Delaware | 8060 | 20-1764048 | ||
(State or Other Jurisdiction of Incorporation or Organization) | (Primary Standard Industrial Classification Code Number) | (I.R.S. Employer Identification No.) |
Stephen M. Leitzell, Esq. Dechert LLP Cira Centre 2929 Arch Street Philadelphia, Pennsylvania 19104 (215) 994-4000 | Richard D. Truesdell, Jr., Esq. Davis Polk & Wardwell 450 Lexington Avenue New York, New York 10017 (212) 450-4000 |
Large accelerated filer o | Accelerated filer o | Non-accelerated filer þ (Do not check if a smaller reporting company) | Smaller reporting company o |
Proposed Maximum | ||||||||||
Title of Each Class of | Aggregate | Amount of | ||||||||
Securities to be Registered | Offering Price(1)(2) | Registration Fee | ||||||||
Common Stock, par value $0.001 per share | $ | 460,000,000 | $ | 25,668(3 | ) | |||||
(1) | Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(o) under the Securities Act of 1933, as amended. | |
(2) | Including shares of common stock which may be purchased by the underwriters to cover over-allotments, if any. | |
(3) | The registration fee has been previously paid. |
The information in this prospectus is not complete and may be changed. A registration statement relating to these securities has been filed with the Securities and Exchange Commission. These securities may not be sold until the registration statement is effective. This preliminary prospectus is not an offer to sell nor does it seek an offer to buy these securities in any state where the offer or sale is not permitted. |
Proceeds to | ||||||||||||
Underwriting | Select | |||||||||||
Price to | Discounts and | Medical Holdings | ||||||||||
Public | Commissions | Corporation | ||||||||||
Per Share | $ | $ | $ | |||||||||
Total | $ | $ | $ |
Goldman, Sachs & Co. | Morgan Stanley | BofA Merrill Lynch | J.P.Morgan |
Wells Fargo Securities | RBC Capital Markets |
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• | Focus on Specialized Inpatient Services. We serve highly acute patients and patients with debilitating injuries that cannot be adequately cared for in a less medically intensive environment, such as a skilled nursing facility. Generally, patients in our specialty hospitals require longer stays and higher levels of clinical care than patients treated in general acute care hospitals. Our patients’ average length of stay in our specialty hospitals was 24 days for the six months ended June 30, 2009. | |
• | Provide High Quality Care and Service. We believe that our specialty hospitals serve a critical role in comprehensive healthcare delivery. Through our specialized treatment programs and staffing models, we treat patients with acute, complex and specialized medical needs who are typically referred to us by general acute care hospitals. Our specialized treatment programs focus on specific patient needs and medical conditions such as ventilator weaning programs, wound care protocols and rehabilitation programs for brain trauma and spinal cord injuries. Our responsive staffing models ensure that patients have the appropriate clinical resources over the course of their stay. We believe that we are recognized for providing quality care and service, as evidenced by accreditation by The Joint Commission and the Commission on Accreditation of Rehabilitation Facilities. We also believe we develop brand loyalty in the local areas we serve allowing us to strengthen our relationships with physicians and other referral sources and drive additional patient volume to our hospitals. | |
• | Reduce Operating Costs. We continually seek to improve operating efficiency and reduce costs at our hospitals by standardizing operations and centralizing key administrative functions. These initiatives include optimizing staffing based on our occupancy and the clinical needs of our patients, centralizing |
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administrative functions, standardizing management information systems and participating in group purchasing arrangements. |
• | Increase Higher Margin Commercial Volume. With reimbursement rates from commercial insurers typically higher than the federal Medicare program, we have focused on continued expansion of our relationships with commercial insurers to increase our volume of patients with commercial insurance in our specialty hospitals. Although the level of care we provide is complex and staff intensive, we typically have lower relative operating expenses than a general acute care hospital because we provide a much narrower range of patient services at our hospitals. We believe that commercial payors seek to contract with our hospitals because we offer patients high quality, cost-effective care at more attractive rates than general acute care hospitals. | |
• | Develop New Inpatient Rehabilitation Facilities. By leveraging the experience of our senior management and dedicated development team, we intend to pursue new inpatient rehabilitation hospital development opportunities. | |
• | Pursue Opportunistic Acquisitions. In addition to our development initiatives, we may grow our network of specialty hospitals through opportunistic acquisitions. Our immediate focus is on acquisitions of inpatient rehabilitation facilities, although we will still consider acquisitions of long term acute care hospitals if they are at attractive valuations. |
• | Provide High Quality Care and Service. We are focused on providing a high level of service to our patients throughout their entire course of treatment. This high quality of care and service allows us to strengthen our relationships with referring physicians, employers and health insurers and drive additional patient volume. | |
• | Increase Market Share. We strive to establish a leading presence within the local areas we serve. This allows us to realize economies of scale, heightened brand loyalty, workforce continuity and increased leverage when negotiating payor contracts. | |
• | Expand Rehabilitation Programs and Services. Through our local clinical directors of operations and clinic managers within their service areas, we assess the healthcare needs of the areas we serve. Based on these assessments, we implement additional programs and services specifically targeted to meet demand in the local community. | |
• | Optimize the Profitability of Our Payor Contracts. We rigorously review payor contracts up for renewal and potential new payor contracts to optimize our profitability. We believe that our size and our strong reputation enables us to negotiate favorable outpatient contracts with commercial insurers. | |
• | Maintain Strong Employee Relations. We seek to retain, motivate and educate our employees whose relationships with referral sources are key to our success. | |
• | Pursue Opportunistic Acquisitions. We may grow our network of outpatient rehabilitation facilities through opportunistic acquisitions. We significantly expanded our network with the 2007 acquisition of the outpatient rehabilitation division of HealthSouth Corporation, consisting of 569 clinics in 35 states and the District of Columbia, including 18 states in which we did not previously have outpatient rehabilitation facilities. We believe our size and centralized infrastructure allow us to take advantage of operational efficiencies and increase margins at acquired facilities. |
• | Leading Operator in Distinct but Complementary Lines of Business. We believe that we are a leading operator in each of our principal business segments, based on number of facilities in the United States. Our leadership position and reputation as a high quality, cost-effective health care provider in each of our |
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business segments allows us to attract patients and employees, aids us in our marketing efforts to payors and referral sources and helps us negotiate payor contracts. |
• | Proven Financial Performance and Strong Cash Flow. We have established a track record of improving the financial performance of our facilities due to our disciplined approach to revenue growth, expense management and an intense focus on free cash flow generation. | |
• | Significant Scale. By building significant scale in each of our business segments, we have been able to leverage our operating costs by centralizing administrative functions at our corporate office. As a result, we have been able to minimize our general and administrative expense as a percentage of revenues, which was 2.3% for the six months ended June 30, 2009. |
• | Well-Positioned to Capitalize on Consolidation Opportunities. We believe that we are well-positioned to capitalize on consolidation opportunities within each of our business segments and selectively augment our internal growth. With our geographically diversified portfolio of facilities in the United States, we believe that our footprint provides us with a wide-ranging perspective on multiple potential acquisition opportunities. |
• | Experience in Successfully Completing and Integrating Acquisitions. From our inception in 1997 through June 30, 2009, we completed six significant acquisitions for approximately $894.8 million in aggregate consideration. We believe that we have improved the operating performance of these facilities over time by applying our standard operating practices and by realizing efficiencies from our centralized operations and management. | |
• | Experienced and Proven Management Team. Prior to co-founding our company with our current Chief Executive Officer, our Executive Chairman founded and operated three other healthcare companies focused on inpatient and outpatient rehabilitation services. In addition, our four senior operations executives have an average of over 31 years of experience in the healthcare industry, including extensive experience working together for our company and for past companies focused on operating acute rehabilitation hospitals and outpatient rehabilitation facilities. |
• | Highly regulated industry. The healthcare services industry is subject to extensive federal, state and local laws and regulations. We conduct business in a heavily regulated industry and changes in regulations, new interpretations of existing regulations or violations of regulations could have a material adverse effect on our business, financial condition and results of operations. | |
• | Reliance on Medicare reimbursement. Approximately 46% and 47% of our net operating revenues for the year ended December 31, 2008 and the six months ended June 30, 2009, respectively, came from the highly regulated federal Medicare program. President Obama has proposed comprehensive reforms to the |
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healthcare system, including changes to the methods for, and amounts of, Medicare reimbursement. If these or other changes are made to the rates or methods of government reimbursements for our services, our business, financial condition and results of operations could decline. |
• | Changes in federal regulations applicable to “hospitals within hospitals.” At June 30, 2009, 65 of our 87 long term acute care hospitals operated as “hospitals within hospitals” or as “satellites.” Recent federal regulations have lowered rates of reimbursement for services we provide to certain Medicare patients admitted to long term acute care hospitals operated as “hospitals within hospitals” or as “satellites.” Compliance with such changes in federal regulations may have an adverse effect on our future net operating revenues and profitability. | |
• | Changes in federal regulations applicable to free-standing hospitals and grandfathered long term acute care hospitals operated as “hospitals within hospitals” or “satellites.” At June 30, 2009, 22 of our 87 long term acute care hospitals operated as free-standing hospitals and three qualified as grandfathered long term acute care hospitals operated as “hospitals within hospitals” or “satellites.” Recent federal regulations have lowered rates of reimbursement for services we provide to certain Medicare patients admitted to free-standing long term acute care hospitals and grandfathered long term acute care hospitals operated as “hospitals within hospitals” or “satellites.” Significant aspects of these federal regulations have been postponed for a three year period for annual cost reporting periods beginning on or after July 1, 2007. If these recent federal regulations are applied as currently written at the end of the three year moratorium, they will have an adverse effect on our future net operating revenues and profitability. | |
• | Failure to maintain certifications as long term acute care hospitals. All of our 87 long term acute care hospitals are currently certified by Medicare as long term acute care hospitals. If our long term acute care hospitals fail to meet or maintain the standards for certification as long term acute care hospitals, such as minimum average length of patient stay, they will receive significantly less Medicare reimbursement than they currently receive for their patient services. | |
• | Modifications to the admissions policies for our inpatient rehabilitation facilities. All of our five acute medical rehabilitation hospitals are currently certified by Medicare as inpatient rehabilitation facilities. Changes to federal regulations have made significant changes to the inpatient rehabilitation facilities certification process. In order to comply with the Medicare inpatient rehabilitation facility certification criteria, it may be necessary for us to implement more restrictive admissions policies at our inpatient rehabilitation facilities and not admit patients whose diagnoses fall outside the specified conditions. Such policies may result in a reduction of patient volume at these hospitals and, as a result, may reduce our future net operating revenues and profitability. |
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Shares of common stock offered by us | shares, or shares if the underwriters exercise their over-allotment option in full. | |
Conversion of preferred stock | All shares of our issued and outstanding participating preferred stock shall be converted into shares of our common stock, based upon an assumed public offering price of $ per share, the midpoint of the range set forth on the cover of this prospectus, at the time the offering is consummated. | |
Common stock to be outstanding after this offering | shares, or shares if the underwriters exercise their over-allotment option in full. | |
Use of proceeds | We estimate that we will receive net proceeds from the sale of shares of our common stock in this offering of $ million, or $ million if the underwriters exercise their over-allotment option in full, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us based on an assumed public offering price of $ per share, the midpoint of the range set forth on the cover page of this prospectus. We intend to use the net proceeds of this offering to: | |
• repay at least $ million of term loans outstanding under our senior secured credit facility, and any related prepayment costs; and | ||
• make payments to executive officers under our Long Term Cash Incentive Plan in the amount of approximately $18.0 million. | ||
Any remaining net proceeds will be used for repayment or repurchase of indebtedness or for general corporate purposes. | ||
Affiliates of J.P. Morgan Securities Inc., Wells Fargo Securities, LLC and Merrill Lynch, Pierce, Fenner & Smith Incorporated, underwriters in this offering, are parties to our senior secured credit facility and will receive a portion of the proceeds from this offering. See “Use of Proceeds” and “Underwriters.” | ||
Dividend policy | We do not anticipate paying any dividends on our common stock in the foreseeable future. Any future determination relating to our dividend policy will be made at the discretion of our board of directors and will depend on then existing conditions, including our financial condition, results of operations, contractual restrictions, capital requirements, business prospects and other factors our board of directors may deem relevant. In addition, our ability to declare and pay dividends is restricted by covenants in our senior secured credit facility and the indentures governing Select’s senior subordinated notes due 2015, which we refer to as “Select’s 75/8% senior subordinated notes,” and our senior floating rate notes due 2015, which we refer to as the “senior floating rate notes.” See “Description of Indebtedness — Senior Secured Credit Facility — Restrictive Covenants and Other Matters” and “Risk Factors.” |
Amendment to revolving credit facility | We expect to enter into an amendment to our senior secured credit facility to extend the maturity on all or a portion of our revolving credit facility to September 2012, effective upon the consummation of this |
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offering. This offering is not conditioned upon the extension of our revolving credit facility. | ||
Proposed New York Stock Exchange symbol | “SEM.” | |
Risk factors | Investment in our common stock involves substantial risks. You should read this prospectus carefully, including the section entitled “Risk Factors” and the consolidated financial statements and the related notes to those statements included elsewhere in this prospectus before investing in our common stock. |
Conflicts of Interest | From time to time, certain of the underwriters and/or their respective affiliates have directly and indirectly engaged in various financial advisory, investment banking and commercial banking services for us and our affiliates, for which they received customary compensation, fees and expense reimbursement. In particular, affiliates of Merrill Lynch, Pierce, Fenner & Smith Incorporated, J.P. Morgan Securities Inc. and Wells Fargo Securities, LLC, underwriters in this offering, are parties to our senior secured credit facility. In addition, affiliates of J.P. Morgan Securities Inc. have in the past provided treasury and security services to us for customary fees. Our senior secured credit facility was negotiated on an arms’ length basis and contains customary terms pursuant to which the lenders receive customary fees. We will use a portion of the proceeds from this offering to repay amounts outstanding under this credit facility. See “Use of Proceeds.” As a result of these repayments, each of Merrill Lynch, Pierce, Fenner & Smith Incorporated, J.P. Morgan Securities Inc. and Wells Fargo Securities, LLC may receive 5% or more of the net proceeds from this offering. Accordingly, this offering will be conducted in compliance with the applicable provisions of Financial Industry Regulatory Authority (“FINRA”) Rule 5110(h) and Rule 2720. Pursuant to those rules, a “qualified independent underwriter,” as defined by the FINRA rules, must participate in the preparation of the prospectus and perform its usual standard of due diligence with respect to the prospectus. Goldman, Sachs & Co. has agreed to act as qualified independent underwriter for the offering and to perform a due diligence investigation and review and participate in the preparation of the prospectus. In addition, from time to time, certain of the underwriters and their affiliates may effect transactions for their own account or the account of customers, and hold on behalf of themselves or their customers, long or short positions in our debt or equity securities or loans, and may do so in the future. See “Underwriting — Conflicts of Interest.” |
• | dividing the original cost of a share of the preferred stock ($26.90 per share of preferred stock) plus all accrued and unpaid dividends thereon less the amount of any previously declared and paid special dividends, or the “accreted value” of such preferred stock, by the initial public offering price per share in this offering net of any expenses incurred and underwriting commissions or concessions paid or allowed in connection with this offering; plus | |
• | shares of common stock for each share of participating preferred stock owned. |
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• | shares of our common stock issuable upon exercise of options granted under our director equity incentive plan. See “Management — Compensation Discussion and Analysis — Director Compensation Table — Option Awards”; and | |
• | shares of our common stock issuable upon exercise of options granted under the Select Medical Holdings Corporation 2005 Equity Incentive Plan. See “Management — Compensation Discussion and Analysis — Elements of Compensation — Equity Compensation.” |
• | other than historical financial information, gives effect to a reverse 1 to common stock split; | |
• | assumes that the underwriters do not exercise their over-allotment option; and |
• | other than historical financial information, reflects the conversion of shares of our issued and outstanding preferred stock into shares of common stock assuming conversion on August 31, 2009, based upon an assumed public offering price of $ per share, the midpoint of the range set forth on the cover page of this prospectus. |
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Year Ended December 31, | ||||||||||||||||
Pro Forma | ||||||||||||||||
As Adjusted | ||||||||||||||||
2006(1) | 2007(1) | 2008(1) | 2008 | |||||||||||||
(in thousands, except per share data) | ||||||||||||||||
Statement of Operations Data: | ||||||||||||||||
Net operating revenues | $ | 1,851,498 | $ | 1,991,666 | $ | 2,153,362 | $ | |||||||||
Operating expenses(2)(3) | 1,546,956 | 1,740,484 | 1,885,168 | |||||||||||||
Depreciation and amortization | 46,668 | 57,297 | 71,786 | |||||||||||||
Income from operations | 257,874 | 193,885 | 196,408 | |||||||||||||
Gain on early retirement of debt(4) | — | — | 912 | |||||||||||||
Other expense | — | (167 | ) | — | ||||||||||||
Interest expense, net(5) | (130,538 | ) | (138,052 | ) | (145,423 | ) | ||||||||||
Income from continuing operations before income taxes | 127,336 | 55,666 | 51,897 | |||||||||||||
Income tax expense | 43,521 | 18,699 | 26,063 | |||||||||||||
Income from continuing operations | 83,815 | 36,967 | 25,834 | |||||||||||||
Income from discontinued operations, net of tax | 12,818 | — | — | |||||||||||||
Net income | 96,633 | 36,967 | 25,834 | |||||||||||||
Less: Net income attributable to non-controlling interests(6) | 1,754 | 1,537 | 3,393 | |||||||||||||
Net income attributable to Select Medical Holdings Corporation | 94,879 | 35,430 | 22,441 | |||||||||||||
Less: Preferred dividends | 22,663 | 23,807 | 24,972 | |||||||||||||
Net income (loss) available to common and preferred stockholders | $ | 72,216 | $ | 11,623 | $ | (2,531 | ) | $ | ||||||||
Income (loss) per common share(7): | ||||||||||||||||
Basic: | ||||||||||||||||
Income (loss) from continuing operations | $ | 0.26 | $ | 0.05 | $ | (0.01 | ) | |||||||||
Income from discontinued operations, net of tax | 0.06 | — | — | |||||||||||||
Net income (loss) | $ | 0.32 | $ | 0.05 | $ | (0.01 | ) | |||||||||
Diluted: | ||||||||||||||||
Income (loss) from continuing operations | $ | 0.26 | $ | 0.05 | $ | (0.01 | ) | |||||||||
Income from discontinued operations, net of tax | 0.06 | — | — | |||||||||||||
Net income (loss) | $ | 0.32 | $ | 0.05 | $ | (0.01 | ) | |||||||||
Income (loss) per common share assuming the reverse stock split contemplated by this offering: | ||||||||||||||||
Basic: | ||||||||||||||||
Income (loss) from continuing operations | $ | $ | $ | $ | ||||||||||||
Income from discontinued operations, net of tax | ||||||||||||||||
Net income (loss) | $ | $ | $ | $ | ||||||||||||
Diluted: | ||||||||||||||||
Income (loss) from continuing operations | $ | $ | $ | $ | ||||||||||||
Income from discontinued operations, net of tax | ||||||||||||||||
Net income (loss) | $ | $ | $ | $ | ||||||||||||
Balance Sheet Data (at end of period): | ||||||||||||||||
Cash and cash equivalents | $ | 81,600 | $ | 4,529 | $ | 64,260 | ||||||||||
Working capital | 59,468 | 14,730 | 118,370 | |||||||||||||
Total assets | 2,182,524 | 2,495,046 | 2,579,469 | |||||||||||||
Total debt | 1,538,503 | 1,755,635 | 1,779,925 | |||||||||||||
Preferred stock | 467,395 | 491,194 | 515,872 | |||||||||||||
Total Select Medical Holdings Corporation stockholders’ equity | (169,139 | ) | (165,889 | ) | (174,204 | ) | ||||||||||
Segment Data: | ||||||||||||||||
Specialty Hospitals(8): | ||||||||||||||||
Net operating revenue | $ | 1,378,543 | $ | 1,386,410 | $ | 1,488,412 | ||||||||||
Adjusted EBITDA(9) | 283,270 | 217,175 | 236,388 | |||||||||||||
Outpatient Rehabilitation: | ||||||||||||||||
Net operating revenue | 470,339 | 603,413 | 664,760 | |||||||||||||
Adjusted EBITDA(9) | 64,823 | 75,437 | 77,279 |
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Six Months Ended June 30, | ||||||||||||
Pro Forma | ||||||||||||
As Adjusted | ||||||||||||
2008(1)(7) | 2009 | 2009 | ||||||||||
(in thousands, except per share data) | ||||||||||||
Statement of Operations Data: | ||||||||||||
Net operating revenues | $ | 1,087,084 | $ | 1,120,707 | $ | |||||||
Operating expenses(2)(3) | 948,992 | 952,023 | ||||||||||
Depreciation and amortization | 35,327 | 35,670 | ||||||||||
Income from operations | 102,765 | 133,014 | ||||||||||
Gain on early retirement of debt(4) | — | 15,316 | ||||||||||
Interest expense, net(5) | (73,268 | ) | (68,250 | ) | ||||||||
Income from operations before income taxes | 29,497 | 80,080 | ||||||||||
Income tax expense | 13,973 | 33,880 | ||||||||||
Net income | 15,524 | 46,200 | ||||||||||
Less: Net income attributable to non-controlling interests(6) | 1,071 | 1,412 | ||||||||||
Net income attributable to Select Medical Holdings Corporation | 14,453 | 44,788 | ||||||||||
Less: Preferred dividends | 12,279 | 12,870 | ||||||||||
Net income available to common and preferred stockholders | $ | 2,174 | $ | 31,918 | $ | |||||||
Net income per common share: | ||||||||||||
Basic | $ | 0.01 | $ | 0.14 | ||||||||
Diluted | $ | 0.01 | $ | 0.14 | ||||||||
Net income per common share assuming the reverse stock split contemplated by this offering: | ||||||||||||
Basic | $ | $ | $ | |||||||||
Diluted | $ | $ | $ | |||||||||
Balance Sheet Data (at end of period): | ||||||||||||
Cash and cash equivalents | $ | 7,534 | $ | 27,689 | ||||||||
Working capital | 105,745 | 103,831 | ||||||||||
Total assets | 2,544,037 | 2,532,682 | ||||||||||
Total debt | 1,805,462 | 1,697,134 | ||||||||||
Preferred stock | 503,179 | 528,742 | ||||||||||
Total Select Medical Holdings Corporation stockholders’ equity | (165,703 | ) | (141,659 | ) | ||||||||
Segment Data: | ||||||||||||
Specialty Hospitals(8): | ||||||||||||
Net operating revenue | $ | 745,893 | $ | 779,563 | ||||||||
Adjusted EBITDA(9) | 118,480 | 147,741 | ||||||||||
Outpatient Rehabilitation: | ||||||||||||
Net operating revenue | 341,072 | 341,009 | ||||||||||
Adjusted EBITDA(9) | 43,843 | 46,578 |
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Year Ended | Year Ended | Year Ended | ||||||||||
December 31, | December 31, | December 31, | ||||||||||
2006 | 2007 | 2008 | ||||||||||
Specialty hospital data(8): | ||||||||||||
Number of hospitals — start of period | 101 | 96 | 87 | |||||||||
Number of hospitalstart-ups | 3 | 3 | 7 | |||||||||
Number of hospitals acquired | — | — | 2 | |||||||||
Number of hospitals closed/sold | (4 | ) | (8 | ) | (1 | ) | ||||||
Number of hospitals consolidated | (4 | ) | (4 | ) | (2 | ) | ||||||
Number of hospitals — end of period | 96 | 87 | 93 | |||||||||
Available licensed beds | 3,867 | 3,819 | 4,222 | |||||||||
Admissions | 39,668 | 40,008 | 41,177 | |||||||||
Patient days | 969,590 | 987,624 | 1,005,719 | |||||||||
Average length of stay (days) | 24 | 25 | 24 | |||||||||
Net revenue per patient day(10) | $ | 1,392 | $ | 1,378 | $ | 1,453 | ||||||
Occupancy rate | 69 | % | 69 | % | 67 | % | ||||||
Percent patient days — Medicare | 73 | % | 69 | % | 65 | % | ||||||
Outpatient rehabilitation data(11): | ||||||||||||
Number of clinics owned — start of period | 553 | 477 | 918 | |||||||||
Number of clinics acquired | — | 570 | 4 | |||||||||
Number of clinicstart-ups | 12 | 15 | 17 | |||||||||
Number of clinics closed/sold(12) | (88 | ) | (144 | ) | (59 | ) | ||||||
Number of clinics owned — end of period | 477 | 918 | 880 | |||||||||
Number of clinics managed — end of period | 67 | 81 | 76 | |||||||||
Total number of clinics (all) — end of period | 544 | 999 | 956 | |||||||||
Number of visits | 2,972,243 | 4,032,197 | 4,533,727 | |||||||||
Net revenue per visit(13) | $ | 94 | $ | 100 | $ | 102 |
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Six Months Ended | ||||||||
June 30, | ||||||||
2008 | 2009 | |||||||
Specialty hospital data(8): | ||||||||
Number of hospitals — start of period | 87 | 93 | ||||||
Number of hospitalstart-ups | 5 | — | ||||||
Number of hospitals closed/sold | — | (1 | ) | |||||
Number of hospitals — end of period | 92 | 92 | ||||||
Available licensed beds | 4,126 | 4,160 | ||||||
Admissions | 20,914 | 21,309 | ||||||
Patient days | 512,286 | 508,983 | ||||||
Average length of stay (days) | 25 | 24 | ||||||
Net revenue per patient day(10) | $ | 1,428 | $ | 1,505 | ||||
Occupancy rate | 69 | % | 67 | % | ||||
Percent patient days — Medicare | 66 | % | 64 | % | ||||
Outpatient rehabilitation data: | ||||||||
Number of clinics owned — start of period | 918 | 880 | ||||||
Number of clinics acquired | — | 1 | ||||||
Number of clinicstart-ups | 9 | 7 | ||||||
Number of clinics closed/sold | (33 | ) | (13 | ) | ||||
Number of clinics owned — end of period | 894 | 875 | ||||||
Number of clinics managed — end of period | 76 | 73 | ||||||
Total number of clinics (all) — end of period | 970 | 948 | ||||||
Number of visits | 2,323,609 | 2,259,637 | ||||||
Net revenue per visit(13) | $ | 103 | $ | 102 |
(1) | Adjusted for the adoption of SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements.” See Note 1, Organization and Significant Accounting Policies — Recent Accounting Pronouncements, in our audited consolidated financial statements and Note 2, Accounting Policies — Recent Accounting Pronouncements, in our interim unaudited consolidated financial statements for additional information. | |
(2) | Operating expenses include cost of services, general and administrative expenses, and bad debt expenses. | |
(3) | Includes compensation expense related to restricted stock and stock options for the years ended December 31, 2006, 2007, and 2008 and for the six months ended June 30, 2008 and 2009. | |
(4) | In the year ended December 31, 2008, we paid approximately $1.0 million to repurchase and retire a portion of Select’s 75/8% senior subordinated notes. These notes had a carrying value of $2.0 million. The gain on early retirement of debt recognized was net of the write-off of unamortized deferred financing costs related to the debt. During the six months ended June 30, 2009, we paid approximately $30.1 million to repurchase and retire a portion of Select’s 75/8% senior subordinated notes. These notes had a carrying value of $46.5 million. The gain on early retirement of debt recognized was net of the write-off of unamortized deferred financing costs related to the debt. | |
(5) | Interest expense, net equals interest expense minus interest income. | |
(6) | Reflects interests held by other parties in subsidiaries, limited liability companies and limited partnerships owned and controlled by us. | |
(7) | Adjusted for the adoption of FASB Staff Position EITF 03-6-1, “Determining Whether Instruments Granted in Share-Based Payment Transactions are Participating Securities.” See Note 14 in our audited consolidated financial statements and Note 8 in our interim unaudited consolidated financial statements for additional information. | |
(8) | Specialty hospitals consist of long term acute care hospitals and inpatient rehabilitation facilities. | |
(9) | We define Adjusted EBITDA as net income before interest, income taxes, depreciation and amortization, income from discontinued operations, gain on early retirement of debt, stock compensation expense, other expense and non-controlling interests. 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 |
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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 and footnote 7 to our interim unaudited consolidated financial statements for the period ended June 30, 2009 for a reconciliation of net income to Adjusted EBITDA as utilized by us in reporting our segment performance in accordance with SFAS No. 131. | ||
(10) | Net revenue per patient day is calculated by dividing specialty hospital patient service revenues by the total number of patient days. | |
(11) | Outpatient rehabilitation data has been restated to remove the clinics operated by Canadian Back Institute Limited, which we refer to as “CBIL,” which was sold on March 31, 2006 and is being reported as a discontinued operation in 2006. | |
(12) | The number of clinics closed/sold for the year ended December 31, 2007 relate primarily to clinics closed in connection with the restructuring plan for integrating the acquisition of HealthSouth Corporation’s outpatient rehabilitation division. | |
(13) | 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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• | 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. |
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• | 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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• | requires us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness, reducing the availability of our cash flow to fund working capital, capital expenditures, development activity, acquisitions and other general corporate purposes; | |
• | increases our vulnerability to adverse general economic or industry conditions; | |
• | limits our flexibility in planning for, or reacting to, changes in our business or the industries in which we operate; | |
• | makes us more vulnerable to increases in interest rates, as borrowings under our senior secured credit facility and the senior floating rate notes are at variable rates; | |
• | limits our ability to obtain additional financing in the future for working capital or other purposes, such as raising the funds necessary to repurchase all notes tendered to us upon the occurrence of specified changes of control in our ownership; and | |
• | places us at a competitive disadvantage compared to our competitors that have less indebtedness. |
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• | our quarterly or annual earnings or those of other companies in our industry; | |
• | changes in laws or regulations, or new interpretations or applications of laws and regulations, that are applicable to our business; | |
• | the public’s reaction to our press releases, our other public announcements and our filings with the SEC; | |
• | changes in accounting standards, policies, guidance, interpretations or principles; | |
• | additions or departures of our senior management personnel; | |
• | sales of common stock by our directors and executive officers; | |
• | sales or distribution of common stock by our sponsors; | |
• | adverse market reaction to any indebtedness we may incur or securities we may issue in the future; | |
• | downgrades of our stock or negative research reports published by securities or industry analysts; | |
• | actions by stockholders; and | |
• | changes in general conditions in the United States and global economies or financial markets, including those resulting from Acts of God, war, incidents of terrorism or responses to such events. |
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• | shares are shares that we are selling in this offering and, unless purchased by affiliates, may be resold in the public market immediately after this offering; and | |
• | shares will be “restricted securities,” as defined in Rule 144 under the Securities Act, and eligible for sale in the public market pursuant to the provisions of Rule 144, of which shares are subject tolock-up agreements and will become available for resale in the public market beginning 180 days after the date of this prospectus. |
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• | prohibition on stockholder action through written consents; | |
• | a requirement that special meetings of stockholders be called only by our board of directors; | |
• | advance notice requirements for stockholder proposals and nominations; | |
• | availability of “blank check” preferred stock; | |
• | establish a classified board of directors so that not all members of our board of directors are elected at one time; | |
• | the right of the board of directors to elect a director to fill a vacancy created by the expansion of the board of directors or due to the resignation or departure of an existing board member; | |
• | the prohibition of cumulative voting in the election of directors, which would otherwise allow less than a majority of stockholders to elect director candidates; | |
• | the ability of our board of directors to alter our bylaws without obtaining stockholder approval; | |
• | limitations on the removal of directors; and | |
• | the required approval of at least 662/3% of the shares entitled to vote at an election of directors to adopt, amend or repeal our bylaws or repeal the provisions of our restated certificate of incorporation regarding the election and removal of directors and the inability of stockholders to take action by written consent in lieu of a meeting. |
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• | additional changes in government reimbursement for our services may result in a reduction in net operating revenues, an increase in costs and a reduction in profitability; | |
• | 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; | |
• | a government investigation or assertion that we have violated applicable regulations may result in sanctions or reputational harm and increased costs; |
• | future acquisitions or joint ventures 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 the areas we serve could reduce our net operating revenues and profitability; | |
• | 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; | |
• | the effect of claims asserted against us or lack of adequate available insurance could subject us to substantial uninsured liabilities; | |
• | the ability to obtain any necessary or desired waiver or amendment from our lenders may be difficult due to the current uncertainty in the credit markets; | |
• | the inability to draw funds under our senior secured credit facility because of lender defaults; | |
• | concentration of ownership among our existing executives, directors and principal stockholders may prevent new investors from influencing significant corporate decisions; and | |
• | other factors discussed under the headings “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business.” |
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• | To repay at least $ million of term loans outstanding under our senior secured credit facility, and any related prepayment costs. | |
• | To make payments under the Long Term Cash Incentive Plan in the amount of approximately $18.0 million, which will be recognized as an expense in the quarter in which the offering occurs. We expect approximately $4.5 million will be paid to Rocco A. Ortenzio, approximately $6.3 million will be paid to Robert A. Ortenzio, approximately $2.7 million will be paid to Patricia A. Rice, approximately $1.3 million will be paid to Martin F. Jackson, approximately $0.9 million will be paid to S. Frank Fritsch, approximately $0.5 million will be paid to David W. Cross, approximately $0.9 million will be paid to James J. Talalai and approximately $0.9 million will be paid to Michael E. Tarvin. |
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• | on an actual basis; | |
• | on a pro forma basis to give effect to the conversion of all shares of our issued and outstanding preferred stock into shares of common stock based upon an assumed public offering price of $ per share, the midpoint of the range set forth on the cover page of this prospectus as if the conversion had occurred on June 30, 2009; and | |
• | on a pro forma as adjusted basis to give effect to (1) the conversion of all shares of our issued and outstanding preferred stock into shares of common stock based upon an assumed public offering price of $ per share, the midpoint of the range set forth on the cover page of this prospectus, (2) the sale of shares of common stock in this offering at an assumed initial public offering price of $ per share, which is the midpoint of the range listed on the cover page of this prospectus, and after deducting estimated underwriting discounts and commissions and estimated fees and expenses payable by us, and (3) the application of all of the net proceeds of this offering to repay indebtedness under our senior secured credit facility and make payments to officers under our Long-Term Cash Incentive Plan as if the events had occurred on June 30, 2009. |
As of June 30, 2009 | ||||||||||||
Pro | Pro Forma As | |||||||||||
Actual | Forma | Adjusted(4) | ||||||||||
Cash and cash equivalents | $ | 27,689 | $ | $ | ||||||||
Debt: | ||||||||||||
Senior floating rate notes | $ | 175,000 | ||||||||||
10% senior subordinated notes due 2015(1) | 136,418 | |||||||||||
Revolving credit facility(2) | 115,000 | |||||||||||
Term loan facility(3) | 653,100 | |||||||||||
75/8% senior subordinated notes due 2015 | 611,500 | |||||||||||
Other debt | 6,116 | |||||||||||
Total debt | 1,697,134 | |||||||||||
Preferred stock | 528,742 | |||||||||||
Total Select Medical Holdings Corporation stockholders’ equity | (141,659 | ) | ||||||||||
Total capitalization | $ | 2,084,217 | $ | $ | ||||||||
(1) | Reflects the balance sheet liability of our 10% 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 because such notes were issued with original issue discount. The remaining unamortized original issue discount is $13.6 million at June 30, 2009. Interest on our 10% senior subordinated notes accrues on the full principal amount thereof, and we will be obligated to repay the full principal amount thereof at maturity or upon any mandatory or voluntary prepayment thereof. On any interest payment date on or after February 24, 2010, we will be obligated to pay an amount of accrued original issue discount on our 10% senior subordinated notes if necessary to ensure that the notes will not be considered “applicable high yield discount obligations” within the meaning of the Internal Reserve Code of 1986, as amended. The $150.0 million aggregate principal payable at maturity on our 10% senior subordinated notes would be reduced by prior payments of accrued original issue discount. | |
(2) | The revolving credit facility is a part of our senior secured credit facility and provides for borrowings of up to $300.0 million of which $154.3 million was available as of June 30, 2009 for working capital and general corporate purposes (after giving effect to $30.7 million of outstanding letters of credit at June 30, 2009). | |
(3) | We borrowed $680.0 million in term loans under our senior secured credit facility. Between February 24, 2005 and June 30, 2009 we repaid approximately $26.9 million of our outstanding term loans. | |
(4) | A $1.00 increase (decrease) in the assumed initial public offering price of $ per share, which is the midpoint of the range set forth on the cover page of this prospectus, would increase (decrease) each of total stockholders’ equity and total capitalization by $ million, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. |
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Per Share | ||||||||
Assumed public offering price per share (the midpoint of the range listed on the cover page of this prospectus) | $ | |||||||
Actual net tangible book deficit per share as of June 30, 2009 | $ | |||||||
Increase attributable to conversion of preferred stock | ||||||||
Increase per share attributable to this offering | ||||||||
Pro forma net tangible book value per share after this offering as of June 30, 2009 | $ | |||||||
Dilution per share to new investors | $ | |||||||
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Shares Purchased | Total Consideration | Average Price | ||||||||||||||||||
Number | Percentage | Amount | Percentage | per Share | ||||||||||||||||
Existing holders | % | $ | % | $ | ||||||||||||||||
New investors | % | % | ||||||||||||||||||
Total | 100.0 | % | $ | 100.0 | % | $ | ||||||||||||||
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Predecessor Period | Successor Period | ||||||||||||||||||||||||||||
Period from | Period from | ||||||||||||||||||||||||||||
January 1 | February 25 | ||||||||||||||||||||||||||||
Year Ended | through | through | |||||||||||||||||||||||||||
December 31, | February 24, | December 31, | Year Ended December 31, | ||||||||||||||||||||||||||
2004(1) | 2005(1) | 2005(1)(2) | 2006(1)(2) | 2007(1)(2) | 2008(1)(2) | ||||||||||||||||||||||||
(in thousands, except per share data) | (in thousands, except per share data) | ||||||||||||||||||||||||||||
Statement of Operations Data: | |||||||||||||||||||||||||||||
Net operating revenues | $ | 1,601,524 | $ | 277,736 | $ | 1,580,706 | $ | 1,851,498 | $ | 1,991,666 | $ | 2,153,362 | |||||||||||||||||
Operating expenses(3)(4) | 1,340,068 | 373,418 | 1,322,068 | 1,546,956 | 1,740,484 | 1,885,168 | |||||||||||||||||||||||
Depreciation and amortization | 38,951 | 5,933 | 37,922 | 46,668 | 57,297 | 71,786 | |||||||||||||||||||||||
Income (loss) from operations | 222,505 | (101,615 | ) | 220,716 | 257,874 | 193,885 | 196,408 | ||||||||||||||||||||||
Gain (loss) on early retirement of debt(5) | — | (42,736 | ) | — | — | — | 912 | ||||||||||||||||||||||
Merger related charges(6) | — | (12,025 | ) | — | — | — | — | ||||||||||||||||||||||
Other income (expense) | 1,096 | 267 | 1,092 | — | (167 | ) | — | ||||||||||||||||||||||
Interest expense, net(7) | (30,716 | ) | (4,128 | ) | (101,441 | ) | (130,538 | ) | (138,052 | ) | (145,423 | ) | |||||||||||||||||
Income (loss) from continuing operations before income taxes | 192,885 | (160,237 | ) | 120,367 | 127,336 | 55,666 | 51,897 | ||||||||||||||||||||||
Income tax expense (benefit) | 76,551 | (59,794 | ) | 49,336 | 43,521 | 18,699 | 26,063 | ||||||||||||||||||||||
Income (loss) from continuing operations | 116,334 | (100,443 | ) | 71,031 | 83,815 | 36,967 | 25,834 | ||||||||||||||||||||||
Income from discontinued operations, net of tax | 4,458 | 522 | 3,072 | 12,818 | — | — | |||||||||||||||||||||||
Net income (loss) | 120,792 | (99,921 | ) | 74,103 | 96,633 | 36,967 | 25,834 | ||||||||||||||||||||||
Less: Net income attributable to non-controlling interests(8) | 2,608 | 330 | 1,776 | 1,754 | 1,537 | 3,393 | |||||||||||||||||||||||
Net income (loss) attributable to Select Medical Holdings Corporation | 118,184 | (100,251 | ) | 72,327 | 94,879 | 35,430 | 22,441 | ||||||||||||||||||||||
Less: Preferred dividends | — | — | 23,519 | 22,663 | 23,807 | 24,972 | |||||||||||||||||||||||
Net income (loss) available to common and preferred stockholders | $ | 118,184 | $ | (100,251 | ) | $ | 48,808 | $ | 72,216 | $ | 11,623 | $ | (2,531 | ) | |||||||||||||||
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Predecessor Period | Successor Period | ||||||||||||||||||||||||||||
Period from | Period from | ||||||||||||||||||||||||||||
January 1 | February 25 | ||||||||||||||||||||||||||||
Year Ended | through | through | |||||||||||||||||||||||||||
December 31, | February 24, | December 31, | Year Ended December 31, | ||||||||||||||||||||||||||
2004(1) | 2005(1) | 2005(1)(2) | 2006(1)(2) | 2007(1)(2) | 2008(1)(2) | ||||||||||||||||||||||||
(in thousands, except per share data) | (in thousands, except per share data) | ||||||||||||||||||||||||||||
Income (loss) per common share: | |||||||||||||||||||||||||||||
Basic: | |||||||||||||||||||||||||||||
Income (loss) from continuing operations | $ | 1.11 | $ | (0.99 | ) | $ | 0.21 | $ | 0.26 | $ | 0.05 | $ | (0.01 | ) | |||||||||||||||
Income from discontinued operations, net of tax | 0.04 | 0.01 | 0.01 | 0.06 | — | — | |||||||||||||||||||||||
Net income (loss) | $ | 1.15 | $ | (0.98 | ) | $ | 0.22 | $ | 0.32 | $ | 0.05 | $ | (0.01 | ) | |||||||||||||||
Diluted: | |||||||||||||||||||||||||||||
Income (loss) from continuing operations | $ | 1.07 | $ | (0.99 | ) | $ | 0.21 | $ | 0.26 | $ | 0.05 | $ | (0.01 | ) | |||||||||||||||
Income from discontinued operations, net of tax | 0.04 | 0.01 | 0.01 | 0.06 | — | — | |||||||||||||||||||||||
Net income (loss) | $ | 1.11 | $ | (0.98 | ) | $ | 0.22 | $ | 0.32 | $ | 0.05 | $ | (0.01 | ) | |||||||||||||||
Weighted average common shares outstanding: | |||||||||||||||||||||||||||||
Basic | 102,165 | 102,026 | 171,330 | 180,183 | 190,286 | 198,554 | |||||||||||||||||||||||
Diluted | 106,529 | 102,026 | 171,330 | 180,183 | 190,286 | 198,554 | |||||||||||||||||||||||
Balance Sheet Data (at end of period): | |||||||||||||||||||||||||||||
Cash and cash equivalents | $ | 247,476 | $ | 35,861 | $ | 81,600 | $ | 4,529 | $ | 64,260 | |||||||||||||||||||
Working capital | 313,715 | 77,556 | 59,468 | 14,730 | 118,370 | ||||||||||||||||||||||||
Total assets | 1,113,721 | 2,168,385 | 2,182,524 | 2,495,046 | 2,579,469 | ||||||||||||||||||||||||
Total debt | 354,590 | 1,628,889 | 1,538,503 | 1,755,635 | 1,779,925 | ||||||||||||||||||||||||
Total Select Medical Holdings Corporation stockholders’ equity | 515,943 | (244,658 | ) | (169,139 | ) | (165,889 | ) | (174,204 | ) |
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Successor Period | ||||||||
For the Six Months Ended June 30, | ||||||||
2008(1)(2) | 2009 | |||||||
(in thousands, except per share data) | ||||||||
Statement of Operations Data: | ||||||||
Net operating revenues | $ | 1,087,084 | $ | 1,120,707 | ||||
Operating expenses(3)(4) | 948,992 | 952,023 | ||||||
Depreciation and amortization | 35,327 | 35,670 | ||||||
Income from operations | 102,765 | 133,014 | ||||||
Gain on early retirement of debt(5) | — | 15,316 | ||||||
Interest expense, net(7) | (73,268 | ) | (68,250 | ) | ||||
Income from operations before income taxes | 29,497 | 80,080 | ||||||
Income tax expense | 13,973 | 33,880 | ||||||
Net income | 15,524 | 46,200 | ||||||
Less: Net income attributable to non-controlling interests(8) | 1,071 | 1,412 | ||||||
Net income attributable to Select Medical Holdings Corporation | 14,453 | 44,788 | ||||||
Less: Preferred dividends | 12,279 | 12,870 | ||||||
Net income available to common and preferred stockholders | $ | 2,174 | $ | 31,918 | ||||
Net income per common share: | ||||||||
Basic | $ | 0.01 | $ | 0.14 | ||||
Diluted | 0.01 | 0.14 | ||||||
Weighted average common shares outstanding: | ||||||||
Basic | 197,270 | 201,698 | ||||||
Diluted | 197,270 | 203,306 | ||||||
Balance Sheet Data (at end of period): | ||||||||
Cash and cash equivalents | $ | 7,534 | $ | 27,689 | ||||
Working capital | 105,745 | 103,831 | ||||||
Total assets | 2,544,037 | 2,532,682 | ||||||
Total debt | 1,805,462 | 1,697,134 | ||||||
Total Select Medical Holdings Corporation stockholders’ equity | (165,703 | ) | (141,659 | ) |
(1) | Adjusted for the adoption of SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements.” See Note 1, Organization and Significant Accounting Policies — Recent Accounting Pronouncements, in our audited consolidated financial statements and Note 2, Accounting Policies — Recent Accounting Pronouncements, in our interim unaudited consolidated financial statements for additional information. | |
(2) | Adjusted for the adoption of FASB Staff PositionEITF 03-6-1, “Determining Whether Instruments Granted inShare-Based Payment Transactions are Participating Securities.” See Note 14 in our audited consolidated financial statements and Note 8 in our interim unaudited consolidated financial statements for additional information. | |
(3) | Operating expenses include cost of services, general and administrative expenses, and bad debt expenses. | |
(4) | Includes stock compensation expense related to the repurchase of outstanding stock options in the Predecessor Period from January 1 through February 24, 2005, compensation expense related to restricted stock, stock options and long term incentive compensation in the Successor Periods from February 25 through December 31, 2005, and for the years ended December 31, 2006, 2007 and 2008 and for the six months ended June 30, 2008 and 2009. | |
(5) | The loss in the Predecessor Period of January 1 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 related to the tender offers for all of Select’s 91/2% senior subordinated notes due 2009 and all of Select’s 71/2% senior subordinated notes due 2013 completed in connection with the Merger. In the year ended December 31, 2008, we paid approximately $1.0 million to repurchase and retire a portion of Select’s 75/8% senior subordinated notes. These notes had a carrying value of $2.0 million. The gain on early retirement of debt recognized was net of the write-off of unamortized deferred financing costs related to the debt. During the six months ended June 30, 2009, we paid approximately $30.1 million to repurchase and retire a portion of Select’s 75/8% senior subordinated notes. These notes had a carrying value of $46.5 million. The gain on early retirement of debt recognized was net of the write-off of unamortized deferred financing costs related to the debt. | |
(6) | As a result of the Merger, Select incurred costs in the Predecessor Period of January 1 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 theHart-Scott-Rodino filing relating to the Merger, the cost associated with purchasing a six year extended reporting period under our directors and officers liability insurance policy and other associated expenses. | |
(7) | Interest expense, net equals interest expense minus interest income. | |
(8) | Reflects interests held by other parties in subsidiaries, limited liability companies and limited partnerships owned and controlled by us. |
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As of June 30, 2009 | ||||||||||||||||||||
Reverse Stock | Adjustments | Pro Forma | ||||||||||||||||||
Split and Conversion | for | as | ||||||||||||||||||
Historical(a) | of Preferred Stock | Pro Forma | Offering | Adjusted | ||||||||||||||||
(in thousands) | ||||||||||||||||||||
ASSETS | ||||||||||||||||||||
Current Assets: | ||||||||||||||||||||
Cash and cash equivalents | $ | 27,689 | — | $ | 27,689 | — | $ | 27,689 | ||||||||||||
Accounts receivable, net of allowance for doubtful accounts | 339,615 | — | 339,615 | — | 339,615 | |||||||||||||||
Current deferred tax asset | 52,270 | — | 52,270 | — | 52,270 | |||||||||||||||
Other current assets | 21,776 | — | 21,776 | — | 21,776 | |||||||||||||||
Total Current Assets | 441,350 | — | 441,350 | 441,350 | ||||||||||||||||
Property and equipment, net | 460,420 | — | 460,420 | — | 460,420 | |||||||||||||||
Goodwill | 1,506,661 | — | 1,506,661 | — | 1,506,661 | |||||||||||||||
Other identifiable intangibles | 69,663 | — | 69,663 | — | 69,663 | |||||||||||||||
Assets held for sale | 11,342 | — | 11,342 | — | 11,342 | |||||||||||||||
Other assets | 43,246 | — | 43,246 | — | 43,246 | |||||||||||||||
Total Assets | $ | 2,532,682 | — | $ | 2,532,682 | — | $ | 2,532,682 | ||||||||||||
LIABILITIES AND EQUITY | ||||||||||||||||||||
Current Liabilities: | ||||||||||||||||||||
Bank overdrafts | $ | 16,472 | — | $ | 16,472 | — | $ | 16,472 | ||||||||||||
Current portion of long-term debt and notes payable | 10,670 | — | 10,670 | — | 10,670 | |||||||||||||||
Accounts payable | 68,777 | — | 68,777 | — | 68,777 | |||||||||||||||
Accrued payroll | 57,832 | — | 57,832 | — | 57,832 | |||||||||||||||
Accrued vacation | 40,380 | — | 40,380 | — | 40,380 | |||||||||||||||
Accrued interest | 35,500 | — | 35,500 | — | 35,500 | |||||||||||||||
Accrued restructuring | 6,061 | — | 6,061 | — | 6,061 | |||||||||||||||
Accrued other | 95,893 | — | 95,893 | — | 95,893 | |||||||||||||||
Income taxes payable | 441 | — | 441 | (2) | ||||||||||||||||
Due to third party payors | 5,493 | — | 5,493 | — | 5,493 | |||||||||||||||
Total Current Liabilities | 337,519 | — | 337,519 | |||||||||||||||||
Long-term debt, net of current portion | 1,686,464 | — | 1,686,464 | (2) | ||||||||||||||||
Non-current deferred tax liability | 51,967 | — | 51,967 | — | 51,967 | |||||||||||||||
Other non-current liabilities | 62,248 | — | 62,248 | 62,248 | ||||||||||||||||
Total Liabilities | 2,138,198 | — | 2,138,198 | |||||||||||||||||
Preferred stock | 528,742 | (1) | (2) | |||||||||||||||||
Stockholders’ Equity: | ||||||||||||||||||||
Common stock | 205 | (1) | (2) | |||||||||||||||||
Capital in excess of par | (288,844 | ) | (1) | (2) | ||||||||||||||||
Retained earnings | 160,103 | (1) | (2) | |||||||||||||||||
Accumulated other comprehensive loss | (13,123 | ) | — | (13,123 | ) | — | (13,123 | ) | ||||||||||||
Total Select Medical Holdings Corporation Stockholders’ Equity | (141,659 | ) | ||||||||||||||||||
Non-controlling interest | 7,401 | 7,401 | 7,401 | |||||||||||||||||
Total Equity | (134,258 | ) | ||||||||||||||||||
Total Liabilities and Equity | $ | 2,532,682 | ||||||||||||||||||
40
Year Ended December 31, 2008 | ||||||||||||||||||||
Reverse Stock | ||||||||||||||||||||
Split and | Adjustments | Pro Forma | ||||||||||||||||||
Conversion of | for | As | ||||||||||||||||||
Historical(a)(b) | Preferred Stock | Pro Forma | Offering | Adjusted | ||||||||||||||||
(in thousands, except per share data) | ||||||||||||||||||||
Net operating revenues | $ | 2,153,362 | — | $ | 2,153,362 | — | $ | 2,153,362 | ||||||||||||
Operating expenses | 1,885,168 | — | 1,885,168 | — | 1,885,168 | |||||||||||||||
Depreciation and amortization | 71,786 | — | 71,786 | — | 71,786 | |||||||||||||||
Total cost and expenses | 1,956,954 | — | 1,956,954 | — | 1,956,954 | |||||||||||||||
Income from operations | 196,408 | — | 196,408 | — | 196,408 | |||||||||||||||
Gain on early retirement of debt | 912 | — | 912 | — | 912 | |||||||||||||||
Interest expense, net | (145,423 | ) | — | (145,423 | ) | (4) | ||||||||||||||
Income before income taxes | 51,897 | — | 51,897 | |||||||||||||||||
Income tax expense | 26,063 | — | 26,063 | (5) | ||||||||||||||||
Net income | 25,834 | — | 25,834 | |||||||||||||||||
Less: Net income attributable to non-controlling interests | 3,393 | — | 3,393 | — | 3,393 | |||||||||||||||
Net income attributable to Select Medical Holdings Corporation | 22,441 | — | 22,441 | |||||||||||||||||
Less: Preferred dividends | 24,972 | (3) | ||||||||||||||||||
Net loss available to common stockholders | $ | (2,531 | ) | $ | $ | |||||||||||||||
Basic income per common share | $ | $ | ||||||||||||||||||
Weighted average basic common shares outstanding | (6) | (6) | ||||||||||||||||||
Diluted income per common share | $ | $ | ||||||||||||||||||
Weighted average diluted common shares outstanding | (6) | (6) |
41
Six Months Ended June 30, 2009 | ||||||||||||||||||||
Reverse Stock | Adjustments | Pro Forma | ||||||||||||||||||
Split and Conversion | for | As | ||||||||||||||||||
Historical | of Preferred Stock | Pro Forma | Offering | Adjusted | ||||||||||||||||
(in thousands, except per share data) | ||||||||||||||||||||
Net operating revenues | $ | 1,120,707 | — | $ | 1,120,707 | $ | 1,120,707 | |||||||||||||
Operating expenses | 952,023 | — | 952,023 | 952,023 | ||||||||||||||||
Depreciation and amortization | 35,670 | — | 35,670 | 35,670 | ||||||||||||||||
Total costs and expenses | 987,693 | — | 987,693 | 987,693 | ||||||||||||||||
Income from operations | 133,014 | — | 133,014 | 133,014 | ||||||||||||||||
Gain on early retirement of debt | 15,316 | 15,316 | 15,316 | |||||||||||||||||
Interest expense, net | (68,250 | ) | — | (68,250 | ) | (4) | ||||||||||||||
Income before income taxes | 80,080 | — | 80,080 | |||||||||||||||||
Income tax expense | 33,880 | — | 33,880 | (5) | ||||||||||||||||
Net income | 46,200 | — | 46,200 | |||||||||||||||||
Less: Net income attributable to non-controlling interests | 1,412 | — | 1,412 | 1,412 | ||||||||||||||||
Net income attributable to Select Medical Holdings Corporation | 44,788 | — | 44,788 | |||||||||||||||||
Less: Preferred dividends | 12,870 | (3) | ||||||||||||||||||
Net income available to common stockholders | $ | 31,918 | $ | $ | ||||||||||||||||
Basic loss per common share | $ | $ | ||||||||||||||||||
Weighted average basic common shares outstanding | (6) | (6) | ||||||||||||||||||
Diluted income per common share | $ | $ | ||||||||||||||||||
Weighted average diluted common shares outstanding | (6) | (6) |
(a) | Adjusted for the adoption of SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements.” See Note 1, Organization and Significant Accounting Policies — Recent Accounting Pronouncements, in our audited consolidated financial statements and Note 2, Accounting Policies — Recent Accounting Pronouncements, in our interim unaudited consolidated financial statements for additional information. |
(b) | Adjusted for the adoption of FASB Staff PositionEITF 03-6-1, “Determining Whether Instruments Granted in Share-Based Payment Transactions are Participating Securities.” See Note 14 in our audited consolidated financial statements and Note 8 in our interim unaudited consolidated financial statements for additional information. |
42
(i) | the elimination of $ million liquidation value of our preferred stock reflecting the conversion of all shares of our issued and outstanding preferred stock into shares of common stock; |
(ii) | a deemed dividend of $ million for the value of the contingent beneficial conversion feature associated with our preferred stock; and |
(iii) | the assumed 1 for reverse split for our common stock to occur prior to the closing of the offering. |
(i) | our issuance of shares of common stock assuming this offering had occurred on June 30, 2009; |
(ii) | the repayment of $ million of indebtedness outstanding under our senior secured credit facilities; and |
(iii) | a non-recurring charge related to payments under our Long Term Cash Incentive Plan in the amount of $18.0 million reduced by $7.4 million of income tax benefit. |
(iv) | a non-recurring charge in the amount of $ million reduced by $ million of income tax benefit, related to the August 12, 2009 issuance of shares of restricted stock to employees which will vest upon completion of this offering. |
(i) | an increase in our interest expense of $ million and $ million for the year ended December 31, 2008 and the six months ended June 30, 2009 for the increase in the interest rate of 1.75% on $384.5 million principal amount ofTranche B-1 term loans that resulted from Amendment No. 3 to our senior secured credit facility which became effective on August 5, 2009. |
(ii) | the reduction in interest expense of $ million and $ million for the year ended December 31, 2008 and the six months ended June 30, 2009 for the assumed repayment of $ million under our senior secured credit facility. |
Year Ended | Six Months Ended | |||||||||||||||
December 31, 2008 | June 30, 2009 | |||||||||||||||
Pro Forma | Pro Forma | |||||||||||||||
Pro Forma | As Adjusted | Pro Forma | As Adjusted | |||||||||||||
Weighted average common shares outstanding after reverse-stock split | ||||||||||||||||
Effect of preferred stock conversion | (a) | (a) | (a) | (a) | ||||||||||||
Effect of vesting of restricted shares which is contingent upon the completion of this offering | ||||||||||||||||
Effect of shares issued in this offering | ||||||||||||||||
Weighted average basic common shares | ||||||||||||||||
Dilutive effect of stock options | ||||||||||||||||
Weighted average diluted common shares | ||||||||||||||||
(a) | Based on accreted value of preferred stock of $528.7 million as of June 30, 2009. |
43
AND RESULTS OF OPERATIONS
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Balance as of | ||||||||||||||||||||||||||||||
Balance as of December 31, | June 30, | |||||||||||||||||||||||||||||
2007 | 2008 | 2009 | ||||||||||||||||||||||||||||
0-90 | Over 90 | 0-90 | Over 90 | 0-90 | Over 90 | |||||||||||||||||||||||||
Days | Days | Days | Days | Days | Days | |||||||||||||||||||||||||
Medicare and Medicaid | $ | 76,927 | $ | 15,131 | $ | 101,687 | $ | 12,780 | $ | 132,780 | $ | 13,584 | ||||||||||||||||||
Commercial insurance, and other | 175,152 | 60,052 | 186,200 | 68,803 | 175,930 | 70,006 | ||||||||||||||||||||||||
Total net accounts receivable | $ | 252,079 | $ | 75,183 | $ | 287,887 | $ | 81,583 | $ | 308,710 | $ | 83,590 | ||||||||||||||||||
As of | As of | |||||||||||||
December 31, | June 30, | |||||||||||||
2007 | 2008 | 2009 | ||||||||||||
0 to 90 days | 77.0 | % | 77.9 | % | 78.7 | % | ||||||||
91 to 180 days | 10.0 | % | 8.8 | % | 8.4 | % | ||||||||
181 to 365 days | 6.0 | % | 6.7 | % | 4.7 | % | ||||||||
Over 365 days | 7.0 | % | 6.6 | % | 8.2 | % | ||||||||
Total | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||
As of | As of | ||||||||||||||
December 31, | June 30, | ||||||||||||||
2007 | 2008 | 2009 | |||||||||||||
Government payors and insured receivables | 99.7 | % | 99.7 | % | 99.7 | % | |||||||||
Self-pay receivables (including deductible and co-payments) | 0.3 | % | 0.3 | % | 0.3 | % | |||||||||
Total | 100.0 | % | 100.0 | % | 100.0 | % | |||||||||
55
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Year Ended | Year Ended | Year Ended | ||||||||||
December 31, | December 31, | December 31, | ||||||||||
2006 | 2007 | 2008 | ||||||||||
Specialty hospital data(1): | ||||||||||||
Number of hospitals — start of period | 101 | 96 | 87 | |||||||||
Number of hospitalstart-ups | 3 | 3 | 7 | |||||||||
Number of hospitals acquired | — | — | 2 | |||||||||
Number of hospitals closed/sold | (4 | ) | (8 | ) | (1 | ) | ||||||
Number of hospitals consolidated | (4 | ) | (4 | ) | (2 | ) | ||||||
Number of hospitals — end of period | 96 | 87 | 93 | |||||||||
Available licensed beds | 3,867 | 3,819 | 4,222 | |||||||||
Admissions | 39,668 | 40,008 | 41,177 | |||||||||
Patient days | 969,590 | 987,624 | 1,005,719 | |||||||||
Average length of stay (days) | 24 | 25 | 24 | |||||||||
Net revenue per patient day(2) | $ | 1,392 | $ | 1,378 | $ | 1,453 | ||||||
Occupancy rate | 69 | % | 69 | % | 67 | % | ||||||
Percent patient days — Medicare | 73 | % | 69 | % | 65 | % | ||||||
Outpatient rehabilitation data(3): | ||||||||||||
Number of clinics owned — start of period | 553 | 477 | 918 | |||||||||
Number of clinics acquired | — | 570 | 4 | |||||||||
Number of clinicstart-ups | 12 | 15 | 17 | |||||||||
Number of clinics closed/sold(4) | (88 | ) | (144 | ) | (59 | ) | ||||||
Number of clinics owned — end of period | 477 | 918 | 880 | |||||||||
Number of clinics managed — end of period | 67 | 81 | 76 | |||||||||
Total number of clinics (all) — end of period | 544 | 999 | 956 | |||||||||
Number of visits | 2,972,243 | 4,032,197 | 4,533,727 | |||||||||
Net revenue per visit(5) | $ | 94 | $ | 100 | $ | 102 |
58
Six Months Ended | ||||||||
June 30, | ||||||||
2008 | 2009 | |||||||
Specialty hospital data(1): | ||||||||
Number of hospitals — start of period | 87 | 93 | ||||||
Number of hospitalstart-ups | 5 | — | ||||||
Number of hospitals closed | — | (1 | ) | |||||
Number of hospitals — end of period | 92 | 92 | ||||||
Available licensed beds | 4,126 | 4,160 | ||||||
Admissions | 20,914 | 21,309 | ||||||
Patient days | 512,286 | 508,983 | ||||||
Average length of stay (days) | 25 | 24 | ||||||
Net revenue per patient day(2) | $ | 1,428 | $ | 1,505 | ||||
Occupancy rate | 69 | % | 67 | % | ||||
Percent patient days — Medicare | 66 | % | 64 | % | ||||
Outpatient rehabilitation data: | ||||||||
Number of clinics owned — start of period | 918 | 880 | ||||||
Number of clinics acquired | — | 1 | ||||||
Number of clinicstart-ups | 9 | 7 | ||||||
Number of clinics closed/sold | (33 | ) | (13 | ) | ||||
Number of clinics owned — end of period | 894 | 875 | ||||||
Number of clinics managed — end of period | 76 | 73 | ||||||
Total number of clinics (all) — end of period | 970 | 948 | ||||||
Number of visits | 2,323,609 | 2,259,637 | ||||||
Net revenue per visit(5) | $ | 103 | $ | 102 |
(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) | Outpatient rehabilitation data has been restated to remove the clinics operated by CBIL. CBIL was sold March 31, 2006 and is being reported as a discontinued operation in 2006. | |
(4) | The number of clinics closed/sold for the year ended December 31, 2007 relate primarily to clinics closed in connection with the restructuring plan for integrating the acquisition of HealthSouth Corporation’s outpatient rehabilitation division. | |
(5) | 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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Year Ended | Year Ended | Year Ended | ||||||||||
December 31, | December 31, | December 31, | ||||||||||
2006(1) | 2007(1) | 2008(1) | ||||||||||
Net operating revenues | 100.0 | % | 100.0 | % | 100.0 | % | ||||||
Cost of services(2) | 80.2 | 83.3 | 83.2 | |||||||||
General and administrative | 2.4 | 2.2 | 2.2 | |||||||||
Bad debt expense | 1.0 | 1.9 | 2.2 | |||||||||
Depreciation and amortization | 2.5 | 2.9 | 3.3 | |||||||||
Income from operations | 13.9 | 9.7 | 9.1 | |||||||||
Gain on early retirement of debt | — | — | 0.0 | |||||||||
Other expense | — | 0.0 | — | |||||||||
Interest expense, net | (7.1 | ) | (6.9 | ) | (6.7 | ) | ||||||
Income from continuing operations before income taxes | 6.8 | 2.8 | 2.4 | |||||||||
Income tax expense | 2.4 | 0.9 | 1.2 | |||||||||
Income from continuing operations | 4.4 | 1.9 | 1.2 | |||||||||
Income from discontinued operations, net of tax | 0.7 | — | — | |||||||||
Net income | 5.1 | 1.9 | 1.2 | |||||||||
Net income attributable to non-controlling interests | 0.1 | 0.1 | 0.2 | |||||||||
Net income attributable to Select Medical Holdings Corporation | 5.0 | % | 1.8 | % | 1.0 | % | ||||||
Six Months | ||||||||
Ended | ||||||||
June 30, | ||||||||
2008(1) | 2009 | |||||||
Net operating revenues | 100.0 | % | 100.0 | % | ||||
Cost of services(2) | 82.9 | 80.7 | ||||||
General and administrative | 2.2 | 2.3 | ||||||
Bad debt expense | 2.1 | 2.0 | ||||||
Depreciation and amortization | 3.3 | 3.2 | ||||||
Income from operations | 9.5 | 11.8 | ||||||
Gain on early retirement of debt | — | 1.4 | ||||||
Interest expense, net | (6.8 | ) | (6.1 | ) | ||||
Income from operations before income taxes | 2.7 | 7.1 | ||||||
Income tax expense | 1.3 | 3.0 | ||||||
Net income | 1.4 | 4.1 | ||||||
Net income attributable to non-controlling interest | 0.1 | 0.1 | ||||||
Net income attributable to Select Medical Holdings Corporation | 1.3 | % | 4.0 | % | ||||
60
% | % | |||||||||||||||||||
Year Ended | Year Ended | Year Ended | Change | Change | ||||||||||||||||
December 31, | December 31, | December 31, | 2006- | 2007- | ||||||||||||||||
2006 | 2007 | 2008 | 2007 | 2008 | ||||||||||||||||
(in thousands) | ||||||||||||||||||||
Net operating revenues: | ||||||||||||||||||||
Specialty hospitals | $ | 1,378,543 | $ | 1,386,410 | $ | 1,488,412 | 0.6 | % | 7.4 | % | ||||||||||
Outpatient rehabilitation | 470,339 | 603,413 | 664,760 | 28.3 | 10.2 | |||||||||||||||
Other(4) | 2,616 | 1,843 | 190 | (29.5 | ) | (89.7 | ) | |||||||||||||
Total company | $ | 1,851,498 | $ | 1,991,666 | $ | 2,153,362 | 7.6 | % | 8.1 | % | ||||||||||
Income (loss) from operations: | ||||||||||||||||||||
Specialty hospitals | $ | 252,539 | $ | 180,090 | $ | 192,450 | (28.7 | )% | 6.9 | % | ||||||||||
Outpatient rehabilitation | 51,859 | 57,979 | 52,964 | 11.8 | (8.6 | ) | ||||||||||||||
Other(4) | (46,524 | ) | (44,184 | ) | (49,006 | ) | 5.0 | (10.9 | ) | |||||||||||
Total company | $ | 257,874 | $ | 193,885 | $ | 196,408 | (24.8 | )% | 1.3 | % | ||||||||||
Adjusted EBITDA:(3) | ||||||||||||||||||||
Specialty hospitals | $ | 283,270 | $ | 217,175 | $ | 236,388 | (23.3 | )% | 8.8 | % | ||||||||||
Outpatient rehabilitation | 64,823 | 75,437 | 77,279 | 16.4 | 2.4 | |||||||||||||||
Other(4) | (39,769 | ) | (37,684 | ) | (43,380 | ) | 5.2 | (15.1 | ) | |||||||||||
Adjusted EBITDA margins:(3) | ||||||||||||||||||||
Specialty hospitals | 20.5 | % | 15.7 | % | 15.9 | % | (23.4 | )% | 1.3 | % | ||||||||||
Outpatient rehabilitation | 13.8 | 12.5 | 11.6 | (9.4 | ) | (7.2 | ) | |||||||||||||
Other(4) : | N/M | N/M | N/M | N/M | N/M | |||||||||||||||
Total assets: | ||||||||||||||||||||
Specialty hospitals | $ | 1,742,803 | $ | 1,882,476 | $ | 1,910,402 | ||||||||||||||
Outpatient rehabilitation | 258,773 | 513,397 | 504,869 | |||||||||||||||||
Other(4) | 180,948 | 99,173 | 164,198 | |||||||||||||||||
Total company | $ | 2,182,524 | $ | 2,495,046 | $ | 2,579,469 | ||||||||||||||
Purchases of property and equipment, net: | ||||||||||||||||||||
Specialty hospitals | $ | 146,291 | $ | 146,901 | $ | 40,069 | ||||||||||||||
Outpatient rehabilitation | 6,527 | 14,737 | 13,271 | |||||||||||||||||
Other(4) | 2,278 | 4,436 | 3,164 | |||||||||||||||||
Total company | $ | 155,096 | $ | 166,074 | $ | 56,504 | ||||||||||||||
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Six Months Ended | ||||||||||||
June 30, | ||||||||||||
2008 | 2009 | % Change | ||||||||||
(in thousands) | ||||||||||||
Net operating revenues: | ||||||||||||
Specialty hospitals | $ | 745,893 | $ | 779,563 | 4.5 | % | ||||||
Outpatient rehabilitation | 341,072 | 341,009 | (0.0 | ) | ||||||||
Other(4) | 119 | 135 | 13.4 | |||||||||
Total company | $ | 1,087,084 | $ | 1,120,707 | 3.1 | % | ||||||
Income (loss) from operations: | ||||||||||||
Specialty hospitals | $ | 96,604 | $ | 126,204 | 30.6 | % | ||||||
Outpatient rehabilitation | 32,142 | 34,181 | 6.3 | |||||||||
Other(4) | (25,981 | ) | (27,371 | ) | (5.4 | ) | ||||||
Total company | $ | 102,765 | $ | 133,014 | 29.4 | % | ||||||
Adjusted EBITDA:(3) | ||||||||||||
Specialty hospitals | $ | 118,480 | $ | 147,741 | 24.7 | % | ||||||
Outpatient rehabilitation | 43,843 | 46,578 | 6.2 | |||||||||
Other(4) | (23,039 | ) | (25,041 | ) | (8.7 | ) | ||||||
Adjusted EBITDA margins:(3) | ||||||||||||
Specialty hospitals | 15.9 | % | 19.0 | % | 19.5 | % | ||||||
Outpatient rehabilitation | 12.9 | 13.7 | 6.2 | |||||||||
Other(4) | N/M | N/M | N/M | |||||||||
Total assets: | ||||||||||||
Specialty hospitals | $ | 1,925,514 | $ | 1,920,040 | ||||||||
Outpatient rehabilitation | 510,248 | 492,936 | ||||||||||
Other(4) | 108,275 | 119,706 | ||||||||||
Total company | $ | 2,544,037 | $ | 2,532,682 | ||||||||
Purchases of property and equipment, net: | ||||||||||||
Specialty hospitals | $ | 17,388 | $ | 15,377 | ||||||||
Outpatient rehabilitation | 6,813 | 5,009 | ||||||||||
Other(4) | 1,906 | 595 | ||||||||||
Total company | $ | 26,107 | $ | 20,981 | ||||||||
62
Year Ended | ||||||||
December 31, | ||||||||
2006 | 2007 | |||||||
(in thousands) | ||||||||
Net operating revenue | ||||||||
Specialty hospitals net operating revenue | $ | 1,378,543 | $ | 1,386,410 | ||||
Less: Specialty hospitals in development, opened or closed after 1/1/06 | 106,940 | 81,514 | ||||||
Specialty hospitals same store net operating revenue | $ | 1,271,603 | $ | 1,304,896 | ||||
Adjusted EBITDA(3) | ||||||||
Specialty hospitals Adjusted EBITDA(3) | $ | 283,270 | $ | 217,175 | ||||
Less: Specialty hospitals in development, opened or closed after 1/1/06 | 5,867 | (13,524 | ) | |||||
Specialty hospitals same store Adjusted EBITDA(3) | $ | 277,403 | $ | 230,699 | ||||
All specialty hospitals Adjusted EBITDA margin(3) | 20.5 | % | 15.7 | % | ||||
Specialty hospitals same store Adjusted EBITDA margin(3) | 21.8 | % | 17.7 | % |
Year Ended | ||||||||
December 31, | ||||||||
2007 | 2008 | |||||||
(in thousands) | ||||||||
Net operating revenue | ||||||||
Specialty hospitals net operating revenue | $ | 1,386,410 | $ | 1,488,412 | ||||
Less: Specialty hospitals in development, opened or closed after 1/1/07 | 79,500 | 85,709 | ||||||
Specialty hospitals same store net operating revenue | $ | 1,306,910 | $ | 1,402,703 | ||||
Adjusted EBITDA(3) | ||||||||
Specialty hospitals Adjusted EBITDA(3) | $ | 217,175 | $ | 236,388 | ||||
Less: Specialty hospitals in development, opened or closed after 1/1/07 | (10,928 | ) | (21,339 | ) | ||||
Specialty hospitals same store Adjusted EBITDA(3) | $ | 228,103 | $ | 257,727 | ||||
All specialty hospitals Adjusted EBITDA margin(3) | 15.7 | % | 15.9 | % | ||||
Specialty hospitals same store Adjusted EBITDA margin(3) | 17.5 | % | 18.4 | % |
63
Six Months Ended | ||||||||
June 30, | ||||||||
2008 | 2009 | |||||||
(in thousands) | ||||||||
Net operating revenue | ||||||||
Specialty hospitals net operating revenue | $ | 745,893 | $ | 779,563 | ||||
Less: Specialty hospitals in development, opened or closed after 1/1/08 | 23,070 | 51,890 | ||||||
Specialty hospitals same store net operating revenue | $ | 722,823 | $ | 727,673 | ||||
Adjusted EBITDA(3) | ||||||||
Specialty hospitals Adjusted EBITDA(3) | $ | 118,480 | $ | 147,741 | ||||
Less: Specialty hospitals in development, opened or closed after 1/1/08 | (11,426 | ) | (2,257 | ) | ||||
Specialty hospitals same store Adjusted EBITDA(3) | $ | 129,906 | $ | 149,998 | ||||
All specialty hospitals Adjusted EBITDA margin(3) | 15.9 | % | 19.0 | % | ||||
Specialty hospitals same store Adjusted EBITDA margin(3) | 18.0 | % | 20.6 | % |
N/M — Not Meaningful. | ||
(1) | Adjusted for the adoption of SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements.” See Note 1, Organization and Significant Accounting Policies — Recent Accounting Pronouncements, in our audited consolidated financial statements and Note 2, Accounting Policies — Recent Accounting Pronouncements, in our interim unaudited consolidated financial statements for additional information. | |
(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, gain on early retirement of debt, stock compensation expense, other expense and non-controlling interests. 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 Note 13 to our audited consolidated financial statements and footnote 7 to our interim unaudited consolidated financial statements for the period ended June 30, 2009 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 and non-healthcare services. |
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Six Months Ended | ||||||||
June 30, | ||||||||
2008 | 2009 | |||||||
(in thousands) | ||||||||
Cash flows provided by (used in) operating activities | $ | (993 | ) | $ | 57,235 | |||
Cash flows used in investing activities | (30,353 | ) | (19,640 | ) | ||||
Cash flows provided by (used in) financing activities | 34,351 | (74,166 | ) | |||||
Net increase (decrease) in cash and cash equivalents | 3,005 | (36,571 | ) | |||||
Cash and cash equivalents at beginning of period | 4,529 | 64,260 | ||||||
Cash and cash equivalents at end of period | $ | 7,534 | $ | 27,689 | ||||
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Year Ended December 31, | ||||||||||||
2006 | 2007 | 2008 | ||||||||||
(in thousands) | ||||||||||||
Cash flows provided by operating activities | $ | 227,651 | $ | 86,013 | $ | 107,438 | ||||||
Cash flows used in investing activities | (81,481 | ) | (382,676 | ) | (60,438 | ) | ||||||
Cash flows provided by (used in) financing activities | (100,466 | ) | 219,592 | 12,731 | ||||||||
Effect of exchange rate changes on cash and cash equivalents | 35 | — | — | |||||||||
Net increase (decrease) in cash and cash equivalents | 45,739 | (77,071 | ) | 59,731 | ||||||||
Cash and cash equivalents at beginning of period | 35,861 | 81,600 | 4,529 | |||||||||
Cash and cash equivalents at end of period | $ | 81,600 | $ | 4,529 | $ | 64,260 | ||||||
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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, |
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• | $268.6 million in Tranche B term loans that mature on February 24, 2012, and | |
• | $384.5 million inTranche B-1 term loans that mature on August 22, 2014. |
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Payments Due by Year | ||||||||||||||||||||
After | ||||||||||||||||||||
Contractual Obligations | Total | 2009 | 2010-2012 | 2013-2014 | 2014 | |||||||||||||||
(in thousands) | ||||||||||||||||||||
75/8% senior subordinated notes | $ | 658,000 | $ | — | $ | — | $ | — | $ | 658,000 | ||||||||||
Senior secured credit facility | 806,500 | 6,800 | 799,700 | (3) | — | — | ||||||||||||||
10% senior subordinated notes(1) | 135,603 | — | — | — | 135,603 | |||||||||||||||
Senior floating rate notes | 175,000 | — | — | — | 175,000 | |||||||||||||||
Seller notes | 1,282 | 416 | 866 | — | — | |||||||||||||||
Capital lease obligations | 1,640 | 426 | 1,214 | — | — | |||||||||||||||
Other debt obligations | 1,900 | 1,404 | 496 | — | — | |||||||||||||||
Total debt | 1,779,925 | 9,046 | 802,276 | — | 968,603 | |||||||||||||||
Interest(2) | 644,385 | 129,004 | 317,366 | 165,940 | 32,075 | |||||||||||||||
Letters of credit outstanding | 28,952 | — | 28,952 | — | — | |||||||||||||||
Purchase obligations | 3,145 | 2,301 | 844 | — | — | |||||||||||||||
Construction contracts | 15,819 | 15,819 | — | — | — | |||||||||||||||
Naming, promotional and sponsorship agreement | 53,822 | 2,619 | 8,226 | 5,807 | 37,170 | |||||||||||||||
Operating leases | 490,976 | 108,438 | 181,779 | 52,002 | 148,757 | |||||||||||||||
Related party operating leases | 46,425 | 2,978 | 9,079 | 6,524 | 27,844 | |||||||||||||||
Total contractual cash obligations | $ | 3,063,449 | $ | 270,205 | $ | 1,348,522 | $ | 230,273 | $ | 1,214,449 | ||||||||||
(1) | Reflects the balance sheet liability of our 10% 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. The remaining unamortized original issue discount was $14.4 million at December 31, 2008. Interest on the 10% senior subordinated notes accrued on the full principal amount thereof and we will be obligated to repay the full principal thereof at maturity or upon any mandatory or voluntary prepayment thereof. On any interest payment date on or after February 24, 2010, we will be obligated to pay an amount of accrued original issue discount on the 10% senior subordinated notes if necessary to ensure that the notes will not be considered “applicable high yield discount obligations” within the meaning of the Internal Revenue Code of 1986, as amended. The $150.0 million aggregate principal payable at maturity on our 10% senior subordinated notes would be reduced by prior payments of accrued original issue discount. | |
(2) | The interest obligation was calculated using the average interest rate at December 31, 2008 of 5.7% 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. | |
(3) | Pursuant to Amendment No. 3 to our senior secured credit facility, $384.5 million principal amount of Tranche B term loans under the senior secured credit facility is now due in 2014. |
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Distribution | ||||
Medical Condition | of Patients | |||
Respiratory disorders | 34 | % | ||
Neuromuscular disorders | 32 | |||
Cardiac disorders | 9 | |||
Wound care | 8 | |||
Other | 17 | |||
Total | 100 | % | ||
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• | optimizing staffing based on our occupancy and the clinical needs of our patients; |
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• | 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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Six | |||||||||||||||||||||
Months | |||||||||||||||||||||
Ended | |||||||||||||||||||||
Year Ended December 31, | June 30, | ||||||||||||||||||||
Net Operating Revenues by Payor Source(1) | 2006 | 2007 | 2008 | 2008 | 2009 | ||||||||||||||||
Medicare | 53.2 | % | 48.0 | % | 46.2 | % | 46.0 | % | 46.8 | % | |||||||||||
Commercial insurance(2) | 40.0 | % | 44.2 | % | 46.3 | % | 46.5 | % | 45.7 | % | |||||||||||
Private and other(3) | 5.0 | % | 5.5 | % | 5.4 | % | 5.5 | % | 5.4 | % | |||||||||||
Medicaid | 1.8 | % | 2.3 | % | 2.1 | % | 2.0 | % | 2.1 | % | |||||||||||
Total | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100 | % | |||||||||||
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(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. | |
(2) | Includes commercial healthcare insurance carriers, health maintenance organizations, preferred provider organizations, workers’ compensation and managed care programs. | |
(3) | 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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• | $1,827.7 million to pay Select’s then existing stockholders (other than rollover stockholders) and option holders all amounts due under the merger agreement; | |
• | $152.0 million of rollover equity from our continuing investors; | |
• | $344.2 million to repay existing indebtedness; and | |
• | $119.2 million to pay related fees and expenses, including premiums, consent fees and interest payable in connection with the tender offers and consent solicitations for Select’s existing senior subordinated notes. |
• | a cash equity investment in Holdings of $570.0 million by an investor group led by Welsh Carson and Thoma Cressey (the net proceeds of which were contributed by Holdings to Select) and a rollover equity investment in Holdings of $152.0 million by our continuing investors; | |
• | Holdings’ issuance and sale of senior subordinated notes, preferred stock and common stock to WCAS Capital Partners IV, L.P., an investment fund affiliated with Welsh Carson, Rocco A. Ortenzio, Robert A. Ortenzio and certain other investors who are members of or affiliated with the Ortenzio family, for an aggregate purchase price of $150.0 million (the net proceeds of which were contributed by Holdings to Select); | |
• | borrowings by us of $580.0 million in term loans and $200.0 million in revolving loans under our senior secured credit facility; | |
• | existing cash on hand of $131.1 million; and | |
• | the issuance of $660.0 million in aggregate principal amount of Select’s 75/8% senior subordinated notes. |
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Hospital Name | City | State | Beds | |||||||
Select Specialty Hospital — Birmingham | Birmingham | AL | 38 | |||||||
Select Specialty Hospital — Fort Smith | Fort Smith | AR | 32 | |||||||
Select Specialty Hospital — Little Rock | Little Rock | AR | 43 | |||||||
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 — Orlando (South Campus) | Edgewood | FL | 40 | |||||||
Select Specialty Hospital — Gainesville | Gainesville | FL | 44 | |||||||
Select Specialty Hospital — Palm Beach | Lake Worth | FL | 60 | |||||||
Select Specialty Hospital — Miami | Miami | FL | 47 | |||||||
Select Specialty Hospital — Orlando (North Campus) | Orlando | FL | 35 | |||||||
Select Specialty Hospital — Panama City | Panama City | FL | 30 | |||||||
Select Specialty Hospital — Pensacola | Pensacola | FL | 54 | |||||||
Select Specialty Hospital — Tallahassee | Tallahassee | FL | 29 | |||||||
Select Specialty Hospital — Atlanta | Atlanta | GA | 27 | |||||||
Select Specialty Hospital — Augusta | Augusta | GA | 80 | |||||||
Select Specialty Hospital — Savannah | Savannah | GA | 36 | |||||||
Select Specialty Hospital — Quad Cities | Davenport | IA | 50 | |||||||
Select Specialty Hospital — Beech Grove | Beech Grove | IN | 40 | |||||||
Select Specialty Hospital — Evansville | Evansville | IN | 60 | |||||||
Select Specialty Hospital — Fort Wayne | Fort Wayne | IN | 32 | |||||||
Select Specialty Hospital — Northwest Indiana | Hammond | IN | 70 | |||||||
Select Specialty Hospital — Kansas City | Overland Park | KS | 40 |
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Hospital Name | City | State | Beds | |||||||
Select Specialty Hospital — Topeka | Topeka | KS | 34 | |||||||
Select Specialty Hospital — Wichita | Wichita | KS | 60 | |||||||
Select Specialty Hospital — Lexington | Lexington | KY | 41 | |||||||
Select Specialty Hospital — Northwest Detroit | Detroit | MI | 36 | |||||||
Select Specialty Hospital — Flint | Flint | MI | 26 | |||||||
Select Specialty Hospital — Grosse Pointe | Grosse Pointe Farms | 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 — Downriver | Taylor | MI | 40 | |||||||
Select Specialty Hospital — Ann Arbor | Ypsilanti | MI | 36 | |||||||
Select Specialty Hospital — Western Missouri | Kansas | MO | 34 | |||||||
Select Specialty Hospital — Springfield | Springfield | MO | 44 | |||||||
Select Specialty Hospital — St. Louis | St. Louis | MO | 33 | |||||||
Select Specialty Hospital — Gulfport | Gulfport | MS | 61 | |||||||
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 (Central Campus) | Omaha | NE | 52 | |||||||
Kessler Institute for Rehabilitation (Welkind Campus) | Chester | NJ | 72 | |||||||
Select Specialty Hospital — Northeast New Jersey | Rochelle Park | NJ | 59 | |||||||
Kessler Institute for Rehabilitation (North Campus) | Saddle Brook | NJ | 112 | |||||||
Kessler Institute for Rehabilitation (West Campus) | West Orange | NJ | 143 | |||||||
Select Specialty Hospital — Akron | Akron | OH | 60 | |||||||
Select Specialty Hospital — Northeast Ohio (Canton Campus) | Canton | OH | 30 | |||||||
Select Specialty Hospital — Cincinnati | Cincinnati | OH | 35 | |||||||
Select Specialty Hospital — Columbus | Columbus | OH | 152 | |||||||
Select Specialty Hospital — Columbus (Mt. Carmel Campus) | Columbus | OH | 24 | |||||||
Select Specialty Hospital — Youngstown | Youngstown | OH | 31 | |||||||
Select Specialty Hospital — Youngstown (Boardman Campus) | Youngstown | OH | 20 | |||||||
Select Specialty Hospital — Zanesville | Zanesville | OH | 35 | |||||||
Select Specialty Hospital — Oklahoma City | Oklahoma City | OK | 72 | |||||||
Select Specialty Hospital — Tulsa/Midtown (Midtown Campus) | Tulsa | OK | 56 | |||||||
Select Specialty Hospital — Tulsa/Midtown (Riverside Campus) | Tulsa | OK | 44 | |||||||
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 | |||||||
Penn State Hershey Rehabilitation | Harrisburg | PA | 32 | |||||||
Select Specialty Hospital — Johnstown | Johnstown | PA | 39 |
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Hospital Name | City | State | Beds | |||||||
Select Specialty Hospital — Laurel Highlands | Latrobe | PA | 40 | |||||||
Select Specialty Hospital — McKeesport | McKeesport | PA | 30 | |||||||
Select Specialty Hospital — Pittsburgh | Pittsburgh | PA | 32 | |||||||
Select Specialty Hospital — Central Pennsylvania (York Campus) | York | PA | 23 | |||||||
Select Specialty Hospital — Central Pennsylvania (Harrisburg Campus) | Harrisburg | PA | 38 | |||||||
Select Specialty Hospital — Sioux Falls | Sioux Falls | SD | 21 | |||||||
Select Specialty Hospital —Tri-Cities | Bristol | TN | 33 | |||||||
Select Specialty Hospital — Knoxville | Knoxville | TN | 35 | |||||||
Select Specialty Hospital — North Knoxville | Knoxville | TN | 33 | |||||||
Select Specialty Hospital — Memphis | Memphis | TN | 38 | |||||||
Select Specialty Hospital — Nashville | Nashville | TN | 47 | |||||||
Rehabilitation Institute of Denton, LLC | Denton | TX | 44 | |||||||
Select Specialty Hospital — Dallas/Ft Worth | Carrolton | TX | 60 | |||||||
Select Specialty Hospital — South Dallas | DeSoto | TX | 100 | |||||||
Select Specialty Hospital — Houston (Houston Heights) | Houston | TX | 135 | |||||||
Select Specialty Hospital — Houston (Houston Medical Center) | Houston | TX | 79 | |||||||
Select Specialty Hospital — Houston (Houston West) | Houston | TX | 56 | |||||||
Select Specialty Hospital — Longview | Longview | TX | 30 | |||||||
Select Specialty Hospital — Midland | Midland | TX | 29 | |||||||
Select Specialty Hospital — San Antonio | San Antonio | TX | 44 | |||||||
Select Specialty Hospital — Madison | Madison | WI | 58 | |||||||
Select Specialty Hospital — Milwaukee | Milwaukee | WI | 34 | |||||||
Select Specialty Hospital — Milwaukee (St Luke’s Campus) | Milwaukee | WI | 29 | |||||||
Select Specialty Hospital — Charleston | Charleston | WV | 32 | |||||||
Total Beds: | 4,160 | |||||||||
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Name | Age | Position | ||
Rocco A. Ortenzio | 76 | Director and Executive Chairman | ||
Robert A. Ortenzio | 52 | Director and Chief Executive Officer | ||
Russell L. Carson | 66 | Director | ||
David S. Chernow | 52 | Director | ||
Bryan C. Cressey | 59 | Director | ||
James E. Dalton, Jr. | 66 | Director | ||
James S. Ely III | 51 | Director | ||
Thomas A. Scully | 51 | Director | ||
Leopold Swergold | 69 | Director | ||
Sean M. Traynor | 40 | Director | ||
Patricia A. Rice | 62 | President and Chief Operating Officer | ||
David W. Cross | 62 | Executive Vice President and Chief Development Officer | ||
S. Frank Fritsch | 58 | Executive Vice President and Chief Human Resources Officer | ||
Martin F. Jackson | 55 | Executive Vice President and Chief Financial Officer | ||
James J. Talalai | 48 | Executive Vice President and Chief Information Officer | ||
Michael E. Tarvin | 49 | Executive Vice President, General Counsel and Secretary | ||
Scott A. Romberger | 49 | Senior Vice President, Controller and Chief Accounting Officer | ||
Robert G. Breighner, Jr. | 40 | Vice President, Compliance and Audit Services and Corporate Compliance Officer |
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• | have direct responsibility for the appointment (subject, if applicable, to stockholder ratification), termination, compensation and oversight of the work of the independent auditors, including resolution of disagreements between management and the auditors regarding financial reporting; | |
• | have the authority to approve all fees and terms of engagement of the independent auditors and will pre-approve all audit and non-audit services provided by the independent auditors and will not engage the independent auditors to perform any non-audit services proscribed by law or regulation; | |
• | have a clear understanding with management and the independent auditors that the independent auditors are ultimately accountable to our board of directors and the audit committee, as representatives of our stockholders; | |
• | have the ultimate authority and responsibility to evaluate and, where appropriate, replace the independent auditors; | |
• | discuss with the auditors their independence from management and us and the matters included in the written disclosures required by the Public Company Accounting Oversight Board; | |
• | review on an annual basis the performance of our independent auditors and determine whether to reappoint the auditors for the upcoming fiscal year, subject to stockholder approval, if applicable; | |
• | set clear hiring policies for employees or former employees of the independent auditors that comply with the rules and regulations of the Securities and Exchange Commission and applicable listing standards of the New York Stock Exchange; | |
• | receive regular reports from the independent auditors on our critical policies and practices, and all alternative treatments of financial information within generally accepted accounting principles that have been discussed with management; | |
• | discuss with the internal auditors and the independent auditors the overall scope and plans for their respective audits, including the adequacy of staffing and compensation; |
• | obtain and review a report by the independent auditors at least annually describing: (1) the independent auditors’ internal quality control procedures, (2) any material issues raised by the most recent internal quality control review, or peer review, of the independent auditors, or by any inquiry or investigation by governmental or professional authorities, within the preceding five years, respecting one or more independent audits carried out by the independent auditors, and any steps taken to deal with any such issues; (3) all relationships between the independent auditor and us that may impact the objectivity and independence of the auditor (to assess the auditor’s independence), and (4) discuss with management, the internal auditors and the independent auditors the adequacy and effectiveness of the accounting and financial controls, including our policies and procedures to assess, monitor, and manage business risk and legal and ethical compliance programs; | |
• | review management’s assertion on its assessment of the effectiveness of internal controls as of the end of the most recent fiscal year and the independent auditors’ report on management’s assertion; | |
• | establish procedures for the receipt, retention and treatment of complaints received by us regarding accounting, internal accounting controls or auditing matters and the confidential, anonymous submission by our employees of concerns regarding questionable accounting or auditing matters; |
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• | review the interim financial statements and disclosures made under the section entitledManagement’s Discussion and Analysis of Financial Condition and Results of Operationswith management and the independent auditors prior to the filing of our Quarterly Report on Form10-Q, and discuss the results of the quarterly review and any other matters required to be communicated to the audit committee by the independent auditors under generally accepted auditing standards; | |
• | review with management and the independent auditors the annual financial statements and disclosures made under the section entitledManagement’s Discussion and Analysis of Financial Condition and Results of Operationsto be included in our Annual Report onForm 10-K (or the annual report to stockholders if distributed prior to the filing ofForm 10-K), including their judgment about the quality, not just the acceptability, of the accounting principles, the reasonableness of significant judgments and the clarity of the disclosures in the financial statements, and discuss the results of the annual audit and any other matters required to be communicated to the audit committee by the independent auditors under generally accepted auditing standards; | |
• | review and discuss earnings press releases, as well as financial information and earnings guidance provided to analysts and rating agencies prior to their release; | |
• | prepare its report to be included in our annual proxy statement as required by the rules and regulations of the Securities and Exchange Commission; |
• | periodically meet separately with management, the internal auditors and the independent auditors to discuss issues and concerns warranting the attention of the audit committee, and provide sufficient opportunity to meet privately with the internal auditors and the independent auditors; | |
• | review with the independent auditors any audit problems or difficulties and management’s response; | |
• | receive corporate attorneys’ reports of evidence of a material violation of securities laws or breaches of fiduciary duty; and | |
• | perform an evaluation of its performance at least annually to determine whether it is functioning effectively. |
• | identify individuals qualified to serve on our board of directors and our board committees; |
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• | recommend to our board of directors nominees for election to our board of directors at annual meetings of stockholders; | |
• | recommend to our board the directors nominees to serve on each of our board committees; | |
• | lead our board of directors in its annual review of the performance of our board of directors and management; | |
• | monitor our corporate governance structure; | |
• | develop and recommend to our board of directors a set of corporate governance guidelines and a code of business conduct and ethics; and | |
• | assist our board of directors in monitoring our compliance with applicable legal and regulatory requirements. |
• | develop qualifications and other criteria for individual candidates for our board of directors including, without limitation, background, technical and industry-specific skills, affiliations and personal characteristics; | |
• | identify candidates for election or re-election to our board of directors, including candidates recommended by our stockholders, gather information on candidates, conduct interviews and hold meetings with candidates, make recommendations to our board of directors as to particular candidates to fill vacancies on our board of directors from time to time and make recommendations to our board of directors as to the slate of candidates for election or re-election to our board of directors to be presented to the stockholders for consideration at our annual meeting of stockholders; | |
• | review the composition and size of our board of directors as a whole, in order to ensure that our board of directors has the appropriate experience, expertise and perspective; | |
• | on a regular basis, but not less frequently than annually, conduct an assessment and evaluation of the performance of our board of directors, as a whole, and the directors individually, and make recommendations to our board of directors as to whether individual directors should stand for re-election; |
• | in consultation with our chief executive officer, review succession planning relating to our chief executive officer as well as other key members of our senior management, and require our chief executive officer to prepare and update regularly his or her recommendation as to the individual who should succeed him or her in the event he or she becomes unable to perform the duties of the office; | |
• | plan for continuity on our board of directors as existing directors retire or rotate off our board of directors; |
• | review on an annual basis the compliance by each board committee with our committee structure, size and composition rules, including holding the required number of meetings and providing to our board of directors reports as to that committee’s activities; | |
• | recommend to our board of directors individual directors to serve as members and chairpersons of the various board committees and recommend changes to the composition of committees from time to time, and ensure that each committee is comprised of members with experience and expertise sufficient for the committee to perform its responsibilities and maintain a diversity of perspective and background; | |
• | review on an annual basis its own performance and report the results of such review to our board of directors; |
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• | review on an annual basis the compliance of our board of directors with Securities and Exchange Commission and New York Stock Exchange rules, including (if appropriate) preparation and review of any required committee report for our annual report or proxy statement; | |
• | develop and recommend to our board of directors for its approval a set of corporate governance guidelines; | |
• | review periodically the adequacy of the corporate governance guidelines and recommend any proposed changes to the corporate governance guidelines to our board of directors for its approval; | |
• | review on an annual basis our compliance with the corporate governance guidelines; | |
• | consult with the chairperson and the chief executive officer with respect to carrying out the responsibilities of the committee and implementing those recommendations of the committee adopted by our board of directors; |
• | in connection with our filing of our Annual Report onForm 10-K, review the independence and other qualifications of our directors, consider questions of possible conflicts of interest between our directors or management and us and our subsidiaries, and monitor all other activities of our directors or management that could interfere with such individuals’ duties; | |
• | identify, analyze and, if possible, resolve actual and potential conflicts of interest a director has or may have; | |
• | in connection with actual or potential conflicts of interest of a director, issue to such director instructions concerning the manner in which he or she is to conduct himself or herself, as applicable, in matters that are, or may come, before our board of directors including, without limitation, recusal of the director when matters implicated by such conflict of interest come before our board of directors; |
• | periodically review our certificate of incorporation and bylaws, as amended from time to time, and make recommendations to our board of directors with the objective of promoting good corporate governance; | |
• | review the procedures and communication plans for stockholders meetings to ensure that the rights of stockholders (including the right to participate) are protected, that required information concerning us is adequately presented and that the meetings promote effective communication between us and our stockholders on matters of importance; | |
• | monitor the manner and frequency with which our board of directors and management communicate with stockholders between scheduled stockholders meetings; | |
• | annually review and reassess the adequacy of our code of business conduct and ethics, and recommend any proposed changes to our code of business conduct and ethics to our board of directors for its approval; and | |
• | consider any requests for waivers from or exceptions to our code of business conduct and ethics for our directors or executive officers, and ensure that we make disclosure of such waivers or exceptions as required by applicable law, regulations and listing requirements. |
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• | have the sole authority to retain and terminate any compensation consultant used to assist us, our board of directors or the compensation committee in the evaluation of the compensation of our executive officers and directors, and have the sole authority to approve such consultant’s fees and other retention terms; | |
• | to the extent necessary or appropriate to carry out its responsibilities, have the authority to retain independent legal, accounting, actuarial or other advisors; | |
• | have the authority to confer with our management and other employees to the extent necessary or appropriate to fulfill its responsibilities, and have the authority to conduct or initiate inquiries or investigations into any matters within its scope of responsibilities and have full access to our books, records, facilities and personnel; | |
• | review and approve on an annual basis the corporate goals and objectives relevant to the compensation of our executive chairman and chief executive officer, evaluate the performance of our executive chairman and chief executive officer in light of those goals and objectives, determine and approve the compensation level of our executive chairman and chief executive officer based on this evaluation, and, in determining the long-term incentive component of the compensation of our executive chairman and chief executive officer, consider our performance and relative stockholder returns, the value of similar incentive awards to the executive chairman and chief executive officer at comparable companies, the awards given to our executive chairman and chief executive officer in past years and other factors as appropriate; | |
• | interpret, implement, administer, review and approve all aspects of remuneration to our executive officers and other key officers, including their participation in incentive-compensation plans and equity-based compensation plans; | |
• | review and approve all employment agreements, consulting agreements, severance arrangements and change in control agreements or provisions for our executive officers; | |
• | develop, approve, administer and recommend to our board of directors and stockholders for their approval (to the extent such approval is required by any applicable law, regulation or rule of the New York Stock Exchange) all of our stock ownership, stock option and other equity-based compensation plans and all related policies and programs; | |
• | make individual determinations and grant any shares, stock options, or other equity-based awards under all equity-based compensation plans, and exercise such other power and authority as may be required or permitted under such plans, other than with respect to non-employee directors, which determinations are subject to the approval of our board of directors; | |
• | review and discuss with our management the Compensation Discussion and Analysis report to be included in our annual proxy statement as required by the rules and regulations of the Securities and Exchange Commission; |
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• | have the authority to form and delegate authority to subcommittees as appropriate; | |
• | report regularly to our board of directors, but not less frequently than annually, and report to our board of directors as frequently as appropriate on the compensation of directors and make recommendations regarding changes to our compensation practices; | |
• | review and reassess on an annual basis the adequacy of its charter and recommend any proposed changes to our board of directors for its approval; and | |
• | review on an annual basis its own performance, and report the results of such review to our board of directors. |
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• | Base Salary | |
• | Annual Performance-Based Bonuses | |
• | Annual Discretionary Bonuses | |
• | Long Term Cash Incentive Plan | |
• | Equity Compensation | |
• | Perquisites and Personal Benefits | |
• | General Benefits |
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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 | % | ||
S. Frank Fritsch | 50 | % |
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Target Bonus | ||||
Named Executive Officer | (% of Base Salary) | |||
Rocco A. Ortenzio | 80 | % | ||
Robert A. Ortenzio | 80 | % | ||
Patricia A. Rice | 80 | % | ||
Martin F. Jackson | 50 | % | ||
S. Frank Fritsch | 50 | % |
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Named Executive Officer | Cash Plan Units | |||
Rocco A. Ortenzio | 25,000 | |||
Robert A. Ortenzio | 35,000 | |||
Patricia A. Rice | 15,000 | |||
Martin F. Jackson | 7,000 | |||
S. Frank Fritsch | 5,000 |
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Named Executive Officer | Cash Plan Payment | |||
Rocco A. Ortenzio | $ | 4,500,000 | ||
Robert A. Ortenzio | $ | 6,300,000 | ||
Patricia A. Rice | $ | 2,700,000 | ||
Martin F. Jackson | $ | 1,260,000 | ||
S. Frank Fritsch | $ | 900,000 |
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Non-Equity | Change in | |||||||||||||||||||||||||||||||||||
Stock | Option | Incentive Plan | Pension | All Other | Total | |||||||||||||||||||||||||||||||
Salary | Bonus | Awards | Awards | Compensation | Value | Compensation | Compensation | |||||||||||||||||||||||||||||
Name & Principal Position | Year | ($) | ($) | ($)(1) | ($) | ($) | ($) | ($)(2) | ($) | |||||||||||||||||||||||||||
Rocco A. Ortenzio | 2008 | 824,000 | 660,000 | — | — | — | �� | 120,106 | 1,604,106 | |||||||||||||||||||||||||||
Executive Chairman | 2007 | 824,000 | 229,000 | — | — | — | — | 132,451 | 1,185,451 | |||||||||||||||||||||||||||
2006 | 824,000 | — | — | — | — | — | 137,605 | 961,605 | ||||||||||||||||||||||||||||
Robert A. Ortenzio | 2008 | 824,000 | 660,000 | 1,003,623 | — | — | — | 58,657 | 2,546,280 | |||||||||||||||||||||||||||
Chief Executive | 2007 | 824,000 | 229,000 | 2,604,033 | — | — | — | 108,077 | 3,765,110 | |||||||||||||||||||||||||||
Officer | 2006 | 824,000 | — | 2,604,032 | — | — | — | 150,040 | 3,578,072 | |||||||||||||||||||||||||||
Patricia A. Rice | 2008 | 743,933 | 600,000 | 444,617 | — | — | — | 197,428 | 1,985,978 | |||||||||||||||||||||||||||
President and Chief | 2007 | 592,250 | 164,645 | 444,618 | — | — | — | 234,555 | 1,436,068 | |||||||||||||||||||||||||||
Operating Officer | 2006 | 592,250 | — | 444,617 | — | — | — | 158,230 | 1,195,097 | |||||||||||||||||||||||||||
Martin F. Jackson | 2008 | 398,897 | 240,000 | 222,309 | — | — | — | 6,900 | 868,106 | |||||||||||||||||||||||||||
Executive Vice | 2007 | 371,315 | 103,225 | 222,309 | — | — | — | 28,216 | 725,065 | |||||||||||||||||||||||||||
President and Chief Financial Officer | 2006 | 371,315 | 50,000 | 222,309 | — | — | — | 6,600 | 650,224 | |||||||||||||||||||||||||||
S. Frank Fritsch | 2008 | 347,148 | 260,000 | 77,067 | — | — | — | 5,750 | 689,965 | |||||||||||||||||||||||||||
Executive Vice | 2007 | 275,834 | 76,680 | 77,067 | — | — | — | 5,625 | 435,206 | |||||||||||||||||||||||||||
President and | 2006 | 275,834 | 50,000 | 77,067 | — | — | — | 5,500 | 408,401 | |||||||||||||||||||||||||||
Chief Human Resources Officer |
(1) | The dollar amounts reported in this column represent the expense recognized by us in accordance with Statements of Financial Accounting Standards No. 123R, “Share-Based Payment” (“FAS 123R”) on outstanding restricted stock awards granted pursuant to the 2005 Equity Incentive Plan. No such expense was recorded for Mr. Rocco Ortenzio’s award because the restricted stock award was fully vested prior to 2006. See Note 10 to the Consolidated Financial Statements included in this prospectus for a discussion of the relevant assumptions used in calculating value pursuant to FAS 123R. See also the “Option Exercises and Stock Vested Table,” which shows the corresponding number of shares vesting under each such restricted stock award with respect to which we recognized an expense under FAS 123R. | |
(2) | Mr. Robert A. Ortenzio, Ms. Rice and Mr. Jackson each received an employer matching contribution to our 401(k) plan in the amount of $6,900 in 2008, $6,750 in 2007 and $6,600 in 2006. Mr. Fritsch received a matching contribution of $5,750 in 2008, $5,625 in 2007 and $5,500 in 2006. The other items reported in this column include the value of personal use of our aircraft and the incremental cost to us of the executive’s participation in our executive physical exam program, each in the amounts set forth in the “Personal Benefits” table below. The incremental cost to us of each of the personal benefits for Mr. Jackson in 2008 and for Mr. Fritsch in both 2008 and 2007 did not exceed $10,000, and accordingly, are not described below. |
Aircraft | Executive | |||||||||||
Name | Usage ($) | Physical ($) | ||||||||||
Rocco A. Ortenzio | 2008 | 120,106 | — | |||||||||
Robert A. Ortenzio | 2008 | 51,757 | — | |||||||||
Patricia A. Rice | 2008 | 190,528 | — | |||||||||
Martin F. Jackson | 2008 | — | — |
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Estimated Future Payouts Under Non-Equity | ||||||||||||||||
Incentive Plan Awards(1) | ||||||||||||||||
Name | Grant Date | Threshold | Target ($) | Maximum ($) | ||||||||||||
Rocco A. Ortenzio | — | — | 659,200 | 1,648,000 | ||||||||||||
Robert A. Ortenzio | — | — | 659,200 | 1,648,000 | ||||||||||||
Patricia A. Rice | — | — | 375,000 | 937,500 | ||||||||||||
Martin F. Jackson | — | — | 200,000 | 500,000 | ||||||||||||
S. Frank Fritsch | — | — | 175,000 | 437,000 |
(1) | The amounts in this table represent the target and maximum payouts that could have been achieved by our named executive officers if the financial performance goals for 2008, described above under the heading “2008 Annual Performance-Based Bonuses,” were attained. None of the named executive officers received payments of these amounts. |
Stock Awards | ||||||||||||||||
Equity | ||||||||||||||||
Incentive Plan | ||||||||||||||||
Equity Incentive | Awards: | |||||||||||||||
Market Value | Plan Awards: | Market or | ||||||||||||||
of Shares or | Number of | Payout Value of | ||||||||||||||
Number of | Units of | Unearned Shares, | Unearned | |||||||||||||
Shares or Units | Stock | Units or Other | Shares, Units or | |||||||||||||
of Stock That | That Have | Rights That Have | Other Rights | |||||||||||||
Have Not Vested | Not Vested | Not Vested | That Have Not | |||||||||||||
Name | (#) | ($)(1) | (#) | Vested (#) | ||||||||||||
Rocco A. Ortenzio | — | — | — | — | ||||||||||||
Robert A. Ortenzio | — | — | — | |||||||||||||
— | — | |||||||||||||||
Patricia A. Rice | — | — | ||||||||||||||
Martin F. Jackson | — | — | ||||||||||||||
S. Frank Fritsch | — | — |
(1) | The values shown in this column are equal to the assumed initial public offering price of $ per share (the midpoint of the price range set forth on the cover page of this prospectus) multiplied by the number of shares of stock held by our named executive officers that had not vested as December 31, 2008. |
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Stock Awards | ||||||||
Number of Shares | Value Realized | |||||||
Acquired on Vesting | on Vesting | |||||||
Name | (#) | ($)(1) | ||||||
Rocco A. Ortenzio | — | |||||||
Robert A. Ortenzio | ||||||||
Patricia A. Rice | ||||||||
Martin F. Jackson | ||||||||
S. Frank Fritsch |
(1) | Values shown in this column are equal to the assumed initial public offering price of $ per share (the midpoint of the price range set forth on the cover page of this prospectus) multiplied by the number of shares vested during the year ended December 31, 2008. |
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Without Cause/Good Reason | Disability | Death | Retirement | |||||||||||||||||||||||||||||
Base | Equity | Equity | Equity | Health and | ||||||||||||||||||||||||||||
Salary and | Vesting | Base Salary | Vesting | Vesting | Dental | |||||||||||||||||||||||||||
Bonus | Value(1) | Continuation(2) | Value(1) | Other(3) | Value(1) | Other(3) | Benefits(4) | |||||||||||||||||||||||||
Name | ($) | ($) | ($) | ($) | ($) | ($) | ($) | ($) | ||||||||||||||||||||||||
Rocco A. Ortenzio | 3,269,334 | — | 8,240,001 | — | 10,719,140 | — | 10,719,140 | — | ||||||||||||||||||||||||
Robert A. Ortenzio | 3,269,334 | — | 4,120,000 | — | 15,006,795 | — | 15,006,795 | — | ||||||||||||||||||||||||
Patricia A. Rice | 2,955,788 | 3,719,665 | 6,431,484 | 6,431,484 | 9,876 |
(1) | Valuation is based on an assumed initial public offering price of $ per share (the midpoint of the price range set forth on the cover page of this prospectus). | |
(2) | The amount reported in this column represents the amount of salary continuation payable each year for ten years following the date of termination of employment for disability, subject to termination if the named executive officer becomes physically able to resume employment. | |
(3) | Represents the value of 50% of the units in such named executive officers account under the Cash Plan as of the date of death or disability. Such payments will be due on January 31st of the second year following such death or disability only in the event of an initial public offering, change of control, or preferred stock liquidity event as defined under the Cash Plan. | |
(4) | The value reported in this column reflects our current cost of providing health and dental coverage to Ms. Rice and her eligible dependents for one year. We are responsible for paying the costs of health and dental coverage for Ms. Rice and her eligible dependents (less her portion of the premiums) each year until Ms. Rice reaches the age of 65 in the event she retires before age 65. The actual cost to us of providing such benefits following Ms. Rice’s retirement will depend on the rates of the carrier selected and accordingly, may be more or less than the amount reported. |
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Equity | ||||||||||||||||
Base Salary | Vesting | Cash Plan | Tax | |||||||||||||
and Bonus | (100%)(1) | Payout(2) | Gross- Up(1) | |||||||||||||
Name | ($) | ($) | ($) | ($) | ||||||||||||
Rocco A. Ortenzio | 3,361,000 | 21,438,279 | ||||||||||||||
Robert A. Ortenzio | 3,361,000 | 30,013,591 | ||||||||||||||
Patricia A. Rice | 2,693,078 | 12,862,968 | ||||||||||||||
Martin F. Jackson | 1,534,752 | 6,002,718 | ||||||||||||||
S. Frank Fritsch | 1,285,696 | 4,287,656 |
(1) | Market value is based on an assumed initial public offering price of $ per share (the midpoint of the price range set forth on the cover page of this prospectus). | |
(2) | These amounts reflect the maximum payments that could be made from the Cash Plan. As discussed in the Compensation Discussion and Analysis section above, however, it is anticipated that the majority of these amounts will not be paid. |
Change | ||||||||||||||||||||||||||||
in Pension | ||||||||||||||||||||||||||||
Value and | ||||||||||||||||||||||||||||
Nonqualified | ||||||||||||||||||||||||||||
Non-Equity | Deferred | All | ||||||||||||||||||||||||||
Fees Earned or | Stock | Option | Incentive Plan | Compensation | Other | |||||||||||||||||||||||
Paid in Cash | Awards | Awards | Compensation | Earnings | Compensation | |||||||||||||||||||||||
Name | ($) | ($)(1) | ($)(2) | ($) | ($) | ($) | Total ($) | |||||||||||||||||||||
Russell L. Carson | — | — | — | — | — | — | — | |||||||||||||||||||||
David S. Chernow | 32,000 | — | 1,057 | — | — | — | 33,057 | |||||||||||||||||||||
Bryan C. Cressey | — | — | — | — | — | — | — | |||||||||||||||||||||
James E. Dalton, Jr. | 46,000 | — | 1,057 | — | — | — | 47,057 | |||||||||||||||||||||
James S. Ely | 4,700 | — | 656 | — | — | — | 5,356 | |||||||||||||||||||||
Thomas A. Scully | — | 6,817 | — | — | — | — | 6,817 | |||||||||||||||||||||
Leopold Swergold | 47,000 | — | 1,057 | — | — | — | 48,057 | |||||||||||||||||||||
Sean M. Traynor | — | — | — | — | — | — | — |
(1) | Represents vesting of restricted shares granted in connection with the Merger Transactions. | |
(2) | The dollar amounts reported in this column represent the FAS 123R expense recognized by us on outstanding option awards (including those made in 2008) granted to non-employee directors pursuant to the Director Plan. The grant date fair market value (calculated in accordance with FAS 123R) of the options granted to each of Messrs. Chernow, Dalton, Jr., and Swergold on August 20, 2008, was $ . See Note 10 to the Consolidated Financial Statements included in this prospectus for a discussion of the relevant assumptions used in calculating |
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value pursuant to FAS 123R. As of December 31, 2008, the total number of outstanding stock and option awards for each director listed in the table above are set forth below: |
Shares Outstanding | Shares Outstanding | |||||||
Subject to Stock | Subject to Option | |||||||
Name | Awards (#) | Awards (#) | ||||||
Russell L. Carson | — | — | ||||||
David S. Chernow | — | |||||||
Bryan C. Cressey | — | — | ||||||
James E. Dalton, Jr. | — | |||||||
James S. Ely | — | |||||||
Thomas A. Scully | — | |||||||
Leopold Swergold | — | |||||||
Sean M. Traynor | — | — |
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Number of | ||||||||||||
Securities | ||||||||||||
Number of | Remaining | |||||||||||
Securities to be | Available | |||||||||||
Issued Upon | Weighted-Average | 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 | $ | |||||||||||
Director equity incentive plan | $ |
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• | select the employees, non-employee directors and consultants who will receive Awards pursuant to the Plan; | |
• | determine the type or types of Awards to be granted to each participant; | |
• | determine the number of shares to which an Award will relate, the terms and conditions of any Award granted under the Plan and all other matters to be determined in connection with an Award; | |
• | determine whether, to what extent, and under what circumstances an Award may be canceled, forfeited, or surrendered; | |
• | determine whether, and to certify that, performance goals to which the settlement of an Award is subject are satisfied; | |
• | correct any defect, supply any omission or reconcile any inconsistency in the Plan; | |
• | adopt, amend and rescind such rules and regulations as, in its opinion, may be advisable in the administration of the Plan; | |
• | determine the effect, if any, of a change of control on outstanding Awards; and | |
• | construe and interpret the Plan and make all other determinations as it may deem necessary or advisable for the administration of the Plan. |
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• | the price of shares of Holdings’ stock; | |
• | the market share of Holdings, its subsidiaries or affiliates (or any business unit thereof); | |
• | sales by Holdings, its subsidiaries or affiliates (or any business unit thereof); | |
• | earnings per share of Holdings’ stock; | |
• | Holdings’ return on stockholder equity; | |
• | costs of Holdings, its subsidiaries or affiliates (or any business unit thereof); | |
• | cash flow of Holdings, its subsidiaries or affiliates (or any business unit thereof); | |
• | return on total assets of Holdings, its subsidiaries or affiliates (or any business unit thereof); | |
• | return on invested capital of Holdings, its subsidiaries or affiliates (or any business unit thereof); | |
• | return on net assets of Holdings, its subsidiaries or affiliates (or any business unit thereof); | |
• | operating income of Holdings, its subsidiaries or affiliates (or any business unit thereof); | |
• | net income of Holdings, its subsidiaries or affiliates (or any business unit thereof); or | |
• | any other financial or other measurement deemed appropriate by the Committee, as it relates to the results of operations or other measurable progress of Holdings, its subsidiaries or affiliates (or any business unit thereof). |
137
(i) | the direct or indirect sale, lease, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all of the properties or assets of Holdings and its subsidiaries or Select Medical Corporation (“Select”) and its subsidiaries, in either |
138
case, taken as a whole, to any “person” (as that term is used in Section 13(d) of the Securities Exchange Act of 1934 (the “1934 Act”)” other than to certain individuals and entities who had significant ownership of Holdings prior to the offering, as well as certain affiliates and family members of such individuals and entities (“Permitted Holders”); |
(ii) | the consummation of any transaction (including, without limitation, any merger or consolidation), the result of which is that any “person” (as that term is used in Section 13(d) of the 1934 Act), other than Permitted Holders, becomes the beneficial owner, directly or indirectly, of more than 40% of the stock of Holdings or Select that is entitled to vote in the election of directors of such entity (“Voting Stock”), measured by voting power rather than number of shares, unless the Permitted Holders are the beneficial owners of a greater percentage of the Voting Stock of Holdings or Select, as the case may be; provided, however, that for purposes of this clause (ii), each person will be deemed to beneficially own any Voting Stock of another person held by one or more of its subsidiaries; or |
(iii) | the first day on which a majority of the members of the Board or the board of directors of Select (the “Select Board”) are not “continuing directors.” For purposes of the Plan, a “continuing director” means, as of any date of determination, any member of the Board or the Select Board who: (1) was a member of such board of directors on the first date Select became a wholly-owned subsidiary of Holdings; (2) was nominated for election or elected to such board of directors with the approval of a majority of the “continuing directors” who were members of such board of directors at the time of such nomination or election; or (3) was designated or appointed with the approval of Permitted Holders holding a majority of the Voting Stock of all of the Permitted Holders. |
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• | select the non-employee directors who will receive Awards pursuant to the Plan; | |
• | determine the type or types of Awards to be granted to each participant; | |
• | determine the number of shares to which an Award will relate, the terms and conditions of any Award granted under the Plan and all other matters to be determined in connection with an Award; | |
• | determine whether, to what extent, and under what circumstances an Award may be canceled, forfeited, or surrendered; | |
• | determine whether, and to certify that, performance goals to which the settlement of an Award is subject are satisfied; | |
• | correct any defect, supply any omission or reconcile any inconsistency in the Plan; | |
• | adopt, amend and rescind such rules and regulations as, in its opinion, may be advisable in the administration of the Plan; | |
• | determine the effect, if any, of a change of control on outstanding Awards; and | |
• | construe and interpret the Plan and make all other determinations as it may deem necessary or advisable for the administration of the Plan. |
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141
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• | each person known to us to beneficially own more than 5% of the outstanding shares of common stock; | |
• | each of our named executive officers; | |
• | each of our directors; and | |
• | all of our directors and executive officers as a group. |
Number of | ||||||||||||
Shares | Percent of Common | |||||||||||
of Common | Stock Beneficially | |||||||||||
Stock | Owned | |||||||||||
Beneficially | Before | After | ||||||||||
Name of Beneficial Owner(1) | Owned(2) | Offering | Offering | |||||||||
Welsh, Carson, Anderson & Stowe(3) | % | % | ||||||||||
Thoma Cressey Bravo(4) | ||||||||||||
Rocco A. Ortenzio(5) | ||||||||||||
Robert A. Ortenzio(6) | ||||||||||||
Russell L. Carson | ||||||||||||
Bryan C. Cressey(7) | ||||||||||||
David S. Chernow(8) | ||||||||||||
James E. Dalton, Jr. | ||||||||||||
James S. Ely III | ||||||||||||
Thomas A. Scully | ||||||||||||
Leopold Swergold | ||||||||||||
Sean M. Traynor | ||||||||||||
Patricia A. Rice(9) | ||||||||||||
S. Frank Fritsch | ||||||||||||
Martin F. Jackson(10) | ||||||||||||
All directors and executive officers as a group (18 persons) |
* | Less than 1% |
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(1) | Unless otherwise indicated, the address of each of the beneficial owners identified isc/o Select Medical Holdings Corporation, 4714 Gettysburg Road, P.O. Box 2034, Mechanicsburg, Pennsylvania 17055. | |
(2) | All shares of our issued and outstanding preferred stock will convert into shares of common stock at the time the offering is consummated. Therefore, no shares of participating preferred stock will be outstanding after the offering. |
(3) | Represents (i) common shares held by Welsh, Carson, Anderson & Stowe IX, L.P., or WCAS IX, over which WCAS IX has sole voting and investment power, (ii) common shares held by WCAS Management Corporation, over which WCAS Management Corporation has sole voting and investment power, (iii) common shares held by WCAS Capital Partners IV, L.P., over which WCAS Capital Partners IV, L.P. has sole voting and investment power, (iv) an aggregate of common 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 (v) an aggregate common 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, 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, Jonathan M. Rather 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. |
(4) | Represents (i) common shares held by Thoma Cressey Fund VI, L.P. over which Thoma Cressey Fund VI, L.P. has shared voting and investment power, (ii) common 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, (iii) common shares held by Thoma Cressey Fund VII, L.P., over which Thoma Cressey Fund VII, L.P. has shared voting and investment power, and (iv) common 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. , or collectively, “Thoma Cressey Fund VII,” is TC Partners VII, L.P., or the “Fund VII GP.” The sole general partner of Fund VII GP is Thoma Cressey Equity Partners Inc., or the “Ultimate GP.” The sole general partner of each of Thoma Cressey Fund VI, L.P. and Thoma Cressey Friends Fund VI, L.P., or collectively, “Thoma Cressey Fund VI,” is TC Partners VI, L.P., or 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 Wacker, Chicago, IL 60606. | |
(5) | Includes common shares owned by the Rocco A. Ortenzio Revocable Trust for which Mr. Rocco Ortenzio acts as sole trustee, and common shares held by the Rocco A. Ortenzio Descendants Trust, for which Mr. Rocco Ortenzio is the investment advisor. Mr. Rocco Ortenzio disclaims beneficial ownership of shares held by the Rocco A. Ortenzio Descendants Trust except in his capacity as a fiduciary of such trust. | |
(6) | Includes common shares owned by the Robert A. Ortenzio Descendants Trust for which Mr. Robert Ortenzio is the investment trustee. Mr. Robert Ortenzio disclaims beneficial ownership of shares held by the Robert A. Ortenzio Descendant’s Trust except in his capacity as a fiduciary of such trust. | |
(7) | In addition to shares owned by Bryan C. Cressey in his individual capacity, includes (i) common shares held by Thoma Cressey Fund VI, L.P., (ii) common shares held by Thoma Cressey Friends Fund VI, L.P., (iii) common shares held by Thoma Cressey Fund VII, L.P., and (iv) common 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. | |
(8) | Includes common shares held by David S. Chernow and Elizabeth A. Chernow as tenants in common. | |
(9) | Includes common shares owned by The Patricia Ann Rice Living Trust for which Ms. Rice acts as a trustee, and common shares owned by the 2005 Rice Family Trust for which Ms. Rice acts as investment trustee. | |
(10) | Includes an aggregate common shares owned by Mr. Jackson’s children who live in his household and over which Mr. Jackson acts as custodian. |
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145
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• | a $300.0 million revolving loan facility that will terminate on February 24, 2011, including both a letter of creditsub-facility and a swingline loansub-facility, | |
• | $268.6 million in Tranche B term loans that mature on February 24, 2012, and | |
• | $384.5 million inTranche B-1 term loans that mature on August 22, 2014. |
147
148
149
150
151
152
• | a $300.0 million revolving loan facility that will terminate on February 24, 2011, including both a letter of creditsub-facility and a swingline loansub-facility, | |
• | $268.6 million in Tranche B term loans that mature on February 24, 2012, and | |
• | $384.5 million inTranche B-1 term loans that mature on August 22, 2014. |
153
• | 50% (as may be reduced based on Select’s ratio of total indebtedness to its consolidated EBITDA) of Select’s annual excess cash flow (as defined in the credit agreement); | |
• | 100% of the net cash proceeds from asset sales and casualty and condemnation events, subject to reinvestment rights and certain other exceptions; | |
• | 50% (as may be reduced based on Select’s ratio of total indebtedness to its consolidated EBITDA) of the net cash proceeds from specified issuances of equity securities; and | |
• | 100% of the net cash proceeds from certain incurrences of debt. |
154
• | incur, assume, permit to exist or guarantee additional debt and issue or sell or permit any subsidiary to issue or sell preferred stock; | |
• | amend, modify or waiver any rights under the certificate of indebtedness, credit agreements, certificate of incorporation, bylaws or other organizational documents which would be materially adverse to the creditors; | |
• | pay dividends or other distributions on, redeem, repurchase, retire or cancel capital stock; | |
• | purchase or acquire any debt or equity securities of, make any loans or advances to, guarantee any obligation of, or make any other investment in, any other company; | |
• | incur or permit to exist certain liens on property or assets owned or accrued or assign or sell any income or revenues with respect to such property or assets; | |
• | sell or otherwise transfer property or assets to, purchase or otherwise receive property or assets from, or otherwise enter into transactions with affiliates; | |
• | merge, consolidate or amalgamate with another company or permit any subsidiary to merge, consolidate or amalgamate with another company; | |
• | sell, transfer, lease or otherwise dispose of assets, including any equity interests; | |
• | repay, redeem, repurchase, retire or cancel any subordinated debt; | |
• | incur capital expenditures; | |
• | engage to any material extent in any business other than business of the type currently conducted by Select or reasonably related businesses; and |
155
• | incur obligations that restrict the ability of its subsidiaries to incur or permit to exist any liens on its property or assets or to make dividends or other payments to us. |
Redemption Price | ||||
February 1, 2010 to January 31, 2011 | 103.813 | % | ||
February 1, 2011 to January 31, 2012 | 102.542 | % | ||
February 1, 2012 to January 31, 2013 | 101.271 | % | ||
Beginning on February 1, 2013 and thereafter | 100.000 | % |
156
Redemption Price | ||||
September 15, 2009 to January 31, 2010 | 102.000 | % | ||
February 1, 2010 to January 31, 2011 | 101.000 | % | ||
Beginning on February 1, 2011 and thereafter | 100.000 | % |
157
158
• | shares will be eligible for sale upon the expiration of thelock-up agreements, as more particularly described below, beginning 180 days after the date of this prospectus; and |
159
• | 1% of the number of shares of common stock then outstanding, which will equal shares immediately after this offering; or | |
• | the average weekly trading volume of the common stock during the four calendar weeks preceding the filing of a notice on Form 144 with respect to such sale. |
160
NON-UNITED STATES HOLDERS
• | an individual who is a citizen or resident of the United States; | |
• | a corporation (or other business entity treated as a corporation) created or organized in the United States or under the laws of the United States, any state thereof or the District of Columbia; | |
• | an estate the income of which is subject to United States federal income taxation; or | |
• | a trust that (1) is subject to the primary supervision of a court within the United States and the control of one or more U.S. persons, or (2) otherwise has elected to be treated as a U.S. domestic trust. |
161
• | the gain is U.S. trade or business income, as described above; | |
• | thenon-U.S. holder is an individual who is present in the United States for 183 or more days in the taxable year of the disposition and meets other conditions; or | |
• | we are or have been a “U.S. real property holding corporation,” which we refer to as “USRPHC,” under section 897 of the Code at any time during the shorter of the five year period ending on the date of disposition and thenon-U.S. holder’s holding period for our common stock. |
162
163
Name | Number of Shares | |||
Goldman, Sachs & Co. | ||||
Morgan Stanley & Co. Incorporated | ||||
Merrill Lynch, Pierce, Fenner & Smith Incorporated | ||||
J.P. Morgan Securities Inc. | ||||
Wells Fargo Securities, LLC | ||||
RBC Capital Markets Corporation | ||||
Total | ||||
164
Discounts and Commissions Payable by Us | ||||||||
No Exercise | Full Exercise | |||||||
Per share | $ | $ | ||||||
Total | $ | $ |
• | offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend, or otherwise transfer or dispose of directly or indirectly, any shares of common stock or any securities convertible into or exercisable or exchangeable for common stock; | |
• | file any registration statement with the SEC relating to the offering of any shares of common stock or any securities convertible into or exercisable or exchangeable for common stock; or | |
• | enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of the common stock; |
• | the sale of shares to the underwriters; | |
• | the issuance by us of shares of common stock upon the exercise of an option or a warrant or the conversion of a security outstanding on the date of this prospectus of which the underwriters have been advised in writing; | |
• | the issuance by us of options to purchase our common stock under stock option or similar plans as in effect on the date of the underwriting agreement and as described in this prospectus; | |
• | sales of shares of common stock underlying employee stock options that are scheduled to expire during such 180 day period in connection with cashless exercises of those stock options by former employees of our company; provided that no filing under Section 16(a) of the Exchange Act shall be required or shall be voluntarily made in connection with such transaction other than a filing on Form 5 after the expiration of such 180 day period; | |
• | the filing by us of any registration statement on FormS-8 relating to the offering of securities pursuant to the terms of a stock option or similar plan in effect on the date of the underwriting agreement and described in this prospectus; | |
• | transfers of common stock or any security convertible into common stock as a bona fide gift (including for estate planning purposes), by will or intestacy, or transfers to any trust for the direct or indirect benefit of the transferor or the immediate family of the transferor; provided that no filing under Section 16(a) of the Exchange Act shall be required or shall be voluntarily made in connection with such transaction other than a filing on Form 5 after the expiration of such 180 day period; and provided further that the transferee agrees with the underwriters to be bound by such restrictions for the remainder of such 180 day period; |
165
• | the establishment of a trading plan pursuant to Rule 10b5-1 under the Exchange Act for the transfer of shares of common stock, provided that such plan does not provide for the transfer of common stock during the restricted periods; | |
• | distributions by a stockholder who is subject to alock-up of common stock or any security convertible into common stock to limited partners, limited liability company members, affiliates or stockholders of such stockholder; provided that no filing under Section 16(a) of the Exchange Act shall be required or shall be voluntarily made in connection with such transaction other than a filing on Form 5 after the expiration of such 180 day period; and provided further that the transferee agrees with the underwriters to be bound by such restrictions for the remainder of such 180 day period; or | |
• | transactions by any person other than us relating to common stock or other securities acquired in open market transactions after the completion of the offering of the shares hereby; provided that no filing under Section 16(a) of the Exchange Act shall be required or shall be voluntarily made in connection with such transaction. |
166
167
168
169
Page | ||||
Select Medical Holdings Corporation Audited Financial Statements as of December 31, 2008 and 2007 and for the years ended December 31, 2008, 2007 and 2006 | ||||
F-2 | ||||
F-3 | ||||
F-4 | ||||
F-5 | ||||
F-6 | ||||
F-7 | ||||
F-42 | ||||
Select Medical Holdings Corporation Unaudited Interim Financial Statements as of June 30, 2009 and for the six months ended June 30, 2009 and 2008 | ||||
F-43 | ||||
F-44 | ||||
F-45 | ||||
F-46 | ||||
F-47 |
F-1
of Select Medical Holdings Corporation:
F-2
December 31, | December 31, | |||||||
2007(1) | 2008(1) | |||||||
(in thousands, except share and per share amounts) | ||||||||
ASSETS | ||||||||
Current Assets: | ||||||||
Cash and cash equivalents | $ | 4,529 | $ | 64,260 | ||||
Accounts receivable, net of allowance for doubtful accounts of $55,856 and $57,052 in 2007 and 2008, respectively | 271,406 | 312,418 | ||||||
Current deferred tax asset | 48,988 | 61,925 | ||||||
Prepaid income taxes | 8,162 | 7,362 | ||||||
Other current assets | 22,507 | 20,897 | ||||||
Total Current Assets | 355,592 | 466,862 | ||||||
Property and equipment, net | 487,026 | 471,065 | ||||||
Goodwill | 1,499,485 | 1,506,661 | ||||||
Other identifiable intangibles | 79,172 | 74,078 | ||||||
Assets held for sale | 14,607 | 12,542 | ||||||
Other assets | 59,164 | 48,261 | ||||||
Total Assets | $ | 2,495,046 | $ | 2,579,469 | ||||
LIABILITIES AND EQUITY | ||||||||
Current Liabilities: | ||||||||
Bank overdrafts | $ | 21,124 | $ | 21,130 | ||||
Current portion of long-term debt and notes payable | 7,749 | 9,046 | ||||||
Accounts payable | 73,847 | 72,496 | ||||||
Accrued payroll | 59,483 | 66,380 | ||||||
Accrued vacation | 33,080 | 37,109 | ||||||
Accrued interest | 36,781 | 37,032 | ||||||
Accrued restructuring | 15,484 | 8,108 | ||||||
Accrued other | 78,242 | 91,482 | ||||||
Due to third party payors | 15,072 | 5,709 | ||||||
Total Current Liabilities | 340,862 | 348,492 | ||||||
Long-term debt, net of current portion | 1,747,886 | 1,770,879 | ||||||
Non-current deferred tax liability | 22,966 | 42,918 | ||||||
Other non-current liabilities | 52,266 | 67,709 | ||||||
Total Liabilities | 2,163,980 | 2,229,998 | ||||||
Commitments and Contingencies | ||||||||
Preferred stock — Authorized shares (liquidation preference is $491,194 and $515,872 in 2007 and 2008, respectively) | 491,194 | 515,872 | ||||||
Stockholders’ Equity: | ||||||||
Common stock, $0.001 par value, 250,000,000 shares authorized, 205,166,000 and 204,885,000 shares issued and outstanding in 2007 and 2008, respectively | 205 | 205 | ||||||
Capital in excess of par | (291,247 | ) | (289,382 | ) | ||||
Retained earnings | 130,716 | 128,185 | ||||||
Accumulated other comprehensive loss | (5,563 | ) | (13,212 | ) | ||||
Total Select Medical Holdings Corporation Stockholders’ Equity | (165,889 | ) | (174,204 | ) | ||||
Non-controlling interest | 5,761 | 7,803 | ||||||
Total Equity | (160,128 | ) | (166,401 | ) | ||||
Total Liabilities and Equity | $ | 2,495,046 | $ | 2,579,469 | ||||
(1) | Adjusted for the adoption of SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements.” See Note 1, Organization and Significant Accounting Policies — Recent Accounting Pronouncements, for additional information. |
F-3
For the Year Ended | ||||||||||||
December 31, | ||||||||||||
2006(1) | 2007(1) | 2008(1) | ||||||||||
(in thousands, except per | ||||||||||||
share data) | ||||||||||||
Net operating revenues | $ | 1,851,498 | $ | 1,991,666 | $ | 2,153,362 | ||||||
Costs and expenses: | ||||||||||||
Cost of services | 1,484,632 | 1,660,049 | 1,791,841 | |||||||||
General and administrative | 43,514 | 42,863 | 45,523 | |||||||||
Bad debt expense | 18,810 | 37,572 | 47,804 | |||||||||
Depreciation and amortization | 46,668 | 57,297 | 71,786 | |||||||||
Total costs and expenses | 1,593,624 | 1,797,781 | 1,956,954 | |||||||||
Income from operations | 257,874 | 193,885 | 196,408 | |||||||||
Other income and expense: | ||||||||||||
Gain on early retirement of debt | — | — | 912 | |||||||||
Other expense | — | (167 | ) | — | ||||||||
Interest income | 1,293 | 2,103 | 471 | |||||||||
Interest expense | (131,831 | ) | (140,155 | ) | (145,894 | ) | ||||||
Income from continuing operations before income taxes | 127,336 | 55,666 | 51,897 | |||||||||
Income tax expense | 43,521 | 18,699 | 26,063 | |||||||||
Income from continuing operations | 83,815 | 36,967 | 25,834 | |||||||||
Income from discontinued operations, net of tax (includes pre-tax gain of $13,950 in 2006) | 12,818 | — | — | |||||||||
Net income | 96,633 | 36,967 | 25,834 | |||||||||
Less: Net income attributable to non-controlling interests | 1,754 | 1,537 | 3,393 | |||||||||
Net income attributable to Select Medical Holdings Corporation | 94,879 | 35,430 | 22,441 | |||||||||
Less: Preferred dividends | 22,663 | 23,807 | 24,972 | |||||||||
Net income (loss) available to common and preferred stockholders | $ | 72,216 | $ | 11,623 | $ | (2,531 | ) | |||||
Amounts attributable to Select Medical Holdings Corporation: | ||||||||||||
Income from continuing operations, net of tax | $ | 82,401 | $ | 35,430 | $ | 22,441 | ||||||
Discontinued operations, net of tax | 12,478 | — | — | |||||||||
Net income | $ | 94,879 | $ | 35,430 | $ | 22,441 | ||||||
Income (loss) per common share(2): | ||||||||||||
Basic: | ||||||||||||
Income (loss) from continuing operations | $ | 0.26 | $ | 0.05 | $ | (0.01 | ) | |||||
Discontinued operations, net of tax | 0.06 | — | — | |||||||||
Income (loss) per common share | $ | 0.32 | $ | 0.05 | $ | (0.01 | ) | |||||
Diluted: | ||||||||||||
Income (loss) from continuing operations | $ | 0.26 | $ | 0.05 | $ | (0.01 | ) | |||||
Discontinued operations, net of tax | 0.06 | — | — | |||||||||
Income (loss) per common share | $ | 0.32 | $ | 0.05 | $ | (0.01 | ) | |||||
Unaudited pro forma income (loss) per common share: | ||||||||||||
Basic | �� | |||||||||||
Diluted |
(1) | Adjusted for the adoption of SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements.” See Note 1, Organization and Significant Accounting Policies — Recent Accounting Pronouncements for additional information. | |
(2) | Adjusted for the Adoption of FASB Staff Position EITF 03-6-1 “Determining Whether Instruments Granted in Share-Based Payment Transactions are Participating Securities.” See Note 14 for additional information. |
F-4
Select Medical Holdings Corporation Stockholders | ||||||||||||||||||||||||||||||||
Accumulated | ||||||||||||||||||||||||||||||||
Other | ||||||||||||||||||||||||||||||||
Common | Comprehensive | |||||||||||||||||||||||||||||||
Comprehensive | Common | Stock Par | Capital in | Retained | Income | Non-Controlling | ||||||||||||||||||||||||||
Total | Income | Stock Issued | Value | Excess of Par | Earnings | (Loss) | Interests(1) | |||||||||||||||||||||||||
Balance at December 31, 2005 | $ | (240,302 | ) | 205,408 | $ | 205 | $ | (299,028 | ) | $ | 48,808 | $ | 5,357 | $ | 4,356 | |||||||||||||||||
Net income | 96,293 | $ | 96,293 | 94,879 | 1,414 | |||||||||||||||||||||||||||
Unrealized gain on interest rate swap, net of tax | 1,438 | 1,438 | 1,438 | |||||||||||||||||||||||||||||
Changes in foreign currency translation | 924 | 924 | 924 | |||||||||||||||||||||||||||||
Sale of foreign subsidiary | (2,831 | ) | (2,831 | ) | (2,831 | ) | ||||||||||||||||||||||||||
Total comprehensive income | 95,824 | $ | 95,824 | |||||||||||||||||||||||||||||
Issuance and vesting of restricted stock | 3,770 | 200 | 1 | 3,769 | ||||||||||||||||||||||||||||
Cancellation of restricted stock awards | (1 | ) | (680 | ) | (1 | ) | ||||||||||||||||||||||||||
Repurchase of common shares | (10 | ) | (24 | ) | — | (10 | ) | |||||||||||||||||||||||||
Stock option expense | 13 | 13 | ||||||||||||||||||||||||||||||
Purchase of subsidiary shares from non-controlling interests | (1,742 | ) | (1,742 | ) | ||||||||||||||||||||||||||||
Distributions to non-controlling interests | (1,746 | ) | (1,746 | ) | ||||||||||||||||||||||||||||
Other | 284 | 284 | ||||||||||||||||||||||||||||||
Accretion of dividends on preferred stock | (22,663 | ) | (22,663 | ) | ||||||||||||||||||||||||||||
Balance at December 31, 2006 | (166,573 | ) | 204,904 | 205 | (295,256 | ) | 121,024 | 4,888 | 2,566 | |||||||||||||||||||||||
Net income | 36,967 | $ | 36,967 | 35,430 | 1,537 | |||||||||||||||||||||||||||
Unrealized loss on interest rate swap, net of tax | (10,451 | ) | (10,451 | ) | (10,451 | ) | ||||||||||||||||||||||||||
Total comprehensive income | 26,516 | $ | 26,516 | |||||||||||||||||||||||||||||
Cumulative impact of change in accounting for uncertainties in income taxes (FIN No. 48 — Note 11) | (1,931 | ) | (1,931 | ) | ||||||||||||||||||||||||||||
Issuance and vesting of restricted stock | 3,923 | 200 | 3,923 | |||||||||||||||||||||||||||||
Exercise of stock options | 66 | 65 | 66 | |||||||||||||||||||||||||||||
Repurchase of common shares | (3 | ) | (3 | ) | (3 | ) | ||||||||||||||||||||||||||
Stock option expense | 23 | 23 | ||||||||||||||||||||||||||||||
Sale of subsidiary shares to non-controlling interest | 3,271 | 3,271 | ||||||||||||||||||||||||||||||
Distributions to non-controlling interests | (1,698 | ) | (1,698 | ) | ||||||||||||||||||||||||||||
Other | 85 | 85 | ||||||||||||||||||||||||||||||
Accretion of dividends on preferred stock | (23,807 | ) | (23,807 | ) | ||||||||||||||||||||||||||||
Balance at December 31, 2007 | (160,128 | ) | 205,166 | 205 | (291,247 | ) | 130,716 | (5,563 | ) | 5,761 | ||||||||||||||||||||||
Net income | 25,834 | $ | 25,834 | 22,441 | 3,393 | |||||||||||||||||||||||||||
Unrealized loss on interest rate swap, net of tax | (7,649 | ) | (7,649 | ) | (7,649 | ) | ||||||||||||||||||||||||||
Total comprehensive income | 18,185 | $ | 18,185 | |||||||||||||||||||||||||||||
Vesting of restricted stock | 2,037 | 2,037 | ||||||||||||||||||||||||||||||
Exercise of stock options | 90 | 82 | — | 90 | ||||||||||||||||||||||||||||
Repurchase of common shares | (318 | ) | (363 | ) | — | (318 | ) | |||||||||||||||||||||||||
Stock option expense | 56 | 56 | ||||||||||||||||||||||||||||||
Sale of subsidiary shares to non-controlling interest | 1,378 | 1,378 | ||||||||||||||||||||||||||||||
Purchase of subsidiary shares from non-controlling interests | (789 | ) | (789 | ) | ||||||||||||||||||||||||||||
Distributions to non-controlling interests | (1,957 | ) | (1,957 | ) | ||||||||||||||||||||||||||||
Other | 17 | 17 | ||||||||||||||||||||||||||||||
Accretion of dividends on preferred stock | (24,972 | ) | (24,972 | ) | ||||||||||||||||||||||||||||
Balance at December 31, 2008 | $ | (166,401 | ) | 204,885 | $ | 205 | $ | (289,382 | ) | $ | 128,185 | $ | (13,212 | ) | $ | 7,803 | ||||||||||||||||
(1) | Adjusted for the adoption of SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements.” See Note 1, Organization and Significant Accounting Policies — Recent Accounting Pronouncements, for additional information. |
F-5
For the Year Ended December 31, | |||||||||||||
2006(1) | 2007(1) | 2008(1) | |||||||||||
(in thousands) | |||||||||||||
Operating Activities | |||||||||||||
Net income | $ | 96,633 | $ | 36,967 | $ | 25,834 | |||||||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||||
Depreciation and amortization | 46,844 | 57,297 | 71,786 | ||||||||||
Provision for bad debts | 18,897 | 37,572 | 47,804 | ||||||||||
Gain on early retirement of debt | — | — | (912 | ) | |||||||||
Loss (gain) from disposal of assets and sale of business units | (11,507 | ) | 2,424 | 546 | |||||||||
Non-cash stock compensation expense | 3,782 | 3,746 | 2,093 | ||||||||||
Amortization of debt discount | 1,176 | 1,325 | 1,492 | ||||||||||
Deferred income taxes | 13,327 | 2,460 | 21,756 | ||||||||||
Changes in operating assets and liabilities, net of effects from acquisition of businesses: | |||||||||||||
Accounts receivable | 30,804 | (75,540 | ) | (88,545 | ) | ||||||||
Other current assets | 2,015 | 1,406 | 8,230 | ||||||||||
Other assets | 6,441 | 6,251 | 16,913 | ||||||||||
Accounts payable | 12,081 | (112 | ) | (1,351 | ) | ||||||||
Due to third-party payors | 711 | 2,186 | (9,363 | ) | |||||||||
Accrued expenses | 6,447 | 10,031 | 11,155 | ||||||||||
Net cash provided by operating activities | 227,651 | 86,013 | 107,438 | ||||||||||
Investing Activities | |||||||||||||
Purchases of property and equipment | (155,096 | ) | (166,074 | ) | (56,504 | ) | |||||||
Proceeds from sale of business units | 74,966 | 9,605 | 2,666 | ||||||||||
Proceeds from sale of property | — | 6,438 | 743 | ||||||||||
Insurance proceeds | — | — | 281 | ||||||||||
Changes in restricted cash | 2,010 | 4,335 | — | ||||||||||
Acquisition of businesses, net of cash acquired | (3,361 | ) | (236,980 | ) | (7,624 | ) | |||||||
Net cash used in investing activities | (81,481 | ) | (382,676 | ) | (60,438 | ) | |||||||
Financing Activities | |||||||||||||
Borrowings on revolving credit facility | 215,000 | 449,000 | 407,000 | ||||||||||
Payments on revolving credit facility | (300,000 | ) | (329,000 | ) | (377,000 | ) | |||||||
Credit facility term loan borrowings | — | 100,000 | — | ||||||||||
Payments on credit facility term loan | (5,800 | ) | (6,550 | ) | (6,800 | ) | |||||||
Repurchase of 75/8% senior subordinated notes | — | — | (1,040 | ) | |||||||||
Principal payments on seller and other debt | (721 | ) | (1,323 | ) | (5,630 | ) | |||||||
Proceeds from (repayment of) bank overdrafts | (7,142 | ) | 8,911 | 6 | |||||||||
Repurchase of common and preferred stock | (41 | ) | (14 | ) | (612 | ) | |||||||
Proceeds from issuance of restricted stock | — | 200 | — | ||||||||||
Proceeds from issuance of common stock | — | 66 | 90 | ||||||||||
Payment of initial public offering costs | — | — | (1,326 | ) | |||||||||
Distributions tonon-controlling interests | (1,762 | ) | (1,698 | ) | (1,957 | ) | |||||||
Net cash provided by (used in) financing activities | (100,466 | ) | 219,592 | 12,731 | |||||||||
Effect of exchange rate changes on cash and cash equivalents | 35 | — | — | ||||||||||
Net increase (decrease) in cash and cash equivalents | 45,739 | (77,071 | ) | 59,731 | |||||||||
Cash and cash equivalents at beginning of period | 35,861 | 81,600 | 4,529 | ||||||||||
Cash and cash equivalents at end of period | $ | 81,600 | $ | 4,529 | $ | 64,260 | |||||||
Supplemental Cash Flow Information | |||||||||||||
Cash paid for interest | $ | 124,251 | $ | 134,527 | $ | 135,838 | |||||||
Cash paid for taxes | $ | 22,572 | $ | 9,009 | $ | 5,313 |
(1) | Adjusted for the adoption of SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements.” See Note 1, Organization and Significant Accounting Policies — Recent Accounting Pronouncements, for additional information. |
F-6
1. | Organization and Significant Accounting Policies |
F-7
Leasehold improvements | 5 years | |
Furniture and equipment | 3 - 20 years | |
Buildings | 40 years |
F-8
Trademarks | Indefinite | |
Certificates of need | Indefinite | |
Accreditation | Indefinite | |
Non-compete agreements | 6 - 7 years | |
Contract therapy relationships | 5 years |
F-9
• | Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities. | |
• | Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active. | |
• | Level 3: Unobservable inputs that reflect the reporting entity’s own assumptions. |
F-10
F-11
F-12
F-13
2. | Acquisitions |
Cash paid, net of cash acquired | $ | 236,899 | ||
Fair value of net tangible assets acquired: | ||||
Accounts receivable | 35,743 | |||
Other current assets | 12,596 | |||
Property and equipment | 39,347 | |||
Other assets | 808 | |||
Current liabilities | (14,104 | ) | ||
Long-term debt | (2,381 | ) | ||
Net tangible assets acquired | 72,009 | |||
Non-compete,5-year | 5,100 | |||
Restructuring reserve | (18,700 | ) | ||
Goodwill | 178,490 | |||
$ | 236,899 | |||
F-14
For the Year Ended December 31, | ||||||||||||
2006 | 2007 | 2008 | ||||||||||
(in thousands) | ||||||||||||
Cash paid (net of cash acquired) | $ | 3,261 | $ | 236,980 | $ | 7,624 | ||||||
Notes issued | — | — | 1,001 | |||||||||
3,261 | 236,980 | 8,625 | ||||||||||
Liabilities assumed | — | 36,458 | 253 | |||||||||
3,261 | 273,438 | 8,878 | ||||||||||
Fair value of assets acquired, principally accounts receivable and property and equipment | — | 88,625 | 1,120 | |||||||||
Non-compete agreement | — | 5,100 | — | |||||||||
Trademark | — | 800 | — | |||||||||
Minority interest relieved | 1,581 | — | 461 | |||||||||
Cost in excess of fair value of net assets acquired (goodwill) | $ | 1,680 | $ | 178,913 | $ | 7,297 | ||||||
F-15
For the Year Ended December 31, | ||||||||
2006 | 2007 | |||||||
(unaudited) | ||||||||
(in thousands, except per share data) | ||||||||
Net revenue | $ | 2,162,162 | $ | 2,092,114 | ||||
Net income attributable to Select Medical Holdings Corporation | 100,657 | 36,046 | ||||||
Earnings per share(1) | ||||||||
Basic income per common share | $ | 0.34 | $ | 0.05 | ||||
Diluted income per common share | $ | 0.34 | $ | 0.05 |
(1) | Adjusted for the adoption of FASB Staff Position EITF 03-6-1, “Determining Whether Instruments Granted in Share-Based Payment Transactions are Participating Securities.” See Note 14 for additional information. |
3. | Discontinued Operations and Assets and Liabilities Held For Sale |
For the Year Ended | ||||
December 31, 2006 | ||||
(in thousands) | ||||
Net revenue | $ | 12,902 | ||
Income from discontinued operations before income tax expense(1) | 15,547 | |||
Income tax expense | 3,069 | |||
Income from discontinued operations, net of tax | $ | 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. |
F-16
4. | Property and Equipment |
December 31, | ||||||||
2007 | 2008 | |||||||
(in thousands) | ||||||||
Land | $ | 40,582 | $ | 48,606 | ||||
Leasehold improvements | 72,010 | 82,228 | ||||||
Buildings | 171,736 | 252,475 | ||||||
Furniture and equipment | 175,964 | 206,316 | ||||||
Construction-in-progress | 104,862 | 6,710 | ||||||
565,154 | 596,335 | |||||||
Less: accumulated depreciation and amortization | 78,128 | 125,270 | ||||||
Total property and equipment | $ | 487,026 | $ | 471,065 | ||||
5. | Intangible Assets |
F-17
As of December 31, 2007 | ||||||||
Gross Carrying | Accumulated | |||||||
Amount | Amortization | |||||||
(in thousands) | ||||||||
Amortized Intangible Assets | ||||||||
Contract therapy relationships | $ | 20,456 | $ | (11,592 | ) | |||
Non-compete agreements | 25,909 | (11,219 | ) | |||||
Total | $ | 46,365 | $ | (22,811 | ) | |||
Indefinite-Lived Intangible Assets | ||||||||
Goodwill | $ | 1,499,485 | ||||||
Trademarks | 47,858 | |||||||
Certificates of need | 6,421 | |||||||
Accreditations | 1,339 | |||||||
Total | $ | 1,555,103 | ||||||
F-18
As of December 31, 2008 | ||||||||
Gross Carrying | Accumulated | |||||||
Amount | Amortization | |||||||
(in thousands) | ||||||||
Amortized Intangible Assets | ||||||||
Contract therapy relationships | $ | 20,456 | $ | (15,683 | ) | |||
Non-compete agreements | 25,909 | (15,958 | ) | |||||
Total | $ | 46,365 | $ | (31,641 | ) | |||
Indefinite-Lived Intangible Assets | ||||||||
Goodwill | $ | 1,506,661 | ||||||
Trademarks | 47,858 | |||||||
Certificates of need | 10,157 | |||||||
Accreditations | 1,339 | |||||||
Total | $ | 1,566,015 | ||||||
For the Year Ended December 31 | ||||||||||||
2006 | 2007 | 2008 | ||||||||||
(in thousands) | ||||||||||||
Amortization expense | $ | 7,811 | $ | 8,491 | $ | 8,830 |
Year | Amount | |||
2009 | $ | 8,831 | ||
2010 | 4,247 | |||
2011 | 1,306 | |||
2012 | 340 | |||
2013 | 0 |
F-19
Specialty | Outpatient | |||||||||||
Hospitals | Rehabilitation | Total | ||||||||||
(in thousands) | ||||||||||||
Balance as of January 1, 2007 | $ | 1,227,533 | $ | 96,039 | $ | 1,323,572 | ||||||
Goodwill acquired during year | 423 | 178,490 | 178,913 | |||||||||
Goodwill related to sale of business | — | (3,000 | ) | (3,000 | ) | |||||||
Balance as of December 31, 2007 | 1,227,956 | 271,529 | 1,499,485 | |||||||||
Goodwill acquired during year | — | 7,297 | 7,297 | |||||||||
Other | (108 | ) | (13 | ) | (121 | ) | ||||||
Balance as of December 31, 2008 | $ | 1,227,848 | $ | 278,813 | $ | 1,506,661 | ||||||
6. | Restructuring Reserves |
Lease | ||||||||||||||||
Termination | ||||||||||||||||
Costs | Severance | Other | Total | |||||||||||||
(in thousands) | ||||||||||||||||
January 1, 2006 | $ | 390 | $ | — | $ | — | $ | 390 | ||||||||
Amounts paid in 2006 | (165 | ) | — | — | (165 | ) | ||||||||||
December 31, 2006 | 225 | — | — | 225 | ||||||||||||
2007 acquisition restructuring reserve | 12,063 | 5,775 | 862 | 18,700 | ||||||||||||
Amounts paid in 2007 | (1,611 | ) | (1,830 | ) | — | (3,441 | ) | |||||||||
December 31, 2007 | 10,677 | 3,945 | 862 | 15,484 | ||||||||||||
Amounts paid in 2008 | (3,630 | ) | (2,953 | ) | (793 | ) | (7,376 | ) | ||||||||
December 31, 2008 | $ | 7,047 | $ | 992 | $ | 69 | $ | 8,108 | ||||||||
F-20
7. | Long-term Debt and Notes Payable |
December 31, | ||||||||
2007 | 2008 | |||||||
(in thousands) | ||||||||
75/8% senior subordinated notes | $ | 660,000 | $ | 658,000 | ||||
Senior secured credit facility | 783,300 | 806,500 | ||||||
10% senior subordinated notes | 134,110 | 135,603 | ||||||
Senior floating rate notes | 175,000 | 175,000 | ||||||
Seller notes | 633 | 1,282 | ||||||
Other | 2,592 | 3,540 | ||||||
Total debt | 1,755,635 | 1,779,925 | ||||||
Less: current maturities | 7,749 | 9,046 | ||||||
Total long-term debt | $ | 1,747,886 | $ | 1,770,879 | ||||
F-21
• | 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, | |
• | $268.6 million in Tranche B term loans that mature on February 24, 2012, and | |
• | $384.5 million inTranche B-1 term loans that mature on August 22, 2014. |
F-22
Year | Redemption Price | |||
2010 | 103.813 | % | ||
2011 | 102.542 | % | ||
2012 | 101.271 | % | ||
2013 and thereafter | 100.000 | % |
F-23
Year | Redemption Price | |||
2009 | 102.00 | % | ||
2010 | 101.00 | % | ||
2011 | 100.00 | % |
F-24
2009 | $ | 9,046 | ||
2010 | 8,924 | |||
2011 | 632,627 | |||
2012 | 160,725 | |||
2013 | — | |||
2014 and beyond | 968,603 |
8. | Stockholders’ Equity |
F-25
9. | Long-term Incentive Compensation |
10. | Stock Option and Restricted Stock Plans |
F-26
Number of | Fair Value of | |||||||||||
Options Granted | Exercise Price | Common Stock | ||||||||||
(in thousands, except per share amounts) | ||||||||||||
February 15, 2006 | 100 | $ | 1.00 | $ | 0.50 | |||||||
August 10, 2006 | 1,248 | 2.50 | 0.83 | |||||||||
November 9, 2006 | 494 | 2.50 | 0.08 | |||||||||
December 11, 2006 | 100 | 2.50 | 0.08 | |||||||||
February 13, 2007 | 56 | 2.50 | 0.08 | |||||||||
May 9, 2007 | 327 | 2.50 | 0.08 | |||||||||
August 15, 2007 | 760 | 2.50 | 0.98 | |||||||||
November 14, 2007 | 106 | 2.50 | 0.98 | |||||||||
February 13, 2008 | 200 | 2.50 | 0.98 | |||||||||
May 13, 2008 | 28 | 2.50 | 0.98 | |||||||||
August 20, 2008 | 404 | 3.00 | 3.00 | |||||||||
November 13, 2008 | 20 | 3.00 | 3.00 |
Price per | Weighted Average | |||||||||||
Share | Shares | Exercise Price | ||||||||||
(in thousands, except per share amounts) | ||||||||||||
Balance, January 1, 2007 | $ | 1.00 - 2.50 | 3,773 | $ | 1.71 | |||||||
Granted | 2.50 | 1,219 | 2.50 | |||||||||
Exercised | 1.00 - 2.50 | (65 | ) | 1.02 | ||||||||
Canceled | 1.00 - 2.50 | (387 | ) | 2.03 | ||||||||
Balance, December 31, 2007 | 1.00 - 2.50 | 4,540 | 1.91 | |||||||||
Granted | 2.50 - 3.00 | 602 | 2.81 | |||||||||
Exercised | 1.00 - 2.50 | (82 | ) | 1.10 | ||||||||
Canceled | 1.00 - 3.00 | (277 | ) | 2.29 | ||||||||
Balance, December 31, 2008 | $ | 1.00 - 3.00 | 4,783 | $ | 2.01 | |||||||
F-27
Weighted Average | ||||||||||||||
Number | Remaining | Number | ||||||||||||
Exercise Price | Outstanding | Contractual Life | Exercisable | |||||||||||
(in thousands, except per share amounts) | ||||||||||||||
$ | 1.00 | 1,678 | 6.21 | 987 | ||||||||||
2.50 | 2,736 | 8.14 | 838 | |||||||||||
3.00 | 369 | 9.63 | — |
Price per | Weighted Average | |||||||||||
Share | Shares | Exercise Price | ||||||||||
(in thousands, except per share amounts) | ||||||||||||
Balance, January 1, 2007 | $ | 1.00 - 2.50 | 90 | $ | 1.50 | |||||||
Granted | 2.50 | 30 | 2.50 | |||||||||
Balance, December 31, 2007 | 1.00 - 2.50 | 120 | 1.75 | |||||||||
Granted | 3.00 | 50 | 3.00 | |||||||||
Balance, December 31, 2008 | $ | 1.00 - 3.00 | 170 | $ | 2.12 | |||||||
Weighted Average | ||||||||||||||
Number | Remaining | Number | ||||||||||||
Exercise Price | Outstanding | Contractual Life | Exercisable | |||||||||||
(in thousands, except per share amounts) | ||||||||||||||
$ | 1.00 | 60 | 6.61 | 36 | ||||||||||
2.50 | 60 | 8.24 | 18 | |||||||||||
3.00 | 50 | 9.73 | — |
Number of Shares | Fair Value of | |||||||
Issued | Common Stock | |||||||
February 15, 2006 | 100,000 | $ | 0.50 | |||||
December 11, 2006 | 100,000 | 0.08 | ||||||
February 13, 2007 | 200,000 | 0.08 |
F-28
2009 | 2010 | 2011 | 2012 | 2013 | ||||||||||||||||
(in thousands) | ||||||||||||||||||||
Stock compensation expense | $ | 1,082 | $ | 181 | $ | 3 | $ | 0 | $ | 0 |
For the Year Ended December 31, | ||||||||||||
2006 | 2007 | 2008 | ||||||||||
(in thousands) | ||||||||||||
Stock compensation expense: | ||||||||||||
Included in general and administrative | $ | 3,551 | $ | 3,555 | $ | 1,953 | ||||||
Included in cost of services | 231 | 191 | 140 | |||||||||
Total | $ | 3,782 | $ | 3,746 | $ | 2,093 | ||||||
11. | Income Taxes |
For the Year Ended December 31, | ||||||||||||
2006 | 2007 | 2008 | ||||||||||
(in thousands) | ||||||||||||
Current: | ||||||||||||
Federal | $ | 24,706 | $ | 11,004 | $ | (262 | ) | |||||
State and local | 5,488 | 5,235 | 4,569 | |||||||||
Total current | 30,194 | 16,239 | 4,307 | |||||||||
Deferred | 13,327 | 2,460 | 21,756 | |||||||||
Total income tax provision | $ | 43,521 | $ | 18,699 | $ | 26,063 | ||||||
F-29
For the Year Ended December 31, | ||||||||||||
2006 | 2007 | 2008 | ||||||||||
Expected federal tax rate | 35.0 | % | 35.0 | % | 35.0 | % | ||||||
State and local taxes, net of federal benefit | 3.0 | 2.5 | 6.0 | |||||||||
Other permanent differences | 0.9 | 2.0 | 2.2 | |||||||||
Valuation allowance | 2.7 | (0.7 | ) | 8.6 | ||||||||
Tax loss on sale of subsidiaries | (6.9 | ) | (5.7 | ) | (0.7 | ) | ||||||
Uncertain tax positions | — | 2.1 | 3.2 | |||||||||
Other | (0.1 | ) | (0.7 | ) | (0.6 | ) | ||||||
Total | 34.6 | % | 34.5 | % | 53.7 | % | ||||||
December 31, | ||||||||
2007 | 2008 | |||||||
(in thousands) | ||||||||
Deferred tax assets — current | ||||||||
Allowance for doubtful accounts | $ | 7,440 | $ | 8,535 | ||||
Compensation and benefit related accruals | 26,746 | 20,371 | ||||||
Malpractice insurance | 10,867 | 11,856 | ||||||
Restructuring reserve | 6,216 | 3,239 | ||||||
Net operating loss carry forwards | 396 | 12,833 | ||||||
Interest rate swap | — | 10,155 | ||||||
Other accruals, net | 2,503 | 135 | ||||||
Net deferred tax asset — current | 54,168 | 67,124 | ||||||
Deferred tax assets (liabilities) — non-current | ||||||||
Expenses not currently deductible for tax | 101 | 101 | ||||||
Excess capital loss carry forwards | 2,619 | 6,424 | ||||||
Net operating loss carry forwards | 24,693 | 27,464 | ||||||
Restricted stock | (1,426 | ) | (567 | ) | ||||
Interest rate swaps | 3,708 | 5,169 | ||||||
Depreciation and amortization | (44,214 | ) | (67,179 | ) | ||||
Other | 3,134 | 3,480 | ||||||
Net deferred tax liability — non-current | (11,385 | ) | (25,108 | ) | ||||
Net deferred tax asset before valuation allowance | 42,783 | 42,016 | ||||||
Valuation allowance | (16,761 | ) | (23,009 | ) | ||||
Net deferred tax asset | $ | 26,022 | $ | 19,007 | ||||
F-30
State Net | ||||||||
Operating | Valuation | |||||||
Losses | Allowance | |||||||
2009 | $ | 8,773 | $ | 8,773 | ||||
2010 | 7,902 | 7,565 | ||||||
2011 | 6,647 | 6,502 | ||||||
2012 | 8,913 | 8,882 | ||||||
Thereafter through 2028 | 521,560 | 364,537 |
F-31
Gross tax contingencies — January 1, 2007 | $ | 21,305 | ||
Reductions for tax positions taken in prior years | (2,249 | ) | ||
Additions for current period tax positions taken | 2,357 | |||
Gross tax contingencies — December 31, 2007 | 21,413 | |||
Reductions for tax positions taken in prior periods | (839 | ) | ||
Additions for current period tax positions taken | 1,918 | |||
Gross tax contingencies — December 31, 2008 | $ | 22,492 | ||
12. | Retirement Savings Plan |
13. | Segment Information |
F-32
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 |
Year Ended December 31, 2007 | ||||||||||||||||
Specialty | Outpatient | |||||||||||||||
Hospitals | Rehabilitation | All Other | Total | |||||||||||||
(in thousands) | ||||||||||||||||
Net revenue | $ | 1,386,410 | $ | 603,413 | $ | 1,843 | $ | 1,991,666 | ||||||||
Adjusted EBITDA | 217,175 | 75,437 | (37,684 | ) | 254,928 | |||||||||||
Total assets(1) | 1,882,476 | 513,397 | 99,173 | 2,495,046 | ||||||||||||
Capital expenditures | 146,901 | 14,737 | 4,436 | 166,074 |
Year Ended December 31, 2008 | ||||||||||||||||
Specialty | Outpatient | |||||||||||||||
Hospitals | Rehabilitation | All Other | Total | |||||||||||||
(in thousands) | ||||||||||||||||
Net revenue | $ | 1,488,412 | $ | 664,760 | $ | 190 | $ | 2,153,362 | ||||||||
Adjusted EBITDA | 236,388 | 77,279 | (43,380 | ) | 270,287 | |||||||||||
Total assets(1): | 1,910,402 | 504,869 | 164,198 | 2,579,469 | ||||||||||||
Capital expenditures | 40,069 | 13,271 | 3,164 | 56,504 |
(1) | The specialty hospital segment includes $14.6 million and $12.5 million in real estate assets held for sale on December 31, 2007 and 2008, respectively. |
F-33
Year Ended December 31, 2006 | ||||||||||||||||
Specialty | Outpatient | |||||||||||||||
Hospitals | Rehabilitation | All Other | ||||||||||||||
(In thousands) | ||||||||||||||||
Adjusted EBITDA | $ | 283,270 | $ | 64,823 | $ | (39,769 | ) | |||||||||
Depreciation and amortization | ( 30,731 | ) | (12,964 | ) | (2,973 | ) | ||||||||||
Stock compensation expense | — | — | (3,782 | ) | ||||||||||||
Income (loss) from operations | $ | 252,539 | $ | 51,859 | $ | (46,524 | ) | $ | 257,874 | |||||||
Interest expense, net | (130,538 | ) | ||||||||||||||
Income from continuing operations before income taxes | $ | 127,336 | ||||||||||||||
Year Ended December 31, 2007 | ||||||||||||||||
Specialty | Outpatient | |||||||||||||||
Hospitals | Rehabilitation | All Other | ||||||||||||||
(in thousands) | ||||||||||||||||
Adjusted EBITDA | $ | 217,175 | $ | 75,437 | $ | (37,684 | ) | |||||||||
Depreciation and amortization | (37,085 | ) | (17,458 | ) | (2,754 | ) | ||||||||||
Stock compensation expense | — | — | (3,746 | ) | ||||||||||||
Income (loss) from operations | $ | 180,090 | $ | 57,979 | $ | (44,184 | ) | $ | 193,885 | |||||||
Other expense | (167 | ) | ||||||||||||||
Interest expense, net | (138,052 | ) | ||||||||||||||
Income from continuing operations before income taxes | $ | 55,666 | ||||||||||||||
Year Ended December 31, 2008 | ||||||||||||||||
Specialty | Outpatient | |||||||||||||||
Hospitals | Rehabilitation | All Other | ||||||||||||||
(in thousands) | ||||||||||||||||
Adjusted EBITDA | $ | 236,388 | $ | 77,279 | $ | (43,380 | ) | |||||||||
Depreciation and amortization | (43,938 | ) | (24,315 | ) | (3,533 | ) | ||||||||||
Stock compensation expense | — | — | (2,093 | ) | ||||||||||||
Income (loss) from operations | $ | 192,450 | $ | 52,964 | $ | (49,006 | ) | $ | 196,408 | |||||||
Gain on early retirement of debt | 912 | |||||||||||||||
Interest expense, net | (145,423 | ) | ||||||||||||||
Income from continuing operations before income taxes | $ | 51,897 | ||||||||||||||
F-34
14. | Income (Loss) per Share |
As Adjusted | ||||||||
As Originally | For FSP EITF | |||||||
Reported | 03-6-1 | |||||||
Basic income per common share: | ||||||||
Income from continuing operations | $ | 0.30 | $ | 0.26 | ||||
Discontinued operations, net of tax | 0.06 | 0.06 | ||||||
Net income per common share | $ | 0.36 | $ | 0.32 | ||||
Diluted income per common share: | ||||||||
Income from continuing operations | $ | 0.28 | $ | 0.26 | ||||
Discontinued operations, net of tax | 0.06 | 0.06 | ||||||
Net income per common share | $ | 0.32 | $ | 0.32 | ||||
(a) | Income from continuing operations is reduced by the contractual amount of dividends in the current period for each class of stock. |
(b) | The remaining income (loss) is allocated to common stock, unvested restricted stock and participating preferred stock to the extent that each security may share in income (loss), as if all of the earnings (losses) for the period had been distributed. The total income (loss) allocated to each security is determined by adding together the amount allocated for dividends and the amount allocated for participation features. |
(c) | The income (loss) allocated to common stock is then divided by the weighted average number of outstanding shares to which the earnings are allocated to determine the income (loss) per share for common stock. |
F-35
For the Year Ended December 31, | ||||||||||||
2006 | 2007 | 2008 | ||||||||||
(in thousands, except per share amounts) | ||||||||||||
Numerator: | ||||||||||||
Net income attributable to Select Medical Holdings Corporation | $ | 94,879 | $ | 35,430 | $ | 22,441 | ||||||
Less: Income from discontinued operations | 12,478 | — | — | |||||||||
Income from continuing operations | $ | 82,401 | $ | 35,430 | $ | 22,441 | ||||||
Less: Preferred dividends | 22,663 | 23,807 | 24,972 | |||||||||
Less: Earnings (losses) allocated to unvested restricted stockholders | 6,615 | 758 | — | |||||||||
Less: Earnings (losses) allocated to preferred stockholders | 5,819 | 1,133 | (254 | ) | ||||||||
Net income (loss) available to common stockholders — continuing operations | $ | 47,304 | $ | 9,732 | $ | (2,277 | ) | |||||
Numerator: | ||||||||||||
Income from discontinued operations | $ | 12,478 | $ | — | $ | — | ||||||
Less: Earnings allocated to unvested restricted stockholders | 1,382 | — | — | |||||||||
Less: Earnings allocated to preferred stockholders | 1,215 | — | — | |||||||||
Net income available to common stockholders — discontinued operations | $ | 9,881 | $ | — | $ | — | ||||||
Denominator: | ||||||||||||
Weighted average shares — basic and diluted | 180,183 | 190,286 | 198,554 | |||||||||
Basic income (loss) per common share: | ||||||||||||
Income (loss) from continuing operations | $ | 0.26 | $ | 0.05 | $ | (0.01 | ) | |||||
Discontinued operations, net of tax | 0.06 | — | — | |||||||||
Net income (loss) per common share | $ | 0.32 | $ | 0.05 | $ | (0.01 | ) | |||||
Diluted income (loss) per common share: | ||||||||||||
Income (loss) from continuing operations | $ | 0.26 | $ | 0.05 | $ | (0.01 | ) | |||||
Discontinued operations, net of tax | 0.06 | — | — | |||||||||
Diluted income (loss) per common share | $ | 0.32 | $ | 0.05 | $ | (0.01 | ) | |||||
For the Year Ended December 31, | ||||||||||||
2006 | 2007 | 2008 | ||||||||||
(in thousands) | ||||||||||||
Stock options | 2,589 | 4,005 | 3,801 | |||||||||
Restricted stock | — | — | 5,278 |
F-36
15. | Fair Value of Financial Instruments |
F-37
16. | Related Party Transactions |
2009 | $ | 2,978 | ||
2010 | 2,996 | |||
2011 | 2,998 | |||
2012 | 3,085 | |||
2013 | 3,200 | |||
Thereafter | 31,168 | |||
$ | 46,425 | |||
17. | Commitments and Contingencies |
2009 | $ | 108,438 | ||
2010 | 81,065 | |||
2011 | 59,341 | |||
2012 | 41,373 | |||
2013 | 29,438 | |||
Thereafter | 171,321 | |||
$ | 490,976 | |||
F-38
F-39
18. | Supplemental Disclosures of Cash Flow Information |
For the Year Ended December 31, | ||||||||||||
2006 | 2007 | 2008 | ||||||||||
(in thousands) | ||||||||||||
Notes issued with acquisitions (Note 2) | $ | — | $ | — | $ | 1,001 | ||||||
Liabilities assumed with acquisitions (Note 2) | — | 36,458 | 253 | |||||||||
Notes recorded related to sale of business (Note 3) | 8,436 | 2,616 | — |
19. | Selected Quarterly Financial Data (Unaudited) |
First | Second | Third | Fourth | |||||||||||||
Quarter | Quarter | Quarter | Quarter | |||||||||||||
(in thousands) | ||||||||||||||||
Year ended December 31, 2007 | ||||||||||||||||
Net revenues | $ | 466,829 | $ | 506,484 | $ | 500,385 | $ | 517,968 | ||||||||
Income from operations | 60,325 | 60,576 | 31,292 | 41,692 | ||||||||||||
Net income (loss) attributable to Select Medical Holdings Corporation | $ | 17,471 | $ | 14,315 | $ | (3,106 | ) | $ | 6,750 | |||||||
Net income (loss) per common share(1) | ||||||||||||||||
Basic | $ | 0.05 | $ | 0.04 | $ | (0.04 | ) | $ | 0.00 | |||||||
Diluted | $ | 0.05 | $ | 0.04 | $ | (0.04 | ) | $ | 0.00 |
F-40
First | Second | Third | Fourth | |||||||||||||
Quarter | Quarter | Quarter | Quarter | |||||||||||||
(in thousands) | ||||||||||||||||
Year ended December 31, 2008 | ||||||||||||||||
Net revenues | $ | 548,278 | $ | 538,806 | $ | 519,179 | $ | 547,099 | ||||||||
Income from operations | 54,344 | 48,421 | 36,158 | 57,485 | ||||||||||||
Net income (loss) attributable to Select Medical Holdings Corporation | $ | 8,700 | $ | 5,753 | $ | (823 | ) | $ | 8,811 | |||||||
Net income (loss) per common share(1): | ||||||||||||||||
Basic | $ | 0.01 | $ | 0.00 | $ | (0.03 | ) | $ | 0.01 | |||||||
Diluted | $ | 0.01 | $ | 0.00 | $ | (0.03 | ) | $ | 0.01 |
(1) | Adjusted for the adoption of FASB Staff Position EITF 03-6-1 “Determining Whether Instruments Granted in Share-Based Payment Transactions are Participating Securities.” See Note 14 for additional information. |
F-41
Balance at | Charged | |||||||||||||||||||
Beginning | to Cost and | Balance at | ||||||||||||||||||
Description | of Year | Expenses | Acquisitions(A) | Deductions(B) | End of Year | |||||||||||||||
Year ended December 31, 2008 allowance for doubtful accounts, | $ | 55,856 | $ | 47,804 | $ | 183 | $ | (46,791 | ) | $ | 57,052 | |||||||||
Year ended December 31, 2007 allowance for doubtful accounts | $ | 55,306 | $ | 37,572 | $ | 9,061 | $ | (46,083 | ) | $ | 55,856 | |||||||||
Year ended December 31, 2006 allowance for doubtful accounts | $ | 74,891 | $ | 18,810 | $ | — | $ | (38,395 | ) | $ | 55,306 | |||||||||
Year ended December 31, 2008 income tax valuation allowance | $ | 16,761 | $ | 6,355 | $ | — | $ | (108 | ) | $ | 23,008 | |||||||||
Year ended December 31, 2007 income tax valuation allowance | $ | 14,428 | $ | 2,507 | $ | — | $ | (174 | ) | $ | 16,761 | |||||||||
Year ended December 31, 2006 income tax valuation allowance | $ | 11,961 | $ | 3,485 | $ | — | $ | (1,018 | ) | $ | 14,428 |
(A) | Represents opening balance sheet reserves resulting from purchase accounting entries. |
(B) | Allowance for doubtful accounts deductions represent write-offs against the reserve for 2006, 2007 and 2008. Income tax valuation allowance deductions primarily represent the disposition of certain subsidiaries. |
F-42
Pro Forma | ||||||||||||
Preferred | ||||||||||||
Stock and | ||||||||||||
December 31, | June 30, | Equity at | ||||||||||
2008(1) | 2009 | June 30, 2009 | ||||||||||
(unaudited) | (unaudited) | |||||||||||
(in thousands, except share and per share amounts) | ||||||||||||
ASSETS | ||||||||||||
Current Assets: | ||||||||||||
Cash and cash equivalents | $ | 64,260 | $ | 27,689 | ||||||||
Accounts receivable, net of allowance for doubtful accounts of $57,052 and $52,685 in 2008 and 2009, respectively | 312,418 | 339,615 | ||||||||||
Current deferred tax asset | 61,925 | 52,270 | ||||||||||
Prepaid income taxes | 7,362 | — | ||||||||||
Other current assets | 20,897 | 21,776 | ||||||||||
Total Current Assets | 466,862 | 441,350 | ||||||||||
Property and equipment, net | 471,065 | 460,420 | ||||||||||
Goodwill | 1,506,661 | 1,506,661 | ||||||||||
Other identifiable intangibles | 74,078 | 69,663 | ||||||||||
Assets held for sale | 12,542 | 11,342 | ||||||||||
Other assets | 48,261 | 43,246 | ||||||||||
Total Assets | $ | 2,579,469 | $ | 2,532,682 | ||||||||
LIABILITIES AND EQUITY | ||||||||||||
Current Liabilities: | ||||||||||||
Bank overdrafts | $ | 21,130 | $ | 16,472 | ||||||||
Current portion of long-term debt and notes payable | 9,046 | 10,670 | ||||||||||
Accounts payable | 72,496 | 68,777 | ||||||||||
Accrued payroll | 66,380 | 57,832 | ||||||||||
Accrued vacation | 37,109 | 40,380 | ||||||||||
Accrued interest | 37,032 | 35,500 | ||||||||||
Accrued restructuring | 8,108 | 6,061 | ||||||||||
Accrued other | 91,482 | 95,893 | ||||||||||
Income taxes payable | — | 441 | ||||||||||
Due to third party payors | 5,709 | 5,493 | ||||||||||
Total Current Liabilities | 348,492 | 337,519 | ||||||||||
Long-term debt, net of current portion | 1,770,879 | 1,686,464 | ||||||||||
Non-current deferred tax liability | 42,918 | 51,967 | ||||||||||
Other non-current liabilities | 67,709 | 62,248 | ||||||||||
Total Liabilities | 2,229,998 | 2,138,198 | ||||||||||
Commitments and Contingencies | ||||||||||||
Preferred stock — Authorized shares (liquidation preference is $515,872 and $528,742 in 2008 and 2009, respectively) | 515,872 | 528,742 | $ | — | ||||||||
Stockholders’ Equity: | ||||||||||||
Common stock $0.001 par value, 250,000,000 shares authorized, 204,885,000 shares and 204,841,000 shares issued and outstanding in 2008 and 2009, respectively | 205 | 205 | ||||||||||
Capital in excess of par | (289,382 | ) | (288,844 | ) | ||||||||
Retained earnings | 128,185 | 160,103 | ||||||||||
Accumulated other comprehensive loss | (13,212 | ) | (13,123 | ) | ||||||||
Total Select Medical Holdings Corporation Stockholders’ Equity | (174,204 | ) | (141,659 | ) | ||||||||
Non-controlling interest | 7,803 | 7,401 | ||||||||||
Total Equity | (166,401 | ) | (134,258 | ) | ||||||||
Total Liabilities and Equity | $ | 2,579,469 | $ | 2,532,682 | $ | — | ||||||
(1) | Adjusted for the adoption of SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements.” See Note 2, Accounting Policies — Recent Accounting Pronouncements, for additional information. |
F-43
For the Quarter | For the Six Months | |||||||||||||||
Ended June 30, | Ended June 30, | |||||||||||||||
2008(1)(2) | 2009 | 2008(1)(2) | 2009 | |||||||||||||
(unaudited) | ||||||||||||||||
(in thousands, except per share amounts) | ||||||||||||||||
Net operating revenues | $ | 538,806 | $ | 559,535 | $ | 1,087,084 | $ | 1,120,707 | ||||||||
Costs and expenses: | ||||||||||||||||
Cost of services | 449,356 | 453,011 | 901,627 | 904,405 | ||||||||||||
General and administrative | 12,654 | 12,885 | 24,305 | 25,660 | ||||||||||||
Bad debt expense | 10,445 | 10,312 | 23,060 | 21,958 | ||||||||||||
Depreciation and amortization | 17,930 | 17,939 | 35,327 | 35,670 | ||||||||||||
Total costs and expenses | 490,385 | 494,147 | 984,319 | 987,693 | ||||||||||||
Income from operations | 48,421 | 65,388 | 102,765 | 133,014 | ||||||||||||
Other income and expense: | ||||||||||||||||
Gain on early retirement of debt | — | 3,562 | — | 15,316 | ||||||||||||
Interest income | 56 | 28 | 182 | 80 | ||||||||||||
Interest expense | (36,531 | ) | (33,658 | ) | (73,450 | ) | (68,330 | ) | ||||||||
Income from operations before income taxes | 11,946 | 35,320 | 29,497 | 80,080 | ||||||||||||
Income tax expense | 5,431 | 15,137 | 13,973 | 33,880 | ||||||||||||
Net income | 6,515 | 20,183 | 15,524 | 46,200 | ||||||||||||
Less: Net income attributable to non-controlling interests | 762 | 391 | 1,071 | 1,412 | ||||||||||||
Net income attributable to Select Medical Holdings Corporation | 5,753 | 19,792 | 14,453 | 44,788 | ||||||||||||
Less: Preferred dividends | 6,195 | 6,508 | 12,279 | 12,870 | ||||||||||||
Net income (loss) available to common stockholders | $ | (442 | ) | $ | 13,284 | $ | 2,174 | $ | 31,918 | |||||||
Income per common share: | ||||||||||||||||
Basic | $ | (0.00 | ) | $ | 0.06 | $ | 0.01 | $ | 0.14 | |||||||
Diluted | $ | (0.00 | ) | $ | 0.06 | $ | 0.01 | $ | 0.14 | |||||||
Unaudited pro forma net income per common share: | ||||||||||||||||
Basic | $ | — | $ | — | ||||||||||||
Diluted | $ | — | $ | — |
(1) | Adjusted for the adoption of SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements.” See Note 2, Accounting Policies — Recent Accounting Pronouncements, for additional information. | |
(2) | Adjusted for the adoption of FASB Staff Position EITF03-6-1, “Determining Whether Instruments Granted in Share-Based Payment Transactions are Participating Securities.” See Note 8 for additional information. |
F-44
Select Medical Holdings Corporation Stockholders | ||||||||||||||||||||||||||||||||
Common | Accumulated Other | |||||||||||||||||||||||||||||||
Comprehensive | Common | Stock Par | Capital in | Retained | Comprehensive | Non-controlling | ||||||||||||||||||||||||||
Total | Income | Stock Issued | Value | Excess of Par | Earnings | Income (Loss) | Interests | |||||||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||||||||||
Balance at December 31, 2008(1) | $ | (166,401 | ) | 204,885 | $ | 205 | $ | (289,382 | ) | $ | 128,185 | $ | (13,212 | ) | $ | 7,803 | ||||||||||||||||
Net income | 46,200 | $ | 46,200 | 44,788 | 1,412 | |||||||||||||||||||||||||||
Unrealized loss on interest rate swap, net of tax | 89 | 89 | 89 | |||||||||||||||||||||||||||||
Total comprehensive income | $ | 46,289 | $ | 46,289 | ||||||||||||||||||||||||||||
Issuance and vesting of restricted stock | 530 | 530 | ||||||||||||||||||||||||||||||
Exercise of stock options | 24 | 10 | — | 24 | ||||||||||||||||||||||||||||
Stock option expense | 64 | 64 | ||||||||||||||||||||||||||||||
Repurchase of common shares | (80 | ) | (54 | ) | — | (80 | ) | |||||||||||||||||||||||||
Distributions to non-controlling interests | (1,814 | ) | (1,814 | ) | ||||||||||||||||||||||||||||
Accretion of dividends on preferred stock | (12,870 | ) | (12,870 | ) | ||||||||||||||||||||||||||||
Balance at June 30, 2009 | $ | (134,258 | ) | 204,841 | $ | 205 | $ | (288,844 | ) | $ | 160,103 | $ | (13,123 | ) | $ | 7,401 | ||||||||||||||||
(1) | Adjusted for the adoption of SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements.” See Note 2, Accounting Policies — Recent Accounting Pronouncements, for additional information. |
F-45
For the Six Months Ended June 30, | ||||||||
2008(1) | 2009 | |||||||
(unaudited) | ||||||||
(in thousands) | ||||||||
Operating activities | ||||||||
Net income | $ | 15,524 | $ | 46,200 | ||||
Adjustments to reconcile net income to net cash provided by (used in) operating activities: | ||||||||
Depreciation and amortization | 35,327 | 35,670 | ||||||
Provision for bad debts | 23,060 | 21,958 | ||||||
Gain on early retirement of debt | — | (15,316 | ) | |||||
Loss from disposal of assets | 387 | 117 | ||||||
Non-cash stock compensation expense | 1,192 | 594 | ||||||
Amortization of debt discount | 724 | 815 | ||||||
Changes in operating assets and liabilities, net of effects from acquisition of businesses: | ||||||||
Accounts receivable | (87,265 | ) | (49,155 | ) | ||||
Other current assets | 4,682 | (667 | ) | |||||
Other assets | 8,040 | 4,242 | ||||||
Accounts payable | (2,449 | ) | (3,693 | ) | ||||
Due to third-party payors | (9,931 | ) | (216 | ) | ||||
Accrued expenses | (564 | ) | (5,927 | ) | ||||
Income and deferred taxes | 10,280 | 22,613 | ||||||
Net cash provided by (used in) operating activities | (993 | ) | 57,235 | |||||
Investing activities | ||||||||
Purchases of property and equipment | (26,107 | ) | (20,981 | ) | ||||
Proceeds from sale of property | — | 1,341 | ||||||
Acquisition of businesses, net of cash acquired | (4,246 | ) | — | |||||
Net cash used in investing activities | (30,353 | ) | (19,640 | ) | ||||
Financing activities | ||||||||
Borrowings on revolving credit facility | 312,000 | 138,000 | ||||||
Payments on revolving credit facility | (262,000 | ) | (173,000 | ) | ||||
Payment on credit facility term loan | (4,582 | ) | (3,400 | ) | ||||
Repurchase of 75/8% senior subordinated notes | — | (30,114 | ) | |||||
Borrowings of other debt | — | 5,184 | ||||||
Principal payments on seller and other debt | (2,622 | ) | (3,891 | ) | ||||
Payment of initial public offering costs | — | (417 | ) | |||||
Repurchase of common and preferred stock | (612 | ) | (80 | ) | ||||
Exercise of stock options | 26 | 24 | ||||||
Repayment of bank overdrafts | (6,888 | ) | (4,658 | ) | ||||
Distributions to non-controlling interests | (971 | ) | (1,814 | ) | ||||
Net cash provided by (used in) financing activities | 34,351 | (74,166 | ) | |||||
Net increase (decrease) in cash and cash equivalents | 3,005 | (36,571 | ) | |||||
Cash and cash equivalents at beginning of period | 4,529 | 64,260 | ||||||
Cash and cash equivalents at end of period | $ | 7,534 | $ | 27,689 | ||||
Supplemental Cash Flow Information | ||||||||
Cash paid for interest | $ | 68,312 | $ | 64,710 | ||||
Cash paid for taxes | $ | 3,700 | $ | 11,090 |
(1) | Adjusted for the adoption of SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements.” See Note 2, Accounting Policies — Recent Accounting Pronouncements, for additional information. |
F-46
1. | Basis of Presentation |
2. | Accounting Policies |
F-47
F-48
3. | Intangible Assets |
As of June 30, 2009 | ||||||||
Gross Carrying | Accumulated | |||||||
Amount | Amortization | |||||||
(in thousands) | ||||||||
Amortized intangible assets | ||||||||
Contract therapy relationships | $ | 20,456 | $ | (17,729 | ) | |||
Non-compete agreements | 25,909 | (18,328 | ) | |||||
Total | $ | 46,365 | $ | (36,057 | ) | |||
Indefinite-lived intangible assets | ||||||||
Goodwill | $ | 1,506,661 | ||||||
Trademarks | 47,858 | |||||||
Certificates of need | 10,158 | |||||||
Accreditations | 1,339 | |||||||
Total | $ | 1,566,016 | ||||||
F-49
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2008 | 2009 | 2008 | 2009 | |||||||||||||
(in thousands) | ||||||||||||||||
Amortization expense | $ | 2,207 | $ | 2,208 | $ | 4,415 | $ | 4,416 |
2009 | $ | 8,831 | ||
2010 | 4,247 | |||
2011 | 1,306 | |||
2012 | 340 | |||
2013 | 0 |
4. | Restructuring Reserves |
Lease | ||||||||||||||||
Termination | ||||||||||||||||
Costs | Severance | Other | Total | |||||||||||||
(in thousands) | ||||||||||||||||
December 31, 2008 | $ | 7,047 | $ | 992 | $ | 69 | $ | 8,108 | ||||||||
Amounts paid in 2009 | (1,685 | ) | (362 | ) | — | (2,047 | ) | |||||||||
Revision of estimate | 565 | (496 | ) | (69 | ) | — | ||||||||||
June 30, 2009 | $ | 5,927 | $ | 134 | $ | — | $ | 6,061 | ||||||||
5. | Accumulated Other Comprehensive Loss |
F-50
6. | Fair Value Measurements |
• | Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities. | |
• | Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active. | |
• | Level 3: Unobservable inputs that reflect the reporting entity’s own assumptions. |
7. | Segment Information |
Three Months Ended June 30, 2008 | ||||||||||||||||
Specialty | Outpatient | |||||||||||||||
Hospitals | Rehabilitation | All Other | Total | |||||||||||||
(in thousands) | ||||||||||||||||
Net operating revenue | $ | 367,289 | $ | 171,495 | $ | 22 | $ | 538,806 | ||||||||
Adjusted EBITDA | 55,237 | 23,746 | (12,194 | ) | 66,789 | |||||||||||
Total assets | 1,925,514 | 510,248 | 108,275 | 2,544,037 | ||||||||||||
Capital expenditures | 7,400 | 2,962 | 689 | 11,051 |
F-51
Three Months Ended June 30, 2009 | ||||||||||||||||
Specialty | Outpatient | |||||||||||||||
Hospitals | Rehabilitation | All Other | Total | |||||||||||||
(in thousands) | ||||||||||||||||
Net operating revenue | $ | 386,331 | $ | 173,190 | $ | 14 | $ | 559,535 | ||||||||
Adjusted EBITDA | 70,960 | 25,294 | (12,628 | ) | 83,626 | |||||||||||
Total assets | 1,920,040 | 492,936 | 119,706 | 2,532,682 | ||||||||||||
Capital expenditures | 11,222 | 2,199 | 524 | 13,945 |
Six Months Ended June 30, 2008 | ||||||||||||||||
Specialty | Outpatient | |||||||||||||||
Hospitals | Rehabilitation | All Other | Total | |||||||||||||
(in thousands) | ||||||||||||||||
Net operating revenue | $ | 745,893 | $ | 341,072 | $ | 119 | $ | 1,087,084 | ||||||||
Adjusted EBITDA | 118,480 | 43,843 | (23,039 | ) | 139,284 | |||||||||||
Total assets | 1,925,514 | 510,248 | 108,275 | 2,544,037 | ||||||||||||
Capital expenditures | 17,388 | 6,813 | 1,906 | 26,107 |
Six Months Ended June 30, 2009 | ||||||||||||||||
Specialty | Outpatient | |||||||||||||||
Hospitals | Rehabilitation | All Other | Total | |||||||||||||
(in thousands) | ||||||||||||||||
Net operating revenue | $ | 779,563 | $ | 341,009 | $ | 135 | $ | 1,120,707 | ||||||||
Adjusted EBITDA | 147,741 | 46,578 | (25,041 | ) | 169,278 | |||||||||||
Total assets | 1,920,040 | 492,936 | 119,706 | 2,532,682 | ||||||||||||
Capital expenditures | 15,377 | 5,009 | 595 | 20,981 |
Three Months Ended June 30, 2008 | ||||||||||||||||
Specialty | Outpatient | |||||||||||||||
Hospitals | Rehabilitation | All Other | ||||||||||||||
Adjusted EBITDA | $ | 55,237 | $ | 23,746 | $ | (12,194 | ) | |||||||||
Depreciation and amortization | (11,134 | ) | (5,908 | ) | (888 | ) | ||||||||||
Stock compensation expense | — | — | (438 | ) | ||||||||||||
Income (loss) from operations | $ | 44,103 | $ | 17,838 | $ | (13,520 | ) | $ | 48,421 | |||||||
Interest expense, net | (36,475 | ) | ||||||||||||||
Income from operations before income taxes | $ | 11,946 | ||||||||||||||
F-52
Three Months Ended June 30, 2009 | ||||||||||||||||
Specialty | Outpatient | |||||||||||||||
Hospitals | Rehabilitation | All Other | ||||||||||||||
Adjusted EBITDA | $ | 70,960 | $ | 25,294 | $ | (12,628 | ) | |||||||||
Depreciation and amortization | (10,790 | ) | (6,264 | ) | (885 | ) | ||||||||||
Stock compensation expense | — | — | (299 | ) | ||||||||||||
Income (loss) from operations | $ | 60,170 | $ | 19,030 | $ | (13,812 | ) | $ | 65,388 | |||||||
Gain on early retirement of debt | 3,562 | |||||||||||||||
Interest expense, net | (33,630 | ) | ||||||||||||||
Income from operations before income taxes | $ | 35,320 | ||||||||||||||
Six Months Ended June 30, 2008 | ||||||||||||||||
Specialty | Outpatient | |||||||||||||||
Hospitals | Rehabilitation | All Other | ||||||||||||||
Adjusted EBITDA | $ | 118,480 | $ | 43,843 | $ | (23,039 | ) | |||||||||
Depreciation and amortization | (21,876 | ) | (11,701 | ) | (1,750 | ) | ||||||||||
Stock compensation expense | — | — | (1,192 | ) | ||||||||||||
Income (loss) from operations | $ | 96,604 | $ | 32,142 | $ | (25,981 | ) | $ | 102,765 | |||||||
Interest expense, net | (73,268 | ) | ||||||||||||||
Income from operations before income taxes | $ | 29,497 | ||||||||||||||
Six Months Ended June 30, 2009 | ||||||||||||||||
Specialty | Outpatient | |||||||||||||||
Hospitals | Rehabilitation | All Other | ||||||||||||||
Adjusted EBITDA | $ | 147,741 | $ | 46,578 | $ | (25,041 | ) | |||||||||
Depreciation and amortization | (21,537 | ) | (12,397 | ) | (1,736 | ) | ||||||||||
Stock compensation expense | — | — | (594 | ) | ||||||||||||
Income (loss) from operations | $ | 126,204 | $ | 34,181 | $ | (27,371 | ) | $ | 133,014 | |||||||
Gain on early retirement of debt | 15,316 | |||||||||||||||
Interest expense, net | (68,250 | ) | ||||||||||||||
Income from operations before income taxes | $ | 80,080 | ||||||||||||||
8. | Net Income per Share |
F-53
For the Quarter Ended June 30, | For the Six Months Ended June 30, | |||||||||||||||
2008 | 2009 | 2008 | 2009 | |||||||||||||
(in thousands, except per share data) | ||||||||||||||||
Numerator: | ||||||||||||||||
Net income attributable to Select Medical Holdings Corporation | $ | 5,753 | $ | 19,792 | $ | 14,453 | $ | 44,788 | ||||||||
Less: Preferred stock dividends | 6,195 | 6,508 | 12,279 | 12,870 | ||||||||||||
Less: Earnings (loss) allocated to preferred stockholders | (44 | ) | 1,296 | 212 | 3,115 | |||||||||||
Less: Earnings allocated to unvested restricted stockholders | — | 161 | 75 | 443 | ||||||||||||
Income (loss) available to common and preferred stockholders — basic and diluted | $ | (398 | ) | $ | 11,827 | $ | 1,887 | $ | 28,360 | |||||||
Denominator: | ||||||||||||||||
Weighted average shares — basic | 198,038 | 202,106 | 197,270 | 201,698 | ||||||||||||
Effect of dilutive securities: | ||||||||||||||||
Stock options | — | 1,605 | — | 1,608 | ||||||||||||
Weighted average shares — diluted | 198,038 | 203,711 | 197,270 | 203,306 | ||||||||||||
Basic income (loss) per common share | $ | (0.00 | ) | $ | 0.06 | $ | 0.01 | $ | 0.14 | |||||||
Diluted income (loss) per common share | $ | (0.00 | ) | $ | 0.06 | $ | 0.01 | $ | 0.14 |
For the | For the | |||||||||||||||
Quarter | Six Months | |||||||||||||||
Ended June 30, | Ended June 30, | |||||||||||||||
2008 | 2009 | 2008 | 2009 | |||||||||||||
(in thousands) | ||||||||||||||||
Stock options | 4,654 | 470 | 4,599 | 453 |
F-54
9. | Fair Value of Financial Instruments |
F-55
10. | Early Retirement of Debt |
11. | Commitments and Contingencies |
F-56
12. | Subsequent Events |
F-57
Item 13. | Other Expenses of Issuance and Distribution. |
SEC registration fee | $ | 30,435 | ||
FINRA filing fee | 58,000 | |||
New York Stock Exchange listing fee | 250,000 | |||
Accounting fees and expenses | 400,000 | |||
Legal fees and expenses | 1,940,000 | |||
Printing and engraving expenses | 470,000 | |||
Transfer agent fees | 5,000 | |||
Miscellaneous | 146,565 | |||
Total | $ | 3,300,000 | ||
Item 14. | Indemnification of Directors and Officers. |
II-1
Item 15. | Recent Sales of Unregistered Securities. |
Item 16. | Exhibits and Financial Statement Schedules. |
Exhibit | ||||
Number | Document | |||
1 | .1* | Form of Underwriting Agreement. |
II-2
Exhibit | ||||
Number | Document | |||
2 | .1 | Stock Purchase Agreement, dated as of January 27, 2007, between HealthSouth Corporation and Select Medical Corporation, incorporated by reference to Exhibit 2.1 of Select Medical Corporation’s Current Report on Form 8-K filed January 30, 2007 (Reg. No. 001-31441). | ||
2 | .2 | Letter Agreement, dated as of May 1, 2007, between HealthSouth Corporation and Select Medical Corporation, incorporated by reference to Exhibit 2.2 of Select Medical Corporation’s Current Report on Form 8-K filed May 7, 2007 (Reg. No. 001-31441). | ||
2 | .3 | Acquisition Agreement, dated as of December 23, 2005, between Select Medical Corporation, SLMC Finance Corporation and Callisto Capital L.P., incorporated by reference to Exhibit 2.1 of Select Medical Corporation’s Current Report on Form 8-K filed December 28, 2005 (Reg. No. 001-31441). | ||
2 | .4 | Amendment to Acquisition Agreement, dated as of February 9, 2006, among Select Medical Corporation, SLMC Finance Corporation, Callisto Capital L.P. and Canadian Back Institute Limited, incorporated by reference to Exhibit 2.1 of Select Medical Corporation’s Current Report on Form 8-K filed February 10, 2006 (Reg. No. 001-31441). | ||
3 | .3* | Restated Certificate of Incorporation of Select Medical Holdings Corporation. | ||
3 | .4* | Amended and Restated Bylaws of Select Medical Holdings Corporation. | ||
4 | .1 | Registration Rights Agreement, dated as of February 24, 2005, among Select Medical Holdings Corporation, Welsh, Carson, Anderson & Stowe IX, L.P., WCAS Capital Partners IV, L.P., each of the entities and individuals listed on Schedule I thereto and each of the other entities and individuals from time to time listed on Schedule II thereto, incorporated by reference to Exhibit 10.77 of Select Medical Holdings Corporation’s Form S-4 filed April 13, 2006 (Reg. No. 333-133284). | ||
4 | .2* | Form of Common Stock Certificate. | ||
5 | .1* | Opinion of Dechert LLP. | ||
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 16, 2005 (Reg. No. 333-125846). | ||
10 | .2 | Guarantee and Collateral Agreement, dated as of February 24, 2005, among Select Medical Holdings Corporation, Select Medical Corporation, the Subsidiaries of Select Medical Corporation 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 16, 2005 (Reg. No. 333-125846). | ||
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 filed October 27, 2000 (Reg. No. 333-48856). | ||
10 | .4 | Amendment No. 1, dated as of January 1, 2000, to Amended and Restated Senior Management Agreement, dated as of 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 filed October 27, 2000 (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 filed October 27, 2000 (Reg. No. 333-48856). | ||
10 | .6 | Amendment No. 1 to Employment Agreement, dated as of August 8, 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 filed October 27, 2000 (Reg. No. 333-48856). |
II-3
Exhibit | ||||
Number | Document | |||
10 | .7 | Amendment No. 2 to Employment Agreement, dated as of February 23, 2001, 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 March 30, 2001 (Reg. No. 333-48856). | ||
10 | .8 | Amendment No. 3 to Employment Agreement, dated as of April 24, 2001, 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 filed June 26, 2001 (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(Reg. No. 000-32499). | ||
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 16, 2005 (Reg. No. 333-125846). | ||
10 | .11** | Restricted Stock Award Agreement, dated as of February 24, 2005, between Select Medical Holdings Corporation and Rocco A. Ortenzio. | ||
10 | .12** | Restricted Stock Award Agreement, dated as of November 8, 2005, between Select Medical Holdings Corporation and Rocco A. Ortenzio. | ||
10 | .13 | 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 filed October 27, 2000 (Reg. No. 333-48856). | ||
10 | .14 | Amendment No. 1 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 filed October 27, 2000 (Reg. No. 333-48856). | ||
10 | .15 | 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 filed March 30, 2001 (Reg. No. 333-48856). | ||
10 | .16 | 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(Reg. No. 000-32499). | ||
10 | .17 | 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 Current Report on Form 8-K filed December 16, 2004 (Reg. No. 001-31441). | ||
10 | .18 | 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 16, 2005 (Reg. No. 333-125846). | ||
10 | .19** | Restricted Stock Award Agreement, dated as of February 24, 2005, between Select Medical Holdings Corporation and Robert A. Ortenzio. | ||
10 | .20** | Restricted Stock Award Agreement, dated as of November 8, 2005, between Select Medical Holdings Corporation and Robert A. Ortenzio. | ||
10 | .21 | 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 filed October 27, 2000 (Reg. No. 333-48856). | ||
10 | .22 | Amendment No. 1 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 filed October 27, 2000 (Reg. No. 333-48856). |
II-4
Exhibit | ||||
Number | Document | |||
10 | .23 | 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 filed March 30, 2001 (Reg. No. 333-48856). | ||
10 | .24 | 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 Current Report on Form 8-K filed December 16, 2004 (Reg. No. 001-31441). | ||
10 | .25 | 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 16, 2005 (Reg. No. 333-125846). | ||
10 | .26 | 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 16, 2005 (Reg. No. 333-125846). | ||
10 | .27** | Amendment No. 6 to Employment Agreement, dated as of February 13, 2008, between Select Medical Corporation and Patricia A. Rice. | ||
10 | .28** | Restricted Stock Award Agreement, dated as of February 24, 2005, between Select Medical Corporation and Patricia A. Rice. | ||
10 | .29** | Amendment No. 1 to Restricted Stock Award Agreement, dated as of February 13, 2008, between Select Medical Corporation and Patricia A. Rice. | ||
10 | .30 | 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 filed October 27, 2000 (Reg. No. 333-48856). | ||
10 | .31 | 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 filed March 30, 2001 (Reg. No. 333-48856). | ||
10 | .32 | 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 16, 2005 (Reg. No. 333-125846). | ||
10 | .33** | Restricted Stock Award Agreement, dated as of February 24, 2005, between Select Medical Holdings Corporation and Martin F. Jackson. | ||
10 | .34 | 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 filed October 27, 2000 (Reg. No. 333-48856). | ||
10 | .35 | First Amendment to Employment Agreement, dated as of October 15, 2000 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 filed October 27, 2000 (Reg. No. 333-48856). | ||
10 | .36 | 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 (Reg. No. 000-32499). | ||
10 | .37 | 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 16, 2005 (Reg. No. 333-125846). | ||
10 | .38 | 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 filed October 27, 2000 (Reg. No. 333-48856). | ||
10 | .39 | 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 filed October 27, 2000 (Reg. No. 333-48856). |
II-5
Exhibit | ||||
Number | Document | |||
10 | .40 | 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 filed March 30, 2001 (Reg. No. 333-48856). | ||
10 | .41 | 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 16, 2005 (Reg. No. 333-125846). | ||
10 | .42** | Restricted Stock Award Agreement, dated as of February 24, 2005, between Select Medical Holdings Corporation and S. Frank Fritsch. | ||
10 | .43 | 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 (Reg. No. 000-32499). | ||
10 | .44 | 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 (Reg. No. 000-32499). | ||
10 | .45 | 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 16, 2005 (Reg. No. 333-125846). | ||
10 | .46 | 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 filed October 27, 2000 (Reg. No. 333-48856). | ||
10 | .47 | 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 filed October 27, 2000 (Reg. No. 333-48856). | ||
10 | .48 | 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 filed March 30, 2001 (Reg. No. 333-48856). | ||
10 | .49 | 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 16, 2005 (Reg. No. 333-125846). | ||
10 | .50 | 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 (Reg. No. 000-32499). | ||
10 | .51 | 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 (Reg. No. 000-32499). | ||
10 | .52 | 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 16, 2005 (Reg. No. 333-125846). | ||
10 | .53 | 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 16, 2005 (Reg. No. 333-125846). | ||
10 | .54** | Form of Unit Award Agreement. | ||
10 | .55 | 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 (Reg. No. 001-31441). |
II-6
Exhibit | ||||
Number | Document | |||
10 | .56 | 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 16, 2005 (Reg. No. 333-125846). | ||
10 | .57 | Office Lease Agreement, dated as of May 18, 1999, between Select Medical Corporation and Old Gettysburg Associates, incorporated by reference to Exhibit 10.24 of Select Medical Corporation’s Registration Statement on Form S-1 filed October 27, 2000 (Reg. No. 333-48856). | ||
10 | .58 | First Addendum to Lease Agreement, dated as of June 1999, between Select Medical Corporation and Old Gettysburg Associates, incorporated by reference to Exhibit 10.25 of Select Medical Corporation’s Registration Statement on Form S-1 filed October 27, 2000 (Reg. No. 333-48856). | ||
10 | .59 | Second Addendum to Lease Agreement, dated as of February 1, 2000, between Select Medical Corporation and Old Gettysburg Associates, incorporated by reference to Exhibit 10.26 of Select Medical Corporation’s Registration Statement on Form S-1 filed October 27, 2000 (Reg. No. 333-48856). | ||
10 | .60 | Third Addendum to Lease Agreement, dated as of May 17, 2001, between Select Medical Corporation and Old Gettysburg Associates, incorporated by reference to Exhibit 10.52 of Select Medical Corporation’s Registration Statement on Form S-4 filed June 26, 2001 (Reg. No. 333-63828). | ||
10 | .61 | 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 (Reg. No. 000-32499). | ||
10 | .62 | 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 16, 2005 (Reg. No. 333-125846). | ||
10 | .63** | Sixth Addendum to Lease Agreement, dated as of April 25, 2008, by and between Old Gettysburg Associates and Select Medical Corporation. | ||
10 | .64 | 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 filed October 27, 2000 (Reg. No. 333-48856). | ||
10 | .65** | First Addendum to Lease Agreement, dated as of April 25, 2008, between Old Gettysburg Associates III and Select Medical Corporation. | ||
10 | .66 | 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 filed June 26, 2001 (Reg. No. 333-63828). | ||
10 | .67 | First Addendum to Lease Agreement, dated as of February 26, 2002, by and between Old Gettysburg Associates II and Select Medical Corporation, 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 (Reg. No. 000-32499). | ||
10 | .68 | Second Addendum to Lease Agreement, dated as of February 26, 2002, by and between Old Gettysburg Associates II and Select Medical Corporation, 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 (Reg. No. 000-32499). | ||
10 | .69 | Third Addendum to Lease Agreement, dated as of February 26, 2002, by and between Old Gettysburg Associates II and Select Medical Corporation, 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 (Reg. No. 000-32499). | ||
10 | .70** | Fourth Addendum to Lease Agreement, dated as of October 1, 2008, by and between Old Gettysburg Associates II and Select Medical Corporation. |
II-7
Exhibit | ||||
Number | Document | |||
10 | .71** | Fifth Addendum to Lease Agreement, dated April 13, 2009, by and between Old Gettysburg Associates II and Select Medical Corporation. | ||
10 | .72 | 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 (Reg. No. 001-31441). | ||
10 | .73** | First Addendum to Lease Agreement, dated November 1, 2008, by and between Select Medical Corporation and Old Gettysburg Associates. | ||
10 | .74** | Second Addendum to Lease Agreement, dated April 13, 2009, by and between Select Medical Corporation and Old Gettysburg Associates. | ||
10 | .75 | 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 10.75 of Select Medical Corporation’s Annual Report on Form 10-K for the fiscal year ended December 31, 2003 (Reg. No. 001-31441). | ||
10 | .76** | First Addendum to Lease Agreement, dated October 1, 2008, by and between Select Medical Corporation and Old Gettysburg Associates II. | ||
10 | .77** | Second Addendum to Lease Agreement, dated April 13, 2009, by and between Select Medical Corporation and Old Gettysburg Associates II, LP. | ||
10 | .78 | 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 (Reg. No. 001-31441). | ||
10 | .79 | 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 (Reg. No. 001-31441). | ||
10 | .80** | First Addendum to Lease Agreement, dated March 6, 2009, by and between Old Gettysburg Associates II, LP and Select Medical Corporation. | ||
10 | .81** | Second Addendum to Lease Agreement, dated April 13, 2009, by and between Old Gettysburg Associates II, LP and Select Medical Corporation. | ||
10 | .82 | 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 Quarterly Report on Form 10-Q for the quarter ended September 30, 2006 (Reg. No. 001-31441). | ||
10 | .83 | Office Lease Agreement, dated August 10, 2005, among Old Gettysburg Associates II and Select Medical Corporation, incorporated by reference to Exhibit 10.1 of Select Medical Corporation’s Current Report on Form 8-K filed August 16, 2005 (Reg. No. 001-31441). | ||
10 | .84** | First Addendum to Lease Agreement, dated April 13, 2009, by and between Old Gettysburg Associates II and Select Medical Corporation. | ||
10 | .85** | Office Lease Agreement, dated October 5, 2006, by and between Select Medical Corporation and Old Gettysburg Associates. | ||
10 | .86 | 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 filed December 7, 2000 (Reg. No. 333-48856). | ||
10 | .87 | 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 16, 2005 (Reg. No. 333-125846). | ||
10 | .88* | Select Medical Holdings Corporation 2005 Equity Incentive Plan, as amended and restated. |
II-8
Exhibit | ||||
Number | Document | |||
10 | .89* | Select Medical Holdings Corporation 2005 Equity Incentive Plan for Non-Employee Directors, as amended and restated. | ||
10 | .90** | Select Medical Holdings Corporation Long Term Cash Incentive Plan, as amended. | ||
10 | .91** | First Amendment to Select Medical Holdings Corporation Long Term Cash Incentive Plan, dated as of August 20, 2008. | ||
10 | .92** | Second Amendment to Select Medical Holdings Corporation Long Term Cash Incentive Plan, dated as of August 12, 2009. | ||
10 | .93** | Second Amendment to Employment Agreement, dated as of October 26, 2001 between Select Medical Corporation and David W. Cross. | ||
10 | .94** | Third Amendment to Employment Agreement, dated as of November 1, 2002 between Select Medical Corporation and David W. Cross. | ||
10 | .95** | Fourth Amendment to Employment Agreement, dated as of December 31, 2003 between Select Medical Corporation and David W. Cross. | ||
10 | .96** | Amendment No. 6 to Employment Agreement between Select Medical Corporation and Rocco A. Ortenzio. | ||
10 | .97** | Amendment No. 6 to Employment Agreement between Select Medical Corporation and Robert A. Ortenzio. | ||
10 | .98** | Amendment No. 7 to Employment Agreement between Select Medical Corporation and Patricia A. Rice. | ||
10 | .99** | Sixth Amendment to Employment Agreement between Select Medical Corporation and David W. Cross. | ||
10 | .100** | Second Amendment to Change of Control Agreement between Select Medical Corporation and David W. Cross. | ||
10 | .101** | Third Amendment to Change of Control Agreement between Select Medical Corporation and Michael E. Tarvin. | ||
10 | .102** | Third Amendment to Change of Control Agreement between Select Medical Corporation and James J. Talalai. | ||
10 | .103** | Third Amendment to Change of Control Agreement between Select Medical Corporation and Scott A. Romberger. | ||
10 | .104** | Third Amendment to Change of Control Agreement between Select Medical Corporation and Martin F. Jackson. | ||
10 | .105** | Third Amendment to Change of Control Agreement between Select Medical Corporation and S. Frank Fritsch. | ||
10 | .106 | 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 Quarterly Report on Form 10-Q for the quarter ended September 30, 2005 (Reg. No. 001-31441). | ||
10 | .107 | Amendment No. 2 and Waiver, dated as of March 19, 2007, 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 10.1 of Select Medical Corporation’s Current Report on Form 8-K filed March 23, 2007 (Reg. No. 001-31441). |
II-9
Exhibit | ||||
Number | Document | |||
10 | .108 | Incremental Facility Amendment, dated as of March 28, 2007, 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 10.1 of Select Medical Corporation’s Current Report on Form 8-K filed March 30, 2007 (Reg. No. 001-31441). | ||
10 | .109** | Amendment No. 3, dated as of August 5, 2009, 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. | ||
10 | .110 | 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 16, 2005 (Reg. No. 333-125846). | ||
10 | .111 | Form of 75/8% Senior Subordinated Notes due 2015 (included in Exhibit 4.4), incorporated by reference to Select Medical Corporation’s Form S-4 filed June 16, 2005 (Reg. No. 333-125846). | ||
10 | .112 | 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 16, 2005 (Reg. No. 333-125846). | ||
10 | .113 | Registration Rights Agreement, dated as of February 24, 2005, between Select Medical Holdings Corporation, WCAS Capital Partners IV, L.P., Rocco A. Ortenzio, Robert A. Ortenzio, John M. Ortenzio, Martin J. Ortenzio, Martin J. Ortenzio Descendants Trust and Ortenzio Family Foundation, incorporated by reference to Exhibit 10.78 of Select Medical Holdings Corporation’s Form S-4 filed April 13, 2006 (Reg. No. 333-133284). | ||
10 | .114 | 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 13, 2006 (Reg. No. 333-133284). | ||
10 | .115 | Form of Senior Floating Rate Notes due 2015 (included in Exhibit 4.7), incorporated by reference to Select Medical Holdings Corporation’s Form S-4 filed April 13, 2006 (Reg. No. 333-133284). | ||
10 | .116 | Exchange and Registration Rights Agreement, dated as of September 29, 2005, by and among Select Medical Holdings Corporation, Merrill Lynch, Pierce, Fenner & Smith Incorporated, Wachovia Capital Markets, LLC and J.P. Morgan Securities Inc., incorporated by reference to Exhibit 4.9 of Select Medical Holdings Corporation’s Form S-4 filed April 13, 2006 (Reg. No. 333-133284). | ||
10 | .117 | 10% Senior Subordinated Note due December 31, 2015 in favor of WCAS Capital Partners IV, L.P., amended and restated as of September 29, 2005, incorporated by reference to Exhibit 10.69 of Select Medical Holdings Corporation’s Form S-4 filed April 13, 2006 (Reg. No. 333-133284). | ||
10 | .118 | 10% Senior Subordinated Note due December 31, 2015 in favor of Rocco A. Ortenzio, amended and restated as of September 29, 2005, incorporated by reference to Exhibit 10.70 of Select Medical Holdings Corporation’s Form S-4 filed April 13, 2006 (Reg. No. 333-133284). | ||
10 | .119 | 10% Senior Subordinated Note due December 31, 2015 in favor of Robert A. Ortenzio, amended and restated as of September 29, 2005, incorporated by reference to Exhibit 10.71 of Select Medical Holdings Corporation’s Form S-4 filed April 13, 2006 (Reg. No. 333-133284). | ||
10 | .120 | 10% Senior Subordinated Note due December 31, 2015 in favor of John M. Ortenzio, amended and restated as of September 29, 2005, incorporated by reference to Exhibit 10.72 of Select Medical Holdings Corporation’s Form S-4 filed April 13, 2006 (Reg. No. 333-133284). |
II-10
Exhibit | ||||
Number | Document | |||
10 | .121 | 10% Senior Subordinated Note due December 31, 2015 in favor of Martin J. Ortenzio, amended and restated as of September 29, 2005, incorporated by reference to Exhibit 10.73 of Select Medical Holdings Corporation’s Form S-4 filed April 13, 2006 (Reg. No. 333-133284). | ||
10 | .122 | 10% Senior Subordinated Note due December 31, 2015 in favor of Martin J. Ortenzio Descendants Trust, amended and restated as of September 29, 2005, incorporated by reference to Exhibit 10.74 of Select Medical Holdings Corporation’s Form S-4 filed April 13, 2006 (Reg. No. 333-133284). | ||
10 | .123 | 10% Senior Subordinated Note due December 31, 2015 in favor of Ortenzio Family Foundation, amended and restated as of September 29, 2005, incorporated by reference to Exhibit 10.75 of Select Medical Holdings Corporation’s Form S-4 filed April 13, 2006 (Reg. No. 333-133284). | ||
10 | .124 | Letter Agreement, dated November 12, 2007, by and among Select Medical Corporation, SLMC Finance Corporation, Cedar Cliff Acquisition Corporation, CORA Health Services, Inc. and Brad C. Roush, as Stockholders’ Agent, incorporated by reference to Exhibit 99.1 of Select Medical Corporation’s Current Report on Form 8-K filed November 13, 2007 (Reg. No. 001-31441). | ||
10 | .125 | Letter Agreement, dated June 7, 2007, by and among Select Medical Corporation, Nexus Health Systems, Inc., Neurobehavioral Management Services L.L.C., and Nexus Health Inc, incorporated by reference to Exhibit 99.1 of Select Medical Corporation’s Current Report on Form 8-K filed June 8, 2007 (Reg. No. 001-31441). | ||
21 | .1** | Subsidiaries of Select Medical Holdings Corporation. | ||
23 | .1 | Consent of PricewaterhouseCoopers LLP. | ||
23 | .2* | Consent of Dechert LLP (included in Exhibit 5.1). | ||
24 | .1** | Powers of Attorney (see signature pages to Amendment No. 1 to the Registration Statement). | ||
24 | .2** | Power of Attorney for James S. Ely III. |
* | To be filed by amendment. |
** | Previously filed. |
Item 17. | Undertakings. |
II-11
II-12
By: | /s/ Michael E. Tarvin |
and Secretary
Signature | Title | Date | ||||
* Rocco A. Ortenzio | Director and Executive Chairman | September 8, 2009 | ||||
* Robert A Ortenzio | Director and Chief Executive Officer (principal executive officer) | September 8, 2009 | ||||
* Martin F. Jackson | Executive Vice President and Chief Financial Officer (principal financial officer) | September 8, 2009 | ||||
* Scott A. Romberger | Senior Vice President, Controller and Chief Accounting Officer (principal accounting officer) | September 8, 2009 | ||||
* Russell L. Carson | Director | September 8, 2009 | ||||
* David S. Chernow | Director | September 8, 2009 | ||||
* Bryan C. Cressey | Director | September 8, 2009 | ||||
* James E. Dalton, Jr. | Director | September 8, 2009 |
II-13
Signature | Title | Date | ||||
* James S. Ely III | Director | September 8, 2009 | ||||
* Thomas A. Scully | Director | September 8, 2009 | ||||
* Leopold Swergold | Director | September 8, 2009 | ||||
* Sean M. Traynor | Director | September 8, 2009 | ||||
*By | /s/ Michael E. Tarvin Name: Michael E. Tarvin Title: Attorney-in-fact |
II-14
Exhibit | ||||
Number | Document | |||
1 | .1* | Form of Underwriting Agreement. | ||
2 | .1 | Stock Purchase Agreement, dated as of January 27, 2007, between HealthSouth Corporation and Select Medical Corporation, incorporated by reference to Exhibit 2.1 of Select Medical Corporation’s Current Report on Form 8-K filed January 30, 2007 (Reg. No. 001-31441). | ||
2 | .2 | Letter Agreement, dated as of May 1, 2007, between HealthSouth Corporation and Select Medical Corporation, incorporated by reference to Exhibit 2.2 of Select Medical Corporation’s Current Report on Form 8-K filed May 7, 2007 (Reg. No. 001-31441). | ||
2 | .3 | Acquisition Agreement, dated as of December 23, 2005, between Select Medical Corporation, SLMC Finance Corporation and Callisto Capital L.P., incorporated by reference to Exhibit 2.1 of Select Medical Corporation’s Current Report on Form 8-K filed December 28, 2005 (Reg. No. 001-31441). | ||
2 | .4 | Amendment to Acquisition Agreement, dated as of February 9, 2006, among Select Medical Corporation, SLMC Finance Corporation, Callisto Capital L.P. and Canadian Back Institute Limited, incorporated by reference to Exhibit 2.1 of Select Medical Corporation’s Current Report on Form 8-K filed February 10, 2006 (Reg. No. 001-31441). | ||
3 | .3* | Restated Certificate of Incorporation of Select Medical Holdings Corporation. | ||
3 | .4* | Amended and Restated Bylaws of Select Medical Holdings Corporation. | ||
4 | .1 | Registration Rights Agreement, dated as of February 24, 2005, among Select Medical Holdings Corporation, Welsh, Carson, Anderson & Stowe IX, L.P., WCAS Capital Partners IV, L.P., each of the entities and individuals listed on Schedule I thereto and each of the other entities and individuals from time to time listed on Schedule II thereto, incorporated by reference to Exhibit 10.77 of Select Medical Holdings Corporation’s Form S-4 filed April 13, 2006 (Reg. No. 333-133284). | ||
4 | .2* | Form of Common Stock Certificate. | ||
5 | .1* | Opinion of Dechert LLP. | ||
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 16, 2005 (Reg. No. 333-125846). | ||
10 | .2 | Guarantee and Collateral Agreement, dated as of February 24, 2005, among Select Medical Holdings Corporation, Select Medical Corporation, the Subsidiaries of Select Medical Corporation 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 16, 2005 (Reg. No. 333-125846). | ||
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 filed October 27, 2000 (Reg. No. 333-48856). | ||
10 | .4 | Amendment No. 1, dated as of January 1, 2000, to Amended and Restated Senior Management Agreement, dated as of 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 filed October 27, 2000 (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 filed October 27, 2000 (Reg. No. 333-48856). | ||
10 | .6 | Amendment No. 1 to Employment Agreement, dated as of August 8, 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 filed October 27, 2000 (Reg. No. 333-48856). |
II-15
Exhibit | ||||
Number | Document | |||
10 | .7 | Amendment No. 2 to Employment Agreement, dated as of February 23, 2001, 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 filed March 30, 2001 (Reg. No. 333-48856). | ||
10 | .8 | Amendment No. 3 to Employment Agreement, dated as of April 24, 2001, 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 filed June 26, 2001 (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 (Reg. No. 000-32499). | ||
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 16, 2005 (Reg. No. 333-125846). | ||
10 | .11** | Restricted Stock Award Agreement, dated as of February 24, 2005, between Select Medical Holdings Corporation and Rocco A. Ortenzio. | ||
10 | .12** | Restricted Stock Award Agreement, dated as of November 8, 2005, between Select Medical Holdings Corporation and Rocco A. Ortenzio. | ||
10 | .13 | 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 filed October 27, 2000 (Reg. No. 333-48856). | ||
10 | .14 | Amendment No. 1 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 filed October 27, 2000 (Reg. No. 333-48856). | ||
10 | .15 | 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 filed March 30, 2001 (Reg. No. 333-48856). | ||
10 | .16 | 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 (Reg. No. 000-32499). | ||
10 | .17 | 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 Current Report on Form 8-K filed December 16, 2004 (Reg. No. 001-31441). | ||
10 | .18 | 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 16, 2005 (Reg. No. 333-125846). | ||
10 | .19** | Restricted Stock Award Agreement, dated as of February 24, 2005, between Select Medical Holdings Corporation and Robert A. Ortenzio. | ||
10 | .20** | Restricted Stock Award Agreement, dated as of November 8, 2005, between Select Medical Holdings Corporation and Robert A. Ortenzio. | ||
10 | .21 | 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 filed October 27, 2000 (Reg. No. 333-48856). | ||
10 | .22 | Amendment No. 1 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 filed October 27, 2000 (Reg. No. 333-48856). |
II-16
Exhibit | ||||
Number | Document | |||
10 | .23 | 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 filed March 30, 2001 (Reg. No. 333-48856). | ||
10 | .24 | 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 Current Report on Form 8-K filed December 16, 2004 (Reg. No. 001-31441). | ||
10 | .25 | 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 16, 2005 (Reg. No. 333-125846). | ||
10 | .26 | 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 16, 2005 (Reg. No. 333-125846). | ||
10 | .27** | Amendment No. 6 to Employment Agreement, dated as of February 13, 2008, between Select Medical Corporation and Patricia A. Rice. | ||
10 | .28** | Restricted Stock Award Agreement, dated as of February 24, 2005, between Select Medical Corporation and Patricia A. Rice. | ||
10 | .29** | Amendment No. 1 to Restricted Stock Award Agreement, dated as of February 13, 2008, between Select Medical Corporation and Patricia A. Rice. | ||
10 | .30 | 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 filed October 27, 2000 (Reg. No. 333-48856). | ||
10 | .31 | 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 filed March 30, 2001 (Reg. No. 333-48856). | ||
10 | .32 | 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 16, 2005 (Reg. No. 333-125846). | ||
10 | .33** | Restricted Stock Award Agreement, dated as of February 24, 2005, between Select Medical Holdings Corporation and Martin F. Jackson. | ||
10 | .34 | 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 filed October 27, 2000 (Reg. No. 333-48856). | ||
10 | .35 | First Amendment to Employment Agreement, dated as of October 15, 2000, 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 filed October 27, 2000 (Reg. No. 333-48856). | ||
10 | .36 | 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 (Reg. No. 000-32499). | ||
10 | .37 | 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 16, 2005 (Reg. No. 333-125846). | ||
10 | .38 | 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 filed October 27, 2000 (Reg. No. 333-48856). | ||
10 | .39 | 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 filed October 27, 2000 (Reg. No. 333-48856). |
II-17
Exhibit | ||||
Number | Document | |||
10 | .40 | 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 filed March 30, 2001 (Reg. No. 333-48856). | ||
10 | .41 | 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 16, 2005 (Reg. No. 333-125846). | ||
10 | .42** | Restricted Stock Award Agreement, dated as of February 24, 2005, between Select Medical Holdings Corporation and S. Frank Fritsch. | ||
10 | .43 | 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 (Reg. No. 000-32499). | ||
10 | .44 | 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 (Reg. No. 000-32499). | ||
10 | .45 | 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 16, 2005 (Reg. No. 333-125846). | ||
10 | .46 | 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 filed October 27, 2000 (Reg. No. 333-48856). | ||
10 | .47 | 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 filed October 27, 2000 (Reg. No. 333-48856). | ||
10 | .48 | 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 filed March 30, 2001 (Reg. No. 333-48856). | ||
10 | .49 | 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 16, 2005 (Reg. No. 333-125846). | ||
10 | .50 | 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 (Reg. No. 000-32499). | ||
10 | .51 | 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 (Reg. No. 000-32499). | ||
10 | .52 | 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 16, 2005 (Reg. No. 333-125846). | ||
10 | .53 | 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 16, 2005 (Reg. No. 333-125846). | ||
10 | .54** | Form of Unit Award Agreement. | ||
10 | .55 | 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 (Reg. No. 001-31441). |
II-18
Exhibit | ||||
Number | Document | |||
10 | .56 | 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 16, 2005 (Reg. No. 333-125846). | ||
10 | .57 | Office Lease Agreement, dated as of May 18, 1999, between Select Medical Corporation and Old Gettysburg Associates, incorporated by reference to Exhibit 10.24 of Select Medical Corporation’s Registration Statement on Form S-1 filed October 27, 2000 (Reg. No. 333-48856). | ||
10 | .58 | First Addendum to Lease Agreement, dated as of June 1999, between Select Medical Corporation and Old Gettysburg Associates, incorporated by reference to Exhibit 10.25 of Select Medical Corporation’s Registration Statement on Form S-1 filed October 27, 2000 (Reg. No. 333-48856). | ||
10 | .59 | Second Addendum to Lease Agreement, dated as of February 1, 2000, between Select Medical Corporation and Old Gettysburg Associates, incorporated by reference to Exhibit 10.26 of Select Medical Corporation’s Registration Statement on Form S-1 filed October 27, 2000 (Reg. No. 333-48856). | ||
10 | .60 | Third Addendum to Lease Agreement, dated as of May 17, 2001, between Select Medical Corporation and Old Gettysburg Associates, incorporated by reference to Exhibit 10.52 of Select Medical Corporation’s Registration Statement on Form S-4 filed June 26, 2001 (Reg. No. 333-63828). | ||
10 | .61 | 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 (Reg. No. 000-32499). | ||
10 | .62 | 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 16, 2005 (Reg. No. 333-125846). | ||
10 | .63** | Sixth Addendum to Lease Agreement, dated as of April 25, 2008, by and between Old Gettysburg Associates and Select Medical Corporation. | ||
10 | .64 | 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 filed October 27, 2000 (Reg. No. 333-48856). | ||
10 | .65** | First Addendum to Lease Agreement, dated as of April 25, 2008, between Old Gettysburg Associates III and Select Medical Corporation. | ||
10 | .66 | 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 filed June 26, 2001 (Reg. No. 333-63828). | ||
10 | .67 | First Addendum to Lease Agreement, dated as of February 26, 2002, by and between Old Gettysburg Associates II and Select Medical Corporation, 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 (Reg. No. 000-32499). | ||
10 | .68 | Second Addendum to Lease Agreement, dated as of February 26, 2002, by and between Old Gettysburg Associates II and Select Medical Corporation, 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 (Reg. No. 000-32499). | ||
10 | .69 | Third Addendum to Lease Agreement, dated as of February 26, 2002, by and between Old Gettysburg Associates II and Select Medical Corporation, 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 (Reg. No. 000-32499). | ||
10 | .70** | Fourth Addendum to Lease Agreement, dated as of October 1, 2008, by and between Old Gettysburg Associates II and Select Medical Corporaton. |
II-19
Exhibit | ||||
Number | Document | |||
10 | .71** | Fifth Addendum to Lease Agreement, dated April 13, 2009, by and between Old Gettysburg Associates II and Select Medical Corporation. | ||
10 | .72 | 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 (Reg. No. 001-31441). | ||
10 | .73** | First Addendum to Lease Agreement, dated November 1, 2008, by and between Select Medical Corporation and Old Gettysburg Associates. | ||
10 | .74** | Second Addendum to Lease Agreement, dated April 13, 2009, by and between Select Medical Corporation and Old Gettysburg Associates. | ||
10 | .75 | 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 10.75 of Select Medical Corporation’s Annual Report on Form 10-K for the fiscal year ended December 31, 2003 (Reg. No. 001-31441). | ||
10 | .76** | First Addendum to Lease Agreement, dated October 1, 2008, by and between Select Medical Corporation and Old Gettysburg Associates II. | ||
10 | .77** | Second Addendum to Lease Agreement, dated April 13, 2009, by and between Select Medical Corporation and Old Gettysburg Associates II, LP. | ||
10 | .78 | 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 (Reg. No. 001-31441). | ||
10 | .79 | 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 (Reg. No. 001-31441). | ||
10 | .80** | First Addendum to Lease Agreement, dated March 6, 2009, by and between Old Gettysburg Associates II, LP and Select Medical Corporation. | ||
10 | .81** | Second Addendum to Lease Agreement, dated April 13, 2009, by and between Old Gettysburg Associates II, LP and Select Medical Corporation. | ||
10 | .82 | 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 Quarterly Report onForm 10-Q for the quarter ended September 30, 2006 (Reg. No. 001-31441). | ||
10 | .83 | Office Lease Agreement, dated August 10, 2005, among Old Gettysburg Associates II and Select Medical Corporation, incorporated by reference to Exhibit 10.1 of Select Medical Corporation’s Current Report on Form 8-K filed August 16, 2005 (Reg. No. 001-31441). | ||
10 | .84** | First Addendum to Lease Agreement, dated April 13, 2009, by and between Old Gettysburg Associates II and Select Medical Corporation. | ||
10 | .85** | Office Lease Agreement, dated October 5, 2006, by and between Select Medical Corporation and Old Gettysburg Associates. | ||
10 | .86 | 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 filed December 7, 2000 (Reg. No. 333-48856). | ||
10 | .87 | 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 16, 2005 (Reg. No. 333-125846). | ||
10 | .88* | Select Medical Holdings Corporation 2005 Equity Incentive Plan, as amended and restated. |
II-20
Exhibit | ||||
Number | Document | |||
10 | .89* | Select Medical Holdings Corporation 2005 Equity Incentive Plan for Non-Employee Directors, as amended and restated. | ||
10 | .90** | Select Medical Holdings Corporation Long Term Cash Incentive Plan, as amended. | ||
10 | .91** | First Amendment to Select Medical Holdings Corporation Long Term Cash Incentive Plan, dated as of August 20, 2008. | ||
10 | .92** | Second Amendment to Select Medical Holdings Corporation Long Term Cash Incentive Plan, dated as of August 12, 2009. | ||
10 | .93** | Second Amendment to Employment Agreement, dated as of October 26, 2001 between Select Medical Corporation and David W. Cross. | ||
10 | .94** | Third Amendment to Employment Agreement, dated as of November 1, 2002 between Select Medical Corporation and David W. Cross. | ||
10 | .95** | Fourth Amendment to Employment Agreement, dated as of December 31, 2003 between Select Medical Corporation and David W. Cross. | ||
10 | .96** | Amendment No. 6 to Employment Agreement between Select Medical Corporation and Rocco A. Ortenzio. | ||
10 | .97** | Amendment No. 6 to Employment Agreement between Select Medical Corporation and Robert A. Ortenzio. | ||
10 | .98** | Amendment No. 7 to Employment Agreement between Select Medical Corporation and Patricia A. Rice. | ||
10 | .99** | Sixth Amendment to Employment Agreement between Select Medical Corporation and David W. Cross. | ||
10 | .100** | Second Amendment to Change of Control Agreement between Select Medical Corporation and David W. Cross. | ||
10 | .101** | Third Amendment to Change of Control Agreement between Select Medical Corporation and Michael E. Tarvin. | ||
10 | .102** | Third Amendment to Change of Control Agreement between Select Medical Corporation and James J. Talalai. | ||
10 | .103** | Third Amendment to Change of Control Agreement between Select Medical Corporation and Scott A. Romberger. | ||
10 | .104** | Third Amendment to Change of Control Agreement between Select Medical Corporation and Martin F. Jackson. | ||
10 | .105** | Third Amendment to Change of Control Agreement between Select Medical Corporation and S. Frank Fritsch. | ||
10 | .106 | 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 Quarterly Report on Form 10-Q for the quarter ended September 30, 2005 (Reg. No. 001-31441). | ||
10 | .107 | Amendment No. 2 and Waiver, dated as of March 19, 2007, 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 10.1 of Select Medical Corporation’s Current Report on Form 8-K filed March 23, 2007 (Reg. No. 001-31441). | ||
10 | .108 | Incremental Facility Amendment, dated as of March 28, 2007, 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 10.1 of Select Medical Corporation’s Current Report on Form 8-K filed March 30, 2007 (Reg. No. 001-31441). |
II-21
Exhibit | ||||
Number | Document | |||
10 | .109** | Amendment No. 3, dated as of August 5, 2009, 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. | ||
10 | .110 | 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 16, 2005 (Reg. No. 333-125846). | ||
10 | .111 | Form of 75/8% Senior Subordinated Notes due 2015 (included in Exhibit 4.4), incorporated by reference to Select Medical Corporation’s Form S-4 filed June 16, 2005 (Reg. No. 333-125846). | ||
10 | .112 | 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 16, 2005 (Reg. No. 333-125846). | ||
10 | .113 | Registration Rights Agreement, dated as of February 24, 2005, between Select Medical Holdings Corporation, WCAS Capital Partners IV, L.P., Rocco A. Ortenzio, Robert A. Ortenzio, John M. Ortenzio, Martin J. Ortenzio, Martin J. Ortenzio Descendants Trust and Ortenzio Family Foundation, incorporated by reference to Exhibit 10.78 of Select Medical Holdings Corporation’s Form S-4 filed April 13, 2006 (Reg. No. 333-133284). | ||
10 | .114 | 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 13, 2006 (Reg. No. 333-133284). | ||
10 | .115 | Form of Senior Floating Rate Notes due 2015 (included in Exhibit 4.7), incorporated by reference to Select Medical Holdings Corporation’s Form S-4 filed April 13, 2006 (Reg. No. 333-133284). | ||
10 | .116 | Exchange and Registration Rights Agreement, dated as of September 29, 2005, by and among Select Medical Holdings Corporation, Merrill Lynch, Pierce, Fenner & Smith Incorporated, Wachovia Capital Markets, LLC and J.P. Morgan Securities Inc., incorporated by reference to Exhibit 4.9 of Select Medical Holdings Corporation’s Form S-4 filed April 13, 2006 (Reg. No. 333-133284). | ||
10 | .117 | 10% Senior Subordinated Note due December 31, 2015 in favor of WCAS Capital Partners IV, L.P., amended and restated as of September 29, 2005, incorporated by reference to Exhibit 10.69 of Select Medical Holdings Corporation’s Form S-4 filed April 13, 2006 (Reg. No. 333-133284). | ||
10 | .118 | 10% Senior Subordinated Note due December 31, 2015 in favor of Rocco A. Ortenzio, amended and restated as of September 29, 2005, incorporated by reference to Exhibit 10.70 of Select Medical Holdings Corporation’s Form S-4 filed April 13, 2006 (Reg. No. 333-133284). | ||
10 | .119 | 10% Senior Subordinated Note due December 31, 2015 in favor of Robert A. Ortenzio, amended and restated as of September 29, 2005, incorporated by reference to Exhibit 10.71 of Select Medical Holdings Corporation’s Form S-4 filed April 13, 2006 (Reg. No. 333-133284). | ||
10 | .120 | 10% Senior Subordinated Note due December 31, 2015 in favor of John M. Ortenzio, amended and restated as of September 29, 2005, incorporated by reference to Exhibit 10.72 of Select Medical Holdings Corporation’s Form S-4 filed April 13, 2006 (Reg. No. 333-133284). | ||
10 | .121 | 10% Senior Subordinated Note due December 31, 2015 in favor of Martin J. Ortenzio, amended and restated as of September 29, 2005, incorporated by reference to Exhibit 10.73 of Select Medical Holdings Corporation’s Form S-4 filed April 13, 2006 (Reg. No. 333-133284). | ||
10 | .122 | 10% Senior Subordinated Note due December 31, 2015 in favor of Martin J. Ortenzio Descendants Trust, amended and restated as of September 29, 2005, incorporated by reference to Exhibit 10.74 of Select Medical Holdings Corporation’s Form S-4 filed April 13, 2006 (Reg. No. 333-133284). |
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Exhibit | ||||
Number | Document | |||
10 | .123 | 10% Senior Subordinated Note due December 31, 2015 in favor of Ortenzio Family Foundation, amended and restated as of September 29, 2005, incorporated by reference to Exhibit 10.75 of Select Medical Holdings Corporation’s Form S-4 filed April 13, 2006 (Reg. No. 333-133284). | ||
10 | .124 | Letter Agreement, dated November 12, 2007, by and among Select Medical Corporation, SLMC Finance Corporation, Cedar Cliff Acquisition Corporation, CORA Health Services, Inc. and Brad C. Roush, as Stockholders’ Agent, incorporated by reference to Exhibit 99.1 of Select Medical Corporation’s Current Report on Form 8-K filed November 13, 2007 (Reg. No. 001-31441). | ||
10 | .125 | Letter Agreement, dated June 7, 2007, by and among Select Medical Corporation, Nexus Health Systems, Inc., Neurobehavioral Management Services L.L.C., and Nexus Health Inc, incorporated by reference to Exhibit 99.1 of Select Medical Corporation’s Current Report on Form 8-K filed June 8, 2007 (Reg. No. 001-31441). | ||
21 | .1** | Subsidiaries of Select Medical Holdings Corporation. | ||
23 | .1 | Consent of PricewaterhouseCoopers LLP. | ||
23 | .2* | Consent of Dechert LLP (included in Exhibit 5.1). | ||
24 | .1** | Powers of Attorney (see signature pages to Amendment No. 1 to the Registration Statement). | ||
24 | .2** | Power of Attorney for James S. Ely III. |
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