UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[ X ] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the period ended June 30, 1997
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from to
Commission File Number: 1-12306
Integrated Health Services, Inc.
(Exact name of registrant as specified in its charter)
DELAWARE 23-2428312
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10065 Red Run Boulevard, Owings Mills, MD 21117
(Address of principal executive offices) (Zip Code)
(410) 998-8400
(Registrant's telephone, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
[ X ] Yes [ ] No
Number of shares of common stock of the registrant outstanding as of
August 6, 1997: 25,513,551 shares.
Page 1 of 27
INTEGRATED HEALTH SERVICES, INC.
INDEX
PART I. FINANCIAL INFORMATION
Page
Item 1. - Condensed Financial Statements -
Consolidated Balance Sheets
June 30, 1997 and December 31, 1996 3
Consolidated Statements of Earnings
for the three and six months ended
June 30, 1997 and 1996 4
Consolidated Statement of Changes in
Stockholders' Equity for the six
months ended June 30, 1997 5
Consolidated Statements of Cash Flows
for the six months ended June 30, 1997
and 1996 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 14
PART II: OTHER INFORMATION
Item 2. Changes in Securities 24
Item 4. Submission of Matters to a Vote of
Security Holders 25
Item 6. Exhibits and Reports on Form 8-K 25
Page 2 of 27
INTEGRATED HEALTH SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars In Thousands)
June 30, December 31,
1997 1996
----------------- --------------------
Assets
Current Assets:
Cash and cash equivalents $ 43,105 39,028
Temporary investments 2,367 2,044
Patient accounts and third-party payor settlements
receivable, less allowance for doubtful receivables 344,144 326,883
of $38,881 at June 30, 1997 and $41,527 at December 31, 1996
Supplies inventories, prepaid expenses
and other current assets 28,931 26,243
Income tax receivable 30,617 20,992
----------------- --------------------
Total current assets 449,164 415,190
----------------- --------------------
Property, plant and equipment, net 910,772 864,335
Intangible assets 633,206 572,159
Investments in and advances to affiliates 74,001 76,047
Other assets 75,504 65,376
----------------- --------------------
Total assets $ 2,142,647 1,993,107
================= ====================
Liabilities and Stockholders' Equity
Current Liabilities:
Current maturities of long-term debt $ 13,161 16,547
Accounts payable and accrued expenses 276,961 341,094
----------------- --------------------
Total current liabilities 290,122 357,641
----------------- --------------------
Long-term Debt:
Convertible subordinated debentures 258,750 258,750
Other long-term debt, less current maturities 946,337 779,450
----------------- --------------------
Total long-term debt 1,205,087 1,038,200
----------------- --------------------
Other long-term liabilities 35,315 33,851
Deferred income taxes 25,073 22,283
Deferred gain on sale-leaseback transactions 5,731 6,267
Stockholders' equity:
Preferred stock, authorized 15,000,000 shares; no shares
issued and outstanding -- --
Common stock, $0.001 par value. Authorized 150,000,000
shares; outstanding 25,387,377 at June 30, 1997 and 23,628,250
at December 31, 1996 (including 41,900 treasury shares at
June 30, 1997) 25 24
Additional paid-in capital 492,892 445,667
Retained earnings 89,940 79,814
Unrealized gain on available for sale securities 0 9,360
Treasury stock at cost (41,900 shares at June 30, 1997) (1,538) 0
----------------- --------------------
Net stockholders' equity 581,319 534,865
----------------- --------------------
Total liabilities and stockholders' equity $ 2,142,647 1,993,107
================= ====================
See accompanying Notes to Consolidated Financial Statements
Page 3 of 27
INTEGRATED HEALTH SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS
(Dollars in Thousands)
Three Months Ended Six Months Ended
June 30, June 30,
-------------------------------------- --------------------------------------
1997 1996 1997 1996
---------------- ---------------- ---------------- ----------------
Net revenues:
Basic medical services $ 88,055 98,063 176,810 195,279
Specialty medical services 360,113 226,868 722,802 446,393
Management services and other 9,805 10,849 19,304 21,381
---------------- ---------------- ---------------- ----------------
Total revenues 457,973 335,780 918,916 663,053
---------------- ---------------- ---------------- ----------------
Costs and expenses:
Operating expenses 338,736 254,274 691,148 504,169
Corporate administrative and general 18,135 14,854 36,151 29,947
Depreciation and amortization 15,814 8,505 30,844 16,779
Rent 25,786 17,879 49,795 35,535
Interest, net 23,224 15,888 44,645 30,102
Non-recurring charges, net 21,072 0 20,047 0
---------------- ---------------- ---------------- ----------------
Total costs and expenses 442,767 311,400 872,630 616,532
---------------- ---------------- ---------------- ----------------
Earnings before equity in earnings
(loss) of affiliates, income taxes
and extraordinary items 15,206 24,380 46,286 46,521
Equity in earnings (loss) of affiliates (83) 460 98 760
---------------- ---------------- ---------------- ----------------
Earnings before income taxes
and extraordinary items 15,123 24,840 46,384 47,281
Federal and state income taxes 5,898 9,563 18,090 18,203
---------------- ---------------- ---------------- ----------------
Earnings before extraordinary items 9,225 15,277 28,294 29,078
Extraordinary items (Note 6) 18,168 1,431 18,168 1,431
---------------- ---------------- ---------------- ----------------
Net earnings (loss) $ (8,943) 13,846 10,126 27,647
================ ================ ================ ================
Per Common Share - primary
Earnings before extraordinary
item $ 0.31 0.64 1.05 1.26
Net earnings (loss) (0.36) 0.58 0.38 1.20
================ ================ ================ ================
Per Common Share - fully diluted
Earnings before extraordinary
item 0.29 0.56 0.92 1.10
Net earnings (loss) (0.22) 0.51 0.41 1.05
================ ================ ================ ================
See accompanying Notes to Consolidated Financial Statements
Page 4 of 27
INTEGRATED HEALTH SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(dollars in thousands)
Unrealized
Gain On
Additional Available
Common Paid-In Retained For Sale Treasury
Stock Capital Earnings Securities Stock Total
---------------------------------------------------------------------------------------
Balance at December 31, 1996 $ 24 445,667 79,814 9,360 - 534,865
Issuance of 976,504 shares of common
stock in payment of earn-out in
connection with prior acquisition (Note 3) 1 26,438 - - - 26,439
Issuance of 322,472 shares of
common stock in connection with 1997
acquisitions (Note 3) - 11,460 - - - 11,460
Issuance of 30,248 shares of common
stock in connection with employee
stock purchase plan - 647 - - - 647
Exercise of employee stock options
for 471,803 shares of common stock - 8,680 - - - 8,680
Repurchase of 41,900 shares of treasury
stock (Note 7) - - - - (1,538) (1,538)
Realized gain on available for sale
securities - - - (9,360) - (9,360)
Net earnings - - 10,126 - - 10,126
--------------------------------------------------------------------------------------
Balance at June 30, 1997 $ 25 492,892 89,940 0 (1,538) 581,319
======================================================================================
See accompanying Notes to Consolidated Financial Statements
Page 5 of 27
INTEGRATED HEALTH SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
Six Months Ended
June 30,
-------------------------------------
1997 1996
---------------- ----------------
Cash flows from operating activities:
Net earnings $ 10,126 27,647
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Extraordinary item (Note 6) 29,784 2,327
Non-recurring charges, net 20,047 0
Undistributed results of joint ventures 328 (390)
Depreciation and amortization 30,844 16,779
Deferred income taxes and other non-cash items 2,090 2,095
Amortization of gain on sale-leaseback transactions (536) (516)
Increase in patient accounts and third-party
payor settlements receivable, net (10,109) (31,399)
Increase in supplies inventory, prepaid
expenses and other current assets (2,483) (986)
Decrease in accounts payable and accrued expenses (59,439) (16,716)
(Increase) decrease in income taxes receivable (9,644) 1,800
---------------- ----------------
Net cash provided by operating activities 11,008 641
---------------- ----------------
Cash flows from financing activities:
Proceeds from issuance of capital stock, net 9,327 1,799
Proceeds from long-term borrowings 1,083,219 627,675
Repayment of long-term debt (919,514) (490,761)
Payment of pre-payment premiums and fees of debt
extinguishment (Note 6) (23,598) 0
Deferred financing costs (13,840) (8,090)
Dividends paid (471) (435)
Purchase of treasury stock (1,538) 0
---------------- ----------------
Net cash provided by financing activities 133,585 130,188
---------------- ----------------
Cash flows from investing activities:
Sale of temporary investments 119 97
Purchase of temporary investments (442) 0
Business acquisitions (34,543) (18,159)
Payment of termination fees and other costs of terminated merger (27,555) 0
Purchase of property, plant and equipment (67,588) (67,355)
Other assets (10,507) (39,930)
---------------- ----------------
Net cash used by investing activities (140,516) (125,347)
---------------- ----------------
Increase in cash and cash equivalents 4,077 5,482
Cash and cash equivalents, beginning of period 39,028 38,917
---------------- ----------------
Cash and cash equivalents, end of period $ 43,105 44,399
================ ================
See accompanying Notes to Consolidated Financial Statements
Page 6 of 27
NOTES
TO
CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements included herein do not
contain all information and footnote disclosures normally
included in financial statements prepared in accordance with
generally accepted accounting principles. For further
information, such as the significant accounting policies
followed by Integrated Health Services, Inc. ("IHS" or
"Company"), refer to the consolidated financial statements and
notes thereto included in the Company's Annual Report on Form
10-K for the year ended December 31, 1996. In the opinion of
management, the consolidated financial statements include all
necessary adjustments (consisting of only normal recurring
accruals) for a fair presentation of the financial position and
results of operations for the interim periods presented. The
results of operations for the interim periods presented are not
necessarily indicative of the results that may be expected for
the full year.
NOTE 2: EARNINGS PER SHARE
Primary earnings per share is computed based on the weighted
average number of common and common equivalent shares
outstanding during the periods. Common stock equivalents
include options and warrants to purchase common stock, assumed
to be exercised using the treasury stock method. Fully diluted
earnings per share is computed as described above, except that
the weighted average number of common equivalent shares is
determined assuming the dilution resulting from the issuance of
the aforementioned options and warrants at the higher of the
end-of-period price per share or the weighted average price for
the period, and the issuance of common shares upon the assumed
conversion of the convertible subordinated debentures.
Additionally, interest expense and amortization of underwriting
costs related to such debentures are added, net of tax, to
income for the purpose of calculating fully diluted earnings
per share. Such amounts and the resulting net earnings for
fully diluted earnings per share purposes are summarized as
follows for the six months ended June 30, 1997 and 1996,
respectively:
1997 1996
-----------------
Net earnings $10,126 27,647
Adjustment for interest and underwriting
costs on convertible debentures 4,904 4,944
--------- -------
Net earnings for fully diluted EPS $15,030 32,591
========= =======
Weighted average shares-Primary 26,963 23,039
Weighted average shares-Fully Diluted 36,233 31,028
========= =======
Page 7 of 27
NOTE 3: NEW ACQUISITIONS
ACQUISITIONS DURING THE SIX MONTHS ENDED JUNE 30, 1997
Acquisitions for the six months ended June 30, 1997 and
the manner of payment are summarized as follows:
COMMON
TOTAL STOCK ACCRUED CASH
MONTH TRANSACTION DESCRIPTION COST ISSUED LIABILITIES PAID
- ----- ----------------------- ----- ------ ----------- ----
January Stock of In-Home Health
Care, Inc. $3,450 $---- $250 $3,200
February Assets of Professional
Health Services, Inc. 350 ---- 100 250
February Assets of Portable X-Ray
Labs, Inc. 6,200 ---- 1,300 4,900
March Assets of Laboratory
Corporation of America 35 ---- ---- 35
March Assets of Doctor's Home
Health Agency, Inc. 445 ---- 95 350
March Payment of earnout in
connection with Achieve-
ment Rehab acquisition
in December 1993 26,439 26,439 ---- ----
April Assets of Coastal
Rehabilitation, Inc. 1,450 ---- 200 1,250
April Assets of Mobile
Diagnostics, Inc. 225 ---- 75 150
June Stock of Health Care
Industries, Inc. 2,325 ---- 500 1,825
June Assets of The Nursing
Connection 330 ---- ---- 330
June Assets of Rehab Dynamics,
Inc. and Restorative
Therapy, Ltd. 22,163 11,460 2,500 8,203
Various Cash payments of
acquisition costs
accrued in 1996 ---- ---- (14,050) 14,050
------ --------- -------- ------
$63,412 $37,899 $(9,030) $34,543
======= ========= ======== =======
Page 8 of 27
The allocation of the total cost of the 1997 acquisitions to the assets acquired
and liabilities assumed is summarized as follows:
PROPERTY,
CURRENT PLANT & OTHER INTANGIBLE CURRENT LONG-TERM TOTAL
TRANSACTION ASSETS EQUIPMENT ASSETS ASSETS LIABILITIES LIABILITIES COSTS
- ----------- ------- --------- ------ ---------- ----------- ----------- -----
In-Home Health
Care, Inc. $ 989 $ 229 $ 7 $ 3,856 ($ 797) ($ 834) $ 3,450
Professional
Health Services,
Inc. -- 20 9 321 -- -- 350
Portable X-Ray
Labs, Inc. 1,309 -- 11 5,653 (297) (476) 6,200
Laboratory Corp.
of America
-- 10 -- 25 -- -- 35
Doctor's Home
Health Agency,
Inc. -- 6 -- 439 -- -- 445
Achievement
Rehab (earnout) -- -- -- 26,439 -- -- 26,439
Coastal
Rehabilitation,
Inc. 257 85 -- 1,764 (576) (80) 1,450
Mobile
Diagnostics,
Inc. -- 38 -- 187 -- -- 225
Health Care
Industries,
Inc. 805 204 41 2,505 (1,080) (150) 2,325
The Nursing
Connection,
Inc. 14 62 -- 254 -- -- 330
Rehab Dynamics,
Inc. & Restorative
Therapy, Ltd. 4,140 954 107 21,478 (3,204) (1,312) 22,163
----- ----- ----- ------- ------- ------- ------
$7,514 $1,608 $175 $62,921 ($5,954) ($2,852) $63,412
====== ====== ===== ======= ======== ======== =======
Page 9 of 27
NOTE 4: 9-1/2% SENIOR SUBORDINATED NOTES DUE 2007
In May 1997, the Company issued $450 million aggregate
principal amount of its 9-1/2% Senior Subordinated
Notes due 2007 (the "Senior Notes"). Interest on the
Senior Notes is payable semiannually on March 15 and
September 15, commencing September 15, 1997. The Senior
Notes are redeemable for cash at any time on or after
September 15, 2002, at the option of the Company, in
whole or in part, initially at the redemption price
equal to 104.75% of principal amount, declining to 100%
of principal amount on September 15, 2005, plus accrued
interest thereon to the date fixed for redemption. In
addition, IHS may redeem up to $150,000,000 aggregate
principal amount of Senior Notes at any time and from
time to time prior to September 15, 2000 at a
redemption price equal to 108.50% of the aggregate
principal amount thereof, plus accrued interest
thereon, out of the net cash proceeds of one or more
Public Equity Offerings (as defined in the indenture
under which the Senior Notes were issued (the "Senior
Notes Indenture")). In the event of a change in control
of IHS (as defined in the Senior Notes Indenture), each
holder of Senior Notes may require IHS to repurchase
such holder's Senior Notes, in whole or in part, at
101% of the principal amount thereof, plus accrued
interest to the repurchase date. The Senior Notes
Indenture contains covenants, including, but not
limited to, covenants with respect to the following
matters: (1) limitations on additional indebtedness
unless certain coverage ratios are met; (2) limitations
on other subordinated debt; (3) limitations on liens;
(4) limitations on the issuance of preferred stock by
the Company's subsidiaries; (5) limitations on
transactions with affiliates; (6) limitations on
restricted payments and investments; (7) application of
the proceeds of certain asset sales; (8) limitations on
restrictions on subsidiary dividends; and (9)
restrictions on mergers, consolidations and the
transfer of all or substantially all of the assets of
the Company to another person. The Company used
approximately $247.2 million of the net proceeds from
the sale of the Senior Notes to repurchase
substantially all of its 9-5/8% Senior Subordinated
Notes due 2002 and its 10-3/4% Senior Subordinated
Notes due 2004, to pay pre-payment premiums, consent
fees and accrued interest related to the repurchase,
and used the remaining approximately $191.0 million to
repay a portion of the $436.0 million then outstanding
under its revolving credit facility. In connection with
the repurchase, the Company recorded an extraordinary
loss of $18.2 million (net of tax). (See Note 6:
Extraordinary Item)
NOTE 5: NON-RECURRING CHARGES
PHARMACY GAIN:
In July 1996, the Company sold its pharmacy division to
Capstone Pharmacy, Inc. ("Capstone") for a purchase
price of $150 million, consisting of cash of $125
million, and shares of Capstone stock having a value of
$25 million. At the date of the sale the Company's
investment in the shares of Capstone's common stock was
recorded at its carryover cost of $14.7 million, which
represented less than 20% of the total Capstone shares.
During the first quarter of 1997, the Company recorded
the remaining gain of $7.6 million on its investment in
the Capstone shares. Previously, such gain was
accounted for as an unrealized gain on available for
sale securities.
Page 10 of 27
SETTLEMENT WITH CORAM:
On October 19, 1996, the Company and Coram Healthcare
Corporation ("Coram") entered into a definitive
agreement and plan of merger (the "Merger Agreement")
providing for the merger of a wholly-owned subsidiary
of IHS into Coram, with Coram becoming a wholly-owned
subsidiary of IHS. Under the terms of the Merger
Agreement, holders of Coram common stock were to
receive for each share of Coram common stock 0.2111 of
a share of the Company's common stock, and IHS would
have assumed approximately $375 million of
indebtedness. On April 4, 1997, IHS notified Coram that
it had exercised its rights to terminate the Merger
Agreement. IHS also terminated the March 30, 1997
letter amendment, setting forth proposed revisions to
the terms of the merger (which included a reduction in
the exchange ratio to 0.15 of a share of IHS common
stock for each share of Coram common stock), prior to
the revisions becoming effective at the close of
business on April 4, 1997. On May 5, 1997, IHS and
Coram entered into a settlement agreement pursuant to
which the Company paid Coram $21 million in full
settlement of all claims Coram might have against IHS
pursuant to the Merger Agreement, which the Company
recognized as a non-recurring charge in the second
quarter. In addition, during the first quarter the
Company incurred a non-recurring charge of $6.6 million
relating to accounting, legal and other costs related
to the merger.
NOTE 6: EXTRAORDINARY ITEM
In the second quarter of 1997, the Company recorded a
pre-tax loss of $29.8 million representing (1)
approximately $23.6 million of cash payments for
pre-payment premium and tender and consent fees
relating to the early extinguishment of debt resulting
from the Company's repurchase pursuant to cash tender
offers of $99,873,000 principal amount of the Company's
$100 million of outstanding 10-3/4% Senior Subordinated
Notes due 2004 and $114,975,000 of the Company's $115
million of outstanding 9-5/8% Senior Subordinated Notes
due 2002 and (2) approximately $6.2 million relating to
the write-off of deferred financing costs. Such loss,
reduced by the related income tax effect of $11.6
million, is presented in the statement of earnings as
an extraordinary loss of $18.2 million.
In the second quarter of 1996, the Company replaced its
$500 million revolving credit facility and term loan
with the $700 million revolving credit facility. This
event has been accounted for as an extinguishment of
debt and the Company has recorded a loss on
extinguishment of debt of $2.3 million, relating
primarily to the write-off of deferred costs. Such
loss, reduced by the related income tax effect of
$896,000, is presented in the statement of earnings as
an extraordinary item of $1.4 million.
NOTE 7: STOCK REPURCHASE
The Company's Board of Directors has authorized the
repurchase in the open market of up to $20 million of
the Company's Common Stock. The purpose of the
repurchase program is to have available treasury shares
of Common Stock to (i) satisfy contingent earn-out
payments under prior business combinations accounted
for by the purchase method, (ii) issue in connection
with acquisition and (iii) issue upon exercise of
outstanding options. The repurchases will be funded
from the cash from operations and drawings under the
Company's revolving credit
Page 11 of 27
facility. During the six months ended June 30, 1997,
the Company repurchased 41,900 shares of Common Stock
for an aggregate purchase price of approximately $1.5
million.
NOTE 8: RECENT ACCOUNTING PRONOUNCEMENTS
In February 1997, the Financial Accounting Standards
Board issued Statement No. 128, "Earnings Per Share,"
("SFAS 128"), which simplifies the standards for
computing earnings per share ("EPS"). SFAS 128 is
effective for the Company's fourth quarter and year
ending December 31, 1997. Early application is not
permitted and prior period EPS data will be restated.
Under SFAS 128, primary EPS will be replaced with basic
EPS. Basic EPS excludes the dilutive effect of common
stock equivalents. Also, under SFAS 128, fully-diluted
EPS will be replaced by diluted EPS. Diluted EPS is
calculated similarly to fully-diluted EPS pursuant to
Accounting Principles Board Opinion 15.
The change in calculation method is not expected to
have a material impact on previously reported earnings
per common share data.
NOTE 9: SUBSEQUENT EVENTS
PROPOSED MERGER WITH ROTECH MEDICAL CORPORATION:
On July 6, 1997, the Company and RoTech Medical
Corporation ("RoTech") entered into a definitive merger
agreement pursuant to which RoTech will merge with the
Company. RoTech provides comprehensive home healthcare
and primary care physician services, principally to
patients in non-urban areas.
Under the terms of the agreement, the Company will
issue 0.5806 shares of IHS common stock for each share
of RoTech common stock currently outstanding. When the
acquisition is consummated, IHS will issue
approximately 15.3 million shares of common stock. The
equity value of the acquisition is approximately $615
million, based on the exchange terms, and the Company
will reserve for issuance approximately 20 million
shares upon exercise of RoTech options and
approximately 2.4 million shares for issuance upon
conversion of $110 million of RoTech's convertible
Debentures. Following the merger, IHS may be obligated
to repurchase such debentures at face value. The total
value of the transaction including the assumption of
RoTech's debt by IHS and other financial obligations,
will be approximately $915 million.
The transaction, which will be accounted for under the
purchase method, has been unanimously approved by the
Board of Directors of each company. Completion of the
transaction is subject to various conditions including
approval by IHS and RoTech stockholders, approval by
IHS' senior lenders, and certain regulatory approvals.
Each party may terminate the agreement if the average
trading price of IHS Common Stock over the ten trading
days ending on the fifth trading day prior to the
RoTech stockholders' meeting to approve the merger is
equal to or less than $33.00. The merger agreement also
provides for payment of breakup fees under certain
circumstances.
PROPOSED MERGER WITH COMMUNITY CARE OF AMERICA, INC.:
On August 1, 1997 the Company and Community Care of
America, Inc. ("CCA") entered into a definitive merger
agreement for IHS to acquire all of the outstanding
shares of CCA for $4.00 per share in cash. Community
Care of America, Inc., based in Naples, Florida,
develops and operates skilled nursing facilities in
medically underserved rural communities. CCA's
Page 12 of 27
operations include 54 long-term care facilities, one
physician practice, and one outpatient rehabilitation
center. Pursuant to the agreement, IHS on August 7,
1997 commenced a tender offer of $4.00 per share in
cash for all outstanding shares of CCA's common stock.
IHS' obligation to purchase the tendered shares is
subject to a number of conditions, including there
being tendered at least 5,329,119 shares of CCA
(representing a majority of the outstanding CCA shares
on a fully-diluted basis). IHS estimates the total cost
for the transaction, including the assumption of
approximately $62 million of debt, will be
approximately $98.2 million.
Dr. Robert N. Elkins, Chairman and Chief Executive
Officer of the Company, is a director of CCA, and
beneficially owns approximately 21% of CCA's shares;
and John Silverman, a director and employee of the
Company, is Chairman of CCA.
OTHER ACQUISITIONS:
On August 8, 1997, the Company purchased Healthcare
Personell, Inc., a home health services company, for
approximately $675,000.
The Company has reached agreements in principle to
purchase a mobile x-ray company for approximately
$300,000, a mobile x-ray company for approximately $1.2
million, a home health company for approximately $5.1
million, and a home health company for approximately
$60.0 million. The Company has also reached definitive
agreements to purchase a home health company for
approximately $24.5 million, and a home health company
for approximately $27.9 million.
There can be no assurance that any of these pending
acquisitions will be consummated on the proposed terms,
on different terms, or at all.
Page 13 of 27
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION
AND
RESULTS OF OPERATIONS
Statements in this Quarterly Report on Form 10-Q concerning the
Company's business outlook or future economic performance; anticipated
profitability, revenues, expenses or other financial items; and product line
growth, together with other statements that are not historical facts, are
"forward-looking statements" as that term is defined under Federal Securities
Laws. Forward-looking statements are subject to risks, uncertainties and other
factors which could cause actual results to differ materially from those stated
in such statements. Such risks, uncertainties and factors include, but are not
limited to, the Company's substantial indebtedness, growth strategy, managed
care strategy, capital requirements and recent acquisitions as well as
competition, government regulation, general economic conditions and the other
risks detailed in the Company's filings with the Securities and Exchange
Commission, including the Company's Annual Report on Form 10-K for the year
ended December 31, 1996.
THREE MONTHS ENDED JUNE 30, 1997
COMPARED TO THREE MONTHS ENDED JUNE 30, 1996
Net revenues for the three months ended June 30, 1997 increased
$122.2 million, or 36%, to $458.0 million from the comparable period in 1996.
Approximately 83% of the increase is attributable to the acquisition of
companies providing rehabilitation, home health, mobile x-ray and
electrocardiogram services subsequent to June 30, 1996, partially offset by a
reduction in revenue resulting from the sale of the Company's pharmacy division
in July 1996, the sale of a majority interest in its assisted living services
division in October 1996, and the sale of two facilities in the second quarter
of 1997. Revenues in the three months ended June 30, 1996 include revenues of
$25.0 million for the pharmacy division and revenues of $5.7 million from its
assisted living services division. The remaining increase was due primarily to
facilities and ancillary companies acquired during the second quarter of 1996
and increased revenues from facilities and ancillary companies in operation
during both periods. The Company derived approximately 49% and 17% of its
patient revenues from Medicare and Medicaid, respectively, in the three months
ended June 30, 1997, compared to 33% and 24%, respectively, in the comparable
period in 1996.
Basic medical services revenue decreased 10% from $98.1 million
to $88.1 million. This decrease primarily resulted from the conversion by the
Company of certain skilled nursing beds to Medical Specialty Unit (MSU) beds
after June 30, 1996, the sale of a majority interest in its assisted living
services division in October 1996, and the sale of two facilities in the second
quarter of 1997.
Specialty medical services revenue increased 59% from $226.9
million to $360.1 million. Of the $133.2 million increase, $101.1 million, or
76%, was attributable to revenue from acquisitions subsequent to June 30, 1996,
partially offset by a reduction in specialty medical services revenue as a
result of the sale of the Company's pharmacy division in July 1996. The
remaining increase was due to increased revenue from facilities and ancillary
companies in operation in both
Page 14 of 27
periods, ancillary companies acquired during the second quarter of 1996, as well
as skilled nursing beds being converted to MSU beds after June 30, 1996.
Management services and other revenues decreased 10% from $10.8
million to $9.8 million.
Total expenses for the period increased 42% to $442.8 million
from $311.4 million in the comparable period of 1996. Of the $131.4 million
increase, $84.5 million, or 64%, resulted from an increase in operating
expenses. A substantial portion of the increase in operating expenses was due to
acquisitions consummated subsequent to June 30, 1996, partially offset by the
sale of the Company's pharmacy division in July 1996, the sale of a majority
interest in its assisted living services division in October 1996, and the sale
of two facilities in the second quarter of 1997.
Corporate administrative and general expenses for the three
months ended June 30, 1997 increased by $3.3 million, or 22%, over the
comparable period in 1996. This increase primarily represents additional
operations, information systems, accounting, finance and other personnel to
support the growth resulting from the acquisition of ancillary businesses.
Depreciation and amortization increased to $15.8 million during the three months
ended June 30, 1997, an 86% increase as compared to $8.5 million in the same
period in 1996, primarily as a result of increases in goodwill amortization, as
well as depreciation related to ancillary company acquisitions consummated
during 1996 and 1997. Rent expense increased by $7.9 million, or 44%, over the
comparable period in 1996, primarily as a result of increases in contingent
rentals, which are based on gross revenues of certain leased facilities and rent
at ancillary companies acquired subsequent to June 30, 1996, partially offset by
a reduction resulting from the sale of the pharmacy division and the sale of a
majority interest in its assisted living services division. Interest expense,
net, increased $7.3 million, or 46%, during the three months ended June 30, 1997
to $23.2 million. The increase in interest expense was primarily a result of the
Company's $450 million principal amount of 9-1/2% Senior
Page 15 of 27
Subordinated Notes issued in May 1997, the Company's $150 million principal
amount of 10-1/4% Senior Subordinated Notes issued in May 1996, and increased
borrowings under its current $700 million credit facility, partially offset by a
reduction in interest resulting from the repurchase of substantially all of the
Company's 9-5/8% and 10-3/4% Senior Subordinated Notes.
Earnings before equity in earnings (loss) of affiliates, income
taxes and extraordinary items decreased by 38% to $15.2 million for the three
months ended June 30, 1997, as compared to $24.4 million for the comparable
period in the prior year. This decrease resulted primarily from non-recurring
charges incurred during the three months ended June 30, 1997. The non-recurring
charge in the three months ended June 30, 1997 represents the settlement and
other costs of the terminated merger with Coram Health Care Corporation
("Coram") of $27.6 million, less the gain on the sale of the pharmacy division
of $7.6 million. Such gain had previously been deferred and reported as an
unrealized gain on available for sale securities, as discussed more fully in
Note 5. Excluding the non-recurring charges, net, earnings before equity in
earnings (loss) of affiliates, income taxes and extraordinary items would have
increased $11.9 million, or 49% over the comparable prior period.
Earnings before income taxes and extraordinary items decreased
by 39% to $15.1 million for the three months ended June 30, 1997, as compared to
$24.8 million for the comparable period in the prior year. This decrease
resulted primarily from the non-recurring charges incurred during the three
months ended June 30, 1997. (See Note 5: Non-Recurring Charges) Excluding the
non-recurring charges, net, earnings before income taxes and extraordinary
items, would have increased $11.4 million or 46% over the comparable prior
period. The provision for federal and state income taxes was $5.9 million for
the three months ended June 30, 1997, and $9.6 million for the same period in
the prior year. Net loss and fully-diluted loss per share for the quarter were
$8.9 million in 1997, or 22 cents per share, as compared to net earnings and
fully diluted earnings per share of $13.8 million or 51 cents per share for the
same period in 1996. During the three months ended June 30, 1997 and 1996, the
Company incurred extraordinary losses on the extinguishments of debt of $18.2
million (net of tax), or 51 cents per share (fully-diluted) representing the
payment of premium and consent fees and the write-off of deferred financing
costs in connection with the repurchase of substantially all of the Company's 9
5/8% and 10 3/4% Senior Subordinated Notes (see Note 6: Extraordinary Item.),
and $1.4 million (net of tax), or 5 cents per share (fully-diluted) representing
the write-off of deferred fees related to replacement of the Company's $500
million revolving credit and term loan facility with the $700 million revolving
credit facility. (See Note 6: Extraordinary Item.), respectively.
Page 16 of 27
SIX MONTHS ENDED JUNE 30, 1997
COMPARED TO SIX MONTHS ENDED JUNE 30, 1996
Net revenues for the six months ended June 30, 1997 increased
$255.9 million, or 39%, to $918.9 million from the comparable period in 1996.
Approximately 84% of the increase is attributable to the acquisition of
companies providing rehabilitation, home health, mobile x-ray and
electrocardiogram services subsequent to June 30, 1996, partially offset by a
reduction in revenue resulting from the sale of the Company's pharmacy division
in July 1996, the sale of a majority interest in its assisted living services
division in October 1996, and the sale of two facilities in the second quarter
of 1997. Revenues in the six months ended June 30, 1996 include revenues of
$47.4 million for the pharmacy division and revenues of $11.3 million from its
assisted living services division. The remaining increase was due primarily to
facilities and ancillary companies acquired during the first half of 1996 and
increased revenues from facilities and ancillary companies in operation during
both periods. The Company derived approximately 49% and 17% of its patient
revenues from Medicare and Medicaid, respectively, in the six months ended June
30, 1997, compared to 33% and 24%, respectively, in the comparable prior period.
Basic medical services revenue decreased 9% from $195.3 million
to $176.8 million. This decrease primarily resulted from the conversion by the
Company of certain skilled nursing beds to Medical Specialty Unit (MSU) beds
after June 30, 1996, the sale of a majority interest in its assisted living
services division in October 1996, and the sale of two facilities in the second
quarter of 1997.
Specialty medical services revenue increased 62% from $446.4
million to $722.8 million. Of the $276.4 million increase, $214.0 million, or
77%, was attributable to revenue from acquisitions subsequent to June 30, 1996
partially offset by a reduction in specialty medical services revenue as a
result of the sale of the Company's pharmacy division in July 1996. The
remaining increase was due to increased revenue from facilities in operation in
both periods, ancillary companies acquired during the first half of 1996, as
well as skilled nursing beds being converted to MSU beds after June 30, 1996.
Page 17 of 27
Management services and other revenues decreased 10% from $21.4
million to $19.3 million.
Total expenses for the period increased 42% to $872.6 million
from $616.5 million, an increase of 42%. Of the $256.1 million increase, $187.0
million, or 73%, was due to an increase in operating expenses. A substantial
portion of the increase in operating expenses was due to acquisitions
consummated subsequent to June 30, 1996, partially offset by the sale of the
Company's pharmacy division in July 1996, the sale of a majority interest in its
assisted living services division in October 1996, and the sale of two
facilities in the second quarter of 1997.
Corporate administrative and general expenses for the six
months ended June 30, 1997 increased by $6.2 million, or 21%, over the
comparable period in 1996. This increase primarily represents additional
operations, information systems, accounting, finance and other personnel to
support the growth resulting from the acquisition of ancillary businesses.
Depreciation and amortization increased 84% to $30.8 million during the six
months ended June 30, 1997 as compared to $16.8 million for the six months ended
June 30, 1996. This increase is primarily the result of increased goodwill
amortization, as well as depreciation related to ancillary company acquisitions
consummated subsequent to the second quarter of 1996. Rent expense increased by
$14.3 million, or 40%, over the comparable period in 1996, as a result of
increases in contingent rentals, which are based on gross revenues of certain
leased facilities and rent at ancillary companies acquired subsequent to June
30, 1996, partially offset by a reduction in rent resulting from the sale of the
pharmacy division and the sale of a majority interest in the Company's assisted
living services division. Interest expense, net increased $14.5 million, or 48%,
during the six months ended June 30, 1997 to $44.6 million. This increase in
interest expense was primarily
Page 18 of 27
a result of the Company's 9-1/2% Senior Subordinated Notes issued in May 1997,
10-1/4% Senior Subordinated Notes issued in May 1996, and increased borrowings
under its $700 million credit facility, partially offset by a reduction in
interest resulting from the repurchase of substantially all of the Company's
9-5/8% and 10-3/4% Senior Subordinated Notes.
Earnings before equity in earnings of affiliates, income taxes
and extraordinary items decreased by 1% to $46.3 million for the six months
ended June 30, 1997, as compared to $46.5 million for the comparable period in
the prior year. This decrease is primarily the result of the non-recurring
charges which were incurred during the three months ended June 30, 1997. (See
Note 5: Non-Recurring Charges) Excluding the non-recurring charges, net,
earnings before equity in earnings of affiliates, income taxes and extraordinary
items would have increased $19.8 million or 43% over the comparable prior
period.
Earnings before income taxes and extraordinary items decreased
by 2% to $46.4 million for the six months ended June 30, 1997, as compared to
$47.3 million for the comparable period in the prior year. This decrease is
primarily the result of the non-recurring charge, net, discussed above.
Excluding the non-recurring charges, net, earnings before income taxes and
extraordinary items would have increased $19.2 million or 41% over the
comparable prior period. The provision for federal and state income taxes was
$18.1 million for the six months ended June 30, 1997, and $18.2 million for the
same period in the prior year. Net earnings and fully diluted earnings per share
for the six months were $10.1 million in 1997, or 41 cents per share, as
compared to $27.6 million or $1.05 per share for the same period in 1996. During
the six months ended June 30, 1997 and 1996, the Company incurred extraordinary
losses on the extinguishments of debt of $18.2 million (net of tax), or 51 cents
per share (fully-diluted) and $1.4 million (net of tax), or 5 cents per share
(fully-diluted), respectively. Weighted average shares (fully-diluted) increased
by 17%, from 31,028,000 at June 30, 1996 to 36,233,000 at June 30, 1997.
Page 19 of 27
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1997, the Company had working capital of $159.0
million, as compared with $57.5 million at December 31, 1996. The increase in
working capital was primarily due to an increase in patient accounts and third
party payor settlements receivable and other current assets and a decrease in
accounts payable and accrued expenses. There were no material commitments for
capital expenditures as of June 30, 1997. Net patient accounts and third-party
payor settlements receivable increased $17.3 million to $344.1 million at June
30, 1997, as compared to $326.9 million at December 31, 1996. Of the $17.3
million increase in accounts receivable, $7.1 million was attributable to
related service businesses acquired subsequent to December 31, 1996 and $10.2
million was due to increased accounts receivable at facilities in operation and
related service businesses owned at both December 31, 1996 and June 30, 1997.
Gross patient accounts receivable were $364.1 million at June 30, 1997, as
compared to $340.8 million at December 31, 1996. Net third-party payor
settlements receivable from federal and state governments (i.e., Medicare and
Medicaid cost reports) was $18.9 million at June 30, 1997, as compared to $27.6
million at December 31, 1996. Approximately $10.8 million, or 57%, of the
third-party payor settlements receivable from federal and state governments at
June 30, 1997 represent the costs for its MSU patients which exceed regional
reimbursement limits established under Medicare.
The Company's cost of care for its MSU patients generally
exceeds regional reimbursement limits established under Medicare. The success of
the Company's MSU strategy will depend in part on its ability to obtain
reimbursement for those costs which exceed the Medicare established
reimbursement limits by obtaining waivers of these cost limitations. The Company
has submitted waiver requests for 225 cost reports, covering all cost report
periods through December 31, 1996. To date, final action has been taken by the
Health Care Financing Administration ("HCFA") on 221 waiver requests covering
cost report periods through December 31, 1996. The Company's final rates as
approved by HCFA represent approximately 95% of the requested rates as submitted
in the waiver requests. There can be no assurance, however, that the
Page 20 of 27
Company will be able to recover its excess costs under any waiver requests which
may be submitted in the future. The Company's failure to recover substantially
all these excess costs would adversely affect its results of operations and
could adversely affect its MSU strategy.
As discussed in Note 4, in May 1997, the Company issued $450
million principal amount Senior Subordinated Notes. The Company used the net
proceeds to repurchase substantially all of its 9-5/8% Senior Subordinated Notes
due 2002 and its 10-3/4% Senior Subordinated Notes due 2004, to pay pre-payment
premiums, consent fees and accrued interest related to the repurchase, as well
as to repay a portion of the $436.0 million then outstanding under its revolving
credit facility. In connection with the repurchase, the Company recorded an
extraordinary loss of $18.2 million (net of tax).
The other asset and liability increases were due to
acquisitions and normal growth in operations which was consistent with the
growth in revenues of such operations in 1997.
Net cash provided by operating activities for the six months
ended June 30, 1997, was $11.0 million as compared to $600,000 for the
comparable period in 1996.
Net cash provided by financing activities was $133.6 million
for the six month period in 1997 as compared to $130.2 million for the
comparable period in 1996. In both periods, the Company received net proceeds
from long-term borrowings and made repayments on certain debt.
Net cash used by investing activities was $140.5 million for
the six month period ended June 30, 1997 as compared to $125.3 million for the
six month period ended June 30, 1996. Cash used for the acquisition of
facilities and ancillary company acquisitions was $34.5 million in 1997 as
compared to $18.2 million for 1996. Cash used for the purchase of property,
plant and equipment was $67.6 million in 1997 and $67.4 million in 1996.
Page 21 of 27
The Company's contingent liabilities (other than liabilities in
respect of litigation and the contingent payments in respect of the First
American acquisition) aggregated approximately $77.3 million as of June 30,
1997. The Company is obligated to purchase its Greenbriar facility upon a change
in control of the Company. The net purchase price of the facility is
approximately $4.0 million. The Company has guaranteed approximately $6.6
million of the lessor's indebtedness. The Company is required, upon certain
defaults under the lease, to purchase its Orange Hills facility at a purchase
price equal to the greater of $7.1 million or the facility's fair market value.
The Company entered into a guaranty agreement whereby the Company guaranteed
approximately $4.0 million owed by the Tutera Group, Inc. and Sunset Plaza
Limited Partnership, a partnership affiliated with a partnership in which the
Company has a 49% interest, to Finova Capital Corporation. The Company has
guaranteed approximately $8.9 million owed by Litchfield Asset Management
Corporation to National Health Investors, Inc. The Company has established
several irrevocable letters of credit with the Bank of Nova Scotia totaling
$15.7 million at June 30, 1997 to secure certain of the Company's workers'
compensation, health benefits and other obligations. The Company has guaranteed
a maximum of $539,062 owed by Dunns Creek to National Health Investors. The
Company has guaranteed approximately $4.8 million owed by Community Care of
America, Inc. ("CCA"), a related party company to which IHS provides certain
management services, to Daiwa Healthco-II, LLC. The Company has also guaranteed
approximately $10.0 million owed by CCA to Health and Retirement Properties
Trust under a loan and lease financing agreement. The Company has also
established three Irrevocable Standby Letters of Credit in the total amount of
$10.7 million. In addition, the Company has obligations under operating leases
aggregating approximately $212.1 million at June 30, 1997. The Company owns
warrants to purchase approximately 14.9% of CCA, and the Company's Chairman and
Chief Executive Officer beneficially owns approximately 21.0% of CCA's
outstanding common stock. The Company has made available to CCA a $10.0 million
revolving credit facility. At June 30, 1997 $5.0 million was outstanding. The
Company currently has outstanding a cash tender offer for all outstanding shares
of CCA. In addition, with respect to certain acquired businesses, the Company is
obligated to make certain contingent payments.
Page 22 of 27
if earnings of the acquired business increase or earnings targets are met. The
Company is also obligated under certain circumstances to make contingent
payments of up to $155 million in respect of its acquisition of First American.
The liquidity of the Company will depend in large part on the
timing of payments by private, third-party and governmental payors, including
payments in excess of regional cost reimbursement limitations established under
Medicare. Costs in excess of the regional reimbursement limits relate primarily
to the delivery of services and patient care to the Company's MSU patients.
The healthcare industry is experiencing a trend toward cost
containment, as government and other third party payors seek to impose lower
reimbursement and utilization rates and negotiate reduced payment schedules with
service providers. These cost containment measures, combined with the increasing
influence of managed care payors and competition for patients, has resulted in
reduced rates of reimbursement for services provided by IHS, which has adversely
affected, and may continue to adversely affect, margins, particularly in its
skilled nursing and subacute facilities. Aspects of certain healthcare reform
proposals, such as cutbacks in the Medicare and Medicaid programs, containment
of healthcare costs on an interim basis by means that could include a short-term
freeze on prices charged by healthcare providers, and permitting greater state
flexibility in the administration of Medicaid, could adversely affect IHS. The
Balanced Budget Act of 1997, enacted in August 1997, provides, among other
things, for a prospective payment system for home nursing to be implemented for
cost reporting periods beginning on or after October 1, 1999, a reduction in
current cost reimbursement for home health care pending implementation of a
prospective payment system and a shift of the bulk of home health coverage from
Part A to Part B of Medicare. The failure to implement a prospective payment
system for home nursing services in the next several years could adversely
affect IHS' post-acute care network strategy. The Company expects that there
will continue to be numerous initiatives on the federal and state levels for
comprehensive reforms affecting the payment for and availability of healthcare
services, including proposals that will further limit reimbursement under
Medicare and Medicaid. It is not clear at this time what proposals, if any, will
be adopted or, if adopted, what effect such proposals will have on the Company's
business.
The Company anticipates that cashflow from operations and
borrowings under revolving credit facilities will be adequate to cover its
scheduled debt payments and future anticipated capital expenditure requirements
throughout 1997. The Company expects to continue to be growth oriented in 1997
through the expansion of its existing operations, by the acquisition of
additional facilities and ancillary companies and the entry into agreements to
manage additional facilities.
Page 23 of 27
Part II: Other Information
Item 2 Changes in Securities
(c) On March 27, 1997, the Company issued 976,504 shares of
Common Stock, having a value of $26.4 million (based on
the average closing price of IHS Common Stock for the
sixty day trading period ending March 19, 1997), in
payment of an earnout related to the December 1993
acquisition of Associated Therapists Corporation,
d/b/a/ Achievement Rehab, a provider of rehabilitation
therapy services. The earnout was paid based on the
increase in Achievement Rehab's earnings over a base
amount in 1996. The issuance of stock was exempt from
registration pursuant to Section 4(2) of the Securities
Act of 1933, as amended (the "Securities Act"). Each of
the investors made representations (the "Investment
Representations") to the effect that: (i) that the
shares were being acquired for its own account and not
with a view to, or for sale in connection with, any
distribution; (ii) acknowledging that the shares were
restricted securities under Rule 144; (iii) that it had
knowledge and experience in business matters, was
capable of evaluating the merits and risks of the
investment, and was able to bear the risk of loss; and
(iv) had the opportunity to make inquiries of and
obtain information from IHS.
On May 30, 1997, the Company sold $450 million
aggregate principal amount of its 9 1/2% Senior
Subordinated Notes due 2007 to Smith Barney Inc.,
Donaldson, Lufkin & Jenrette Securities Corporation,
Morgan Stanley & Co. Incorporated and Salomon Brothers
Inc as Initial Purchasers pursuant to Section 4(2) of
the Securities Act. The Initial Purchasers resold the
notes to qualified institutional buyers pursuant to
Rule 144A under the Securities Act. The Company
received net proceeds (after underwriting discounts and
commissions) of $438,187,500.
On June 20, 1997, the Company acquired substantially
all the assets, and assumed certain liabilities, of
Rehab Dynamics, Inc. and Restorative Therapy Limited
(which has since changed its name to Synergy Two,
Inc.), which provide contract rehabilitation services,
including speech and language pathology, occupational
therapy and physical therapy services, to patients in a
variety of settings. The purchase price was $31.4
million, of which $8.2 million was paid in cash at the
closing, $11.5 million was paid through the issuance of
322,472 shares of the Company's Common Stock (based on
the average closing price of IHS' common stock for the
thirty day trading period ending two days prior to
closing date) and the remainder is to be paid after
determination of any purchase price adjustment due to
earnings relating to the purchased assets in the year
following the closing. The issuance of stock was exempt
from registration pursuant to Section 4(2) of the
Securities Act. The sellers made the Investment
Representations. These shares were subsequently
registered for resale pursuant to a Registration
Statement on Form S-3 (No. 333-31121).
Page 24 of 27
Item 4: Submission of Matters to a Vote of Security Holders
(a) The Annual Meeting of Stockholders of Integrated
Health Services, Inc. was held on June 20, 1997.
(c)(i) The following persons, comprising the entire
Board of Directors, were elected at the Annual Meeting
pursuant to the following vote tabulations:
Votes
Votes For Withheld
--------- --------
Robert N. Elkins 19,839,582 693,460
Lawrence P. Cirka 19,737,006 796,036
Edwin M. Crawford 19,825,899 707,143
Kenneth M. Mazik 19,889,406 643,636
Robert A. Mitchell 19,889,357 643,685
Charles W. Newhall 19,826,006 707,036
Timothy F. Nicholson 19,889,372 643,670
John L. Silverman 19,825,972 707,070
George H. Strong 19,889,396 643,646
Item 6: EXHIBITS AND REPORTS ON FORM 8-K
A. EXHIBITS
4.1 Second Amended and Restated Supplemental
Indenture, dated as of May 15, 1997, between
Integrated Health Services Inc. and Signet Trust
Company, as Trustee, relating to the Company's 9
5/8% Senior Subordinated Notes due 2002.
4.2 Amended and Restated Supplemental Indenture, dated
as of May 15, 1997, between Integrated Health
Services, Inc. and Signet Trust Company, as
Trustee, relating to the Company's 10 3/4% Senior
Subordinated Notes due 2004.
4.3 Indenture, dated as of May 30, 1997, between
Integrated Health Services, Inc., and First Union
National Bank of Virginia, as Trustee, relating to
the Company's 9 1/2% Senior Subordinated Notes due
2007.
10.1 Credit Agreement, dated as of May 15, 1996, as
amended, by and among Integrated Health Services,
the lenders named therein, and Citibank, N.A., as
administrative agent.
10.2 Purchase Agreement, dated May 22, 1997, between
Integrated Health Services, Inc. and Smith Barney
Inc., Donaldson, Lufkin & Jenrette Securities
Corporation, Morgan Stanley & Co. Incorporated and
Salomon Brothers Inc, relating to the Company's
9 1/2% Senior Subordinated Notes due 2007.
10.3 Registration Rights Agreement, dated May 22, 1997,
between Integrated Health Services, Inc., and
Smith Barney Inc., Donaldson, Lufkin & Jenrette
Securities Corporation, Morgan Stanley & Co.
Incorporated and Salomon Brothers Inc, relating
to the Company's 9 1/2% Senior Subordinated Notes
due 2007.
10.4 Agreement and Plan of Merger, dated as of July 6,
1997, by and among Integrated Health Services,
Inc., IHS Acquisition XXIV, Inc. and RoTech
Medical Corporation (incorporated by reference
from the Company's Current Report on Form 8-K
dated July 6, 1997).
10.5 Agreement and Plan of Merger, dated as of August
1, 1997, by and among Integrated Health Services,
Inc., IHS Acquisition XXVI, Inc. and Community
Care of America, Inc. (incorporated by reference
from the Company's Schedule 14D-1 filed August 7,
1997).
Page 25 of 27
B. REPORTS ON FORM 8-K
The Company filed a Current Report on Form 8-K dated as
of May 23, 1997 relating to the private issuance of
$450,000,000 aggregate principal amount 9-1/2% Senior
Subordinated Notes due 2007.
The Company filed a Current Report on Form 8-K dated as
of May 30, 1997, relating to the completion of tender
offer for its 9-5/8% and 10-3/4% Senior Subordinated
Notes and completion of financing.
The Company filed a Current Report on Form 8-K dated as
of October 19, 1996 as amended by Form 8/KA filed April
11, 1997 relating to the Company's termination of its
agreement to acquire Coram Healthcare Corporation.
The Company filed a Current Report on Form 8-K dated
October 17, 1996 reporting the acquisition of First
American Healthcare of Georgia, Inc., as amended by
Form 8-K/A filed November 26, 1996 and Amendment No. 1
to form 8-K/A filed July 11, 1997.
The Company filed a Current Report on Form 8-K dated
July 6, 1997 reporting the execution of the Agreement
and Plan of Merger among the Company, IHS Acquisition
XXIV, Inc., and RoTech Medical Corporation ("RoTech")
relating to the Company's proposed acquisition of
RoTech.
Page 26 of 27
- 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 thereunto duly authorized.
INTEGRATED HEALTH SERVICES, INC.
By: /s/ Robert N. Elkins
--------------------
Robert N. Elkins
Chief Executive Officer
By: /s/ W. Bradley Bennett
----------------------
W. Bradley Bennett
Senior Vice President and
Chief Accounting Officer
By: /s/ Eleanor C. Harding
----------------------
Eleanor C. Harding
Senior Vice President Finance
Dated: August 13, 1997
-------------------------
Page 27 of 27