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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
 
FORM 10-Q
 
x    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended September 30, 2002
 
OR
 
¨    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from                      to                     
 
Commission file number 0-29816
 
 
Triad Hospitals, Inc.
(Exact name of registrant as specified in its charter)
 
Delaware
  
75-2816101
(State or other jurisdiction of incorporation or organization)
  
(I.R.S. Employer Identification No.)
5800 Tennyson Parkway Plano, Texas
  
75024
(Address of principal executive offices)
  
(Zip Code)
 
(214) 473-7000
(Registrant’s telephone number, including area code)
 
13455 Noel Road, Suite 2000
Dallas, Texas 75240
(Former name, former address and former fiscal year,
if changed since last report)
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days.
 
YES  x    NO  ¨
 
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act)
 
YES  x    NO  ¨
 
Indicate the number of shares outstanding of each of the issuer’s classes of common stock of the latest practical date.
 
As of October 31, 2002, the number of shares of common stock of Triad Hospitals, Inc. outstanding was 74,710,430.
 

 
Part I:    Financial Information
Item 1:    Financial Statements
 
TRIAD HOSPITALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the periods ended September 30, 2002 and 2001
Unaudited
(Dollars in millions, except per share amounts)
 
    
For the three
months ended
     
For the nine
months ended
  
    
2002
     
2001
     
2002
     
2001
  
Revenues
   
$
894.0
 
   
$
829.5
 
   
$
2,622.1
 
   
$
1,838.5
 
Salaries and benefits
   
 
380.2
 
   
 
353.7
 
   
 
1,097.3
 
   
 
775.7
 
Reimbursable expenses
   
 
13.8
 
   
 
15.7
 
   
 
45.6
 
   
 
26.3
 
Supplies
   
 
139.9
 
   
 
127.3
 
   
 
410.5
 
   
 
285.3
 
Other operating expenses
   
 
165.8
 
   
 
155.1
 
   
 
480.8
 
   
 
348.2
 
Provision for doubtful accounts
   
 
67.7
 
   
 
66.3
 
   
 
197.2
 
   
 
171.7
 
Depreciation
   
 
43.0
 
   
 
44.8
 
   
 
121.4
 
   
 
102.6
 
Amortization
   
 
1.3
 
   
 
10.5
 
   
 
4.6
 
   
 
19.8
 
Interest expense
   
 
34.5
 
   
 
39.9
 
   
 
102.6
 
   
 
89.8
 
Interest income
   
 
(0.5
)
   
 
(0.4
)
   
 
(1.3
)
   
 
(1.1
)
Litigation settlements
   
 
(5.9
)
   
 
—  
 
   
 
(10.4
)
   
 
—  
 
ESOP expense
   
 
3.0
 
   
 
2.5
 
   
 
8.3
 
   
 
6.9
 
Gain on sale of assets
   
 
(0.6
)
   
 
(0.7
)
   
 
(2.5
)
   
 
(1.1
)
    
  
  
  
Total operating expenses
   
 
842.2
 
   
 
814.7
 
   
 
2,454.1
 
   
 
1,824.1
 
    
  
  
  
Income from operations before minority interests, equity in earnings and income tax provision
   
 
51.8
 
   
 
14.8
 
   
 
168.0
 
   
 
14.4
 
Minority interests in earnings of consolidated entities
   
 
(3.9
)
   
 
(2.5
)
   
 
(11.0
)
   
 
(6.5
)
Equity in earnings of affiliates
   
 
6.9
 
   
 
4.7
 
   
 
18.6
 
   
 
8.1
 
    
  
  
  
Income from operations before income tax provision
   
 
54.8
 
   
 
17.0
 
   
 
175.6
 
   
 
16.0
 
Income tax provision
   
 
(22.2
)
   
 
(10.5
)
   
 
(69.8
)
   
 
(20.6
)
    
  
  
  
Income (loss) from operations
   
 
32.6
 
   
 
6.5
 
   
 
105.8
 
   
 
(4.6
)
Extraordinary loss on retirement of debt, net of income tax benefit of $1.5 million
   
 
—  
 
   
 
—  
 
   
 
—  
 
   
 
(2.4
)
    
  
  
  
Net income (loss)
   
$
32.6
 
   
$
6.5
 
   
$
105.8
 
   
$
(7.0
)
    
  
  
  
Income (loss) per common share:
                                    
Basic
                                    
Operations
   
$
0.45
 
   
$
0.09
 
   
$
1.48
 
   
$
(0.09
)
Extraordinary loss on retirement of debt
   
 
—  
 
   
 
—  
 
   
 
—  
 
   
 
(0.04
)
    
  
  
  
Net
   
$
0.45
 
   
$
0.09
 
   
$
1.48
 
   
$
(0.13
)
    
  
  
  
Diluted
                                    
Operations
   
$
0.43
 
   
$
0.09
 
   
$
1.41
 
   
$
(0.09
)
Extraordinary loss on retirement of debt
   
 
—  
 
   
 
—  
 
   
 
—  
 
   
 
(0.04
)
    
  
  
  
Net
   
$
0.43
 
   
$
0.09
 
   
$
1.41
 
   
$
(0.13
)
    
  
  
  
 
See notes to the condensed consolidated financial statements.

2

TRIAD HOSPITALS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
Unaudited
(Dollars in millions)
 
    
September 30, 2002
     
December 31, 2001
  
ASSETS
                  
Current assets:
                  
Cash and cash equivalents
   
$
51.9
 
   
$
16.3
 
Restricted cash
   
 
—  
 
   
 
5.7
 
Accounts receivable, less allowances for doubtful accounts of $181.0 at September 30, 2002 and $192.4 at December 31, 2001
   
 
483.2
 
   
 
446.6
 
Inventories
   
 
91.0
 
   
 
82.2
 
Deferred income taxes
   
 
98.8
 
   
 
103.1
 
Prepaid expenses
   
 
43.9
 
   
 
23.2
 
Other
   
 
76.6
 
   
 
70.2
 
    
  
    
 
845.4
 
   
 
747.3
 
Property and equipment, at cost:
                  
Land
   
 
165.5
 
   
 
126.4
 
Buildings and improvements
   
 
1,328.9
 
   
 
1,173.4
 
Equipment
   
 
1,106.1
 
   
 
998.1
 
Construction in progress
   
 
75.9
 
   
 
175.8
 
    
  
    
 
2,676.4
 
   
 
2,473.7
 
Accumulated depreciation
   
 
(753.3
)
   
 
(656.7
)
    
  
    
 
1,923.1
 
   
 
1,817.0
 
Goodwill
   
 
1,224.7
 
   
 
1,215.2
 
Intangible assets, net of accumulated amortization of $10.9 at September 30, 2002 and $7.1 at December 31, 2001
   
 
73.3
 
   
 
80.6
 
Investment in and advances to affiliates
   
 
186.5
 
   
 
189.4
 
Other
   
 
101.3
 
   
 
115.8
 
    
  
Total assets
   
$
4,354.3
 
   
$
4,165.3
 
    
  
LIABILITIES AND EQUITY
                  
Current liabilities:
                  
Accounts payable
   
$
116.5
 
   
$
122.4
 
Accrued salaries
   
 
94.6
 
   
 
80.0
 
Current portion of long-term debt
   
 
67.8
 
   
 
30.9
 
Other current liabilities
   
 
150.9
 
   
 
133.0
 
    
  
    
 
429.8
 
   
 
366.3
 
Long-term debt
   
 
1,640.2
 
   
 
1,742.9
 
Other liabilities
   
 
91.4
 
   
 
68.4
 
Deferred taxes
   
 
164.5
 
   
 
132.1
 
Minority interests in equity of consolidated entities
   
 
121.9
 
   
 
124.1
 
Stockholders’ equity:
                  
Common stock .01 par value: 120,000,000 shares authorized, 74,537,499 and 72,202,736 shares issued and outstanding at September 30, 2002 and December 31, 2001, respectively
   
 
0.7
 
   
 
0.7
 
Additional paid-in capital
   
 
1,872.1
 
   
 
1,810.2
 
Accumulated other comprehensive loss
   
 
(4.0
)
   
 
—  
 
Unearned ESOP compensation and stockholder notes receivable
   
 
(21.6
)
   
 
(32.9
)
Accumulated earnings (deficit)
   
 
59.3
 
   
 
(46.5
)
    
  
Total stockholders’ equity
   
 
1,906.5
 
   
 
1,731.5
 
    
  
Total liabilities and stockholders’ equity
   
$
4,354.3
 
   
$
4,165.3
 
    
  
 
See notes to the condensed consolidated financial statements.

3

 
TRIAD HOSPITALS, INC.