SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
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CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) December 31, 1997
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INTEGRATED HEALTH SERVICES, INC.
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(Exact Name of Registrant as Specified in its Charter)
Delaware 1-12306 23-2428312
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(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
10065 Red Run Boulevard, Owings Mills, Maryland 21117
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (410) 998-8400
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Not Applicable
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(Former Name or Former Address, if Changed Since Last Report)
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On December 31, 1997, Integrated Health Services, Inc. ("IHS")
acquired from HEALTHSOUTH Corporation ("HEALTHSOUTH") 139 owned, leased or
managed long-term care facilities, 12 specialty hospitals, a contract therapy
business having over 1,000 contracts and an institutional pharmacy business
serving approximately 38,000 beds. The businesses acquired, which had annual
revenues of approximately $925 million for the 12 months ended August 31, 1997,
were acquired by HEALTHSOUTH in its recent acquisition of Horizon/CMS Healthcare
Corporation.
Under the terms of the acquisition agreement, IHS paid $1.15 billion in
cash and assumed approximately $100 million in debt. IHS funded the purchase
price with available cash from term loan borrowings under its $2.15 billion
revolving credit and term loan facility and the sale of its 9 1/4% Senior
Subordinated Notes due 2008 and borrowings under the revolving credit portion of
the new credit facility. On a pro forma basis after giving effect to the
acquisition of these business from HEALTHSOUTH and the acquisition of RoTech
Medical Corporation and the lithotripsy division of Coram Healthcare Corporation
in October 1997, IHS' total debt, including current portion, accounted for
approximately 74% of its total pro forma capitalization as of September 30,
1997. The transaction will be treated as a purchase for accounting and financial
reporting purposes.
Donaldson Lufkin & Jenrette Securities Corporation and Morgan Stanley
Dean Witter Discover & Co. acted as financial advisors to IHS in the
transaction.
ITEM 5. OTHER EVENTS
In connection with the acquisition of the businesses from HEALTHSOUTH
described in Item 2 above IHS and the lenders under IHS' revolving credit and
term loan facility (the "Credit Facility") amended the Credit Facility to
provide for an additional $400 million term loan facility (the "Additional Term
Facility") to finance a portion of the purchase price for the acquisition and to
amend certain covenants to permit the consummation of the acquisition. The
Additional Term Facility, which was borrowed at the closing of the acquisition,
will mature on December 31, 2005, and will be amortized beginning December 31,
1998 as follows: 1998 -- $4 million; each of 1999, 2000, 2001, 2002 and 2003 --
$4 million (payable in equal quarterly installments); 2004 -- $176 million
(payable in equal quarterly installments); and 2005 -- $200 million (payable in
equal quarterly installments). The Additional Term Facility bears interest at a
rate equal to, at the option of IHS, either (i) in the case of Eurodollar loans,
the sum of (x) two and one-quarter percent or two and one-half percent
(depending on the ratio of IHS' Debt (as defined in the Credit Facility) to
earnings before interest, taxes, depreciation, amortization and rent, pro forma
for any acquisitions or divestitures during the measurement period (the
"Debt/EBITDAR Ratio")) and (y) the interest rate in the London interbank market
for loans in an amount substantially equal to the amount of borrowing and for
the period of borrowing selected by IHS or (ii) the sum
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of (a) the higher of (1) Citibank, N.A.'s base rate or (2) one percent plus the
latest overnight federal funds rate plus (b) a margin of one percent or one and
one-quarter percent (depending on the Debt/EBITDAR Ratio). The Additional Term
Facility can be prepaid at any time in whole or in part without penalty.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED.
It is impracticable for IHS to provide the required financial
statements on the date this report is being filed. IHS intends
to file the required financial statements under cover of Form
8-K/A as soon as practicable, but not later than 60 days after
the date this report must have been filed.
(b) PRO FORMA FINANCIAL INFORMATION.
It is impracticable for IHS to provide the required pro forma
financial information on the date this report is being filed.
IHS intends to file the required financial information under
cover of Form 8-K/A as soon as practicable, but not later than
60 days after the date this report must have been filed.
(c) EXHIBITS.
2. Purchase and Sale Agreement, entered into as of November 3,
1997, between HEALTHSOUTH Corporation, Horizon/CMS Healthcare
Corporation and Integrated Health Services, Inc. (incorporated
herein by reference to Exhibit 2 to Current Report on Form 8-K
dated November 3, 1997 of Integrated Health Services, Inc.).
10. Amendment No. 1 dated as of December 1, 1997, to the
Revolving Credit and Term Loan Agreement among Integrated
Health Services, Inc., the lenders parties to the Credit
Agreement and Citibank, N.A., as administrative agent for the
lenders.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
INTEGRATED HEALTH SERVICES, INC.
Date: January 14, 1998 By: /s/ Taylor Pickett
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Name: Taylor Pickett
Title: Executive Vice President--Chief
Financial Officer
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Exhibit Index
2. Purchase and Sale Agreement, entered into as of November 3, 1997,
between HEALTHSOUTH Corporation, Horizon/CMS Healthcare Corporation
and Integrated Health Services, Inc. (incorporated herein by reference
to Exhibit 2 to Current Report on Form 8-K dated November 3, 1997 of
Integrated Health Services, Inc.).
10. Amendment No. 1 dated as of December 1, 1997, to the Revolving
Credit and Term Loan Agreement among Integrated Health Services, Inc.,
the lenders parties to the Credit Agreement and Citibank, N.A., as
administrative agent for the lenders.
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