<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 8-K/A
Amendment No. 5
Current Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report: May 19, 1995
HEALTHSOUTH Corporation
------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
Delaware 1-10315 63-0860407
---------------------------- ------------ -------------------
(State or Other (Commission (I.R.S. Employer
Jurisdiction of Incorporation File Number) Identification No.)
or Organization)
Two Perimeter Park South
Birmingham, Alabama 35243
------------------------ ----------
(Address of Principal (Zip Code)
Executive Offices)
Registrant's Telephone Number, (205) 967-7116
Including Area Code:
<PAGE>
Item 2. ACQUISITION OR DISPOSITION OF ASSETS
On May 19, 1995, HEALTHSOUTH Corporation, a Delaware corporation (the
"Company"), purchased all of the issued and outstanding capital stock of Rehab
Systems Company, a wholly-owned second-tier subsidiary of NovaCare, Inc., a
Delaware corporation ("NovaCare"), through which NovaCare's rehabilitation
hospital division was operated, pursuant to a Stock Purchase Agreement between
the Company and NovaCare, Inc. Under the terms of the Stock Purchase Agreement,
the Company purchased the capital stock of Rehab Systems Company for $215
million in cash and the assumption of approximately $20 million in long-term
debt for a total consideration of approximately $235 million. In accordance with
the Stock Purchase Agreement, certain assets were retained by and certain
liabilities were transferred to NovaCare. The acquisition was funded by an
increase in the Company's existing bank credit facilities. As a result of this
transaction, the Company acquired 11 rehabilitation hospitals in 7 states, 12
other rehabilitation facilities and two Certificates of Need.
Item 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Businesses Acquired.
The required audited consolidated financial statements of the
acquired business, Rehab Systems Company, for the fiscal year ended
June 30, 1994, and the unaudited consolidated financial statements of
the acquired business for the six months ended December 31, 1994, were
filed with Amendment No. 4 to this Current Report on Form 8-K/A, and
are hereby incorporated herein by reference.
(b) Pro Forma Financial Information.
The required pro forma financial information listed on the
Index to Financial Statements included in this Current Report on Form
8-K/A, Amendment No. 5, is herewith filed.
(c) Exhibits
2. Stock Purchase Agreement, dated February 3, 1995, among
HEALTHSOUTH Corporation, NovaCare, Inc., and NC Resources, Inc., filed
as Exhibit (2)-5 to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1995, is hereby incorporated herein by
reference.
2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this Report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: June 2, 1995.
HEALTHSOUTH Corporation
By /s/ ANTHONY J. TANNER
---------------------------
Anthony J. Tanner
Executive Vice President
and Secretary
3
<PAGE>
HEALTHSOUTH Corporation
Pro Forma Consolidated Financial Information
Index to Financial Statements
<TABLE>
<CAPTION>
Page
<S> <C>
Pro Forma Condensed Financial Information.................................................................. 5
Pro Forma Condensed Combined Balance Sheet
(Unaudited) at December 31, 1994....................................................................... 6
Pro Forma Condensed Combined Income Statement
(Unaudited) for the Year Ended December 31, 1994....................................................... 7
Pro Forma Condensed Combined Income Statement
(Unaudited) for the Year Ended December 31, 1993....................................................... 8
Pro Forma Condensed Combined Income Statement
(Unaudited) for the Year Ended December 31, 1992....................................................... 9
Notes to Pro Forma Condensed Financial Information......................................................... 10
</TABLE>
4
<PAGE>
PRO FORMA CONDENSED FINANCIAL INFORMATION
The following pro forma condensed financial information and explanatory
notes are presented to reflect the effect of the proposed merger (the "Merger")
of Surgical Health Corporation ("SHC") with a wholly-owned subsidiary of
HEALTHSOUTH Corporation ("HEALTHSOUTH") on the historical financial statements
of HEALTHSOUTH and SHC. The Merger is reflected in the pro forma condensed
financial information as a pooling of interests. The HEALTHSOUTH historical
amounts reflect the combination of HEALTHSOUTH and ReLife, Inc. ("ReLife") for
all periods presented, as HEALTHSOUTH acquired ReLife in December 1994 in a
transaction accounted for as a pooling of interests.
In addition, the pro forma condensed financial information reflects the
impact of the acquisition from NovaCare, Inc. ("NovaCare") by HEALTHSOUTH of 11
rehabilitation hospitals, 12 other facilities and two Certificates of Need (the
"NovaCare Rehabilitation Hospitals Acquisition") on the results of operations
and financial position for the year ended December 31, 1994. Prior to the
NovaCare Rehabilitation Hospitals Acquisition, which was consummated in the
second quarter of 1995, these facilities were operated by a wholly-owned
second-tier subsidiary of NovaCare, Rehab Systems Company ("RSC").
The pro forma condensed balance sheet assumes that the Merger was
consummated on December 31, 1994, and the pro forma condensed income statements
assume that the SHC Merger was consummated on January 1, 1992. The assumptions
are described in the accompanying Notes to Pro Forma Condensed Financial
Information.
All HEALTHSOUTH shares outstanding and per share amounts have been
adjusted to reflect a two-for-one stock split effected in the form of a 100
percent stock dividend payable on April 17, 1995.
The pro forma information should be read in conjunction with the
historical financial statements of HEALTHSOUTH, SHC and RSC and the related
notes thereto included in documents incorporated in HEALTHSOUTH's Registration
Statement on Form S-4 (Registration No. 33-57987) by reference. The pro forma
financial information is presented for informational purposes only and is not
necessarily indicative of the results of operations or combined financial
position that would have resulted had the Merger and other acquisitions
described above been consummated at the dates indicated, nor is it necessarily
indicative of the results of operations of future periods or future combined
financial position.
5
<PAGE>
HEALTHSOUTH Corporation and Subsidiaries
Pro Forma Condensed Combined Balance Sheet (Unaudited)
December 31, 1994
<TABLE>
<CAPTION>
Acquisition
---------------------------------------
Pro Forma Pro Forma Pro Forma Pro Forma
HEALTHSOUTH NovaCare Adjustments Combined SHC Adjustments Combined
----------- --------- ----------- --------- ------- ----------- ---------
(In thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 65,949 $ 8,858 $ (4,973) (1) $ 69,834 $ 2,786 $ 0 $ 72,620
Other marketable securities 16,628 0 0 16,628 0 0 16,628
Accounts receivable 222,720 42,608 (259) (1) 265,069 19,939 0 285,008
Inventories, prepaid expenses
and other current assets 90,663 5,515 (42) (1) 96,136 6,517 0 102,653
------ ----- ------ ------ ----- ------ -------
Total current assets 395,960 56,981 (5,274) 447,667 29,242 0 476,909
Other assets 41,932 49,844 (40,637) (1) 51,139 1,142 0 52,281
Property, plant and equipment, net 789,538 38,724 (1,719) (1) 946,543 67,834 0 1,014,377
120,000 (2)
Intangible assets, net 324,904 62,447 (1,242) (1) 364,103 85,784 (2,856) (1) 447,031
(22,006) (2)
------ ----- ------ ------ ----- ------ -------
Total assets $1,552,334 $ 207,997 $ 49,122 $1,809,452 $ 184,002 $ (2,856) $1,990,598
========== ======= ====== ========= ======= ====== =========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable $ 83,180 $ 20,347 $ (454) (1) $ 103,073 $ 3,973 $ 4,000 (2) $ 111,046
Salaries and wages payable 32,672 0 0 32,672 1,430 0 34,102
Accrued interest payable and
other liabilities 46,714 672 (275) 47,111 9,208 (1,560) (2) 47,698
(7,061) (1)
Current portion of long-term debt 14,713 1,732 (146) (1) 16,299 1,985 0 18,284
------ ----- ------ ------ ----- ------ -------
Total current liabilities 177,279 22,751 (875) 199,155 16,596 (4,621) 211,130
Long-term debt 930,061 56,756 (38,620) (1) 1,163,197 87,635 11,250 (1) 1,262,082
215,000 (2)
Deferred income taxes 7,882 0 0 7,882 713 0 8,595
Other long-term liabilities 5,655 0 0 5,655 2,743 0 8,398
Payable to affiliates 0 92,377 (92,377) (1) 0 0 0 0
Deferred revenue 7,526 736 0 8,262 0 0 8,262
Minority interests (2,203) 1,370 0 0 3,034 (3,034) (3) 0
Redeemable common stock and warrants 0 0 0 0 26,569 (26,569) (3) 0
Redeemable convertible preferred
stock 0
Stockholders' equity:
Preferred Stock, $.10 par 0 0 0 0 0 0
Common Stock, $.01 par 342 0 0 342 54 (15) (3) 381
Additional paid-in capital 306,565 34,006 83,000 (1) 306,565 33,392 29,618 (3) 369,575
(117,006) (2)
Retained earnings 137,027 0 0 137,027 737 (2,440) (2) 128,279
Treasury stock (323) 0 0 (323) 0 0 (323)
Receivable from Employee Stock
Ownership Plan (17,477) 0 0 (17,477) 0 0 (17,477)
------- ------ ------- ------- ------ ------ -------
Total stockholders' equity 426,134 34,006 (34,006) 426,134 34,183 20,118 480,435
------- ------ ------- ------- ------ ------ -------
Total liabilities and stock-
holders' equity $1,552,334 $ 207,996 $ 49,122 $1,809,452 $ 184,002 $ (2,856) $1,990,598
========== ========= ======== ========= ======== ======== =========
</TABLE>
See accompanying notes.
6
<PAGE>
HEALTHSOUTH Corporation and Subsidiaries
Pro Forma Condensed Combined Income Statement (Unaudited)
Year Ended December 31, 1994
<TABLE>
<CAPTION>
Acquisition
---------------------------------------
Pro Forma Pro Forma Pro Forma Pro Forma
HEALTHSOUTH NovaCare Adjustments Combined SHC Adjustments Combined
----------- -------- ----------- --------- ------- ----------- ----------
(In thousands, except per share amounts)
---------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues $1,127,441 $ 142,548 $ 5,455 (6) $1,275,444 $ 108,749 $ 0 $1,384,193
Operating expenses:
Operating units 835,888 128,233 (12,406) (3) 951,715 70,824 0 1,022,539
Corporate general and
administrative 37,139 0 0 37,139 8,756 0 45,895
Provision for doubtful accounts 20,583 1,269 0 21,852 3,156 0 25,008
Depreciation and amortization 75,588 7,041 (1,918) (1) 86,161 11,090 0 97,251
5,450 (4)
Interest expense 57,255 11,096 8,457 (5) 76,808 8,031 (728) (1) 84,111
Interest income (4,224) 0 0 (4,224) (84) 0 (4,308)
Merger expenses 2,949 0 0 2,949 3,571 0 6,520
Loss on extinguishment of debt 0 0 0 0 0 14,106 (1) 14,106
Loss on impairment of assets 10,500 0 0 10,500 0 0 10,500
Loss on abandonment of computer
project 4,500 0 0 4,500 0 0 4,500
------ ------ ----- ------ --- ------ ------
1,040,178 147,639 (417) 1,187,400 105,344 13,378 1,306,122
Income before income taxes and
minority interests 87,263 (5,091) 5,872 88,044 3,405 (13,378) 78,071
Provision for income taxes 33,835 (1,084) 1,215 (7) 33,966 470 (6,777) (1) 27,659
------ ------ ----- ------ --- ------ ------
53,428 (4,007) 4,657 54,078 2,935 (6,601) 50,412
Minority interests 203 445 0 648 6,199 0 6,847
------ ------ ----- ------ --- ------ ------
Net income $ 53,225 $ (4,452) $ 4,657 $ 53,430 $ (3,264) $ (6,601) $ 43,565
======= ======= ====== ======= ======= ======= =======
Weighted average common and common
equivalent shares outstanding 75,876 N/A N/A 75,876 21,814 (13,493) 84,197
======= ======= ====== ======= ======= ======= =======
Net income per common and common
equivalent share $ 0.70 $ N/A $ N/A $ 0.70 $ (0.15) $ N/A $ 0.52
======= ======= ====== ======= ======= ======= =======
Net income per common share--
assuming full dilution $ 0.70 $ N/A $ N/A $ 0.70 $ N/A $ N/A $ 0.52
======= ======= ====== ======= ======= ======= =======
</TABLE>
See accompanying notes.
7
<PAGE>
HEALTHSOUTH Rehabilitation Corporation and Subsidiaries
Pro Forma Condensed Combined Income Statement (Unaudited)
Year Ended December 31, 1993
<TABLE>
<CAPTION>
Pro Forma Pro Forma
HEALTHSOUTH SHC Adjustments Combined
------------- ------- ----------- -----------
(In thousands, except per share amounts)
<S> <C> <C> <C> <C>
Revenues $ 575,346 $ 80,983 $ $ 656,329
Operating expenses:
Operating units 418,981 52,797 471,778
Corporate general and administrative 20,018 4,311 24,329
Provision for doubtful accounts 13,875 2,306 16,181
Depreciation and amortization 39,376 6,848 46,224
Interest expense 14,261 4,234 18,495
Interest income (3,698) (226) (3,924)
Merger expense 333 333
NME Selected Hospitals Acquisition
related expense 49,742 49,742
Loss on sale of partnership interest 0 (1,400) (1,400)
--------- --------- --------- --------
552,555 69,203 0 621,758
Income before income taxes and
minority interests 22,791 11,780 0 34,571
Provision for income taxes 9,009 2,921 11,930
--------- --------- --------- --------
13,782 8,859 0 22,641
Minority interests 190 5,254 5,444
--------- --------- --------- --------
Net income $ 13,592 $ 3,605 $ 0 $ 17,197
========= ========= ========= =====
Weighted average common and common
equivalent shares outstanding 69,434 31,428 (23,615) 77,247
========= ========= ========= =====
Net income per common and common
equivalent share $ 0.20 $ 0.11 $ N/A $ 0.22
========= ========= ========= =====
</TABLE>
See accompanying notes.
8
<PAGE>
HEALTHSOUTH Rehabilitation Corporation and Subsidiaries
Pro Forma Condensed Combined Income Statement (Unaudited)
Year Ended December 31, 1992
<TABLE>
<CAPTION>
Pro Forma Pro Forma
HEALTHSOUTH SHC Adjustments Combined
----------- --------- ----------- ----------
(In thousands, except per share amounts)
<S> <C> <C> <C> <C>
Revenues $ 464,288 $ 36,758 $ $ 501,046
Operating expenses:
Operating units 347,073 25,096 372,169
Corporate general and administrative 14,418 2,460 16,878
Provision for doubtful accounts 11,842 1,412 13,254
Depreciation and amortization 26,737 3,097 29,834
Interest expense 11,295 1,328 12,623
Interest income (5,121) (294) (5,415)
Terminated merger expense 3,665 3,665
------ ------ ------ ------
409,909 33,099 0 443,008
Income before income taxes and
minority interests 54,379 3,659 0 58,038
Provision for income taxes 18,383 481 18,864
------ ------ ------ ------
35,996 3,178 0 39,174
Minority interests 1,402 2,843 4,245
------ ------ ------ ------
Net income $ 34,594 $ 335 $ 0 $ 34,929
====== ====== ====== ======
Weighted average common and common
equivalent shares outstanding 68,836 20,425 (15,347) 73,914
====== ====== ======= ======
Net income per common and common
equivalent share $ 0.50 $ 0.02 $ N/A $ 0.47
====== ====== ====== ======
</TABLE>
See accompanying notes.
9
<PAGE>
HEALTHSOUTH Corporation and Subsidiaries
Notes to Pro Forma Condensed Financial Information
A. The NovaCare Rehabilitation Hospitals Acquisition
In February 1995 HEALTHSOUTH entered into a definitive agreement to
purchase the rehabilitation hospitals division of NovaCare, Inc. ("NovaCare"),
consisting of 11 rehabilitation hospitals, 12 other facilities, and certificates
of need to build two additional facilities (the "NovaCare Rehabilitation
Hospitals Acquisition"). The purchase price will be approximately $215,000,000
in cash and the assumption of approximately $20,000,000 in long-term debt. The
transaction will be accounted for as a purchase and is expected to be completed
in the second quarter of 1995. HEALTHSOUTH intends to finance the cost of the
NovaCare Rehabilitation Hospitals Acquisition through additional borrowings
under its existing credit facilities, as amended.
NovaCare has historically reported on a June 30 fiscal year end.
NovaCare's results of operations have been recast to a December 31 fiscal year
end in the accompanying 1994 pro forma condensed income statement. This was
accomplished by excluding the results of operations for the six months ending
December 31, 1993 from their historical June 30, 1994 income statement and then
adding to it their results of operations for the six months ending December 31,
1994.
The accompanying pro forma adjustments are necessary for the NovaCare
Rehabilitation Hospitals Acquisition:
1. To eliminate assets (including associated depreciation and
amortization expenses) and liabilities of Rehab Systems Company (a wholly owned
subsidiary of NovaCare, Inc.) which are excluded from the NovaCare
Rehabilitation Hospitals Acquisition. The excluded assets and liabilities are as
follows (in thousands):
<TABLE>
<S> <C>
Cash and cash equivalents $ 4,973
Accounts receivable 259
Other current assets 42
Equipment, net 1,719
Intangible assets, net 1,242
Other assets (primary investments in subsidiaries) 40,637
Accounts payable (454)
Other current liabilities (275)
Current portion of long term debt (146)
Long term debt (38,620)
Payable to affiliates (92,377)
-------
Net excluded asset (liability) $ (83,000)
=======
</TABLE>
Also being excluded is depreciation and amortization expense of
$1,918,000 related to the excluded assets.
2. To allocate the excess of the $215,000,000 cash purchase price over
the net tangible asset value of the acquired NovaCare facilities, which is
approximately $159,199,000. Of this excess, $120,000,000 has been allocated to
leasehold value and the remaining $39,199,000 has been allocated to
10
<PAGE>
goodwill. This allocation serves to decrease historical goodwill of the NovaCare
facilities by $22,006,000. This adjustment also reflects the increase in
long-term debt necessary to finance the transaction. The $120,000,000 allocated
to leasehold value was based on total lease payments for the remaining lease
terms capitalized at 8.33% capitalization rate. There are seven leases involved.
Total lease payments approximate $10,700,000 annually. Six of the leases have
remaining terms ranging from 19 to 29 years. The seventh lease has a remaining
term of six years.
3. To eliminate intercompany management fees of $4,196,000 and royalty
fees of $8,210,000 of the acquired NovaCare facilities. These fees totaling
$12,406,000 are included in operating unit expenses in the accompanying income
statement.
4. To adjust depreciation and amortization expense to reflect the
allocation of the excess purchase price over the net tangible asset value
described in Item 1 above as follows (in thousands):
<TABLE>
<CAPTION>
Purchase Price
Allocation Useful Annual
Adjustment Life Amortization
--------------- -------- ------------
<S> <C> <C> <C>
Leasehold value.................... $ 120,000 20 years $ 6,000
Goodwill........................... (22,006) 40 years (550)
----
$ 5,450
=====
</TABLE>
No additional adjustments to NovaCare's historical depreciation and amortization
are necessary. The remaining net assets acquired approximate their fair value.
Because NovaCare's results of operations before intercompany items (described in
item 3 above) are profitable, both on a historical and pro forma basis, the
40-year amortization period for goodwill is appropriate and consistent with
HEALTHSOUTH policy. Leasehold value is being amortized over the weighted average
remaining terms of the leases, which is 20 years.
5. To increase interest expense by $17,916,000 to reflect pro forma
borrowings of $215,000,000, described above, at an 8.33% variable interest rate,
which represents HEALTHSOUTH's weighted average cost of debt, as if they were
outstanding for the entire year, and to decrease interest expense by $9,459,000,
which represents interest on NovaCare debt not assumed by HEALTHSOUTH. A 1/8%
variance in the assumed interest rate would change pro forma interest expense by
approximately $269,000.
6. To adjust estimated Medicare reimbursement for the changes in
reimbursable expenses described in items 1, 3, 4 and 5 above. These changes are
as follows (in thousands):
<TABLE>
<S> <C>
Depreciation and amortization (item 1) $ (1,918)
Intercompany management fees (item 3) (4,196)
Depreciation and amortization (item 4) 5,450
Interest expense (item 5) 8,457
-----
7,793
Assumed Medicare utilization 70%
---
Increased reimbursement $ 5,455
=====
</TABLE>
11
<PAGE>
The Medicare utilization rate of 70% assumes a slight improvement in NovaCare's
historical Medicare percentage of 78% as a result of bringing these facilities
into the HEALTHSOUTH network.
7. To adjust the NovaCare provision for income taxes to an effective
rate of 39% (net of minority interests).
B. The SHC Merger
The proposed SHC Merger is intended to be accounted for as a pooling of
interests. The pro forma condensed income statements assume that the SHC Merger
was consummated on January 1, 1992. The pro forma condensed balance sheet
assumes that the SHC Merger was consummated on December 31, 1994.
The pro forma condensed financial information contains no adjustments
to conform the accounting policies of the two companies because any such
adjustments have been determined to be immaterial by the management of
HEALTHSOUTH.
The following pro forma adjustments are necessary for the SHC Merger:
1. To adjust pro forma long-term debt by $11,250,000, assuming the
$75,000,000 of 11.5% Senior Subordinated Notes due 2004 (issued on June 28,
1994) are purchased by HEALTHSOUTH at 115% of their face value. The resulting
$2,856,000 loss from the write-off of unamortized balance of deferred loan costs
and $11,250,000 loss on early extinguishment of debt has been charged to
retained earnings, net of taxes of $(7,061,000). The $728,000 decrease in
interest expense represents the $3,632,000 increase in interest expense for the
pro forma borrowings of $86,250,000, described above, at a 8.33% variable rate,
which represents HEALTHSOUTH's weighted average cost of debt, as if they were
outstanding for six months and two days, and to decrease interest expense by
$4,360,000, which represents SHC's $75,000,000 Senior Subordinated Notes due
2004 at a 11.5% rate over a period of 6 months and 2 days.
2. The pro forma condensed income statements do not reflect
non-recurring costs resulting directly from the Merger. The management of
HEALTHSOUTH estimates that these costs will approximate $4,000,000 and will be
charged to operations in the quarter the Merger is consummated. The amount
includes costs to merge the two companies and professional fees. However, this
estimated expense, net of taxes of $1,560,000, has been charged to retained
earnings in the accompanying pro forma balance sheet.
3. To adjust pro forma share amounts based on historical share amounts,
converting each outstanding share of SHC Common Stock and redeemable preferred
stock into .2486 shares of HEALTHSOUTH Common Stock. The conversion ratio is
based upon an assumed Base Period Trading Price for HEALTHSOUTH's Common Stock
equal to or in excess of $18.50 per share.
SHC's weighted average common and common equivalent shares outstanding
have also been adjusted using the .2486 exchange ratio. Assuming the exchange
ratio was .2788 (which is the maximum Exchange Ratio), then pro forma earnings
per share data would be as follows:
12
<PAGE>
<TABLE>
<CAPTION>
Year ended December 31,
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Net income per common and
common equivalent share $.51 $.22 $.47
==== ==== ====
Net income per common and
common equivalent share--
assuming full dilution $.51 $N/A $N/A
==== ==== ====
</TABLE>
13
