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þ | Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
o | Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
Delaware | 20-1764048 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. employer identification number) |
P.O. Box 2034
Mechanicsburg, Pennsylvania 17055
(Address of principal executive offices and zip code)
(Registrant’s telephone number, including area code)
ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 2006
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• | additional changes in government reimbursement for our services may result in increased costs and have an adverse effect on our future net operating revenues and profitability, such as the regulations released by the Centers for Medicare & Medicaid Services, or CMS, on May 2, 2006 and the proposed regulations published by CMS on February 1, 2007; | ||
• | the failure of our long-term acute care hospitals to maintain their status as such may cause our net operating revenues and profitability to decline; | ||
• | the failure of our facilities operated as “hospitals within hospitals” to qualify as hospitals separate from their host hospitals may cause our net operating revenues and profitability to decline; | ||
• | implementation of modifications to the admissions policies for our inpatient rehabilitation facilities, as required to achieve compliance with Medicare guidelines, may result in a loss of patient volume at these hospitals and, as a result, may reduce our future net operating revenues and profitability; | ||
• | implementation of annual caps that limit the amounts that can be paid for outpatient therapy services rendered to any Medicare beneficiary may reduce our future net operating revenues and profitability; | ||
• | a government investigation or assertion that we have violated applicable regulations may result in sanctions or reputational harm and increased costs; | ||
• | integration of recently acquired operations and future acquisitions may prove difficult or unsuccessful, use significant resources or expose us to unforeseen liabilities; | ||
• | private third-party payors for our services may undertake future cost containment initiatives that limit our future net operating revenues and profitability; | ||
• | the failure to maintain established relationships with the physicians in our markets could reduce our net operating revenues and profitability; |
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• | shortages in qualified nurses or therapists could increase our operating costs significantly; | ||
• | competition may limit our ability to grow and result in a decrease in our net operating revenues and profitability; | ||
• | the loss of key members of our management team could significantly disrupt our operations; and | ||
• | the effect of claims asserted against us or lack of adequate available insurance could subject us to substantial uninsured liabilities. |
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Distribution | ||||
Medical Condition | of Patients | |||
Respiratory disorder | 32 | % | ||
Neuromuscular disorder | 31 | |||
Cardiac disorder | 11 | |||
Wound care | 9 | |||
Other | 17 | |||
Total | 100.0 | % | ||
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• | optimizing staffing based on our occupancy and the clinical needs of our patients; | ||
• | centralizing administrative functions such as accounting, finance, payroll, legal, reimbursement, compliance, human resources and billing and collection; | ||
• | standardizing management information systems to aid in financial reporting as well as billing and collecting; and | ||
• | participating in group purchasing arrangements to receive discounted prices for pharmaceuticals and medical supplies. |
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Fiscal Year Ended | ||||||||||||
December 31, | ||||||||||||
Net Operating Revenues by Payor Source (1) | 2004 | 2005 (2) | 2006 | |||||||||
Medicare | 49.8 | % | 56.4 | 53.2 | ||||||||
Commercial insurance (3) | 42.3 | 37.2 | 40.1 | |||||||||
Private and other (4) | 5.7 | 4.3 | 4.9 | |||||||||
Medicaid | 2.2 | 2.1 | 1.8 | |||||||||
Total | 100.0 | % | 100.0 | % | 100.0 | % | ||||||
(1) | This table excludes the net operating revenues of our Canadian operations which were sold on March 1, 2006 and are now reported as a discontinued operation. See “Business — Subsequent Event.” | |
(2) | The net operating revenues for the period after the Merger, February 25, 2005 through December 31, 2005 (Successor period), has been added to the net operating revenues for the period from January 1, 2005 through February 24, 2005 (Predecessor period), to arrive at the combined fiscal year ended December 31, 2005. | |
(3) | Includes commercial healthcare insurance carriers, health maintenance organizations, preferred provider organizations, workers’ compensation and managed care programs. | |
(4) | Includes self payors, contract management services and non-patient related payments. Self pay revenues represent less than 1% of total net operating revenues. |
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• | facility and professional licensure, including certificates of need; | ||
• | conduct of operations, including financial relationships among healthcare providers, Medicare fraud and abuse, and physician self-referral; | ||
• | addition of facilities and services and enrollment of newly developed facilities in the Medicare program; | ||
• | payment for services; and | ||
• | safeguarding protected health information. |
• | the difficulty and expense of integrating acquired personnel into our business; | ||
• | diversion of management’s time from existing operations; | ||
• | potential loss of key employees or customers of acquired companies; and | ||
• | assumption of the liabilities and exposure to unforeseen liabilities of acquired companies, including liabilities for failure to comply with healthcare regulations. |
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Hospital Name | City | State | Beds | |||||||||
Select Specialty Hospital — Birmingham | Birmingham | AL | 38 | |||||||||
Select Specialty Hospital — Fort Smith | Fort Smith | AR | 34 | |||||||||
Select Specialty Hospital — Little Rock | Little Rock | AR | 43 | |||||||||
Select Specialty Hospital — Little Rock/ BMC | Little Rock | AR | 37 | |||||||||
Select Specialty Hospital — Arizona (Mesa Campus) | Mesa | AZ | 37 | |||||||||
Select Specialty Hospital — Arizona (Phoenix Downtown Campus) | Phoenix | AZ | 33 | |||||||||
Select Specialty Hospital — Phoenix | Phoenix | AZ | 48 | |||||||||
Select Specialty Hospital — Arizona (Scottsdale Campus) | Scottsdale | AZ | 29 | |||||||||
Select Specialty Hospital — Colorado Springs | Colorado Springs | CO | 30 | |||||||||
Select Specialty Hospital — Denver | Denver | CO | 37 | |||||||||
Select Specialty Hospital — Denver (South Campus) | Denver | CO | 28 | |||||||||
Select Specialty Hospital — Wilmington | Wilmington | DE | 35 | |||||||||
Select Specialty Hospital — Miami | Miami | FL | 40 | |||||||||
Select Specialty Hospital — Orlando | Orlando | FL | 35 | |||||||||
Select Specialty Hospital — Panama City | Panama City | FL | 30 | |||||||||
Select Specialty Hospital — Atlanta | Atlanta | GA | 30 | |||||||||
Select Specialty Hospital — Augusta | Augusta | GA | 35 | |||||||||
Select Specialty Hospital — Augusta/ UH | Augusta | GA | 30 | |||||||||
Select Specialty Hospital — Savannah | Savannah | GA | 30 | |||||||||
Select Specialty Hospital — Quad Cities | Davenport | IA | 50 | |||||||||
Select Specialty Hospital — Beech Grove | Beech Grove | IN | 40 | |||||||||
Select Specialty Hospital — Bloomington | Bloomington | IN | 30 | |||||||||
Select Specialty Hospital — Evansville | Evansville | IN | 35 | |||||||||
Select Specialty Hospital — Fort Wayne | Fort Wayne | IN | 32 | |||||||||
Select Specialty Hospital — Northwest Indiana | Hammond | IN | 70 | |||||||||
Select Specialty Hospital — Indianapolis | Indianapolis | IN | 54 | |||||||||
Select Specialty Hospital — Kansas City | Kansas City | KS | 40 | |||||||||
Select Specialty Hospital — Topeka | Topeka | KS | 34 | |||||||||
Select Specialty Hospital — Wichita | Wichita | KS | 35 | |||||||||
Select Specialty Hospital — Wichita (Central Campus) | Wichita | KS | 30 | |||||||||
Select Specialty Hospital — Lexington | Lexington | KY | 41 | |||||||||
Select Specialty Hospital — New Orleans | Metairie | LA | 31 | |||||||||
Select Specialty Hospital — Battle Creek | Battle Creek | MI | 32 | |||||||||
Select Specialty Hospital — Northwest Detroit | Detroit | MI | 36 | |||||||||
Select Specialty Hospital — Flint | Flint | MI | 32 | |||||||||
Select Specialty Hospital — Grosse Point | Grosse Point | MI | 30 | |||||||||
Select Specialty Hospital — Kalamazoo | Kalamazoo | MI | 25 | |||||||||
Select Specialty Hospital — Macomb County | Mount Clemens | MI | 36 | |||||||||
Select Specialty Hospital — Western Michigan | Muskegon | MI | 31 | |||||||||
Select Specialty Hospital — Pontiac | Pontiac | MI | 30 | |||||||||
Select Specialty Hospital — Saginaw | Saginaw | MI | 32 | |||||||||
Select Specialty Hospital — Wyandotte | Wyandotte | MI | 35 | |||||||||
Select Specialty Hospital — Ann Arbor | Ypsilanti | MI | 36 | |||||||||
Select Specialty Hospital — Western Missouri | Kansas City | MO | 34 | |||||||||
Select Specialty Hospital — St. Louis | St. Louis | MO | 33 | |||||||||
Select Specialty Hospital — Gulf Coast | Gulfport | MS | 39 | |||||||||
Select Specialty Hospital — Jackson | Jackson | MS | 53 | |||||||||
Select Specialty Hospital — Durham | Durham | NC | 30 | |||||||||
Select Specialty Hospital — Winston-Salem | Winston-Salem | NC | 42 | |||||||||
Select Specialty Hospital — Omaha (North Campus) | Omaha | NE | 36 | |||||||||
Select Specialty Hospital — Omaha (South Campus) | Papillion | NE | 40 | |||||||||
Select Specialty Hospital — Northeast New Jersey | Belleville | NJ | 62 | |||||||||
Kessler Institute for Rehabilitation (Welkind Campus) | Chester | NJ | 72 |
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Hospital Name | City | State | Beds | |||||||||
Kessler Institute for Rehabilitation (East Campus) | East Orange | NJ | 78 | |||||||||
Kessler Institute for Rehabilitation (North Campus) | Saddle Brook | NJ | 92 | |||||||||
Kessler Institute for Rehabilitation (West Campus) | West Orange | NJ | 80 | |||||||||
Select Specialty Hospital — Akron/ SHS | Akron | OH | 34 | |||||||||
Select Specialty Hospital — Northeast Ohio (Akron Campus) | Akron | OH | 31 | |||||||||
Select Specialty Hospital — Northeast Ohio (Canton Campus) | Canton | OH | 30 | |||||||||
Select Specialty Hospital — Cincinnati | Cincinnati | OH | 36 | |||||||||
Select Specialty Hospital — Columbus (Grant Campus) | Columbus | OH | 60 | |||||||||
Select Specialty Hospital — Columbus (Mt. Carmel Campus) | Columbus | OH | 24 | |||||||||
Select Specialty Hospital — Columbus/ East | Columbus | OH | 36 | |||||||||
Select Specialty Hospital — Youngstown | Youngstown | OH | 31 | |||||||||
Select Specialty Hospital — Zanesville | Zanesville | OH | 35 | |||||||||
Select Specialty Hospital — Oklahoma City | Oklahoma City | OK | 72 | |||||||||
Select Specialty Hospital — Tulsa | Tulsa | OK | 30 | |||||||||
Select Specialty Hospital — Central Pennsylvania (Camp Hill Campus) | Camp Hill | PA | 31 | |||||||||
Select Specialty Hospital — Danville | Danville | PA | 30 | |||||||||
Select Specialty Hospital — Erie | Erie | PA | 50 | |||||||||
Select Specialty Hospital — Greensburg | Greensburg | PA | 31 | |||||||||
Select Specialty Hospital — Johnstown | Johnstown | PA | 39 | |||||||||
Select Specialty Hospital — Lancaster | Lancaster | PA | 30 | |||||||||
Select Specialty Hospital — McKeesport | McKeesport | PA | 30 | |||||||||
Select Specialty Hospital — Pittsburgh/ UPMC | Pittsburgh | PA | 32 | |||||||||
Select Specialty Hospital — Central Pennsylvania (York Campus) | York | PA | 23 | |||||||||
Select Specialty Hospital — Sioux Falls | Sioux Falls | SD | 24 | |||||||||
Select Specialty Hospital — TriCities | Bristol | TN | 33 | |||||||||
Select Specialty Hospital — Knoxville | Knoxville | TN | 35 | |||||||||
Select Specialty Hospital — Knoxville (U.T. Campus) | Knoxville | TN | 25 | |||||||||
Select Specialty Hospital — North Knoxville | Knoxville | TN | 33 | |||||||||
Select Specialty Hospital — Memphis | Memphis | TN | 37 | |||||||||
Select Specialty Hospital — Nashville | Nashville | TN | 37 | |||||||||
Select Specialty Hospital — Dallas | Carrollton | TX | 60 | |||||||||
Select Specialty Hospital — Conroe | Conroe | TX | 46 | |||||||||
Select Specialty Hospital — South Dallas | DeSoto | TX | 100 | |||||||||
Select Specialty Hospital — Houston (Houston Heights) | Houston | TX | 130 | |||||||||
Select Specialty Hospital — Houston (Houston Medical Center) | Houston | TX | 86 | |||||||||
Select Specialty Hospital — Houston (Houston West) | Houston | TX | 56 | |||||||||
Select Specialty Hospital — Longview | Longview | TX | 32 | |||||||||
Select Specialty Hospital — Midland | Midland | TX | 29 | |||||||||
Select Specialty Hospital — San Antonio | San Antonio | TX | 44 | |||||||||
Select Specialty Hospital — Madison | Madison | WI | 23 | |||||||||
Select Specialty Hospital — Milwaukee (St. Luke’s Campus) | Milwaukee | WI | 29 | |||||||||
Select Specialty Hospital — Milwaukee | West Allis | WI | 34 | |||||||||
Select Specialty Hospital ��� Charleston | Charleston | WV | 32 | |||||||||
Total Beds | 3,867 | |||||||||||
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ITEM 5. | MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES |
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Predecessor | Successor | ||||||||||||||||||||||||
Period from | Period from | ||||||||||||||||||||||||
January 1 | February 25 | ||||||||||||||||||||||||
through | through | Year ended | |||||||||||||||||||||||
Year Ended December 31, | February 24, | December 31, | December | ||||||||||||||||||||||
2002 | 2003 | 2004 | 2005 | 2005 | 31, 2006 | ||||||||||||||||||||
(in thousands, except ratios) | |||||||||||||||||||||||||
Statement of Operations Data: | |||||||||||||||||||||||||
Net operating revenues | $ | 1,086,894 | $ | 1,341,657 | $ | 1,601,524 | $ | 277,736 | $ | 1,580,706 | $ | 1,851,498 | |||||||||||||
Operating expenses(1)(2) | 966,596 | 1,165,814 | 1,340,068 | 373,418 | 1,322,068 | 1,546,956 | |||||||||||||||||||
Depreciation and amortization | 25,071 | 33,663 | 38,951 | 5,933 | 37,922 | 46,668 | |||||||||||||||||||
Income (loss) from operations | 95,227 | 142,180 | 222,505 | (101,615 | ) | 220,716 | 257,874 | ||||||||||||||||||
Loss on early retirement of debt(3) | — | — | — | (42,736 | ) | — | — | ||||||||||||||||||
Merger related charges(4) | — | — | — | (12,025 | ) | — | — | ||||||||||||||||||
Equity in income from joint ventures | — | 824 | — | — | — | — | |||||||||||||||||||
Other income | — | — | 1,096 | 267 | 1,092 | — | |||||||||||||||||||
Interest expense, net(5) | (25,293 | ) | (24,499 | ) | (30,716 | ) | (4,128 | ) | (101,441 | ) | (130,538 | ) | |||||||||||||
Income (loss) from continuing operations before minority interests and income taxes | 69,934 | 118,505 | 192,885 | (160,237 | ) | 120,367 | 127,336 | ||||||||||||||||||
Minority interests(6) | 1,404 | 1,661 | 2,608 | 330 | 1,776 | 1,414 | |||||||||||||||||||
Income (loss) from continuing operations before income taxes | 68,530 | 116,844 | 190,277 | (160,567 | ) | 118,591 | 125,922 | ||||||||||||||||||
Income tax provision (benefit) | 26,822 | 46,238 | 76,551 | (59,794 | ) | 49,336 | 43,521 | ||||||||||||||||||
Income (loss) from continuing operations | 41,708 | 70,606 | 113,726 | (100,773 | ) | 69,255 | 82,401 | ||||||||||||||||||
Income from discontinued operations, net of tax | 2,523 | 3,865 | 4,458 | 522 | 3,072 | 12,478 | |||||||||||||||||||
Net income (loss) | 44,231 | 74,471 | 118,184 | (100,251 | ) | 72,327 | 94,879 | ||||||||||||||||||
Less: Preferred dividends | — | — | — | — | 23,519 | 22,663 | |||||||||||||||||||
Net income (loss) available to common stockholders | $ | 44,231 | $ | 74,471 | $ | 118,184 | $ | (100,251 | ) | $ | 48,808 | $ | 72,216 | ||||||||||||
Other Financial Data: | |||||||||||||||||||||||||
Capital expenditures | $ | 43,183 | $ | 35,852 | $ | 32,626 | $ | 2,586 | $ | 107,360 | $ | 155,096 | |||||||||||||
Ratio of earnings to fixed charges(7) | 2.3x | 3.1x | 3.9x | n/a | 1.7x | 1.6x | |||||||||||||||||||
Cash Flow Data: | |||||||||||||||||||||||||
Net cash provided by operating activities | $ | 120,812 | $ | 246,248 | $ | 174,276 | $ | 19,056 | $ | 38,155 | $ | 227,651 | |||||||||||||
Net cash used in investing activities | (54,048 | ) | (261,452 | ) | (28,959 | ) | (110,757 | ) | (110,054 | ) | (81,481 | ) | |||||||||||||
Net cash provided by (used in) financing activities | (21,423 | ) | 124,318 | (63,959 | ) | 94 | (48,604 | ) | (100,466 | ) | |||||||||||||||
Balance Sheet Data (at end of period): | |||||||||||||||||||||||||
Cash and cash equivalents | $ | 56,062 | $ | 165,507 | $ | 247,476 | $ | 35,861 | $ | 81,600 | |||||||||||||||
Working capital | 130,621 | 188,380 | 313,715 | 77,556 | 27,904 | ||||||||||||||||||||
Total assets | 739,059 | 1,078,998 | 1,113,721 | 2,168,385 | 2,182,524 | ||||||||||||||||||||
Total debt | 260,217 | 367,503 | 354,590 | 1,628,889 | 1,538,503 | ||||||||||||||||||||
Total stockholders’ equity | 286,418 | 419,175 | 515,943 | (244,658 | ) | (169,139 | ) |
(1) | Operating expenses include cost of services, general and administrative expenses, and bad debt expenses. | |
(2) | Includes stock compensation expense related to the repurchase of outstanding stock options in the Predecessor period from January 1, 2005 through February 24, 2005, compensation expense related to restricted stock, stock options and long-term incentive compensation in the Successor period from February 25, 2005 through December 31, 2005, and compensation related to restricted stock and stock options in the Successor period for the year ended December 31, 2006. | |
(3) | In connection with the Merger, Select tendered for all of its 91/2% senior subordinated notes due 2009 and all of its 71/2% senior subordinated notes due 2013. The loss in the Predecessor period of January 1, 2005 through February 24, 2005 consists of the tender premium cost of $34.8 million and the remaining write-off of unamortized deferred financing costs of $7.9 million. | |
(4) | As a result of the Merger, Select incurred costs in the Predecessor period of January 1, 2005 through February 24, 2005 directly related to the Merger. This included the cost of the investment advisor hired by the special committee of Select’s board of directors to evaluate the Merger, legal and accounting fees, costs associated with the Hart-Scott-Rodino filing relating to the Merger, cost associated with purchasing a six-year extended reporting period under our directors and officers liability insurance policy and other associated expenses. | |
(5) | Net interest equals interest expense minus interest income. |
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(6) | Reflects interests held by other parties in subsidiaries, limited liability companies and limited partnerships owned and controlled by us. | |
(7) | For purposes of computing the ratio of earnings to fixed charges, earnings consist of income (loss) from continuing operations before income taxes, fixed charges, minority interest in income of subsidiaries and income (loss) from unconsolidated joint ventures. Fixed charges include preferred dividend requirements of subsidiaries, deemed dividends on preferred stock conversion, interest expense and the portion of operating rents that is deemed representative of an interest factor. For the period January 1, 2005 through February 24, 2005 (Predecessor period), the ratio coverage was less than 1:1. We would have had to generate additional earnings of approximately $160.3 million to achieve a coverage ratio of 1:1. |
ITEM 7. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. |
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Balance as of December 31, | |||||||||||||||||
2005 | 2006 | ||||||||||||||||
Over 90 | Over 90 | ||||||||||||||||
0-90 Days | Days | 0-90 Days | Days | ||||||||||||||
Medicare and Medicaid | $ | 111,707 | $ | 24,141 | $ | 56,558 | $ | 15,216 | |||||||||
Commercial insurance, and other | 131,087 | 64,754 | 116,552 | 66,907 | |||||||||||||
Total net accounts receivable | $ | 242,794 | $ | 88,895 | $ | 173,110 | $ | 82,123 | |||||||||
As of December 31, | |||||||||
2005 | 2006 | ||||||||
0 to 90 days | 73.2 | % | 67.8 | % | |||||
91 to 180 days | 9.7 | % | 10.8 | % | |||||
181 to 365 days | 7.6 | % | 8.4 | % | |||||
Over 365 days | 9.5 | % | 13.0 | % | |||||
Total | 100.0 | % | 100.0 | % | |||||
As of December 31, | |||||||||
2005 | 2006 | ||||||||
Insured receivables | 99.1 | % | 99.1 | % | |||||
Self-pay receivables (including deductible and copayments) | 0.9 | % | 0.9 | % | |||||
Total | 100.0 | % | 100.0 | % | |||||
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Combined | ||||||||||||
Fiscal Year Ended | Year Ended | Fiscal Year Ended | ||||||||||
December 31, | December 31, | December 31, | ||||||||||
2004 | 2005 | 2006 | ||||||||||
Specialty hospital data(1): | ||||||||||||
Number of hospitals — start of period | 83 | 86 | 101 | |||||||||
Number of hospital start-ups | 4 | — | 3 | |||||||||
Number of hospitals acquired | — | 17 | — | |||||||||
Number of hospitals closed | — | (2 | ) | (4 | ) | |||||||
Number of hospitals consolidated | (1 | ) | — | (4 | ) | |||||||
Number of hospitals — end of period | 86 | 101 | 96 | |||||||||
Available licensed beds | 3,403 | 3,829 | 3,867 | |||||||||
Admissions | 33,523 | 39,963 | 39,668 | |||||||||
Patient days | 816,898 | 985,025 | 969,590 | |||||||||
Average length of stay (days) | 24 | 25 | 24 | |||||||||
Net revenue per patient day(2) | $ | 1,306 | $ | 1,370 | $ | 1,392 | ||||||
Occupancy rate | 67 | % | 70 | % | 69 | % | ||||||
Percent patient days — Medicare | 74 | % | 75 | % | 73 | % | ||||||
Outpatient rehabilitation data (3): | ||||||||||||
Number of clinics owned — start of period | 645 | 589 | 553 | |||||||||
Number of clinics acquired | 1 | — | — | |||||||||
Number of clinic start-ups | 19 | 22 | 12 | |||||||||
Number of clinics closed/sold | (76 | ) | (58 | ) | (88 | ) | ||||||
Number of clinics owned — end of period | 589 | 553 | 477 | |||||||||
Number of clinics managed — end of period | 51 | 55 | 67 | |||||||||
Total number of clinics (all) — end of period | 640 | 608 | 544 | |||||||||
Number of visits | 3,621,129 | 3,308,620 | 2,972,243 | |||||||||
Net revenue per visit(4) | $ | 90 | $ | 89 | $ | 94 |
(1) | Specialty hospitals consist of long-term acute care hospitals and inpatient rehabilitation facilities. | |
(2) | Net revenue per patient day is calculated by dividing specialty hospital patient service revenues by the total number of patient days. | |
(3) | Clinic data has been restated to remove the clinics operated by CBIL, which is being reported as a discontinued operation. CBIL operated 101 and 109 clinics at December 31, 2004 and 2005, respectively. | |
(4) | Net revenue per visit is calculated by dividing outpatient rehabilitation clinic revenue by the total number of visits. For purposes of this computation, outpatient rehabilitation clinic revenue does not include contract services revenue. |
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Predecessor | Successor | Combined | ||||||||||
Period from | Period from | |||||||||||
January 1 | February 25 | |||||||||||
through | through | Year Ended | ||||||||||
February 24, | December | December 31, | ||||||||||
2005 | 31, 2005 | 2005 | ||||||||||
(in thousands) | ||||||||||||
Net operating revenues | $ | 277,736 | $ | 1,580,706 | $ | 1,858,442 | ||||||
Costs and expenses: | ||||||||||||
Cost of services | 244,321 | 1,244,361 | 1,488,682 | |||||||||
General and administrative | 122,509 | 59,494 | 182,003 | |||||||||
Bad debt expense | 6,588 | 18,213 | 24,801 | |||||||||
Depreciation and amortization | 5,933 | 37,922 | 43,855 | |||||||||
Total costs and expenses | 379,351 | 1,359,990 | 1,739,341 | |||||||||
Income (loss) from operations | (101,615 | ) | 220,716 | 119,101 | ||||||||
Other income and expense: | ||||||||||||
Loss on early retirement of debt | (42,736 | ) | — | (42,736 | ) | |||||||
Merger related charges | (12,025 | ) | — | (12,025 | ) | |||||||
Other income | 267 | 1,092 | 1,359 | |||||||||
Interest income | 523 | 767 | 1,290 | |||||||||
Interest expense | (4,651 | ) | (102,208 | ) | (106,859 | ) | ||||||
Income (loss) from continuing operations before minority interests and income taxes | (160,237 | ) | 120,367 | (39,870 | ) | |||||||
Minority interest in consolidated subsidiary companies | 330 | 1,776 | 2,106 | |||||||||
Income (loss) from continuing operations before income taxes | (160,567 | ) | 118,591 | (41,976 | ) | |||||||
Income tax expense (benefit) | (59,794 | ) | 49,336 | (10,458 | ) | |||||||
Income (loss) from continuing operations | (100,773 | ) | 69,255 | (31,518 | ) | |||||||
Income from discontinued operations, net of tax | 522 | 3,072 | 3,594 | |||||||||
Net income (loss) | $ | (100,251 | ) | $ | 72,327 | $ | (27,924 | ) | ||||
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Combined | ||||||||||||
Year | ||||||||||||
Fiscal Year | Ended | Fiscal Year | ||||||||||
Ended | December | Ended | ||||||||||
December 31, | 31, | December | ||||||||||
2004 | 2005(1) | 31, 2006 | ||||||||||
Net operating revenues | 100.0 | % | 100.0 | % | 100.0 | % | ||||||
Cost of services(2) | 77.8 | 80.1 | 80.2 | |||||||||
General and administrative | 2.9 | 9.8 | 2.4 | |||||||||
Bad debt expense | 3.0 | 1.3 | 1.0 | |||||||||
Depreciation and amortization | 2.4 | 2.4 | 2.5 | |||||||||
Income from operations | 13.9 | 6.4 | 13.9 | |||||||||
Loss on early retirement of debt | — | (2.3 | ) | — | ||||||||
Merger related charges | — | (0.7 | ) | — | ||||||||
Other income | 0.1 | 0.1 | — | |||||||||
Interest expense, net | (1.9 | ) | (5.7 | ) | (7.1 | ) | ||||||
Income (loss) from continuing operations before minority interests and income taxes | 12.1 | (2.2 | ) | 6.8 | ||||||||
Minority interests | 0.2 | 0.1 | 0.1 | |||||||||
Income (loss) from continuing operations before income taxes | 11.9 | (2.3 | ) | 6.7 | ||||||||
Income tax expense (benefit) | 4.8 | (0.6 | ) | 2.4 | ||||||||
Income (loss) from continuing operations | 7.1 | (1.7 | ) | 4.3 | ||||||||
Income from discontinued operations, net of tax | 0.3 | 0.2 | 0.7 | |||||||||
Net income (loss) | 7.4 | % | (1.5 | )% | 5.0 | % | ||||||
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Combined | ||||||||||||||||||||
Year | ||||||||||||||||||||
Ended | % | % | ||||||||||||||||||
Fiscal Year Ended | December | Fiscal Year Ended | Change | Change | ||||||||||||||||
December 31, | 31, | December 31, | 2004- | 2005- | ||||||||||||||||
2004 | 2005(1) | 2006 | 2005 | 2006 | ||||||||||||||||
(in thousands) | ||||||||||||||||||||
Net operating revenues: | ||||||||||||||||||||
Specialty hospitals | $ | 1,091,699 | $ | 1,372,483 | $ | 1,378,543 | 25.7 | % | 0.4 | % | ||||||||||
Outpatient rehabilitation | 498,830 | 480,711 | 470,339 | (3.6 | ) | (2.2 | ) | |||||||||||||
Other(4) | 10,995 | 5,248 | 2,616 | (52.3 | ) | (50.2 | ) | |||||||||||||
Total company | $ | 1,601,524 | $ | 1,858,442 | $ | 1,851,498 | 16.0 | % | (0.4 | )% | ||||||||||
Income (loss) from operations: | ||||||||||||||||||||
Specialty hospitals | $ | 217,128 | $ | 280,789 | $ | 252,539 | 29.3 | % | (10.1 | )% | ||||||||||
Outpatient rehabilitation | 57,777 | 56,052 | 51,859 | (3.0 | ) | (7.5 | ) | |||||||||||||
Other(4) | (52,400 | ) | (217,740 | ) | (46,524 | ) | (315.5 | ) | 78.6 | |||||||||||
Total company | $ | 222,505 | $ | 119,101 | $ | 257,874 | (46.5 | )% | 116.5 | % | ||||||||||
Adjusted EBITDA:(3) | ||||||||||||||||||||
Specialty hospitals | $ | 236,516 | $ | 308,144 | $ | 283,270 | 30.3 | % | (8.1 | )% | ||||||||||
Outpatient rehabilitation | 71,562 | 65,957 | 64,823 | (7.8 | ) | (1.7 | ) | |||||||||||||
Other(4) | (46,622 | ) | (44,167 | ) | (39,769 | ) | 5.3 | 10.0 | ||||||||||||
Adjusted EBITDA margins:(3) | ||||||||||||||||||||
Specialty hospitals | 21.7 | % | 22.5 | % | 20.5 | % | 3.7 | % | (8.9 | )% | ||||||||||
Outpatient rehabilitation | 14.3 | 13.7 | 13.8 | (4.2 | ) | 0.7 | ||||||||||||||
Other(4) : | N/M | N/M | N/M | N/M | N/M | |||||||||||||||
Total assets: | ||||||||||||||||||||
Specialty hospitals | $ | 522,183 | $ | 1,656,224 | $ | 1,742,803 | ||||||||||||||
Outpatient rehabilitation | 318,180 | 293,720 | 258,773 | |||||||||||||||||
Other | 273,358 | 218,441 | 180,948 | |||||||||||||||||
Total company(4) | $ | 1,113,721 | $ | 2,168,385 | $ | 2,182,524 | ||||||||||||||
Purchases of property and equipment, net: | ||||||||||||||||||||
Specialty hospitals | $ | 24,182 | $ | 102,323 | $ | 146,291 | ||||||||||||||
Outpatient rehabilitation | 5,885 | 3,750 | 6,527 | |||||||||||||||||
Other(4) | 2,559 | 3,873 | 2,278 | |||||||||||||||||
Total company | $ | 32,626 | $ | 109,946 | $ | 155,096 | ||||||||||||||
Twelve Months Ended | ||||||||
December 31, | ||||||||
2004 | 2005(1) | |||||||
(in thousands) | ||||||||
Net operating revenue | ||||||||
Specialty hospitals net operating revenue | $ | 1,091,699 | $ | 1,372,483 | ||||
Less: Specialty hospitals opened, acquired or closed after 1/1/04 | 30,754 | 218,837 | ||||||
Specialty hospitals same store net operating revenue | $ | 1,060,945 | $ | 1,153,646 | ||||
Adjusted EBITDA(3) | ||||||||
Specialty hospitals Adjusted EBITDA(3) | $ | 236,516 | $ | 308,144 | ||||
Less: Specialty hospitals opened, acquired or closed after 1/1/04 | (4,591 | ) | 34,095 | |||||
Specialty hospitals same store Adjusted EBITDA(3) | $ | 241,107 | $ | 274,049 | ||||
All specialty hospitals Adjusted EBITDA margin(3) | 21.7 | % | 22.5 | % | ||||
Specialty hospitals same store Adjusted EBITDA margin(3) | 22.7 | % | 23.8 | % |
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Twelve Months Ended | ||||||||
December 31, | ||||||||
2005(1) | 2006 | |||||||
(in thousands) | ||||||||
Net operating revenue | ||||||||
Specialty hospitals net operating revenue | $ | 1,372,483 | $ | 1,378,543 | ||||
Less: Specialty hospitals opened, acquired or closed after 1/1/05 | 49,046 | 23,764 | ||||||
Specialty hospitals same store net operating revenue | $ | 1,323,437 | $ | 1,354,779 | ||||
Adjusted EBITDA(3) | ||||||||
Specialty hospitals Adjusted EBITDA(3) | $ | 308,144 | $ | 283,270 | ||||
Less: Specialty hospitals opened, acquired or closed after 1/1/05 | 5,404 | (9,344 | ) | |||||
Specialty hospitals same store Adjusted EBITDA(3) | $ | 302,740 | $ | 292,614 | ||||
All specialty hospitals Adjusted EBITDA margin(3) | 22.5 | % | 20.5 | % | ||||
Specialty hospitals same store Adjusted EBITDA margin(3) | 22.9 | % | 21.6 | % |
N/M — Not Meaningful. | ||
(1) | The financial data for the period after the Merger, February 25, 2005 through December 31, 2005 (Successor period), has been added to the financial data for the period from January 1, 2005 through February 24, 2005 (Predecessor period), to arrive at the combined year ended December 31, 2005. | |
(2) | Cost of services includes salaries, wages and benefits, operating supplies, lease and rent expense and other operating costs. | |
(3) | We define Adjusted EBITDA as net income before interest, income taxes, depreciation and amortization, income from discontinued operations, loss on early retirement of debt, merger related charges, stock compensation expense, long-term incentive compensation, other income and minority interest. We believe that the presentation of Adjusted EBITDA is important to investors because Adjusted EBITDA is commonly used as an analytical indicator of performance by investors within the healthcare industry. Adjusted EBITDA is used by management to evaluate financial performance and determine resource allocation for each of our operating units. Adjusted EBITDA is not a measure of financial performance under generally accepted accounting principles. Items excluded from Adjusted EBITDA are significant components in understanding and assessing financial performance. Adjusted EBITDA should not be considered in isolation or as an alternative to, or substitute for, net income, cash flows generated by operations, investing or financing activities, or other financial statement data presented in the consolidated financial statements as indicators of financial performance or liquidity. Because Adjusted EBITDA is not a measurement determined in accordance with generally accepted accounting principles and is thus susceptible to varying calculations, Adjusted EBITDA as presented may not be comparable to other similarly titled measures of other companies. See footnote 13 to our audited consolidated financial statements for a reconciliation of net income to Adjusted EBITDA as utilized by us in reporting our segment performance in accordance with SFAS No. 131. | |
(4) | Other includes our general and administrative services, as well as businesses associated with the sale of home medical equipment, infusion/intravenous services and non-healthcare services. |
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• | a $300.0 million revolving loan facility that will terminate on February 24, 2011, including both a letter of credit sub-facility and a swingline loan sub-facility, and | ||
• | a $580.0 million term loan facility that matures on February 24, 2012. |
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Payments Due by Year | ||||||||||||||||||||
Contractual Obligations | Total | 2007 | 2008-2010 | 2011-2012 | After 2012 | |||||||||||||||
(in thousands) | ||||||||||||||||||||
75/8% senior subordinated notes | $ | 660,000 | $ | — | $ | — | $ | — | $ | 660,000 | ||||||||||
Senior secured credit facility | 569,850 | 5,800 | 17,400 | 546,650 | — | |||||||||||||||
10% senior subordinated notes (1) | 132,785 | — | — | — | 132,785 | |||||||||||||||
Senior floating rate notes | 175,000 | — | — | — | 175,000 | |||||||||||||||
Seller notes | 413 | 258 | 155 | — | — | |||||||||||||||
Capital lease obligations | 94 | 49 | 45 | — | — | |||||||||||||||
Other debt obligations | 361 | 102 | 259 | — | — | |||||||||||||||
Total debt | 1,538,503 | 6,209 | 17,859 | 546,650 | 967,785 | |||||||||||||||
Interest (2) | 870,617 | 121,379 | 361,667 | 189,238 | 198,333 | |||||||||||||||
Letters of credit outstanding | 24,501 | 50 | — | 24,451 | — | |||||||||||||||
Purchase obligations | 4,081 | 2,103 | 1,978 | — | — | |||||||||||||||
Construction contracts | 48,067 | 48,067 | — | — | — | |||||||||||||||
Naming, promotional and sponsorship agreement | 58,883 | 2,501 | 7,858 | 5,547 | 42,977 | |||||||||||||||
Operating leases | 198,111 | 63,743 | 90,967 | 17,918 | 25,483 | |||||||||||||||
Related party operating leases | 15,155 | 1,992 | 5,660 | 3,610 | 3,893 | |||||||||||||||
Total contractual cash obligations | $ | 2,757,918 | $ | 246,044 | $ | 485,989 | $ | 787,414 | $ | 1,238,471 | ||||||||||
(1) | Reflects the balance sheet liability of Holdings’ senior subordinated notes calculated in accordance with GAAP. The balance sheet liability so reflected is less than the $150.0 million aggregate principal amount of such notes that were issued with an original issued discount totaling $17.2 million. Interest on the senior subordinated notes accrued on the full principal amount thereof and Holdings will be obligated to repay the full principal thereof at maturity or upon any mandatory or voluntary prepayment thereof. | |
(2) | The interest obligation was calculated using the average interest rate at December 31, 2006 of 6.73% for the senior secured credit facility, the stated interest rate for the 75/8% senior subordinated notes and the 10% senior subordinated notes, 10.2% for the senior floating rate notes and 6.0% for seller notes, capital lease obligations and other debt obligations. |
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Name | Age | Position(s) | ||||
Rocco A. Ortenzio | 74 | Director and Executive Chairman | ||||
Robert A. Ortenzio | 49 | Director and Chief Executive Officer | ||||
Russell L. Carson | 62 | Director | ||||
David S. Chernow | 49 | Director | ||||
Bryan C. Cressey | 57 | Director | ||||
James E. Dalton, Jr. | 64 | Director | ||||
Thomas A. Scully | 49 | Director | ||||
Leopold Swergold | 67 | Director | ||||
Sean M. Traynor | 38 | Director | ||||
Patricia A. Rice | 60 | President and Chief Operating Officer | ||||
David W. Cross | 60 | Executive Vice President and Chief Development Officer | ||||
S. Frank Fritsch | 55 | Executive Vice President and Chief Human Resources Officer | ||||
Martin F. Jackson | 52 | Executive Vice President and Chief Financial Officer | ||||
James J. Talalai | 45 | Executive Vice President and Chief Information Officer | ||||
Michael E. Tarvin | 46 | Executive Vice President, General Counsel and Secretary | ||||
Scott A. Romberger | 46 | Senior Vice President, Controller and Chief Accounting Officer |
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• | Base Salary | ||
• | Annual Performance-Based Bonuses for senior executive officers | ||
• | Annual Discretionary Bonuses for other executive officers | ||
• | Holdings’ Long-Term Cash Incentive Plan |
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• | Equity compensation | ||
• | Perquisites | ||
• | General benefits |
Target Bonus | ||
Named Executive Officer | (% of Base Salary) | |
Rocco A. Ortenzio | 80% | |
Robert A. Ortenzio | 80% | |
Patricia A. Rice | 50% | |
Martin F. Jackson | 50% |
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Target Bonus | ||
Named Executive Officer | (% of Base Salary) | |
Rocco A. Ortenzio | 80% | |
Robert A. Ortenzio | 80% | |
Patricia A. Rice | 50% | |
Martin F. Jackson | 50% |
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Named Executive Officer | Cash Plan Units | |
Robert A. Ortenzio | 35,000 | |
Rocco A. Ortenzio | 25,000 | |
Patricia A. Rice | 15,000 | |
Martin F. Jackson | 7,000 |
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The Compensation Committee | ||
Russell L. Carson | ||
David S. Chernow | ||
Bryan C. Cressey | ||
Robert A. Ortenzio | ||
Rocco A. Ortenzio |
Non-Equity | Change in | |||||||||||||||||||||||||||||||||||
Stock | Option | Incentive Plan | Pension | All Other | Total | |||||||||||||||||||||||||||||||
Name & Principal | Salary | Bonus | Awards | Awards | Compensation | Value | Compensation | Compensation | ||||||||||||||||||||||||||||
Position | Year | ($) | ($)(1) | ($)(2) | ($) | ($) | ($) | ($)(3) | ($) | |||||||||||||||||||||||||||
Rocco A. Ortenzio Executive Chairman | 2006 | 824,000 | — | — | — | — | — | 137,605 | 961,605 | |||||||||||||||||||||||||||
Robert A. Ortenzio Chief Executive Officer | 2006 | 824,000 | — | 2,604,033 | — | — | — | 150,040 | 3,578,073 | |||||||||||||||||||||||||||
Patricia A. Rice President and Chief Operating Officer | 2006 | 592,250 | — | 444,609 | — | — | — | 158,230 | 1,195,089 | |||||||||||||||||||||||||||
Martin F. Jackson Executive Vice President and Chief Financial Officer | 2006 | 371,315 | 50,000 | 222,304 | — | — | — | 6,600 | 650,219 | |||||||||||||||||||||||||||
Scott A. Romberger Senior Vice President, Controller and Chief Accounting Officer | 2006 | 260,000 | 93,600 | 20,156 | — | — | — | 6,600 | 380,356 |
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Name | Aircraft Usage ($) | Executive Physical ($) | ||||||
Rocco A. Ortenzio | 137,605 | — | ||||||
Robert A. Ortenzio | 143,440 | — | ||||||
Patricia A. Rice | 149,023 | 2,607 |
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Option Awards | Stock Awards | |||||||||||||||||||||
Equity | ||||||||||||||||||||||
Equity | Incentive | |||||||||||||||||||||
Incentive | Plan | |||||||||||||||||||||
Plan | Awards: | |||||||||||||||||||||
Awards: | Market or | |||||||||||||||||||||
Equity | Number | Payout | ||||||||||||||||||||
Incentive | of | Value of | ||||||||||||||||||||
Plan | Market | Unearned | Unearned | |||||||||||||||||||
Awards: | Number | Value of | Shares, | Shares, | ||||||||||||||||||
Number of | of Shares | Shares | Units or | Units or | ||||||||||||||||||
Number of | Number of | Securities | or Units | or Units | Other | Other | ||||||||||||||||
Securities | Securities | Underlying | of Stock | of Stock | Rights | Rights | ||||||||||||||||
Underlying | Underlying | Unexercised | Option | That | That | That | That | |||||||||||||||
Unexercised | Unexercised | Unearned | Exercise | Option | Have Not | Have Not | Have Not | Have Not | ||||||||||||||
Options (#) | Options (#) | Options | Price | Expiration | Vested | Vested | Vested | Vested | ||||||||||||||
Name | Exercisable | Unexercisable | (#) | ($) | Date | (#) | ($)(1) | (#) | (#) | |||||||||||||
Rocco A. Ortenzio | — | — | — | — | — | — | — | — | — | |||||||||||||
Robert A. Ortenzio | — | — | — | — | — | 5,932,959 | 5,932,959 | — | — | |||||||||||||
— | — | — | — | — | 3,354,167 | 3,354,167 | — | — | ||||||||||||||
Patricia A. Rice | — | — | — | — | — | 4,140,960 | 4,140,960 | — | — | |||||||||||||
Martin F. Jackson | — | — | — | — | — | 2,070,480 | 2,070,480 | — | — | |||||||||||||
Scott A. Romberger | — | — | — | — | — | 187,724 | 187,724 | — | — |
Option Awards | Stock Awards | |||||||||||
Number of Shares | ||||||||||||
Acquired on | Value Realized on | Number of Shares | Value Realized on | |||||||||
Exercise | Exercise | Acquired on Vesting | Vesting | |||||||||
Name | (#) | ($) | (#) | ($)(1) | ||||||||
Rocco A. Ortenzio | — | — | — | — | ||||||||
Robert A. Ortenzio | — | — | 6,835,392 | 6,835,392 | ||||||||
Patricia A. Rice | — | — | 1,307,672 | 1,307,672 | ||||||||
Martin F. Jackson | — | — | 653,836 | 653,836 | ||||||||
Scott A. Romberger | — | — | 59,281 | 59,281 |
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Without Cause / Good | ||||||||||||||||||||||||
Reason | Disability | Death | Retirement | |||||||||||||||||||||
Base | Equity | Base Salary | Equity | Equity | ||||||||||||||||||||
Salary and | Vesting | Continuation | Vesting | Vesting | Health and Dental | |||||||||||||||||||
Bonus | Value (1) | (2) | Value (1) | Value (1) | Benefits (3) | |||||||||||||||||||
Rocco A. Ortenzio | $ | 2,472,000 | — | $ | 824,000 | — | — | — | ||||||||||||||||
Robert A. Ortenzio | $ | 2,472,000 | $ | 9,287,126 | $ | 412,000 | $ | 9,287,126 | $ | 9,287,126 | — | |||||||||||||
Patricia A. Rice | $ | 2,240,250 | $ | 4,140,960 | $ | 296,125 | $ | 4,140,960 | $ | 4,140,960 | $ | 9,065 |
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Base Salary and | Equity Vesting | Cash Plan | Tax Gross- | |||||||||||||
Name | Bonus | (100%)(1) | Payout(2) | Up(3) | ||||||||||||
Rocco A. Ortenzio | $ | 7,510,154 | — | $ | 21,438,279 | — | ||||||||||
Robert A. Ortenzio | $ | 7,510,154 | $ | 9,287,126 | $ | 30,013,590 | — | |||||||||
Patricia A. Rice | $ | 4,047,652 | $ | 4,140,960 | $ | 12,862,967 | $ | 1,579,275 | ||||||||
Martin F. Jackson | $ | 2,513,368 | $ | 2,070,480 | $ | 6,002,718 | — | |||||||||
Scott A. Romberger | $ | 1,099,269 | $ | 187,724 | — | — |
Change | ||||||||||||||||||||||||||||
in Pension | ||||||||||||||||||||||||||||
Value and | ||||||||||||||||||||||||||||
Nonqualified | ||||||||||||||||||||||||||||
Non-Equity | Deferred | |||||||||||||||||||||||||||
Fees Earned or | Incentive Plan | Compensation | All Other | |||||||||||||||||||||||||
Paid in Cash | Stock Awards | Option Awards | Compensation | Earnings | Compensation | Total | ||||||||||||||||||||||
Name | ($) | ($)(1) | ($)(2) | ($) | ($) | ($) | ($) | |||||||||||||||||||||
Russell L. Carson | — | — | — | — | — | — | — | |||||||||||||||||||||
David S. Chernow | 30,000 | — | 120 | — | — | — | 30,120 | |||||||||||||||||||||
Bryan C. Cressey | — | — | — | — | — | — | — | |||||||||||||||||||||
James E. Dalton, Jr. | 38,000 | — | 120 | — | — | — | 38,120 | |||||||||||||||||||||
Thomas A. Scully | — | 6,817 | — | — | — | — | 6,817 | |||||||||||||||||||||
Leopold Swergold | 41,500 | — | 120 | — | — | — | 41,620 | |||||||||||||||||||||
Sean M. Traynor | — | — | — | — | — | — | — |
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Shares | Shares | |||||||
Outstanding | Outstanding | |||||||
subject to | subject to | |||||||
Stock Awards | Option Awards | |||||||
Name | (#) | (#) | ||||||
Russell L. Carson | — | — | ||||||
David S. Chernow | — | 30,000 | ||||||
Bryan C. Cressey | — | — | ||||||
James E. Dalton, Jr. | — | 30,000 | ||||||
Thomas A. Scully | 63,495 | — | ||||||
Leopold Swergold | — | 30,000 | ||||||
Sean M. Traynor | — | — |
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Number of | ||||||||||||
Number of | securities | |||||||||||
securities to be | remaining | |||||||||||
issued upon | Weighted-average | available for future | ||||||||||
exercise of | exercise price of | issuance under | ||||||||||
outstanding | outstanding | equity | ||||||||||
options, warrants | options, warrants | compensation | ||||||||||
Plan Category | and rights | and rights | plans | |||||||||
Equity compensation plans approved by security holders | ||||||||||||
Select Medical Holdings Corporation 2005 Equity Incentive Plan | 3,773,335 | $ | 1.71 | 18,951,263 | ||||||||
Restricted Stock Plan | 55,867,096 | $ | 1.00 | 1,080,979 | ||||||||
Director stock option plan | 90,000 | $ | 1.50 | 160,000 |
ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS |
Participating | Percent of | |||||||||||||||
Percent of | Preferred Shares | Outstanding | ||||||||||||||
Common Shares | Outstanding | Beneficially | Participating | |||||||||||||
Name of Beneficial Owner(1) | Beneficially Owned | Common Shares | Owned | Preferred Shares | ||||||||||||
Welsh, Carson, Anderson & Stowe(2) | 114,938,082 | 56.1 | % | 16,877,179.59 | 76.1 | % | ||||||||||
Thoma Cressey Bravo(3) | 17,554,946 | 8.6 | % | 2,610,400.84 | 11.8 | % | ||||||||||
Rocco A. Ortenzio(4) | 22,453,271 | 11.0 | % | 921,500.59 | 4.2 | % | ||||||||||
Robert A. Ortenzio(5) | 21,651,873 | 10.6 | % | 913,858.31 | 4.1 | % | ||||||||||
Russell L. Carson | 2,910,387 | 1.4 | % | 432,771.36 | 2.0 | % | ||||||||||
Bryan C. Cressey(6) | 17,962,732 | 8.8 | % | 2,671,038.22 | 12.1 | % | ||||||||||
David S. Chernow(7) | 20,000 | * | 2,973.98 | * | ||||||||||||
James E. Dalton, Jr. | 50,000 | * | 7,434.94 | * | ||||||||||||
Thomas A. Scully(8) | 130,255 | * | 4,460.97 | * | ||||||||||||
Leopold Swergold | 200,000 | * | 29,739.78 | * | ||||||||||||
Sean M. Traynor | 5,000 | * | 743.49 | * | ||||||||||||
Patricia A. Rice(9) | 6,898,361 | 3.4 | % | 53,531.60 | * | |||||||||||
Scott A. Romberger(10) | 325,206 | * | 4,282.53 | * | ||||||||||||
Martin F. Jackson(11) | 3,632,781 | 1.8 | % | 54,066.93 | * | |||||||||||
All directors and executive officers as a group(12) (sixteen persons) | 80,735,091 | 39.4 | % | 5,167,691.68 | 23.3 | % |
* | Less than one percent | |
(1) | Unless otherwise indicated, the address of each of the beneficial owners identified is 4716 Old Gettysburg Road, P.O. Box 2034, Mechanicsburg, Pennsylvania 17055. | |
(2) | Represents (A) 80,857,183 common shares and 12,023,373.01 participating preferred shares held by WCAS IX over which WCAS IX has sole voting and investment power, (B) 15,000 common shares and 2,230.48 participating preferred shares held by WCAS Management Corporation, over which WCAS Management Corporation has sole voting and investment power, (C) 3,623,302 common shares and 538,780.97 participating preferred shares held by WCAS Capital Partners IV, |
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L.P., over which WCAS Capital Partners IV, L.P. has sole voting and investment power, (D) an aggregate 8,246,203 common shares and 1,226,213.10 participating preferred shares held by individuals who are general partners of WCAS IX Associates LLC, the sole general partner of WCAS IX and/or otherwise employed by an affiliate of Welsh, Carson, Anderson & Stowe, and (E) an aggregate 22,196,394 common shares and 3,086,582.03 participating preferred shares held by other co-investors, over which WCAS IX has sole voting power. Each of the following individuals are managing members of WCAS IX Associates, LLC, the sole general partner of WCAS IX, and WCAS CP IV Associates, LLC, the sole general partner of WCAS Capital Partners IV, L.P.: Patrick J. Welsh, Russell L. Carson, Bruce K. Anderson, Thomas E. Mclnerney, Robert A. Minicucci, Anthony J. de Nicola, Paul B. Queally, D. Scott Mackesy, Sanjay Swani, John D. Clark, James R. Matthews, Sean M. Traynor, John Almeida and Jonathan M. Rather. In addition, Thomas A. Scully is also a managing member of WCAS CP IV Associates, LLC. Each of the following individuals are shareholders of WCAS Management Corporation: Patrick J. Welsh, Russell L. Carson, Bruce K. Anderson, Thomas E. Mclnerney and Robert A. Minicucci. The principal executive offices of Welsh, Carson, Anderson & Stowe are located at 320 Park Avenue, Suite 2500, New York, New York 10022. | ||
(3) | Represents (A) 7,480,145 common shares and 1,112,289.19 participating preferred shares held by Thoma Cressey Fund VI, L.P. over which Thoma Cressey Fund VI, L.P. has shared voting and investment power, (B) 74,801 common shares and 11,122.80 participating preferred shares held by Thoma Cressey Friends Fund VI, L.P., over which Thoma Cressey Friends Fund VI, L.P. has shared voting and investment power, (C) 9,846,200 common shares and 1,464,118.96 participating preferred shares held by Thoma Cressey Fund VII, L.P., over which Thoma Cressey Fund VII, L.P. has shared voting and investment power, and (D) 153,800 common shares and 22,869.89 participating preferred shares held by Thoma Cressey Friends Fund VII, L.P., over which Thoma Cressey Friends Fund VII, L.P. has shared voting and investment power. The sole general partner of each of Thoma Cressey Fund VII, L.P. and Thoma Cressey Friends Fund VII, L.P. (collectively, “Thoma Cressey Fund VII”) is TC Partners VII, L.P. (the “Fund VII GP”). The sole general partner of Fund VII GP is Thoma Cressey Equity Partners Inc. (the “Ultimate GP”). The sole general partner of each of Thoma Cressey Fund VI, L.P. and Thoma Cressey Friends Fund VI, L.P. (collectively, “Thoma Cressey Fund VI”) is TC Partners VI, L.P. (the “Fund VI GP”). The sole general partner of Fund VI GP is the Ultimate GP. The sole shareholder of the Ultimate GP is Carl D. Thoma. The officers of the Ultimate GP are Carl D. Thoma, Bryan C. Cressey and Lee M. Mitchell. The principal executive offices of the Ultimate GP are located at 233 South Wacher, Chicago, IL 60606. | |
(4) | In addition to shares held by Rocco A. Ortenzio in his individual capacity, includes 5,000,000 common shares held by the Robert A. Ortenzio Descendants Trust, of which Mr. Rocco Ortenzio is a trustee. Mr. Rocco Ortenzio disclaims beneficial ownership of shares held by the Robert A. Ortenzio Descendants Trust except in his capacity as a fiduciary of such trust. | |
(5) | Includes 20,506,176 common shares which are subject to restrictions on transfer set forth in a restricted stock award agreement entered into at the time of the consummation of the Transactions. | |
(6) | In addition to shares owned by Bryan C. Cressey in his individual capacity, includes (A) 7,480,145 common shares and 1,112,289.19 participating preferred shares held by Thoma Cressey Fund VI, L.P., (B) 74,801 common shares and 11,122.80 participating preferred shares held by Thoma Cressey Friends Fund VI, L.P., (C) 9,846,200 common shares and 1,464,118.96 participating preferred shares held by Thoma Cressey Fund VII, L.P., and (D) 153,800 common shares and 22,869.89 participating preferred shares held by Thoma Cressey Friends Fund VII, L.P. Mr. Cressey is a principal of Thoma Cressey Equity Partners Inc. Mr. Cressey may be deemed to beneficially own the shares beneficially owned by Thoma Cressey Fund VI, L.P., Thoma Cressey Friends Fund VI, L.P., Thoma Cressey Fund VII, L.P. and Thoma Cressey Friends Fund VII, L.P. Mr. Cressey disclaims beneficial ownership of such shares. The principal address of Mr. Cressey is 9200 Sears Tower, 233 South Wacker Drive, Chicago, IL 60606. | |
(7) | Represents 20,000 common shares held by David S. Chernow and Elizabeth A. Chernow as tenants in common. | |
(8) | Includes 100,255 common shares which are subject to restrictions on transfer set forth in a restricted stock award agreement entered into at the time of the consummation of the Transactions. | |
(9) | Includes 6,538,361 common shares which are subject to restrictions on transfer set forth in a restricted stock award agreement entered into at the time of the consummation of the Transactions. In addition to shares held by Patricia A. Rice in her individual capacity, includes 360,000 common shares and 53,531.60 participating preferred shares owned by The Patricia Ann Rice Living Trust for which Ms. Rice acts as a trustee, and 2,615,000 common shares owned by the 2005 Rice Family Trust for which Ms. Rice acts as investment trustee. | |
(10) | Includes 296,406 common shares which are subject to restrictions on transfer set forth in a restricted stock award agreement entered into at the time of the consummation of the Transactions | |
(11) | Includes 3,269,181 common shares which are subject to restrictions on transfer set forth in a restricted stock award agreement entered into at the time of the consummation of the Transactions. In addition to shares held by Martin F. Jackson in his individual capacity, includes an aggregate 14,400 common shares and 2,141.28 participating preferred shares owned by Mr. Jackson’s children who live in his household and over which Mr. Jackson acts as custodian. | |
(12) | Includes an aggregate 49,455,021 common shares which are subject to restrictions on transfer set forth in restricted stock award agreements entered into at the time of the consummation of the Transactions. |
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ITEM 13. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE |
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Name of Executive | Target Bonus Percentage | |||
Rocco A. Ortenzio | 80 | % | ||
Robert A. Ortenzio | 80 | % | ||
Patricia A. Rice | 50 | % | ||
Martin F. Jackson | 50 | % |
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Year Ended December 31, | ||||||||
2005 | 2006 | |||||||
(in thousands) | ||||||||
Audit Fees(1) | $ | 1,437,666 | $ | 1,265,256 | ||||
Tax Fees(2) | 58,233 | — | ||||||
All Other Fees | — | — | ||||||
Total | $ | 1,495,899 | $ | 1,265,256 |
(1) | The Audit fees for the years ended December 31, 2005 and 2006, respectively, were for professional services rendered for the audits of the consolidated financial statements of the Company and statutory and subsidiary audits, Section 404 attestation procedures, issuance of comfort letters, consents and assistance with reviews of documents filed with the SEC. | |
(2) | Tax fees for the year ended December 31, 2005 were for tax services associated with mergers and acquisitions. |
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of Select Medical Holdings Corporation:
PricewaterhouseCoopers LLP
Philadelphia, PA
March 17, 2006
F-2
Table of Contents
of Select Medical Holdings Corporation:
PricewaterhouseCoopers LLP
Philadelphia, PA
March 28, 2007
F-3
Table of Contents
Consolidated Balance Sheets
(in thousands, except share and per share amounts)
December 31, | December 31, | |||||||
2005 | 2006 | |||||||
ASSETS | ||||||||
Current Assets: | ||||||||
Cash and cash equivalents | $ | 35,861 | $ | 81,600 | ||||
Restricted cash | 6,345 | 4,335 | ||||||
Accounts receivable, net of allowance for doubtful accounts of $74,891 and $55,306 in 2005 and 2006, respectively | 256,798 | 199,927 | ||||||
Prepaid income taxes | 4,110 | — | ||||||
Current deferred tax asset | 59,135 | 42,613 | ||||||
Current assets held for sale | 13,876 | — | ||||||
Other current assets | 19,725 | 16,762 | ||||||
Total Current Assets | 395,850 | 345,237 | ||||||
Property and equipment, net | 248,541 | 356,336 | ||||||
Goodwill | 1,305,210 | 1,323,572 | ||||||
Other identifiable intangibles | 86,789 | 79,230 | ||||||
Other assets held for sale | 61,388 | 4,855 | ||||||
Other assets | 70,607 | 73,294 | ||||||
Total Assets | $ | 2,168,385 | $ | 2,182,524 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current Liabilities: | ||||||||
Bank overdrafts | $ | 19,355 | $ | 12,213 | ||||
Current portion of long-term debt and notes payable | 6,516 | 6,209 | ||||||
Accounts payable | 60,528 | 72,597 | ||||||
Accrued payroll | 61,531 | 55,084 | ||||||
Accrued vacation | 26,983 | 27,360 | ||||||
Accrued interest | 36,028 | 36,759 | ||||||
Accrued professional liability | 21,527 | 24,979 | ||||||
Accrued restructuring | 390 | 225 | ||||||
Accrued other | 69,046 | 67,084 | ||||||
Income taxes payable | — | 1,937 | ||||||
Due to third party payors | 12,175 | 12,886 | ||||||
Current liabilities held for sale | 4,215 | — | ||||||
Total Current Liabilities | 318,294 | 317,333 | ||||||
Long-term debt, net of current portion | 1,622,373 | 1,532,294 | ||||||
Non-current deferred tax liability | 19,438 | 32,075 | ||||||
Non-current liabilities held for sale | 3,817 | — | ||||||
Total Liabilities | 1,963,922 | 1,881,702 | ||||||
Commitments and Contingencies | ||||||||
Minority interest in consolidated subsidiary companies | 4,356 | 2,566 | ||||||
Preferred stock — Authorized shares (liquidation preference is $444,765 and $467,395 in 2005 and 2006, respectively) | 444,765 | 467,395 | ||||||
Stockholders’ Equity: | ||||||||
Common stock, $0.001 par value, 250,000,000 shares authorized, 205,408,000 shares and 204,904,000 shares issued and outstanding in 2005 and 2006, respectively | 205 | 205 | ||||||
Capital in excess of par | (299,028 | ) | (295,256 | ) | ||||
Retained earnings | 48,808 | 121,024 | ||||||
Accumulated other comprehensive income | 5,357 | 4,888 | ||||||
Total Stockholders’ Equity | (244,658 | ) | (169,139 | ) | ||||
Total Liabilities and Stockholders’ Equity | $ | 2,168,385 | $ | 2,182,524 | ||||
F-4
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Consolidated Statements of Operations
(in thousands)
Select Medical Corporation | |||||||||||||||||
Predecessor | Successor | ||||||||||||||||
Period | Period | ||||||||||||||||
from | from | ||||||||||||||||
January 1 | February | Year | |||||||||||||||
Year Ended | through | 25 through | Ended | ||||||||||||||
December | February | December | December | ||||||||||||||
31, 2004 | 24, 2005 | 31, 2005 | 31, 2006 | ||||||||||||||
Net operating revenues | $ | 1,601,524 | $ | 277,736 | $ | 1,580,706 | $ | 1,851,498 | |||||||||
Costs and expenses: | |||||||||||||||||
Cost of services | 1,246,249 | 244,321 | 1,244,361 | 1,484,632 | |||||||||||||
General and administrative | 45,856 | 122,509 | 59,494 | 43,514 | |||||||||||||
Bad debt expense | 47,963 | 6,588 | 18,213 | 18,810 | |||||||||||||
Depreciation and amortization | 38,951 | 5,933 | 37,922 | 46,668 | |||||||||||||
Total costs and expenses | 1,379,019 | 379,351 | 1,359,990 | 1,593,624 | |||||||||||||
Income (loss) from operations | 222,505 | (101,615 | ) | 220,716 | 257,874 | ||||||||||||
Other income and expense: | |||||||||||||||||
Loss on early retirement of debt | — | (42,736 | ) | — | — | ||||||||||||
Merger related charges | — | (12,025 | ) | — | — | ||||||||||||
Other income | 1,096 | 267 | 1,092 | — | |||||||||||||
Interest income | 2,583 | 523 | 767 | 1,293 | |||||||||||||
Interest expense | (33,299 | ) | (4,651 | ) | (102,208 | ) | (131,831 | ) | |||||||||
Income (loss) from continuing operations before minority interests and income taxes | 192,885 | (160,237 | ) | 120,367 | 127,336 | ||||||||||||
Minority interest in consolidated subsidiary companies | 2,608 | 330 | 1,776 | 1,414 | |||||||||||||
Income (loss) from continuing operations before income taxes | 190,277 | (160,567 | ) | 118,591 | 125,922 | ||||||||||||
Income tax expense (benefit) | 76,551 | (59,794 | ) | 49,336 | 43,521 | ||||||||||||
Income (loss) from continuing operations | 113,726 | (100,773 | ) | 69,255 | 82,401 | ||||||||||||
Income from discontinued operations, net of tax (includes pre-tax gain of $13,950 in 2006) | 4,458 | 522 | 3,072 | 12,478 | |||||||||||||
Net income (loss) | 118,184 | (100,251 | ) | 72,327 | 94,879 | ||||||||||||
Less: Preferred dividends | — | — | 23,519 | 22,663 | |||||||||||||
Net income (loss) available to common stockholders | $ | 118,184 | $ | (100,251 | ) | $ | 48,808 | $ | 72,216 | ||||||||
F-5
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Consolidated Statement of Changes in Stockholders’ Equity and Comprehensive Income (Loss)
(in thousands)
Common | Accumulated | |||||||||||||||||||||||
Common | Stock | Capital in | Other | |||||||||||||||||||||
Stock | Par | Excess of | Retained | Comprehensive | Comprehensive | |||||||||||||||||||
Issued | Value | Par | Earnings | Income | Income/(Loss) | |||||||||||||||||||
Predecessor: | ||||||||||||||||||||||||
Balance at December 31, 2003 | 102,219 | $ | 1,022 | $ | 291,519 | $ | 121,560 | $ | 5,074 | |||||||||||||||
Net income | 118,184 | $ | 118,184 | |||||||||||||||||||||
Unrealized losses on available for sale securities | (4 | ) | (4 | ) | ||||||||||||||||||||
Realized losses on available for sale securities | 53 | 53 | ||||||||||||||||||||||
Changes in foreign currency translation | 3,984 | 3,984 | ||||||||||||||||||||||
Total comprehensive income | $ | 122,217 | ||||||||||||||||||||||
Issuance of common stock | 3,134 | 32 | 18,591 | |||||||||||||||||||||
Cash dividends | (9,209 | ) | ||||||||||||||||||||||
Repurchase of common stock | (3,399 | ) | (34 | ) | (48,024 | ) | ||||||||||||||||||
Valuation of non-employee options | 151 | |||||||||||||||||||||||
Tax benefit of stock option exercises | 13,044 | |||||||||||||||||||||||
Balance at December 31, 2004 | 101,954 | 1,020 | 275,281 | 230,535 | 9,107 | |||||||||||||||||||
Net loss | (100,251 | ) | $ | (100,251 | ) | |||||||||||||||||||
Changes in foreign currency translation | (1,019 | ) | (1,019 | ) | ||||||||||||||||||||
Total comprehensive loss | $ | (101,270 | ) | |||||||||||||||||||||
Issuance of common stock | 267 | 3 | 1,020 | |||||||||||||||||||||
Repurchase of non-employee options | (1,617 | ) | ||||||||||||||||||||||
Tax benefit of stock option exercises | 1,507 | |||||||||||||||||||||||
Balance at February 24, 2005 | 102,221 | $ | 1,023 | $ | 276,191 | $ | 130,284 | $ | 8,088 | |||||||||||||||
Common | Accumulated | |||||||||||||||||||||||
Common | Stock | Capital in | Other | |||||||||||||||||||||
Stock | Par | Excess of | Retained | Comprehensive | Comprehensive | |||||||||||||||||||
Issued | Value | Par | Earnings | Income | Income | |||||||||||||||||||
Successor: | ||||||||||||||||||||||||
Capitalization of Successor Company at February 25, 2005 | 148,253 | $ | 148 | $ | (310,092 | ) | ||||||||||||||||||
Issuance of common stock | 808 | 1 | 808 | |||||||||||||||||||||
Issuance and vesting of restricted stock | 56,347 | 56 | 10,247 | |||||||||||||||||||||
Stock option expense | 9 | |||||||||||||||||||||||
Accretion of dividends on preferred stock | $ | (23,519 | ) | |||||||||||||||||||||
Net income | 72,327 | $ | 72,327 | |||||||||||||||||||||
Unrealized gain on interest rate swap | $ | 3,539 | 3,539 | |||||||||||||||||||||
Changes in foreign currency translation | 1,818 | 1,818 | ||||||||||||||||||||||
Total comprehensive income | $ | 77,684 | ||||||||||||||||||||||
Balance at December 31, 2005 | 205,408 | 205 | (299,028 | ) | 48,808 | 5,357 | ||||||||||||||||||
Net income | 94,879 | $ | 94,879 | |||||||||||||||||||||
Unrealized gain on interest rate swap, net of tax | 1,438 | 1,438 | ||||||||||||||||||||||
Changes in foreign currency translation | 924 | 924 | ||||||||||||||||||||||
Sale of foreign subsidiary | (2,831 | ) | (2,831 | ) | ||||||||||||||||||||
Total comprehensive income | $ | 94,410 | ||||||||||||||||||||||
Issuance and vesting of restricted stock | 200 | 1 | 3,769 | |||||||||||||||||||||
Cancellation of restricted stock awards | (680 | ) | (1 | ) | ||||||||||||||||||||
Repurchase of common shares | (24 | ) | — | (10 | ) | |||||||||||||||||||
Stock option expense | 13 | |||||||||||||||||||||||
Accretion of dividends on preferred stock | (22,663 | ) | ||||||||||||||||||||||
Balance at December 31, 2006 | 204,904 | $ | 205 | $ | (295,256 | ) | $ | 121,024 | $ | 4,888 | ||||||||||||||
F-6
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Consolidated Statements of Cash Flows
(in thousands)
Select Medical Corporation | |||||||||||||||||
Predecessor | Successor | ||||||||||||||||
Period from | Period from | ||||||||||||||||
Year Ended | January 1 through | February 25 through | Year Ended | ||||||||||||||
December 31, 2004 | February 24, 2005 | December 31, 2005 | December 31, 2006 | ||||||||||||||
Operating activities | |||||||||||||||||
Net income (loss) | $ | 118,184 | $ | (100,251 | ) | $ | 72,327 | $ | 94,879 | ||||||||
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | |||||||||||||||||
Depreciation and amortization | 39,912 | 6,177 | 39,060 | 46,844 | |||||||||||||
Provision for bad debts | 48,986 | 6,661 | 18,600 | 18,897 | |||||||||||||
Gain on sale of business | — | — | — | (13,950 | ) | ||||||||||||
Loss on early retirement of debt (non-cash) | — | 7,977 | — | — | |||||||||||||
Non cash compensation expense | — | — | 10,312 | 3,782 | |||||||||||||
Amortization of debt discount | — | — | 881 | 1,176 | |||||||||||||
Minority interests | 3,448 | 469 | 3,018 | 1,754 | |||||||||||||
Loss on disposal of assets | — | — | 810 | 2,443 | |||||||||||||
Changes in operating assets and liabilities, net of effects from acquisition of businesses: | |||||||||||||||||
Accounts receivable | (22,864 | ) | (48,976 | ) | (2,908 | ) | 30,804 | ||||||||||
Other current assets | 8,594 | 1,816 | 312 | 2,015 | |||||||||||||
Other assets | 2,778 | (622 | ) | 4,887 | 6,441 | ||||||||||||
Accounts payable | (13,980 | ) | 5,250 | 1,879 | 12,081 | ||||||||||||
Due to third-party payors | (52,296 | ) | 667 | (1,757 | ) | 711 | |||||||||||
Accrued interest | 433 | (4,839 | ) | 34,216 | 731 | ||||||||||||
Accrued expenses | 2,636 | 204,748 | (186,552 | ) | (3,666 | ) | |||||||||||
Income taxes and deferred taxes | 38,445 | (60,021 | ) | 43,070 | 22,709 | ||||||||||||
Net cash provided by operating activities | 174,276 | 19,056 | 38,155 | 227,651 | |||||||||||||
Investing activities | |||||||||||||||||
Purchases of property and equipment | (32,626 | ) | (2,586 | ) | (107,360 | ) | (155,096 | ) | |||||||||
Earnout payments | (2,983 | ) | — | — | (100 | ) | |||||||||||
Restricted cash | (7,031 | ) | 108 | 578 | 2,010 | ||||||||||||
Proceeds from sale of business, net of cash sold | 11,554 | — | — | 74,966 | |||||||||||||
Proceeds from sale of membership interests | 4,064 | — | — | — | |||||||||||||
Acquisition of businesses, net of cash acquired | (1,937 | ) | (108,279 | ) | (3,272 | ) | (3,261 | ) | |||||||||
Net cash used in investing activities | (28,959 | ) | (110,757 | ) | (110,054 | ) | (81,481 | ) | |||||||||
Financing activities | |||||||||||||||||
Proceeds from senior floating rate notes | — | — | 175,000 | — | |||||||||||||
Equity investment | — | — | 724,042 | — | |||||||||||||
Proceeds from credit facility | — | — | 780,000 | — | |||||||||||||
Proceeds from 75/8% senior subordinated notes | — | — | 660,000 | — | |||||||||||||
Repayment of senior subordinated notes | — | — | (350,000 | ) | — | ||||||||||||
Deferred financing costs | — | — | (60,269 | ) | — | ||||||||||||
Costs associated with equity investment | — | — | (8,686 | ) | — | ||||||||||||
Net repayments on credit facility debt | (8,483 | ) | — | (119,350 | ) | (90,800 | ) | ||||||||||
Principal payments on seller and other debt | (3,904 | ) | (528 | ) | (4,161 | ) | (721 | ) | |||||||||
Repurchases of common stock and options | (48,058 | ) | — | (1,687,994 | ) | (41 | ) | ||||||||||
Payment of preferred stock dividends | — | — | (175,000 | ) | — | ||||||||||||
Proceeds from issuance of common stock | 18,623 | 1,023 | — | — | |||||||||||||
Payment of common stock dividends | (9,209 | ) | — | — | — | �� | |||||||||||
Proceeds from (repayment of) bank overdrafts | (11,427 | ) | — | 19,355 | (7,142 | ) | |||||||||||
Distributions to minority interests | (1,501 | ) | (401 | ) | (1,541 | ) | (1,762 | ) | |||||||||
Net cash provided by (used in) financing activities | (63,959 | ) | 94 | (48,604 | ) | (100,466 | ) | ||||||||||
Effect of exchange rate changes on cash and cash equivalents | 611 | (149 | ) | 644 | 35 | ||||||||||||
Net increase (decrease) in cash and cash equivalents | 81,969 | (91,756 | ) | (119,859 | ) | 45,739 | |||||||||||
Cash and cash equivalents at beginning of period | 165,507 | 247,476 | 155,720 | 35,861 | |||||||||||||
Cash and cash equivalents at end of period | $ | 247,476 | $ | 155,720 | $ | 35,861 | $ | 81,600 | |||||||||
Supplemental Cash Flow Information | |||||||||||||||||
Cash paid for interest | $ | 30,677 | $ | 10,630 | $ | 59,725 | $ | 124,251 | |||||||||
Cash paid for taxes | $ | 42,134 | $ | 1,502 | $ | 10,712 | $ | 22,572 |
F-7
Table of Contents
Notes to Consolidated Financial Statements
F-8
Table of Contents
Notes to Consolidated Financial Statements
• | a cash common and preferred equity investment in Holdings by Welsh Carson and other equity investors of $570.0 million; | |
• | a senior subordinated notes offering by Holdings of $150.0 million; | |
• | borrowing by Select of $580.0 million in term loans and $200.0 million on the revolving loan facility under a new senior secured credit facility; | |
• | the issuance by Select of $660.0 million in aggregate principle amount of 75/8% senior subordinated notes; and | |
• | $131.1 million of cash on hand at Select at the closing date. |
F-9
Table of Contents
Notes to Consolidated Financial Statements
Equity Contribution | $ | 570,000 | ||
Exchange of shares of Select for equity of Holdings at $18.00 per share | 151,992 | |||
Aggregate equity contribution | 721,992 | |||
Continuing shareholders’ basis adjustment | (449,510 | ) | ||
Equity contribution, net | 272,482 | |||
Merger expenses paid | (8,686 | ) | ||
Proceeds from borrowings | 1,590,000 | |||
Purchase price allocated | $ | 1,853,796 | ||
Fair value of net tangible assets acquired: | ||||
Cash | $ | 34,484 | ||
Accounts receivable | 280,891 | |||
Current deferred tax asset | 69,858 | |||
Other current assets | 20,955 | |||
Property and equipment | 177,634 | |||
Non-current deferred tax asset | 31,879 | |||
Other assets | 12,970 | |||
Current liabilities | (267,831 | ) | ||
Long-term debt | (7,052 | ) | ||
Minority interest in consolidated subsidiary companies | (6,661 | ) | ||
Net tangible assets acquired | 347,127 | |||
Capitalized debt issuance costs | 55,392 | |||
Intangible assets acquired | 92,988 | |||
Goodwill | 1,358,289 | |||
$ | 1,853,796 | |||
F-10
Table of Contents
Notes to Consolidated Financial Statements
For the Year Ended December 31, | ||||||||
2004 | 2005 | |||||||
Net revenue | $ | 1,601,524 | $ | 1,858,442 | ||||
Net income (loss) | 66,749 | (39,044 | ) |
F-11
Table of Contents
Notes to Consolidated Financial Statements
F-12
Table of Contents
Notes to Consolidated Financial Statements
Leasehold improvements Furniture and equipment Buildings | 5 years 3 — 20 years 40 years |
F-13
Table of Contents
Notes to Consolidated Financial Statements
Goodwill | Indefinite | |
Trademarks | Indefinite | |
Certificates of need | Indefinite | |
Accreditation | Indefinite | |
Non-compete agreements | 6-7 years | |
Contract therapy relationships | 5 years |
F-14
Table of Contents
Notes to Consolidated Financial Statements
F-15
Table of Contents
Notes to Consolidated Financial Statements
Predecessor | ||||||||
Period from January 1 | ||||||||
For the Year Ended | through | |||||||
December 31, 2004 | February 24, 2005 | |||||||
(in thousands, except per share amounts) | ||||||||
Net income (loss) available to common stockholders — as reported | $ | 118,184 | $ | (100,251 | ) | |||
Add: Stock-based employee compensation, net of related tax effects, included in the determination of net income (loss) as reported | — | 87,927 | ||||||
Deduct: Total stock based employee compensation expense determined under fair value based method for all awards, net of related tax effects | 21,069 | 14,931 | ||||||
Net income (loss) available to common stockholders — pro forma | $ | 97,115 | $ | (27,255 | ) | |||
Weighted average grant-date fair value (1) | 6.42 | — |
(1) | No stock options were granted in the period from January 1, 2005 through February 24, 2005. |
F-16
Table of Contents
Notes to Consolidated Financial Statements
F-17
Table of Contents
Notes to Consolidated Financial Statements
F-18
Table of Contents
Notes to Consolidated Financial Statements
F-19
Table of Contents
Notes to Consolidated Financial Statements
F-20
Table of Contents
Notes to Consolidated Financial Statements
Cash paid, net of cash acquired | $ | 105,085 | ||
Fair value of net tangible assets acquired: | ||||
Accounts receivable | 22,143 | |||
Other current assets | 4,718 | |||
Property and equipment | 9,265 | |||
Other assets | 242 | |||
Current liabilities | (14,150 | ) | ||
Long-term debt | (1,203 | ) | ||
Net tangible assets acquired | 21,015 | |||
Intangible assets acquired | 2,000 | |||
Goodwill | 82,070 | |||
$ | 105,085 | |||
F-21
Table of Contents
Notes to Consolidated Financial Statements
Predecessor | Successor | ||||||||||||||||
Period from January 1 | Period from February 25, | ||||||||||||||||
For the Year Ended | through | through | For the Year Ended | ||||||||||||||
December 31, 2004 | February 24, 2005 | December 31, 2005 | December 31, 2006 | ||||||||||||||
(in thousands) | |||||||||||||||||
Cash paid (net of cash acquired) | $ | 1,937 | $ | 108,279 | $ | 3,276 | $ | 3,261 | |||||||||
Notes issued | 214 | — | 60 | — | |||||||||||||
2,151 | 108,279 | 3,336 | 3,261 | ||||||||||||||
Liabilities assumed | 573 | 19,924 | 148 | — | |||||||||||||
2,724 | 128,203 | 3,484 | 3,261 | ||||||||||||||
Fair value of assets acquired, principally accounts receivable and property and equipment | 227 | 41,295 | 165 | — | |||||||||||||
Non-compete agreement | — | 2,000 | — | — | |||||||||||||
Minority interest liabilities relieved | 1,069 | — | 666 | 1,581 | |||||||||||||
Cost in excess of fair value of net assets acquired (goodwill) | $ | 1,428 | $ | 84,908 | $ | 2,653 | $ | 1,680 | |||||||||
Pro Forma Unaudited Results of Operations | ||||
For the Year Ended December 31, | ||||
2004 | ||||
(in thousands) | ||||
Net revenue | $ | 1,756,083 | ||
Net income | 126,036 |
F-22
Table of Contents
Notes to Consolidated Financial Statements
F-23
Table of Contents
Notes to Consolidated Financial Statements
December 31, 2005 | ||||
(in thousands) | ||||
Current assets held for sale: | ||||
Accounts receivable, net | $ | 9,334 | ||
Other current assets | 4,542 | |||
Total current assets held for sale | $ | 13,876 | ||
Non-current assets held for sale: | ||||
Property, plant and equipment, net | $ | 3,461 | ||
Goodwill allocated to business | 57,252 | |||
Other assets | 675 | |||
Total non-current assets held for sale | $ | 61,388 | ||
Current liabilities held for sale: | ||||
Current portion of long-term debt | $ | 477 | ||
Accrued other | 3,738 | |||
Total current liabilities held for sale | $ | 4,215 | ||
Long-term liabilities: | ||||
Long-term debt, net of current portion | $ | 731 | ||
Other long-term liabilities | 3,086 | |||
Total non current liabilities held for sale | $ | 3,817 | ||
F-24
Table of Contents
Notes to Consolidated Financial Statements
Predecessor | Successor | ||||||||||||||||
Period from January 1 | Period from February 25 | ||||||||||||||||
For the Year Ended | through | through | For the Year Ended | ||||||||||||||
December 31, 2004 | February 24, 2005 | December 31, 2005 | December 31, 2006 | ||||||||||||||
(in thousands) | |||||||||||||||||
Net revenue | $ | 69,699 | $ | 10,051 | $ | 60,161 | $ | 12,902 | |||||||||
Income from discontinued operations before income tax expense (1) | 8,019 | 950 | 8,130 | 15,547 | |||||||||||||
Income tax expense (2) | 3,561 | 428 | 5,058 | 3,069 | |||||||||||||
Income from discontinued operations, net of tax | $ | 4,458 | $ | 522 | $ | 3,072 | $ | 12,478 | |||||||||
(1) | Income from discontinued operations before income tax expense for the twelve months ended December 31, 2006 includes a gain on sale of approximately $14.0 million. | |
(2) | The period from February 25 through December 31, 2005 includes income tax of $1.4 million related to undistributed earnings of the Company’s foreign subsidiary that were previously permanently reinvested. |
F-25
Table of Contents
Notes to Consolidated Financial Statements
December 31, | ||||||||
2005 | 2006 | |||||||
(in thousands) | ||||||||
Land | $ | 17,599 | $ | 24,263 | ||||
Leasehold improvements | 46,242 | 56,777 | ||||||
Buildings | 55,281 | 106,126 | ||||||
Furniture and equipment | 85,946 | 116,881 | ||||||
Construction-in-progress | 67,778 | 100,478 | ||||||
272,846 | 404,525 | |||||||
Less: accumulated depreciation and amortization | 24,305 | 48,189 | ||||||
Total property and equipment | $ | 248,541 | $ | 356,336 | ||||
F-26
Table of Contents
Notes to Consolidated Financial Statements
F-27
Table of Contents
Notes to Consolidated Financial Statements
As of December 31, 2005 | ||||||||
Gross Carrying | Accumulated | |||||||
Amount | Amortization | |||||||
(in thousands) | ||||||||
Amortized intangible assets | ||||||||
Contract therapy relationships | $ | 20,456 | $ | (3,409 | ) | |||
Non-compete agreements | 20,809 | (3,100 | ) | |||||
Total | $ | 41,265 | $ | (6,509 | ) | |||
Indefinite-lived intangible assets | ||||||||
Goodwill | $ | 1,305,210 | ||||||
Trademarks | 47,058 | |||||||
Certificates of need | 3,083 | |||||||
Accreditations | 1,892 | |||||||
Total | $ | 1,357,243 | ||||||
F-28
Table of Contents
Notes to Consolidated Financial Statements
As of December 31, 2006 | ||||||||
Gross Carrying | Accumulated | |||||||
Amount | Amortization | |||||||
(in thousands) | ||||||||
Amortized intangible assets | ||||||||
Contract therapy relationships | $ | 20,456 | $ | (7,501 | ) | |||
Non-compete agreements | 20,809 | (6,819 | ) | |||||
Total | $ | 41,265 | $ | (14,320 | ) | |||
Indefinite-lived intangible assets | ||||||||
Goodwill | $ | 1,323,572 | ||||||
Trademarks | 47,058 | |||||||
Certificates of need | 3,523 | |||||||
Accreditations | 1,704 | |||||||
Total | $ | 1,375,857 | ||||||
Predecessor | Successor | ||||||||||||||||
Period from January 1 | Period from | ||||||||||||||||
For the Year Ended | through February | February 25 through | For the Year Ended | ||||||||||||||
December 31, 2004 | 24, 2005 | December 31, 2005 | December 31, 2006 | ||||||||||||||
(in thousands) | |||||||||||||||||
Amortization expense | $ | 3,429 | $ | 576 | $ | 6,509 | $ | 7,811 |
F-29
Table of Contents
Notes to Consolidated Financial Statements
2007 | $ | 7,811 | ||
2008 | 7,811 | |||
2009 | 7,811 | |||
2010 | 3,227 | |||
2011 | 285 |
F-30
Table of Contents
Notes to Consolidated Financial Statements
Specialty | Outpatient | |||||||||||||||
Hospitals | Rehabilitation | All Other | Total | |||||||||||||
(in thousands) | ||||||||||||||||
Predecessor: | ||||||||||||||||
Balance as of January 1, 2005 | $ | 175,967 | $ | 125,518 | $ | 584 | $ | 302,069 | ||||||||
Goodwill acquired during the year | 82,070 | 2,838 | — | 84,908 | ||||||||||||
Income tax benefits recognized | — | (936 | ) | — | (936 | ) | ||||||||||
Translation adjustment | — | (880 | ) | — | (880 | ) | ||||||||||
Other | 260 | — | — | 260 | ||||||||||||
Balance as of February 24, 2005 | $ | 258,297 | $ | 126,540 | $ | 584 | $ | 385,421 | ||||||||
Successor: | ||||||||||||||||
February 25, 2005, beginning balance resulting from Merger | $ | 1,225,780 | $ | 132,509 | — | $ | 1,358,289 | |||||||||
Deferred tax adjustments related to Merger | (6,441 | ) | 6,269 | — | (172 | ) | ||||||||||
Goodwill acquired during year | 2,270 | 383 | — | 2,653 | ||||||||||||
Translation adjustment | — | 1,951 | — | 1,951 | ||||||||||||
Goodwill allocated to assets held for sale | — | (57,252 | ) | — | (57,252 | ) | ||||||||||
Other | 167 | (426 | ) | — | (259 | ) | ||||||||||
Balance as of December 31, 2005 | 1,221,776 | 83,434 | — | 1,305,210 | ||||||||||||
Tax adjustments related to Merger (1) | 5,359 | 10,800 | — | 16,159 | ||||||||||||
Goodwill acquired during year | 398 | 1,282 | — | 1,680 | ||||||||||||
Earnouts | — | 100 | — | 100 | ||||||||||||
Other | — | 423 | — | 423 | ||||||||||||
Balance as of December 31, 2006 | $ | 1,227,533 | $ | 96,039 | — | $ | 1,323,572 | |||||||||
(1) | In conjunction with recording the gain on sale of the Canadian Back Institute Limited (“CBIL”) (Note 3), the Company determined that deferred taxes should have been recorded as of the date of the Merger related to differences between the Company’s book and tax investment basis in CBIL. Also during 2006, the Company determined that additional deferred taxes should have been recorded as of the date of the Merger related to a step-up in fair value of a fixed asset and a difference in timing related to the |
F-31
Table of Contents
Notes to Consolidated Financial Statements
Lease | ||||||||||||
Termination | ||||||||||||
Costs | Severance | Total | ||||||||||
(in thousands) | ||||||||||||
January 1, 2004 — Predecessor | $ | 5,805 | $ | 4,570 | $ | 10,375 | ||||||
Amounts paid in 2004 | (2,580 | ) | (2,871 | ) | (5,451 | ) | ||||||
December 31, 2004 — Predecessor | 3,225 | 1,699 | 4,924 | |||||||||
Amounts paid during the period from January 1 through February 24, 2005 | (197 | ) | (392 | ) | (589 | ) | ||||||
February 24, 2005 — Predecessor | 3,028 | 1,307 | 4,335 | |||||||||
Amounts paid during the period from February 25 through December 31, 2005 | (2,638 | ) | (1,307 | ) | (3,945 | ) | ||||||
December 31, 2005 — Successor | 390 | — | 390 | |||||||||
Amounts paid in 2006 | (165 | ) | — | (165 | ) | |||||||
December 31, 2006 — Successor | 225 | — | 225 | |||||||||
F-32
Table of Contents
Notes to Consolidated Financial Statements
December 31, | ||||||||
2005 | 2006 | |||||||
(in thousands) | ||||||||
75/8% Senior Subordinated Notes | $ | 660,000 | $ | 660,000 | ||||
Senior secured credit facility | 660,650 | 569,850 | ||||||
10% senior subordinated notes | 131,609 | 132,785 | ||||||
Senior floating rate notes | 175,000 | 175,000 | ||||||
Seller notes | 899 | 413 | ||||||
Other | 731 | 455 | ||||||
Total debt | 1,628,889 | 1,538,503 | ||||||
Less: current maturities | 6,516 | 6,209 | ||||||
Total long-term debt | $ | 1,622,373 | $ | 1,532,294 | ||||
• | A $300.0 million revolving credit facility that will terminate on February 24, 2011 including both a letter of credit sub facility and a swingline loan sub facility and; | ||
• | A $580.0 million term loan facility that matures on February 24, 2012 that was drawn at the closing of the Merger. |
F-33
Table of Contents
Notes to Consolidated Financial Statements
F-34
Table of Contents
Notes to Consolidated Financial Statements
Year | Redemption Price | |||
2010 | 103.813 | % | ||
2011 | 102.542 | % | ||
2012 | 101.271 | % | ||
2013 and thereafter | 100.000 | % |
F-35
Table of Contents
Notes to Consolidated Financial Statements
F-36
Table of Contents
Notes to Consolidated Financial Statements
Year | Redemption Price | |||
2009 | 102.00 | % | ||
2010 | 101.00 | % | ||
2011 | 100.00 | % |
F-37
Table of Contents
Notes to Consolidated Financial Statements
2007 | $ | 6,209 | ||
2008 | 6,259 | |||
2009 | 5,800 | |||
2010 | 5,800 | |||
2011 | 409,988 | |||
2012 and beyond | 1,104,447 |
F-38
Table of Contents
Notes to Consolidated Financial Statements
F-39
Table of Contents
Notes to Consolidated Financial Statements
F-40
Table of Contents
Notes to Consolidated Financial Statements
2007 | 2008 | 2009 | 2010 | 2011 | ||||||||||||||||
Compensation expense | $ | 3,698 | $ | 2,111 | $ | 1,094 | $ | 203 | $ | 0 |
Weighted | ||||||||||||
Average | ||||||||||||
Price Per | Exercise | |||||||||||
Share | Shares | Price | ||||||||||
(in thousands, except per share amounts) | ||||||||||||
Granted, February 25, 2005 | $ | 1.00 | 2,100 | $ | 1.00 | |||||||
Canceled | 1.00 | (116 | ) | 1.00 | ||||||||
Balance, December 31, 2005 | 1.00 | 1,984 | 1.00 | |||||||||
Granted | 1.00-2.50 | 1,913 | 2.42 | |||||||||
Canceled | 1.00-2.50 | (124 | ) | 1.22 | ||||||||
Balance, December 31, 2006 | $ | 1.00-2.50 | 3,773 | $ | 1.71 | |||||||
F-41
Table of Contents
Notes to Consolidated Financial Statements
Weighted | ||||||||||||
Average | ||||||||||||
Remaining | ||||||||||||
Number | Contractual | Number | ||||||||||
Exercise Price | Outstanding | Life | Exercisable | |||||||||
(in thousands, except per share amounts) | ||||||||||||
$1.00 | 1,979 | 8.20 | 376 | |||||||||
2.50 | 1,794 | 9.69 | 6 |
Weighted | ||||||||||||
Price Per | Average | |||||||||||
Share | Shares | Exercise Price | ||||||||||
(in thousands, except per share amounts) | ||||||||||||
Balance, February 25, 2005 | $ | — | — | $ | — | |||||||
Granted | 1.00 | 60 | 1.00 | |||||||||
Balance, December 31, 2005 | 1.00 | 60 | 1.00 | |||||||||
Granted | 2.50 | 30 | 2.50 | |||||||||
Balance, December 31, 2006 | $ | 1.00-2.50 | 90 | $ | 1.50 | |||||||
Weighted | ||||||||||||
Average | ||||||||||||
Remaining | ||||||||||||
Number | Contractual | Number | ||||||||||
Exercise Price | Outstanding | Life | Exercisable | |||||||||
(in thousands, except per share amounts) | ||||||||||||
$1.00 | 60 | 8.61 | 12 | |||||||||
2.50 | 30 | 9.86 | — |
F-42
Table of Contents
Notes to Consolidated Financial Statements
Predecessor | Successor | ||||||||||||
Period from | Period from | For the | |||||||||||
January 1 | February 25 | Year | |||||||||||
through | through | Ended | |||||||||||
February 24, | December 31, | December 31, | |||||||||||
2005 | 2005 | 2006 | |||||||||||
(in thousands) | |||||||||||||
Stock compensation expense: | |||||||||||||
Included in general and administrative | 115,025 | 10,134 | 3,551 | ||||||||||
Included in cost of services | 27,188 | 178 | 231 | ||||||||||
Total | 142,213 | 10,312 | 3,782 | ||||||||||
Predecessor | Successor | ||||||||||||||||
For the | Period from | Period from | For the | ||||||||||||||
Year | January 1 | February 25 | Year | ||||||||||||||
Ended | through | through | Ended | ||||||||||||||
December 31, | February 24, | December 31, | December 31, | ||||||||||||||
2004 | 2005 | 2005 | 2006 | ||||||||||||||
(in thousands) | |||||||||||||||||
Current: | |||||||||||||||||
Federal | $ | 53,742 | $ | 3,632 | $ | 26,585 | $ | 24,706 | |||||||||
State and local | 12,006 | 437 | 2,929 | 5,488 | |||||||||||||
Total current | 65,748 | 4,069 | 29,514 | 30,194 | |||||||||||||
Deferred | 10,803 | (63,863 | ) | 19,822 | 13,327 | ||||||||||||
Total income tax provision | $ | 76,551 | $ | (59,794 | ) | $ | 49,336 | $ | 43,521 | ||||||||
F-43
Table of Contents
Notes to Consolidated Financial Statements
Predecessor | Successor | ||||||||||||||||
For the | Period from | Period from | For the | ||||||||||||||
Year | January 1 | February 25 | Year | ||||||||||||||
Ended | through | through | Ended | ||||||||||||||
December 31, | February 24, | December 31, | December 31, | ||||||||||||||
2004 | 2005 | 2005 | 2006 | ||||||||||||||
Expected federal tax rate | 35.0 | % | 35.0 | % | 35.0 | % | 35.0 | % | |||||||||
State and local taxes, net of federal benefit | 3.1 | 4.6 | 5.7 | 3.0 | |||||||||||||
Other permanent differences | 0.8 | — | 3.4 | 0.9 | |||||||||||||
Valuation allowance | 1.3 | (1.5 | ) | (1.4 | ) | 2.7 | |||||||||||
Tax loss of sale of subsidiaries | — | — | — | (6.9 | ) | ||||||||||||
Other | — | (0.9 | ) | (1.1 | ) | (0.1 | ) | ||||||||||
Total | 40.2 | % | 37.2 | % | 41.6 | % | 34.6 | % | |||||||||
December 31, | ||||||||
2005 | 2006 | |||||||
(in thousands) | ||||||||
Deferred tax assets — current | ||||||||
Allowance for doubtful accounts | $ | 29,845 | $ | 14,555 | ||||
Compensation and benefit related accruals | 19,020 | 18,743 | ||||||
Malpractice insurance | 9,717 | 10,856 | ||||||
Restructuring reserve | 201 | 90 | ||||||
Net operating loss carryforwards | 4,822 | — | ||||||
Other accruals, net | 1,890 | 2,769 | ||||||
Net deferred tax asset — current | 65,495 | 47,013 | ||||||
Deferred tax assets — non current | ||||||||
Expenses not currently deductible for tax | 212 | 101 | ||||||
Net operating loss carry forwards | 16,050 | 20,886 | ||||||
Restricted stock options | (4,413 | ) | (2,918 | ) | ||||
Interest rate swap | (2,520 | ) | (3,397 | ) | ||||
Depreciation and amortization | (23,166 | ) | (36,719 | ) | ||||
Net deferred tax asset — non current | (13,837 | ) | (22,047 | ) | ||||
Net deferred tax asset before valuation allowance | 51,658 | 24,966 | ||||||
Valuation allowance | (11,961 | ) | (14,428 | ) | ||||
$ | 39,697 | $ | 10,538 | |||||
F-44
Table of Contents
Notes to Consolidated Financial Statements
2007 | $ | — | ||
2008 | — | |||
2009 | — | |||
2010 | — | |||
Thereafter through 2019 | 1,676 |
F-45
Table of Contents
Notes to Consolidated Financial Statements
Predecessor | ||||||||||||||||
Year Ended December 31, 2004 | ||||||||||||||||
Specialty | Outpatient | |||||||||||||||
Hospitals | Rehabilitation | All Other | Total | |||||||||||||
(in thousands) | ||||||||||||||||
Net revenue | $ | 1,091,699 | $ | 498,830 | $ | 10,995 | $ | 1,601,524 | ||||||||
Adjusted EBITDA | 236,516 | 71,562 | (46,622 | ) | 261,456 | |||||||||||
Total assets | 522,183 | 318,180 | 273,358 | 1,113,721 | ||||||||||||
Capital expenditures | 24,182 | 5,885 | 2,559 | 32,626 |
Predecessor | ||||||||||||||||
Period from January 1 through February 24, 2005 | ||||||||||||||||
Specialty | Outpatient | |||||||||||||||
Hospitals | Rehabilitation | All Other | Total | |||||||||||||
(in thousands) | ||||||||||||||||
Net revenue | $ | 202,781 | $ | 73,344 | $ | 1,611 | $ | 277,736 | ||||||||
Adjusted EBITDA | 44,384 | 9,848 | (7,701 | ) | 46,531 | |||||||||||
Total assets | 904,754 | 239,019 | 87,640 | 1,231,413 | ||||||||||||
Capital expenditures | 1,165 | 408 | 1,013 | 2,586 |
F-46
Table of Contents
Notes to Consolidated Financial Statements
Successor | ||||||||||||||||
Period from February 25 through December 31, 2005 | ||||||||||||||||
Specialty | Outpatient | |||||||||||||||
Hospitals | Rehabilitation | All Other | Total | |||||||||||||
(in thousands) | ||||||||||||||||
Net revenue | $ | 1,169,702 | $ | 407,367 | $ | 3,637 | $ | 1,580,706 | ||||||||
Adjusted EBITDA | 263,760 | 56,109 | (36,466 | ) | 283,403 | |||||||||||
Total assets (1) | 1,656,224 | 293,720 | 218,441 | 2,168,385 | ||||||||||||
Capital expenditures | 101,158 | 3,342 | 2,860 | 107,360 |
Successor | ||||||||||||||||
Year Ended December 31, 2006 | ||||||||||||||||
Specialty | Outpatient | |||||||||||||||
Hospitals | Rehabilitation | All Other | Total | |||||||||||||
(in thousands) | ||||||||||||||||
Net revenue | $ | 1,378,543 | $ | 470,339 | $ | 2,616 | $ | 1,851,498 | ||||||||
Adjusted EBITDA | 283,270 | 64,823 | (39,769 | ) | 308,324 | |||||||||||
Total assets | 1,742,803 | 258,773 | 180,948 | 2,182,524 | ||||||||||||
Capital expenditures | 146,291 | 6,527 | 2,278 | 155,096 |
(1) | The Outpatient Rehabilitation segment includes $75.3 million in assets held for sale related to the sale of the Company’s Canadian operations (Footnote 3). |
F-47
Table of Contents
Notes to Consolidated Financial Statements
Predecessor | Successor | ||||||||||||||||
Period from January 1 | Period from February 25 | ||||||||||||||||
For the Year Ended | through | through | For the Year Ended | ||||||||||||||
December 31, 2004 | February 24, 2005 | December 31, 2005 | December 31, 2006 | ||||||||||||||
(in thousands) | |||||||||||||||||
Net income (loss) | $ | 118,184 | $ | (100,251 | ) | $ | 72,327 | $ | 94,879 | ||||||||
Income from discontinued operations | (4,458 | ) | (522 | ) | (3,072 | ) | (12,478 | ) | |||||||||
Income tax expense (benefit) | 76,551 | (59,794 | ) | 49,336 | 43,521 | ||||||||||||
Minority interest | 2,608 | 330 | 1,776 | 1,414 | |||||||||||||
Interest expense, net | 30,716 | 4,128 | 101,441 | 130,538 | |||||||||||||
Other income | (1,096 | ) | (267 | ) | (1,092 | ) | — | ||||||||||
Merger related charges | — | 12,025 | — | — | |||||||||||||
Loss on early retirement of debt | — | 42,736 | — | — | |||||||||||||
Depreciation and amortization | 38,951 | 5,933 | 37,922 | 46,668 | |||||||||||||
Stock compensation expense | |||||||||||||||||
Included in general and administrative | — | 115,025 | 10,134 | 3,551 | |||||||||||||
Included in cost of services | — | 27,188 | 178 | 231 | |||||||||||||
Long-term incentive compensation (1) | — | — | 14,453 | — | |||||||||||||
Adjusted EBITDA | $ | 261,456 | $ | 46,531 | $ | 283,403 | $ | 308,324 | |||||||||
(1) | Included in general and administrative expenses on the Company’s consolidated statement of operations. |
F-48
Table of Contents
Notes to Consolidated Financial Statements
F-49
Table of Contents
Notes to Consolidated Financial Statements
2007 | $ | 1,992 | ||
2008 | 2,001 | |||
2009 | 1,843 | |||
2010 | 1,816 | |||
2011 | 1,771 | |||
Thereafter | 5,732 | |||
$ | 15,155 | |||
2007 | $ | 63,743 | ||
2008 | 43,883 | |||
2009 | 28,396 | |||
2010 | 18,688 | |||
2011 | 11,042 | |||
Thereafter | 32,359 | |||
$ | 198,111 | |||
F-50
Table of Contents
Notes to Consolidated Financial Statements
F-51
Table of Contents
Notes to Consolidated Financial Statements
F-52
Table of Contents
Notes to Consolidated Financial Statements
Predecessor | Successor | ||||||||||||||||
Period | Period | ||||||||||||||||
For the | from | from | For the | ||||||||||||||
Year | January 1 | February | Year | ||||||||||||||
Ended | through | 25 through | Ended | ||||||||||||||
December | February 24, | December | December | ||||||||||||||
31, 2004 | 2005 | 31, 2005 | 31, 2006 | ||||||||||||||
(in thousands) | |||||||||||||||||
Notes issued with acquisitions (Note 2) | $ | 214 | $ | — | $ | 60 | $ | — | |||||||||
Liabilities assumed with acquisitions (Note 2) | 573 | 19,924 | 148 | — | |||||||||||||
Notes recorded related to sale of business (Note 3) | — | — | — | 8,436 | |||||||||||||
Tax benefit of stock option exercises | 13,044 | 1,507 | — | — |
F-53
Table of Contents
Notes to Consolidated Financial Statements
F-54
Table of Contents
Notes to Consolidated Financial Statements
Predecessor | Successor | ||||||||||||||||||||
Period from | Period from | ||||||||||||||||||||
January 1 | February 25 | ||||||||||||||||||||
through | through | ||||||||||||||||||||
February 24, | March 31, | Second | Third | Fourth | |||||||||||||||||
2005 | 2005 | Quarter | Quarter | Quarter | |||||||||||||||||
(in thousands) | |||||||||||||||||||||
Year ended December 31, 2005 | |||||||||||||||||||||
Net revenues | $ | 277,736 | $ | 188,386 | $ | 473,704 | $ | 460,658 | $ | 457,958 | |||||||||||
Income (loss) from operations | (101,615 | ) | 30,511 | 71,606 | 53,751 | 64,848 | |||||||||||||||
Income (loss) from continuing operations | (100,773 | ) | 11,492 | 25,311 | 14,306 | 18,146 | |||||||||||||||
Income (loss) from discontinued operations, net of tax | 522 | 672 | 1,634 | 1,061 | (295 | ) | |||||||||||||||
Net income (loss) | $ | (100,251 | ) | $ | 12,164 | $ | 26,945 | $ | 15,367 | $ | 17,851 | ||||||||||
Successor | ||||||||||||||||
First Quarter | Second Quarter | Third Quarter | Fourth Quarter | |||||||||||||
(in thousands) | ||||||||||||||||
Year ended December 31, 2006 | ||||||||||||||||
Net revenues | $ | 479,743 | $ | 482,141 | $ | 443,872 | $ | 445,742 | ||||||||
Income from operations | 66,451 | 77,993 | 54,313 | 59,117 | ||||||||||||
Income from continuing operations | 18,171 | 27,271 | 12,544 | 24,415 | ||||||||||||
Income from discontinued operations, net of tax | 10,018 | — | — | 2,460 | ||||||||||||
Net income | $ | 28,189 | $ | 27,271 | $ | 12,544 | $ | 26,875 | ||||||||
F-55
Table of Contents
Notes to Consolidated Financial Statements
VALUATION AND QUALIFYING ACCOUNTS
Balance at | Charged to | Balance | ||||||||||||||||||
Beginning | Cost and | at End | ||||||||||||||||||
Description | of Year | Expenses | Acquisitions(A) | Deductions(B) | of Year | |||||||||||||||
(in thousands) | ||||||||||||||||||||
Year ended December 31, 2006 allowance for doubtful accounts | $ | 74,891 | $ | 18,810 | $ | — | $ | (38,395 | ) | $ | 55,306 | |||||||||
Combined Year ended December 31, 2005 allowance for doubtful accounts | $ | 94,622 | $ | 24,801 | $ | 7,847 | $ | (52,379 | ) | $ | 74,891 | |||||||||
Year ended December 31, 2004 allowance for doubtful accounts | $ | 111,517 | $ | 48,522 | $ | — | $ | (65,417 | ) | $ | 94,622 | |||||||||
Year ended December 31, 2006 income tax valuation allowance | $ | 11,961 | $ | 3,485 | $ | — | $ | (1,018 | ) | $ | 14,428 | |||||||||
Combined Year ended December 31, 2005 income tax valuation allowance | $ | 10,506 | $ | 2,322 | $ | 823 | $ | (1,690 | ) | $ | 11,961 | |||||||||
Year ended December 31, 2004 income tax valuation allowance | $ | 4,520 | $ | 3,386 | $ | 2,600 | $ | — | $ | 10,506 |
(A) | Represents opening balance sheet reserves resulting from purchase accounting entries. | |
(B) | Allowance for doubtful accounts deductions represent write-offs against the reserve for 2004 and 2006. In 2005, allowance for doubtful accounts deductions represent write-offs against the reserve of $52.1 million and $0.3 million reclassed to assets held for sale due to the sale of the Company’s Canadian subsidiary. Income tax valuation allowance deductions primarily represent the disposition of certain subsidiaries. |
F-56
Table of Contents
SELECT MEDICAL HOLDINGS CORPORATION | ||||||
By: | /s/ Robert A. Ortenzio | |||||
Director and Chief Executive Officer (principal executive officer) |
Signature | Title | Date | ||
/s/ Rocco A. Ortenzio | Director and Executive Chairman | March 30, 2007 | ||
Rocco A. Ortenzio | ||||
/s/ Robert A. Ortenzio | Director and Chief Executive Officer (principal executive officer) | March 30, 2007 | ||
/s/ Martin F. Jackson | Executive Vice President and Chief Financial Officer (principal financial | March 30, 2007 | ||
officer) | ||||
/s/ Scott A. Romberger | Senior Vice President, Controller and Chief Accounting Officer (principal | March 30, 2007 | ||
accounting officer) | ||||
/s/ Russell L. Carson | Director | March 30, 2007 | ||
/s/ David S. Chernow | Director | March 30, 2007 | ||
/s/ Bryan C. Cressey | Director | March 30, 2007 | ||
/s/ James E. Dalton, Jr. | Director | March 30, 2007 | ||
/s/ Thomas A. Scully | Director | March 30, 2007 | ||
/s/ Leopold Swergold | Director | March 30, 2007 | ||
/s/ Sean M. Traynor | Director | March 30, 2007 |
Table of Contents
Exhibit | ||
Number | Document | |
2 .1 | Agreement and Plan of Merger and Reorganization, dated as of November 19, 2004, by and among Select Medical Corporation, Camp Hill Acquisition Corp., SemperCare, Inc. and Jeffrey J. Collinson, as stockholders’ agent, incorporated by reference to Exhibit 2.1 of Select Medical Corporation’s current report on Form 8-K filed November 23, 2004. | |
3 .1 | Amended and Restated Certificate of Incorporation of Select Medical Corporation, incorporated by reference to Exhibit 3.1 of Select Medical Corporation’s Form S-4 filed June 15, 2005. | |
3 .2 | Amended and Restated Bylaws of Select Medical Corporation, incorporated by reference to Exhibit 3.2 of Select Medical Corporation’s Form S-4 filed June 15, 2005. | |
3 .3 | Amended and Restated Certificate of Incorporation of Select Medical Holdings Corporation, incorporated by reference to Exhibit 3.3 of Select Medical Holdings Corporation’s Form S-4 filed April 16, 2006. | |
3 .4 | Amended and Restated Bylaws of Select Medical Holdings Corporation, incorporated by reference to Exhibit 3.4 of Select Medical Holdings Corporation’s Form S-4 filed April 16, 2006. | |
4 .1 | Indenture governing 75/8 % Senior Subordinated Notes due 2015 among Select Medical Corporation, the Guarantors named therein and U.S. Bank Trust National Association, dated February 24, 2005, incorporated by reference to Exhibit 4.4 of Select Medical Corporation’s Form S-4 filed June 15, 2005. | |
4 .2 | Form of 75/8 % Senior Subordinated Notes due 2015 (included in Exhibit 4.4), incorporated by reference to Exhibit 4.5 of Select Medical Corporation’s Form S-4 filed June 15, 2005. | |
4 .3 | Exchange and Registration Rights Agreement, dated as of February 24, 2005, by and among Select Medical Corporation, the Guarantors named therein, Merrill Lynch, Pierce, Fenner & Smith Incorporated, J.P. Morgan Securities Inc., Wachovia Capital Markets, LLC, CIBC World Markets Corp. and PNC Capital Markets, Inc. , incorporated by reference to Exhibit 4.6 of Select Medical Corporation’s Form S-4 filed June 15, 2005. | |
4 .4 | Indenture governing Senior Floating Rate Notes due 2015 among Select Medical Holdings Corporation and U.S. Bank Trust National Association, dated September 29, 2005, incorporated by reference to Exhibit 4.7 of Select Medical Holdings Corporation’s Form S-4 filed April 16, 2006. | |
4 .5 | Form of Senior Floating Rate Notes due 2015, incorporated by reference to Exhibit 4.8 of Select Medical Holdings Corporation’s Form S-4 filed April 16, 2006. | |
4 .6 | Exchange and Registration Rights Agreement, dated as of September 29, 2005, by and among Select Medical Holdings Corporation, Merrill Lynch, Pierce, Fenner & Smith Incorporated, J.P. Morgan Securities Inc., Wachovia Capital Markets, LLC, CIBC World Markets Corp. and PNC Capital Markets, Inc., incorporated by reference to Exhibit 4.9 of Select Medical Holdings Corporation’s Form S-4 filed April 16, 2006. |
Table of Contents
Exhibit | ||
Number | Document | |
10 .1 | Credit Agreement, dated as of February 24, 2005, among Select Medical Holdings Corporation, Select Medical Corporation, as Borrower, the Lenders party thereto, JPMorgan Chase Bank, N.A., as Administrative Agent and Collateral Agent, Wachovia Bank, National Association, as Syndication Agent and Merrill Lynch, Pierce, Fenner & Smith Incorporated and CIBC Inc., as Co-Documentation Agents, incorporated by reference to Exhibit 10.1 of Select Medical Corporation’s Form S-4 filed June 15, 2005. | |
10 .2 | Guarantee and Collateral Agreement, dated as of February 24, 2005, among Select Medical Holdings Corporation, Select Medical Corporation, the Subsidiaries of Select identified therein and JPMorgan Chase Bank, N.A., as Collateral Agent, incorporated by reference to Exhibit 10.2 of Select Medical Corporation’s Form S-4 filed June 15, 2005. | |
10 .3 | Amended and Restated Senior Management Agreement dated as of May 7, 1997 between Select Medical Corporation, John Ortenzio, Martin Ortenzio, Select Investments II, Select Partners, L.P. and Rocco Ortenzio, incorporated by reference to Exhibit 10.34 of Select Medical Corporation’s Registration Statement on Form S-1 (Reg. No. 333-48856). | |
10 .4 | Amendment No. 1 dated as of January 1, 2000 to Amended and Restated Senior Management Agreement dated May 7, 1997 between Select Medical Corporation and Rocco A. Ortenzio, incorporated by reference to Exhibit 10.35 of Select Medical Corporation’s Registration Statement on Form S-1 (Reg. No. 333-48856). | |
10 .5 | Employment Agreement dated as of March 1, 2000 between Select Medical Corporation and Rocco A. Ortenzio, incorporated by reference to Exhibit 10.16 of Select Medical Corporation’s Registration Statement on Form S-1 (Reg. No. 333-48856). | |
10 .6 | Amendment dated as of August 8, 2000 to Employment Agreement dated as of March 1, 2000 between Select Medical Corporation and Rocco A. Ortenzio, incorporated by reference to Exhibit 10.17 of Select Medical Corporation’s Registration Statement on Form S-1 (Reg. No. 333-48856). | |
10 .7 | Amendment No. 2 dated as of February 23, 2001 to Employment Agreement dated as of March 1, 2000 between Select Medical Corporation and Rocco A. Ortenzio, incorporated by reference to Exhibit 10.47 of Select Medical Corporation’s Registration Statement on Form S-1 (Reg. No. 333-48856). | |
10 .8 | Amendment No. 3 dated as of April 24, 2001 to Employment Agreement dated as of March 1, 2000 between Select Medical Corporation and Rocco A. Ortenzio, incorporated by reference to Exhibit 10.50 of Select Medical Corporation’s Registration Statement on Form S-4 (Reg. No. 333-63828). | |
10 .9 | Amendment No. 4 to Employment Agreement dated as of September 17, 2001 between Select Medical Corporation and Rocco A. Ortenzio, incorporated by reference to Exhibit 10.52 of Select Medical Corporation’s Annual Report on Form 10-K for the fiscal year ended December 31, 2001. | |
10 .10 | Amendment No. 5 to Employment Agreement dated as of February 24, 2005 between Select Medical Corporation and Rocco A. Ortenzio, incorporated by reference to Exhibit 10.10 of Select Medical Corporation’s Form S-4 filed June 15, 2005. | |
10 .11 | Employment Agreement, dated as of March 1, 2000, between Select Medical Corporation and Robert A. Ortenzio, incorporated by reference to Exhibit 10.14 of Select Medical Corporation’s Registration Statement on Form S-1 (Reg. No. 333-48856). | |
10 .12 | Amendment to Employment Agreement, dated as of August 8, 2000, between Select Medical Corporation and Robert A. Ortenzio, incorporated by reference to Exhibit 10.15 of Select Medical Corporation’s Registration Statement on Form S-1 (Reg. No. 333-48856). |
Table of Contents
Exhibit | ||
Number | Document | |
10 .13 | Amendment No. 2 to Employment Agreement, dated as of February 23, 2001, between Select Medical Corporation and Robert A. Ortenzio, incorporated by reference to Exhibit 10.48 of Select Medical Corporation’s Registration Statement on Form S-1 (Reg. No. 333-48856). | |
10 .14 | Amendment No. 3 to Employment Agreement, dated as of September 17, 2001, between Select Medical Corporation and Robert A. Ortenzio, incorporated by reference to Exhibit 10.53 of Select Medical Corporation’s Annual Report on Form 10-K for the fiscal year ended December 31, 2001. | |
10 .15 | Amendment No. 4 to Employment Agreement, dated as of December 10, 2004, between Select Medical Corporation and Robert A. Ortenzio, incorporated by reference to Exhibit 99.3 of Select Medical Corporation’s Form 8-K (Reg. No. 001-31441). | |
10 .16 | Amendment No. 5 to Employment Agreement, dated as of February 24, 2005, between Select Medical Corporation and Robert A. Ortenzio, incorporated by reference to Exhibit 10.16 of Select Medical Corporation’s Form S-4 filed June 15, 2005. | |
10 .17 | Employment Agreement, dated as of March 1, 2000, between Select Medical Corporation and Patricia A. Rice, incorporated by reference to Exhibit 10.19 of Select Medical Corporation’s Registration Statement on Form S-1 (Reg. No. 333-48856). | |
10 .18 | Amendment to Employment Agreement, dated as of August 8, 2000, between Select Medical Corporation and Patricia A. Rice, incorporated by reference to Exhibit 10.20 of Select Medical Corporation’s Registration Statement on Form S-1 (Reg. No. 333-48856). | |
10 .19 | Amendment No. 2 to Employment Agreement, dated as of February 23, 2001, between Select Medical Corporation and Patricia A. Rice, incorporated by reference to Exhibit 10.49 of Select Medical Corporation’s Registration Statement on Form S-1 (Reg. No. 333-48856). | |
10 .20 | Amendment No. 3 to Employment Agreement, dated as of December 10, 2004, between Select Medical Corporation and Patricia A. Rice, incorporated by reference to Exhibit 99.2 of Select Medical Corporation’s Form 8-K (Reg. No. 001-31441). | |
10 .21 | Amendment No. 4 to Employment Agreement, dated as of February 24, 2005, between Select Medical Corporation and Patricia A. Rice, incorporated by reference to Exhibit 10.21 of Select Medical Corporation’s Form S-4 filed June 15, 2005. | |
10 .22 | Change of Control Agreement, dated as of March 1, 2000, between Select Medical Corporation and Martin F. Jackson, incorporated by reference to Exhibit 10.11 of Select Medical Corporation’s Registration Statement on Form S-1 (Reg. No. 333-48856). |
Table of Contents
Exhibit | ||
Number | Document | |
10 .23 | Amendment to Change of Control Agreement, dated as of February 23, 2001, between Select Medical Corporation and Martin F. Jackson, incorporated by reference to Exhibit 10.52 of Select Medical Corporation’s Registration Statement on Form S-1 (Reg. No. 333-48856). | |
10 .24 | Second Amendment to Change of Control Agreement, dated as of February 24, 2005, between Select Medical Corporation and Martin F. Jackson, incorporated by reference to Exhibit 10.24 of Select Medical Corporation’s Form S-4 filed June 15, 2005. | |
10 .25 | Employment Agreement dated as of December 16, 1998 between Select Medical Corporation and David W. Cross, incorporated by reference to Exhibit 10.8 of Select Medical Corporation’s Registration Statement on Form S-1 (Reg. No. 333-48856). | |
10 .26 | First Amendment dated as of October 15, 2000 to Employment Agreement dated as of December 16, 1998 between Select Medical Corporation and David W. Cross, incorporated by reference to Exhibit 10.33 of Select Medical Corporation’s Registration Statement on Form S-1 (Reg. No. 333-48856). | |
10 .27 | Change of Control Agreement dated as of November 21, 2001 between Select Medical Corporation and David W. Cross, incorporated by reference to Exhibit 10.61 of Select Medical Corporation’s Annual Report on Form 10-K for the fiscal year ended December 31, 2001. | |
10 .28 | Amendment to Change of Control Agreement, dated as of February 24, 2005, between Select Medical Corporation and David W. Cross, incorporated by reference to Exhibit 10.28 of Select Medical Corporation’s Form S-4 filed June 15, 2005. | |
10 .29 | Other Senior Management Agreement, dated as of June 2, 1997, between Select Medical Corporation and S. Frank Fritsch, incorporated by reference to Exhibit 10.9 of Select Medical Corporation’s Registration Statement on Form S-1 (Reg. No. 333-48856). | |
10 .30 | Change of Control Agreement, dated as of March 1, 2000, between Select Medical Corporation and S. Frank Fritsch, incorporated by reference to Exhibit 10.10 of Select Medical Corporation’s Registration Statement on Form S-1 (Reg. No. 333-48856). | |
10 .31 | Amendment to Change of Control Agreement, dated as of February 23, 2001, between Select Medical Corporation and S. Frank Fritsch, incorporated by reference to Exhibit 10.53 of Select Medical Corporation’s Registration Statement on Form S-1 (Reg. No. 333-48856). | |
10 .32 | Second Amendment to Change of Control Agreement, dated as of February 24, 2005, between Select Medical Corporation and S. Frank Fritsch, incorporated by reference to Exhibit 10.32 of Select Medical Corporation’s Form S-4 filed June 15, 2005. | |
10 .33 | Change of Control Agreement, dated as of March 1, 2000, between Select Medical Corporation and James J. Talalai, incorporated by reference to Exhibit 10.58 of Select Medical Corporation’s Annual Report on Form 10-K for the fiscal year ended December 31, 2001. |
Table of Contents
Exhibit | ||
Number | Document | |
10 .34 | Amendment to Change of Control Agreement, dated as of February 23, 2001, between Select Medical Corporation and James J. Talalai, incorporated by reference to Exhibit 10.59 of Select Medical Corporation’s Annual Report on Form 10-K for the fiscal year ended December 31, 2001. | |
10 .35 | Second Amendment to Change of Control Agreement, dated as of February 24, 2005, between Select Medical Corporation and James J. Talalai, incorporated by reference to Exhibit 10.35 of Select Medical Corporation’s Form S-4 filed June 15, 2005. | |
10 .36 | Other Senior Management Agreement, dated as of March 28, 1997, between Select Medical Corporation and Michael E. Tarvin, incorporated by reference to Exhibit 10.21 of Select Medical Corporation’s Registration Statement on Form S-1 (Reg. No. 333-48856). | |
10 .37 | Change of Control Agreement, dated as of March 1, 2000, between Select Medical Corporation and Michael E. Tarvin, incorporated by reference to Exhibit 10.22 of Select Medical Corporation’s Registration Statement on Form S-1 (Reg. No. 333-48856). | |
10 .38 | Amendment to Change of Control Agreement, dated as of February 23, 2001, between Select Medical Corporation and Michael E. Tarvin, incorporated by reference to Exhibit 10.54 of Select Medical Corporation’s Registration Statement on Form S-1 (Reg. No. 333-48856). | |
10 .39 | Second Amendment to Change of Control Agreement, dated as of February 24, 2005, between Select Medical Corporation and Michael E. Tarvin, incorporated by reference to Exhibit 10.39 of Select Medical Corporation’s Form S-4 filed June 15, 2005. | |
10 .40 | Change of Control Agreement, dated as of March 1, 2000, between Select Medical Corporation and Scott A. Romberger, incorporated by reference to Exhibit 10.56 of Select Medical Corporation’s Annual Report on Form 10-K for the fiscal year ended December 31, 2001. | |
10 .41 | Amendment to Change of Control Agreement, dated as of February 23, 2001, between Select Medical Corporation and Scott A. Romberger, incorporated by reference to Exhibit 10.57 of Select Medical Corporation’s Annual Report on Form 10-K for the fiscal year ended December 31, 2001. | |
10 .42 | Second Amendment to Change of Control Agreement, dated as of February 24, 2005, between Select Medical Corporation and Scott A. Romberger, incorporated by reference to Exhibit 10.42 of Select Medical Corporation’s Form S-4 filed June 15, 2005. | |
10 .43 | Fifth Amendment to Employment Agreement, dated as of April 18, 2005, between Select Medical Corporation and David W. Cross, incorporated by reference to Exhibit 10.43 of Select Medical Corporation’s Form S-4 filed June 15, 2005. | |
10 .44 | Consulting Agreement, dated as of January 1, 2004, between Select Medical Corporation and Thomas A. Scully, incorporated by reference to Exhibit 10.1 of Select Medical Corporation’s quarterly report on Form 10-Q for the fiscal quarter ended March 31, 2004. | |
10 .45 | First Amendment to Consulting Agreement, dated as of April 18, 2005, between Select Medical Corporation and Thomas A. Scully, incorporated by reference to Exhibit 10.45 of Select Medical Corporation’s Form S-4 filed June 15, 2005. | |
10 .46 | Amendment No. 5 to Employment Agreement, dated as of April 27, 2005, between Select Medical Corporation and Patricia A. Rice, incorporated by reference to Exhibit 10.46 of Select Medical Corporation’s Form S-4 filed June 15, 2005. |
Table of Contents
Exhibit | ||
Number | Document | |
10 .47 | Office Lease Agreement dated as of May 18, 1999 between Select Medical Corporation and Old Gettysburg Associates I, incorporated by reference to Exhibit 10.24 of Select Medical Corporation’s Registration Statement on Form S-1 (Reg. No. 333-48856). | |
10 .48 | First Addendum dated June 1999 to Office Lease Agreement dated as of May 18, 1999 between Select Medical Corporation and Old Gettysburg Associates I, incorporated by reference to Exhibit 10.25 of Select Medical Corporation’s Registration Statement on Form S-1 (Reg. No. 333-48856). | |
10 .49 | Second Addendum dated as of February 1, 2000 to Office Lease Agreement dated as of May 18, 1999 between Select Medical Corporation and Old Gettysburg Associates I, incorporated by reference to Exhibit 10.26 of Select Medical Corporation’s Registration Statement on Form S-1 (Reg. No. 333-48856). | |
10 .50 | Office Lease Agreement dated as of June 17, 1999 between Select Medical Corporation and Old Gettysburg Associates III, incorporated by reference to Exhibit 10.27 of Select Medical Corporation’s Registration Statement on Form S-1 (Reg. No. 333-48856). | |
10 .51 | Third Addendum dated as of May 17, 2001 to Office Lease Agreement dated as of May 18, 1999 between Select Medical Corporation and Old Gettysburg Associates I, incorporated by reference to Exhibit 10.52 of Select Medical Corporation’s Registration Statement on Form S-4 (Reg. No. 333-63828). | |
10 .52 | Office Lease Agreement dated as of May 15, 2001 by and between Select Medical Corporation and Old Gettysburg Associates II, incorporated by reference to Exhibit 10.53 of Select Medical Corporation’s Registration Statement on Form S-4 (Reg. No. 333-63828). | |
10 .53 | Fourth Addendum to Lease Agreement dated as of September 1, 2001 by and between Old Gettysburg Associates and Select Medical Corporation, incorporated by reference to Exhibit 10.54 of Select Medical Corporation’s Annual Report on Form 10-K for the fiscal year ended December 31, 2001. | |
10 .54 | First Addendum to Lease Agreement by and between Old Gettysburg Associates II and Select Medical Corporation, dated as of February 26, 2002, incorporated by reference to Exhibit 10.2 of Select Medical Corporation’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2002. | |
10 .55 | Second Addendum to Lease Agreement by and between Old Gettysburg Associates II and Select Medical Corporation, dated as of February 26, 2002, incorporated by reference to Exhibit 10.3 of Select Medical Corporation’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2002. | |
10 .56 | Third Addendum to Lease Agreement by and between Old Gettysburg Associates II and Select Medical Corporation, dated as of February 26, 2002, incorporated by reference to Exhibit 10.4 of Select Medical Corporation’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2002. |
Table of Contents
Exhibit | ||
Number | Document | |
10 .57 | Office Lease Agreement dated as of October 29, 2003 by and between Select Medical Corporation and Old Gettysburg Associates, incorporated by reference to Exhibit 10.74 of Select Medical Corporation’s annual report on Form 10-K for the fiscal year ended December 31, 2003. | |
10 .58 | Office Lease Agreement dated as of October 29, 2003 by and between Select Medical Corporation and Old Gettysburg Associates II, incorporated by reference to Exhibit 10.74 of Select Medical Corporation’s annual report on Form 10-K for the fiscal year ended December 31, 2003. | |
10 .59 | Fifth Addendum to Lease Agreement, dated as of February 19, 2004, by and between Old Gettysburg Associates and Select Medical Corporation, incorporated by reference to Exhibit 10.59 of Select Medical Corporation’s Form S-4 filed June 15, 2005. | |
10 .60 | Office Lease Agreement dated as of March 19, 2004 by and between Select Medical Corporation and Old Gettysburg Associates II, incorporated by reference to Exhibit 10.3 of Select Medical Corporation’s quarterly report on Form 10-Q for the fiscal quarter ended March 31, 2004. | |
10 .61 | Office Lease Agreement dated as of March 19, 2004 by and between Select Medical Corporation and Old Gettysburg Associates, incorporated by reference to Exhibit 10.4 of Select Medical Corporation’s quarterly report on Form 10-Q for the fiscal quarter ended March 31, 2004. | |
10 .62 | Naming, Promotional and Sponsorship Agreement dated as of October 1, 1997 between NovaCare, Inc. and the Philadelphia Eagles Limited Partnership, assumed by Select Medical Corporation in a Consent and Assumption Agreement dated November 19, 1999 by and among NovaCare, Inc., Select Medical Corporation and the Philadelphia Eagles Limited Partnership, incorporated by reference to Exhibit 10.36 of Select Medical Corporation’s Registration Statement on Form S-1 (Reg. No. 333-48856). | |
10 .63 | First Amendment to Naming, Promotional and Sponsorship Agreement, dated as of January 1, 2004, between Select Medical Corporation and Philadelphia Eagles, LLC, incorporated by reference to Exhibit 10.63 of Select Medical Corporation’s Form S-4 filed June 15, 2005. | |
10 .64 | Office Lease Agreement dated August 10, 2005 among Old Gettysburg Associates II and Select Medical Corporation, dated August 10, 2005, incorporated by reference to Exhibit 10.1 of Select Medical Corporation’s current report on Form 8-K filed August 10, 2005. | |
10 .65 | Amended and Restated Select Medical Holdings Corporation 2005 Equity Incentive Plan, incorporated by reference to Exhibit 10.1 of Select Medical Corporation’s current report on Form 8-K filed November 8, 2005. | |
10 .66 | Select Medical Holdings Corporation 2005 Equity Incentive Plan for Non-Employee Directors, incorporated by reference to Exhibit 10.2 of Select Medical Corporation’s current report on Form 8-K filed November 8, 2005. | |
10 .67 | Amendment No. 1, dated as of September 26, 2005, to Credit Agreement, dated as of February 24, 2005, among Select Medical Holdings Corporation, Select Medical Corporation, as Borrower, the Lenders party thereto, JPMorgan Chase Bank, N.A., as Administrative Agent and Collateral Agent, Wachovia Bank, National Association, as Syndication Agent and Merrill Lynch, Pierce, Fenner & Smith Incorporated and CIBC Inc., as Co-Documentation Agents, incorporated by reference to Exhibit 10.2 of Select Medical Corporation’s Form 10-Q filed November 14, 2005. |
Table of Contents
Exhibit | ||
Number | Document | |
10 .68 | Acquisition Agreement between Select Medical Corporation, SLMC Finance Corporation and Callisto Capital L.P., dated December 23, 2005, incorporated by reference to Exhibit 2.2 of Select Medical Corporation’s current report on Form 8-K filed December 23, 2005. | |
10 .69 | Amendment to Acquisition Agreement among Select Medical Corporation, SLMC Finance Corporation, Callisto Capital, L.P. and Canadian Back Institute Limited dated February 9, 2006, incorporated by reference to Exhibit 10.1 of Select Medical Corporation’s Form 8-K filed February 10, 2006. | |
10 .70 | Office Lease Agreement dated August 25, 2006 between Old Gettysburg Associates IV, L.P. and Select Medical Corporation, incorporated by reference to Exhibit 10.1 of Select Medical Corporation’s Form 10-Q filed November 13, 2006. | |
12 .1 | Statement of Ratio of Earnings to Fixed Charges. | |
21 .1 | Subsidiaries of Select Medical Corporation. | |
31 .1 | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
31 .2 | Certification of Executive Vice President and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
32 .1 | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
32 .2 | Certification of Executive Vice President and Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |