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As filed with the Securities and Exchange Commission on August 8, 2000.
Registration No.333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
______________
Form S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
______________
TRIAD HOSPITALS, INC.
(Exact name of registrant as specified in its charter)
Delaware 75-2816101
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
13455 Noel Road, 20th Floor
Dallas, Texas 75240
972-789-2700
(Address, including zip code, and telephone number, including area code of each
registrant's principal executive offices)
______________
Donald P. Fay, Esq.
Executive Vice President, General Counsel and Secretary
Triad Hospitals, Inc.
13455 Noel Road, 20th Floor
Dallas, Texas 75240
972-789-2700
(Name, address, including zip code, and telephone number, including area code of
agent for services)
______________
Copy to:
Morton A. Pierce, Esq.
Michelle B. Rutta, Esq.
Dewey Ballantine LLP
1301 Avenue of the Americas
New York, New York 10019-6092
______________
Approximate date of commencement of proposed sale to the public: From time
to time after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box: [_]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box: [X]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering:[_]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: [_]
______________
CALCULATION OF REGISTRATION FEE
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Proposed Maximum Proposed Maximum Amount of
Title of Securities Amount to be Offering Price Aggregate Offering Registration
to be Registered Registered Per Unit(1) Price (1) Fee(1)
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<S> <C> <C> <C> <C>
Common Stock, par value $0.01
per share (2)................... 340,000 shares $25.09 $8,530,600 $2,252.08
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(1) Estimated solely for purposes of determining the registration fee pursuant
to Rule 457(c) under the Securities Act of 1933, as amended, and based upon
the average high $25.6875 and low $24.50 prices reported in the
consolidated reporting system on August 1, 2000.
(2) Includes the Series A Preferred Stock purchase rights associated with the
common stock.
______________
The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
================================================================================
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SUBJECT TO COMPLETION, DATED AUGUST 8, 2000
[LOGO]
Triad Hospitals, Inc.
340,000 Shares of Common Stock
Issuable upon Exercise of Options
This prospectus relates to 340,000 shares of Triad Hospitals, Inc. common stock
reserved for issuance upon the exercise of options granted to 17 officers of
HCA-The Healthcare Company in connection with the spin-off of our company from
HCA on May 11, 1999. The shares covered by this prospectus may be offered for
sale by the selling stockholders from time to time in ordinary brokerage
transactions on the Nasdaq National Market at market prices prevailing at the
time of the sale or in one or more negotiated transactions at prices acceptable
to the respective selling stockholder.
Our common stock is traded on the Nasdaq National Market under the symbol
"TRIH." On August 7, 2000, the last sale price for our common stock as quoted on
the Nasdaq National Market was $26.69 per share.
Investing in our common stock involves risks. For information concerning
factors that should be considered by prospective investors see "Risk Factors" on
page 4.
______________
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is
a criminal offense.
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an
offer to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
______________
The date of this prospectus is ____________ 2000
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Table Of Contents
<TABLE>
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ABOUT THE COMPANY.............................. 3
RISK FACTORS................................... 4
SPECIAL NOTE REGARDING FORWARD-LOOKING
STATEMENTS.................................... 13
USE OF PROCEEDS................................ 13
SELLING SECURITY HOLDERS....................... 14
PLAN OF DISTRIBUTION........................... 15
LEGAL MATTERS.................................. 15
EXPERTS........................................ 16
WHERE YOU CAN FIND MORE INFORMATION............ 16
</TABLE>
________________
You should rely only on the information contained in this document or to which
we have referred you. We have not authorized anyone to provide you other
information that is different. This document may only be used where it is legal
to sell these securities. The information in this document may only be accurate
on the date of this document.
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ABOUT THE COMPANY
We provide health care services through hospitals and ambulatory surgery
centers located in small cities and selected high growth urban markets in the
southwestern, western and southcentral United States. Our facilities include 29
general, acute care hospitals and 15 ambulatory surgery centers located in the
states of Alabama, Arizona, Arkansas, California, Kansas, Louisiana, Missouri,
New Mexico, Oklahoma, Oregon and Texas. Two hospitals included among these
facilities are operated through 50/50 joint ventures that are not consolidated
for financial reporting purposes. In June 2000, we entered into an agreement to
acquire Denton Community Hospital in Denton, Texas and Greenbrier Valley Medical
Center in Lewisburg, West Virginia. The acquisition agreement also includes a
hospital in Statesville, North Carolina, but we have assigned our rights to
acquire that hospital to a third party.
Our general, acute care hospitals typically provide a full range of
services commonly available in hospitals, such as internal medicine, general
surgery, cardiology, oncology, neurosurgery, orthopedics and obstetrics, as well
as diagnostic and emergency services. These hospitals also generally provide
outpatient and ancillary health care services such as outpatient surgery,
laboratory, radiology, respiratory therapy, cardiology and physical therapy.
Outpatient services also are provided by ambulatory surgery centers operated by
us. In addition, certain of our general, acute care hospitals have a limited
number of licensed psychiatric beds.
In addition to providing capital resources we make available a variety of
management services to our health care facilities. These services include ethics
and compliance programs, national supply and equipment purchasing and leasing
contracts, accounting, financial and clinical systems, governmental
reimbursement assistance, information systems, legal support, personnel
management and internal audit, access to regional managed care networks, and
resource management.
On May 11, 1999, our company was spun-off from HCA-The Healthcare Company.
As a result of the spin-off, through the distribution of all outstanding shares
of Triad common stock to the stockholders of HCA, our company became an
independent, publicly traded company that owns and operates the healthcare
service business which had previously comprised the Pacific Group of HCA. HCA no
longer owns any shares of Triad common stock. Our principal executive office is
located at 13455 Noel Road, 20th Floor, Dallas, Texas, 75240. Our telephone
number is (972) 789-2700.
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RISK FACTORS
In evaluating an investment in our common stock, you should carefully
consider the following factors in addition to all other information contained in
this prospectus.
We have a limited operating history as an independent company, a history of
losses and may never become profitable
We had net income of $8.0 million for the three months ended March 31,
2000 and net losses of $95.6 million in 1999 and $87.1 million in 1998 and we
may continue to experience net losses in the future. Until May 1999, we
operated as the Pacific Group division of HCA and, therefore, we do not have a
long operating history as an independent, publicly-traded company. Prior to our
spin-off from HCA, we relied on HCA for various financial, administrative and
managerial expertise relevant to the conduct of our business. We maintain our
own lines of credit and banking relationships, employ our own senior executives
and perform our own administrative functions; however, HCA continues to provide
various support services to us on a contractual basis.
We may have difficulty effectively integrating acquisitions into our ongoing
operations, and we may not be able to acquire hospitals that meet our target
criteria. We may also have difficulty acquiring hospitals from non-profit
entities due to increased regulatory scrutiny
One element of our business strategy is expansion through the
selective acquisition of acute care hospitals in selected markets. The
competition to acquire hospitals in the markets that we target is significant,
and we may not be able to make suitable acquisitions on terms favorable to us if
other health care companies, including those with greater financial resources
than ours, are competing for the same target businesses. In order to consummate
acquisitions we may be required to incur or assume additional indebtedness. We
also may not be able to obtain financing, if necessary, for any acquisitions
that we might make or we may be required to borrow at higher rates and on less
favorable terms. We may not be able to effectively integrate the facilities
that we acquire with our ongoing operations. In addition, in order to ensure the
tax-free treatment of the distribution of our stock in connection with our spin-
off from HCA, we may be limited in the amount of stock that we may issue as
consideration for acquisitions.
Acquired businesses may have unknown or contingent liabilities,
including liabilities for failure to comply with health care laws and
regulations. Although we have policies to conform the practices of acquired
facilities to our standards, and generally we will seek indemnification from
prospective sellers covering these matters, we may become liable for past
activities of acquired businesses.
Many states have enacted or are considering enacting laws affecting
the conversion or sale of not-for-profit hospitals. These laws, in general,
include provisions relating to state attorney general approval, advance
notification and community involvement. In addition, state attorneys general in
states without specific conversion legislation may exercise authority over these
transactions based upon existing law. In many states there has been an
increased interest in the oversight of not-for-profit conversions and other
transactions involving not-for-profit entities. The adoption of conversion
legislation and the increased review of not-for-profit hospital conversions and
other transactions involving not-for-profit entities may increase the costs
required, or limit our ability, to acquire not-for-profit hospitals.
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We are a highly leveraged company and our debt service obligations could
adversely affect our business operations and profitability
We are highly leveraged. As of March 31, 2000, our consolidated long-
term debt was $534.2 million (excluding the current portion of $15.8 million).
We also may draw upon revolving credit loans in an aggregate principal amount of
up to $125.0 million. We also have the ability to incur additional debt, subject
to the conditions imposed by the terms of our credit facility and the indenture
governing our outstanding notes. Although we believe that our future operating
cash flow, together with available financing arrangements, will be sufficient to
fund our operating requirements, our leverage and debt service obligations could
have important consequences to you, including the following:
. The terms of our debt obligations contain numerous financial and
other restrictive covenants which, among other things, restrict
our ability to pay dividends, incur additional debt and sell our
assets. If we do not comply with these obligations we may cause
an event of default, which, if not cured or waived, could require
us to repay the indebtedness immediately.
. We may be more vulnerable in the event of downturns in our
businesses, in our industries, in the economy generally or if
further limitations on reimbursement under Medicare and Medicaid
are implemented.
. We may have difficulty obtaining additional financing to meet our
requirements for working capital, capital expenditures,
acquisitions, general corporate purposes or other purposes at
interest rates favorable to us.
. We may be required to dedicate a substantial portion of our cash
flow to the payment of principal and interest on our indebtedness
which could reduce the amount of funds available for operations.
. Any borrowings we may make at variable interest rates make us
vulnerable to increases in interest rates generally.
Our future success depends on our ability to maintain our relationships with the
physicians at our hospitals
Because physicians generally direct the majority of hospital
admissions, our success is, in part, dependent upon the number and quality of
physicians on our hospitals' medical staffs, the admissions practices of the
physicians at our hospitals and our ability to maintain good relations with our
physicians. Hospital physicians are generally not employees and, in many of the
markets that we serve, most physicians have admitting privileges at other
hospitals. If we are unable to successfully maintain relationships with
physicians, our hospitals' admissions may decrease and our operating performance
may decline.
We depend heavily on our senior and local management personnel, and the loss of
the services of one or more of our key senior or local management personnel
could weaken our management team and our ability to deliver health care services
efficiently
We are dependent upon the continued services and management experience
of James D. Shelton and other of our executive officers. If Mr. Shelton or any
of our other executive officers were to resign their positions or otherwise be
unable to serve, our management could be
5
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weakened and operating results could be adversely affected. In addition, our
success depends on our ability to attract and retain managers at our hospitals
and related facilities, on the ability of our officers and key employees to
manage growth successfully and on our ability to attract and retain skilled
employees. If we are unable to locate and retain local management, our operating
performance could decline.
A significant portion of our revenue is dependent on Medicare and Medicaid
payments, and possible reductions in Medicare or Medicaid payments in the future
or the implementation of other measures to reduce reimbursements may reduce our
revenue
A significant portion of our revenues are derived from the Medicare
and Medicaid programs, which are highly regulated and subject to frequent and
substantial changes. In recent years, fundamental changes in the Medicare and
Medicaid programs, including the implementation of a prospective payment system
or PPS for inpatient services at medical/surgical hospitals, have resulted in
limitations on, and reduced levels of payment and reimbursement for, a
substantial portion of hospital procedures and costs.
The Federal Balanced Budget Act of 1997, which establishes a plan to
balance the Federal budget by fiscal year 2002, includes significant additional
reductions in spending levels for the Medicare and Medicaid programs, including,
among others:
. payment reductions for inpatient and outpatient hospital services;
. establishment of a PPS for hospital outpatient services, skilled
nursing facilities and home health agencies under Medicare; and
. repeal of the Federal payment standard (the so-called "Boren
Amendment") for hospitals and nursing facilities under Medicaid.
A number of states also are considering legislation designed to reduce
their Medicaid expenditures and to provide universal coverage and additional
care, including enrolling Medicaid recipients in managed care programs and
imposing additional taxes on hospitals to help finance or expand the states'
Medicaid systems. In addition, private payers increasingly are attempting to
control health care costs through direct contracting with hospitals to provide
services on a discounted basis, increased utilization review and greater
enrollment in managed care programs such as health maintenance organizations and
preferred provider organizations, referred to as PPOs. We believe that hospital
operating margins have been, and may continue to be, under significant pressure
because of deterioration in pricing flexibility and payer mix, and growth in
operating expenses in excess of the increase in prospective payments under the
Medicare program.
In recent years, an increasing number of legislative proposals have
been introduced or proposed in Congress and in some state legislatures that
would effect major changes in the health care system, either nationally or at
the state level. Among the proposals under consideration or already enacted are:
. price controls on hospitals;
. insurance market reforms to increase the availability of group
health insurance to small businesses;
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. Medicare and Medicaid managed care programs; and
. requirements that all businesses offer health insurance coverage
to their employees.
Although we anticipate that the rate of increase in payments to
hospitals will be reduced as a result of future Federal and state legislation,
it is uncertain at this time what legislation on health care reform may
ultimately be enacted or whether other changes in the administration or
interpretation of governmental health care programs will occur. Future health
care legislation or other changes in the administration or interpretation of
governmental health care programs may have a material adverse effect on our
business, financial condition, results of operations or prospects.
If we are unable to lower our costs, our future revenue and profitability may be
constrained by future cost containment initiatives undertaken by purchasers of
health care services
The competitive position of our hospitals is also affected by the
increasing number of initiatives undertaken during the past several years by
major purchasers of health care, including Federal and state governments,
insurance companies and employers, to revise payment methodologies and monitor
health care expenditures in order to contain health care costs. As a result of
these initiatives, managed care organizations offering prepaid and discounted
medical services packages represent an increasing portion of our admissions,
resulting in reduced hospital revenue growth nationwide. If we are unable to
lower costs through increased operational efficiencies and the trend toward
declining reimbursements and payments continues, the results of our operations
and our cash flow will be adversely affected.
We face intense competition from other hospitals and health care providers which
may result in a decline in our revenues, profitability and market share
The health care business is highly competitive and competition among
hospitals and other health care providers for patients has intensified in recent
years. More than half of our hospitals operate in geographic areas where they
compete with at least one other hospital that provides most of the services
offered by our hospitals. Some of these competing facilities offer services,
including extensive medical research and medical education programs, which are
not offered by our facilities. Some of the hospitals that compete with us are
owned by tax-supported governmental agencies or not-for-profit entities
supported by endowments and charitable contributions which can finance capital
expenditures on a tax-exempt basis and are exempt from sales, property and
income taxes. In some of these markets, we also face competition from other
providers such as outpatient surgery and diagnostic centers.
Less than half of our hospitals operate in geographic areas where they
are currently the sole provider of hospital services in their communities.
While these hospitals face less direct competition in their immediate service
areas than would be expected in larger communities, they do face competition
from other hospitals, including larger tertiary care centers. Although these
competing hospitals may be as far as 30 to 50 miles away, patients in our
markets may migrate to, may be referred by local physicians to, or may be lured
by incentives from managed care plans to travel to, such distant hospitals.
Our revenue is heavily concentrated in Texas and Arizona, which makes us
particularly sensitive to economic changes in those states
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After we have completed the sales of the remaining two hospitals that we
have designated as held for sale (one of which was closed in February 2000), 12
of our remaining 28 hospitals will be located in the state of Texas, and three
of our remaining 28 hospitals will be located in the state of Arizona. After
giving effect to our divestitures for the year ended December 31, 1999 and the
three months ended March 31, 2000, respectively, 45.9% and 45.6% of our revenue
was generated by our Texas hospitals and 22.8% and 23.5% of our revenue was
generated by our Arizona hospitals. We have also entered into an agreement to
acquire one additional hospital in Texas. Changes in the current demographic,
economic, competitive and regulatory conditions in Texas or Arizona may result
in increased costs and decreases in our revenue, profitability and market share.
Our results of operations are dependant on our ability to successfully manage
the effects of inflation and changes in the prices of our services as a result
of federal, state and local laws
Various federal, state and local laws have been enacted that, in certain
cases, limit our ability to increase prices. Revenues for acute care hospital
services rendered to Medicare patients are established under the federal
government's prospective payment system. Our net revenues from Medicare
approximated 31.9% in 1999, 35.2% in 1998 and 36.5% in 1997.
Our management believes that hospital industry operating margins have
been, and may continue to be, under significant pressure because of
deterioration in inpatient volumes, changes in payer mix and growth in operating
expenses in excess of the increase in prospective payments under the Medicare
program. Our management expects that the average rate of increase in Medicare
prospective payments will continue to decline slightly in 2000 not withstanding
the enactment of the Balanced Budget Refinement Act of 1999, which Congress
passed on November 19, 1999 in order to reduce the perceived adverse effects of
the Balanced Budget Act on various healthcare providers by, among other things,
reducing some of the Balanced Budget Act's reductions to outpatient PPS
reimbursement. As a result of increasing regulatory and competitive pressures,
our ability to maintain operating margins through price increases to non-
Medicare patients is limited.
We conduct business in a heavily regulated industry; changes in regulations or
violations of regulations may result in increased costs or sanctions that reduce
our revenue and profitability
The health care industry is subject to extensive Federal, state and local
laws and regulations relating to:
. licensure;
. conduct of operations;
. ownership of facilities;
. addition of facilities and services;
. payment for services; and
. prices for services
8
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These laws and regulations are extremely complex and, in many instances,
the industry does not have the benefit of significant regulatory or judicial
interpretation. In particular, Medicare and Medicaid antifraud and abuse
amendments, codified under Section 1128B(b) of the Social Security Act and known
as the "anti-kickback statute," prohibit certain business practices and
relationships related to items or services reimbursable under Medicare, Medicaid
and other Federal health care programs, including the payment or receipt of
remuneration to induce or arrange for the referral of patients covered by a
Federal or state health care program.
Under the Medicare and Medicaid Patient and Program Protection Act of 1987,
the United States Department of Health and Human Services, or HHS, has issued
regulations which describe some of the conduct and business relationships immune
from prosecution under the anti-kickback statute. The fact that a given
business arrangement does not fall within one of these "safe harbor" provisions
does not render the arrangement illegal. However, business arrangements of
health care service providers that fail to satisfy the applicable safe harbor
criteria could be scrutinized by enforcement authorities. Several of our
current business arrangements do not qualify for a safe harbor.
The Health Insurance Portability and Accountability Act of 1996, which
became effective January 1, 1997, amends, among other things, Title XI (42
U.S.C. (S) 1301 et seq.) to broaden the scope of certain fraud and abuse laws to
include all health care services, whether or not they are reimbursed under a
Federal program, and creates new enforcement mechanisms to combat fraud and
abuse, including an incentive program under which individuals can receive up to
$1,000 for providing information on Medicare fraud and abuse that leads to the
recovery of at least $100 of Medicare funds.
We provide financial incentives, including loans and minimum revenue
guarantees, to recruit physicians into the communities served by our hospitals.
Although HHS has proposed a safe harbor for certain physician recruitment, no
safe harbor for physician recruitment is currently in force. Several of the
free standing surgery centers affiliated with us have physician investors. We
also enter into employment agreements, independent contractor agreements, leases
and other agreements with physicians.
Regulatory authorities that enforce the anti-kickback statute could
determine that any of these arrangements not meeting safe harbor criteria
violate the anti-kickback statute or other federal laws. A determination that we
have violated the anti-kickback laws or other federal laws could subject us to
liability under the Social Security Act, including:
. criminal penalties;
. civil sanctions, including civil monetary penalties; and
. exclusion from participation in government programs such as Medicare and
Medicaid or other federal health care programs.
If we became subject to this liability, our operating performance and
business reputation could suffer significantly.
In addition, the portion of the Social Security Act, commonly known as the
"Stark Law," prohibits physicians from referring Medicare and Medicaid patients
to providers of designated health services if the physician or a member of his
immediate family has an ownership interest or compensation arrangements with
that provider. There are exceptions to the Stark Law for
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physicians maintaining an ownership interest in an entire hospital or surgery
center, employment agreements, leases, physician recruitment and certain other
physician arrangements. Our physician arrangements may ultimately be found to be
not in compliance with the Stark Law.
Many states have adopted or are considering similar anti-kickback and
physician self-referral legislation, some of which extends beyond the scope of
the Federal law to prohibit the payment or receipt of remuneration for the
referral of patients and physician self-referrals regardless of the source of
the payment for the care. Both Federal and state government agencies have
announced heightened and coordinated civil and criminal enforcement efforts. In
addition, the Office of the Inspector General of the United States Department of
Health and Human Services and the Department of Justice have occasionally
established enforcement initiatives that focus on specific billing practices or
other suspected areas of abuse. Current initiatives include a focus on hospital
billing for outpatient charges associated with inpatient services, as well as
hospital laboratory billing practices.
We exercise care in structuring our arrangements with physicians and other
referral sources to comply in all material respects with applicable laws. It is
possible, however, that government officials charged with responsibility for
enforcing these laws could assert that we, or any of the transactions in which
we are involved, are in violation of these laws. It is also possible that these
laws ultimately could be interpreted by the courts in a manner that is different
than our interpretations.
Some states require prior approval for the purchase, construction and
expansion of health care facilities, based upon a determination of need for
additional or expanded health care facilities or services. Such determinations,
embodied in Certificates of Need, known as CONs, issued by governmental agencies
with jurisdiction over health care facilities, may be required for capital
expenditures exceeding a prescribed amount, changes in bed capacity or services
and certain other matters. One state in which we currently own a hospital,
Alabama, has enacted CON legislation affecting acute care hospital services, and
we have entered into an agreement to acquire a hospital in West Virginia, which
has also enacted CON legislation affecting acute care hospital services. We
cannot predict whether we will be able to obtain required CONs in the future.
Any failure to obtain any required CONs may impair our ability to operate
profitably.
The laws, rules and regulations described above are complex and subject to
interpretation. In the event of a determination that we are in violation of any
of these laws, rules or regulations, or if further changes in the regulatory
framework occur, our results of operations could be significantly harmed.
We may be subject to liabilities because of litigation and investigations
involving HCA
HCA is currently the subject of several Federal investigations into certain
of its business practices, as well as governmental investigations by various
states. HCA is cooperating in these investigations and understands, through
written notice and other means, that it is a target in these investigations.
Given the breadth of the ongoing investigations, HCA expects additional
subpoenas and other investigative and prosecutorial activity to occur in these
and other jurisdictions in the future. HCA is the subject of a formal order of
investigation by the Securities and Exchange Commission. HCA understands that
the Commission's investigation includes the anti-fraud, periodic reporting and
internal accounting control provisions of the Federal securities laws. According
to published reports, in July 1999, two HCA employees were found guilty of
conspiracy and making false statements on Medicare, Medicaid and Champus cost
reports.
<PAGE>
HCA is a defendant in several qui tam actions, or actions under a state
statute brought by private parties on behalf of the United States of America,
which have been unsealed and served on HCA. The actions allege, in general,
that HCA and certain subsidiaries and/or affiliated partnerships violated the
False Claims Act, 31 U.S.C. (S) 3729 et seq., for improper claims submitted to
the government for reimbursement. The lawsuits seek three times the amount of
damages caused to the United States by the submission of any Medicare or
Medicaid false claims presented by the defendants to the Federal government,
civil penalties of not less than $5,000 nor more than $10,000 for each such
Medicare or Medicaid claim, attorneys' fees and costs. To the knowledge of HCA
, the government has intervened in six qui tam actions. HCA is aware of
additional qui tam actions that remain under seal and believes that there may be
other sealed qui tam cases of which it is unaware.
On May 5, 2000, we were advised that one of the qui tam cases which had
recently been unsealed listed three of our hospitals as defendants. This qui
tam action alleges various violations arising out of the relationship between
Curative Health Services and the other defendants. Two of the three Triad
hospitals named as defendants terminated their relationship with Curative Health
Services prior to our spin-off from HCA and the third hospital continues to
maintain an ongoing relationship with Curative Health Services.
HCA is a defendant in a number of other suits, which allege, in general,
improper and fraudulent billing, overcharging, coding and physician referrals,
as well as other violations of law. Certain of the suits have been
conditionally certified as class actions. Several derivative actions have been
filed in state court by certain purported stockholders of HCA against certain of
its current and former officers and directors alleging breach of fiduciary duty,
and failure to take reasonable steps to ensure that HCA did not engage in
illegal practices thereby exposing it to significant damages.
On May 18, 2000 HCA announced that it had reached an understanding with the
Civil Division of the Department of Justice to recommend an agreement to settle,
subject to certain conditions, the civil claims actions against HCA relating to
diagnosis related group coding, outpatient laboratory billing and home health
issues. The understanding with the Department of Justice would require HCA to
pay $745 million in compensation to the government, with interest accruing
immediately at a fixed rate of 6.5% per annum, and would reduce HCA's existing
letter of credit agreement with the government from $1 billion to $250 million
at the time of the payment of the settlement.
We are unable to predict the effect or outcome of any of the ongoing
investigations or qui tam and other actions, or whether any additional
investigations or litigation will be commenced. In connection with the spin-off
of our company from HCA, we entered into a distribution agreement with HCA. The
terms of the distribution agreement provide that HCA will indemnify us for any
losses which they may incur as a result of the proceedings described above. HCA
has also agreed to indemnify our company for any losses which we may incur as a
result of proceedings which may be commenced by government authorities or by
private parties in the future that arise from acts, practices or omissions
engaged in prior to the distribution date and relate to the proceedings
described above. HCA has also agreed that, in the event that any hospital owned
by our company is permanently excluded from participation in the Medicare and
Medicaid programs as result of the proceedings described above, then HCA will
make a cash payment to us, in an amount (if positive) equal to five times the
excluded hospital's 1998 income from continuing operations before depreciation
and amortization, interest expense, management fees, impairment of long-lived
assets, minority interests and income taxes, as set forth on a
<PAGE>
schedule to the distribution agreement, less the net proceeds of the sale or
other disposition of the excluded hospital. We have agreed that, in connection
with the government investigations described above, we will participate with HCA
in negotiating one or more compliance agreements setting forth each of their
agreements to comply with applicable laws and regulations. If any of these
indemnified matters were successfully asserted against us, or any of our
facilities, and HCA failed to meet its indemnification obligations, then our
losses could have a material adverse effect on our business, financial position,
results of operations or prospects. HCA will not indemnify us for losses
relating to any acts, practices and omissions engaged in by us after the
distribution date, whether or not we are indemnified for similar acts, practices
and omissions occurring prior to the distribution date.
HCA believes that the ongoing governmental investigations and related media
coverage may have had a negative effect on HCA's results of operations, which
included us for the periods prior to May 11, 1999. The extent to which we may
or may not continue to be affected by the ongoing investigations of HCA, the
initiation of additional investigations, if any, and the related media coverage
cannot be predicted. These matters could have a material adverse effect on our
business, financial condition, results of operations or prospects in future
periods.
We are subject to liabilities because of claims and legal actions brought
against us in the ordinary course of our business, which may result in increased
costs and reduce our profitability
As is typical in the health care industry, we are subject to claims and
legal actions by patients and others in the ordinary course of business. We and
HCA have cooperated in the purchase of insurance coverage for professional and
general liability risks for periods ending on or after the spin-off date.
Substantially all losses in periods prior to the spin-off are insured through a
wholly-owned insurance subsidiary of HCA and excess loss policies maintained by
HCA .
All liability for professional and general liability claims incurred prior
to our spin-off was insured through a wholly-owned insurance subsidiary of HCA
and excess loss policies maintained by HCA. Subsequent to the spin-off, we
obtained insurance coverage on a claims incurred basis from HCA's captive
insurance company. While the professional and general liability insurance
coverage maintained for our business has been adequate to provide for liability
claims in the past, and the insurance coverage to be obtained for future periods
is expected to be adequate for future claims, we cannot assure you that
professional and general liability insurance will continue be available for us
in adequate amounts and on a cost effective basis.
We could be liable for additional taxes if the Internal Revenue Services rules
that the spin-off of our company from HCA is Taxable
On March 30, 1999, HCA received a ruling from the IRS concerning the United
States Federal income tax consequences of the distribution of Triad common
stock. The tax ruling provides that, because the distribution qualifies under
Section 355 of the Internal Revenue Code of 1986, the distribution generally
will be tax-free to HCA and to HCA 's stockholders, except for any cash received
instead of fractional shares. The tax ruling is based upon the accuracy of
representations made by HCA as to numerous factual matters and as to the
intention to take, or to refrain from taking, certain future actions. The
inaccuracy of any of those factual representations or the failure to take the
intended actions, or the taking of actions which were represented would not be
taken, could cause the IRS to revoke all or part of the tax ruling
retroactively.
<PAGE>
If the distribution of our common stock were not to qualify for tax-free
treatment under Section 355 of the Code, then, in general, additional corporate
tax (which would be substantial) would be payable by the consolidated group of
which HCA is the common parent. Under the consolidated return rules, each
member of the consolidated group, including our company, would be jointly and
severally liable for such tax liability. If the distribution did not qualify
for tax-free treatment under Section 355 of the Code, the resulting tax
liability would have a material adverse effect on the business, financial
position, results of operations or prospects of HCA and, possibly, also of our
company.
HCA, our company and LifePoint Hospitals, Inc., which was spun-off from HCA
concurrently with our spin-off, entered into a tax sharing and indemnification
agreement, which allocates tax liabilities among HCA, LifePoint and our company
and addresses certain other tax matters such as responsibility for filing tax
returns, control of and cooperation in tax litigation, and the tax treatment of
the spin-off. Generally, HCA will be responsible for taxes that are allocable
to periods prior to the spin-off date, and HCA, and our company will each be
responsible for its own tax liabilities, including its allocable share of taxes
shown on any consolidated, combined or other tax return filed by HCA, for
periods after the distribution date. The tax sharing and indemnification
agreement prohibits us from taking actions that could jeopardize the tax
treatment of either the distribution or the restructuring that preceded the
distribution, and requires us to indemnify HCA, as well as Lifepoint, for any
taxes or other losses that result from any such actions.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Some of the information included and incorporated by reference in this
prospectus and other written and oral statements made from time to time by us
contain "forward-looking statements" as defined by the Private Securities
Litigation Reform Act of 1995. Forward-looking statements include, among other
things, discussions concerning our potential exposure to market risks, as well
as statements expressing our expectations, beliefs, estimates, forecasts,
projections and assumptions about the future. Forward-looking statements can be
identified by the use of words such as "anticipate," "believe," "estimate,"
"expect," "intend," "may," "could," "possible," "plan," "project," "will,"
"forecast" and similar words or expressions. Forward-looking statements are
only predictions. Our forward-looking statements generally relate to our
strategies, financial results, product development and regulatory approval
programs, and sales efforts. You should carefully consider forward-looking
statements and understand that actual events or results may differ materially as
a result of a variety of risks and uncertainties, known and unknown, and other
factors facing our company. Many of those factors are noted in conjunction with
the forward-looking statements in this prospectus. It is not possible to
foresee or identify all factors affecting our forward-looking statements;
therefore, investors should not consider any list of factors affecting our
forward-looking statements to be an exhaustive statement of all risks or
uncertainties.
USE OF PROCEEDS
We will not receive any proceeds from this offering.
<PAGE>
SELLING SECURITY HOLDERS
The selling security holders consist of 17 officers of HCA who received
options to purchase an aggregate of 340,000 shares of our common stock reserved
for issuance in connection with the spin-off of our company from HCA on May 11,
1999.
We are registering all 340,000 shares covered by this prospectus on behalf
of the selling security holders named in the table below. We have registered the
shares to permit the selling stockholders and their pledges, donees, transferees
or other successors-in-interest that receive their shares from selling security
holders as a gift, partnership distribution or another non-sale related transfer
after the date of this prospectus to resell the shares when they deem
appropriate. We refer to all of these possible sellers as selling security
holders in this prospectus.
The following table sets forth information regarding the beneficial
ownership of the common stock by the selling security holders as of July 31,
2000. None of the selling security holders beneficially own greater than 5% of
our outstanding common stock.
<TABLE>
<CAPTION>
Shares Beneficially
Shares Beneficially Maximum Number of Owned After
Owned Prior to Shares Being Completion of the
Name(1) Offering(2) Offered(3) Offering (4)
---- -------- ------- --------
<S> <C> <C> <C>
David G. Anderson 16,680 15,000 1,680
Jack O. Bovender, Jr. 52,284 50,000 2,284
Richard M. Bracken 31,917 25,000 6,917
Victor L. Campbell 43,056 25,000 18,056
Roslyn S. Elton 18,189 15,000 3,189
James A. Fitzgerald 15,878 15,000 878
V. Carl George 19,344 15,000 4,344
Jay Grinney 31,076 25,000 6,076
R. Lee Grubbs 10,506 10,000 506
R. Milton Johnson 22,680 20,000 2,680
Patricia T. Lindler 10,038 10,000 38
A. Bruce Moore, Jr. 21,981 20,000 1,981
Philip R. Patton 15,074 15,000 74
Joseph N. Steakley 16,453 15,000 1,453
Robert Waterman 26,148 25,000 1,148
Noel B. Williams 25,624 25,000 624
Alan R. Yuspeh 15,294 15,000 294
</TABLE>
_______________
(1) The address of each selling security holder is c/o HCA, One Park Plaza,
Nashville, Tennessee 37203. Prior to our spin-off our business comprised the
Pacific Group of HCA. Each of the selling security holders is, and was at the
time of our spin-off, an officer of HCA.
(2) Includes any shares as to which the individual has sole or shared voting
power or investment power and also any shares which the individual has the right
to acquire within 60 days of the date of this prospectus through the exercise of
any stock option or other right. Unless otherwise
<PAGE>
indicated in the footnotes, each person has sole voting and investment power (or
shares such powers with his or her spouse) with respect to the shares shown as
beneficially owned.
(3) These securities consist of shares of common stock, issuable by Triad upon
exercise of the 340,000 options granted to the selling security holders. The
options are currently exercisable at an exercise price of $11.50 per share and
expire on May 11, 2009.
(4) In each case represents less than 1% of the class.
PLAN OF DISTRIBUTION
We do not know how the selling security holders will sell the shares. They
may sell the shares from time to time in any of several ways and in any of
several marketplaces, including:
. Through private negotiations directly with purchasers;
. Through agreements with underwriters, dealers or brokers for their own
accounts;
. Through agreements with underwriters or dealers for resale;
. In block trades with brokers or dealers who will attempt to sell the
shares as agent but may resell a portion of the block as principal to
facilitate the transaction; or
. In brokers' transactions on the Nasdaq National Market, subject to its
rules.
We do not know at what prices the selling security holders may sell the
options.
We do not know at what prices the selling security holders may sell the
shares after exercise of the options. They may sell the shares at market prices
prevailing at the time of the sale, at prices related to the prevailing market
prices, or at negotiated prices. They may pay usual and customary or
specifically negotiated fees, discounts or commissions in connection with these
sales. We will not pay any of those fees, discounts or commissions.
Because selling security holders may be deemed to be "underwriters" within
the meaning of Section 2(11) of the Securities Act of 1933, they will be subject
to the prospectus delivery requirements of the Securities Act.
We will bear the expense of preparation and filing of the registration
statement of which this prospectus is a part. The aggregate amount of all these
expenses is expected to be approximately $20,000.
See "Selling Security Holders" for information concerning the beneficial
ownership of Triad common stock by the selling security holders.
LEGAL MATTERS
The legality of the common stock offered will be passed upon for us by
Dewey Ballantine LLP, New York, New York.
<PAGE>
EXPERTS
The financial statements as of and for the year ended December 31, 1999
incorporated in this prospectus by reference to the Annual Report on Form 10-K
for the year ended December 31, 1999, have been so incorporated in reliance on
the report of PricewaterhouseCoopers LLP, independent accountants given on
authority of said firm as experts in auditing and accounting.
Ernst & Young, LLP, independent auditors, has audited our combined
financial statements for each of the two years in the period ended December 31,
1998, as set forth in their report, which are incorporated by reference in this
prospectus and elsewhere in the registration statement. Our financial statements
for each of the two years in the period ended December 31, 1998 are
incorporated by reference in reliance on the reports of Ernst & Young and given
on their authority as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We have filed a registration statement on Form S-3 with the Securities and
Exchange Commission in connection with this offering. In addition, we file
annual, quarterly and periodic reports, proxy statements and other information
with the Securities and Exchange Commission.
Our SEC filings are available to the public over the internet at the SEC's
web site at http://www.sec.gov. You may also read and copy any document we file
with the SEC at its public reference facilities at:
450 Fifth Street, N.W. 7 World Trade Center Citicorp Center
Washington, D.C. 20549 Suite 1300 500 West Madison Street
New York, New York 10048 Suite 1400
Chicago, Illinois 60661
You may also obtain copies of this information at prescribed rates by writing to
the Public Reference Section of the SEC at 450 Fifth Street, N.W., Washington,
D.C., 20549. Please call the SEC at 1-800-SEC-0330 for further information on
the operation of the public reference facilities.
The SEC allows us to "incorporate by reference" into this prospectus
information which we file with the SEC. This means that we can disclose
important information to you by referring you to those documents. The
information incorporated by reference is an important part of this prospectus
and information that we file later with the SEC will automatically update and
supersede the information in this prospectus and in our other filings with the
SEC.
The following documents filed by us with the Commission are incorporated
herein by reference:
. Annual Report on Form 10-K for the year ended December 31, 1999;
. Quarterly Report on Form 10-Q for the quarter ended March 31, 2000;
. Proxy Statement on Schedule 14A dated May 2, 2000;
<PAGE>
. Description of our capital stock contained in the our Registration
Statement on Form 10 dated March 15, 1999 registering our common stock
under Section 12(g) of the Exchange Act.
. All documents filed by us with the Commission pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act prior to and subsequent
to the date hereof and prior to the termination of the offering of the
common stock registered hereby shall be deemed to be incorporated by
reference into this prospectus and to be a part hereof from the date
of filing such documents.
Any statements contained herein or in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this prospectus to the extent that a statement contained herein
or in any other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus. We will provide without
charge to each person to whom this Prospectus is delivered, upon a written or
oral request of such person, a copy of any or all of the foregoing documents
incorporated by reference into this Prospectus (other than exhibits to such
documents, unless such exhibits are specifically incorporated by reference into
such documents). Requests for such copies should be directed to:
Triad Hospitals, Inc.
Investor Relations Department
13455 Noel Road, 20th Floor
Dallas, Texas 75240
(972) 789-2700
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
Securities and Exchange Commission registration fee....... $ 2,252.08
Printing services......................................... $ 1,000.00*
Accounting services....................................... $ 1,000.00*
Legal services............................................ $15,000.00*
Miscellaneous............................................. $ 747.92*
Total............................................... $20,000.00*
___________
* Estimated.
Item 15. Indemnification of Directors and Officers.
Triad is a Delaware corporation. Reference is made to Section 145 of the
Delaware General Corporation Law as to indemnification by Triad of its officers
and directors. The general effect of such law is to empower a corporation to
indemnify any of its officers and directors against certain expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by the person to be indemnified in connection with certain
actions, suits or proceedings (threatened, pending or completed) if the person
to be indemnified acted in good faith and in a manner he or she reasonably
believed to be in, or not opposed to, the best interests of the corporation and,
with respect to any criminal action or proceeding, had no reasonable cause to
believe his or her conduct was unlawful.
Article Fourteenth of Triad's Certificate of Incorporation, provides for
the indemnification of Triad's officers and directors in accordance with the
Delaware General Corporation Law. Article Tenth of Triad's Certificate of
Incorporation includes, as permitted by the Delaware General Corporation Law,
certain limitations on the potential personal liability of members of Triad's
Board of Directors for monetary damages as a result of actions taken in their
capacity as Board members.
The directors and officers of Triad are covered by insurance policies
indemnifying them against certain liabilities arising under the Securities Act,
which might be incurred by them in such capacities.
II-1
<PAGE>
Item 16. List of Exhibits.
Exhibit No. Description
----------- -----------
2.1 Distribution Agreement dated May 11, 1999 by and among
HCA, Triad Hospitals, Inc. and LifePoint Hospitals,
Inc. incorporated by reference to Exhibit 2.1 to Triad
Hospitals' Quarterly Report on From 10-Q, for the
quarter ended March 31, 1999.
4.1 Rights Agreement dated as of May 11, 1999 between the
Company and National City Bank as Rights Agent.
Incorporated by reference to the Company's Quarterly
Report on Form 10Q for the quarter ended March 31,
1999.
5.1 Opinion of Dewey Ballantine LLP.
23.1 Consent of PricewaterhouseCoopers LLP.
23.2 Consent of Ernst & Young LLP.
23.2 Consent of Dewey Ballantine LLP (included in Exhibit
5.1).
Item 17. Undertakings.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933.
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate, represent
a fundamental change in the information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of prospectus
filed with the Securities and Exchange Commission under Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more than a 20% change
in the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement.
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement.
II-2
<PAGE>
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
(4) That, for purposes of determining any liability under the Securities
Act of 1933, each filing of the registrant's annual report under Section 13(a)
or 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each
filing of an employee benefit plan's annual report under Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(5) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant under Rule 424(b)(1) or (4) or 497(h) under
the Securities Act shall be deemed to be part of this registration statement as
of the time it was declared effective.
(6) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant under the foregoing provisions, or otherwise, the registrant has been
advised that, in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Dallas, State of Texas, on August 7, 2000.
TRIAD HOSPITALS, INC.
By: /s/ James D. Shelton
----------------------------
James D. Shelton
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Date: August 7, 2000 By: /s/ James D. Shelton
----------------------------
James D. Shelton
Chairman of the Board, President
and Chief Executive Officer and Director
Principal executive officer)
Date: August 7, 2000 By: /s/ Michael J. Parsons
----------------------------
Michael J. Parsons
Executive Vice President and
Chief Operating Officer and Director
Date: August 7, 2000 By: /s/ Thomas F. Frist III
----------------------------
Thomas F. Frist III
Director
Date: August 7, 2000 By: /s/ Thomas G. Loeffler
----------------------------
Thomas G. Loeffler
Director
Date: August 7, 2000 By: /s/ Marvin Runyon
----------------------------
Marvin Runyon
Director
II-4
<PAGE>
Date: August 7, 2000 By: /s/ Dale V. Kesler
----------------------------
Dale V. Kesler
Director
Date: August 7, 2000 By: /s/ Gale Sayers
----------------------------
Gale Sayers
Director
Date: August 7, 2000 By: /s/ Donald B. Halverstadt
----------------------------
Donald B. Halverstadt, M.D.
Director
Date: August 7, 2000 By: /s/ Burke W. Whitman
----------------------------
Burke W. Whitman
Executive Vice President, Chief Financial
Officer and Treasurer
(Principal financial officer)
Date: August 7, 2000 By: /s/ W. Stephen Love
----------------------------
W. Stephen Love
Senior Vice President of Finance/Comptroller
(Principal accounting officer)
II-5
<PAGE>
INDEX TO EXHIBITS
Exhibit No. Description
----------- -----------
2.1 Distribution Agreement dated May 11, 1999 by and among
HCA, Triad Hospitals, Inc. and LifePoint Hospitals,
Inc. incorporated by reference to Exhibit 2.1 to Triad
Hospitals' Quarterly Report on Form 10-Q, for the
quarter ended March 31, 1999.
4.1 Rights Agreement dated as of May 11, 1999 between the
Company and National City Bank as Rights Agent.
Incorporated by reference to the Company's Quarterly
Report on Form 10Q for the quarter ended March 31,
1999.
5.1 Opinion of Dewey Ballantine LLP.
23.1 Consent of PricewaterhouseCoopers LLP.
23.2 Consent of Ernst & Young LLP.
23.2 Consent of Dewey Ballantine LLP (included in Exhibit
5.1).
