As filed with the Securities and Exchange Commission on November 26, 1997
REGISTRATION NO. 333-39825
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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HEALTHSOUTH CORPORATION
(Exact Name of Registrant as Specified in its Charter)
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<TABLE>
<S> <C> <C>
DELAWARE 8062 63-0860407
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification
Incorporation or Organization) Classification Code Number) Number)
</TABLE>
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ONE HEALTHSOUTH PARKWAY, BIRMINGHAM, ALABAMA 35243
(205) 967-7116
(Address, including Zip Code, and Telephone Number,
including Area Code, of Registrant's Principal Executive Offices)
RICHARD M. SCRUSHY
CHAIRMAN OF THE BOARD AND
CHIEF EXECUTIVE OFFICER
HEALTHSOUTH CORPORATION
ONE HEALTHSOUTH PARKWAY
BIRMINGHAM, ALABAMA 35243
(205) 967-7116
(Name, Address, including Zip Code, and Telephone Number,
including Area Code, of Agent for Service)
COPIES TO:
DONALD T. LOCKE, ESQ. WILLIAM W. HORTON, ESQ.
F. HAMPTON MCFADDEN, JR., ESQ. Senior Vice President and Corporate Counsel
Haskell Slaughter & Young, L.L.C. HEALTHSOUTH Corporation
1200 AmSouth/Harbert Plaza One HealthSouth Parkway
1901 Sixth Avenue North Birmingham, Alabama 35243
Birmingham, Alabama 35203 (205) 967-7116
(205) 251-1000
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time to
time after this Registration Statement becomes effective.
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. [ ]
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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<PAGE>
SUBJECT TO COMPLETION, DATED NOVEMBER 26, 1997
PROSPECTUS
OF
HEALTHSOUTH CORPORATION
THIS PROSPECTUS RELATES TO 984,189 SHARES (THE "SHARES") OF THE COMMON
STOCK, PAR VALUE $.01 PER SHARE (THE "HEALTHSOUTH COMMON STOCK"), OF HEALTHSOUTH
CORPORATION (TOGETHER WITH ITS SUBSIDIARIES, "HEALTHSOUTH" OR THE "COMPANY")
BEING OFFERED BY THE SELLING STOCKHOLDERS ("THE SELLING STOCKHOLDERS"). SEE
"SELLING STOCKHOLDERS".
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All proceeds from any sales of the Shares by the Selling Stockholders will
inure to the benefit of the Selling Stockholders. The Company will receive none
of the proceeds from the sale of Shares which may be offered hereby. All
expenses of registration incurred in connection herewith, including fees and
expenses, are being borne by the Company, and all selling and other expenses
incurred by the Selling Stockholders will be borne by the Selling Stockholder.
The Selling Stockholders have not advised the Company of any specific plans
for the distribution of the Shares covered by this Prospectus, but it is
anticipated that the Shares will be sold from time to time primarily in
transactions (which may include block transactions) on The New York Stock
Exchange, Inc. ("NYSE") at the market price then prevailing, although sales may
also be made in negotiated transactions or otherwise. The Selling Stockholders
and the brokers and dealers through whom sale of the Shares may be made may be
deemed to be "underwriters" within the meaning of the Securities Act of 1933, as
amended, and their commissions or discounts and other compensation may be
regarded as underwriters' compensation. See "Plan of Distribution".
SEE "RISK FACTORS" ON PAGE 4 FOR A DISCUSSION OF CERTAIN FACTORS TO BE
CONSIDERED BY PROSPECTIVE PURCHASERS OF THE SHARES.
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THE SECURITIES TO BE ISSUED HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION (THE "SEC") OR BY ANY STATE SECURITIES
COMMISSION NOR HAS THE SEC OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
--------------
THE DATE OF THIS PROSPECTUS IS NOVEMBER , 1997.
<PAGE>
Information contained herein is subject to completion or amendment. A
Registration Statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the Registration Statement becomes
effective. This Prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
<PAGE>
AVAILABLE INFORMATION
HEALTHSOUTH has filed a Registration Statement on Form S-3 under the
Securities Act of 1933, as amended (the "Securities Act"), with the SEC covering
the Shares (including exhibits and amendments thereto, the "Registration
Statement"). As permitted by the rules and regulations of the SEC, this
Prospectus omits certain information contained in the Registration Statement.
For further information pertaining to the securities offered hereby, reference
is made to the Registration Statement.
HEALTHSOUTH is subject to the information requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files periodic reports, proxy statements and other information with
the SEC relating to its business, financial statements and other matters. The
Registration Statement, as well as such reports, proxy statements and other
information, may be inspected at the public reference facilities maintained by
the SEC at Room 1024, 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C.
20549 and should be available for inspection and copying at the regional offices
of the SEC located at Seven World Trade Center, Suite 1300, New York, New York
10048, 5670 Wilshire Boulevard, 11th Floor, Los Angeles, California 90036-3648;
and Citicorp Center, 500 West Madison Street, Room 1400, Chicago, Illinois
60661-2511. Copies of such material can be obtained at prescribed rates by
writing to the SEC, Public Reference Section, 450 Fifth Street, N.W.,
Washington, D.C. 20549. The SEC also maintains a web site that contains reports,
proxy and information statements and other information regarding HEALTHSOUTH and
the Registration Statement. The address at that web site is http://www.sec.gov.
The HEALTHSOUTH Common Stock is listed on the New York Stock Exchange, and the
Registration Statement, reports, proxy statements and certain other information
filed by HEALTHSOUTH should be available for inspection at the library of the
New York Stock Exchange, Inc., 20 Broad Street, 7th Floor, New York, New York
10005.
FORWARD-LOOKING STATEMENTS
Statements relating to HEALTHSOUTH contained in this Prospectus that are
not historical facts are forward-looking statements. In addition, HEALTHSOUTH,
through its senior management, from time to time makes forward-looking public
statements concerning its expected future operations and performance and other
developments. Such forward-looking statements are necessarily estimates
reflecting HEALTHSOUTH's best judgment based upon current information and
involve a number of risks and uncertainties, and there can be no assurance that
other factors will not affect the accuracy of such forward-looking statements.
While it is impossible to identify all such factors, factors which could cause
actual results to differ materially from those estimated by HEALTHSOUTH include,
but are not limited to, changes in the regulation of the healthcare industry at
either or both of the federal and state levels, changes in reimbursement for
HEALTHSOUTH's services by government or private payors, competitive pressures in
the healthcare industry and HEALTHSOUTH's response thereto, HEALTHSOUTH's
ability to obtain and retain favorable arrangements with third-party payors,
unanticipated delays in HEALTHSOUTH's implementation of its Integrated Service
Model, general conditions in the economy and capital markets, and other factors
which may be identified from time to time in HEALTHSOUTH's SEC filings and other
public announcements.
Certain of the matters discussed in this Prospectus relating to Horizon/CMS
Healthcare Corporation ("Horizon/CMS") are forward-looking statements, and such
statements involve risks and uncertainties. Although Horizon/CMS believes that
its expectations are based upon reasonable assumptions, it can give no assurance
that the anticipated results will occur. Important factors that could cause
actual results to differ materially from those in the forward-looking statements
include conditions in the capital markets, the regulatory environment in which
Horizon/CMS operates and the enactment by Congress of healthcare reform
measures.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT PRESENTED
HEREIN OR DELIVERED HEREWITH. COPIES OF SUCH REPORTS, PROXY STATEMENTS AND OTHER
INFORMATION FILED BY HEALTHSOUTH, OTHER THAN EXHIBITS TO SUCH DOCUMENTS UNLESS
SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED HEREIN BY REFERENCE, ARE AVAILABLE
WITHOUT CHARGE, UPON WRITTEN OR ORAL REQUEST, FROM THE SECRETARY OF HEALTHSOUTH
CORPORATION, ONE HEALTHSOUTH PARKWAY, BIRMINGHAM, ALABAMA 35243, TELEPHONE (205)
967-7116.
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<PAGE>
There are hereby incorporated by reference in this Prospectus, and
specifically made a part hereof, the following documents heretofore filed by
HEALTHSOUTH (Commission File No. 1-10315) with the SEC, pursuant to the Exchange
Act:
1. HEALTHSOUTH's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996, as amended.
2. HEALTHSOUTH's Quarterly Reports on Form 10-Q for the quarterly periods
ended March 31, 1997, June 30, 1997 and September 30, 1997, as amended.
3. HEALTHSOUTH's Current Report on Form 8-K filed February 19, 1997
(relating to the acquisition of Horizon/CMS).
4. HEALTHSOUTH's Current Report on Form 8-K filed March 13, 1997
(reporting the consummation of the acquisition of Health Images, Inc.).
5. HEALTHSOUTH's Current Report on Form 8-K filed August 26, 1997, as
amended (containing audited consolidated financial statements of HEALTHSOUTH
at December 31, 1996 and for the three years then ended reflecting the
combined operations of HEALTHSOUTH and Health Images, Inc.).
6. HEALTHSOUTH's Current Report on Form 8-K filed November 13, 1997
(containing information relating to the Company's acquisition of
Horizon/CMS).
7. The description of HEALTHSOUTH's capital stock contained in
HEALTHSOUTH's Registration Statement on Form 8-A filed August 26, 1989.
There are also hereby incorporated by reference into this Prospectus and
made a part hereof the following documents filed by Horizon/CMS, a Delaware
corporation (Commission File No. 1-9369):
1. Horizon/CMS's Annual Report on Form 10-K for the fiscal year ended May
31, 1997, as amended.
2. Horizon/CMS's Quarterly Report for the quarterly period ended August
31, 1997, as amended.
All documents filed by HEALTHSOUTH pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus and prior to the
termination of any offering hereunder shall be deemed to be incorporated by
reference into this Prospectus and to be made a part hereof from the date of the
filing of such documents. Any statement contained in a document incorporated by
reference herein shall be deemed to be modified or superseded for the purpose
hereof to the extent that a statement contained herein (or in any other
subsequently filed document which also is incorporated by reference herein)
modifies or supersedes such statement. Any statement so modified or superseded
shall not be deemed to constitute a part hereof, except as so modified or
superseded.
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION SHOULD NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY DISTRIBUTION OF THE
SECURITIES TO WHICH THIS PROSPECTUS RELATES SHALL, UNDER ANY CIRCUMSTANCES,
CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE INFORMATION
CONCERNING HEALTHSOUTH CONTAINED IN THIS PROSPECTUS SINCE THE DATE OF SUCH
INFORMATION.
The principal executive offices of HEALTHSOUTH are located at One
HealthSouth Parkway, Birmingham, Alabama 35243 and its telephone number is (205)
967-7116.
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<PAGE>
RISK FACTORS
In addition to the other information in this Prospectus, the following
should be considered carefully by potential purchasers of the Shares.
REIMBURSEMENT BY THIRD PARTY PAYORS
Substantially all of HEALTHSOUTH's revenues are derived from private and
governmental third party payors (in 1996, approximately 37.8% from Medicare and
approximately 62.2% from commercial insurers, managed care plans, workers'
compensation payors and other private pay revenue sources). There are increasing
pressures from many payor sources to control healthcare costs and to limit
increases in reimbursement rates for medical services. There can be no
assurances that payments under governmental and third party payor programs will
remain at levels comparable to present levels. In attempts to limit the federal
budget deficit, there have been, and HEALTHSOUTH expects that there will
continue to be, a number of proposals to limit Medicare reimbursements for
certain services. HEALTHSOUTH cannot now predict whether any of these pending
proposals will be adopted or, if adopted and implemented, what effect such
proposals would have on HEALTHSOUTH.
REGULATION
The operation of HEALTHSOUTH's facilities and the provision of healthcare
services are subject to federal, state and local licensure and certification
laws. These facilities and services are subject to periodic inspection by
governmental and other authorities to assure compliance with the various
standards established for continued licensure under state law, certification
under the Medicare and Medicaid programs and participation in the Veteran's
Administration program. Additionally, in many states, Certificates of Need or
other similar approvals are required for expansion of HEALTHSOUTH's operations.
HEALTHSOUTH could be adversely affected by the failure or inability to obtain
such approvals, by changes in the standards applicable to approvals and by
possible delays and expenses associated with obtaining approvals. The failure by
HEALTHSOUTH to obtain, retain or renew any required regulatory approvals,
licenses or certificates could prevent HEALTHSOUTH from being reimbursed for, or
from, offering its services, or could adversely affect its results of
operations.
A wide array of Medicare/Medicaid fraud and abuse provisions apply to the
operations of HEALTHSOUTH. HEALTHSOUTH is subject to extensive federal and state
regulation with respect to financial relationships among healthcare providers,
physician self-referral arrangements and other fraud and abuse issues. Penalties
for violation of federal and state laws and regulations include exclusion from
participation in the Medicare/Medicaid programs, asset forfeiture, civil
penalties and criminal penalties. The Office of Inspector General of the
Department of Health and Human Services (the "OIG"), the DOJ and other federal
agencies interpret healthcare fraud and abuse provisions liberally and enforce
them aggressively.
HEALTHCARE REFORM
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 healthcare system, either nationally or at the state
level. Among the proposals which are, or recently have been, under consideration
are cost controls on hospitals, insurance market reforms to increase the
availability of group health insurance to small businesses, requirements that
all businesses offer health insurance coverage to their employees and the
creation of a single government health insurance plan that would cover all
citizens. The costs of certain proposals would be funded in significant part by
reductions in payments by governmental programs, including Medicare and
Medicaid, to healthcare providers. There continue to be federal and state
proposals that would, and actions that do, impose more limitations on government
and private payments to healthcare providers such as HEALTHSOUTH and proposals
to increase copayments and deductibles from program and private patients. At the
federal level, both Congress and the current Administration have continued to
propose healthcare budgets that substantially reduce payments under the Medicare
and Medicaid programs. In addition, many states are considering the enact-
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<PAGE>
ment of initiatives designed to reduce their Medicaid expenditures, to provide
universal coverage or additional levels of care and/or to impose additional
taxes on healthcare providers to help finance or expand the states' Medicaid
systems. There can be no assurance as to the ultimate content, timing or effect
of any healthcare reform legislation, nor is it possible at this time to
estimate the impact of potential legislation, which may be material, on
HEALTHSOUTH.
DEMAND FOR PERSONNEL
The success and growth strategy of HEALTHSOUTH are dependent in part on its
ability to attract and retain competent individuals with training and experience
in marketing, therapy, nursing and other clinical or operating disciplines. Such
persons are in high demand and often are subject to competing offers. In past
years, the healthcare industry has experienced nursing and therapy personnel
shortages. There can be no assurance that HEALTHSOUTH will be able to attract
and retain the qualified clinical or operating personnel necessary for existing
business and planned growth. A future lack of such personnel could adversely
affect the results of operations of HEALTHSOUTH.
DEPENDENCE ON KEY PERSONNEL
The future success of HEALTHSOUTH's business will depend in part on its
ability to attract and retain highly qualified individuals to fill key
management positions. HEALTHSOUTH competes for such individuals with similar
healthcare companies, and there can be no assurance that it will be successful
in hiring or retaining qualified personnel. The loss of key personnel or the
inability to hire or retain qualified management personnel could adversely
affect HEALTHSOUTH's results of operations.
COMPETITION
HEALTHSOUTH operates in a highly competitive industry. HEALTHSOUTH
generally operates its facilities in communities that also are served by similar
facilities operated by others. Although HEALTHSOUTH is the largest provider of
outpatient surgery and rehabilitation healthcare services on a nationwide basis,
in any particular market it may encounter competition from local or national
entities with longer operating histories or other superior competitive
advantages. There can be no assurance that such competition, or other
competition which HEALTHSOUTH may encounter in the future, will not adversely
affect HEALTHSOUTH's results of operations.
FAIR PRICE PROVISION
HEALTHSOUTH's Restated Certificate of Incorporation (the "HEALTHSOUTH
Certificate") contains certain provisions requiring supermajority stockholder
approval to effect specified extraordinary corporate transactions unless certain
conditions are met. The HEALTHSOUTH Certificate requires the affirmative vote of
66 2/3% of all shares of HEALTHSOUTH entitled to vote in an election of
Directors to approve a "business combination" with any "other entity" that is
the beneficial owner, directly or indirectly, of more than 20% of the
outstanding shares of HEALTHSOUTH entitled to vote in an election of Directors.
The effect of the foregoing provisions is to make it more difficult for a
person, entity or group to effect a change in control of HEALTHSOUTH through the
acquisition of a large block of HEALTHSOUTH's voting stock, or to effect a
merger or other acquisition that is not approved by a majority of HEALTHSOUTH's
Directors serving in office prior to the acquisition by the other entity of 5%
or more of HEALTHSOUTH's stock.
CERTAIN HORIZON/CMS LITIGATION
On October 29, 1997 HEALTHSOUTH acquired Horizon/CMS through the merger of
a wholly owned subsidiary of HEALTHSOUTH with and into Horizon/CMS. Horizon/CMS
is currently a party, or is subject, to certain material litigation matters and
disputes, which are described below. Horizon/ CMS is also, from time to time, a
party to various litigation matters and disputes arising in the ordinary course
of its business.
5
<PAGE>
Tenet Healthcare Corporation and Related Litigation
Horizon/CMS filed a lawsuit on March 7, 1996 against Tenet Healthcare
Corporation ("Tenet") in the United States District Court for the District of
Nevada. The lawsuit arose out of an agreement entered into between Horizon/CMS
and Tenet in connection with Horizon/CMS's attempted acquisition of The
Hillhaven Corporation ("Hillhaven") in January 1995. In the lawsuit, Horizon/CMS
alleges that Tenet failed to honor its commitment to pay Horizon/CMS
approximately $14.5 million pursuant to the agreement. Tenet has contended that
the amount owing to Horizon/CMS under the agreement is approximately $5.1
million. During the nine months ended February 28, 1996, Horizon/CMS recognized
as a receivable approximately $13.0 million of the approximately $14.5 million
Horizon/CMS contends it is owed under the agreement. On May 13, 1997,
Horizon/CMS sought leave of the court to amend its complaint against Tenet to
assert, among other things, that Tenet tortiously interfered with Horizon/ CMS's
contractual relationship with its investment bankers, Donaldson, Lufkin &
Jenrette Securities Corporation ("DLJ"). In this connection, Horizon/CMS seeks
actual damages against Tenet in the approximate amount of $14.5 million plus
pre-judgment interest and punitive damages.
On May 13, 1997, Horizon/CMS filed a lawsuit against DLJ in the United
States District Court for the Central District of California. This lawsuit
arises out of the events and circumstances involved in the lawsuit against
Tenet. Specifically, this lawsuit alleges that DLJ, which served as investment
banker to Horizon/CMS in connection with Horizon/CMS's attempted acquisition of
Hillhaven, breached its fiduciary duty to Horizon/CMS, engaged in professional
negligence and tortiously interfered with Horizon/ CMS's contract with Tenet by
advising Tenet not to pay the $14.5 million Horizon/CMS contends is owing under
the agreement. In this connection, Horizon/CMS seeks actual damages against DLJ
in the approximate amount of $14.5 million and punitive damages. On June 27,
1997, pursuant to an agreement reached with DLJ and its counsel, Horizon/CMS
filed a new lawsuit against DLJ in the United States District Court for the
District of Nevada. This lawsuit is identical in all respects to the lawsuit
filed in the United States District Court for the Central District of
California. Pursuant to the agreement with DLJ and its counsel, DLJ has agreed
that it will not contest either jurisdiction or venue in Nevada. In addition, on
June 27, 1997, Horizon/CMS moved to consolidate the two Nevada matters, which
motion was granted. Horizon/CMS agreed to dismiss the litigation pending in
California upon consolidation of the two Nevada matters. Horizon/CMS seeks an
aggregate of $14.5 million in actual damages plus prejudgment interest and
punitive damages against Tenet, DLJ or both. Horizon/CMS, Tenet and DLJ are
actively pursuing a negotiated settlement of this litigation and, in that
connection, have entered into an agreement whereby Horizon/CMS will dismiss the
consolidated case without prejudice subject to Tenet's and DLJ's agreement that
they will not raise defenses based on the statute of limitations or jurisdiction
if Horizon/CMS refiles the case within a specified period of time. No assurance
can be given that the case can be settled, nor as to the ultimate outcome of the
case if it is refiled.
OIG/DOJ Investigation Involving Certain Medicare Part B and Related
Co-Insurance Billings
Horizon/CMS announced on March 15, 1996 that certain Medicare Part B and
related co-insurance billings previously submitted by Horizon/CMS were being
investigated by the OIG and the DOJ. On December 31, 1996, Horizon/CMS announced
that it had reached a settlement with the DOJ and OIG that concluded their
investigation of these billings. Horizon/CMS also announced that it had received
a letter from the United States Attorney's office conducting such investigation
indicating that the United States declined any criminal prosecution of
Horizon/CMS or any of its employees with respect to these billings. Under the
settlement, Horizon/CMS paid approximately $5.8 million to the United States as
a complete and final resolution of such matters. In addition, pursuant to the
terms of the settlement, Horizon/CMS is implementing a corporate-wide Medicare
Part B compliance program that includes the appointment of a subcommittee to
Horizon/CMS's Corporate Compliance Committee reporting directly to the
Chairman's office and to Horizon/CMS's Board of Directors, ongoing orientation
and training sessions for current and new employees, training evaluation and
annual audits to assess accuracy, validity and reliability of billings.
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SEC and NYSE Investigations
The Division of Enforcement of the SEC is conducting a private
investigation with respect to trading in the securities of Horizon/CMS and
Continental Medical Systems, Inc. ("CMS"). In connection with that
investigation, Horizon/CMS has produced certain documents and Neal M. Elliott,
Chairman of the Board, President and Chief Executive Officer of Horizon/CMS, and
certain other present and former officers of Horizon/CMS have given testimony to
the SEC. Horizon/CMS has also been informed that certain of its division office
employees and an individual, affiliates of whom have limited business
relationships with Horizon/CMS, have responded to subpoenas from the SEC. Mr.
Elliott has also produced certain documents in response to a subpoena from the
SEC. In addition, Horizon/CMS and Mr. Elliott have responded or are responding
to separate subpoenas from the SEC pertaining to trading in Horizon/
CMS's common stock and Horizon/CMS's March 1, 1996 press release announcing a
revision in Horizon/CMS's third quarter earnings estimate; Horizon/CMS's March
7, 1996 press release announcing the filing of a lawsuit against Tenet; the
March 12, 1996 press release announcing that the merger with Pacific
Rehabilitation & Sports Medicine, Inc. could not be effected by April 1, 1996;
Horizon/CMS's March 15, 1996 press release announcing the existence of a federal
investigation into certain of Horizon/ CMS's Medicare Part B billings;
Horizon/CMS's February 19, 1997 announcement that HEALTHSOUTH would acquire
Horizon/CMS; and any discussions of proposed business combinations between
Horizon/ CMS and Medical Innovations and Horizon/CMS and certain other
companies. The investigation is ongoing, and neither Horizon/CMS nor Mr. Elliott
possesses all the facts with respect to the matters under investigation.
Although neither Horizon/CMS nor Mr. Elliott has been advised by the SEC that
the SEC has concluded that any of Horizon/CMS, Mr. Elliott or any other current
or former officer or director of Horizon/CMS has been involved in any violation
of the federal securities laws, there can be no assurance as to the outcome of
the investigation or the time of its conclusion. Both Horizon/CMS and Mr.
Elliott intend to continue cooperating fully with the SEC in connection with the
investigation.
In March 1995, the NYSE informed Horizon/CMS that it had initiated a review
of trading in Hillhaven common stock prior to the announcement of Horizon/CMS's
proposed acquisition of Hillhaven. In April 1995, the NYSE extended the review
of trading to include all dealings with CMS. On April 3, 1996, the NYSE notified
Horizon/CMS that it had initiated a review of trading in its common stock
preceding Horizon/CMS's March 1, 1996 press release described above. On February
20, 1997, the NYSE notified Horizon/CMS that it was reviewing trading in
Horizon/CMS's securities prior to the February 18, 1997 announcement that
HEALTHSOUTH would acquire Horizon/CMS. Horizon/CMS is cooperating with the NYSE
in its reviews and, to Horizon/CMS's knowledge, the reviews are ongoing.
Michigan Attorney General Investigation Into Long-Term Care Facility In
Michigan
Horizon/CMS learned in September 1996 that the Attorney General of the
State of Michigan is investigating one of its skilled nursing facilities. The
facility, in Howell, Michigan, has been owned and operated by Horizon/CMS since
February 1994. As widely reported in the press, the Attorney General seized a
number of patient, financial and accounting records that were located at this
facility. By order of a circuit judge in the county in which the facility is
located, the Attorney General was ordered to return patient records to the
facility for copying. The investigation appears to involve allegations arising
out of a licensing survey conducted in April 1996. Horizon/CMS has advised the
Michigan Attorney General that it is willing to cooperate in this investigation.
Due to the preliminary nature of this investigation, Horizon/CMS cannot now
predict when the investigation will be completed; the ultimate outcome of the
investigation; or the effect thereof on Horizon/CMS's financial condition or
results of operations. If adversely determined, this investigation could result
in the imposition of civil and criminal fines or sanctions against Horizon/CMS,
which could have a material adverse impact on Horizon/CMS's financial condition
and its results of operations.
Stockholder Litigation
On March 28, 1996, Horizon/CMS was served with a lawsuit filed on March 21,
1996 in New Mexico state district court in Albuquerque, New Mexico, by a former
stockholder of CMS, Ronald Gottesman v. Horizon/CMS Healthcare Corporation, No.
CV-96-02894, Second Judicial District Court, County of
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Bernalillo, State of New Mexico. This lawsuit, which among other things seeks
class certification, alleges violations of federal and New Mexico state
securities laws arising from what the plaintiff contends are materially
misleading statements by Horizon/CMS in its June 6, 1995 joint proxy
statement/prospectus (the "CMS Prospectus"). The plaintiff alleges that
Horizon/CMS failed to disclose in the CMS Prospectus those problems in
Horizon/CMS's Medicare Part B billings Horizon/CMS described in its related
March 15, 1996 announcement. In this action, the plaintiff seeks damages in an
unspecified amount, plus costs and attorneys' fees. On August 22, 1997,
Horizon/CMS and the plaintiff entered into a stipulation whereby the plaintiff
agreed to dismiss the litigation upon final approval of the proposed settlement
described below.
Since April 5, 1996, Horizon/CMS has been served with several complaints by
current or former stockholders of Horizon/CMS on behalf of all persons who
purchased Horizon/CMS Common Stock between June 6, 1995 and March 15, 1996. Each
of these lawsuits was filed in the United States District Court for the District
of New Mexico, in Albuquerque, New Mexico. In July 1996, the Court entered its
order consolidating these lawsuits into a single action styled In re Horizon/CMS
Healthcare Corporation Securities Litigation, Case No. CIV 96-0442-BB. On
September 30, 1996, the consolidated putative class plaintiffs filed their
consolidated complaint. In this complaint, the plaintiffs allege violations of
federal and New Mexico state securities laws. Among such violations, the
plaintiffs alleged that Horizon/CMS, certain of its current and former directors
and certain former directors of CMS, disseminated materially misleading
statements or omitted disclosing material facts about Horizon/CMS and its
operations. In December 1996, Horizon/CMS and the individual defendants filed
their motions to dismiss this consolidated lawsuit.
On February 20, 1997, Horizon/CMS announced that it had reached an
agreement in principle to settle the claims against it and certain of its
current and former directors in the consolidated class action lawsuit. Under the
proposed settlement, Horizon/CMS agreed to pay a minimum amount of $17.0 million
to resolve all claims against Horizon/CMS and its current and former directors,
excluding those claims arising against the former directors of CMS for conduct
occurring prior to the merger between CMS and Horizon. Under the settlement, the
maximum amount payable by Horizon/CMS is $20.0 million to completely and finally
resolve all claims in the litigation, including any amounts related to claims
against former directors of CMS. In agreeing to settle the litigation, none of
the defendants concede, or admit to, any of the plaintiffs' claims or
allegations. The settlement is subject to court approval.
On April 7, 1997, Horizon/CMS paid the $17.0 million, in trust, to the
plaintiffs' lead counsel. Also in April, Horizon/CMS paid $2.25 million to CMS's
directors' and officers' liability insurance carrier in exchange for the
carrier's assumption of the remaining risk contingency. On June 16, 1997, the
Court preliminarily approved the proposed settlement and set a final hearing to
approve the proposed settlement in September 1997. The parties are currently
proceeding to consummate the settlement in accordance with the rules governing
these proceedings.
On August 19, 1997, the plaintiffs and the individual defendants announced
to the Court that they had reached a settlement of the claims excluded by
Horizon/CMS's prior settlement. This proposed settlement calls for the claims to
settle by a payment of $4 million. This entire amount will be paid by CMS's
directors' and officers' liability insurance carrier. The effect of this
settlement is to discharge Horizon/CMS of its $3 million guarantee described
above. Accordingly, subject to negotiation and execution of definitive
agreements between Horizon/CMS and its carrier reflecting such settlement,
Horizon/CMS's $17 million payment will represent Horizon/CMS's total liability
to the plaintiffs in this matter.
On September 12, 1997 the Court, after hearing, entered an order approving
the settlement. While an appeal from such order may be perfected during the 30
day period following the entry of the order, Horizon/CMS does not believe, since
no plaintiff objected thereto, that any appeal will be perfected. Because no
appeal was taken in this case, the judgment became final at the end of such 30
day period.
8
<PAGE>
Stockholder Derivative Actions
Commencing in April and continuing into May 1996, Horizon/CMS was served
with nine complaints alleging a class action derivative action brought by
stockholders of Horizon/CMS for and on behalf of Horizon/CMS in the Court of
Chancery of New Castle County, Delaware, against Neal M. Elliott, Klemett L.
Belt, Jr., Rocco A. Ortenzio, Robert A. Ortenzio, Russell L. Carson, Bryan C.
Cressey, Charles H. Gonzales, Michael A. Jeffries, Gerard M. Martin, Frank M.
McCord, Raymond M. Noveck, Barry M. Portnoy and LeRoy S. Zimmerman. The nine
lawsuits have been consolidated into one action styled In re Horizon/CMS
Healthcare Corporation Shareholders Litigation. The plaintiffs allege, among
other things, that Horizon/CMS's current and former directors breached their
fiduciary duties to Horizon/CMS and the stockholders as a result of (i) the
purported failure to supervise adequately and the purported knowing
mismanagement of the operations of Horizon/CMS, and the (ii) purported misuse of
inside information in connection with the sale of Horizon/CMS's Common Stock by
certain of the current and former directors in January and February 1996. To
that end, the plaintiffs seek an accounting from the directors for profits to
themselves and damages suffered by Horizon/CMS as a result of the transaction
complained of in the complaint and attorneys' fees and costs. On June 21, 1996,
the individual defendants filed a motion with the Chancery Court seeking to
dismiss this matter because, among other things, the plaintiffs failed to make a
demand on the board of directors prior to commencing this litigation.
Horizon/CMS cannot now predict the outcome or the effect of this litigation or
the length of time it will take to resolve this litigation.
In April 1996, Horizon/CMS was served with a complaint in a stockholder's
derivative lawsuit styled Lind v. Rocco A. Ortenzio, Neal M. Elliott, Klemett L.
Belt, Jr., Robert A. Ortenzio, Russell L. Carson, Bryan C. Cressey, Charles H.
Gonzales, Michael A. Jeffries, Gerard M. Martin, Frank M. McCord, Raymond N.
Noveck, Barry M. Portnoy, LeRoy S. Zimmerman and Horizon/CMS Healthcare
Corporation, No. CIV 96-0538-BB, pending in the United States District Court for
the District of New Mexico. The plaintiff alleges, among other things, that
Horizon/CMS's current and former directors breached their fiduciary duties to
Horizon/CMS and the stockholders as a result of (i) the purported failure to
supervise adequately and the purported knowing mismanagement of the operations
of Horizon/CMS, and the (ii) purported misuse of inside information in
connection with the sale of Horizon/CMS's Common Stock by certain of the current
and former directors in January and February 1996. To that end, the plaintiff
seeks an accounting from the directors for profits to themselves and damages
suffered by Horizon/CMS as a result of the transaction complained of in the
complaint and attorneys' fees and costs. Horizon/CMS filed a motion seeking a
stay of this case pending the outcome of the motion to dismiss in the Delaware
derivative lawsuits or, in the alternative, to dismiss this case for those same
reasons. Horizon/CMS cannot now predict the outcome or the effect of this
litigation or the length of time it will take to resolve this litigation.
Lawsuit by Former Shareholders of Communi-Care, Inc. and Pro Rehab, Inc.
On May 28, 1997, CMS was served with a lawsuit styled Kenneth Hubbard and
Lynn Hubbard v. Rocco Ortenzio, Robert A. Ortenzio and Continental Medical
Systems, Inc., No. 3:97 CV294MCK, filed in the United States District Court for
the Western District of North Carolina, Charlotte Division by the former
shareholders of Communi-Care, Inc. and Pro Rehab, Inc. seeking damages arising
out of certain "earnout" provisions of the definitive purchase agreements under
which CMS purchased the outstanding stock of Communi-Care, Inc. and Pro Rehab,
Inc. from such shareholders. The plaintiffs allege that the manner in which CMS
and the other defendants operated the companies after their acquisition breached
its fiduciary duties to the plaintiffs, constituted fraud, gross negligence and
bad faith and a breach of their employment agreements with the companies. As a
result of such alleged conduct, the plaintiffs assert that they are entitled to
damages in an amount in excess of $27.0 million from CMS and the other
defendants. Horizon/CMS believes, based upon the advice of Eaves, Bardacke &
Baugh, P.A., counsel to Horizon/CMS in this matter, the assertions of these
plaintiffs to be without factual or legal merit and, as a result, intends to
vigorously contest such claims. Because this litigation has just been commenced,
Horizon/CMS cannot now predict the outcome of such litigation, the length of
time it will take to resolve such litigation or the effect of any such
resolution on Horizon/CMS's financial condition or results of operations.
9
<PAGE>
RehabOne Litigation
In March 1997, Horizon/CMS was served with a lawsuit filed in the United
States District Court for the Middle District of Pennsylvania, styled RehabOne,
Inc. v. Horizon/CMS Healthcare Corporation, Continental Medical Systems, Inc.,
David Nation and Robert Ortenzio, No. CV-97-0292. In this lawsuit the plaintiff
alleges violations of federal and state securities laws, fraud, and negligent
misrepresentation by Horizon/CMS and certain former officers of CMS in
connection with the issuance of a warrant to purchase 500,000 shares of
Horizon/CMS Common Stock (the "Warrant"). The Warrant was issued to the
plaintiff by Horizon/CMS in connection with the settlement of certain prior
litigation between the plaintiff and CMS. The plaintiff's complaint does not
state the amount of damages sought. Horizon/CMS disputes the factual and legal
assertions of the plaintiff in this litigation and intends to vigorously contest
the plaintiff's claims. Because this litigation has just commenced, Horizon/CMS
cannot predict the length of time it will take to resolve the litigation, the
outcome of the litigation or the effect of any such outcome on Horizon/CMS's
financial condition or results of operations.
EEOC Litigation
In March 1997, the Equal Employment Opportunity Commission (the "EEOC")
filed a complaint against Horizon/CMS alleging that Horizon/CMS has engaged in
unlawful employment practices in respect of Horizon/CMS's employment policies
related to pregnancies. Specifically, the EEOC asserts that Horizon/CMS's
alleged refusal to provide pregnant employees with light-duty assignments to
accommodate their temporary disabilities caused by pregnancy violates Sections
701(k) and 703(a) of Title VII, 42 U.S.C. (section)(section) 2000e-(k) and
2000e-2(a). In this lawsuit, the EEOC seeks, among other things, to permanently
enjoin Horizon/CMS's employment practices in this regard. Horizon/CMS disputes
the factual and legal assertions of the EEOC in this litigation and intends to
vigorously contest the EEOC's claims. Because this litigation has just
commenced, Horizon/CMS cannot predict the length of time it will take to resolve
the litigation, the outcome of the litigation or the effect of any such outcome
on Horizon/CMS's financial condition or results of operations.
North Louisiana Rehabilitation Hospital Medicare Billing Investigation
In August 1996, the United States Attorney for the Western District of
Louisiana, without actually initiating litigation, apprised Horizon/CMS of
alleged civil liability under the federal False Claims Act for what the
government believes were false or fraudulent Medicare and other federal program
claims submitted by Horizon/CMS's North Louisiana Rehabilitation Hospital
("NLRH") during the period from 1989 through 1992, including certain claims
submitted by a physician who was a member of the medical staff and under
contract to NLRH during the period. Specifically, the government alleges that
NLRH facilitated the submission of false claims under Part B of the Medicare
program by the physician and that NLRH itself submitted false claims under Part
A of the Medicare program for services that were not medically necessary. In
August 1996, the U.S. Attorney identified allegedly improper Part A and Part B
billings, together with penalty provisions under the False Claims Act, ranging
in the aggregate from approximately $1.7 million to $2.2 million. The government
does not dispute that the Medicare Part A services were rendered, only whether
they were medically necessary. Horizon/CMS has vigorously contested the
allegation that any cases of disputed medical necessity in this matter
constitute false or fraudulent claims under the civil False Claims Act.
Moreover, Horizon/CMS denies that NLRH facilitated the submission of false
claims under Medicare Part B.
In late April 1997, Horizon/CMS received administrative subpoenas relating
to the matter and has since then produced extensive materials with respect
thereto. Without conceding liability for either the Medicare Part A or Part B
claims, in May 1997, Horizon commenced preliminary settlement discussions with
the government. In preparation for settlement meetings held in late June and
mid-July 1997, Horizon/CMS and the government developed and then refined their
respective analyses of any losses the government may have incurred in this
regard. Following the July 1997 meeting, the government proposed to Horizon/CMS
that the matter be settled by Horizon/CMS paying the government $4.9 million
with respect to alleged Medicare Part A overpayments and that Horizon/CMS and
certain individual physicians pay the government $820,000 with respect to Medi-
10
<PAGE>
care Part B claims for physician services. In late July, Horizon/CMS responded
by offering to settle the matter for $3.7 million for alleged Medicare Part A
overpayments and $445,000 for alleged Medicare Part B claims for which
Horizon/CMS potentially could bear any responsibility. Horizon/ CMS anticipates
that settlement discussions will continue and, at this time, is optimistic that
the matter can be resolved without litigation. The government recently advised
Horizon/CMS that it has accepted the latter's settlement offer in this regard,
and the parties are currently in the process of negotiating and implementing
definitive settlement documentation.
Heritage Western Hills Litigation
Since July 1996, Horizon/CMS has been a defendant in a lawsuit styled Lexa
A. Auld, Administratrix of Martha Hary, Deceased v. Horizon/CMS Healthcare
Corporation and Charles T. Maxvill, D.O., No. 48-165121, 48th Judicial District
Court, Tarrant County, Texas. The case involved injuries allegedly suffered by a
resident of the Heritage Western Hills nursing facility in Fort Worth, Texas.
Horizon/CMS tendered the claim to its insurance carrier, which accepted coverage
with a reservation of rights and provided a defense through the carrier's
selected counsel in Dallas, Texas. The case went to trial on October 29, 1997,
and on November 7, 1997, the jury rendered a verdict in favor of the plaintiff
in the amount of $2.37 million in compensatory damages and $90 million in
punitive damages. Counsel has advised Horizon/CMS that, under applicable Texas
law, the punitive damages award is, at worst, limited to four times the amount
of the compensatory damages (the "Punitive Damages Cap"), and thus that the
maximum amount of an enforceable judgment in favor of the plaintiff is
approximately $12 million. Counsel has also advised Horizon/CMS that there are,
potentially, other and further caps on both the amount of compensatory damages
available to the plaintiff and the amount of punitive damages. Horizon/CMS has
filed the required motions with the court to impose the Punitive Damages Cap.
Horizon/CMS is also vigorously disputing the efficacy of the jury's verdict and,
subject to unfavorable resolutions of a variety of post-trial motions, intends
to appeal.
Horizon/CMS's insurance carrier continues to defend the matter subject to a
reservation of rights. Horizon/CMS's internal counsel, after reviewing the
findings contained in the jury verdict, the insurance policy at issue and the
carrier's handling of the case, believes that the entirety of any judgment
ultimately entered is covered by and payable from such insurance policy, less
Horizon/CMS's self-insured retention of $250,000. On November 19, 1997, the
insurance carrier sent Horizon/CMS a letter indicating its belief that certain
policy exclusions might apply and requesting additional information which might
affect its coverage determination. Horizon/CMS has retained separate counsel to
analyze the coverage issues and advise Horizon/CMS on its position, and
Horizon/CMS expects to continue to negotiate any coverage issues with its
carrier. Except as described above with respect to the Punitive Damages Cap, it
is not possible at this time to predict the outcome of any post-trial motions or
appeals, the resolution of any coverage issues or the ultimate amount of any
liability which will be borne by Horizon/CMS.
RECENT DEVELOPMENTS
Effective October 29, 1997, HEALTHSOUTH, through its wholly-owned
subsidiary, Reid Acquisition Corporation, a Delaware corporation (the
"Subsidiary"), completed the acquisition of Horizon/ CMS through a merger of the
Subsidiary into Horizon/CMS. As contemplated by the terms of the Plan and
Agreement of Merger by and among the parties, Horizon/CMS is the surviving
corporation in the merger, and is wholly owned by HEALTHSOUTH. Horizon/CMS
stockholders received 0.84338 shares of HEALTHSOUTH Common Stock, for each share
of the Common Stock, par value $.001 per share, of Horizon/CMS held by them.
Based on the price of HEALTHSOUTH Common Stock on the last business day
preceding the effective date of the merger, the exchange ratio represents a
value of $21.51 per share to Horizon/CMS's stockholders. The transaction was
accounted for as a purchase and had an approximate value of $1.65 billion,
including the assumption of debt.
On November 3, 1997, HEALTHSOUTH announced that it has signed a definitive
agreement to sell all of the Horizon/CMS's long-term care assets to Integrated
Health Services, Inc. ("Integrated"). HEALTHSOUTH will retain 31 inpatient
rehabilitation facilities and approximately 275 outpatient rehabilitation
locations. HEALTHSOUTH will sell 139 long-term care facilities, 12 specialty
hospitals,
11
<PAGE>
35 institutional pharmacy locations, and over 1,000 rehabilitation therapy
contracts with long-term care facilities. Under the agreement, HEALTHSOUTH will
receive $1.15 billion in cash and Integrated will assume approximately $100
million of HEALTHSOUTH debt. This transaction is expected to close near the end
of 1997.
THE COMPANY
HEALTHSOUTH is the nation's largest provider of outpatient and
rehabilitative healthcare services. The Company provides these services through
its national network of outpatient and inpatient rehabilitation facilities,
outpatient surgery centers, diagnostic centers, occupational medicine centers,
medical centers and other healthcare facilities. The Company believes that it
provides patients, physicians and payors with high-quality healthcare services
at significantly lower costs than traditional inpatient hospitals. Additionally,
the Company's national network, reputation for quality and focus on outcomes has
enabled it to secure contracts with national and regional managed care payors.
At November 1, 1997, the Company operated approximately 1,200 outpatient
rehabilitation locations, 131 inpatient rehabilitation locations, 175 outpatient
surgery centers, 85 diagnostic centers, and 85 occupational medicine locations.
In its outpatient and inpatient rehabilitation facilities, the Company
provides interdisciplinary programs for the rehabilitation of patients
experiencing disability due to a wide variety of physical conditions, such as
stroke, head injury, orthopaedic problems, neuromuscular disease and
sports-related injuries. The Company's rehabilitation services include physical
therapy, sports medicine, work hardening, neurorehabilitation, occupational
therapy, respiratory therapy, speech language pathology and rehabilitation
nursing. Independent studies have shown that rehabilitation services like those
provided by the Company can save money for payors and employers.
In addition to its rehabilitation facilities, the Company operates the
largest networks of free-standing outpatient surgery centers in the United
States. The Company's outpatient surgery centers provide the facilities and
medical support staff necessary for physicians to perform non-emergency surgical
procedures. While outpatient surgery is widely recognized as generally less
expensive than surgery performed in a hospital, the Company believes that
outpatient surgery performed at a free-standing outpatient surgery center is
generally less expensive than hospital-based outpatient surgery. Approximately
80% of the Company's surgery center facilities are located in markets served by
its rehabilitative service facilities, enabling the Company to pursue
opportunities for cross-referrals.
Over the last three years, the Company has completed several significant
acquisitions in the rehabilitation business and has expanded into the surgery
center, diagnostic and occupational medicine businesses. The Company believes
that these acquisitions complement its historical operations and enhance its
market position. The Company further believes that its expansion into the
outpatient surgery, diagnostic and occupational medicine businesses provides it
with platforms for future growth. The Company is continually evaluating
potential acquisitions in the outpatient and rehabilitative healthcare services
industry.
USE OF PROCEEDS
All proceeds from any sales of the Shares by the Selling Stockholders will
inure to the benefit of the Selling Stockholders. The Company will receive none
of the proceeds from the sale of Shares offered hereby.
SELLING STOCKHOLDERS
After completion of the offering, no Selling Stockholder will own more than
1% of all outstanding shares of Common Stock of the Company.
12
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF NUMBER OF
SHARES SHARES SHARES
BENEFICIALLY COVERED BY TO BE HELD
SELLING STOCKHOLDERS OWNED THIS PROSPECTUS AFTER OFFERING
- --------------------------------------------------- -------------- ----------------- ---------------
<S> <C> <C> <C>
ACI Profit Sharing Plan & Trust .................. 847 847 0
Robert G. Aitkens .............................. 847 847 0
Doug Altenbern ................................. 4,236 4,236 0
Robert G. Anderson .............................. 847 847 0
David F. Apple ................................. 2,541 2,541 0
John R. Atwell ................................. 491 491 0
David W. Banks ................................. 847 847 0
James K. Bennett ................................. 847 847 0
John E. Blount ................................. 3,375 3,375 0
James L. Chappuis .............................. 847 847 0
Jay S. Coffsky ................................. 847 847 0
Cynthia S. Crawford .............................. 406 406 0
Joseph P. Crawford .............................. 406 406 0
Jerry Domescik ................................. 847 847 0
Gary L. Durday ................................. 2,541 2,541 0
Daphne Berry Eaton .............................. 847 847 0
James T. Fajkus ................................. 254 254 0
Muhammad Farooq and Mirjana Farooq ............... 169 169 0
Charles M. Fischman and Carol Fischman ......... 491 491 0
William H. Frazier .............................. 491 491 0
William H. Frazier and Jean F. Frazier ......... 1,694 1,694 0
Michael Charles Garovich, III .................. 847 847 0
Georgia Urology Profit Sharing Plan ............ 1,694 1,694 0
Charles R. Gershon .............................. 2,329 2,329 0
Michael E. Glasscock ........................... 5,930 5,930 0
Heidi D. Gorsuch and Steven H. Lewis ............ 491 491 0
Bruce G. Green ................................. 847 847 0
Vickie Rae Gropper .............................. 1,694 1,694 0
Mark A. Haber .................................... 423 423 0
William M. Harper, IV ........................... 2,118 2,118 0
Don W. Hebard .................................... 2,965 2,965 0
Charles A. Henderson ........................... 847 847 0
Lucius Wells Heriot, Jr. ........................ 94 94 0
HIC Holdings, Inc. c/o Stanley Crossland ......... 2,626 2,626 0
Eugene H. Hirsh ................................. 847 847 0
Larry D. Iverson ................................. 1,694 1,694 0
J.G. Keating .................................... 1,270 1,270 0
Arie Kohn ....................................... 423 423 0
William C. Lang and Martha M. Lang ............... 1,694 1,694 0
Joyce Legieza .................................... 508 508 0
Leslie S. Leighton and Deborah G. Leighton ...... 2,541 2,541 0
James R. Leininger .............................. 74,694 74,694 0
James M. Libby ................................. 1,270 1,270 0
Trust: Jeffrey I. Libby ........................ 211 211 0
Trust: R. Scott Libby ........................... 211 211 0
Trust: Russell P. Libby ........................ 211 211 0
Trust: Valerie R. Libby ........................ 211 211 0
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF NUMBER OF
SHARES SHARES SHARES
BENEFICIALLY COVERED BY TO BE HELD
SELLING STOCKHOLDERS OWNED THIS PROSPECTUS AFTER OFFERING
- ------------------------------------------------ -------------- ----------------- ---------------
<S> <C> <C> <C>
Marc E. Lieberman ........................... 491 491 0
Ann McClellan Longhurst ..................... 423 423 0
Robert D. Marcus .............................. 2,118 2,118 0
Robert A. Marwick ........................... 847 847 0
Robert T. McClellan ........................... 423 423 0
David D. McClellan ........................... 3,375 3,375 0
John Wesley McClellan ........................ 423 423 0
Paul S. McCullough ........................... 25,416 25,416 0
MedCare Investment Fund, Inc. ............... 611,035 611,035 0
Jerald F. Mitchell ........................... 847 847 0
Hardy Morgan ................................. 1,694 1,694 0
Rock A. Morphis .............................. 3,375 3,375 0
Elias N. Nasr ................................. 169 169 0
NationsBanc Capital Corporation ............... 149,388 149,388 0
George K. Nichols ........................... 491 491 0
William K. Panakos ........................... 491 491 0
Nicholas J. Patronas and Diane Patronas ...... 847 847 0
Stephen Elliott Puckette, Jr. ............... 94 94 0
Radiology Nine .............................. 564 564 0
Jack S. Rice ................................. 423 423 0
M.L. Richardson III, as custodian
for Kathryn Richardson ..................... 42 42 0
M.L. Richardson III, as custodian for
Shelly Richardson ........................... 42 42 0
Albert Rodewald .............................. 3,375 3,375 0
Howard A. Rottenbereg ........................ 847 847 0
Arnold B. Rubenstein ........................ 847 847 0
P.E. Sadler ................................. 6,354 6,354 0
Dana I. Sakalas .............................. 847 847 0
Romas Sakalas ................................. 491 491 0
William M. Scaljon ........................... 1,694 1,694 0
Raymond L. Schettino ........................ 847 847 0
Roy S. Schottenfeld ........................... 847 847 0
Jerry H. Schulze .............................. 423 423 0
Michaela G. Scott ........................... 491 491 0
Sidney M. Seltzer ........................... 847 847 0
Steven L. Sisko .............................. 1,016 1,016 0
Patricia F. Sloan MLPF & S Cust. fpo
Patricia Sloan IRRA fbo Patricia Sloan ...... 2,541 2,541 0
Bruce Stein ................................. 1,906 1,906 0
Reliance Trust Company, IRA Cust.
FBO Bruce Stein .............................. 1,059 1,059 0
H. Carlton Stinson ........................... 2,358 2,358 0
William Stump ................................. 5,930 5,930 0
Terry L. Swezey .............................. 211 211 0
Harvey B. Tauber .............................. 847 847 0
Alan S. Terlinsky and Joan Terlinsky ......... 847 847 0
Charles O. Tubbs .............................. 94 94 0
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF NUMBER OF
SHARES SHARES SHARES
BENEFICIALLY COVERED BY TO BE HELD
SELLING STOCKHOLDERS OWNED THIS PROSPECTUS AFTER OFFERING
- ---------------------------------------------- -------------- ----------------- ---------------
<S> <C> <C> <C>
Mike Owens Tyler, Jr. ..................... 2,541 2,541 0
Money Purchase Pension Plan and
Trust of Mike O. Tyler, Jr. ............... 847 847 0
Reliance Trust, Trustee for Mike O. Tyler, Jr.
SEP-IRA .................................... 847 847 0
Wayne L. Wampler ........................... 338 338 0
Robert B. Wilcox ........................... 847 847 0
SEP-IRA FBO N. Al Wilson .................. 847 847 0
Daniel M. Wilson ........................... 1,694 1,694 0
Mary K. Wood .............................. 4,236 4,236 0
Barry M. Zisholtz ........................... 847 847 0
Total ....................................... 984,189 984,189 0
</TABLE>
PLAN OF DISTRIBUTION
The Shares of HEALTHSOUTH Common Stock may be offered and sold by or for
the account of the Selling Stockholders from time to time as market conditions
permit on the NYSE, or otherwise, at prices and on terms then prevailing or in
negotiated transactions. Some or all of the Shares may be sold by one or more of
the following methods, without limitation: (a) a block trade in which a broker
or dealer so engaged will attempt to sell the shares as agent, but may position
and resell a portion of the block as principal to facilitate the transaction;
(b) purchases by a broker or dealer (including a market maker) as principal and
resale by such broker or dealer for its account pursuant to this Prospectus; (c)
ordinary brokerage transactions and transactions in which the broker solicits
purchasers; and (d) face-to-face transactions between sellers and purchasers
without a broker-dealer. In effecting sales, brokers or dealers engaged by the
Selling Stockholders may arrange for other brokers or dealers to participate.
Such brokers or dealers may receive commissions or discounts from the Selling
Stockholders in amounts to be negotiated. Such brokers and dealers and any other
participating brokers or dealers may be deemed to be "underwriters" within the
meaning of the Securities Act, in connection with such sales.
Upon the Selling Stockholders notifying the Company that any material
arrangement has been entered into with a broker-dealer for the sale of Shares
through a cross or block trade, a supplemental prospectus will be filed under
Rule 424(c) under the Securities Act, setting forth the name of the
participating broker-dealer(s), the number of Shares involved, the price at
which such Shares were sold by the Selling Stockholders, the commissions paid or
discounts or concessions allowed by the Selling Stockholders to such
broker-dealer(s), and where applicable, that such broker-dealer(s) did not
conduct any investigation to verify the information set out in the Prospectus.
EXPERTS
The consolidated financial statements and schedule of HEALTHSOUTH at
December 31, 1996 and 1995, and for each of the three years in the period ended
December 31, 1996, appearing in HEALTHSOUTH's Annual Report (Form 10-K/A) for
the year ended December 31, 1996 and the supplemental consolidated financial
statements of HEALTHSOUTH included in its Current Report on Form 8-K/A dated
August 26, 1997, have been audited by Ernst & Young LLP, independent auditors,
as set forth in their report thereon incorporated herein by reference. Such
consolidated financial statements and schedule are incorporated herein by
reference in reliance upon such report given upon the authority of such firm as
experts in accounting and auditing.
The consolidated financial statements and financial statement schedule of
Horizon/CMS as of May 31, 1997 and 1996, and for each of the three years in the
period ended May 31, 1997 appearing in Horizon/CMS's Annual Report (Form 10-K/A)
for the year ended May 31, 1997, have been audited by
15
<PAGE>
Arthur Andersen LLP, independent public accountants, as set forth in their
reports thereon incorporated herein by reference, which, as to the year 1995, is
based in part on the report of Ernst & Young LLP, independent auditors. The
financial statements and financial statement schedule referred to above have
been incorporated by reference herein in reliance upon said reports given upon
the authority of said firms as experts in accounting and auditing.
LEGAL MATTERS
Certain legal matters with respect to the validity of the shares of
HEALTHSOUTH Common Stock offered hereby will be passed upon by Haskell Slaughter
& Young, L.L.C.
16
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the estimated expenses to be incurred in
connection with the distribution of the securities registered hereby. All such
expenses shall be borne by the Company.
Registration fee under the Securities Act of 1933 $ 7,363
Printing expenses .............................. 10,000
Legal fees and expenses ........................ 10,000
Accounting services ........................... 15,000
Miscellaneous ................................. 7,000
--------
Total .................................... $49,363
========
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 102(b)(7) of the Delaware General Corporation Law ("DGCL") grants
corporations the right to limit or eliminate the personal liability of their
directors in certain circumstances in accordance with provisions therein set
forth. Article Nine of the HEALTHSOUTH Restated Certificate of Incorporation
filed in the Office of the Secretary of the State of Delaware on March 13, 1997
(the "HEALTHSOUTH Certificate"), contains a provision eliminating or limiting
director liability to HEALTHSOUTH and its stockholders for monetary damages
arising from acts or omissions in the director's capacity as a director. The
provision does not, however, eliminate or limit the personal liability of a
director (i) for any breach of such director's duty of loyalty to HEALTHSOUTH or
its stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under the Delaware
statutory provision making directors personally liable, under a negligence
standard, for unlawful dividends or unlawful stock purchases or redemptions, or
(iv) for any transaction from which the director derived an improper personal
benefit. This provision offers persons who serve on the Board of Directors of
HEALTHSOUTH protection against awards of monetary damages resulting from
breaches of their duty of care (except as indicated above). As a result of this
provision, the ability of HEALTHSOUTH or a stockholder thereof to successfully
prosecute an action against a director for a breach of his duty of care is
limited. However, the provision does not affect the availability of equitable
remedies such as an injunction or rescission based upon a director's breach of
his duty of care. The SEC has taken the position that the provision will have no
effect on claims arising under the Federal securities laws.
Section 145 of the DGCL grants corporations the right to indemnify their
directors, officers, employees and agents in accordance with the provisions
therein set forth. Article Nine of the HEALTHSOUTH Certificate and Article IX of
the HEALTHSOUTH Bylaws provide for mandatory indemnification rights, subject to
limited exceptions, to any director, officer, employee, or agent of HEALTHSOUTH
who, by reason of the fact that he or she is a director, officer, employee, or
agent of HEALTHSOUTH, is involved in a legal proceeding of any nature. Such
indemnification rights include reimbursement for expenses incurred by such
director, officer, employee, or agent in advance of the final disposition of
such proceeding in accordance with the applicable provisions of the DGCL.
HEALTHSOUTH has entered into agreements with all of its Directors and its
executive officers pursuant to which HEALTHSOUTH has agreed to indemnify such
Directors and executive officers against liability incurred by them by reason of
their services of a Director to the fullest extent allowable under applicable
law.
II-1
<PAGE>
ITEM 16. EXHIBITS.
Exhibits:
EXHIBIT
NO. DESCRIPTION
- --------- --------------------------------------------------------------------
(2) Plan and Agreement of Merger, dated February 17, 1997, among
HEALTHSOUTH Corporation, Reid Acquisition Corporation and
Horizon/CMS Healthcare Corporation filed as Exhibit 2 to
HEALTHSOUTH's Registration Statement on Form S-4 (No. 333-36419)
dated as of September 25, 1997, is hereby incorporated by reference.
+(5) Opinion of Haskell Slaughter & Young, L.L.C., as to the legality of
the shares of HEALTHSOUTH Common Stock issued in connection
herewith.
(23)-1 Consent of Ernst & Young LLP (with regard to HEALTHSOUTH
consolidated Financial Statements).
(23)-2 Consent of Arthur Andersen LLP (with regard to Horizon/CMS
consolidated Financial Statements).
(23)-3 Consent of Ernst & Young LLP (with regard, in part, to Horizon/CMS
consolidated Financial Statements as of May 31, 1995).
+(23)-4 Consent of Haskell Slaughter & Young, L.L.C. (included in the
opinion filed as Exhibit (5)).
+(24) Powers of Attorney.
- ----------
+ Previously filed.
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;
(iii) to include any material information with respect to the plan of
distribution not previously disclosed in this registration statement or
any material change to such information in the registration statement.
(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 the purpose of determining any liability under the
Securities Act of 1933, each filing of the registrant's annual report
pursuant to section 13(a) or 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.
II-2
<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 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 Birmingham, State of Alabama, on November 26, 1997.
HEALTHSOUTH CORPORATION
By /s/ RICHARD M. SCRUSHY
-------------------------------------
Richard M. Scrushy
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ---------------------------- --------------------------------- ------------------
<S> <C> <C>
/s/ RICHARD M. SCRUSHY
- ------------------------ Chairman of the Board November 26, 1997
Richard M. Scrushy and Chief Executive Officer
and Director
*
- ------------------------- Executive Vice President, November 26, 1997
Michael D. Martin Chief Financial Officer and Treasurer
*
- ------------------------- Senior Vice President November 26, 1997
William T. Owens and Controller (Principal
Accounting Officer)
* Director November 26, 1997
- -------------------------
James P. Bennett
* Director November 26, 1997
- -------------------------
Anthony J. Tanner
* Director November 26, 1997
- -------------------------
P. Daryl Brown
* Director November 26, 1997
- -------------------------
Phillip C. Watkins, M.D.
* Director November 26, 1997
- -------------------------
George H. Strong
* Director November 26, 1997
- -------------------------
C. Sage Givens
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ---------------------------- --------------------------------- ------------------
<S> <C> <C>
* Director November 26, 1997
- -------------------------
Charles W. Newhall III
* Director November 26, 1997
- -------------------------
Larry R. House
* Director November 26, 1997
- -------------------------
John S. Chamberlin
* Director November 26, 1997
- -------------------------
Joel C. Gordon
* Director November 26, 1997
- -------------------------
Neal M. Elliot
</TABLE>
*By /s/ RICHARD M. SCRUSHY
------------------------------
Richard M. Scrushy
Attorney-in-Fact
II-4
EXHIBIT (23)-1
CONSENT OF ERNST & YOUNG LLP
INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Amendment No. 1 to Form S-3, No. 333-39825) and related
Prospectus of HEALTHSOUTH Corporation for the registration of shares of its
common stock and to the incorporation by reference therein of our report dated
February 24, 1997, except for the first paragraph of Note 15, as to which the
date is March 12, 1997, with respect to the consolidated financial statements
and schedule of HEALTHSOUTH Corporation included in its Annual Report (Form
10-K/A) for the year ended December 31, 1996 and our report dated August 20,
1997 with respect to the supplemental consolidated financial statements of
HEALTHSOUTH Corporation included in its Current Report on Form 8-K/A dated
August 26, 1997, filed with the Securities and Exchange Commission.
ERNST & YOUNG LLP
Birmingham, Alabama
November 25, 1997
EXHIBIT (23)-2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
by reference in this registration statement of our report dated August 27, 1997,
included in the Horizon/CMS Healthcare Corporation Form 10-K/A Amendment No. 1
for the fiscal year ended May 31, 1997, and to all references to our Firm
included in this registration statement.
ARTHUR ANDERSEN LLP
Albuquerque, New Mexico
November 18, 1997
EXHIBIT (23)-3
CONSENT OF ERNST & YOUNG LLP
INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Amendment No. 1 to Form S-3) and the related Prospectus
of HEALTHSOUTH Corporation for the registration of 984,189 shares of its common
stock and to the incorporation by reference therein of our report (related to
the financial statements and schedule of Continental Medical Systems, Inc. for
the year ended June 30, 1995, not presented separately therein) dated August 3,
1995, except for Note 6 and Note 19 for which the date is September 26, 1995;
Note 14 for which the date is September 12, 1995; and Note 20 for which the date
is September 27, 1995 included in the Horizon/CMS Healthcare Corporation Annual
Report (Form 10-K/A Amendment No. 1) for the year ended May 31, 1997, filed with
the Securities and Exchange Commission.
ERNST & YOUNG LLP
Harrisburg, Pennsylvania
November 18, 1997
