UNITED SURGICAL PARTNERS INTERNATIONAL INC - FORM 8-K - EX-99.1 - EXCERPT OF A CONFIDENTIAL OFFERING MEMORANDUM OF THE INITIAL ISSUER

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8-K - FORM 8-K - UNITED SURGICAL PARTNERS INTERNATIONAL INC	d316270d8k.htm
EX-99.3 - PRESS RELEASE ISSUED BY THE COMPANY ON MARCH 14, 2012 - UNITED SURGICAL PARTNERS INTERNATIONAL INC	d316270dex993.htm
EX-99.2 - PRESS RELEASE - UNITED SURGICAL PARTNERS INTERNATIONAL INC	d316270dex992.htm

Exhibit 99.1

The following unaudited summary pro forma statements of income data gives effect to the U.K. spin-out, as if it had occurred on January 1, 2009, 2010 and 2011. The following unaudited summary pro forma, as adjusted, statement of income data gives effect to the U.K. spin-out and the financing transactions as if they had occurred on January 1, 2011. The following unaudited summary pro forma balance sheet data as of December 31, 2011, gives effect to the U.K. spin-out as if it had occurred on such date. The following unaudited summary pro forma, as adjusted, balance sheet data as of December 31, 2011, gives effect to the U.K. spin-out and the financing transactions as if it had occurred on such date. The unaudited summary pro forma consolidated financial data is for illustrative purposes only. Such data does not purport to be indicative of the financial condition and the results of operations that would have been achieved had the events for which we are giving pro forma effect actually occurred on the dates referred to above or the financial condition and the results of operations that may be expected in the future.


	Unaudited Pro Forma Years Ended December 31,									Unaudited Pro Forma, As Adjusted, at December 31, 2011
	2009			2010			2011			Unaudited Pro Forma, As Adjusted, at December 31, 2011
	(Dollars in thousands)
Consolidated Pro Forma Statement of Income Data
Total revenues	$	488,378		$	473,949		$	499,178		$	499,178
Equity in earnings of unconsolidated affiliates		61,771			69,916			83,137			83,137
Operating expenses excluding depreciation and amortization		(347,541	)		(326,761	)		(327,479	)		(327,479	)
Depreciation and amortization		(24,432	)		(22,493	)		(21,177	)		(21,177	)

Operating income		178,176			194,611			233,659			233,659
Other income (expense):
Interest income		1,729			742			516			516
Interest expense		(67,770	)		(66,886	)		(63,538	)		(96,674	)
Other		373			708			(73	)		(73	)

Income from continuing operations before income taxes		112,508			129,175			170,564			137,428
Income tax (expense) benefit		5,455			(29,257	)		(39,918	)		(28,321	)

Income from continuing operations		117,963			99,918			130,646			109,107
Less: Net income attributable to noncontrolling interests		(65,313	)		(60,240	)		(69,779	)		(69,779	)

Income from continuing operations attributable to USPI’s common stockholder	$	52,650		$	39,678		$	60,867		$	39,328

Other Data:
EBITDA less noncontrolling interests¹	$	137,295		$	156,864		$	185,057		$	185,057
Adjusted EBITDA, excluding the pro forma effect of the recent and pending acquisitions¹		170,408			180,079			194,088			194,088
Adjusted EBITDA¹										$	209,973
Number of facilities operated as of end of period		165			185			200
Cash flows from operating activities	$	162,018		$	148,319		$	164,665


	Historical December 31,							Unaudited Pro Forma, December 31, 2011			Unaudited Pro Forma, As Adjusted December 31, 2011
	2009		2010		2011			Unaudited Pro Forma, December 31, 2011			Unaudited Pro Forma, As Adjusted December 31, 2011
	(Dollars in thousands)
Consolidated Balance Sheet Data:
Working capital (deficit)	$	(113,016)	$	(100,249)	$	(121,909	)	$	(73,186	)	$	(120,125	)
Cash and cash equivalents²		34,890		60,253		41,822			40,884			40,884
Total assets		2,325,392		2,372,739		2,393,498			2,170,157			2,143,252
Total debt		1,071,528		1,069,826		1,068,456			1,013,589			1,330,074
Noncontrolling interests—redeemable		63,865		81,668		106,668			105,847			105,847
Total equity		798,003		821,151		767,871			630,310			293,569

EBITDA is computed by adding operating income plus depreciation and amortization. EBITDA less noncontrolling interests is computed by subtracting net income attributable to noncontrolling interests from EBITDA to reflect that the Company does not wholly own each facility. Adjusted EBITDA, excluding recent and pending acquisitions and Adjusted EBITDA include further adjustment items set forth in the table below. We have included EBITDA and Adjusted EBITDA in this offering memorandum to provide investors with a supplemental measure of our operating performance and ability to service and incur debt. EBITDA and Adjusted EBITDA are not presentations made in accordance with GAAP. EBITDA and Adjusted EBITDA have important limitations as analytical tools, and you should not consider them in isolation, or as substitutes for analysis of our results as reported under GAAP. For example, neither EBITDA nor Adjusted EBITDA reflect (a) our cash expenditures, or future requirements for capital expenditures or contractual commitments; (b) changes in, or cash requirements for, our working capital needs; (c) the significant interest expense, or the cash requirements necessary to service interest or principal payments, on our debt; and (d) tax payments or distributions to our parent to make payments with respect to taxes attributable to us that represent a reduction in cash available to us. Because of these limitations, we primarily rely on our results as reported in accordance with GAAP and use EBITDA and Adjusted EBITDA only supplementally. In addition, because other companies may calculate EBITDA and Adjusted EBITDA differently than we do, EBITDA may not be, and Adjusted EBITDA as presented in this offering memorandum is not, comparable to similarly titled measures reported by other companies.

A reconciliation of operating income to EBITDA and to Adjusted EBITDA is included below:


	Unaudited Pro Forma Years Ended December 31,									Unaudited Pro Forma, As Adjusted Year Ended December 31, 2011
Pro Forma (includes U.S. only)	2009			2010			2011
	(Dollars in thousands)
Operating income	$	178,176		$	194,611		$	233,659		$	233,659
Depreciation and amortization		24,432			22,493			21,177			21,177

EBITDA		202,608			217,104			254,836			254,836
Net income attributable to noncontrolling interests		(65,313	)		(60,240	)		(69,779	)		(69,779	)

EBITDA less noncontrolling interests		137,295			156,864			185,057			185,057
Net (gain) loss on deconsolidations, disposals and impairments		29,162			6,378			(1,529	)		(1,529	)
Impairment of unconsolidated affiliate		—			3,676			—			—
De novo start-up losses^a		—			136			4,009			4,009
Acquisition costs^b		—			2,857			3,314			3,314
Expense related to prior acquisition^c		—			6,000			—			—
Equity compensation		1,951			2,168			1,237			1,237
Management fee^d		2,000			2,000			2,000			2,000

Adjusted EBITDA, excluding the pro forma effect of recent and pending acquisitions	$	170,408		$	180,079		$	194,088			194,088

Titan acquisition (14 facilities)^e											6,239

Acquisition of facility in Hackensack, New Jersey^f											3,549

Acquisition of facility in San Diego, California^g											599

Acquisition of facility in Midland, Texas^h											546

Acquisition of facility in Phoenix, Arizonaⁱ											518

Titan buy-up (one facility)^j											4,434

Adjusted EBITDA^k										$	209,973

Represents our share of operating losses incurred primarily by a hospital located in Phoenix, Arizona. The hospital opened in June 2010. We own 50% of the hospital and the remaining 50% is owned by a local not-for-profit hospital partner. This hospital has no physician ownership as it opened after the Patient Protection and Affordable Care Act was enacted on March 23, 2010, which disallowed physician ownership in this hospital.

Represents transaction expenses and related costs incurred related to our acquisitions of HealthMark Partners, Inc. in 2010 and Titan Health Corporation primarily in 2011.

Represents payment of fee related to the settlement of a dispute regarding an acquisition of a facility in 2003.

Represents annual management fees paid to Welsh Carson Anderson & Stowe.

Effective September 1, 2011, we acquired 100% of the equity interests in Titan Health Corporation, or Titan. We paid cash totaling $43.4 million, net of $5.0 million of cash acquired. Titan has an equity investment in 14 ambulatory surgery centers. In addition, we paid approximately $14.3 million in cash to physicians in order to obtain additional ownership in six of these centers. Adjusted EBITDA has been increased to reflect this acquisition as though it were effective January 1, 2011, by applying our ownership percentage and management contract earnings formula to the historical financial statements of the acquiree for the months of 2011 that preceded our acquisition.

Effective December 1, 2011, we paid cash of approximately $23.7 million to acquire a noncontrolling equity interest and right to manage a facility in Hackensack, New Jersey. Adjusted EBITDA has been increased to reflect this acquisition as though it were effective January 1, 2011, by applying our ownership percentage and management contract earnings formula to the historical financial statements of the acquiree for the months of 2011 that preceded our acquisition.

Effective December 31, 2011, we paid cash of approximately $3.3 million to acquire a controlling equity interest and right to manage a facility in San Diego, California. Adjusted EBITDA has been increased to reflect this acquisition as though it were effective January 1, 2011, by applying our ownership percentage and management contract earnings formula to the historical financial statements of the acquiree for 2011.

Effective February 1, 2012, we paid cash of approximately $3.1 million to acquire a noncontrolling equity interest and right to manage a facility in Midland, Texas. Adjusted EBITDA has been increased to reflect this acquisition as though it were effective January 1, 2011, by applying our ownership percentage and management contract earnings formula to the historical financial statements of the acquiree for 2011.

Effective March 1, 2012, we paid cash of approximately $3.0 million to acquire a noncontrolling equity interest and right to manage a facility in Phoenix, Arizona. Adjusted EBITDA has been increased to reflect this acquisition as though it were effective January 1, 2011, by applying our ownership percentage and management contract earnings formula to the historical financial statements of the acquiree for 2011.

Represents a pending acquisition of additional ownership in a Titan facility in Cherry Hill, New Jersey. We currently have a minority interest in such facility and have reached an agreement in principle to acquire a controlling interest for $18.0 million in cash. At this time, we have completed our due diligence and believe we have completed negotiation of the definitive documentation for the acquisition, but such documentation remains subject to the approval of certain physicians at the facility and therefore has not yet been signed. We expect to sign the definitive documentation and close the acquisition by March 31, 2012. However, we can provide no assurance that acquisition will close by such date, if at all. For purposes of this offering memorandum, we have assumed such acquisition will be completed, and therefore Adjusted EBITDA has been increased to reflect this acquisition as though it were effective January 1, 2011, by applying our ownership percentage and management contract earnings formula to the historical financial statements of the acquiree for 2011.

Adjusted EBITDA does not reflect two additional acquisition opportunities that are currently pending. We have substantially completed our due diligence with respect to such acquisitions and are in active negotiations with the existing owners of such businesses, but have not reached a definitive agreement with the existing owners. At this time, the Company expects to pay approximately $24.4 million in cash to complete such acquisitions. Based on diligence completed to date, if such acquisitions were completed as of January 1, 2011, we estimate that the Adjusted EBITDA contribution from such acquisitions would have been approximately $2.6 million. However, this estimate is subject to our ongoing diligence review. While we expect to complete such acquisitions within a few months of the consummation of this offering, we can provide no assurance that such acquisitions will close during that time, if at all.

2.	This amount does not reflect any deduction for the $6.2 million in cash we paid subsequent to December 31, 2011 to complete the 2012 acquisitions included in Adjusted EBITDA or the estimated purchase price of $18.0 million to complete the pending acquisition included therein.

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UNITED SURGICAL PARTNERS INTERNATIONAL INC Reports

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