Form 8-K HEALTHSOUTH CORP For: Jan 29
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E-mailUNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant To Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (date of earliest event reported): January 29, 2016
HealthSouth Corporation
(Exact name of Registrant as specified in its Charter)
Delaware
(State or Other Jurisdiction of Incorporation)
001-10315 | 63-0860407 |
(Commission File Number) | (IRS Employer Identification No.) |
3660 Grandview Parkway, Suite 200, Birmingham, Alabama 35243
(Address of Principal Executive Offices, Including Zip Code)
(205) 967-7116
(Registrant’s Telephone Number, Including Area Code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
¨ | Written communication pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 8.01. Other Items.
On October 1, 2015, HealthSouth Corporation (“HealthSouth” or the “Company”) filed a Current Report on Form 8-K with the United States Securities and Exchange Commission to report the consummation of its acquisition (the “Acquisition”) of the operations of Reliant Hospital Partners, LLC (“Reliant”) and affiliated entities. On December 17, 2015, the Company filed a Current Report on Form 8-K/A that included certain audited and unaudited financial statements of Reliant (the “Reliant Financial Statements”) and certain unaudited pro forma condensed combined financial statements of the Company in connection with the Acquisition.
Certain Reliant subsidiaries acquired by HealthSouth in the Acquisition (the “Subsidiary Guarantors”) serve as guarantors of unsecured senior notes issued by HealthSouth and may serve as guarantors of notes to be issued by HealthSouth in the future. Such notes, and the guarantees of such notes, may be registered by HealthSouth under the Securities Act of 1933, as amended. Attached to this Current Report on Form 8-K as Exhibits 99.1 and 99.2 are the Reliant Financial Statements updated to include footnotes presenting condensed consolidating financial information of the Subsidiary Guarantors, a Reliant subsidiary acquired by HealthSouth in the Acquisition that is not a Subsidiary Guarantor, and Reliant (parent only).
Item 9.01. Financial Statements and Exhibits
(a) | Financial Statements of Business Acquired |
The audited consolidated balance sheet of Reliant as of December 31, 2014 and the related audited consolidated statements of operations, members' deficit, and cash flows for the year ended December 31, 2014, together with the notes thereto and the auditor’s report thereon, are filed as Exhibit 99.1 hereto and are incorporated herein by reference.
The unaudited interim condensed consolidated balance sheet of Reliant as of September 30, 2015 and the related unaudited interim condensed consolidated statements of operations, members' (deficit) equity, and cash flows for the nine months ended September 30, 2015 and 2014, together with the notes thereto, are filed as Exhibit 99.2 hereto and are incorporated herein by reference.
(d) | Exhibits |
See Exhibit Index.
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.
HEALTHSOUTH CORPORATION
By: | /S/ DOUGLAS E. COLTHARP | |
Name: | Douglas E. Coltharp | |
Title: | Executive Vice President and Chief Financial Officer | |
Dated: January 29, 2016
EXHIBIT INDEX
Exhibit Number | Description of Exhibit |
23.1 | Consent of BKD, LLP. |
99.1 | Audited consolidated balance sheet of Reliant as of December 31, 2014 and the related audited consolidated statements of operations, members' deficit, and cash flows for the year ended December 31, 2014, together with the notes thereto and the auditor’s report thereon. |
99.2 | Unaudited consolidated balance sheet of Reliant as of September 30, 2015 and the related unaudited interim condensed consolidated statements of operations, members' (deficit) equity, and cash flows for the nine months ended September 30, 2015 and 2014. |
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (No. 333-202552) and Form S-8 (No. 333-141702, No. 333-157445, and No. 333-175981) of HealthSouth Corporation of our report dated March 31, 2015, except for Note 16 as to which the date is January 29, 2016, relating to the financial statements of Reliant Hospital Partners, LLC. as of and for the year ended December 31, 2014, which appears in this Current Report on Form 8-K dated January 29, 2016.
/s/ BKD LLP
Dallas, Texas
January 29, 2016
Exhibit 99.1
Reliant Hospital Partners, LLC
Auditor’s Report and Consolidated Financial Statements
December 31, 2014
Reliant Hospital Partners, LLC
December 31, 2014
Contents
INDEPENDENT AUDITOR’S REPORT | 1 | |
CONSOLIDATED FINANCIAL STATEMENTS | ||
Balance Sheet | 3 | |
Statement of Operations | 5 | |
Statement of Members’ Deficit | 6 | |
Statement of Cash Flows | 7 | |
Notes to Consolidated Financial Statements | 8 | |
Independent Auditor’s Report
Board of Directors and Members of
Reliant Hospital Partners, LLC
Richardson, Texas
We have audited the accompanying consolidated financial statements of Reliant Hospital Partners, LLC and its subsidiaries (Company), which comprise the consolidated balance sheet as of December 31, 2014, and the related consolidated statement of operations, members’ deficit and cash flows for the year then ended, and the related notes to the consolidated financial statements.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Board of Directors and Members of
Reliant Hospital Partners, LLC
Page 2
Opinion
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Reliant Hospital Partners, LLC and its subsidiaries as of December 31, 2014, and the results of their operations and their cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America.
/s/ BKD, LLP
Dallas, Texas
March 31, 2015, except for Note 16 as to which the date is January 29, 2016
Reliant Hospital Partners, LLC
Consolidated Balance Sheet
December 31, 2014
ASSETS | |||
Currents assets | |||
Cash | $ | 29,314,883 | |
Patient accounts receivable, net of allowance; 2014 - $3,755,046 | 29,985,411 | ||
Estimated amounts due from third-party payers | 972,145 | ||
Prepaid expenses | 3,715,579 | ||
Supply inventory and other | 1,036,469 | ||
Total current assets | 65,024,487 | ||
Property and Equipment, At cost | |||
Buildings and land recorded under capital leases | 194,142,528 | ||
Facility equipment and furniture | 22,609,351 | ||
Construction in progress | 39,994 | ||
216,791,873 | |||
Less accumulated depreciation and amortization | 38,639,126 | ||
178,152,747 | |||
Other Assets | |||
Deferred financing costs, net | 3,356,709 | ||
Goodwill | 60,223,270 | ||
Intangible assets, net | 7,067,000 | ||
Due from affiliates | 868,003 | ||
Other long-term assets | 1,078,096 | ||
72,593,078 | |||
Total assets | $ | 315,770,312 | |
(Continued)
3
Reliant Hospital Partners, LLC
Consolidated Balance Sheet (Continued)
December 31, 2014
Liabilities And Members’ Deficit | |||
Current liabilities | |||
Current maturities of long-term debt | $ | 3,862,500 | |
Current maturities of capital lease obligations | 2,363,175 | ||
Accounts payable | 2,401,627 | ||
Accrued bonuses | 1,298,316 | ||
Accrued benefits | 2,985,431 | ||
Accrued property taxes | 3,213,956 | ||
Other accrued expenses | 4,962,167 | ||
Estimated amounts due to third-party payors | 979,017 | ||
Total current liabilities | 22,066,189 | ||
Long-term Debt, Less Current Maturities | 150,637,500 | ||
Capital Lease Obligations, Less Current Maturities | 186,238,796 | ||
Other Long-term Liabilities | 6,981,679 | ||
365,924,164 | |||
Commitments and Contingencies | |||
Members’ Deficit | |||
Reliant Hospital Partners, LLC’s deficit | (53,416,858 | ) | |
Noncontrolling interests | 3,263,006 | ||
Total members’ deficit | (50,153,852 | ) | |
Total liabilities and members’ deficit | $ | 315,770,312 | |
See Notes to Consolidated Financial Statements
4
Reliant Hospital Partners, LLC
Consolidated Statement of Operations
Year Ended December 31, 2014
Revenue | |||
Net patient service revenue | $ | 247,676,520 | |
Other | 1,400,036 | ||
Total revenue | 249,076,556 | ||
Expenses | |||
Salaries, wages, and benefits | 108,826,751 | ||
Purchased services and professional fees | 16,160,077 | ||
Other operating expenses | 27,005,812 | ||
Rent expense | 11,812,386 | ||
Depreciation and amortization | 13,066,173 | ||
Management fees to affiliates | 1,000,000 | ||
Provision for doubtful accounts | 3,437,563 | ||
Total expenses | 181,308,762 | ||
Operating income | 67,767,794 | ||
Interest expense | (22,605,000 | ) | |
Net income | $ | 45,162,794 | |
Amounts Attributable to Noncontrolling Interests | |||
Net Income | $ | 45,162,794 | |
Less net income attributable to noncontrolling interests | 4,184,072 | ||
Net income attributable to Reliant Hospital Partners, LLC | $ | 40,978,722 | |
See Notes to Consolidated Financial Statements
5
Reliant Hospital Partners, LLC
Consolidated Statement of Members’ Deficit
Year Ended December 31, 2014
Reliant Hospital Partners, LLC | Noncontrolling Interests | Total Members’ Equity (Deficit) | |||||||||
Balance, January 1, 2014 | $ | 33,807,301 | $ | 6,976,493 | $ | 40,783,794 | |||||
Unit-based compensation | 350,927 | — | 350,927 | ||||||||
Member distributions | (127,824,491 | ) | (7,432,499 | ) | (135,256,990 | ) | |||||
Reliant Hospital Partners, LLC purchase of noncontrolling interests and other redemption of interests | (729,317 | ) | (465,060 | ) | (1,194,377 | ) | |||||
Net income | 40,978,722 | 4,184,072 | 45,162,794 | ||||||||
Balance, December 31, 2014 | $ | (53,416,858 | ) | $ | 3,263,006 | $ | (50,153,852 | ) | |||
See Notes to Consolidated Financial Statements
6
Reliant Hospital Partners, LLC
Consolidated Statement of Cash Flows
Year Ended December 31, 2014
Operating activities | |||
Net income | $ | 45,162,794 | |
Items not requiring cash | |||
Depreciation and amortization of property and equipment | 12,581,598 | ||
Amortization of intangible assets | 484,575 | ||
Amortization of deferred financing costs | 1,747,670 | ||
Provision for doubtful accounts | 3,437,563 | ||
Unit-based compensation | 350,927 | ||
Changes in | |||
Patient accounts receivable | (20,149,864 | ) | |
Estimated amounts due from third-party payers | 1,425,222 | ||
Inventory, prepaid expenses and other | (1,111,568 | ) | |
Accounts payable | (2,162,387 | ) | |
Accrued expenses and other | 223,847 | ||
Net cash provided by operating activities | 41,990,377 | ||
Investing activities | |||
Purchase of property and equipment | (1,228,990 | ) | |
Net cash used in investing activities | (1,228,990 | ) | |
Financing activities | |||
Distributions to members | (135,256,990 | ) | |
Reliant Hospital Partners, LLC purchase of noncontrolling interests and other redemption of interests | (1,194,377 | ) | |
Proceeds from issuance of long-term debt | 124,667,621 | ||
Payment of deferred financing costs | (3,533,321 | ) | |
Payments on line of credit | (11,000,000 | ) | |
Payments on long-term debt | (15,993,538 | ) | |
Payments on capital lease obligations | (2,504,192 | ) | |
Net cash used in financing activities | (44,814,797 | ) | |
Decrease in Cash | (4,053,410 | ) | |
Cash, Beginning of Year | 33,368,293 | ||
Cash, End of Year | $ | 29,314,883 | |
Supplemental Cash Flows Information | |||
Interest paid | $ | 20,998,582 | |
Supplemental Disclosures of Noncash Investing Activities | |||
Payables incurred for property and equipment | $ | 29,028 | |
See Notes to Consolidated Financial Statements
7
Reliant Hospital Partners, LLC
Notes to Consolidated Financial Statements
December 31, 2014
Note 1: | Nature of Operations and Summary of Significant Accounting Policies |
Nature of Operations and Principles of Consolidation
Reliant Hospital Partners, LLC (RHP) is a Texas limited liability company. RHP and its subsidiaries (Company) operate inpatient rehabilitation hospitals providing physical, occupational and speech therapy services on an inpatient and outpatient basis at eight hospitals in Texas, two hospitals in Massachusetts and one hospital in Ohio. The consolidated financial statements include the accounts of RHP and its subsidiaries. All significant intercompany transactions and balances have been eliminated.
The Company operates seven of its hospitals through multiple tier partnership arrangements in which the hospital operating entity is in a separate partnership and whose owners consist of physician limited partners with RHP controlling the general partnership of each entity and varying amounts of limited partner interests. The term of each partnership is 50 years, commencing on various dates. The partnership agreements contain provisions, which limit the sale, assignment or transfer of a partner’s interest in the partnerships.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Patient Accounts Receivable
The Company reports patient accounts receivable for services rendered at net realizable amounts from third-party payers, patients and others. The Company provides an allowance for doubtful accounts based upon a review of outstanding receivables, historical collection information and existing economic conditions. The Company bills third-party payers directly and bills the patient when the patient’s liability is determined. Patient accounts receivable are due in full when billed. Accounts are considered delinquent and subsequently written off as bad debts based on individual credit evaluation and specific circumstances of the account.
Supply Inventory
Supply inventories are stated at the lower of cost, determined using the first-in, first-out method, or market.
8
Reliant Hospital Partners, LLC
Notes to Consolidated Financial Statements
December 31, 2014
Property and Equipment
Property and equipment acquisitions are recorded at cost and are depreciated using the straight-line method over the estimated useful life of each asset. Assets under capital lease obligations, including both land and buildings, are amortized over the shorter of the lease term or their respective estimated useful lives.
At December 31, 2014, fully depreciated assets included in property and equipment was approximately $387,000.
The estimated useful lives for each major depreciable class of property and equipment are as follows:
Buildings and land recorded under capital leases | 20 - 25 years |
Facility equipment and furniture | 3 - 20 years |
Deferred Financing Costs
Deferred financing costs represent costs incurred in connection with the issuance or modification of long-term debt. Such costs are being amortized to interest expense over the term of the respective debt using the straight-line method, which approximates the effective interest method. During the year ended December 31, 2014, interest expense of $1,335,399 was recognized due to refinancing the long-term debt. Total interest expense related to debt issuance costs was $1,747,670 in 2014.
Goodwill and Indefinite-lived Intangible Assets
Goodwill and indefinite-lived intangibles are evaluated annually for impairment or more frequently if impairment indicators are present. A qualitative assessment is performed to determine whether the existence of events or circumstances leads to a determination that it is more-likely-than-not the fair value of the reporting unit or indefinite-lived intangible asset is less than its carrying amount. If, based on the evaluation, it is determined to be more-likely-than-not that the fair value is less than the carrying value, then the goodwill or indefinite-lived intangible is tested further for impairment. If the implied fair value of goodwill or the fair value of the indefinite-lived intangible is lower than their carrying amounts, an impairment loss is recognized in an amount equal to the difference. Any subsequent increases in the value of goodwill and indefinite-lived intangibles are not recognized in the financial statements. There was no impairment of goodwill or indefinite-lived intangible assets recognized during the year ended December 31, 2014.
Intangible Assets
The Company’s intangible assets with finite lives are trade names. The trade names are being amortized on a straight-line basis over periods ranging from 5 – 20 years. These assets are periodically evaluated as to the recoverability of their carrying values and more frequently if there are impairment indicators.
9
Reliant Hospital Partners, LLC
Notes to Consolidated Financial Statements
December 31, 2014
Long-lived Asset Impairment
The Company evaluates the recoverability of the carrying value of long-lived assets whenever events or circumstances indicate the carrying amount may not be recoverable. If a long-lived asset is tested for recoverability and the undiscounted estimated future cash flows expected to result from the use and eventual disposition of the asset are less than the carrying amount of the asset, the asset is written down to fair value and an impairment loss is recognized for the amount by which the carrying amount of the long-lived asset exceeds its fair value.
No asset impairment was recognized during the year ended December 31, 2014.
Net Patient Service Revenue
The Company has agreements with third-party payers that provide for payments to the Company at amounts different from its established rates. Net patient service revenue is reported at the estimated net realizable amounts from patients, third-party payers and others for services rendered and includes estimated retroactive revenue adjustments. Retroactive adjustments are considered in the recognition of revenue on an estimated basis in the period the related services are rendered and such estimated amounts are revised in future periods as adjustments become known.
Income Taxes
The Company is not directly subject to income taxes under the provisions of the Internal Revenue Code and applicable state laws. Therefore, taxable income or loss is reported to the individual members for inclusion in their respective tax returns and no provision for federal income taxes are included in the accompanying consolidated statements of operations.
The Company is subject to state income taxes, including the Texas margin tax. These taxes are not significant for the year ended December 31, 2014.
Professional Liability Claims
The Company recognizes an accrual for claim liabilities based on estimated ultimate losses and costs associated with settling claims and a receivable to reflect the estimated insurance recoveries, if any. Professional liability claims are described more fully in Note 5.
Unit-based Compensation
Awards of unit-based compensation are measured at their grant date fair value. Compensation expense is recognized in the accompanying consolidated statement of operations over the vesting period of the respective award. See Note 14 for additional information.
10
Reliant Hospital Partners, LLC
Notes to Consolidated Financial Statements
December 31, 2014
Note 2: | Net Patient Service Revenue |
Revenues consist primarily of net patient service revenue that is recorded based on established billing rates less contractual adjustments.
Inpatient and outpatient rehabilitation services rendered to Medicare and Medicaid program beneficiaries are paid at prospectively determined rates. These rates vary according to a patient classification system that is based on clinical and diagnostic factors. The Company is reimbursed for certain services at tentative rates with final settlement determined after submission of annual cost reports and audits thereof by the Medicare and Medicaid administrative contractors.
Approximately 75% of net patient service revenue is from participation in the Medicare program during the year ended December 31, 2014. Net patient service revenue from participation in the Medicaid program has not been a significant source of revenue for the Company.
Laws and regulations governing the Medicare and Medicaid programs are complex and subject to interpretation and change. As a result, it is reasonably possible that recorded estimates will change materially in the near term.
The Company has also entered into payment agreements with certain commercial insurance carriers, health maintenance organizations and preferred provider organizations. The basis for payment to the Company under these agreements includes prospectively determined rates per discharge, discounts from established charges and prospectively determined daily rates.
Note 3: | Concentration of Credit Risk |
The Company grants credit without collateral to its patients, most of who reside in areas near the Company’s hospitals and are insured under third-party payer agreements. Substantially all of the Company’s net receivables are due from third-party payers. The mix of net receivables from third-party payers at December 31, 2014 is:
Medicare | 76 | % |
Medicaid | 7 | % |
Blue Cross Blue Shield | 10 | % |
Other third-party payers | 7 | % |
100 | % | |
11
Reliant Hospital Partners, LLC
Notes to Consolidated Financial Statements
December 31, 2014
Note 4: | Acquired Intangible Assets and Goodwill |
At December 31, 2014, the carrying amount of goodwill was $60,223,270. The goodwill was recorded as the excess of the purchase price over the fair value of the identifiable assets acquired, net of liabilities assumed, from a 2011 acquisition of all of the assets of Reliant Hospital Partners, LLC. This acquisition included varying interests in multiple tier partnerships. The goodwill has been assigned to the Company’s sole reporting unit and includes goodwill attributable to both the Company and noncontrolling interests.
The carrying amount and accumulated amortization of the Company’s identifiable intangible assets were as follows at December 31, 2014:
Gross Carrying Amount | Accumulated Amortization | Net | |||||||||
2014 | |||||||||||
Trade names | $ | 5,881,500 | $ | (1,124,500 | ) | $ | 4,757,000 | ||||
Certificates of need | 2,310,000 | — | 2,310,000 | ||||||||
$ | 8,191,500 | $ | (1,124,500 | ) | $ | 7,067,000 | |||||
The trade names are being amortized over periods ranging from 5 – 20 years. The certificates of need have indefinite lives.
Amortization expense related to the identifiable intangible assets was $484,575 for the year ended December 31, 2014. Estimated future intangible asset amortization expense at December 31, 2014 is as follows:
2015 | $ | 484,575 | |
2016 | 484,575 | ||
2017 | 484,575 | ||
2018 | 484,575 | ||
2019 | 230,575 | ||
Thereafter | 2,588,125 | ||
$ | 4,757,000 | ||
Note 5: | Professional Liability Claims |
The Company purchases professional liability insurance under a claims-made policy. Under such a policy, only claims made and reported to the insurer during the policy term, regardless of when the incidents giving rise to the claims occurred, are covered. The Company also purchases excess umbrella liability coverage, which provides additional coverage above the basic policy limits up to the amount specified in the umbrella policy.
12
Reliant Hospital Partners, LLC
Notes to Consolidated Financial Statements
December 31, 2014
The Company recognizes an accrual for claim liabilities based on estimated ultimate losses and costs associated with litigating and settling claims and a receivable to reflect estimated insurance recoveries, if any. Based upon the Company’s claims experience, no accrual has been made for the Company’s estimated professional liability costs as the amount is not expected to be material. It is reasonably possible that this estimate could change materially in the near term.
Note 6: | Lines of Credit |
On May 2, 2012, the Company entered into a revolving credit facility agreement with two lenders that provided for cash borrowings under revolving lines of credit or issuances of letters of credit up to $9,000,000 and was to expire on May 2, 2017. On December 31, 2013, the Company amended the credit facility to, among other things, increase the revolving credit borrowings to $22,000,000 for the 180 day period following the effective date and $12,000,000 thereafter. On September 30, 2014, the Company amended the credit facility to, among other things, increase the revolving credit borrowings to $15,000,000. Borrowings and letters of credit are limited to amounts calculated using adjusted EBITDA, the leverage multiple in effect and funded indebtedness. Cash borrowings under the revolving line of credit at December 31, 2014 totaled $0. At December 31, 2014, there were no amounts outstanding under letters of credit. Interest on borrowings under the credit agreement is computed based on the Company’s outstanding balance at the LIBOR rate plus 4.75% with a floor of 5.75%. The interest rate was 5.75% at December 31, 2014.
The Company also pays an annual unused commitment fee of 0.5%. The credit agreement is secured by substantially all assets of the Company and is guaranteed by the parents of the Company. The credit agreement contains limitations customarily found in such agreements on the incurrence of additional debt, investments, dividends and sale or merger of the Company and contains certain financial covenants. The credit agreement matures on December 31, 2018.
Note 7: | Long-term Debt |
Prior to the credit facility entered into on May 2, 2012, described below, the Company utilized long-term notes to finance equipment and initial startup needs including supply inventory and operating expenses. The obligor on each note was the operating partnership who utilized the funds. Payment of outstanding balances was guaranteed by RHP and each operating partnership’s limited partners. The working capital and equipment notes were paid off and replaced by the credit facility entered into during May 2012 discussed below. At December 31, 2014, long-term debt includes the following:
Credit facility | $ | 154,500,000 | |
Less current maturities | (3,862,500 | ) | |
$ | 150,637,500 | ||
13
Reliant Hospital Partners, LLC
Notes to Consolidated Financial Statements
December 31, 2014
On May 2, 2012, the Company entered into a $45,000,000 credit facility with a group of institutional lenders, which included a $36,000,000 term loan and was to expire May 2, 2017. The facility was entered into in order to: (1) purchase additional noncontrolling interests, (2) refinance the lines of credit and other long-term indebtedness, (3) provide working capital and (4) fund certain fees associated with the facility funding and the purchase of the limited partner ownership interests. On December 31, 2013, the Company amended the credit facility agreement to increase the credit facility to $70,375,000, which included Term Loan A for $36,000,000 and Term Loan B for $12,375,000 in order to purchase two additional hospitals and to provide working capital. On September 30, 2014, the Company amended the credit facility agreement to increase the credit facility to $169,500,000, in order to fund distributions of accumulated earnings to members. The credit facility matures October 1, 2019, and requires quarterly payments ranging from $965,625 to $1,931,250 plus interest beginning on January 1, 2015, with a final payment at maturity of $125,531,250. Interest on borrowings under the credit agreement is computed based on the Company’s outstanding balance (at the lower of the bank’s prime rate plus 3.75% or the LIBOR rate plus 4.75%). The interest rate was 5.75% at December 31, 2014. The credit agreement is secured by substantially all assets of the Company and is guaranteed by the parent of the Company. The credit agreement contains limitations customarily found in such agreements on the incurrence of additional debt, investments, dividends and sale or merger of the Company and contains certain financial covenants.
In November 2011, RHP purchased additional ownership interests of its subsidiaries from certain limited partners for $3,716,619. $2,477,745 of the purchase was funded through notes payable to the limited partners at 5% interest, payable in three annual installments with the final payment on November 14, 2014. These notes were not collateralized.
Aggregate annual maturities of long-term debt at December 31, 2014 were:
2015 | $ | 3,862,500 | |
2016 | 3,862,500 | ||
2017 | 7,725,000 | ||
2018 | 7,725,000 | ||
2019 | 131,325,000 | ||
$ | 154,500,000 | ||
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Reliant Hospital Partners, LLC
Notes to Consolidated Financial Statements
December 31, 2014
Note 8: | Capital Lease Obligations |
The Company is obligated under long-term noncancellable leases for certain buildings and land, which for accounting purposes, qualify as capital leases. The leases have minimum lease terms expiring through 2036 and have imputed interest rates recorded ranging from 7.5% to 8.895%. The lease payments are guaranteed by RHP and each respective operating partnership limited partner for its related lease. Future annual payments on capital lease obligations at December 31, 2014, are shown below:
2015 | $ | 16,879,767 | |
2016 | 18,478,579 | ||
2017 | 18,770,450 | ||
2018 | 19,083,339 | ||
2019 | 19,240,915 | ||
Thereafter | 299,219,818 | ||
391,672,868 | |||
Less amount representing interest | (203,070,897 | ) | |
Present value of future minimum lease payments | 188,601,971 | ||
Less current maturities | (2,363,175 | ) | |
Long-term portion | $ | 186,238,796 | |
At December 31, 2014, property and equipment include the following property under capital leases:
Buildings and land | $ | 194,142,528 | |
Less accumulated depreciation | (29,936,057 | ) | |
$ | 164,206,471 | ||
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Reliant Hospital Partners, LLC
Notes to Consolidated Financial Statements
December 31, 2014
Note 9: | Sale-leaseback Transaction and Operating Leases |
At the close of business on December 31, 2013, RHP purchased certain personal property and operations of two hospitals in the Boston area from FS Commonwealth LLC (FSC) and FS Patriot LLC (FSP). Concurrently, an unrelated third-party, HRSE-TST III, LLC (TST) purchased the land and buildings associated with FSP and FSC from HRSE 1 Properties Trust (HRSE1) for $88,000,000. It was determined that the substance of the transaction was that the Company acquired all of the assets of the hospitals, and simultaneously sold the real property to TST in a sale-leaseback transaction. The Company has entered into lease agreements to lease the property from TST for a period of 15 years beginning January 1, 2014. The real estate was valued at $82,000,000 in the business combination. A gain of $6,000,000 realized in this transaction was deferred and is being amortized to income in proportion to rent charged over the term of the lease. At December 31, 2014, the remaining deferred gain of $5,600,000 is included in other long-term liabilities on the accompanying consolidated balance sheet.
The Company leases four facilities and the home office under noncancellable facility lease agreements with terms ranging from 5 – 15 years along with renewal options for periods ranging from 15 – 25 years. The leases also require additional payments for operating expenses, real estate taxes and insurance. The facility lease agreements contain escalation clauses based on fixed terms and changes in the Consumer Price Index. The excess of cumulative rent expense, recognized on a straight-line basis, over cumulative rent payments is recorded as a long-term liability in the accompanying consolidated balance sheet and was approximately $1,382,000 as of December 31, 2014.
Future minimum lease payments at December 31, 2014 were:
2015 | $ | 7,966,033 | |
2016 | 8,698,913 | ||
2017 | 8,860,513 | ||
2018 | 8,921,531 | ||
2019 | 9,077,241 | ||
Thereafter | 83,369,837 | ||
Future minimum lease payments | $ | 126,894,068 | |
The lease payments are guaranteed by RHP and each operating partnership limited partner for its related lease. Total rent expense under these lease agreements was approximately $11,909,000 for the year ended December 31, 2014.
16
Reliant Hospital Partners, LLC
Notes to Consolidated Financial Statements
December 31, 2014
Note 10: | Retirement Plan |
The Company has a defined contribution pension plan covering substantially all employees. The Board of Directors annually determines the amount, if any, of the Company’s contributions to the plan. The Board of Directors approved a discretionary contribution for the year ended December 31, 2014 of $150,000 which is included in accounts payable and accrued expenses in the accompanying 2014 consolidated balance sheet.
Note 11: | Related Party Transactions |
RHP has an agreement with Nautic Partners VI, L.P. (Nautic), which is a member of RHP’s ultimate parent, Reliant Holding Company, LLC (Holding), to pay management fees of $500,000 annually, until actual annualized or budgeted EBITDA equals or exceeds $20,000,000, when the management fee increases to $1,000,000 annually. The Company’s EBITDA exceeded $20,000,000 during 2014. Nautic received $900,000 of the management fee in 2014, and $100,000 was paid to board consultants in 2014. Additionally, the Company reimburses certain travel costs of Nautic. RHP paid travel costs totaling $47,632 to Nautic for the year ended December 31, 2014, under this agreement.
Nautic is also named in the lawsuit discussed in Note 13. The Company and Nautic have agreed to share in certain legal costs related to the lawsuit. Based on the allocation proposed by Nautic’s insurer, the Company has paid and accrued obligations to various firms that include amounts to be reimbursed by Nautic. At December 31, 2014, approximately $868,000, is recorded as a receivable from Nautic included in due from affiliates in the accompanying consolidated balance sheet and as an offset to legal expense.
Note 12: | Fair Value of Financial Instruments |
The following methods were used to estimate the fair value of financial instruments recognized in the accompanying balance sheets at amounts other than fair value.
Cash
The carrying amount approximates fair value.
Long-term Debt
Fair value is estimated based on the borrowing rates currently available to the Company for bank loans with similar terms and maturities and determined through the use of a discounted cash flow model. Substantially all long-term debt was modified during 2014 and, therefore, their carrying amount approximates fair value.
17
Reliant Hospital Partners, LLC
Notes to Consolidated Financial Statements
December 31, 2014
Note 13: | Significant Estimates and Concentrations |
Accounting principles generally accepted in the United States of America require disclosure of certain significant estimates and current vulnerabilities due to certain concentrations. Those matters include the following:
Cash
At December 31, 2014, the Company’s cash accounts exceeded federally insured limits by approximately $28,522,000.
Allowance for Net Patient Service Revenue Adjustments
Estimates of allowances for adjustments included in net patient service revenue are described in Notes 1 and 2.
Professional Liability Claims
Estimates related to the accrual for professional liability claims are described in Note 5.
Litigation
A lawsuit has been brought against RHP, Old RHP, other parties and selected current and former executives of RHP in Dallas County, Texas, District Court. The plaintiff alleges a number of causes of actions and seeks, among other things, monetary damages and an injunction prohibiting RHP from pursuing any expansion of services in certain markets. RHP has denied any wrongdoing and is defending the case vigorously. On November 18, 2011, the court awarded monetary sanctions against certain former executives of RHP. The Court has not awarded any sanctions against RHP. No potential range of loss, if any, can be estimated. Accordingly, an estimated liability has not been recorded in the accompanying consolidated financial statements. A portion of the Company’s legal expenses were recoverable based on the Company’s insurance policies in effect. As of December 31, 2014, the insurance coverage related to this case and any additional legal expenses or settlements will not be recovered as the maximum insurance payment was fully recovered.
In the normal course of business, the Company is, from time to time, subject to allegations that may or do result in litigation. Some of these allegations are in areas not covered by commercial insurance; for example, allegations regarding employment practices or performance of contracts. The Company evaluates such allegations by conducting investigations to determine the validity of each potential claim. Based upon the advice of counsel, management records an estimate of the amount of ultimate expected loss, if any, for each of these matters. No provisions for potential losses were accrued at December 31, 2014. Events could occur that would cause the estimate of ultimate loss to differ materially in the near term.
18
Reliant Hospital Partners, LLC
Notes to Consolidated Financial Statements
December 31, 2014
Note 14: | Incentive Units |
Holding, parent of RHP, issued incentive units in the form of Class B, Class C-1, Class C-2 and Class C-3 units during 2011, 2012 and 2014 to key employees and directors of the Company. The units are considered profits interests, so no capital contributions are required by the holders of the units. The incentive unit holders participate in distributions made by the Company, subject to achievement of certain distribution targets and an order of priority as defined by Holding. The incentive units are accounted for as compensatory awards. The Class B and Class C-1 units granted in 2011 and 2012 vest in five equal annual installments on each anniversary of the grant date, provided that they vest in their entirety upon consummation of a sale of the Company. The Class C-1 units granted in 2014 vested 40% at the time of issuance and the remaining units issued vest in three equal annual installments beginning on January 31, 2015, provided that they vest in their entirety upon consummation of a sale of the Company. The Class C-2 and Class C-3 units vest in their entirety upon the consummation of a sale of the Company, if in connection with the sale of the Company the aggregate consideration payable will result in a target distribution as specified by Holding having been satisfied. In the case of employee termination, only unvested incentive units are returned to the Company. The Company believes that such awards better align the interests of its employees with those of its members.
The Company used an option pricing method to value the incentive units. Under this method, all classes of membership units are modeled as call options on the Company’s underlying equity value, and the rights and preferences of each class of membership are considered in order to allocate a fair value to each class. A significant input of the option pricing method is the enterprise value of the Company, which was estimated utilizing a combination of the income and market approach. The fair value of the incentive units were estimated on the date of grant using a Black-Scholes option valuation model with the assumptions noted in the following table. As the Company does not have a history of market prices for units, expected volatility is based on observable data for a group of peer companies and other factors. The expected term represents the estimated time until a liquidity event. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant. The fair value of the incentive units also includes a nonmarketability discount of 25%.
Expected volatility | 42.16 | % |
Expected dividend yield | 0 | % |
Expected term (in years) | 5 | |
Risk-free rate | 1.68 | % |
19
Reliant Hospital Partners, LLC
Notes to Consolidated Financial Statements
December 31, 2014
Information regarding the amount and grant-date fair value of the vested and nonvested Class B and Class C-1 incentive units is as follows for 2014:
Units | Weighted-Average Grant-Date Fair Value | |||||
Outstanding, beginning of year | 3,313,419 | $ | 0.45 | |||
Granted | ||||||
Class C-1 | 94,694 | $ | 1.11 | |||
Forfeited | — | $ | — | |||
Outstanding, end of year | 3,408,113 | $ | 0.47 | |||
Vested, beginning of year | 1,573,298 | $ | 0.44 | |||
Class B | 20,000 | $ | 0.42 | |||
Class C-1 | 672,322 | $ | 0.51 | |||
Forfeited | — | $ | — | |||
Vested, end of year | 2,265,620 | $ | 0.46 | |||
Nonvested, end of year | 1,142,493 | $ | 0.50 | |||
The Company recognized compensation expense related to the Class B and Class C-1 incentive units of $350,927 during the year ended December 31, 2014. At December 31, 2014, there was $571,981 of total unrecognized compensation expense related to nonvested incentive units that is expected to be recognized over a weighted-average period of 1.8 years.
Information regarding the amount and grant-date fair value of the Class C-2 and Class C-3 incentive units is as follows for 2014:
Units | Weighted-Average Grant-Date Fair Value | |||||
Outstanding, beginning of year | 6,344,442 | $ | 0.21 | |||
Granted | ||||||
Class C-2 | 94,694 | $ | 0.68 | |||
Class C-3 | 94,694 | $ | 0.44 | |||
Forfeited | ||||||
Class C-2 | — | $ | — | |||
Class C-3 | — | $ | — | |||
Outstanding, end of year | 6,533,830 | $ | 0.22 | |||
20
Reliant Hospital Partners, LLC
Notes to Consolidated Financial Statements
December 31, 2014
Unrecognized compensation expense of $1,470,006 related to the Class C-2 and Class C-3 incentive units will be recognized when they vest, which will occur upon sale of the Company.
Note 15: | Subsequent Event (Unaudited) |
On October 1, 2015, HealthSouth Corporation, a Delaware corporation, and it’s newly formed 100%-owned subsidiary, HealthSouth Acquisition Holdings, LLC, a Delaware limited liability company, completed its previously announced acquisition of the operations of the Company and affiliated entities. At closing, one Company entity had a remaining minority limited partner interest of 0.5%. The cash purchase price was reduced by the estimated fair value of this interest. The total consideration delivered at closing was approximately $730 million in cash, which amount includes payment of outstanding borrowings, transaction expenses, and an escrow reserve and is subject to working capital and other adjustments.
Note 16: | Condensed Consolidating Financial Information |
Due to the above acquisition and the requirement under HealthSouth's credit agreement that certain wholly-owned subsidiaries guarantee its debt, the accompanying condensed consolidating financial information for the Company has been prepared and presented pursuant to SEC Regulation S-X, Rule 3-10, “Financial Statements of Guarantors and Issuers of Guaranteed Securities Registered or Being Registered.” The following tables present the condensed consolidating financial information for RHP, which was not included in the acquisition and is therefore not a guarantor nor an issuer of the debt that has been issued by HealthSouth Corporation (the “Parent”), the subsidiaries of RHP that are now 100% owned by HealthSouth Corporation and are guarantors (the “Guarantor Subsidiaries”), and the subsidiary of RHP that had a remaining minority limited partner interest after the acquisition and is a nonguarantor (the “Nonguarantor Subsidiary”), together with elimination adjustments, as of and for the periods indicated. All guarantees of the Guarantor Subsidiaries are full and unconditional and joint and several, subject to certain customary conditions for release.
Periodically, certain subsidiaries of RHP make distributions of available cash to RHP. When made, these distributions impact the Investments in consolidated affiliates and Reliant Hospital Partners, LLC's deficit line items in the accompanying condensed consolidating balance sheet but have no impact on the consolidated financial statements of RHP. RHP’s long-term debt was not assumed by HealthSouth Corporation in the acquisition discussed above and was paid off with proceeds from the transaction. In addition, for the Guarantor Subsidiaries presented in the accompanying condensed consolidating financial information, all of the noncontrolling interests were subsequently acquired by HealthSouth Corporation.
21
Reliant Hospital Partners, LLC
Notes to Consolidated Financial Statements
December 31, 2014
Condensed Consolidating Balance Sheet | |||||||||||||||||||
As of December 31, 2014 | |||||||||||||||||||
Parent | Guarantor Subsidiaries | Nonguarantor Subsidiary | Eliminating Entries | Consolidated | |||||||||||||||
Assets | |||||||||||||||||||
Currents assets | |||||||||||||||||||
Cash | $ | 3,813,656 | $ | 22,980,397 | $ | 2,520,830 | $ | — | $ | 29,314,883 | |||||||||
Patient accounts receivable, net of allowance | — | 27,618,126 | 2,367,285 | — | 29,985,411 | ||||||||||||||
Estimated amounts due from third-party payers | — | 794,022 | 178,123 | — | 972,145 | ||||||||||||||
Prepaid expenses | 270,282 | 3,200,716 | 244,581 | — | 3,715,579 | ||||||||||||||
Supply inventory and other | 1,552,962 | 985,447 | 49,685 | (1,551,625 | ) | 1,036,469 | |||||||||||||
Total current assets | 5,636,900 | 55,578,708 | 5,360,504 | (1,551,625 | ) | 65,024,487 | |||||||||||||
Property and Equipment, At cost | |||||||||||||||||||
Buildings and land recorded under capital leases | — | 168,142,528 | 26,000,000 | — | 194,142,528 | ||||||||||||||
Facility equipment and furniture | 347,284 | 20,634,008 | 1,628,059 | — | 22,609,351 | ||||||||||||||
Construction in progress | 10,269 | 29,725 | — | — | 39,994 | ||||||||||||||
357,553 | 188,806,261 | 27,628,059 | — | 216,791,873 | |||||||||||||||
Less accumulated depreciation and amortization | 171,894 | 33,341,527 | 5,125,705 | — | 38,639,126 | ||||||||||||||
185,659 | 155,464,734 | 22,502,354 | — | 178,152,747 | |||||||||||||||
Other Assets | |||||||||||||||||||
Deferred financing costs, net | 518,450 | 2,609,083 | 229,176 | — | 3,356,709 | ||||||||||||||
Goodwill | — | 46,336,141 | 13,887,129 | — | 60,223,270 | ||||||||||||||
Intangible assets, net | 3,741,000 | 3,326,000 | — | — | 7,067,000 | ||||||||||||||
Due from affiliates | 868,003 | — | — | — | 868,003 | ||||||||||||||
Other long-term assets | 87,290 | 979,492 | 11,314 | — | 1,078,096 | ||||||||||||||
Investments in consolidated affiliates | (28,541,184 | ) | — | — | 28,541,184 | — | |||||||||||||
(23,326,441 | ) | 53,250,716 | 14,127,619 | 28,541,184 | 72,593,078 | ||||||||||||||
Total assets | $ | (17,503,882 | ) | $ | 264,294,158 | $ | 41,990,477 | $ | 26,989,559 | $ | 315,770,312 | ||||||||
22
Reliant Hospital Partners, LLC
Notes to Consolidated Financial Statements
December 31, 2014
Condensed Consolidating Balance Sheet (Continued) | |||||||||||||||||||
As of December 31, 2014 | |||||||||||||||||||
Parent | Guarantor Subsidiaries | Nonguarantor Subsidiary | Eliminating Entries | Consolidated | |||||||||||||||
Liabilities And Members’ Deficit | |||||||||||||||||||
Current liabilities | |||||||||||||||||||
Current maturities of long-term debt | $ | — | $ | 3,575,351 | $ | 287,149 | $ | — | $ | 3,862,500 | |||||||||
Current maturities of capital lease obligations | — | 1,982,020 | 381,155 | — | 2,363,175 | ||||||||||||||
Accounts payable | 326,049 | 1,965,935 | 109,643 | — | 2,401,627 | ||||||||||||||
Accrued bonuses | — | 1,203,737 | 94,579 | 1,298,316 | |||||||||||||||
Accrued benefits | 425,256 | 2,252,386 | 307,789 | 2,985,431 | |||||||||||||||
Accrued property taxes | 5,995 | 2,886,351 | 321,610 | — | 3,213,956 | ||||||||||||||
Other accrued expenses | 987,434 | 5,078,966 | 447,392 | (1,551,625 | ) | 4,962,167 | |||||||||||||
Estimated amounts due to third-party payers | — | 979,017 | — | — | 979,017 | ||||||||||||||
Total current liabilities | 1,744,734 | 19,923,763 | 1,949,317 | (1,551,625 | ) | 22,066,189 | |||||||||||||
Long-term Debt, Less Current Maturities | 34,123,900 | 109,000,749 | 7,512,851 | — | 150,637,500 | ||||||||||||||
Capital Lease Obligations, Less Current Maturities | — | 162,254,308 | 23,984,488 | — | 186,238,796 | ||||||||||||||
Other Long-term Liabilities | 44,342 | 6,937,337 | — | — | 6,981,679 | ||||||||||||||
35,912,976 | 298,116,157 | 33,446,656 | (1,551,625 | ) | 365,924,164 | ||||||||||||||
Commitments and Contingencies | |||||||||||||||||||
Members’ Deficit | |||||||||||||||||||
Reliant Hospital Partners, LLC’s deficit | (53,416,858 | ) | (36,231,703 | ) | 7,690,519 | 28,541,184 | (53,416,858 | ) | |||||||||||
Noncontrolling interests | — | 2,409,704 | 853,302 | — | 3,263,006 | ||||||||||||||
Total members’ deficit | (53,416,858 | ) | (33,821,999 | ) | 8,543,821 | 28,541,184 | (50,153,852 | ) | |||||||||||
Total liabilities and members’ deficit | $ | (17,503,882 | ) | $ | 264,294,158 | $ | 41,990,477 | $ | 26,989,559 | $ | 315,770,312 | ||||||||
23
Reliant Hospital Partners, LLC
Notes to Consolidated Financial Statements
December 31, 2014
Condensed Consolidating Statement of Operations | |||||||||||||||||||
For the Year Ended December 31, 2014 | |||||||||||||||||||
Parent | Guarantor Subsidiaries | Nonguarantor Subsidiary | Eliminating Entries | Consolidated | |||||||||||||||
Revenue | |||||||||||||||||||
Net patient service revenue | $ | — | $ | 224,062,934 | $ | 23,613,586 | $ | — | $ | 247,676,520 | |||||||||
Management fee revenue | 12,213,257 | — | — | (12,213,257 | ) | — | |||||||||||||
Other | — | 1,386,434 | 13,602 | — | 1,400,036 | ||||||||||||||
Total revenue | 12,213,257 | 225,449,368 | 23,627,188 | (12,213,257 | ) | 249,076,556 | |||||||||||||
Expenses | |||||||||||||||||||
Salaries, wages, and benefits | 4,186,364 | 95,925,258 | 8,715,129 | — | 108,826,751 | ||||||||||||||
Purchased services and professional fees | 1,990,712 | 13,033,691 | 1,135,674 | — | 16,160,077 | ||||||||||||||
Other operating expenses | 296,446 | 24,485,847 | 2,223,519 | — | 27,005,812 | ||||||||||||||
Rent expense | 96,666 | 11,715,720 | — | — | 11,812,386 | ||||||||||||||
Depreciation and amortization | 286,160 | 11,408,197 | 1,371,816 | — | 13,066,173 | ||||||||||||||
Management fees to affiliates | 1,000,000 | — | — | — | 1,000,000 | ||||||||||||||
Management fees | — | 11,036,337 | 1,176,920 | (12,213,257 | ) | — | |||||||||||||
Provision for doubtful accounts | — | 3,362,384 | 75,179 | — | 3,437,563 | ||||||||||||||
Total expenses | 7,856,348 | 170,967,434 | 14,698,237 | (12,213,257 | ) | 181,308,762 | |||||||||||||
Operating income | 4,356,909 | 54,481,934 | 8,928,951 | — | 67,767,794 | ||||||||||||||
Interest expense | (1,434,310 | ) | (18,753,280 | ) | (2,417,410 | ) | — | (22,605,000 | ) | ||||||||||
Equity in net income of consolidated affiliates | 38,056,123 | — | — | (38,056,123 | ) | — | |||||||||||||
Net income | $ | 40,978,722 | $ | 35,728,654 | $ | 6,511,541 | $ | (38,056,123 | ) | $ | 45,162,794 | ||||||||
Amounts Attributable to Noncontrolling Interests | |||||||||||||||||||
Net Income | $ | 40,978,722 | $ | 35,728,654 | $ | 6,511,541 | $ | (38,056,123 | ) | $ | 45,162,794 | ||||||||
Less net income attributable to noncontrolling interests | — | 2,728,171 | 1,455,901 | — | 4,184,072 | ||||||||||||||
Net income attributable to Reliant Hospital Partners, LLC | $ | 40,978,722 | $ | 33,000,483 | $ | 5,055,640 | $ | (38,056,123 | ) | $ | 40,978,722 | ||||||||
24
Reliant Hospital Partners, LLC
Notes to Consolidated Financial Statements
December 31, 2014
Condensed Consolidating Statement of Cash Flows | |||||||||||||||||||
For the Year Ended December 31, 2014 | |||||||||||||||||||
Parent | Guarantor Subsidiaries | Nonguarantor Subsidiary | Eliminating Entries | Consolidated | |||||||||||||||
Operating activities | |||||||||||||||||||
Net income | $ | 40,978,722 | $ | 35,728,654 | $ | 6,511,541 | $ | (38,056,123 | ) | $ | 45,162,794 | ||||||||
Items not requiring cash | |||||||||||||||||||
Depreciation and amortization of property and equipment | 55,585 | 11,154,197 | 1,371,816 | — | 12,581,598 | ||||||||||||||
Amortization of intangible assets | 230,575 | 254,000 | — | — | 484,575 | ||||||||||||||
Amortization of deferred financing costs | 104,085 | 1,560,331 | 83,254 | — | 1,747,670 | ||||||||||||||
Provision for doubtful accounts | — | 3,362,384 | 75,179 | — | 3,437,563 | ||||||||||||||
Distributions from subsidiaries | 111,188,584 | — | — | (111,188,584 | ) | — | |||||||||||||
Unit-based compensation | 350,927 | — | — | — | 350,927 | ||||||||||||||
Equity in net income of consolidated affiliates | (38,056,123 | ) | — | — | 38,056,123 | — | |||||||||||||
Changes in | |||||||||||||||||||
Patient accounts receivable | — | (20,219,909 | ) | 70,045 | — | (20,149,864 | ) | ||||||||||||
Estimated amounts due from third-party payers | — | 1,244,783 | 180,439 | — | 1,425,222 | ||||||||||||||
Inventory, prepaid expenses and other | 307,928 | (385,737 | ) | 13,911 | (1,047,670 | ) | (1,111,568 | ) | |||||||||||
Accounts payable | (438,771 | ) | 11,691 | (1,735,307 | ) | — | (2,162,387 | ) | |||||||||||
Accrued expenses and other | (1,898,464 | ) | 1,655,845 | (581,204 | ) | 1,047,670 | 223,847 | ||||||||||||
Net cash provided by operating activities | 112,823,048 | 34,366,239 | 5,989,674 | (111,188,584 | ) | 41,990,377 | |||||||||||||
Investing activities | |||||||||||||||||||
Purchase of property and equipment | (45,937 | ) | (1,144,347 | ) | (38,706 | ) | — | (1,228,990 | ) | ||||||||||
Net cash used in investing activities | (45,937 | ) | (1,144,347 | ) | (38,706 | ) | — | (1,228,990 | ) | ||||||||||
Financing activities | |||||||||||||||||||
Distributions to members | (127,824,491 | ) | (4,192,866 | ) | (3,239,633 | ) | — | (135,256,990 | ) | ||||||||||
Reliant Hospital Partners, LLC purchase of noncontrolling interests and other redemption of interests | (738,863 | ) | (455,514 | ) | — | — | (1,194,377 | ) | |||||||||||
Proceeds from issuance of long-term debt | 124,667,621 | — | — | — | 124,667,621 | ||||||||||||||
Payment of deferred financing costs | (3,533,321 | ) | — | — | — | (3,533,321 | ) | ||||||||||||
Payments on line of credit | (11,000,000 | ) | — | — | — | (11,000,000 | ) | ||||||||||||
Payments on long-term debt | (15,993,538 | ) | — | — | — | (15,993,538 | ) | ||||||||||||
Payments on capital lease obligations | — | (2,166,389 | ) | (337,803 | ) | — | (2,504,192 | ) | |||||||||||
Distributions to Parent | — | (99,928,346 | ) | (11,260,238 | ) | 111,188,584 | — | ||||||||||||
Change in intercompany advances | (77,134,273 | ) | 71,775,511 | 5,358,762 | — | — | |||||||||||||
Net cash used in financing activities | (111,556,865 | ) | (34,967,604 | ) | (9,478,912 | ) | 111,188,584 | (44,814,797 | ) | ||||||||||
Increase (Decrease) in Cash | 1,220,246 | (1,745,712 | ) | (3,527,944 | ) | — | (4,053,410 | ) | |||||||||||
Cash, Beginning of Year | 2,593,410 | 24,726,109 | 6,048,774 | — | 33,368,293 | ||||||||||||||
Cash, End of Year | $ | 3,813,656 | $ | 22,980,397 | $ | 2,520,830 | $ | — | $ | 29,314,883 | |||||||||
Supplemental Disclosures of Noncash Investing Activities | |||||||||||||||||||
Payables incurred for property and equipment | $ | — | $ | 29,028 | $ | — | $ | — | $ | 29,028 | |||||||||
25
Exhibit 99.2
Reliant Hospital Partners, LLC
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
September 30, 2015
Reliant Hospital Partners, LLC
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
September 30, 2015
Contents
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) | ||
Balance Sheet | 1 | |
Statement of Operations | 3 | |
Statement of Members’ Deficit | 4 | |
Statement of Cash Flows | 5 | |
Notes to Consolidated Financial Statements | 6 | |
Reliant Hospital Partners, LLC
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
September 30, 2015 | December 31, 2014 | ||||||
ASSETS | |||||||
Currents assets | |||||||
Cash | $ | 45,006,669 | $ | 29,314,883 | |||
Patient accounts receivable, net of allowance; 2015 - $3,628,029 and 2014 - $3,755,046 | 27,574,945 | 29,985,411 | |||||
Estimated amounts due from third-party payers | 23,318 | 972,145 | |||||
Prepaid expenses | 8,935,451 | 3,715,579 | |||||
Supply inventory and other | 1,044,263 | 1,036,469 | |||||
Total current assets | 82,584,646 | 65,024,487 | |||||
Property and Equipment, At cost | |||||||
Buildings and land recorded under capital leases | 194,142,528 | 194,142,528 | |||||
Facility equipment and furniture | 25,232,837 | 22,609,351 | |||||
Construction in progress | 135,645 | 39,994 | |||||
219,511,010 | 216,791,873 | ||||||
Less accumulated depreciation and amortization | 47,582,990 | 38,639,126 | |||||
171,928,020 | 178,152,747 | ||||||
Other Assets | |||||||
Deferred financing costs, net | 2,826,658 | 3,356,709 | |||||
Goodwill | 60,223,270 | 60,223,270 | |||||
Intangible assets, net | 6,703,569 | 7,067,000 | |||||
Due from affiliates | 868,003 | 868,003 | |||||
Other long-term assets | 995,075 | 1,078,096 | |||||
71,616,575 | 72,593,078 | ||||||
Total assets | $ | 326,129,241 | $ | 315,770,312 | |||
(Continued)
1.
Reliant Hospital Partners, LLC
CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)
(UNAUDITED)
September 30, 2015 | December 31, 2014 | ||||||
Liabilities And Members’ Deficit | |||||||
Current liabilities | |||||||
Current maturities of long-term debt | $ | 3,862,500 | $ | 3,862,500 | |||
Current maturities of capital lease obligations | 2,532,378 | 2,363,175 | |||||
Accounts payable | 1,885,697 | 2,401,627 | |||||
Accrued bonuses | 26,680 | 1,298,316 | |||||
Accrued benefits | 3,458,540 | 2,985,431 | |||||
Accrued property taxes | 2,438,170 | 3,213,956 | |||||
Other accrued expenses | 6,218,799 | 4,962,167 | |||||
Estimated amounts due to third-party payors | 1,369,718 | 979,017 | |||||
Total current liabilities | 21,792,482 | 22,066,189 | |||||
Long-term Debt, Less Current Maturities | 147,740,625 | 150,637,500 | |||||
Capital Lease Obligations, Less Current Maturities | 184,143,306 | 186,238,796 | |||||
Other Long-term Liabilities | 7,413,710 | 6,981,679 | |||||
361,090,123 | 365,924,164 | ||||||
Commitments and Contingencies | |||||||
Members’ Deficit | |||||||
Reliant Hospital Partners, LLC’s deficit | (38,931,093 | ) | (53,416,858 | ) | |||
Noncontrolling interests | 3,970,211 | 3,263,006 | |||||
Total members’ deficit | (34,960,882 | ) | (50,153,852 | ) | |||
Total liabilities and members’ deficit | $ | 326,129,241 | $ | 315,770,312 | |||
See accompanying notes to condensed consolidated financial statements.
2.
Reliant Hospital Partners, LLC
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 2015 AND 2014
(UNAUDITED)
2015 | 2014 | ||||||
Revenue | |||||||
Net patient service revenue | $ | 193,257,183 | $ | 182,498,952 | |||
Other | 1,176,148 | 1,294,670 | |||||
Total revenue | 194,433,331 | 183,793,622 | |||||
Expenses | |||||||
Salaries, wages, and benefits | 75,380,870 | 83,078,351 | |||||
Purchased services and professional fees | 15,594,872 | 11,781,746 | |||||
Other operating expenses | 19,916,774 | 20,932,357 | |||||
Rent expense | 8,860,538 | 8,933,623 | |||||
Depreciation and amortization | 9,318,562 | 9,774,290 | |||||
Fees to affiliates | 750,000 | 750,000 | |||||
Provision for doubtful accounts | 1,854,744 | 2,426,105 | |||||
Total expenses | 131,676,360 | 137,676,472 | |||||
Operating income | 62,756,971 | 46,117,150 | |||||
Interest expense | (19,229,338 | ) | (16,094,804 | ) | |||
Net income | $ | 43,527,633 | $ | 30,022,346 | |||
Amounts Attributable to Noncontrolling Interests | |||||||
Net income | $ | 43,527,633 | $ | 30,022,346 | |||
Less net income attributable to noncontrolling interests | 4,420,409 | 2,970,239 | |||||
Net income attributable to Reliant Hospital Partners, LLC | $ | 39,107,224 | $ | 27,052,107 | |||
See accompanying notes to condensed consolidated financial statements.
3.
Reliant Hospital Partners, LLC
CONDENSED CONSOLIDATED STATEMENTS OF MEMBERS' (DEFICIT) EQUITY
NINE MONTHS ENDED SEPTEMBER 30, 2015 AND 2014
(UNAUDITED)
Reliant Hospital Partners, LLC | Noncontrolling Interests | Total Members’ Deficit | |||||||||
Balance, January 1, 2015 | $ | (53,416,858 | ) | $ | 3,263,006 | $ | (50,153,852 | ) | |||
Unit-based compensation | 237,109 | — | 237,109 | ||||||||
Member distributions | (24,858,568 | ) | (2,608,920 | ) | (27,467,488 | ) | |||||
Reliant Hospital Partners, LLC purchase of noncontrolling interests and other redemption of interests | — | (1,104,284 | ) | (1,104,284 | ) | ||||||
Net income | 39,107,224 | 4,420,409 | 43,527,633 | ||||||||
Balance, September 30, 2015 | $ | (38,931,093 | ) | $ | 3,970,211 | $ | (34,960,882 | ) | |||
Reliant Hospital Partners, LLC | Noncontrolling Interests | Total Members’ Equity | |||||||||
Balance, January 1, 2014 | $ | 33,807,301 | $ | 6,976,493 | $ | 40,783,794 | |||||
Unit-based compensation | 263,195 | — | 263,195 | ||||||||
Member distributions | (33,917,906 | ) | (3,269,218 | ) | (37,187,124 | ) | |||||
Reliant Hospital Partners, LLC purchase of noncontrolling interests and other redemption of interests | (729,317 | ) | (474,605 | ) | (1,203,922 | ) | |||||
Net income | 27,052,107 | 2,970,239 | 30,022,346 | ||||||||
Balance, September 30, 2014 | $ | 26,475,380 | $ | 6,202,909 | $ | 32,678,289 | |||||
See accompanying notes to condensed consolidated financial statements.
4.
Reliant Hospital Partners, LLC
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 2015 AND 2014
(UNAUDITED)
2015 | 2014 | ||||||
Operating activities | |||||||
Net income | $ | 43,527,633 | $ | 30,022,346 | |||
Items not requiring cash | |||||||
Depreciation and amortization of property and equipment | 8,955,131 | 9,410,859 | |||||
Amortization of intangible assets | 363,431 | 363,431 | |||||
Amortization of deferred financing costs | 530,051 | 1,571,058 | |||||
Provision for doubtful accounts | 1,854,744 | 2,426,105 | |||||
Unit-based compensation | 237,109 | 263,195 | |||||
Changes in | |||||||
Patient accounts receivable | 555,722 | (16,234,203 | ) | ||||
Estimated amounts due from third-party payers | 1,339,528 | 1,748,220 | |||||
Inventory, prepaid expenses and other | (5,144,644 | ) | (256,683 | ) | |||
Accounts payable | (515,930 | ) | (1,954,203 | ) | |||
Accrued expenses and other | 120,146 | 2,113,985 | |||||
Net cash provided by operating activities | 51,822,921 | 29,474,110 | |||||
Investing activities | |||||||
Purchase of property and equipment | (2,736,201 | ) | (913,916 | ) | |||
Net cash used in investing activities | (2,736,201 | ) | (913,916 | ) | |||
Financing activities | |||||||
Distributions to members | (27,467,488 | ) | (37,187,124 | ) | |||
Reliant Hospital Partners, LLC purchase of noncontrolling interests and other redemption of interests | (1,104,284 | ) | (1,203,922 | ) | |||
Proceeds from issuance of long-term debt | — | 124,667,621 | |||||
Payment of deferred financing costs | — | (3,449,024 | ) | ||||
Payments on line of credit | — | (11,000,000 | ) | ||||
Payments on long-term debt | (2,896,875 | ) | (15,167,621 | ) | |||
Payments on capital lease obligations | (1,926,287 | ) | (1,828,422 | ) | |||
Net cash (used in) provided by financing activities | (33,394,934 | ) | 54,831,508 | ||||
Increase in Cash | 15,691,786 | 83,391,702 | |||||
Cash, Beginning of Period | 29,314,883 | 33,368,293 | |||||
Cash, End of Period | $ | 45,006,669 | $ | 116,759,995 | |||
Supplemental Cash Flows Information | |||||||
Interest paid | $ | 18,731,007 | $ | 14,711,319 | |||
Supplemental Disclosures of Noncash Investing Activities | |||||||
Payables incurred for property and equipment | $ | 34,826 | $ | 219,192 | |||
See accompanying notes to condensed consolidated financial statements.
5.
Reliant Hospital Partners, LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 1: | Nature of Operations and Summary of Significant Accounting Policies |
Nature of Operations and Principles of Consolidation
Reliant Hospital Partners, LLC (RHP) is a Texas limited liability company. RHP and its subsidiaries (Company) operate inpatient rehabilitation hospitals providing physical, occupational and speech therapy services on an inpatient and outpatient basis at eight hospitals in Texas, two hospitals in Massachusetts and one hospital in Ohio. The condensed consolidated financial statements include the accounts of RHP and its subsidiaries. All significant intercompany transactions and balances have been eliminated.
The Company operates seven of its hospitals through multiple tier partnership arrangements in which the hospital operating entity is in a separate partnership and whose owners consist of physician limited partners with RHP controlling the general partnership of each entity and varying amounts of limited partner interests. The term of each partnership is 50 years, commencing on various dates. The partnership agreements contain provisions, which limit the sale, assignment or transfer of a partner’s interest in the partnerships.
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements of RHP should be read in conjunction with the consolidated financial statements and accompanying notes of RHP’s consolidated financial statements as of and for the year ended December 31, 2014. The unaudited condensed consolidated financial statements have been prepared consistent with the rules and regulations of the United States Securities and Exchange Commission applicable to interim financial information. Certain information and note disclosures included in financial statements prepared in accordance with generally accepted accounting principles in the United States of America have been omitted in these interim statements, as allowed by such SEC rules and regulations. The condensed consolidated balance sheet as of December 31, 2014 has been derived from audited financial statements. However, we believe the disclosures are adequate to make the information presented not misleading.
The unaudited results of operations for the interim periods shown in these financial statements are not necessarily indicative of operating results for the entire year. In our opinion, the accompanying condensed consolidated financial statements recognize all adjustments of a normal recurring nature considered necessary to fairly state the financial position, results of operations, and cash flows for each interim period presented.
Net Patient Service Revenue
The Company has agreements with third-party payers that provide for payments to the Company at amounts different from its established rates. Net patient service revenue is reported at the estimated net realizable amounts from patients, third-party payers and others for services rendered and includes estimated retroactive revenue adjustments. Retroactive adjustments are considered in the recognition of revenue on an estimated basis in the period the related services are rendered and such estimated amounts are revised in future periods as adjustments become known.
6.
Reliant Hospital Partners, LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Income Taxes
The Company is not directly subject to income taxes under the provisions of the Internal Revenue Code and applicable state laws. Therefore, taxable income or loss is reported to the individual members for inclusion in their respective tax returns and no provision for federal income taxes are included in the accompanying condensed consolidated statements of operations.
The Company is subject to state income taxes, including the Texas margin tax. These taxes are not significant for the nine months ended September 30, 2015 and 2014.
Note 2: | Net Patient Service Revenue |
Revenues consist primarily of net patient service revenue that is recorded based on established billing rates less contractual adjustments.
Inpatient and outpatient rehabilitation services rendered to Medicare and Medicaid program beneficiaries are paid at prospectively determined rates. These rates vary according to a patient classification system that is based on clinical and diagnostic factors. The Company is reimbursed for certain services at tentative rates with final settlement determined after submission of annual cost reports and audits thereof by the Medicare and Medicaid administrative contractors.
Approximately 75% of net patient service revenue is from participation in the Medicare program during the nine months ended September 30, 2015 and 2014. Net patient service revenue from participation in the Medicaid program has not been a significant source of revenue for the Company.
Laws and regulations governing the Medicare and Medicaid programs are complex and subject to interpretation and change. As a result, it is reasonably possible that recorded estimates will change materially in the near term.
The Company has also entered into payment agreements with certain commercial insurance carriers, health maintenance organizations and preferred provider organizations. The basis for payment to the Company under these agreements includes prospectively determined rates per discharge, discounts from established charges and prospectively determined daily rates.
Note 3: | Concentration of Credit Risk |
The Company grants credit without collateral to its patients, most of who reside in areas near the Company’s hospitals and are insured under third-party payer agreements. Substantially all of the Company’s net receivables are due from third-party payers. The mix of net receivables from third-party payers at September 30, 2015 is:
Medicare | 76 | % |
Medicaid | 5 | % |
Blue Cross Blue Shield | 6 | % |
Other third-party payers | 13 | % |
100 | % | |
7.
Reliant Hospital Partners, LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 4: | Related Party Transactions |
RHP has an agreement with Nautic Partners VI, L.P. (Nautic), which is a member of RHP’s ultimate parent, Reliant Holding Company, LLC (Holding), to pay management fees of $500,000 annually, until actual annualized or budgeted EBITDA equals or exceeds $20,000,000, when the management fee increases to $900,000 annually. The Company’s EBITDA exceeded $20,000,000 during the nine months ended September 30, 2015 and 2014. Nautic received $675,000 of the management fee during the nine months ended September 30, 2015 and 2014 and $75,000 was paid to board consultants during the nine months ended September 30, 2015 and 2014. Additionally, the Company reimburses certain travel costs of Nautic. RHP paid travel costs totaling $21,363 and $25,111 to Nautic during the nine months ended September 30, 2015 and 2014, respectively, under this agreement.
Nautic is also named in the lawsuit discussed in Note 5. The Company and Nautic have agreed to share in certain legal costs related to the lawsuit. Based on the allocation proposed by Nautic’s insurer, the Company has paid and accrued obligations to various firms that include amounts to be reimbursed by Nautic. At September 30, 2015 and December 31, 2014, approximately $868,000 is recorded as a receivable from Nautic included in due from affiliates in the accompanying consolidated balance sheet and as an offset to legal expense.
Note 5: | Litigation |
A lawsuit has been brought against RHP and other parties in Dallas County, Texas, District Court. The plaintiff alleges a number of causes of actions and seeks, among other things, monetary damages and an injunction prohibiting RHP from pursuing any expansion of services in certain markets. RHP has denied any wrongdoing and is defending the case vigorously. On November 18, 2011, the court awarded monetary sanctions against certain former executives of RHP. The Court has not awarded any sanctions against RHP. No potential range of loss, if any, can be estimated. Accordingly, an estimated liability has not been recorded in the accompanying condensed consolidated financial statements. A portion of the Company’s legal expenses were recoverable based on the Company’s insurance policies in effect. As of September 30, 2015, any additional legal expenses or settlements will not be recovered as the maximum insurance payment was fully recovered.
In the normal course of business, the Company is, from time to time, subject to allegations that may or do result in litigation. Some of these allegations are in areas not covered by commercial insurance; for example, allegations regarding employment practices or performance of contracts. The Company evaluates such allegations by conducting investigations to determine the validity of each potential claim. Based upon the advice of counsel, management records an estimate of the amount of ultimate expected loss, if any, for each of these matters. No provisions for potential losses were accrued at September 30, 2015. Events could occur that would cause the estimate of ultimate loss to differ materially in the near term.
8.
Reliant Hospital Partners, LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 6: | Subsequent Event |
On October 1, 2015, HealthSouth Corporation, a Delaware corporation, and it’s newly formed 100%-owned subsidiary, HealthSouth Acquisition Holdings, LLC, a Delaware limited liability company, completed its previously announced acquisition of the operations of the Company and affiliated entities. At closing, one Company entity had a remaining minority limited partner interest of 0.5%. The cash purchase price was reduced by the estimated fair value of this interest. The total consideration delivered at closing was approximately $730 million in cash, which amount includes payment of outstanding borrowings, transaction expenses, and an escrow reserve and is subject to working capital and other adjustments.
Note 7: | Condensed Consolidating Financial Information |
Due to the above acquisition and the requirement under HealthSouth's credit agreement that certain wholly-owned subsidiaries guarantee its debt, the accompanying condensed consolidating financial information for the Company has been prepared and presented pursuant to SEC Regulation S-X, Rule 3-10, “Financial Statements of Guarantors and Issuers of Guaranteed Securities Registered or Being Registered.” The following tables present the condensed consolidating financial information for RHP, which was not included in the acquisition and is therefore not a guarantor nor an issuer of the debt that has been issued by HealthSouth Corporation (the “Parent”), the subsidiaries of RHP that are now 100% owned by HealthSouth Corporation and are guarantors (the “Guarantor Subsidiaries”), and the subsidiary of RHP that had a remaining minority limited partner interest after the acquisition and is a nonguarantor (the “Nonguarantor Subsidiary”), together with elimination adjustments, as of and for the periods indicated. All guarantees of the Guarantor Subsidiaries are full and unconditional and joint and several, subject to certain customary conditions for release.
Periodically, certain subsidiaries of RHP make distributions of available cash to RHP. When made, these distributions impact the Investments in consolidated affiliates and Reliant Hospital Partners, LLC's deficit line items in the accompanying condensed consolidating balance sheet but have no impact on the consolidated financial statements of RHP. RHP’s long-term debt was not assumed by HealthSouth Corporation in the acquisition discussed above and was paid off with proceeds from the transaction. In addition, for the Guarantor Subsidiaries presented in the accompanying condensed consolidating financial information, all of the noncontrolling interests were subsequently acquired by HealthSouth Corporation.
9.
Reliant Hospital Partners, LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
CONDENSED CONSOLIDATED BALANCE SHEETS | |||||||||||||||||||
As of September 30, 2015 | |||||||||||||||||||
Parent | Guarantor Subsidiaries | Nonguarantor Subsidiary | Eliminating Entries | Consolidated | |||||||||||||||
Assets | |||||||||||||||||||
Currents assets | |||||||||||||||||||
Cash | $ | 2,150,253 | $ | 36,131,486 | $ | 6,724,930 | $ | — | $ | 45,006,669 | |||||||||
Patient accounts receivable, net | — | 24,554,229 | 3,020,716 | — | 27,574,945 | ||||||||||||||
Estimated amounts due from third-party payers | — | 23,318 | — | — | 23,318 | ||||||||||||||
Prepaid expenses | 5,420,909 | 3,279,761 | 234,781 | — | 8,935,451 | ||||||||||||||
Supply inventory and other | 100,688 | 913,703 | 86,699 | (56,827 | ) | 1,044,263 | |||||||||||||
Total current assets | 7,671,850 | 64,902,497 | 10,067,126 | (56,827 | ) | 82,584,646 | |||||||||||||
Property and Equipment, At cost | |||||||||||||||||||
Buildings and land recorded under capital leases | — | 168,142,528 | 26,000,000 | — | 194,142,528 | ||||||||||||||
Facility equipment and furniture | 349,568 | 23,250,503 | 1,632,766 | — | 25,232,837 | ||||||||||||||
Construction in progress | — | 135,645 | — | — | 135,645 | ||||||||||||||
349,568 | 191,528,676 | 27,632,766 | — | 219,511,010 | |||||||||||||||
Less accumulated depreciation and amortization | 212,205 | 41,258,248 | 6,112,537 | — | 47,582,990 | ||||||||||||||
137,363 | 150,270,428 | 21,520,229 | — | 171,928,020 | |||||||||||||||
Other Assets | |||||||||||||||||||
Deferred financing costs, net | 436,545 | 2,197,123 | 192,990 | — | 2,826,658 | ||||||||||||||
Goodwill | — | 46,336,141 | 13,887,129 | — | 60,223,270 | ||||||||||||||
Intangible assets, net | 3,568,069 | 3,135,500 | — | — | 6,703,569 | ||||||||||||||
Due from affiliates | 868,003 | — | — | — | 868,003 | ||||||||||||||
Other long-term assets | 35,862 | 952,699 | 6,514 | — | 995,075 | ||||||||||||||
Investments in consolidated affiliates | (15,502,572 | ) | — | — | 15,502,572 | — | |||||||||||||
(10,594,093 | ) | 52,621,463 | 14,086,633 | 15,502,572 | 71,616,575 | ||||||||||||||
Total assets | $ | (2,784,880 | ) | $ | 267,794,388 | $ | 45,673,988 | $ | 15,445,745 | $ | 326,129,241 | ||||||||
10.
Reliant Hospital Partners, LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED) | |||||||||||||||||||
As of September 30, 2015 | |||||||||||||||||||
Parent | Guarantor Subsidiaries | Nonguarantor Subsidiary | Eliminating Entries | Consolidated | |||||||||||||||
Liabilities And Members’ Deficit | |||||||||||||||||||
Current liabilities | |||||||||||||||||||
Current maturities of long-term debt | $ | — | $ | 3,575,351 | $ | 287,149 | $ | — | $ | 3,862,500 | |||||||||
Current maturities of capital lease obligations | — | 2,125,027 | 407,351 | — | 2,532,378 | ||||||||||||||
Accounts payable | 224,294 | 1,546,691 | 114,712 | — | 1,885,697 | ||||||||||||||
Accrued bonuses | — | 26,680 | — | — | 26,680 | ||||||||||||||
Accrued benefits | 49,084 | 3,073,601 | 335,855 | — | 3,458,540 | ||||||||||||||
Accrued property taxes | 4,725 | 2,193,367 | 240,078 | — | 2,438,170 | ||||||||||||||
Other accrued expenses | 1,918,376 | 3,938,694 | 418,556 | (56,827 | ) | 6,218,799 | |||||||||||||
Estimated amounts due to third-party payers | — | 1,259,593 | 110,125 | — | 1,369,718 | ||||||||||||||
Total current liabilities | 2,196,479 | 17,739,004 | 1,913,826 | (56,827 | ) | 21,792,482 | |||||||||||||
Long-term Debt, Less Current Maturities | 33,878,900 | 106,564,235 | 7,297,490 | — | 147,740,625 | ||||||||||||||
Capital Lease Obligations, Less Current Maturities | — | 160,494,546 | 23,648,760 | — | 184,143,306 | ||||||||||||||
Other Long-term Liabilities | 70,834 | 7,342,876 | — | — | 7,413,710 | ||||||||||||||
36,146,213 | 292,140,661 | 32,860,076 | (56,827 | ) | 361,090,123 | ||||||||||||||
Commitments and Contingencies | |||||||||||||||||||
Members’ Deficit | |||||||||||||||||||
Reliant Hospital Partners, LLC’s deficit | (38,931,093 | ) | (26,681,107 | ) | 11,178,535 | 15,502,572 | (38,931,093 | ) | |||||||||||
Noncontrolling interests | — | 2,334,834 | 1,635,377 | — | 3,970,211 | ||||||||||||||
Total members’ deficit | (38,931,093 | ) | (24,346,273 | ) | 12,813,912 | 15,502,572 | (34,960,882 | ) | |||||||||||
Total liabilities and members’ deficit | $ | (2,784,880 | ) | $ | 267,794,388 | $ | 45,673,988 | $ | 15,445,745 | $ | 326,129,241 | ||||||||
11.
Reliant Hospital Partners, LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
CONDENSED CONSOLIDATED BALANCE SHEETS | |||||||||||||||||||
As of December 31, 2014 | |||||||||||||||||||
Parent | Guarantor Subsidiaries | Nonguarantor Subsidiary | Eliminating Entries | Consolidated | |||||||||||||||
Assets | |||||||||||||||||||
Currents assets | |||||||||||||||||||
Cash | $ | 3,813,656 | $ | 22,980,397 | $ | 2,520,830 | $ | — | $ | 29,314,883 | |||||||||
Patient accounts receivable, net | — | 27,618,126 | 2,367,285 | — | 29,985,411 | ||||||||||||||
Estimated amounts due from third-party payers | — | 794,022 | 178,123 | — | 972,145 | ||||||||||||||
Prepaid expenses | 270,282 | 3,200,716 | 244,581 | — | 3,715,579 | ||||||||||||||
Supply inventory and other | 1,552,962 | 985,447 | 49,685 | (1,551,625 | ) | 1,036,469 | |||||||||||||
Total current assets | 5,636,900 | 55,578,708 | 5,360,504 | (1,551,625 | ) | 65,024,487 | |||||||||||||
Property and Equipment, At cost | |||||||||||||||||||
Buildings and land recorded under capital leases | — | 168,142,528 | 26,000,000 | — | 194,142,528 | ||||||||||||||
Facility equipment and furniture | 347,284 | 20,634,008 | 1,628,059 | — | 22,609,351 | ||||||||||||||
Construction in progress | 10,269 | 29,725 | — | — | 39,994 | ||||||||||||||
357,553 | 188,806,261 | 27,628,059 | — | 216,791,873 | |||||||||||||||
Less accumulated depreciation and amortization | 171,894 | 33,341,527 | 5,125,705 | — | 38,639,126 | ||||||||||||||
185,659 | 155,464,734 | 22,502,354 | — | 178,152,747 | |||||||||||||||
Other Assets | |||||||||||||||||||
Deferred financing costs, net | 518,450 | 2,609,083 | 229,176 | — | 3,356,709 | ||||||||||||||
Goodwill | — | 46,336,141 | 13,887,129 | — | 60,223,270 | ||||||||||||||
Intangible assets, net | 3,741,000 | 3,326,000 | — | — | 7,067,000 | ||||||||||||||
Due from affiliates | 868,003 | — | — | — | 868,003 | ||||||||||||||
Other long-term assets | 87,290 | 979,492 | 11,314 | — | 1,078,096 | ||||||||||||||
Investments in consolidated affiliates | (28,541,184 | ) | — | — | 28,541,184 | — | |||||||||||||
(23,326,441 | ) | 53,250,716 | 14,127,619 | 28,541,184 | 72,593,078 | ||||||||||||||
Total assets | $ | (17,503,882 | ) | $ | 264,294,158 | $ | 41,990,477 | $ | 26,989,559 | $ | 315,770,312 | ||||||||
12.
Reliant Hospital Partners, LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED) | |||||||||||||||||||
As of December 31, 2014 | |||||||||||||||||||
Parent | Guarantor Subsidiaries | Nonguarantor Subsidiary | Eliminating Entries | Consolidated | |||||||||||||||
Liabilities And Members’ Deficit | |||||||||||||||||||
Current liabilities | |||||||||||||||||||
Current maturities of long-term debt | $ | — | $ | 3,575,351 | $ | 287,149 | $ | — | $ | 3,862,500 | |||||||||
Current maturities of capital lease obligations | — | 1,982,020 | 381,155 | — | 2,363,175 | ||||||||||||||
Accounts payable | 326,049 | 1,965,935 | 109,643 | — | 2,401,627 | ||||||||||||||
Accrued bonuses | — | 1,203,737 | 94,579 | — | 1,298,316 | ||||||||||||||
Accrued benefits | 425,256 | 2,252,386 | 307,789 | — | 2,985,431 | ||||||||||||||
Accrued property taxes | 5,995 | 2,886,351 | 321,610 | — | 3,213,956 | ||||||||||||||
Other accrued expenses | 987,434 | 5,078,966 | 447,392 | (1,551,625 | ) | 4,962,167 | |||||||||||||
Estimated amounts due to third-party payers | — | 979,017 | — | — | 979,017 | ||||||||||||||
Total current liabilities | 1,744,734 | 19,923,763 | 1,949,317 | (1,551,625 | ) | 22,066,189 | |||||||||||||
Long-term Debt, Less Current Maturities | 34,123,900 | 109,000,749 | 7,512,851 | — | 150,637,500 | ||||||||||||||
Capital Lease Obligations, Less Current Maturities | — | 162,254,308 | 23,984,488 | — | 186,238,796 | ||||||||||||||
Other Long-term Liabilities | 44,342 | 6,937,337 | — | — | 6,981,679 | ||||||||||||||
35,912,976 | 298,116,157 | 33,446,656 | (1,551,625 | ) | 365,924,164 | ||||||||||||||
Commitments and Contingencies | |||||||||||||||||||
Members’ Deficit | |||||||||||||||||||
Reliant Hospital Partners, LLC’s deficit | (53,416,858 | ) | (36,231,703 | ) | 7,690,519 | 28,541,184 | (53,416,858 | ) | |||||||||||
Noncontrolling interests | — | 2,409,704 | 853,302 | — | 3,263,006 | ||||||||||||||
Total members’ deficit | (53,416,858 | ) | (33,821,999 | ) | 8,543,821 | 28,541,184 | (50,153,852 | ) | |||||||||||
Total liabilities and members’ deficit | $ | (17,503,882 | ) | $ | 264,294,158 | $ | 41,990,477 | $ | 26,989,559 | $ | 315,770,312 | ||||||||
13.
Reliant Hospital Partners, LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | |||||||||||||||||||
For the Nine Months Ended September 30, 2015 | |||||||||||||||||||
Parent | Guarantor Subsidiaries | Nonguarantor Subsidiary | Eliminating Entries | Consolidated | |||||||||||||||
Revenue | |||||||||||||||||||
Net patient service revenue | $ | — | $ | 172,314,935 | $ | 20,942,248 | $ | — | $ | 193,257,183 | |||||||||
Management fee revenue | 9,570,463 | — | — | (9,570,463 | ) | — | |||||||||||||
Other | — | 1,156,997 | 19,151 | — | 1,176,148 | ||||||||||||||
Total revenue | 9,570,463 | 173,471,932 | 20,961,399 | (9,570,463 | ) | 194,433,331 | |||||||||||||
Expenses | |||||||||||||||||||
Salaries, wages, and benefits | 3,657,384 | 64,804,805 | 6,918,681 | — | 75,380,870 | ||||||||||||||
Purchased services and professional fees | 4,851,352 | 9,910,068 | 833,452 | — | 15,594,872 | ||||||||||||||
Other operating expenses | 255,813 | 17,975,040 | 1,685,921 | — | 19,916,774 | ||||||||||||||
Rent expense | 77,964 | 8,737,530 | 45,044 | — | 8,860,538 | ||||||||||||||
Depreciation and amortization | 213,242 | 8,118,488 | 986,832 | — | 9,318,562 | ||||||||||||||
Fees to affiliates | 750,000 | — | — | — | 750,000 | ||||||||||||||
Fees | — | 8,532,753 | 1,037,710 | (9,570,463 | ) | — | |||||||||||||
Provision for doubtful accounts | — | 1,666,702 | 188,042 | — | 1,854,744 | ||||||||||||||
Total expenses | 9,805,755 | 119,745,386 | 11,695,682 | (9,570,463 | ) | 131,676,360 | |||||||||||||
Operating income | (235,292 | ) | 53,726,546 | 9,265,717 | — | 62,756,971 | |||||||||||||
Interest expense | (1,595,453 | ) | (15,638,261 | ) | (1,995,624 | ) | — | (19,229,338 | ) | ||||||||||
Equity in net income of consolidated affiliates | 40,937,967 | — | — | (40,937,967 | ) | — | |||||||||||||
Net income | $ | 39,107,222 | $ | 38,088,285 | $ | 7,270,093 | $ | (40,937,967 | ) | $ | 43,527,633 | ||||||||
Amounts Attributable to Noncontrolling Interests | |||||||||||||||||||
Net income | $ | 39,107,222 | $ | 38,088,285 | $ | 7,270,093 | $ | (40,937,967 | ) | $ | 43,527,633 | ||||||||
Less net income attributable to noncontrolling interests | — | 2,802,829 | 1,617,580 | — | 4,420,409 | ||||||||||||||
Net income attributable to Reliant Hospital Partners, LLC | $ | 39,107,222 | $ | 35,285,456 | $ | 5,652,513 | $ | (40,937,967 | ) | $ | 39,107,224 | ||||||||
14.
Reliant Hospital Partners, LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | |||||||||||||||||||
For the Nine Months Ended September 30, 2014 | |||||||||||||||||||
Parent | Guarantor Subsidiaries | Nonguarantor Subsidiary | Eliminating Entries | Consolidated | |||||||||||||||
Revenue | |||||||||||||||||||
Net patient service revenue | $ | — | $ | 164,965,569 | $ | 17,533,383 | $ | — | $ | 182,498,952 | |||||||||
Management fee revenue | 9,004,923 | — | — | (9,004,923 | ) | — | |||||||||||||
Other | — | 1,278,382 | 15,928 | — | 1,294,670 | ||||||||||||||
Total revenue | 9,004,923 | 166,243,951 | 17,549,311 | (9,004,923 | ) | 183,793,622 | |||||||||||||
Expenses | |||||||||||||||||||
Salaries, wages, and benefits | 2,748,511 | 73,734,104 | 6,595,736 | — | 83,078,351 | ||||||||||||||
Purchased services and professional fees | 970,642 | 9,914,618 | 896,486 | — | 11,781,746 | ||||||||||||||
Other operating expenses | 192,611 | 18,998,016 | 1,741,370 | — | 20,932,357 | ||||||||||||||
Rent expense | 72,499 | 8,861,120 | 4 | — | 8,933,623 | ||||||||||||||
Depreciation and amortization | 214,651 | 8,525,606 | 1,034,033 | — | 9,774,290 | ||||||||||||||
Fees to affiliates | 750,000 | — | — | — | 750,000 | ||||||||||||||
Fees | — | 8,135,961 | 868,962 | (9,004,923 | ) | — | |||||||||||||
Provision for doubtful accounts | — | 2,271,966 | 154,139 | — | 2,426,105 | ||||||||||||||
Total expenses | 4,948,914 | 130,441,391 | 11,290,730 | (9,004,923 | ) | 137,676,472 | |||||||||||||
Operating income | 4,056,009 | 35,802,560 | 6,258,581 | — | 46,117,150 | ||||||||||||||
Interest expense | (2,155,816 | ) | (12,255,669 | ) | (1,683,319 | ) | — | (16,094,804 | ) | ||||||||||
Equity in net income of consolidated affiliates | 25,151,913 | — | — | (25,151,913 | ) | — | |||||||||||||
Net income | $ | 27,052,106 | $ | 23,546,891 | $ | 4,575,262 | $ | (25,151,913 | ) | $ | 30,022,346 | ||||||||
Amounts Attributable to Noncontrolling Interests | |||||||||||||||||||
Net income | $ | 27,052,106 | $ | 23,546,891 | $ | 4,575,262 | $ | (25,151,913 | ) | $ | 30,022,346 | ||||||||
Less net income attributable to noncontrolling interests | — | 1,947,025 | 1,023,214 | — | 2,970,239 | ||||||||||||||
Net income attributable to Reliant Hospital Partners, LLC | $ | 27,052,106 | $ | 21,599,866 | $ | 3,552,048 | $ | (25,151,913 | ) | $ | 27,052,107 | ||||||||
15.
Reliant Hospital Partners, LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||||||||||||||
For the Nine Months Ended September 30, 2015 | |||||||||||||||||||
Parent | Guarantor Subsidiaries | Nonguarantor Subsidiary | Eliminating Entries | Consolidated | |||||||||||||||
Operating activities | |||||||||||||||||||
Net income | $ | 39,107,222 | $ | 38,088,285 | $ | 7,270,093 | $ | (40,937,967 | ) | $ | 43,527,633 | ||||||||
Items not requiring cash | |||||||||||||||||||
Depreciation and amortization of property and equipment | 40,311 | 7,927,988 | 986,832 | — | 8,955,131 | ||||||||||||||
Amortization of intangible assets | 172,931 | 190,500 | — | — | 363,431 | ||||||||||||||
Amortization of deferred financing costs | 81,905 | 411,960 | 36,186 | — | 530,051 | ||||||||||||||
Provision for doubtful accounts | — | 1,666,702 | 188,042 | — | 1,854,744 | ||||||||||||||
Distributions from subsidiaries | 29,003,640 | — | — | (29,003,640 | ) | — | |||||||||||||
Unit-based compensation | 237,109 | — | — | — | 237,109 | ||||||||||||||
Equity in net income of consolidated affiliates | (40,937,967 | ) | — | — | 40,937,967 | — | |||||||||||||
Changes in | |||||||||||||||||||
Patient accounts receivable | — | 1,397,195 | (841,473 | ) | — | 555,722 | |||||||||||||
Estimated amounts due from third-party payers | — | 1,161,405 | 178,123 | — | 1,339,528 | ||||||||||||||
Inventory, prepaid expenses and other | (3,646,925 | ) | 19,493 | (22,414 | ) | (1,494,798 | ) | (5,144,644 | ) | ||||||||||
Accounts payable | (101,755 | ) | (419,244 | ) | 5,069 | — | (515,930 | ) | |||||||||||
Accrued expenses and other | 579,992 | (1,887,888 | ) | (66,756 | ) | 1,494,798 | 120,146 | ||||||||||||
Net cash provided by operating activities | 24,536,463 | 48,556,396 | 7,733,702 | (29,003,640 | ) | 51,822,921 | |||||||||||||
Investing activities | |||||||||||||||||||
Purchase of property and equipment | (2,284 | ) | (2,729,210 | ) | (4,707 | ) | — | (2,736,201 | ) | ||||||||||
Net cash used in investing activities | (2,284 | ) | (2,729,210 | ) | (4,707 | ) | — | (2,736,201 | ) | ||||||||||
Financing activities | |||||||||||||||||||
Distributions to members | (24,858,566 | ) | (1,943,317 | ) | (665,605 | ) | — | (27,467,488 | ) | ||||||||||
Reliant Hospital Partners, LLC purchase of noncontrolling interests and other redemption of interests | (1,104,284 | ) | — | — | — | (1,104,284 | ) | ||||||||||||
Payments on long-term debt | (2,896,875 | ) | — | — | — | (2,896,875 | ) | ||||||||||||
Payments on capital lease obligations | — | (1,616,755 | ) | (309,532 | ) | — | (1,926,287 | ) | |||||||||||
Distributions to Parent | — | (26,669,244 | ) | (2,334,396 | ) | 29,003,640 | — | ||||||||||||
Change in intercompany advances | 2,662,143 | (2,446,781 | ) | (215,362 | ) | — | — | ||||||||||||
Net cash used in financing activities | (26,197,582 | ) | (32,676,097 | ) | (3,524,895 | ) | 29,003,640 | (33,394,934 | ) | ||||||||||
(Decrease) Increase in Cash | (1,663,403 | ) | 13,151,089 | 4,204,100 | — | 15,691,786 | |||||||||||||
Cash, Beginning of Period | 3,813,656 | 22,980,397 | 2,520,830 | — | 29,314,883 | ||||||||||||||
Cash, End of Period | $ | 2,150,253 | $ | 36,131,486 | $ | 6,724,930 | $ | — | $ | 45,006,669 | |||||||||
Supplemental Disclosures of Noncash Investing Activities | |||||||||||||||||||
Payables incurred for property and equipment | $ | — | $ | 34,826 | $ | — | $ | — | $ | 34,826 | |||||||||
16.
Reliant Hospital Partners, LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||||||||||||||
For the Nine Months Ended September 30, 2014 | |||||||||||||||||||
Parent | Guarantor Subsidiaries | Nonguarantor Subsidiary | Eliminating Entries | Consolidated | |||||||||||||||
Operating activities | |||||||||||||||||||
Net income | $ | 27,052,106 | $ | 23,546,891 | $ | 4,575,262 | $ | (25,151,913 | ) | $ | 30,022,346 | ||||||||
Items not requiring cash | |||||||||||||||||||
Depreciation and amortization of property and equipment | 41,720 | 8,335,106 | 1,034,033 | — | 9,410,859 | ||||||||||||||
Amortization of intangible assets | 172,931 | 190,500 | — | — | 363,431 | ||||||||||||||
Amortization of deferred financing costs | 1,346,932 | 213,447 | 10,679 | — | 1,571,058 | ||||||||||||||
Provision for doubtful accounts | — | 2,271,966 | 154,139 | — | 2,426,105 | ||||||||||||||
Distributions from subsidiaries | 28,434,961 | — | — | (28,434,961 | ) | — | |||||||||||||
Unit-based compensation | 263,195 | — | — | — | 263,195 | ||||||||||||||
Equity in net income of consolidated affiliates | (25,151,913 | ) | — | — | 25,151,913 | — | |||||||||||||
Changes in | |||||||||||||||||||
Patient accounts receivable | — | (16,313,359 | ) | 79,156 | — | (16,234,203 | ) | ||||||||||||
Estimated amounts due from third-party payers | — | 1,637,098 | 111,122 | — | 1,748,220 | ||||||||||||||
Inventory, prepaid expenses and other | 770,630 | 281,628 | 16,301 | (1,325,242 | ) | (256,683 | ) | ||||||||||||
Accounts payable | (533,914 | ) | 261,618 | (1,681,907 | ) | — | (1,954,203 | ) | |||||||||||
Accrued expenses and other | (1,028,456 | ) | 2,342,440 | (525,241 | ) | 1,325,242 | 2,113,985 | ||||||||||||
Net cash provided by operating activities | 31,368,192 | 22,767,335 | 3,773,544 | (28,434,961 | ) | 29,474,110 | |||||||||||||
Investing activities | |||||||||||||||||||
Purchase of property and equipment | (31,040 | ) | (856,527 | ) | (26,349 | ) | — | (913,916 | ) | ||||||||||
Net cash used in investing activities | (31,040 | ) | (856,527 | ) | (26,349 | ) | — | (913,916 | ) | ||||||||||
Financing activities | |||||||||||||||||||
Distributions to members | (33,917,906 | ) | (1,719,131 | ) | (1,550,087 | ) | — | (37,187,124 | ) | ||||||||||
Reliant Hospital Partners, LLC purchase of noncontrolling interests and other redemption of interests | (738,863 | ) | (465,059 | ) | — | — | (1,203,922 | ) | |||||||||||
Proceeds from issuance of long-term debt | 124,667,621 | — | — | — | 124,667,621 | ||||||||||||||
Payment of deferred financing costs | (3,449,024 | ) | — | — | — | (3,449,024 | ) | ||||||||||||
Payments on line of credit | (11,000,000 | ) | — | — | — | (11,000,000 | ) | ||||||||||||
Payments on long-term debt | (15,167,621 | ) | — | — | — | (15,167,621 | ) | ||||||||||||
Payments on capital lease obligations | — | (1,581,008 | ) | (247,414 | ) | — | (1,828,422 | ) | |||||||||||
Distributions to Parent | — | (23,021,328 | ) | (5,413,633 | ) | 28,434,961 | — | ||||||||||||
Change in intercompany advances | 16,478,087 | (14,278,087 | ) | (2,200,000 | ) | — | — | ||||||||||||
Net cash provided by (used in) financing activities | 76,872,294 | (41,064,613 | ) | (9,411,134 | ) | 28,434,961 | 54,831,508 | ||||||||||||
Increase (Decrease) in Cash | 108,209,446 | (19,153,805 | ) | (5,663,939 | ) | — | 83,391,702 | ||||||||||||
Cash, Beginning of Period | 2,593,410 | 24,726,109 | 6,048,774 | — | 33,368,293 | ||||||||||||||
Cash, End of Period | $ | 110,802,856 | $ | 5,572,304 | $ | 384,835 | $ | — | $ | 116,759,995 | |||||||||
Supplemental Disclosures of Noncash Investing Activities | |||||||||||||||||||
Payables incurred for property and equipment | $ | — | $ | 219,192 | $ | — | $ | — | $ | 219,192 | |||||||||
17.
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