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, 2004
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)
Not Applicable
(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 29, 2004, the number of shares of common stock of Triad Hospitals, Inc. outstanding was 76,978,976.
Part I: Financial Information
Item 1: Financial Statements
TRIAD HOSPITALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the periods ended September 30, 2004 and 2003
Unaudited
(Dollars in millions, except per share amounts)
| For the three months ended |
For the nine months ended |
|||||||||||||||
| 2004 |
2003 |
2004 |
2003 |
|||||||||||||
| Revenues |
$ | 1,112.4 | $ | 925.3 | $ | 3,310.7 | $ | 2,717.8 | ||||||||
| Salaries and benefits |
447.5 | 375.1 | 1,333.4 | 1,111.9 | ||||||||||||
| Reimbursable expenses |
12.4 | 12.4 | 38.8 | 39.3 | ||||||||||||
| Supplies |
185.9 | 145.8 | 540.9 | 420.7 | ||||||||||||
| Other operating expenses |
209.9 | 175.3 | 612.9 | 509.9 | ||||||||||||
| Provision for doubtful accounts |
121.2 | 128.8 | 349.9 | 273.2 | ||||||||||||
| Depreciation |
45.6 | 39.4 | 132.9 | 117.5 | ||||||||||||
| Amortization |
1.6 | 1.4 | 4.7 | 4.4 | ||||||||||||
| Interest expense |
27.0 | 33.1 | 87.9 | 99.7 | ||||||||||||
| Interest income |
(0.6 | ) | (0.9 | ) | (1.7 | ) | (2.0 | ) | ||||||||
| Refinancing transaction costs |
— | — | 76.0 | — | ||||||||||||
| ESOP expense |
2.6 | 2.1 | 7.6 | 6.2 | ||||||||||||
| (Gain) loss on sales of assets |
0.1 | 0.2 | (0.2 | ) | (1.0 | ) | ||||||||||
| Total operating expenses |
1,053.2 | 912.7 | 3,183.1 | 2,579.8 | ||||||||||||
| Income from continuing operations before minority interests, equity in earnings and income tax provision |
59.2 | 12.6 | 127.6 | 138.0 | ||||||||||||
| Minority interests in (earnings) losses of consolidated entities |
1.2 | (1.9 | ) | (4.2 | ) | (5.9 | ) | |||||||||
| Equity in earnings of affiliates |
7.2 | 7.6 | 17.4 | 22.9 | ||||||||||||
| Income from continuing operations before income tax provision |
67.6 | 18.3 | 140.8 | 155.0 | ||||||||||||
| Income tax provision |
(24.2 | ) | (7.7 | ) | (53.5 | ) | (61.6 | ) | ||||||||
| Income from continuing operations |
43.4 | 10.6 | 87.3 | 93.4 | ||||||||||||
| Income (loss) from discontinued operations, net of tax |
5.8 | (0.2 | ) | 54.5 | 2.3 | |||||||||||
| Net income |
$ | 49.2 | $ | 10.4 | $ | 141.8 | $ | 95.7 | ||||||||
| Income per common share: |
||||||||||||||||
| Basic: |
||||||||||||||||
| Continuing operations |
$ | 0.57 | $ | 0.14 | $ | 1.16 | $ | 1.27 | ||||||||
| Discontinued operations |
$ | 0.08 | $ | — | $ | 0.73 | $ | 0.03 | ||||||||
| Net |
$ | 0.65 | $ | 0.14 | $ | 1.89 | $ | 1.30 | ||||||||
| Diluted: |
||||||||||||||||
| Continuing operations |
$ | 0.56 | $ | 0.14 | $ | 1.14 | $ | 1.24 | ||||||||
| Discontinued operations |
$ | 0.08 | $ | — | $ | 0.72 | $ | 0.03 | ||||||||
| Net |
$ | 0.64 | $ | 0.14 | $ | 1.86 | $ | 1.27 | ||||||||
See notes to the condensed consolidated financial statements.
2
TRIAD HOSPITALS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
Unaudited
(Dollars in millions)
| September 30, 2004 |
December 31, 2003 |
|||||||
| ASSETS | ||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 88.9 | $ | 14.5 | ||||
| Accounts receivable, less allowances for doubtful accounts of $329.5 at September 30, 2004 and $257.3 at December 31, 2003 |
618.0 | 606.0 | ||||||
| Inventories |
114.6 | 109.2 | ||||||
| Deferred income taxes |
65.9 | 36.5 | ||||||
| Prepaid expenses |
49.8 | 43.0 | ||||||
| Discontinued operations assets |
— | 152.9 | ||||||
| Other |
79.5 | 60.5 | ||||||
| 1,016.7 | 1,022.6 | |||||||
| Property and equipment, at cost: |
||||||||
| Land |
168.3 | 169.0 | ||||||
| Buildings and improvements |
1,445.1 | 1,404.6 | ||||||
| Equipment |
1,224.2 | 1,123.9 | ||||||
| Construction in progress |
293.4 | 144.7 | ||||||
| 3,131.0 | 2,842.2 | |||||||
| Accumulated depreciation |
(867.4 | ) | (747.2 | ) | ||||
| 2,263.6 | 2,095.0 | |||||||
| Goodwill |
1,252.3 | 1,231.4 | ||||||
| Intangible assets, net of accumulated amortization |
72.8 | 71.5 | ||||||
| Investment in and advances to affiliates |
200.3 | 191.1 | ||||||
| Other |
109.0 | 123.8 | ||||||
| Total assets |
$ | 4,914.7 | $ | 4,735.4 | ||||
| LIABILITIES AND EQUITY | ||||||||
| Current liabilities: |
||||||||
| Accounts payable |
$ | 134.2 | $ | 151.4 | ||||
| Accrued salaries |
124.0 | 121.5 | ||||||
| Current portion of long-term debt |
80.4 | 73.7 | ||||||
| Discontinued operations liabilities |
— | 17.9 | ||||||
| Other current liabilities |
178.7 | 145.6 | ||||||
| 517.3 | 510.1 | |||||||
| Long-term debt |
1,606.4 | 1,684.4 | ||||||
| Other liabilities |
129.6 | 118.1 | ||||||
| Deferred taxes |
216.5 | 174.7 | ||||||
| Minority interests in equity of consolidated entities |
185.6 | 171.8 | ||||||
| Stockholders’ equity: |
||||||||
| Common stock $0.01 par value: 120,000,000 shares authorized, 76,881,218 and 75,633,354 shares issued and outstanding at September 30, 2004 and December 31, 2003, respectively |
0.8 | 0.8 | ||||||
| Additional paid-in capital |
1,941.9 | 1,904.6 | ||||||
| Unearned ESOP compensation |
(14.7 | ) | (17.2 | ) | ||||
| Accumulated other comprehensive loss |
(0.7 | ) | (2.1 | ) | ||||
| Accumulated earnings |
332.0 | 190.2 | ||||||
| Total stockholders’ equity |
2,259.3 | 2,076.3 | ||||||
| Total liabilities and stockholders’ equity |
$ | 4,914.7 | $ | 4,735.4 | ||||
See notes to the condensed consolidated financial statements.
3
TRIAD HOSPITALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the periods ended September 30, 2004 and 2003
Unaudited
(Dollars in millions)
| For the nine months ended |
||||||||
| 2004 |
2003 |
|||||||
| Cash flows from operating activities: |
||||||||
| Net income |
$ | 141.8 | $ | 95.7 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
| Income from discontinued operations, net of tax |
(54.5 | ) | (2.3 | ) | ||||
| Provision for doubtful accounts |
349.9 | 273.2 | ||||||
| Depreciation and amortization |
137.6 | 121.9 | ||||||
| ESOP expense |
7.6 | 6.2 | ||||||
| Minority interests |
4.2 | 5.9 | ||||||
| Equity in earnings of affiliates |
(17.4 | ) | (22.9 | ) | ||||
| Gain on sales of assets |
(0.2 | ) | (1.0 | ) | ||||
| Deferred income tax provision (benefit) |
(7.0 | ) | 52.1 | |||||
| Non-cash interest expense |
5.5 | 6.0 | ||||||
| Refinancing transaction costs |
76.0 | — | ||||||
| Non-cash stock option expense |
0.9 | 0.3 | ||||||
| Increase (decrease) in cash from operating assets and liabilities: |
||||||||
| Accounts receivable |
(360.4 | ) | (286.0 | ) | ||||
| Inventories and other assets |
(27.5 | ) | (17.2 | ) | ||||
| Accounts payable and other current liabilities |
11.8 | 27.4 | ||||||
| Other |
13.4 | 33.6 | ||||||
| Net cash provided by operating activities |
281.7 | 292.9 | ||||||
| Cash flows from investing activities: |
||||||||
| Purchases of property and equipment |
(330.4 | ) | (182.9 | ) | ||||
| Distributions and advances from affiliates |
8.2 | 10.9 | ||||||
| Proceeds received on s | ||||||||