,573 | |||||||||||||||||||||
Accumulated deficit | (116,247 | ) | 12,294 | 2,968 | (101,494 | ) | 53,452 | (47,533 | ) | |||||||||||||||||||
Accumulated other comprehensive loss | — | — | — | — | — | — | — | |||||||||||||||||||||
Treasury stock, at cost; 1,954,361 shares at March 31, 2011 | (44,797 | ) | — | — | — | (44,797 | ) | — | (44,797 | ) | ||||||||||||||||||
Total MedCath Corporation stockholders’ equity | 297,745 | 12,294 | 2,968 | — | 312,498 | 53,452 | 366,459 | |||||||||||||||||||||
Noncontrolling interest | 10,850 | — | — | — | 10,850 | (3,745 | ) | 7,105 | ||||||||||||||||||||
Total equity | 308,595 | 12,294 | 2,968 | — | 323,348 | 49,707 | 373,564 | |||||||||||||||||||||
Total liabilities and equity | $ | 421,029 | $ | 11,525 | $ | 2,968 | $ | (30,166 | ) | $ | 404,847 | $ | 20,764 | $ | 426,120 | |||||||||||||
(1) | As reported in the Company’s Current Report onForm 8-K on May 27, 2011. | |
(2) | Reflects the sale of MedCath Partners, which was effective on May 1, 2011, including the reclassification of retained assets and liabilities as discontinued operations and the net proceeds from the sale. | |
(3) | Reflects the net proceeds from the sale of Coastal Carolina Heart, which was effective on May 6, 2011. | |
(4) | Reflects the impact of the repayment of debt under the credit facility, which was repaid and terminated on May 9, 2011. | |
(5) | Impact of the assumed sale of Heart Hospital of New Mexico with the retained assets and liabilities reflected as discontinued operations as well as the impact of the assumed sale of Arkansas Heart Hospital. The AHH transaction is an equity sale with no retained assets or liabilities. |
F-56
Table of Contents
Twelve Months Ended September 30, 2010 | ||||||||||||||||||||
Reclassification | ||||||||||||||||||||
of MedCath | ||||||||||||||||||||
Partners as a | ||||||||||||||||||||
Company | Discontinued | Company | Sale of | Company | ||||||||||||||||
Historical(1) | Operation(2) | Recast(3) | HHNM(4) | Pro Forma | ||||||||||||||||
(In thousands, except per share data) | ||||||||||||||||||||
Net revenue | $ | 376,926 | $ | (11,440 | ) | $ | 365,486 | $ | (81,232 | ) | $ | 284,254 | ||||||||
Operating expenses: | ||||||||||||||||||||
Personnel expense | 128,663 | (3,606 | ) | 125,057 | (22,032 | ) | 103,025 | |||||||||||||
Medical supplies expense | 91,931 | (461 | ) | 91,470 | (21,213 | ) | 70,257 | |||||||||||||
Bad debt expense | 40,620 | (22 | ) | 40,598 | (5,438 | ) | 35,160 | |||||||||||||
Other operating expenses | 91,635 | (4,950 | ) | 86,685 | (17,166 | ) | 69,519 | |||||||||||||
Pre-opening expenses | 866 | — | 866 | — | 866 | |||||||||||||||
Depreciation | 23,675 | (3,186 | ) | 20,489 | (2,934 | ) | 17,555 | |||||||||||||
Amortization | 32 | — | 32 | (32 | ) | — | ||||||||||||||
Impairment of long-lived assets and goodwill | 66,822 | (800 | ) | 66,022 | — | 66,022 | ||||||||||||||
Loss (gain) on disposal of property, equipment and other assets | (36 | ) | 49 | 13 | (43 | ) | (30 | ) | ||||||||||||
Total operating expenses | 444,208 | (12,976 | ) | 431,232 | (68,858 | ) | 362,374 | |||||||||||||
Income (loss) from operations | (67,282 | ) | 1,536 | (65,746 | ) | (12,374 | ) | (78,120 | ) | |||||||||||
Other income (expenses): | ||||||||||||||||||||
Interest expense | (4,278 | ) | 18 | (4,260 | ) | 311 | (3,949 | ) | ||||||||||||
Interest and other income, net | 82 | 112 | 194 | (66 | ) | 128 | ||||||||||||||
Loss on note receivable | (1,507 | ) | — | (1,507 | ) | — | (1,507 | ) | ||||||||||||
Equity in net earnings of unconsolidated affiliates | 7,267 | (1,908 | ) | 5,359 | — | 5,359 | ||||||||||||||
Total other income (expense), net | 1,564 | (1,778 | ) | (214 | ) | 245 | 31 | |||||||||||||
Loss from continuing operations before income taxes | (65,718 | ) | (242 | ) | (65,960 | ) | (12,129 | ) | (78,089 | ) | ||||||||||
Income tax (expense) benefit | (26,179 | ) | (93 | ) | (26,271 | ) | (3,687 | ) | (29,958 | ) | ||||||||||
Loss from continuing operations | (39,540 | ) | (149 | ) | (39,689 | ) | (8,442 | ) | (48,131 | ) | ||||||||||
Less: income (loss) attributable to noncontrolling interest | (12,389 | ) | — | (12,389 | ) | 2,530 | (9,859 | ) | ||||||||||||
Loss attributable to MedCath Corporation | $ | (51,929 | ) | $ | (149 | ) | $ | (52,078 | ) | $ | (5,912 | ) | $ | (57,990 | ) | |||||
Loss from continuing operations attributable to MedCath Corporation common stockholders, net of taxes | $ | (50,485 | ) | $ | (149 | ) | $ | (50,634 | ) | $ | (5,912 | ) | $ | (56,546 | ) | |||||
Loss per share, basic | $ | (2.55 | ) | $ | (0.01 | ) | $ | (2.55 | ) | $ | (0.30 | ) | $ | (2.85 | ) | |||||
Loss per share, diluted | $ | (2.55 | ) | $ | (0.01 | ) | $ | (2.55 | ) | $ | (0.30 | ) | $ | (2.85 | ) | |||||
Weighted average number of shares, basic | 19,842 | 19,842 | 19,842 | 19,842 | 19,842 | |||||||||||||||
Dilutive effect of stock options and restricted stock | — | — | — | — | — | |||||||||||||||
Weighted average number of shares, diluted | 19,842 | 19,842 | 19,842 | 19,842 | 19,842 | |||||||||||||||
(1) | As reported in the Company’sForm 8-K on May 27, 2011. | |
(2) | Includes the historical results of MedCath Partners, which was effective May 1, 2011. The reclassification does not include the proforma effects of the net gain related to the sale as it would be reported in discontinued operations. | |
(3) | Represents the Company’s historical financial statements recast to exclude the historical operations of MedCath Partners. | |
(4) | Impact of the assumed sale of Heart Hospital of New Mexico as though the sale occurred at the beginning of the reporting period. |
F-57
Table of Contents
Twelve Months Ended September 30, 2010 | ||||||||||||||||||||
Reclassification | ||||||||||||||||||||
of MedCath | ||||||||||||||||||||
Partners as a | ||||||||||||||||||||
Company | Discontinued | Company | Sale of | Company | ||||||||||||||||
Historical(1) | Operation(2) | Recast(3) | AHH(4) | Pro Forma | ||||||||||||||||
(In thousands, except per share data) | ||||||||||||||||||||
Net revenue | $ | 376,926 | $ | (11,440 | ) | $ | 365,486 | $ | (117,843 | ) | $ | 247,643 | ||||||||
Operating expenses: | ||||||||||||||||||||
Personnel expense | 128,663 | (3,606 | ) | 125,057 | (36,291 | ) | 88,766 | |||||||||||||
Medical supplies expense | 91,931 | (461 | ) | 91,470 | (36,847 | ) | 54,623 | |||||||||||||
Bad debt expense | 40,620 | (22 | ) | 40,598 | (11,355 | ) | 29,243 | |||||||||||||
Other operating expenses | 91,635 | (4,950 | ) | 86,685 | (16,060 | ) | 70,625 | |||||||||||||
Pre-opening expenses | 866 | — | 866 | — | 866 | |||||||||||||||
Depreciation | 23,675 | (3,186 | ) | 20,489 | (5,334 | ) | 15,155 | |||||||||||||
Amortization | 32 | — | 32 | — | 32 | |||||||||||||||
Impairment of long-lived assets and goodwill | 66,822 | (800 | ) | 66,022 | — | 66,022 | ||||||||||||||
Loss (gain) on disposal of property, equipment and other assets | (36 | ) | 49 | 13 | (24 | ) | (11 | ) | ||||||||||||
Total operating expenses | 444,208 | (12,976 | ) | 431,232 | (105,911 | ) | 325,321 | |||||||||||||
Income (loss) from operations | (67,282 | ) | 1,536 | (65,746 | ) | (11,932 | ) | (77,678 | ) | |||||||||||
Other income (expenses): | ||||||||||||||||||||
Interest expense | (4,278 | ) | 18 | (4,260 | ) | 14 | (4,246 | ) | ||||||||||||
Interest and other income, net | 82 | 112 | 194 | (41 | ) | 153 | ||||||||||||||
Loss on note receivable | (1,507 | ) | — | (1,507 | ) | — | (1,507 | ) | ||||||||||||
Equity in net earnings of unconsolidated affiliates | 7,267 | (1,908 | ) | 5,359 | — | 5,359 | ||||||||||||||
Total other income (expense), net | 1,564 | (1,778 | ) | (214 | ) | (27 | ) | (241 | ) | |||||||||||
Loss from continuing operations before income taxes | (65,718 | ) | (242 | ) | (65,960 | ) | (11,959 | ) | (77,919 | ) | ||||||||||
Income tax (expense) benefit | (26,178 | ) | (93 | ) | (26,271 | ) | (3,347 | ) | (29,618 | ) | ||||||||||
Loss from continuing operations | (39,540 | ) | (149 | ) | (39,689 | ) | (8,612 | ) | (48,301 | ) | ||||||||||
Less: income (loss) attributable to noncontrolling interest | (12,389 | ) | — | (12,389 | ) | 3,245 | (9,144 | ) | ||||||||||||
Loss attributable to MedCath Corporation | $ | (51,929 | ) | $ | (149 | ) | $ | (52,078 | ) | $ | (5,367 | ) | $ | (57,445 | ) | |||||
(Loss) Income from continuing operations attributable to MedCath Corporation common stockholders, net of taxes | $ | (50,485 | ) | $ | (149 | ) | $ | (50,634 | ) | $ | (5,367 | ) | $ | (56,001 | ) | |||||
Loss per share, basic | $ | (2.55 | ) | $ | (0.01 | ) | $ | (2.55 | ) | $ | (0.27 | ) | $ | (2.82 | ) | |||||
Loss per share, diluted | $ | (2.55 | ) | $ | (0.01 | ) | $ | (2.55 | ) | $ | (0.27 | ) | $ | (2.82 | ) | |||||
Weighted average number of shares, basic | 19,842 | 19,842 | 19,842 | 19,842 | 19,842 | |||||||||||||||
Dilutive effect of stock options and restricted stock | — | — | — | — | — | |||||||||||||||
Weighted average number of shares, diluted | 19,842 | 19,842 | 19,842 | 19,842 | 19,842 | |||||||||||||||
(1) | As reported in the Company’sForm 8-K on May 27, 2011. | |
(2) | Includes the historical results of MedCath Partners, which was effective May 1, 2011. The reclassification does not include the proforma effects of the net gain related to the sale as it would be reported in discontinued operations. | |
(3) | Represents the Company’s historical financial statements recast to exclude the historical operations of MedCath Partners. | |
(4) | Impact of the assumed sale of Arkansas Heart Hospital as though the sale occurred at the beginning of the reporting period. |
F-58
Table of Contents
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
REFLECTING THE SALE OF HEART HOSPTIAL OF NEW MEXICO & ARKANSAS
HEART HOSPITAL
Twelve Months Ended September 30, 2010 | ||||||||||||||||||||
Reclassification of | ||||||||||||||||||||
MedCath Partners as | Sale of | |||||||||||||||||||
Company | a Discontinued | Company | HHNM and | Company | ||||||||||||||||
Historical(1) | Operation(2) | Recast(3) | AHH(4) | Pro Forma | ||||||||||||||||
(In thousands, except per share data) | ||||||||||||||||||||
Net revenue | $ | 376,926 | $ | (11,440 | ) | $ | 365,486 | $ | (199,075 | ) | $ | 166,411 | ||||||||
Operating expenses: | ||||||||||||||||||||
Personnel expense | 128,663 | (3,606 | ) | 125,057 | (58,323 | ) | 66,734 | |||||||||||||
Medical supplies expense | 91,931 | (461 | ) | 91,470 | (58,060 | ) | 33,410 | |||||||||||||
Bad debt expense | 40,620 | (22 | ) | 40,598 | (16,793 | ) | 23,805 | |||||||||||||
Other operating expenses | 91,635 | (4,950 | ) | 86,685 | (33,226 | ) | 53,459 | |||||||||||||
Pre-opening expenses | 866 | — | 866 | — | 866 | |||||||||||||||
Depreciation | 23,675 | (3,186 | ) | 20,489 | (8,268 | ) | 12,221 | |||||||||||||
Amortization | 32 | — | 32 | (32 | ) | — | ||||||||||||||
Impairment of long-lived assets and goodwill | 66,822 | (800 | ) | 66,022 | — | 66,022 | ||||||||||||||
Loss (gain) on disposal of property, equipment and other assets | (36 | ) | 49 | 13 | (67 | ) | (54 | ) | ||||||||||||
Total operating expenses | 444,208 | (12,976 | ) | 431,232 | (174,769 | ) | 256,463 | |||||||||||||
Income (loss) from operations | (67,282 | ) | 1,536 | (65,746 | ) | (24,306 | ) | (90,052 | ) | |||||||||||
Other income (expenses): | ||||||||||||||||||||
Interest expense | (4,278 | ) | 18 | (4,260 | ) | 325 | (3,935 | ) | ||||||||||||
Interest and other income, net | 82 | 112 | 194 | (107 | ) | 87 | ||||||||||||||
Loss on note receivable | (1,507 | ) | — | (1,507 | ) | — | (1,507 | ) | ||||||||||||
Equity in net earnings of unconsolidated affiliates | 7,267 | (1,908 | ) | 5,359 | — | 5,359 | ||||||||||||||
Total other income (expense), net | 1,564 | (1,778 | ) | (214 | ) | 218 | 4 | |||||||||||||
Loss from continuing operations before income taxes | (65,718 | ) | (242 | ) | (65,960 | ) | (24,088 | ) | (90,048 | ) | ||||||||||
Income tax (expense) benefit | (26,178 | ) | (93 | ) | (26,271 | ) | (7,034 | ) | (33,305 | ) | ||||||||||
Loss from continuing operations | (39,540 | ) | (149 | ) | (39,689 | ) | (17,054 | ) | (56,743 | ) | ||||||||||
Less: income (loss) attributable to noncontrolling interest | (12,389 | ) | — | (12,389 | ) | 5,775 | (6,614 | ) | ||||||||||||
Loss attributable to MedCath Corporation | $ | (51,929 | ) | $ | (149 | ) | $ | (52,078 | ) | $ | (11,279 | ) | $ | (63,357 | ) | |||||
(Loss) Income from continuing operations attributable to MedCath Corporation common stockholders, net of taxes | $ | (50,485 | ) | $ | (149 | ) | $ | (50,634 | ) | $ | (11,279 | ) | $ | (61,913 | ) | |||||
Loss per share, basic | $ | (2.55 | ) | $ | (0.01 | ) | $ | (2.55 | ) | $ | (0.57 | ) | $ | (3.12 | ) | |||||
Loss per share, diluted | $ | (2.55 | ) | $ | (0.01 | ) | $ | (2.55 | ) | $ | (0.57 | ) | $ | (3.12 | ) | |||||
Weighted average number of shares, basic | 19,842 | 19,842 | 19,842 | 19,842 | 19,842 | |||||||||||||||
Dilutive effect of stock options and restricted stock | — | — | — | — | — | |||||||||||||||
Weighted average number of shares, diluted | 19,842 | 19,842 | 19,842 | 19,842 | 19,842 | |||||||||||||||
(1) | As reported in the Company’sForm 8-K on May 27, 2011. | |
(2) | Includes the historical results of MedCath Partners, which was effective May 1, 2011. The reclassification does not include the proforma effects of the net gain related to the sale as it would be reported in discontinued operations. | |
(3) | Represents the Company’s historical financial statements recast to exclude the historical operations of MedCath Partners. | |
(4) | Impact of the assumed sale of Heart Hospital of New Mexico and Arkansas Heart Hospital as though the sales occurred at the beginning of the reporting period. |
F-59
Table of Contents
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
REFLECTING THE SALE OF HEART HOSPITAL OF NEW MEXICO
Twelve Months Ended September 30, 2009 | ||||||||||||||||||||
Reclassification of | ||||||||||||||||||||
MedCath Partners as | ||||||||||||||||||||
Company | a Discontinued | Company | Sale of | Company | ||||||||||||||||
Historical(1) | Operation(2) | Recast(3) | HHNM(4) | Pro Forma | ||||||||||||||||
(In thousands, except per share data) | ||||||||||||||||||||
Net revenue | $ | 343,849 | $ | (16,645 | ) | $ | 327,204 | $ | (75,425 | ) | $ | 251,779 | ||||||||
Operating expenses: | ||||||||||||||||||||
Personnel expense | 114,893 | (6,187 | ) | 108,706 | (21,295 | ) | 87,411 | |||||||||||||
Medical supplies expense | 84,366 | (794 | ) | 83,572 | (19,576 | ) | 63,996 | |||||||||||||
Bad debt expense | 33,177 | (25 | ) | 33,152 | (5,303 | ) | 27,849 | |||||||||||||
Other operating expenses | 77,000 | (6,435 | ) | 70,565 | (17,366 | ) | 53,199 | |||||||||||||
Pre-opening expenses | 3,563 | — | 3,563 | — | 3,563 | |||||||||||||||
Depreciation | 19,299 | (3,849 | ) | 15,450 | (2,824 | ) | 12,626 | |||||||||||||
Amortization | 891 | (859 | ) | 32 | (32 | ) | — | |||||||||||||
Impairment of long-lived assets and goodwill | 42,000 | — | 42,000 | (14,000 | ) | 28,000 | ||||||||||||||
Loss (gain) on disposal of property, equipment and other assets | 93 | 32 | 125 | (91 | ) | 34 | ||||||||||||||
Total operating expenses | 375,282 | (18,117 | ) | 357,165 | (80,487 | ) | 276,678 | |||||||||||||
Income (loss) from operations | (31,433 | ) | 1,472 | (29,961 | ) | 5,062 | (24,899 | ) | ||||||||||||
Other income (expenses): | ||||||||||||||||||||
Interest expense | (3,184 | ) | 13 | (3,171 | ) | 117 | (3,054 | ) | ||||||||||||
Interest and other income, net | 214 | (5 | ) | 209 | (21 | ) | 188 | |||||||||||||
Loss on early extinguishment of debt | (6,702 | ) | — | (6,702 | ) | — | (6,702 | ) | ||||||||||||
Equity in net earnings of unconsolidated affiliates | 9,057 | (3,785 | ) | 5,272 | — | 5,272 | ||||||||||||||
Total other income (expense), net | (615 | ) | (3,777 | ) | (4,392 | ) | 96 | (4,296 | ) | |||||||||||
Loss from before income taxes | (32,048 | ) | (2,305 | ) | (34,353 | ) | 5,158 | (29,195 | ) | |||||||||||
Income tax benefit | (169 | ) | (877 | ) | (1,046 | ) | (2,746 | ) | (3,792 | ) | ||||||||||
Loss from continuing operations | (31,879 | ) | (1,428 | ) | (33,307 | ) | 7,904 | (25,403 | ) | |||||||||||
Less: Net income attributable to noncontrolling interest | (17,527 | ) | 21 | (17,506 | ) | 1,694 | (15,812 | ) | ||||||||||||
Loss income attributable to MedCath Corporation | $ | (49,406 | ) | $ | (1,407 | ) | $ | (50,813 | ) | $ | 9,598 | $ | (41,215 | ) | ||||||
Loss Income from continuing operations attributable to MedCath Corporation common stockholders, net of taxes | $ | (41,252 | ) | $ | (1,407 | ) | $ | (42,659 | ) | $ | 9,598 | $ | (33,061 | ) | ||||||
Loss per share, basic | $ | (2.09 | ) | $ | (0.07 | ) | $ | (2.17 | ) | $ | 0.49 | $ | (1.68 | ) | ||||||
Loss per share, diluted | $ | (2.09 | ) | $ | (0.07 | ) | $ | (2.17 | ) | $ | 0.49 | $ | (1.68 | ) | ||||||
Weighted average number of shares, basic | 19,684 | 19,684 | 19,684 | 19,684 | 19,684 | |||||||||||||||
Dilutive effect of stock options and restricted stock | — | — | — | — | — | |||||||||||||||
Weighted average number of shares, diluted | 19,684 | 19,684 | 19,684 | 19,684 | 19,684 | |||||||||||||||
(1) | As reported in the Company’sForm 8-K on May 27, 2011. | |
(2) | Includes the historical results of MedCath Partners, which was effective May 1, 2011. The reclassification does not include the proforma effects of the net gain related to the sale as it would be reported in discontinued operations. | |
(3) | Represents the Company’s historical financial statements recast to exclude the historical operations of MedCath Partners. | |
(4) | Impact of the assumed sale of Heart Hospital of New Mexico as though the sale occurred at the beginning of the reporting period. |
F-60
Table of Contents
Twelve Months Ended September 30, 2009 | ||||||||||||||||||||
Reclassification | ||||||||||||||||||||
of MedCath | ||||||||||||||||||||
Partners as a | ||||||||||||||||||||
Company | Discontinued | Company | Sale of | Company | ||||||||||||||||
Historical(1) | Operation(2) | Recast(3) | AHH(4) | Pro Forma | ||||||||||||||||
(In thousands, except per share data) | ||||||||||||||||||||
Net revenue | $ | 343,849 | $ | (16,645 | ) | $ | 327,204 | $ | (117,650 | ) | $ | 209,554 | ||||||||
Operating expenses: | ||||||||||||||||||||
Personnel expense | 114,893 | (6,187 | ) | 108,706 | (36,346 | ) | 72,360 | |||||||||||||
Medical supplies expense | 84,366 | (794 | ) | 83,572 | (34,860 | ) | 48,712 | |||||||||||||
Bad debt expense | 33,177 | (25 | ) | 33,152 | (13,058 | ) | 20,094 | |||||||||||||
Other operating expenses | 77,000 | (6,435 | ) | 70,565 | (15,470 | ) | 55,095 | |||||||||||||
Pre-opening expenses | 3,563 | — | 3,563 | — | 3,563 | |||||||||||||||
Depreciation | 19,299 | (3,849 | ) | 15,450 | (5,150 | ) | 10,300 | |||||||||||||
Amortization | 891 | (859 | ) | 32 | — | 32 | ||||||||||||||
Impairment of long-lived assets and goodwill | 42,000 | — | 42,000 | (11,000 | ) | 31,000 | ||||||||||||||
Loss (gain) on disposal of property, equipment and other assets | 93 | 32 | 125 | 4 | 129 | |||||||||||||||
Total operating expenses | 375,282 | (18,117 | ) | 357,165 | (115,880 | ) | 241,285 | |||||||||||||
Income (loss) from operations | (31,433 | ) | 1,472 | (29,961 | ) | (1,770 | ) | (31,731 | ) | |||||||||||
Other income (expenses): | ||||||||||||||||||||
Interest expense | (3,184 | ) | 13 | (3,171 | ) | 1 | (3,170 | ) | ||||||||||||
Interest and other income, net | 214 | (5 | ) | 209 | (11 | ) | 198 | |||||||||||||
Loss on early extinguishment of debt | (6,702 | ) | — | (6,702 | ) | — | (6,702 | ) | ||||||||||||
Equity in net earnings of unconsolidated affiliates | 9,057 | (3,785 | ) | 5,272 | — | 5,272 | ||||||||||||||
Total other income (expense), net | (615 | ) | (3,777 | ) | (4,392 | ) | (10 | ) | (4,402 | ) | ||||||||||
Loss from before income taxes | (32,048 | ) | (2,305 | ) | (34,353 | ) | (1,780 | ) | (36,133 | ) | ||||||||||
Income tax benefit | (169 | ) | (877 | ) | (1,046 | ) | (3,602 | ) | (4,648 | ) | ||||||||||
Loss from continuing operations | (31,879 | ) | (1,428 | ) | (33,307 | ) | 1,822 | (31,485 | ) | |||||||||||
Less: Net income attributable to noncontrolling interest | (17,527 | ) | 21 | (17,506 | ) | 3,401 | (14,105 | ) | ||||||||||||
Loss income attributable to MedCath Corporation | $ | (49,406 | ) | $ | (1,407 | ) | $ | (50,813 | ) | $ | 5,223 | $ | (45,590 | ) | ||||||
Loss Income from continuing operations attributable to MedCath Corporation common stockholders, net of taxes | $ | (41,252 | ) | $ | (1,407 | ) | $ | (42,659 | ) | $ | 5,223 | $ | (37,436 | ) | ||||||
Loss per share, basic | $ | (2.09 | ) | $ | (0.07 | ) | $ | (2.17 | ) | $ | 0.27 | $ | (1.90 | ) | ||||||
Loss per share, diluted | $ | (2.09 | ) | $ | (0.07 | ) | $ | (2.17 | ) | $ | 0.27 | $ | (1.90 | ) | ||||||
Weighted average number of shares, basic | 19,684 | 19,684 | 19,684 | 19,684 | 19,684 | |||||||||||||||
Dilutive effect of stock options and restricted stock | — | — | — | — | — | |||||||||||||||
Weighted average number of shares, diluted | 19,684 | 19,684 | 19,684 | 19,684 | 19,684 | |||||||||||||||
(1) | As reported in the Company’sForm 8-K on May 27, 2011. | |
(2) | Includes the historical results of MedCath Partners, which was effective May 1, 2011. The reclassification does not include the proforma effects of the net gain related to the sale as it would be reported in discontinued operations. | |
(3) | Represents the Company’s historical financial statements recast to exclude the historical operations of MedCath Partners. | |
(4) | Impact of the assumed sale of Arkansas Heart Hospital as though the sale occurred at the beginning of the reporting period. |
F-61
Table of Contents
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
REFLECTING THE SALE OF HEART HOSPITAL OF NEW MEXICO & ARKANSAS
HEART HOSPITAL
Twelve Months Ended September 30, 2009 | ||||||||||||||||||||
Reclassification | ||||||||||||||||||||
of MedCath | ||||||||||||||||||||
Partners as a | Sale of | |||||||||||||||||||
Company | Discontinued | Company | HHNM and | Company | ||||||||||||||||
Historical(1) | Operation(2) | Recast(3) | AHH(4) | Pro Forma | ||||||||||||||||
(In thousands, except per share data) | ||||||||||||||||||||
Net revenue | $ | 343,849 | $ | (16,645 | ) | $ | 327,204 | $ | (193,075 | ) | $ | 134,129 | ||||||||
Operating expenses: | ||||||||||||||||||||
Personnel expense | 114,893 | (6,187 | ) | 108,706 | (57,641 | ) | 51,065 | |||||||||||||
Medical supplies expense | 84,366 | (794 | ) | 83,572 | (54,436 | ) | 29,136 | |||||||||||||
Bad debt expense | 33,177 | (25 | ) | 33,152 | (18,361 | ) | 14,791 | |||||||||||||
Other operating expenses | 77,000 | (6,435 | ) | 70,565 | (32,836 | ) | 37,729 | |||||||||||||
Pre-opening expenses | 3,563 | — | 3,563 | — | 3,563 | |||||||||||||||
Depreciation | 19,299 | (3,849 | ) | 15,450 | (7,974 | ) | 7,476 | |||||||||||||
Amortization | 891 | (859 | ) | 32 | (32 | ) | — | |||||||||||||
Impairment of long-lived assets and goodwill | 42,000 | — | 42,000 | (25,000 | ) | 17,000 | ||||||||||||||
Loss (gain) on disposal of property, equipment and other assets | 93 | 32 | 125 | (87 | ) | 38 | ||||||||||||||
Total operating expenses | 375,282 | (18,117 | ) | 357,165 | (196,367 | ) | 160,798 | |||||||||||||
Income (loss) from operations | (31,433 | ) | 1,472 | (29,961 | ) | 3,292 | (26,669 | ) | ||||||||||||
Other income (expenses): | ||||||||||||||||||||
Interest expense | (3,184 | ) | 13 | (3,171 | ) | 118 | (3,053 | ) | ||||||||||||
Interest and other income, net | 214 | (5 | ) | 209 | (32 | ) | 177 | |||||||||||||
Loss on early extinguishment of debt | (6,702 | ) | — | (6,702 | ) | — | (6,702 | ) | ||||||||||||
Equity in net earnings of unconsolidated affiliates | 9,057 | (3,785 | ) | 5,272 | — | 5,272 | ||||||||||||||
Total other income (expense), net | (615 | ) | (3,777 | ) | (4,392 | ) | 86 | (4,306 | ) | |||||||||||
Loss from before income taxes | (32,048 | ) | (2,305 | ) | (34,353 | ) | 3,378 | (30,975 | ) | |||||||||||
Income tax benefit | (169 | ) | (877 | ) | (1,046 | ) | (6,348 | ) | (7,394 | ) | ||||||||||
Loss from continuing operations | (31,879 | ) | (1,428 | ) | (33,307 | ) | 9,726 | (23,581 | ) | |||||||||||
Less: Net income attributable to noncontrolling interest | (17,527 | ) | 21 | (17,506 | ) | 5,095 | (12,411 | ) | ||||||||||||
Loss income attributable to MedCath Corporation | $ | (49,406 | ) | $ | (1,407 | ) | $ | (50,813 | ) | $ | 14,821 | $ | (35,992 | ) | ||||||
Loss Income from continuing operations attributable to MedCath Corporation common stockholders, net of taxes | $ | (41,252 | ) | $ | (1,407 | ) | $ | (42,659 | ) | $ | 14,821 | $ | (27,838 | ) | ||||||
Loss per share, basic | $ | (2.09 | ) | $ | (0.07 | ) | $ | (2.17 | ) | $ | 0.75 | $ | (1.41 | ) | ||||||
Loss per share, diluted | $ | (2.09 | ) | $ | (0.07 | ) | $ | (2.17 | ) | $ | 0.75 | $ | (1.41 | ) | ||||||
Weighted average number of shares, basic | 19,684 | 19,684 | 19,684 | 19,684 | 19,684 | |||||||||||||||
Dilutive effect of stock options and restricted stock | — | — | — | — | — | |||||||||||||||
Weighted average number of shares, diluted | 19,684 | 19,684 | 19,684 | 19,684 | 19,684 | |||||||||||||||
(1) | As reported in the Company’sForm 8-K on May 27, 2011. | |
(2) | Includes the historical results of MedCath Partners, which was effective May 1, 2011. The reclassification does not include the proforma effects of the net gain related to the sale as it would be reported in discontinued operations. | |
(3) | Represents the Company’s historical financial statements recast to exclude the historical operations of MedCath Partners. | |
(4) | Impact of the assumed sale of Heart Hospital of New Mexico and Arkansas Heart Hospital as though the sales occurred at the beginning of the reporting period. |
F-62
Table of Contents
Twelve Months Ended September 30, 2008 | ||||||||||||||||||||
Reclassification | ||||||||||||||||||||
of MedCath | ||||||||||||||||||||
Partners as a | ||||||||||||||||||||
Company | Discontinued | Company | Sale of | Company | ||||||||||||||||
Historical(1) | Operation(2) | Recast(3) | HHNM(4) | Pro Forma | ||||||||||||||||
(In thousands, except per share data) | ||||||||||||||||||||
Net revenue | $ | 337,769 | $ | (18,070 | ) | $ | 319,699 | $ | (72,752 | ) | $ | 246,947 | ||||||||
Operating expenses: | ||||||||||||||||||||
Personnel expense | 112,236 | (5,712 | ) | 106,524 | (19,499 | ) | 87,025 | |||||||||||||
Medical supplies expense | 81,632 | (1,519 | ) | 80,113 | (18,390 | ) | 61,723 | |||||||||||||
Bad debt expense | 24,515 | (28 | ) | 24,487 | (4,707 | ) | 19,780 | |||||||||||||
Other operating expenses | 72,104 | (7,258 | ) | 64,846 | (14,831 | ) | 50,015 | |||||||||||||
Pre-opening expenses | 786 | — | 786 | — | 786 | |||||||||||||||
Depreciation | 17,896 | (4,066 | ) | 13,830 | (2,598 | ) | 11,232 | |||||||||||||
Amortization | 32 | — | 32 | (32 | ) | — | ||||||||||||||
Loss (gain) on disposal of property, equipment and other assets | 82 | 153 | 235 | (84 | ) | 151 | ||||||||||||||
Total operating expenses | 309,283 | (18,430 | ) | 290,853 | (60,141 | ) | 230,712 | |||||||||||||
Loss from operations | 28,486 | 360 | 28,846 | (12,611 | ) | 16,235 | ||||||||||||||
Other income (expenses): | ||||||||||||||||||||
Interest expense | (10,464 | ) | 37 | (10,427 | ) | 158 | (10,269 | ) | ||||||||||||
Interest and other income, net | 1,904 | (10 | ) | 1,894 | (110 | ) | 1,784 | |||||||||||||
Equity in net earnings of unconsolidated affiliates | 7,891 | (2,157 | ) | 5,734 | — | 5,734 | ||||||||||||||
Total other income (expense), net | (669 | ) | (2,130 | ) | (2,799 | ) | 48 | (2,751 | ) | |||||||||||
Income (Loss) from before income taxes | 27,817 | (1,770 | ) | 26,047 | (12,563 | ) | 13,484 | |||||||||||||
Income tax (benefit) expense | 6,636 | (716 | ) | 5,920 | (3,716 | ) | 2,204 | |||||||||||||
Net (Loss) Income from continuing operations | 21,181 | (1,054 | ) | 20,127 | (8,847 | ) | 11,280 | |||||||||||||
Less: Net income attributable to noncontrolling interest | (21,858 | ) | (95 | ) | (21,953 | ) | 2,889 | (19,064 | ) | |||||||||||
Loss attributable to MedCath Corporation | $ | (677 | ) | $ | (1,149 | ) | $ | (1,826 | ) | $ | (5,958 | ) | $ | (7,784 | ) | |||||
(Loss) Income from continuing operations attributable to MedCath Corporation common stockholders, net of taxes | $ | 7,982 | $ | (1,149 | ) | $ | 6,833 | $ | (5,958 | ) | $ | 875 | ||||||||
Income (Loss) per share, basic | $ | 0.40 | $ | (0.06 | ) | $ | 0.34 | $ | (0.30 | ) | $ | 0.04 | ||||||||
Income (Loss) per share, diluted | $ | 0.40 | $ | (0.06 | ) | $ | 0.34 | $ | (0.30 | ) | $ | 0.04 | ||||||||
Weighted average number of shares, basic | 19,996 | 19,996 | 19,996 | 19,996 | 19,996 | |||||||||||||||
Dilutive effect of stock options and restricted stock | 73 | 73 | 73 | 73 | 73 | |||||||||||||||
Weighted average number of shares, diluted | 20,069 | 20,069 | 20,069 | 20,069 | 20,069 | |||||||||||||||
(1) | As reported in the Company’sForm 8-K on May 27, 2011. | |
(2) | Includes the historical results of MedCath Partners, which was effective May 1, 2011. The reclassification does not include the proforma effects of the net gain related to the sale as it would be reported in discontinued operations. | |
(3) | Represents the Company’s historical financial statements recast to exclude the historical operations of MedCath Partners. | |
(4) | Impact of the assumed sale of Heart Hospital of New Mexico as though the sale occurred at the beginning of the reporting period. |
F-63
Table of Contents
Twelve Months Ended September 30, 2008 | ||||||||||||||||||||
Reclassification | ||||||||||||||||||||
of MedCath | ||||||||||||||||||||
Partners as a | ||||||||||||||||||||
Company | Discontinued | Company | Sale of | Company | ||||||||||||||||
Historical(1) | Operation(2) | Recast(3) | AHH(4) | Pro Forma | ||||||||||||||||
(In thousands, except per share data) | ||||||||||||||||||||
Net revenue | $ | 337,769 | $ | (18,070 | ) | $ | 319,699 | $ | (114,314 | ) | $ | 205,385 | ||||||||
Operating expenses: | ||||||||||||||||||||
Personnel expense | 112,236 | (5,712 | ) | 106,524 | (35,322 | ) | 71,202 | |||||||||||||
Medical supplies expense | 81,632 | (1,519 | ) | 80,113 | (32,452 | ) | 47,661 | |||||||||||||
Bad debt expense | 24,515 | (28 | ) | 24,487 | (9,003 | ) | 15,484 | |||||||||||||
Other operating expenses | 72,104 | (7,258 | ) | 64,846 | (15,713 | ) | 49,133 | |||||||||||||
Pre-opening expenses | 786 | — | 786 | — | 786 | |||||||||||||||
Depreciation | 17,896 | (4,066 | ) | 13,830 | (4,612 | ) | 9,218 | |||||||||||||
Amortization | 32 | — | 32 | — | 32 | |||||||||||||||
Loss (gain) on disposal of property, equipment and other assets | 82 | 153 | 235 | (145 | ) | 90 | ||||||||||||||
Total operating expenses | 309,283 | (18,430 | ) | 290,853 | (97,247 | ) | 193,606 | |||||||||||||
Loss from operations | 28,486 | 360 | 28,846 | (17,067 | ) | 11,779 | ||||||||||||||
Other income (expenses): | ||||||||||||||||||||
Interest expense | (10,464 | ) | 37 | (10,427 | ) | — | (10,427 | ) | ||||||||||||
Interest and other income, net | 1,904 | (10 | ) | 1,894 | (20 | ) | 1,874 | |||||||||||||
Equity in net earnings of unconsolidated affiliates | 7,891 | (2,157 | ) | 5,734 | — | 5,734 | ||||||||||||||
Total other income (expense), net | (669 | ) | (2,130 | ) | (2,799 | ) | (20 | ) | (2,819 | ) | ||||||||||
Income (Loss) from before income taxes | 27,817 | (1,770 | ) | 26,047 | (17,087 | ) | 8,960 | |||||||||||||
Income tax (benefit) expense | 6,636 | (716 | ) | 5,920 | (4,809 | ) | 1,111 | |||||||||||||
Net (Loss) Income from continuing operations | 21,181 | (1,054 | ) | 20,127 | (12,278 | ) | 7,849 | |||||||||||||
Less: Net income attributable to noncontrolling interest | (21,858 | ) | (95 | ) | (21,953 | ) | 4,568 | (17,385 | ) | |||||||||||
Loss attributable to MedCath Corporation | $ | (677 | ) | $ | (1,149 | ) | $ | (1,826 | ) | $ | (7,710 | ) | $ | (9,536 | ) | |||||
(Loss) Income from continuing operations attributable to MedCath Corporation common stockholders, net of taxes | $ | 7,982 | $ | (1,149 | ) | $ | 6,833 | $ | (7,710 | ) | $ | (877 | ) | |||||||
Income (Loss) per share, basic | $ | 0.40 | $ | (0.06 | ) | $ | 0.34 | $ | (0.39 | ) | $ | (0.04 | ) | |||||||
Income (Loss) per share, diluted | $ | 0.40 | $ | (0.06 | ) | $ | 0.34 | $ | (0.38 | ) | $ | (0.04 | ) | |||||||
Weighted average number of shares, basic | 19,996 | 19,996 | 19,996 | 19,996 | 19,996 | |||||||||||||||
Dilutive effect of stock options and restricted stock | 73 | 73 | 73 | 73 | 73 | |||||||||||||||
Weighted average number of shares, diluted | 20,069 | 20,069 | 20,069 | 20,069 | 20,069 | |||||||||||||||
(1) | As reported in the Company’sForm 8-K on May 27, 2011. | |
(2) | Includes the historical results of MedCath Partners, which was effective May 1, 2011. The reclassification does not include the proforma effects of the net gain related to the sale as it would be reported in discontinued operations. | |
(3) | Represents the Company’s historical financial statements recast to exclude the historical operations of MedCath Partners. | |
(4) | Impact of the assumed sale of Arkansas Heart Hospital as though the sale occurred at the beginning of the reporting period. |
F-64
Table of Contents
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
REFLECTING THE SALE OF HEART HOSPTIAL OF NEW MEXICO & ARKANSAS
HEART HOSPITAL
Twelve Months Ended September 30, 2008 | ||||||||||||||||||||
Reclassification | ||||||||||||||||||||
of MedCath | ||||||||||||||||||||
Partners as a | Sale of | |||||||||||||||||||
Company | Discontinued | Company | HHNM and | Company | ||||||||||||||||
Historical(1) | Operation(2) | Recast(3) | AHH(4) | Pro Forma | ||||||||||||||||
(In thousands, except per share data) | ||||||||||||||||||||
Net revenue | $ | 337,769 | $ | (18,070 | ) | $ | 319,699 | $ | (187,066 | ) | $ | 132,633 | ||||||||
Operating expenses: | ||||||||||||||||||||
Personnel expense | 112,236 | (5,712 | ) | 106,524 | (54,821 | ) | 51,703 | |||||||||||||
Medical supplies expense | 81,632 | (1,519 | ) | 80,113 | (50,842 | ) | 29,271 | |||||||||||||
Bad debt expense | 24,515 | (28 | ) | 24,487 | (13,710 | ) | 10,777 | |||||||||||||
Other operating expenses | 72,104 | (7,258 | ) | 64,846 | (30,544 | ) | 34,302 | |||||||||||||
Pre-opening expenses | 786 | — | 786 | — | 786 | |||||||||||||||
Depreciation | 17,896 | (4,066 | ) | 13,830 | (7,210 | ) | 6,620 | |||||||||||||
Amortization | 32 | — | 32 | (32 | ) | — | ||||||||||||||
Loss (gain) on disposal of property, equipment and other assets | 82 | 153 | 235 | (229 | ) | 6 | ||||||||||||||
Total operating expenses | 309,283 | (18,430 | ) | 290,853 | (157,388 | ) | 133,465 | |||||||||||||
Loss from operations | 28,486 | 360 | 28,846 | (29,678 | ) | (832 | ) | |||||||||||||
Other income (expenses): | ||||||||||||||||||||
Interest expense | (10,464 | ) | 37 | (10,427 | ) | 158 | (10,269 | ) | ||||||||||||
Interest and other income, net | 1,904 | (10 | ) | 1,894 | (130 | ) | 1,764 | |||||||||||||
Equity in net earnings of unconsolidated affiliates | 7,891 | (2,157 | ) | 5,734 | — | 5,734 | ||||||||||||||
Total other income (expense), net | (669 | ) | (2,130 | ) | (2,799 | ) | 28 | (2,771 | ) | |||||||||||
Income (Loss) from before income taxes | 27,817 | (1,770 | ) | 26,047 | (29,650 | ) | (3,603 | ) | ||||||||||||
Income tax (benefit) expense | 6,636 | (716 | ) | 5,920 | (8,525 | ) | (2,605 | ) | ||||||||||||
Net (Loss) Income from continuing operations | 21,181 | (1,054 | ) | 20,127 | (21,125 | ) | (998 | ) | ||||||||||||
Less: Net income attributable to noncontrolling interest | (21,858 | ) | (95 | ) | (21,953 | ) | 7,457 | (14,496 | ) | |||||||||||
Loss attributable to MedCath Corporation | $ | (677 | ) | $ | (1,149 | ) | $ | (1,826 | ) | $ | (13,668 | ) | $ | (15,494 | ) | |||||
(Loss) Income from continuing operations attributable to MedCath Corporation common stockholders, net of taxes | $ | 7,982 | $ | (1,149 | ) | $ | 6,833 | $ | (13,668 | ) | $ | (6,835 | ) | |||||||
Income (Loss) per share, basic | $ | 0.40 | $ | (0.06 | ) | $ | 0.34 | $ | (0.68 | ) | $ | (0.34 | ) | |||||||
Income (Loss) per share, diluted | $ | 0.40 | $ | (0.06 | ) | $ | 0.34 | $ | (0.68 | ) | $ | (0.34 | ) | |||||||
Weighted average number of shares, basic | 19,996 | 19,996 | 19,996 | 19,996 | 19,996 | |||||||||||||||
Dilutive effect of stock options and restricted stock | 73 | 73 | 73 | 73 | 73 | |||||||||||||||
Weighted average number of shares, diluted | 20,069 | 20,069 | 20,069 | 20,069 | 20,069 | |||||||||||||||
(1) | As reported in the Company’sForm 8-K on May 27, 2011. | |
(2) | Includes the historical results of MedCath Partners, which was effective May 1, 2011. The reclassification does not include the proforma effects of the net gain related to the sale as it would be reported in discontinued operations. | |
(3) | Represents the Company’s historical financial statements recast to exclude the historical operations of MedCath Partners. | |
(4) | Impact of the assumed sale of Heart Hospital of New Mexico and Arkansas Heart Hospital as though the sales occurred at the beginning of the reporting period. |
F-65
Table of Contents
Three Months Ended March 31, 2011 | ||||||||||||||||||||
Reclassification | ||||||||||||||||||||
of MedCath | ||||||||||||||||||||
Partners as a | ||||||||||||||||||||
Company | Discontinued | Company | Sale of | Company | ||||||||||||||||
Historical(1) | Operation(2) | Recast(3) | HHNM(4) | Pro Forma | ||||||||||||||||
(In thousands, except per share data) | ||||||||||||||||||||
Net revenue | $ | 97,163 | $ | (2,057 | ) | $ | 95,106 | $ | (18,991 | ) | $ | 76,115 | ||||||||
Operating expenses: | ||||||||||||||||||||
Personnel expense | 33,859 | (642 | ) | 33,217 | (5,510 | ) | 27,707 | |||||||||||||
Medical supplies expense | 23,189 | (33 | ) | 23,156 | (4,986 | ) | 18,170 | |||||||||||||
Bad debt expense | 10,006 | (1 | ) | 10,005 | (1,071 | ) | 8,934 | |||||||||||||
Other operating expenses | 22,843 | (569 | ) | 22,274 | (4,260 | ) | 18,014 | |||||||||||||
Depreciation | 4,630 | (562 | ) | 4,068 | (794 | ) | 3,274 | |||||||||||||
Amortization | — | — | — | (8 | ) | (8 | ) | |||||||||||||
Impairment of long-lived assets and goodwill | 19,548 | — | 19,548 | — | 19,548 | |||||||||||||||
Loss (gain) on disposal of property, equipment and other assets | 178 | 5 | 183 | (6 | ) | 177 | ||||||||||||||
Total operating expenses | 114,253 | (1,802 | ) | 112,451 | (16,635 | ) | 95,816 | |||||||||||||
Loss from operations | (17,090 | ) | (255 | ) | (17,345 | ) | (2,356 | ) | (19,701 | ) | ||||||||||
Other income (expenses): | ||||||||||||||||||||
Interest expense | (997 | ) | 15 | (982 | ) | 90 | (892 | ) | ||||||||||||
Interest and other income, net | 50 | — | 50 | (8 | ) | 42 | ||||||||||||||
Gain on sale of unconsolidated affiliates | 179 | — | 179 | — | 179 | |||||||||||||||
Equity in net earnings of unconsolidated affiliates | 1,258 | (213 | ) | 1,045 | — | 1,045 | ||||||||||||||
Total other income (expense), net | 490 | (198 | ) | 292 | 82 | 374 | ||||||||||||||
Loss from continuing operations before income taxes | (16,600 | ) | (453 | ) | (17,053 | ) | (2,274 | ) | (19,327 | ) | ||||||||||
Income tax benefit | (7,695 | ) | (185 | ) | (7,880 | ) | (692 | ) | (8,572 | ) | ||||||||||
Loss from continuing operations | (8,905 | ) | (268 | ) | (9,173 | ) | (1,582 | ) | (10,755 | ) | ||||||||||
Less: Net income attributable to noncontrolling interest | (3,189 | ) | (29 | ) | (3,218 | ) | 473 | (2,745 | ) | |||||||||||
Loss attributable to MedCath Corporation | $ | (12,094 | ) | $ | (297 | ) | $ | (12,391 | ) | $ | (1,109 | ) | $ | (13,500 | ) | |||||
Loss from continuing operations attributable to MedCath Corporation common stockholders, net of taxes | $ | (12,341 | ) | $ | (297 | ) | $ | (12,638 | ) | $ | (1,109 | ) | $ | (13,747 | ) | |||||
Loss per share, basic | $ | (0.61 | ) | $ | (0.01 | ) | $ | (0.63 | ) | $ | (0.05 | ) | $ | (0.68 | ) | |||||
Loss per share, diluted | $ | (0.61 | ) | $ | (0.01 | ) | $ | (0.63 | ) | $ | (0.05 | ) | $ | (0.68 | ) | |||||
Weighted average number of shares, basic | 20,208 | 20,208 | 20,208 | 20,208 | 20,208 | |||||||||||||||
Dilutive effect of stock options and restricted stock | — | — | — | — | — | |||||||||||||||
Weighted average number of shares, diluted | 20,208 | 20,208 | 20,208 | 20,208 | 20,208 | |||||||||||||||
(1) | As reported in the Company’sForm 8-K on May 27, 2011. | |
(2) | Includes the historical results of MedCath Partners, which was effective May 1, 2011. The reclassification does not include the proforma effects of the net gain related to the sale as it would be reported in discontinued operations. | |
(3) | Represents the Company’s historical financial statements recast to exclude the historical operations of MedCath Partners. | |
(4) | Impact of the assumed sale of Heart Hospital of New Mexico as though the sale occurred at the beginning of the reporting period. |
F-66
Table of Contents
Three Months Ended March 31, 2011 | ||||||||||||||||||||
Reclassification | ||||||||||||||||||||
of MedCath | ||||||||||||||||||||
Partners as a | ||||||||||||||||||||
Company | Discontinued | Company | Sale of | Company | ||||||||||||||||
Historical(1) | Operation(2) | Recast(3) | AHH(4) | Pro Forma | ||||||||||||||||
(In thousands, except per share data) | ||||||||||||||||||||
Net revenue | $ | 97,163 | $ | (2,057 | ) | $ | 95,106 | $ | (32,216 | ) | $ | 62,890 | ||||||||
Operating expenses: | ||||||||||||||||||||
Personnel expense | 33,859 | (642 | ) | 33,217 | (9,397 | ) | 23,820 | |||||||||||||
Medical supplies expense | 23,189 | (33 | ) | 23,156 | (9,523 | ) | 13,633 | |||||||||||||
Bad debt expense | 10,006 | (1 | ) | 10,005 | (2,961 | ) | 7,044 | |||||||||||||
Other operating expenses | 22,843 | (569 | ) | 22,274 | (3,729 | ) | 18,545 | |||||||||||||
Depreciation | 4,630 | (562 | ) | 4,068 | (1,120 | ) | 2,948 | |||||||||||||
Amortization | — | — | — | — | — | |||||||||||||||
Impairment of long-lived assets and goodwill | 19,548 | — | 19,548 | — | 19,548 | |||||||||||||||
Loss (gain) on disposal of property, equipment and other assets | 178 | 5 | 183 | — | 183 | |||||||||||||||
Total operating expenses | 114,253 | (1,802 | ) | 112,451 | (26,730 | ) | 85,721 | |||||||||||||
Loss from operations | (17,090 | ) | (255 | ) | (17,345 | ) | (5,486 | ) | (22,831 | ) | ||||||||||
Other income (expenses): | ||||||||||||||||||||
Interest expense | (997 | ) | 15 | (982 | ) | 3 | (979 | ) | ||||||||||||
Interest and other income, net | 50 | — | 50 | — | 50 | |||||||||||||||
Gain on sale of unconsolidated affiliates | 179 | — | 179 | — | 179 | |||||||||||||||
Equity in net earnings of unconsolidated affiliates | 1,258 | (213 | ) | 1,045 | — | 1,045 | ||||||||||||||
Total other income (expense), net | 490 | (198 | ) | 292 | 3 | 295 | ||||||||||||||
Loss from continuing operations before income taxes | (16,600 | ) | (453 | ) | (17,053 | ) | (5,483 | ) | (22,536 | ) | ||||||||||
Income tax benefit | (7,695 | ) | (185 | ) | (7,880 | ) | (1,508 | ) | (9,388 | ) | ||||||||||
Loss from continuing operations | (8,905 | ) | (268 | ) | (9,173 | ) | (3,975 | ) | (13,148 | ) | ||||||||||
Less: Net income attributable to noncontrolling interest | (3,189 | ) | (29 | ) | (3,218 | ) | 1,558 | (1,660 | ) | |||||||||||
Loss attributable to MedCath Corporation | $ | (12,094 | ) | $ | (297 | ) | $ | (12,391 | ) | $ | (2,417 | ) | $ | (14,808 | ) | |||||
Loss from continuing operations attributable to MedCath Corporation common stockholders, net of taxes | $ | (12,341 | ) | $ | (297 | ) | $ | (12,638 | ) | $ | (2,417 | ) | $ | (15,055 | ) | |||||
Loss per share, basic | $ | (0.61 | ) | $ | (0.01 | ) | $ | (0.63 | ) | $ | (0.12 | ) | $ | (0.75 | ) | |||||
Loss per share, diluted | $ | (0.61 | ) | $ | (0.01 | ) | $ | (0.63 | ) | $ | (0.12 | ) | $ | (0.75 | ) | |||||
Weighted average number of shares, basic | 20,208 | 20,208 | 20,208 | 20,208 | 20,208 | |||||||||||||||
Dilutive effect of stock options and restricted stock | — | — | — | — | — | |||||||||||||||
Weighted average number of shares, diluted | 20,208 | 20,208 | 20,208 | 20,208 | 20,208 | |||||||||||||||
(1) | As reported in the Company’sForm 8-K on May 27, 2011. | |
(2) | Includes the historical results of MedCath Partners, which was effective May 1, 2011. The reclassification does not include the proforma effects of the net gain related to the sale as it would be reported in discontinued operations. | |
(3) | Represents the Company’s historical financial statements recast to exclude the historical operations of MedCath Partners. | |
(4) | Impact of the assumed sale of Arkansas Heart Hospital as though the sale occurred at the beginning of the reporting period. |
F-67
Table of Contents
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
REFLECTING SALE OF HEART HOSPITAL OF NEW MEXICO & ARKANSAS
HEART HOSPITAL
Three Months Ended March 31, 2011 | ||||||||||||||||||||
Reclassification | ||||||||||||||||||||
of MedCath | ||||||||||||||||||||
Partners as a | Sale of | |||||||||||||||||||
Company | Discontinued | Company | HHNM and | Company | ||||||||||||||||
Historical(1) | Operation(2) | Recast(3) | AHH(4) | Pro Forma | ||||||||||||||||
(In thousands, except per share data) | ||||||||||||||||||||
Net revenue | $ | 97,163 | $ | (2,057 | ) | $ | 95,106 | $ | (51,207 | ) | $ | 43,899 | ||||||||
Operating expenses: | $ | — | ||||||||||||||||||
Personnel expense | 33,859 | (642 | ) | 33,217 | (14,907 | ) | 18,310 | |||||||||||||
Medical supplies expense | 23,189 | (33 | ) | 23,156 | (14,509 | ) | 8,647 | |||||||||||||
Bad debt expense | 10,006 | (1 | ) | 10,005 | (4,032 | ) | 5,973 | |||||||||||||
Other operating expenses | 22,843 | (569 | ) | 22,274 | (7,989 | ) | 14,285 | |||||||||||||
Depreciation | 4,630 | (562 | ) | 4,068 | (1,914 | ) | 2,154 | |||||||||||||
Amortization | — | — | — | (8 | ) | (8 | ) | |||||||||||||
Impairment of long-lived assets and goodwill | 19,548 | — | 19,548 | — | 19,548 | |||||||||||||||
Loss (gain) on disposal of property, equipment and other assets | 178 | 5 | 183 | (6 | ) | 177 | ||||||||||||||
Total operating expenses | 114,253 | (1,802 | ) | 112,451 | (43,365 | ) | 69,086 | |||||||||||||
Loss from operations | (17,090 | ) | (255 | ) | (17,345 | ) | (7,842 | ) | (25,187 | ) | ||||||||||
Other income (expenses): | ||||||||||||||||||||
Interest expense | (997 | ) | 15 | (982 | ) | 93 | (889 | ) | ||||||||||||
Interest and other income, net | 50 | — | 50 | (8 | ) | 42 | ||||||||||||||
Gain on sale of unconsolidated affiliates | 179 | — | 179 | — | 179 | |||||||||||||||
Equity in net earnings of unconsolidated affiliates | 1,258 | (213 | ) | 1,045 | — | 1,045 | ||||||||||||||
Total other income (expense), net | 490 | (198 | ) | 292 | 85 | 377 | ||||||||||||||
Loss from continuing operations before income taxes | (16,600 | ) | (453 | ) | (17,053 | ) | (7,757 | ) | (24,810 | ) | ||||||||||
Income tax benefit | (7,695 | ) | (185 | ) | (7,880 | ) | (2,200 | ) | (10,080 | ) | ||||||||||
Loss from continuing operations | (8,905 | ) | (268 | ) | (9,173 | ) | (5,557 | ) | (14,730 | ) | ||||||||||
Less: Net income attributable to noncontrolling interest | (3,189 | ) | (29 | ) | (3,218 | ) | 2,031 | (1,187 | ) | |||||||||||
Loss attributable to MedCath Corporation | $ | (12,094 | ) | $ | (297 | ) | $ | (12,391 | ) | $ | (3,526 | ) | $ | (15,917 | ) | |||||
Loss from continuing operations attributable to MedCath Corporation common stockholders, net of taxes | $ | (12,341 | ) | $ | (297 | ) | $ | (12,638 | ) | $ | (3,526 | ) | $ | (16,164 | ) | |||||
Loss per share, basic | $ | (0.61 | ) | $ | (0.01 | ) | $ | (0.63 | ) | $ | (0.17 | ) | $ | (0.80 | ) | |||||
Loss per share, diluted | $ | (0.61 | ) | $ | (0.01 | ) | $ | (0.63 | ) | $ | (0.17 | ) | $ | (0.80 | ) | |||||
Weighted average number of shares, basic | 20,208 | 20,208 | 20,208 | 20,208 | 20,208 | |||||||||||||||
Dilutive effect of stock options and restricted stock | — | — | — | — | — | |||||||||||||||
Weighted average number of shares, diluted | 20,208 | 20,208 | 20,208 | 20,208 | 20,208 | |||||||||||||||
(1) | As reported in the Company’sForm 8-K on May 27, 2011. | |
(2) | Includes the historical results of MedCath Partners, which was effective May 1, 2011. The reclassification does not include the proforma effects of the net gain related to the sale as it would be reported in discontinued operations. | |
(3) | Represents the Company’s historical financial statements recast to exclude the historical operations of MedCath Partners. | |
(4) | Impact of the assumed sale of Heart Hospital of New Mexico and Arkansas Heart Hospital as though the sales occurred at the beginning of the reporting period. |
F-68
Table of Contents
Three Months Ended March 31, 2010 | ||||||||||||||||||||
Reclassification | ||||||||||||||||||||
of MedCath | ||||||||||||||||||||
Partners as a | ||||||||||||||||||||
Company | Discontinued | Company | Sale of | Company | ||||||||||||||||
Historical(1) | Operation(2) | Recast(3) | HHNM(4) | Pro Forma | ||||||||||||||||
(In thousands, except per share data) | ||||||||||||||||||||
Net revenue | $ | 96,777 | $ | (2,785 | ) | $ | 93,992 | $ | (21,031 | ) | $ | 72,961 | ||||||||
Operating expenses: | ||||||||||||||||||||
Personnel expense | 33,150 | (951 | ) | 32,199 | (5,455 | ) | 26,744 | |||||||||||||
Medical supplies expense | 23,581 | (150 | ) | 23,431 | (5,688 | ) | 17,743 | |||||||||||||
Bad debt expense | 9,931 | (13 | ) | 9,918 | (1,213 | ) | 8,705 | |||||||||||||
Other operating expenses | 22,296 | (1,151 | ) | 21,145 | (4,446 | ) | 16,699 | |||||||||||||
Pre-opening expenses | — | — | — | — | — | |||||||||||||||
Depreciation | 6,124 | (785 | ) | 5,339 | (604 | ) | 4,735 | |||||||||||||
Impairment of long-lived assets and goodwill | 14,700 | (114 | ) | 14,586 | — | 14,586 | ||||||||||||||
Loss (gain) on disposal of property, equipment and other assets | (69 | ) | 76 | 7 | (8 | ) | (1 | ) | ||||||||||||
Total operating expenses | 109,713 | (3,088 | ) | 106,625 | (17,414 | ) | 89,211 | |||||||||||||
(Loss) income from operations | (12,936 | ) | 303 | (12,633 | ) | (3,617 | ) | (16,250 | ) | |||||||||||
Other income (expenses): | ||||||||||||||||||||
Interest expense | (1,054 | ) | — | (1,054 | ) | 40 | (1,014 | ) | ||||||||||||
Interest and other income, net | 15 | — | 15 | (8 | ) | 7 | ||||||||||||||
Gain on sale of unconsolidated affiliates | — | — | — | — | — | |||||||||||||||
Loss on not receivable | (1,507 | ) | — | (1,507 | ) | — | (1,507 | ) | ||||||||||||
Equity in net earnings of unconsolidated affiliates | 3,092 | (1,488 | ) | 1,604 | — | 1,604 | ||||||||||||||
Total other income (expense), net | 546 | (1,488 | ) | (942 | ) | 32 | (910 | ) | ||||||||||||
Loss from continuing operations before income taxes | (12,390 | ) | (1,185 | ) | (13,575 | ) | (3,585 | ) | (17,160 | ) | ||||||||||
Income tax benefit | (5,639 | ) | (455 | ) | (6,094 | ) | (1,082 | ) | (7,176 | ) | ||||||||||
Loss from continuing operations | (6,751 | ) | (730 | ) | (7,481 | ) | (2,503 | ) | (9,984 | ) | ||||||||||
Less: Net income attributable to noncontrolling interest | (2,524 | ) | (2,663 | ) | (5,187 | ) | 769 | (4,418 | ) | |||||||||||
Net (loss) income attributable to MedCath Corporation | $ | (9,275 | ) | $ | 1,933 | $ | (12,668 | ) | $ | (1,734 | ) | $ | (14,402 | ) | ||||||
(Loss) Income from continuing operations attributable to MedCath Corporation common stockholders, net of taxes | $ | (8,970 | ) | $ | 1,933 | $ | (7,037 | ) | $ | (1,734 | ) | $ | (8,771 | ) | ||||||
(Loss) Income per share, basic | $ | (0.45 | ) | $ | 0.10 | $ | (0.35 | ) | $ | (0.09 | ) | $ | (0.44 | ) | ||||||
(Loss) Income per share, diluted | $ | (0.45 | ) | $ | 0.10 | $ | (0.35 | ) | $ | (0.09 | ) | $ | (0.44 | ) | ||||||
Weighted average number of shares, basic | 19,829 | 19,829 | 19,829 | 19,829 | 19,829 | |||||||||||||||
Dilutive effect of stock options and restricted stock | — | — | — | — | — | |||||||||||||||
Weighted average number of shares, diluted | 19,829 | 19,829 | 19,829 | 19,829 | 19,829 | |||||||||||||||
(1) | As reported in the Company’sForm 8-K on May 27, 2011. | |
(2) | Includes the historical results of MedCath Partners, which was effective May 1, 2011. The reclassification does not include the proforma effects of the net gain related to the sale as it would be reported in discontinued operations. | |
(3) | Represents the Company’s historical financial statements recast to exclude the historical operations of MedCath Partners. | |
(4) | Impact of the assumed sale of Heart Hospital of New Mexico as though the sale occurred at the beginning of the reporting period. |
F-69
Table of Contents
Three Months Ended March 31, 2010 | ||||||||||||||||||||
Reclassification | ||||||||||||||||||||
of MedCath | ||||||||||||||||||||
Partners as a | ||||||||||||||||||||
Company | Discontinued | Company | Sale of | Company | ||||||||||||||||
Historical(1) | Operation(2) | Recast(3) | AHH(4) | Pro Forma | ||||||||||||||||
(In thousands, except per share data) | ||||||||||||||||||||
Net revenue | $ | 96,777 | $ | (2,785 | ) | $ | 93,992 | $ | (29,139 | ) | $ | 64,853 | ||||||||
Operating expenses: | ||||||||||||||||||||
Personnel expense | 33,150 | (951 | ) | 32,199 | (9,067 | ) | 23,132 | |||||||||||||
Medical supplies expense | 23,581 | (150 | ) | 23,431 | (8,943 | ) | 14,488 | |||||||||||||
Bad debt expense | 9,931 | (13 | ) | 9,918 | (2,690 | ) | 7,228 | |||||||||||||
Other operating expenses | 22,296 | (1,151 | ) | 21,145 | (3,775 | ) | 17,370 | |||||||||||||
Pre-opening expenses | — | — | — | — | — | |||||||||||||||
Depreciation | 6,124 | (785 | ) | 5,339 | (1,355 | ) | 3,984 | |||||||||||||
Impairment of long-lived assets and goodwill | 14,700 | (114 | ) | 14,586 | — | 14,586 | ||||||||||||||
Loss (gain) on disposal of property, equipment and other assets | (69 | ) | 76 | 7 | (7 | ) | — | |||||||||||||
Total operating expenses | 109,713 | (3,088 | ) | 106,625 | (25,837 | ) | 80,788 | |||||||||||||
(Loss) income from operations | (12,936 | ) | 303 | (12,633 | ) | (3,302 | ) | (15,935 | ) | |||||||||||
Other income (expenses): | ||||||||||||||||||||
Interest expense | (1,054 | ) | — | (1,054 | ) | 3 | (1,051 | ) | ||||||||||||
Interest and other income, net | 15 | — | 15 | 6 | 21 | |||||||||||||||
Gain on sale of unconsolidated affiliates | — | — | — | — | — | |||||||||||||||
Loss on note receivable | (1,507 | ) | — | (1,507 | ) | — | (1,507 | ) | ||||||||||||
Equity in net earnings of unconsolidated affiliates | 3,092 | (1,488 | ) | 1,604 | — | 1,604 | ||||||||||||||
Total other income (expense), net | 2,053 | (1,488 | ) | 565 | 9 | (933 | ) | |||||||||||||
Loss from continuing operations before income taxes | (14,414 | ) | (1,185 | ) | (16,064 | ) | (3,293 | ) | (16,868 | ) | ||||||||||
Income tax benefit | (5,639 | ) | (455 | ) | (6,094 | ) | (919 | ) | (7,013 | ) | ||||||||||
Loss from continuing operations | (7,438 | ) | (730 | ) | (8,454 | ) | (2,374 | ) | (9,855 | ) | ||||||||||
Less: Net income attributable to noncontrolling interest | (2,524 | ) | (2,663 | ) | (5,187 | ) | 900 | (4,287 | ) | |||||||||||
Net (loss) income attributable to MedCath Corporation | $ | (9,275 | ) | $ | 1,933 | $ | (12,668 | ) | $ | (1,474 | ) | $ | (14,142 | ) | ||||||
(Loss) Income from continuing operations attributable to MedCath Corporation common stockholders, net of taxes | $ | (8,970 | ) | $ | 1,933 | $ | (7,037 | ) | $ | (1,474 | ) | $ | (8,511 | ) | ||||||
(Loss) Income per share, basic | $ | (0.45 | ) | $ | 0.10 | $ | (0.35 | ) | $ | (0.07 | ) | $ | (0.43 | ) | ||||||
(Loss) Income per share, diluted | $ | (0.45 | ) | $ | 0.10 | $ | (0.35 | ) | $ | (0.07 | ) | $ | (0.43 | ) | ||||||
Weighted average number of shares, basic | 19,829 | 19,829 | 19,829 | 19,829 | 19,829 | |||||||||||||||
Dilutive effect of stock options and restricted stock | — | — | — | — | — | |||||||||||||||
Weighted average number of shares, diluted | 19,829 | 19,829 | 19,829 | 19,829 | 19,829 | |||||||||||||||
(1) | As reported in the Company’sForm 8-K on May 27, 2011. | |
(2) | Includes the historical results of MedCath Partners, which was effective May 1, 2011. The reclassification does not include the proforma effects of the net gain related to the sale as it would be reported in discontinued operations. | |
(3) | Represents the Company’s historical financial statements recast to exclude the historical operations of MedCath Partners. | |
(4) | Impact of the assumed sale of Arkansas Heart Hospital as though the sale occurred at the beginning of the reporting period. |
F-70
Table of Contents
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
REFLECTING SALE OF HEART HOSPITAL OF NEW MEXICO & ARKANSAS
HEART HOSPITAL
Three Months Ended March 31, 2010 | ||||||||||||||||||||
Reclassification | ||||||||||||||||||||
of MedCath | ||||||||||||||||||||
Partners as a | Sale of | |||||||||||||||||||
Company | Discontinued | Company | HHNM and | Company | ||||||||||||||||
Historical(1) | Operation(2) | Recast(3) | AHH(4) | Pro Forma | ||||||||||||||||
(In thousands, except per share data) | ||||||||||||||||||||
Net revenue | $ | 96,777 | $ | (2,785 | ) | $ | 93,992 | $ | (50,170 | ) | $ | 43,822 | ||||||||
Operating expenses: | ||||||||||||||||||||
Personnel expense | 33,150 | (951 | ) | 32,199 | (14,522 | ) | 17,677 | |||||||||||||
Medical supplies expense | 23,581 | (150 | ) | 23,431 | (14,631 | ) | 8,800 | |||||||||||||
Bad debt expense | 9,931 | (13 | ) | 9,918 | (3,903 | ) | 6,015 | |||||||||||||
Other operating expenses | 22,296 | (1,151 | ) | 21,145 | (8,221 | ) | 12,924 | |||||||||||||
Pre-opening expenses | — | — | — | — | — | |||||||||||||||
Depreciation | 6,124 | (785 | ) | 5,339 | (1,959 | ) | 3,380 | |||||||||||||
Impairment of long-lived assets and goodwill | 14,700 | (114 | ) | 14,586 | — | 14,586 | ||||||||||||||
Loss (gain) on disposal of property, equipment and other assets | (69 | ) | 76 | 7 | (15 | ) | (8 | ) | ||||||||||||
Total operating expenses | 109,713 | (3,088 | ) | 106,625 | (43,251 | ) | 63,374 | |||||||||||||
(Loss) income from operations | (12,936 | ) | 303 | (12,633 | ) | (6,919 | ) | (19,552 | ) | |||||||||||
Other income (expenses): | ||||||||||||||||||||
Interest expense | (1,054 | ) | — | (1,054 | ) | 43 | (1,011 | ) | ||||||||||||
Interest and other income, net | 15 | — | 15 | (2 | ) | 13 | ||||||||||||||
Gain on sale of unconsolidated affiliates | — | — | — | — | — | |||||||||||||||
Loss on note receivable | (1,507 | ) | — | (1,507 | ) | — | (1,507 | ) | ||||||||||||
Equity in net earnings of unconsolidated affiliates | 3,092 | (1,488 | ) | 1,604 | — | 1,604 | ||||||||||||||
Total other income (expense), net | 2,053 | (1,488 | ) | (942 | ) | 41 | (901 | ) | ||||||||||||
Loss from continuing operations before income taxes | (14,414 | ) | (1,185 | ) | (13,575 | ) | (6,878 | ) | (20,453 | ) | ||||||||||
Income tax benefit | (5,639 | ) | (455 | ) | (6,094 | ) | (2,001 | ) | (8,095 | ) | ||||||||||
Loss from continuing operations | (7,438 | ) | (730 | ) | (7,481 | ) | (4,877 | ) | (12,358 | ) | ||||||||||
Less: Net income attributable to noncontrolling interest | (2,524 | ) | (2,663 | ) | (5,187 | ) | 1,669 | (3,518 | ) | |||||||||||
Net (loss) income attributable to MedCath Corporation | $ | (9,275 | ) | $ | 1,933 | $ | (12,668 | ) | $ | (3,208 | ) | $ | (15,876 | ) | ||||||
(Loss) Income from continuing operations attributable to MedCath Corporation common stockholders, net of taxes | $ | (8,970 | ) | $ | 1,933 | $ | (7,037 | ) | $ | (3,208 | ) | $ | (10,245 | ) | ||||||
(Loss) Income per share, basic | $ | (0.45 | ) | $ | 0.10 | $ | (0.35 | ) | $ | (0.16 | ) | $ | (0.52 | ) | ||||||
(Loss) Income per share, diluted | $ | (0.45 | ) | $ | 0.10 | $ | (0.35 | ) | $ | (0.16 | ) | $ | (0.52 | ) | ||||||
Weighted average number of shares, basic | 19,829 | 19,829 | 19,829 | 19,829 | 19,829 | |||||||||||||||
Dilutive effect of stock options and restricted stock | — | — | — | — | — | |||||||||||||||
Weighted average number of shares, diluted | 19,829 | 19,829 | 19,829 | 19,829 | 19,829 | |||||||||||||||
(1) | As reported in the Company’sForm 8-K on May 27, 2011. | |
(2) | Includes the historical results of MedCath Partners, which was effective May 1, 2011. The reclassification does not include the proforma effects of the net gain related to the sale as it would be reported in discontinued operations. | |
(3) | Represents the Company’s historical financial statements recast to exclude the historical operations of MedCath Partners. | |
(4) | Impact of the assumed sale of Heart Hospital of New Mexico and Arkansas Heart Hospital as though the sales occurred at the beginning of the reporting period. |
F-71
Table of Contents
Six Months Ended March 31, 2011 | ||||||||||||||||||||
Reclassification | ||||||||||||||||||||
of MedCath | ||||||||||||||||||||
Partners as a | ||||||||||||||||||||
Company | Discontinued | Company | Sale of | Company | ||||||||||||||||
Historical(1) | Operation(2) | Recast(3) | HHNM(4) | Pro Forma | ||||||||||||||||
(In thousands, except per share data) | ||||||||||||||||||||
Net revenue | $ | 186,063 | $ | (4,285 | ) | $ | 181,778 | $ | (38,604 | ) | $ | 143,174 | ||||||||
Operating expenses: | ||||||||||||||||||||
Personnel expense | 66,313 | (1,337 | ) | 64,976 | (10,763 | ) | 54,213 | |||||||||||||
Medical supplies expense | 42,411 | (56 | ) | 42,355 | (9,386 | ) | 32,969 | |||||||||||||
Bad debt expense | 19,715 | — | 19,715 | (2,817 | ) | 16,898 | ||||||||||||||
Other operating expenses | 46,959 | (1,402 | ) | 45,557 | (8,495 | ) | 37,062 | |||||||||||||
Depreciation | 9,517 | (1,170 | ) | 8,347 | (1,615 | ) | 6,732 | |||||||||||||
Amortization | — | — | — | (16 | ) | (16 | ) | |||||||||||||
Impairment of long-lived assets and goodwill | 19,548 | (209 | ) | 19,339 | — | 19,339 | ||||||||||||||
Loss (gain) on disposal of property, equipment and other assets | 271 | (21 | ) | 250 | (7 | ) | 243 | |||||||||||||
Total operating expenses | 204,734 | (4,195 | ) | 200,539 | (33,099 | ) | 167,440 | |||||||||||||
Loss from operations | (18,671 | ) | (90 | ) | (18,761 | ) | (5,505 | ) | (24,266 | ) | ||||||||||
Other income (expenses): | ||||||||||||||||||||
Interest expense | (2,079 | ) | — | (2,079 | ) | 188 | (1,891 | ) | ||||||||||||
Interest and other income, net | 539 | 31 | 570 | (18 | ) | 552 | ||||||||||||||
Gain on sale of unconsolidated affiliates | 15,570 | — | 15,570 | — | 15,570 | |||||||||||||||
Equity in net earnings of unconsolidated affiliates | 1,860 | (693 | ) | 1,167 | — | 1,167 | ||||||||||||||
Total other income (expense), net | 15,890 | (662 | ) | 15,228 | 170 | 15,398 | ||||||||||||||
Loss from continuing operations before income taxes | (2,781 | ) | (752 | ) | (3,533 | ) | (5,335 | ) | (8,868 | ) | ||||||||||
Income tax benefit | (3,213 | ) | (300 | ) | (3,513 | ) | (1,611 | ) | (5,124 | ) | ||||||||||
Income (Loss) from continuing operations | 432 | (452 | ) | (20 | ) | (3,724 | ) | (3,744 | ) | |||||||||||
Less: Net income attributable to noncontrolling interest | (14,615 | ) | (29 | ) | (14,644 | ) | 1,142 | (13,502 | ) | |||||||||||
Loss attributable to MedCath Corporation | $ | (14,183 | ) | $ | (481 | ) | $ | (14,664 | ) | $ | (2,582 | ) | $ | (17,246 | ) | |||||
Loss from continuing operations attributable to MedCath Corporation common stockholders, net of taxes | $ | (5,179 | ) | $ | (481 | ) | $ | (5,660 | ) | $ | (2,582 | ) | $ | (8,242 | ) | |||||
Loss per share, basic | $ | (0.26 | ) | $ | (0.02 | ) | $ | (0.28 | ) | $ | (0.13 | ) | $ | (0.41 | ) | |||||
Loss per share, diluted | $ | (0.26 | ) | $ | (0.02 | ) | $ | (0.28 | ) | $ | (0.13 | ) | $ | (0.41 | ) | |||||
Weighted average number of shares, basic | 20,075 | 20,075 | 20,075 | 20,075 | 20,075 | |||||||||||||||
Dilutive effect of stock options and restricted stock | 6 | 6 | 6 | 6 | 6 | |||||||||||||||
Weighted average number of shares, diluted | 20,081 | 20,081 | 20,081 | 20,081 | 20,081 | |||||||||||||||
(1) | As reported in the Company’sForm 8-K on May 27, 2011. | |
(2) | Includes the historical results of MedCath Partners, which was effective May 1, 2011. The reclassification does not include the proforma effects of the net gain related to the sale as it would be reported in discontinued operations. | |
(3) | Represents the Company’s historical financial statements recast to exclude the historical operations of MedCath Partners. | |
(4) | Impact of the assumed sale of Heart Hospital of New Mexico as though the sale occurred at the beginning of the reporting period. |
F-72
Table of Contents
Six Months Ended March 31, 2011 | ||||||||||||||||||||
Reclassification | ||||||||||||||||||||
of MedCath | ||||||||||||||||||||
Partners as | ||||||||||||||||||||
Company | a Discontinued | Company | Sale of | Company | ||||||||||||||||
Historical(1) | Operation(2) | Recast(3) | AHH(4) | Pro Forma | ||||||||||||||||
(In thousands, except per share data) | ||||||||||||||||||||
Net revenue | $ | 186,063 | $ | (4,285 | ) | $ | 181,778 | $ | (60,435 | ) | $ | 121,343 | ||||||||
Operating expenses: | ||||||||||||||||||||
Personnel expense | 66,313 | (1,337 | ) | 64,976 | (18,158 | ) | 46,818 | |||||||||||||
Medical supplies expense | 42,411 | (56 | ) | 42,355 | (16,238 | ) | 26,117 | |||||||||||||
Bad debt expense | 19,715 | — | 19,715 | (5,299 | ) | 14,416 | ||||||||||||||
Other operating expenses | 46,959 | (1,402 | ) | 45,557 | (8,664 | ) | 36,893 | |||||||||||||
Depreciation | 9,517 | (1,170 | ) | 8,347 | (2,323 | ) | 6,024 | |||||||||||||
Amortization | — | — | — | — | — | |||||||||||||||
Impairment of long-lived assets and goodwill | 19,548 | (209 | ) | 19,339 | — | 19,339 | ||||||||||||||
Loss (gain) on disposal of property, equipment and other assets | 271 | (21 | ) | 250 | (23 | ) | 227 | |||||||||||||
Total operating expenses | 204,734 | (4,195 | ) | 200,539 | (50,705 | ) | 149,834 | |||||||||||||
Loss from operations | (18,671 | ) | (90 | ) | (18,761 | ) | (9,730 | ) | (28,491 | ) | ||||||||||
Other income (expenses): | ||||||||||||||||||||
Interest expense | (2,079 | ) | — | (2,079 | ) | 6 | (2,073 | ) | ||||||||||||
Interest and other income, net | 539 | 31 | 570 | (406 | ) | 164 | ||||||||||||||
Gain on sale of unconsolidated affiliates | 15,570 | — | 15,570 | — | 15,570 | |||||||||||||||
Equity in net earnings of unconsolidated affiliates | 1,860 | (693 | ) | 1,167 | — | 1,167 | ||||||||||||||
Total other income (expense), net | 15,890 | (662 | ) | 15,228 | (400 | ) | 14,828 | |||||||||||||
Loss from continuing operations before income taxes | (2,781 | ) | (752 | ) | (3,533 | ) | (10,130 | ) | (13,663 | ) | ||||||||||
Income tax benefit | (3,213 | ) | (300 | ) | (3,513 | ) | (2,790 | ) | (6,303 | ) | ||||||||||
Income (Loss) from continuing operations | 432 | (452 | ) | (20 | ) | (7,340 | ) | (7,360 | ) | |||||||||||
Less: Net income attributable to noncontrolling interest | (14,615 | ) | (29 | ) | (14,644 | ) | 2,865 | (11,779 | ) | |||||||||||
Loss attributable to MedCath Corporation | $ | (14,183 | ) | $ | (481 | ) | $ | (14,664 | ) | $ | (4,475 | ) | $ | (19,139 | ) | |||||
Loss from continuing operations attributable to MedCath Corporation common stockholders, net of taxes | $ | (5,179 | ) | $ | (481 | ) | $ | (5,660 | ) | $ | (4,475 | ) | $ | (10,135 | ) | |||||
Loss per share, basic | $ | (0.26 | ) | $ | (0.02 | ) | $ | (0.28 | ) | $ | (0.22 | ) | $ | (0.50 | ) | |||||
Loss per share, diluted | $ | (0.26 | ) | $ | (0.02 | ) | $ | (0.28 | ) | $ | (0.22 | ) | $ | (0.50 | ) | |||||
Weighted average number of shares, basic | 20,075 | 20,075 | 20,075 | 20,075 | 20,075 | |||||||||||||||
Dilutive effect of stock options and restricted stock | 6 | 6 | 6 | 6 | 6 | |||||||||||||||
Weighted average number of shares, diluted | 20,081 | 20,081 | 20,081 | 20,081 | 20,081 | |||||||||||||||
(1) | As reported in the Company’sForm 8-K on May 27, 2011. | |
(2) | Includes the historical results of MedCath Partners, which was effective May 1, 2011. The reclassification does not include the proforma effects of the net gain related to the sale as it would be reported in discontinued operations. | |
(3) | Represents the Company’s historical financial statements recast to exclude the historical operations of MedCath Partners. | |
(4) | Impact of the assumed sale of Arkansas Heart Hospital as though the sale occurred at the beginning of the reporting period. |
F-73
Table of Contents
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
REFLECTING SALE OF HEART HOSPITAL OF NEW MEXICO & ARKANSAS
HEART HOSPITAL
Six Months Ended March 31, 2011 | ||||||||||||||||||||
Reclassification | ||||||||||||||||||||
of MedCath | ||||||||||||||||||||
Partners as | Sale of | |||||||||||||||||||
Company | a Discontinued | Company | HHNM and | Company | ||||||||||||||||
Historical(1) | Operation(2) | Recast(3) | AHH(4) | Pro Forma | ||||||||||||||||
(In thousands, except per share data) | ||||||||||||||||||||
Net revenue | $ | 186,063 | $ | (4,285 | ) | $ | 181,778 | $ | (99,039 | ) | $ | 82,739 | ||||||||
Operating expenses: | ||||||||||||||||||||
Personnel expense | 66,313 | (1,337 | ) | 64,976 | (28,921 | ) | 36,055 | |||||||||||||
Medical supplies expense | 42,411 | (56 | ) | 42,355 | (25,624 | ) | 16,731 | |||||||||||||
Bad debt expense | 19,715 | — | 19,715 | (8,116 | ) | 11,599 | ||||||||||||||
Other operating expenses | 46,959 | (1,402 | ) | 45,557 | (17,159 | ) | 28,398 | |||||||||||||
Depreciation | 9,517 | (1,170 | ) | 8,347 | (3,938 | ) | 4,409 | |||||||||||||
Amortization | — | — | — | (16 | ) | (16 | ) | |||||||||||||
Impairment of long-lived assets and goodwill | 19,548 | (209 | ) | 19,339 | — | 19,339 | ||||||||||||||
Loss (gain) on disposal of property, equipment and other assets | 271 | (21 | ) | 250 | (30 | ) | 220 | |||||||||||||
Total operating expenses | 204,734 | (4,195 | ) | 200,539 | (83,804 | ) | 116,735 | |||||||||||||
Loss from operations | (18,671 | ) | (90 | ) | (18,761 | ) | (15,235 | ) | (33,996 | ) | ||||||||||
Other income (expenses): | ||||||||||||||||||||
Interest expense | (2,079 | ) | — | (2,079 | ) | 194 | (1,885 | ) | ||||||||||||
Interest and other income, net | 539 | 31 | 570 | (424 | ) | 146 | ||||||||||||||
Gain on sale of unconsolidated affiliates | 15,570 | — | 15,570 | — | 15,570 | |||||||||||||||
Equity in net earnings of unconsolidated affiliates | 1,860 | (693 | ) | 1,167 | — | 1,167 | ||||||||||||||
Total other income (expense), net | 15,890 | (662 | ) | 15,228 | (230 | ) | 14,998 | |||||||||||||
Loss from continuing operations before income taxes | (2,781 | ) | (752 | ) | (3,533 | ) | (15,465 | ) | (18,998 | ) | ||||||||||
Income tax benefit | (3,213 | ) | (300 | ) | (3,513 | ) | (4,401 | ) | (7,914 | ) | ||||||||||
Income (Loss) from continuing operations | 432 | (452 | ) | (20 | ) | (11,064 | ) | (11,084 | ) | |||||||||||
Less: Net income attributable to noncontrolling interest | (14,615 | ) | (29 | ) | (14,644 | ) | 4,007 | (10,637 | ) | |||||||||||
Loss attributable to MedCath Corporation | $ | (14,183 | ) | $ | (481 | ) | $ | (14,664 | ) | $ | (7,057 | ) | $ | (21,721 | ) | |||||
Loss from continuing operations attributable to MedCath Corporation common stockholders, net of taxes | $ | (5,179 | ) | $ | (481 | ) | $ | (5,660 | ) | $ | (7,057 | ) | $ | (12,717 | ) | |||||
Loss per share, basic | $ | (0.26 | ) | $ | (0.02 | ) | $ | (0.28 | ) | $ | (0.35 | ) | $ | (0.63 | ) | |||||
Loss per share, diluted | $ | (0.26 | ) | $ | (0.02 | ) | $ | (0.28 | ) | $ | (0.35 | ) | $ | (0.63 | ) | |||||
Weighted average number of shares, basic | 20,075 | 20,075 | 20,075 | 20,075 | 20,075 | |||||||||||||||
Dilutive effect of stock options and restricted stock | 6 | 6 | 6 | 6 | 6 | |||||||||||||||
Weighted average number of shares, diluted | 20,081 | 20,081 | 20,081 | 20,081 | 20,081 | |||||||||||||||
(1) | As reported in the Company’sForm 8-K on May 27, 2011. | |
(2) | Includes the historical results of MedCath Partners, which was effective May 1, 2011. The reclassification does not include the proforma effects of the net gain related to the sale as it would be reported in discontinued operations. | |
(3) | Represents the Company’s historical financial statements recast to exclude the historical operations of MedCath Partners. | |
(4) | Impact of the assumed sale of Heart Hospital of New Mexico and Arkansas Heart Hospital as though the sales occurred at the beginning of the reporting period. |
F-74
Table of Contents
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
REFLECTING SALE OF HEART HOSPITAL OF NEW MEXICO
Six Months Ended March 31, 2010 | ||||||||||||||||||||
Reclassification | ||||||||||||||||||||
of MedCath | ||||||||||||||||||||
Partners as | ||||||||||||||||||||
Company | a Discontinued | Company | Sale of | Company | ||||||||||||||||
Historical(1) | Operation(2) | Recast(3) | HHNM(4) | Pro Forma | ||||||||||||||||
(In thousands, except per share data) | ||||||||||||||||||||
Net revenue | $ | 184,607 | $ | (6,121 | ) | $ | 178,486 | $ | (41,145 | ) | $ | 137,341 | ||||||||
Operating expenses: | ||||||||||||||||||||
Personnel expense | 64,786 | (1,926 | ) | 62,860 | (11,062 | ) | 51,798 | |||||||||||||
Medical supplies expense | 45,688 | (309 | ) | 45,379 | (10,921 | ) | 34,458 | |||||||||||||
Bad debt expense | 17,437 | (23 | ) | 17,414 | (2,764 | ) | 14,650 | |||||||||||||
Other operating expenses | 44,640 | (2,550 | ) | 42,090 | (8,701 | ) | 33,389 | |||||||||||||
Pre-opening expenses | 866 | — | 866 | — | 866 | |||||||||||||||
Depreciation | 12,064 | (1,681 | ) | 10,383 | (1,227 | ) | 9,156 | |||||||||||||
Impairment of long-lived assets and goodwill | 14,700 | (114 | ) | 14,586 | — | 14,586 | ||||||||||||||
Loss (gain) on disposal of property, equipment and other assets | 27 | 4 | 31 | (8 | ) | 23 | ||||||||||||||
Total operating expenses | 200,208 | (6,599 | ) | 193,609 | (34,683 | ) | 158,926 | |||||||||||||
(Loss) income from operations | (15,601 | ) | 478 | (15,123 | ) | (6,462 | ) | (21,585 | ) | |||||||||||
Other income (expenses): | ||||||||||||||||||||
Interest expense | (1,999 | ) | 1 | (1,998 | ) | 99 | (1,899 | ) | ||||||||||||
Interest and other income, net | 85 | — | 85 | (17 | ) | 68 | ||||||||||||||
Gain on sale of unconsolidated affiliates | — | — | — | — | — | |||||||||||||||
Loss on not receivable | (1,507 | ) | — | (1,507 | ) | — | (1,507 | ) | ||||||||||||
Equity in net earnings of unconsolidated affiliates | 4,608 | (2,129 | ) | 2,479 | — | 2,479 | ||||||||||||||
Total other income (expense), net | 1,187 | (2,128 | ) | (941 | ) | 82 | (859 | ) | ||||||||||||
Loss from continuing operations before income taxes | (14,414 | ) | (1,650 | ) | (16,064 | ) | (6,380 | ) | (22,444 | ) | ||||||||||
Income tax benefit | (6,976 | ) | (634 | ) | (7,610 | ) | (1,937 | ) | (9,547 | ) | ||||||||||
Loss from continuing operations | (7,438 | ) | (1,016 | ) | (8,454 | ) | (4,443 | ) | (12,897 | ) | ||||||||||
Less: Net income attributable to noncontrolling interest | (3,064 | ) | (2,663 | ) | (5,727 | ) | 1,337 | (4,390 | ) | |||||||||||
Loss attributable to MedCath Corporation | $ | (10,502 | ) | $ | (3,679 | ) | $ | (14,181 | ) | $ | (3,106 | ) | $ | (17,287 | ) | |||||
Loss from continuing operations attributable to MedCath Corporation common stockholders, net of taxes | $ | (10,872 | ) | $ | (3,679 | ) | $ | (14,551 | ) | $ | (3,106 | ) | $ | (17,657 | ) | |||||
Loss per share, basic | $ | (0.55 | ) | $ | (0.19 | ) | $ | (0.74 | ) | $ | (0.16 | ) | $ | (0.89 | ) | |||||
Loss per share, diluted | $ | (0.55 | ) | $ | (0.19 | ) | $ | (0.74 | ) | $ | (0.16 | ) | $ | (0.89 | ) | |||||
Weighted average number of shares, basic | 19,786 | 19,786 | 19,786 | 19,786 | 19,786 | |||||||||||||||
Dilutive effect of stock options and restricted stock | — | — | — | — | — | |||||||||||||||
Weighted average number of shares, diluted | 19,786 | 19,786 | 19,786 | 19,786 | 19,786 | |||||||||||||||
(1) | As reported in the Company’sForm 8-K on May 27, 2011. | |
(2) | Includes the historical results of MedCath Partners, which was effective May 1, 2011. The reclassification does not include the proforma effects of the net gain related to the sale as it would be reported in discontinued operations. | |
(3) | Represents the Company’s historical financial statements recast to exclude the historical operations of MedCath Partners. | |
(4) | Impact of the assumed sale of Heart Hospital of New Mexico as though the sale occurred at the beginning of the reporting period. |
F-75
Table of Contents
Six Months Ended March 31, 2010 | ||||||||||||||||||||
Reclassification | ||||||||||||||||||||
of MedCath | ||||||||||||||||||||
Partners as a | ||||||||||||||||||||
Company | Discontinued | Company | Sale of | Company | ||||||||||||||||
Historical(1) | Operation(2) | Recast(3) | AHH(4) | Pro Forma | ||||||||||||||||
(In thousands, except per share data) | ||||||||||||||||||||
Net revenue | $ | 184,607 | $ | (6,121 | ) | $ | 178,486 | $ | (54,673 | ) | $ | 123,813 | ||||||||
Operating expenses: | ||||||||||||||||||||
Personnel expense | 64,786 | (1,926 | ) | 62,860 | (17,912 | ) | 44,948 | |||||||||||||
Medical supplies expense | 45,688 | (309 | ) | 45,379 | (17,996 | ) | 27,383 | |||||||||||||
Bad debt expense | 17,437 | (23 | ) | 17,414 | (3,436 | ) | 13,978 | |||||||||||||
Other operating expenses | 44,640 | (2,550 | ) | 42,090 | (7,753 | ) | 34,337 | |||||||||||||
Pre-opening expenses | 866 | — | 866 | — | 866 | |||||||||||||||
Depreciation | 12,064 | (1,681 | ) | 10,383 | (2,719 | ) | 7,664 | |||||||||||||
Impairment of long-lived assets and goodwill | 14,700 | (114 | ) | 14,586 | — | 14,586 | ||||||||||||||
Loss (gain) on disposal of property, equipment and other assets | 27 | 4 | 31 | (24 | ) | 7 | ||||||||||||||
Total operating expenses | 200,208 | (6,599 | ) | 193,609 | (49,840 | ) | 143,769 | |||||||||||||
(Loss) income from operations | (15,601 | ) | 478 | (15,123 | ) | (4,833 | ) | (19,956 | ) | |||||||||||
Other income (expenses): | ||||||||||||||||||||
Interest expense | (1,999 | ) | 1 | (1,998 | ) | 7 | (1,991 | ) | ||||||||||||
Interest and other income, net | 85 | — | 85 | — | 85 | |||||||||||||||
Gain on sale of unconsolidated affiliates | — | — | — | — | — | |||||||||||||||
Loss on not receivable | (1,507 | ) | — | (1,507 | ) | — | (1,507 | ) | ||||||||||||
Equity in net earnings of unconsolidated affiliates | 4,608 | (2,129 | ) | 2,479 | — | 2,479 | ||||||||||||||
Total other income (expense), net | 2,694 | (2,128 | ) | (941 | ) | 7 | (934 | ) | ||||||||||||
Loss from continuing operations before income taxes | (14,414 | ) | (1,650 | ) | (16,064 | ) | (4,826 | ) | (20,890 | ) | ||||||||||
Income tax benefit | (6,976 | ) | (634 | ) | (7,610 | ) | (1,361 | ) | (8,971 | ) | ||||||||||
Loss from continuing operations | (7,438 | ) | (1,016 | ) | (8,454 | ) | (3,465 | ) | (11,919 | ) | ||||||||||
Less: Net income attributable to noncontrolling interest | (3,064 | ) | (2,663 | ) | (5,727 | ) | 1,283 | (4,444 | ) | |||||||||||
Loss attributable to MedCath Corporation | $ | (10,502 | ) | $ | (3,679 | ) | $ | (14,181 | ) | $ | (2,182 | ) | $ | (16,363 | ) | |||||
Loss from continuing operations attributable to MedCath Corporation common stockholders, net of taxes | $ | (10,872 | ) | $ | (3,679 | ) | $ | (14,551 | ) | $ | (2,182 | ) | $ | (16,733 | ) | |||||
Loss per share, basic | $ | (0.55 | ) | $ | (0.19 | ) | $ | (0.74 | ) | $ | (0.11 | ) | $ | (0.85 | ) | |||||
Loss per share, diluted | $ | (0.55 | ) | $ | (0.19 | ) | $ | (0.74 | ) | $ | (0.11 | ) | $ | (0.85 | ) | |||||
Weighted average number of shares, basic | 19,786 | 19,786 | 19,786 | 19,786 | 19,786 | |||||||||||||||
Dilutive effect of stock options and restricted stock | — | — | — | — | — | |||||||||||||||
Weighted average number of shares, diluted | 19,786 | 19,786 | 19,786 | 19,786 | 19,786 | |||||||||||||||
(1) | As reported in the Company’sForm 8-K on May 27, 2011. | |
(2) | Includes the historical results of MedCath Partners, which was effective May 1, 2011. The reclassification does not include the proforma effects of the net gain related to the sale as it would be reported in discontinued operations. | |
(3) | Represents the Company’s historical financial statements recast to exclude the historical operations of MedCath Partners. | |
(4) | Impact of the assumed sale of Arkansas Heart Hospital as though the sale occurred at the beginning of the reporting period. |
F-76
Table of Contents
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
REFLECTING SALE OF HEART HOSPITAL OF NEW MEXICO & ARKANSAS
HEART HOSPITAL
Six Months Ended March 31, 2010 | ||||||||||||||||||||
Reclassification | ||||||||||||||||||||
of MedCath | ||||||||||||||||||||
Partners as a | Sale of | |||||||||||||||||||
Company | Discontinued | Company | HHNM and | Company | ||||||||||||||||
Historical(1) | Operation(2) | Recast(3) | AHH(4) | Pro Forma | ||||||||||||||||
(In thousands, except per share data) | ||||||||||||||||||||
Net revenue | $ | 184,607 | $ | (6,121 | ) | $ | 178,486 | $ | (95,818 | ) | $ | 82,668 | ||||||||
Operating expenses: | ||||||||||||||||||||
Personnel expense | 64,786 | (1,926 | ) | 62,860 | (28,974 | ) | 33,886 | |||||||||||||
Medical supplies expense | 45,688 | (309 | ) | 45,379 | (28,917 | ) | 16,462 | |||||||||||||
Bad debt expense | 17,437 | (23 | ) | 17,414 | (6,200 | ) | 11,214 | |||||||||||||
Other operating expenses | 44,640 | (2,550 | ) | 42,090 | (16,454 | ) | 25,636 | |||||||||||||
Pre-opening expenses | 866 | — | 866 | — | 866 | |||||||||||||||
Depreciation | 12,064 | (1,681 | ) | 10,383 | (3,946 | ) | 6,437 | |||||||||||||
Impairment of long-lived assets and goodwill | 14,700 | (114 | ) | 14,586 | — | 14,586 | ||||||||||||||
Loss (gain) on disposal of property, equipment and other assets | 27 | 4 | 31 | (32 | ) | (1 | ) | |||||||||||||
Total operating expenses | 200,208 | (6,599 | ) | 193,609 | (84,523 | ) | 109,086 | |||||||||||||
(Loss) income from operations | (15,601 | ) | 478 | (15,123 | ) | (11,295 | ) | (26,418 | ) | |||||||||||
Other income (expenses): | ||||||||||||||||||||
Interest expense | (1,999 | ) | 1 | (1,998 | ) | 106 | (1,892 | ) | ||||||||||||
Interest and other income, net | 85 | — | 85 | (17 | ) | 68 | ||||||||||||||
Gain on sale of unconsolidated affiliates | — | — | — | — | — | |||||||||||||||
Loss on not receivable | (1,507 | ) | — | (1,507 | ) | — | (1,507 | ) | ||||||||||||
Equity in net earnings of unconsolidated affiliates | 4,608 | (2,129 | ) | 2,479 | — | 2,479 | ||||||||||||||
Total other income (expense), net | 2,694 | (2,128 | ) | (941 | ) | 89 | (852 | ) | ||||||||||||
Loss from continuing operations before income taxes | (14,414 | ) | (1,650 | ) | (16,064 | ) | (11,206 | ) | (27,270 | ) | ||||||||||
Income tax benefit | (6,976 | ) | (634 | ) | (7,610 | ) | (3,298 | ) | (10,908 | ) | ||||||||||
Loss from continuing operations | (7,438 | ) | (1,016 | ) | (8,454 | ) | (7,908 | ) | (16,362 | ) | ||||||||||
Less: Net income attributable to noncontrolling interest | (3,064 | ) | (2,663 | ) | (5,727 | ) | 2,620 | (3,107 | ) | |||||||||||
Loss attributable to MedCath Corporation | $ | (10,502 | ) | $ | (3,679 | ) | $ | (14,181 | ) | $ | (5,288 | ) | $ | (19,469 | ) | |||||
Loss from continuing operations attributable to MedCath Corporation common stockholders, net of taxes | $ | (10,872 | ) | $ | (3,679 | ) | $ | (14,551 | ) | $ | (5,288 | ) | $ | (19,839 | ) | |||||
Loss per share, basic | $ | (0.55 | ) | $ | (0.19 | ) | $ | (0.74 | ) | $ | (0.27 | ) | $ | (1.00 | ) | |||||
Loss per share, diluted | $ | (0.55 | ) | $ | (0.19 | ) | $ | (0.74 | ) | $ | (0.27 | ) | $ | (1.00 | ) | |||||
Weighted average number of shares, basic | 19,786 | 19,786 | 19,786 | 19,786 | 19,786 | |||||||||||||||
Dilutive effect of stock options and restricted stock | — | — | — | — | — | |||||||||||||||
Weighted average number of shares, diluted | 19,786 | 19,786 | 19,786 | 19,786 | 19,786 | |||||||||||||||
(1) | As reported in the Company’sForm 8-K on May 27, 2011. | |
(2) | Includes the historical results of MedCath Partners, which was effective May 1, 2011. The reclassification does not include the proforma effects of the net gain related to the sale as it would be reported in discontinued operations. | |
(3) | Represents the Company’s historical financial statements recast to exclude the historical operations of MedCath Partners. | |
(4) | Impact of the assumed sale of Heart Hospital of New Mexico and Arkansas Heart Hospital as though the sales occurred at the beginning of the reporting period. |
F-77
Table of Contents
BY
AND
BETWEEN
LOVELACE HEALTH SYSTEM, INC.
AND
HEART HOSPITAL OF NEW MEXICO, LLC
Dated as of May 6, 2011
Table of Contents
Page | ||||||||
ARTICLE 1 DEFINITIONS | 1 | |||||||
1.1 | Definitions | 1 | ||||||
1.2 | Interpretation | 6 | ||||||
1.3 | Schedules | 7 | ||||||
ARTICLE 2 SALE OF PURCHASED ASSETS AND CERTAIN RELATED MATTERS | 8 | |||||||
2.1 | Sale of Purchased Assets | 8 | ||||||
2.2 | Excluded Assets | 9 | ||||||
2.3 | Assumed Liabilities | 10 | ||||||
2.4 | Excluded Liabilities | 10 | ||||||
2.5 | Purchase Price | 11 | ||||||
2.6 | Interim Cash Purchase Price | 11 | ||||||
2.7 | Final Cash Purchase Price | 11 | ||||||
2.8 | Dispute of Adjustments/Reconciliation of Final Cash Purchase Price | 11 | ||||||
2.9 | Proration | 12 | ||||||
2.10 | No Compensation for Referrals | 12 | ||||||
ARTICLE 3 CLOSING | 12 | |||||||
3.1 | Closing | 12 | ||||||
3.2 | Actions of Buyer at Closing | 12 | ||||||
3.3 | Actions of Seller at Closing | 13 | ||||||
3.4 | Additional Acts | 13 | ||||||
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF BUYER | 14 | |||||||
4.1 | Organization, Qualification and Capacity | 14 | ||||||
4.2 | Powers; Consents; Absence of Conflicts With Other Agreements, Etc. | 14 | ||||||
4.3 | Binding Agreement | 14 | ||||||
4.4 | Sufficient Resources | 14 | ||||||
4.5 | Litigation | 14 | ||||||
4.6 | Buyer Acknowledgements | 14 | ||||||
4.7 | Statements True and Correct | 15 | ||||||
4.8 | No Other Representations and Warranties | 15 | ||||||
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF SELLER | 15 | |||||||
5.1 | Incorporation, Qualification and Capacity | 15 | ||||||
5.2 | Powers; Consents; Absence of Conflicts With Other Agreements, Etc | 15 | ||||||
5.3 | Affiliates and Minority Interests | 15 | ||||||
5.4 | No Outstanding Rights | 16 | ||||||
5.5 | Binding Agreement | 16 | ||||||
5.6 | Seller Financial Information | 16 | ||||||
5.7 | Permits and Approvals | 16 | ||||||
5.8 | Intellectual Property | 17 | ||||||
5.9 | Medicare Participation/Accreditation | 17 | ||||||
5.10 | Regulatory Compliance | 18 | ||||||
5.11 | Scheduled Contracts | 18 | ||||||
5.12 | Encumbrances; Real Property | 18 | ||||||
5.13 | Personal Property | 19 |
i
Table of Contents
Page | ||||||||
5.14 | Insurance | 19 | ||||||
5.15 | Employee Benefit Plans | 19 | ||||||
5.16 | Hospital Employees and Employee Relations | 20 | ||||||
5.17 | Litigation or Proceedings | 20 | ||||||
5.18 | Tax Matters | 21 | ||||||
5.19 | Environmental Matters | 21 | ||||||
5.20 | Absence of Changes | 22 | ||||||
5.21 | Medical Staff Matters | 22 | ||||||
5.22 | Sufficiency of Purchased Assets | 22 | ||||||
5.23 | Experimental Procedures | 23 | ||||||
5.24 | Supplies | 23 | ||||||
5.25 | Third Party Payor Cost Reports | 23 | ||||||
5.26 | Compliance Program | 23 | ||||||
5.27 | Statements True and Correct | 23 | ||||||
5.28 | No Other Representations and Warranties | 23 | ||||||
ARTICLE 6 COVENANTS OF BUYER | 24 | |||||||
6.1 | Notification of Certain Matters | 24 | ||||||
6.2 | HSR Act Filings | 24 | ||||||
6.3 | Approvals | 24 | ||||||
6.4 | Survey | 25 | ||||||
6.5 | Environmental Survey | 25 | ||||||
ARTICLE 7 COVENANTS OF SELLER | 25 | |||||||
7.1 | Information | 25 | ||||||
7.2 | Operations | 25 | ||||||
7.3 | Negative Covenants | 26 | ||||||
7.4 | Notification of Certain Matters | 26 | ||||||
7.5 | HSR Act Filings | 27 | ||||||
7.6 | Additional Financial Information | 27 | ||||||
7.7 | No-Shop Clause | 27 | ||||||
7.8 | Title Policy | 28 | ||||||
7.9 | Provider Agreements | 28 | ||||||
7.10 | Approvals | 28 | ||||||
ARTICLE 8 CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER | 28 | |||||||
8.1 | Compliance With Covenants | 28 | ||||||
8.2 | HSR Act Waiting Period | 28 | ||||||
8.3 | Action/Proceeding | 28 | ||||||
8.4 | Representations and Warranties | 29 | ||||||
8.5 | Approvals | 29 | ||||||
ARTICLE 9 CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER | 29 | |||||||
9.1 | Compliance with Covenants | 29 | ||||||
9.2 | Pre-Closing Confirmations | 29 | ||||||
9.3 | Action/Proceeding | 29 | ||||||
9.4 | Representations and Warranties | 30 | ||||||
9.5 | Transition Services Agreement | 30 |
ii
Table of Contents
Page | ||||||||
9.6 | Title Policy | 30 | ||||||
9.7 | Absence of Certain Changes | 30 | ||||||
9.8 | Releases | 30 | ||||||
9.9 | Environmental Report | 30 | ||||||
9.10 | Seller’s Deliverables | 30 | ||||||
ARTICLE 10 TRANSITIONAL ARRANGEMENTS | 30 | |||||||
10.1 | Transition Patients | 30 | ||||||
10.2 | Seller’s Cost Reports | 31 | ||||||
10.3 | Employees; Benefits | 31 | ||||||
10.4 | Misdirected Payments | 33 | ||||||
ARTICLE 11 ADDITIONAL AGREEMENTS | 33 | |||||||
11.1 | Allocations | 33 | ||||||
11.2 | Termination Prior to Closing | 33 | ||||||
11.3 | Buyer Preservation and Seller Access to Records After the Closing | 34 | ||||||
11.4 | Reproduction of Documents | 35 | ||||||
11.5 | Tax Matters | 35 | ||||||
11.6 | Consented Assignment and Permits | 35 | ||||||
11.7 | Use of Controlled Substance Permits | 35 | ||||||
11.8 | Risk of Loss; Preclosing Casualty | 36 | ||||||
11.9 | Change of Name | 36 | ||||||
11.10 | Transition Services Agreement | 36 | ||||||
11.11 | CVSTAT Program | 37 | ||||||
11.12 | Quality Reporting | 37 | ||||||
11.13 | Supplemental Insurance | 37 | ||||||
11.14 | Seller’s Covenant Not to Compete | 37 | ||||||
11.15 | Information from Virtual Data Room | 38 | ||||||
11.16 | MedCath Corporation Shareholder Approval | 38 | ||||||
11.17 | Post Closing Access to Information | 39 | ||||||
ARTICLE 12 GENERAL | 39 | |||||||
12.1 | Consents, Approvals and Discretion | 39 | ||||||
12.2 | Legal Fees and Costs | 39 | ||||||
12.3 | Choice of Law; Waiver of Jury Trial; Limitation on Damages | 39 | ||||||
12.4 | Benefit; Assignment | 39 | ||||||
12.5 | Effective Time; Accounting Date | 40 | ||||||
12.6 | No Brokerage | 40 | ||||||
12.7 | Cost of Transaction | 40 | ||||||
12.8 | Confidentiality | 40 | ||||||
12.9 | Press Release | 41 | ||||||
12.10 | Waiver of Breach | 41 | ||||||
12.11 | Notice | 41 | ||||||
12.12 | Severability | 41 | ||||||
12.13 | No Inferences | 42 | ||||||
12.14 | Divisions and Headings of this Agreement | 42 | ||||||
12.15 | No Third-Party Beneficiaries | 42 |
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12.16 | Tax and Medicare Advice and Reliance | 42 | ||||||
12.17 | Entire Agreement; Amendment | 42 | ||||||
12.18 | Seller’s Knowledge | 42 | ||||||
12.19 | Multiple Counterparts | 42 | ||||||
12.20 | Disclaimer of Warranties | 42 | ||||||
12.21 | No Survival Period | 42 | ||||||
12.22 | Right to Seek Damages | 43 | ||||||
12.23 | Right to Take Limited Liability Company and Corporate Action | 43 | ||||||
12.24 | Guarantee of Buyer’s Obligations | 43 |
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Schedule 1.1A | Capital Lease Obligations | |
Schedule 1.1B | Net Working Capital | |
Schedule 1.1C | Leased Real Property | |
Schedule 1.1D | Owned Real Property | |
Schedule 2.1(f) | Software | |
Schedule 2.2(d) | Excluded Assets | |
Schedule 2.2(i) | Excluded Intellectual Property | |
Schedule 4.2 | Required Approvals for Buyer | |
Schedule 5.1 | Outstanding Corporate Approvals | |
Schedule 5.2 | Required Approvals for Seller | |
Schedule 5.3 | Affiliates and Minority Interests in Seller | |
Schedule 5.4 | Rights Regarding Purchased Assets | |
Schedule 5.6 | Historical Financial Information | |
Schedule 5.7 | Permits | |
Schedule 5.8 | Intellectual Property | |
Schedule 5.9 | Medicare Participation/Accreditation | |
Schedule 5.10 | Regulatory Compliance | |
Schedule 5.11 | Scheduled Contracts | |
Schedule 5.14 | Insurance | |
Schedule 5.15 | Employee Benefit Plans | |
Schedule 5.16(a) | Labor Disputes | |
Schedule 5.16(b) | Hospital Employees | |
Schedule 5.17 | Litigation or Proceedings against Seller | |
Schedule 5.18 | Tax Matters | |
Schedule 5.19 | Environmental Matters | |
Schedule 5.20 | Certain Seller Changes | |
Schedule 5.25 | Unaudited Cost Reports | |
Schedule 5.26 | Audits and Investigations | |
Schedule 7.2 | Operating Covenants | |
Schedule 7.3 | Permitted Operations | |
Schedule 10.1(a) | ACE Demonstration Project Payments | |
Schedule 10.3 | COBRA Beneficiaries | |
Schedule 11.1 | Allocations | |
Schedule 11.13 | Supplemental Insurance | |
Schedule 12.18 | Persons with Knowledge | |
LIST OF EXHIBITS | ||
Exhibit A | Limited Power of Attorney | |
Exhibit B | Transition Services Agreement |
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If to Buyer: | c/o Ardent Health Services One Burton Hills Boulevard Suite 250 Nashville, Tennessee 37215 Attention: President and Chief Executive Officer Facsimile: (615)296-6351 | |
with copy to: | Ardent Health Services One Burton Hills Boulevard Suite 250 Nashville, Tennessee 37215 Attention: General Counsel Facsimile: (615)296-6384 | |
If to Seller | c/o MedCath Corporation | |
10720 Sikes Place, Suite 300 Charlotte, NC 28277 Attention: Chief Financial Officer Facsimile: (704) 708-5035 | ||
with a copy to: | Moore and Van Allen PLLC 100 North Tryon Street Suite 4700 Charlotte, NC 28202 Attention: Hal A. Levinson, Esq. Facsimile: (704)331-1159 |
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By: | /s/ Ron Stern |
Title: | CFO |
By: | NM Hospital Management, LLC, its Manager | |
By: |
Title: | Manager |
a Delaware corporation
By: |
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By: |
By: | NM Hospital Management, LLC, its Manager | |
By: |
Title: | Manager |
a Delaware corporation
By: | /s/ Clint B. Adams |
Title: | CFO |
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By: |
By: | NM Hospital Management, LLC, its Manager | |
By: | /s/ O. Edwin French |
Title: | Manager |
By: |
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a North Carolina limited liability company
By: | /s/ O. Edwin French |
Title: | Manager |
a Delaware corporation
By: | /s/ O. Edwin French |
Title: | President & CEO |
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BY
AND
AMONG
AR-MED, LLC,
BRUCE MURPHY, M.D.,
MEDCATH OF LITTLE ROCK, L.L.C.,
MEDCATH OF ARKANSAS, LLC
AND MEDCATH FINANCE COMPANY, LLC
Dated as of May 6, 2011
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ARTICLE 1 DEFINITIONS | 1 | |||||||
1.1 | Definitions | 1 | ||||||
1.2 | Interpretation | 6 | ||||||
1.3 | Schedules | 7 | ||||||
ARTICLE 2 SALE AND PURCHASE; PAYMENT OF FINCO OBLIGATIONS | 7 | |||||||
2.1 | Transfer of Equity Interest | 7 | ||||||
2.2 | [Intentionally omitted.] | 7 | ||||||
2.3 | Purchase Price for Equity Interest | 7 | ||||||
2.4 | Payment for Finco Obligations | 7 | ||||||
2.5 | Interim Equity Purchase Price | 7 | ||||||
2.6 | Final Equity Purchase Price | 7 | ||||||
2.7 | Dispute of Adjustments/Reconciliation of Final Equity Purchase Price | 7 | ||||||
2.8 | Allocation of Total Payment | 8 | ||||||
ARTICLE 3 CLOSING | 8 | |||||||
3.1 | Closing | 8 | ||||||
3.2 | Actions of Buyer at Closing | 9 | ||||||
3.3 | Actions of Seller at Closing | 9 | ||||||
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF BUYER | 10 | |||||||
4.1 | Organization, Qualification and Capacity | 10 | ||||||
4.2 | Powers; Consents; Absence of Conflicts With Other Contracts | 10 | ||||||
4.3 | Binding Agreement | 10 | ||||||
4.4 | Litigation | 10 | ||||||
4.5 | Buyer Acknowledgements | 10 | ||||||
4.6 | No Other Representations and Warranties | 11 | ||||||
ARTICLE 4-B REPRESENTATIONS AND WARRANTIES OF DR. MURPHY | 11 | |||||||
4.1-B | Financial Statements of Dr. Murphy | 11 | ||||||
4.2-B | No Other Representations and Warranties | 11 | ||||||
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF SELLER | 12 | |||||||
5.1 | Organization, Qualification and Capacity of Seller | 12 | ||||||
5.2 | Ownership of Equity Interest | 12 | ||||||
5.3 | Powers; Absence of Conflicts with other Contracts | 12 | ||||||
5.4 | Binding Agreement | 12 | ||||||
5.5 | Access to Records Related to Certain Liabilities and Contracts | 12 | ||||||
5.6 | No Other Representations and Warranties | 12 | ||||||
ARTICLE 6 [INTENTIONALLY OMITTED.] | 13 | |||||||
ARTICLE 7 COVENANTS OF BUYER | 13 | |||||||
7.1 | Notification of Certain Matters | 13 | ||||||
7.2 | Approvals | 13 |
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ARTICLE 8 COVENANTS OF SELLER | 13 | |||||||
8.1 | Information | 13 | ||||||
8.2 | Notification of Certain Matters | 13 | ||||||
8.3 | No-Shop Clause | 13 | ||||||
8.4 | Agreement to Cooperate with Buyer in Arranging for Financing | 14 | ||||||
ARTICLE 9 CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER | 14 | |||||||
9.1 | Compliance With Covenants | 14 | ||||||
9.2 | Action/Proceeding | 14 | ||||||
9.3 | Representations and Warranties | 14 | ||||||
9.4 | Approvals | 14 | ||||||
9.5 | [Intentionally omitted.] | 15 | ||||||
9.6 | Amounts Due to Seller or MedCath | 15 | ||||||
ARTICLE 10 CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER | 15 | |||||||
10.1 | Compliance with Covenants | 15 | ||||||
10.2 | Action/Proceeding | 15 | ||||||
10.3 | Representations and Warranties | 15 | ||||||
ARTICLE 11 ADDITIONAL, AGREEMENTS | 16 | |||||||
11.1 | Termination Prior to Closing | 16 | ||||||
11.2 | Assignment of Employment Agreements | 16 | ||||||
11.3 | Buyer Preservation and Seller Access to Records After the Closing | 16 | ||||||
11.4 | Reproduction of Documents | 17 | ||||||
11.5 | Tax Matters | 17 | ||||||
11.6 | Change of Name | 18 | ||||||
11.7 | Insurance | 18 | ||||||
11.8 | Cessation of Contractual Benefits and Withdrawal from MedCath Employee Benefit Plans; Transfer to New Company Plans | 18 | ||||||
11.9 | Payment of Additional Outstanding Expenses | 18 | ||||||
ARTICLE 12 INDEMNIFICATION; LIMITATION ON DAMAGES | 19 | |||||||
12.1 | Indemnification | 19 | ||||||
12.2 | Specific Performance by Seller | 20 | ||||||
12.3 | Seller’s Remedies upon Buyer’s Material Breach of this Agreement | 20 | ||||||
12.4 | Release | 20 | ||||||
12.5 | Survival | 20 | ||||||
ARTICLE 13 GENERAL | 21 | |||||||
13.1 | Consents, Approvals and Discretion | 21 | ||||||
13.2 | Legal Fees and Costs | 21 | ||||||
13.3 | Choice of Law; Jurisdiction and Venue; Damages | 21 | ||||||
13.4 | Benefit; Assignment | 21 | ||||||
13.5 | Effective Time; Accounting Date | 21 | ||||||
13.6 | No Brokerage | 21 | ||||||
13.7 | Cost of Transaction | 21 | ||||||
13.8 | Confidentiality | 21 |
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13.9 | Press Release | 22 | ||||||
13.10 | Waiver of Breach | 22 | ||||||
13.11 | Notice | 22 | ||||||
13.12 | Severability | 23 | ||||||
13.13 | No Inferences | 23 | ||||||
13.14 | Divisions and Headings of this Agreement | 23 | ||||||
13.15 | No Third-Party Beneficiaries | 23 | ||||||
13.16 | Tax and Medicare Advice and Reliance | 23 | ||||||
13.17 | Entire Agreement; Amendment | 23 | ||||||
13.18 | Knowledge | 24 | ||||||
13.19 | Multiple Counterparts | 24 | ||||||
13.20 | Right to Take Action | 24 | ||||||
13.21 | Guaranty of Buyer’s Obligations | 24 | ||||||
Exhibits |
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If to Company, Buyer, or Dr. Murphy: | c/o Bruce E. Murphy, M.D. PERSONAL & CONFIDENTIAL 7 Shackleford West Blvd. Little Rock, AR 72211-3714 Facsimile: ( ) - | |
with copies to: | Gregory M. Hopkins, Esq. Hopkins Law Firm, A Professional Association 1000 West Second Street Little Rock, AR 72201 Facsimile: (501) 375-0231 |
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If to Seller or Finco: | c/o MedCath Corporation 10720 Sikes Place, Suite 300 Charlotte, NC 28277 Attention: Chief Financial Officer Facsimile: (704) 708-5035 | |
with a copy to: | Moore and Van Allen PLLC 100 North Tryon Street Suite 4700 Charlotte, NC 28202 Attention: Hal A. Levinson, Esq. Facsimile: (704) 331-1159 |
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BUYER: | AR-MED | |
By: /s/ Bruce Murphy its President | ||
By: Name: Title: | ||
DR. MURPHY: | /s/ Bruce Murphy | |
BRUCE MURPHY, M.D. |
COMPANY: (for the purpose of agreeing to be bound under Section 11.6, Article 12 and Section 13.21) | MEDCATH OF LITTLE ROCK, L.L.C. | |
By: MedCath of Arkansas, LLC, its Manager | ||
By: /s/ O. Edwin French Name: O. Edwin French Title: Manager | ||
SELLER: | MEDCATH OF ARKANSAS, LLC a North Carolina limited liability company | |
By: /s/ O. Edwin French Name: O. Edwin French Title: Manager |
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• | Reviewed certain business and financial information relating to the Hospital that we deemed to be relevant; | |
• | Reviewed certain information, including financial forecasts, relating to the business, earnings, cash flow, assets, liabilities and prospects of the Hospital furnished to us by the Company; | |
• | Concerning the two matters above, conducted discussions with members of senior management and representatives of the Company; | |
• | Reviewed the consideration and valuation multiples for the Hospital and compared them with those of certain publicly traded companies that we deemed to be relevant; | |
• | Reviewed the results of operations of the Hospital and compared them with those of certain publicly traded companies that we deemed to be relevant; | |
• | Compared the proposed financial terms of the Transaction with the financial terms of certain other transactions that we deemed to be relevant; | |
• | Participated in certain discussions among representatives of the Company, the Board and the Special Committee and their financial and legal advisors; |
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• | Reviewed drafts as of May 4, 2011 of the Agreement by and between Lovelace Health System, Inc. and Heart Hospital of New Mexico, LLC, and certain related documents (the “Transaction Documents”); and | |
• | Reviewed such other financial studies and analyses and took into account such other matters as we deemed necessary, including our assessment of general economic, market and monetary conditions. |
• | Hospital’s audited financial statements for the fiscal years ended September 30, 2006 through September 30, 2010; | |
• | Hospital’s internally prepared financial statements for the six month periods ended March 31, 2010 and March 31, 2011; | |
• | Financial projections prepared by the Hospital management for the fiscal years ending September 30, 2011 through September 30, 2013; | |
• | A timeline detailing the negotiations between Navigant Capital Advisors, LLC and various parties regarding the sale of the Hospital; | |
• | A Confidential Information Memorandum concerning the potential sale of the Hospital prepared by Navigant Capital Advisors, LLC; | |
• | A review of publicly available financial data of certain publicly traded companies that we deemed relevant; | |
• | A review of available information regarding certain merger and acquisition transactions that we deemed relevant; | |
• | Discussions with both the Hospital’s and MedCath’s management concerning the Hospital’s business, industry, history, and prospects; | |
• | A site visit to the Hospital located in Albuquerque, New Mexico; and | |
• | An analysis of other facts and data resulting in our conclusions. |
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• | Reviewed certain business and financial information relating to Arkansas LLC that we deemed to be relevant; | |
• | Reviewed certain information, including financial forecasts, relating to the business, earnings, cash flow, assets, liabilities and prospects of Arkansas LLC furnished to us by the Company; | |
• | Concerning the two matter above, conducted discussions with members of senior management and representatives of the Company; | |
• | Reviewed the consideration and valuation multiples for the Hospital and compared them with those of certain publicly traded companies that we deemed to be relevant; | |
• | Reviewed the results of operations of Arkansas LLC and compared them with those of certain publicly traded companies that we deemed to be relevant; | |
• | Compared the proposed financial terms of the Transaction with the financial terms of certain other transactions that we deemed to be relevant; | |
• | Participated in certain discussions among representatives of the Company, the Board and the Special Committee and their financial and legal advisors; | |
• | Reviewed drafts as of May 4, 2011 of the Agreement by and between AR-Med, Dr. Bruce Murphy, Arkansas LLC, MedCath Arkansas, and MedCath Finance Company, LLC and certain related documents (the “Transaction Documents”); and | |
• | Reviewed such other financial studies and analyses and took into account such other matters as we deemed necessary, including our assessment of general economic, market and monetary conditions. |
• | Arkansas LLC’s audited financial statements for the fiscal years ended September 30, 2006 through September 30, 2010; | |
• | Arkansas LLC’s internally prepared financial statements for the six month periods ended March 31, 2010 and March 31, 2011; | |
• | Financial projections prepared by Arkansas LLC management for the fiscal years ending September 30, 2011 through September 30, 2013; | |
• | A timeline detailing the negotiations between Navigant and various parties regarding the sale of the Hospital; | |
• | A Confidential Information Memorandum concerning the potential sale of the Hospital prepared by Navigant; |
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• | A review of publicly available financial data of certain publicly traded companies that we deemed relevant; | |
• | A review of available information regarding certain merger and acquisition transactions that we deemed relevant; | |
• | Discussions with both the Hospital’s and MedCath’s management concerning the Hospital’s business, industry, history, and prospects; | |
• | A site visit to Heart Hospital of Arkansas located in Little Rock, Arkansas; and | |
• | An analysis of other facts and data resulting in our conclusions. |
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ANNUAL MEETING OF STOCKHOLDERS OF MEDCATH CORPORATION to be held on July 26, 2011 Important Notice Regarding the Availability of Proxy Materials for the Stockholder Meeting to Be Held on July 26, 2011: The Company’s Notice of Meeting for the Annual Meeting, Proxy Statement for the Annual Meeting, form of proxy card and 2010 Annual Report on Form 10-K, as amended, are available at: l_selectgroup=Proxy%20Filings and hoenix.zhtml?c=129804&p=irol-reports, respectively. Please sign, date and mail your proxy card in the envelope provided as soon as possible. Please detach along perforated line and mail in the envelope provided.20233304033300001000 7 072611 PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE x FOR AGAINST ABSTAIN 1. To elect two individuals to the board of directors to serve for a three-year term as a Class I 2. To approve the sale of substantially all of the assets of Heart Hospital of New Mexico director. to Lovelace Health Systems, Inc. as described in the accompanying proxy statement. NOMINEES: FOR ALL NOMINEES O Robert S. McCoy, Jr.3. To approve the sale of MedCath’s equity interests in Arkansas Heart Hospital to AR-MED, LLC as described in the accompanying proxy statement. O James A. Deal 4. To cast a non-binding advisory vote on MedCath’s compensation of our named executive WITHHOLD AUTHORITY FOR ALL NOMINEESofficers as described in the accompanying proxy statement. FOR ALL EXCEPT 1 year 2 years 3 years ABSTAIN (See instructions below) 5. To cast a non-binding advisory vote on the frequency of holding a non-binding advisory vote on executive compensation. FOR AGAINST ABSTAIN 6. To cast a non-binding advisory vote on compensation and other payments to executives as described in the accompanying proxy statement. 7. To ratify the appointment of Deloitte & Touche LLP as the Company’s independent registered public accounting firm for the fiscal year ending September 30, 2011. INSTRUCTIONS:To withhold authority to vote for any individual nominee(s), mark “FOR ALL EXCEPT” 8. To approve the adjournment proposal as described in the accompanying proxy and fill in the circle next to each nominee you wish to withhold, as shown here: statement. This appointment of proxy, when properly executed, will be voted in the manner directed by the undersigned stockholder(s). If no direction is given, this proxy will be voted FOR the election of each nominee in Proposal 1 and FOR approval of Proposals 2, 3, 4, 6, 7 and 8 and 1 YEAR in Proposal 5, and in their discretion, the proxies are authorized to vote upon any other business as may properly come before the meeting. PLEASE COMPLETE, SIGN, DATE, AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE. (for directions to the annual meeting, stockholders may contact James A. Parker, MedCath’s Secretary, at (704) 815-7700) MARK “X” HERE IF YOU PLAN TO ATTEND THE MEETING. To change the address on your account, please check the box at right and indicate your new address in the address space above. Please note that changes to the registered name(s) on the account may not be submitted via this method. Signature of Stockholder Date: Signature of Stockholder Date: Note: Please sign exactly as your name or names appear on this Proxy. When shares are held jointly, each holder should sign. When signing as executor, administrator, attorney, trustee or guardian, please give full title as such. If the signer is a corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is a partnership, please sign in partnership name by authorized person. |
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MEDCATH CORPORATION ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON JULY 26, 2011 THIS REVOCABLE PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS The undersigned hereby appoints O. Edwin French and James A. Parker as proxies, each with full power of substitution, to represent and vote as designated on the reverse side, all the shares of Common Stock of Medcath Corporation which the undersigned would be entitled to vote if personally present at the Annual Meeting of Stockholders to be held at the Moore & Van Allen PLLC located at 100 North Tryon Street, Suite 4700, Charlotte, North Carolina 28202, on July 26, 2011, or any adjournment or postponement thereof. (Continued and to be signed on the reverse side) |