Get Started for Free Contexxia identifies hard-to-find pieces of information in SEC filings. No more highlighters, no more redlining, no more poring over huge documents. SYMBION INC/TN (1091312) 10-Q published on Aug 08, 2014 at 1:22 pm
Reporting Period: Jun 29, 2014
On June 13, 2014, Holdings entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Surgery Center Holdings, Inc. (“Buyer”), Buyer’s wholly-owned subsidiary, SCH Acquisition Corp. (“Merger Sub”), and, solely in its capacity as the Stockholders’ Representative under the Merger Agreement, Crestview Symbion Holdings, L.L.C., an affiliate of Crestview. Pursuant to the terms of the Merger Agreement, Merger Sub is to merge with and into Holdings, with Holdings being the surviving corporation in the merger (the “Merger”). At the closing of the Merger, each share of common stock of Holdings, other than those held by Holdings or by Buyer, Merger Sub or their subsidiaries and other than those shares with respect to which appraisal rights are properly exercised in accordance with the General Corporation Law of the State of Delaware, will be converted into the right to receive a cash payment per share equal to (x) $792.0 million, subject to certain adjustments for Holdings’ cash, debt, transaction expenses, working capital and other items at closing, plus the aggregate exercise price of all vested options, minus certain escrowed amounts relating to post-closing purchase price adjustment and indemnity obligations, divided by (y) the number of shares outstanding on a fully-diluted basis assuming full exercise of vested options and exercise of rights to receive shares upon the exchange of the 8.00% Senior PIK Exchangeable Notes due 2017 issued by Symbion (the “Merger Consideration”). In addition, each outstanding option to purchase shares of Holdings’ common stock will be cancelled, and the holders of vested options will be paid an amount equal to the excess, if any, of the Merger Consideration over the per-share exercise price of such vested options.
Buyer has obtained financing commitments for the transactions contemplated by the Merger Agreement, the aggregate proceeds of which are to be sufficient for Buyer to pay the aggregate Merger Consideration and all related fees and expenses. Consummation of the Merger is not subject to a financing condition, but it is subject to customary closing conditions including (i) the absence of a material adverse effect on Holdings, (ii) the receipt of certain state regulatory approvals and (iii) the expiration or termination of the required waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976. The parties anticipate that the transactions contemplated by the Merger Agreement will close near the end of the third quarter or early in the fourth quarter of 2014.
Payments under the Medicare program to ASCs are made under a system whereby the Secretary of the Department of Health and Human Services determines payment amounts prospectively for various categories of medical services performed in ASCs based upon the hospital outpatient prospective payment system (“OPPS”). On July 14, 2014, CMS published a proposed rule to update the Medicare program's payment policies and rates for ASCs for calendar year (“CY”) 2015. Among other things, the proposed rule applies a 1.2% increase to the ASC payment rate for CY 2015 for ASCs that successfully report the quality measures for the ASC Quality Reporting (“ASCQR”) Program and a 0.8% decrease for ASCs that do not. The increase is based on a proposed consumer price index for all urban consumers (CPI-U) update of 1.7%, which is reduced by a multi-factor productivity adjustment of 0.5%. In addition, among other things, the proposed rule also adds ten new procedures to the Medicare program’s list of ASC covered surgical procedures and adds one new quality measure to the ASCQR Program that ASCs will need to report in order to receive the full payment rate update for CY 2017 and subsequent years. CMS estimates that total Medicare payments to ASCs will increase by $243 million in CY 2015.
Our operating income margin for the three months ended June 30, 2014 increased to 15.7% from 10.0% during the three months ended June 30, 2013. During the three months ended June 30, 2014, we recorded $2.3 million of merger transaction costs related to the Merger. During the three months ended June 30, 2013, we recorded a loss of $7.7 million related to an asset sale at our surgical hospital in Austin, Texas. Excluding the impact of these items, our operating income margin was 17.3% for the three months ended June 30, 2014 and 15.8% for the three months ended June 30, 2013. This increase in the 2014 period from the 2013 period is primarily attributable to our surgical hospital in Lubbock, Texas, which we acquired in June 2012. We have made significant investments in this facility to implement new patient service lines. During 2013, these investments put pressure on our operating margins as they were not fully developed. For 2014, the new patient service lines are maturing and are positively impacting our operating margins.
You should consider the risks and uncertainties described under Item 1A of Part I of our Annual Report on Form 10-K for the fiscal year ended December 31, 2013, which we filed with the Securities and Exchange Commission on March 14, 2014, together with all other information contained or incorporated by reference in this Quarterly Report on Form 10-Q when evaluating our business and our prospects. Except as set forth below, there have been no material changes from the risk factors as previously disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2013. If any of the risks and uncertainties described in our Annual Report on Form 10-K or this Quarterly Report on Form 10-Q actually occurs, our business, financial condition, results of operations and our future growth prospects could be materially and adversely affected.