IASIS Healthcare LLC - FORM 8-K - EX-99.1 - EXHIBIT 99.1 - December 6, 2012

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Exhibit 99.1

IASIS Healthcare Announces Fourth Quarter and Year-End 2012 Results

FRANKLIN, Tenn.--(BUSINESS WIRE)--December 6, 2012--IASIS Healthcare® LLC (“IASIS”) today announced financial and operating results for the fiscal fourth quarter and year ended September 30, 2012.

Net revenue for the fourth quarter totaled $633.0 million, a decrease of 2.2%, compared to $647.5 million in the prior year quarter. Acute care revenue for the fourth quarter increased $23.0 million or 4.9% compared to the prior year quarter, while premium revenue at Health Choice, the Company’s Medicaid and Medicare managed health plan, decreased $37.5 million or 21.2% compared to the prior year quarter, as a result of an Arizona state mandated reduction in certain Medicaid enrollees, along with capitation rate reductions implemented by the Arizona Health Care Cost Containment System (“AHCCCS”). Adjusted EBITDA for the fourth quarter totaled $70.7 million, compared to $74.8 million in the prior year quarter. Net earnings from continuing operations for the fourth quarter totaled $3.0 million, compared to $4.9 million in the prior year quarter.

During the fourth quarter, as a result of the dividend paid to the common stockholders of IASIS' parent company in June 2012, the Company reset the exercise prices of all outstanding common stock options. In connection with the dividend and related option re-pricing, results for the fourth quarter include stock-based and other compensation totaling $3.6 million and $2.0 million, respectively. In addition, the fourth quarter includes $1.7 million in start-up costs associated with the expansion of the Company's St. Joseph Medical Center campus into the Heights community of Houston, Texas.

In the fourth quarter, admissions and adjusted admissions increased 0.5% and 2.0%, respectively, while net patient revenue per adjusted admission increased 3.0%, each compared to the prior year quarter.

Net revenue for the year ended September 30, 2012, totaled $2.5 billion, which was consistent with the prior year. Acute care revenue for the year ended September 30, 2012, increased $187.3 million or 10.5% compared to the prior year, while premium revenue at Health Choice declined $188.2 million or 24.8% compared to the prior year. Adjusted EBITDA for the year ended September 30, 2012, totaled $302.2 million, compared to $304.7 million in the prior year. Net earnings from continuing operations for the year ended September 30, 2012, totaled $31.3 million, compared to $47.3 million in the prior year, which included a $23.1 million loss on extinguishment of debt.

For the year ended September 30, 2012, admissions and adjusted admissions increased 9.3% and 9.9%, respectively, compared to the prior year. On a same-facility basis, admissions and adjusted admissions increased 1.3% and 2.9%, respectively, while net patient revenue per adjusted admission increased 1.8%, each compared to the prior year.

“The ongoing economic and industry headwinds, especially with regard to substantial Medicaid cuts and increasing uncompensated care, presented significant challenges, particularly in certain of our markets, during our 2012 year. In light of overcoming these significant pressures, we are pleased with our overall performance, which also includes volume growth, improved quality metrics, increased patient satisfaction, effective cost management and exciting business development activities, including our new partnership with Aurora Health Care,” said IASIS Healthcare President and Chief Executive Officer Carl Whitmer.

Whitmer continued, “As we look toward the coming year, we continue to focus on integrating our operational strategies designed for navigating continuing healthcare reform, executing our development strategies and enhancing our constant commitment to operational excellence across all clinical and business sectors, all designed to position the Company for future success.”

A listen-only simulcast and 30-day replay of IASIS’ fourth quarter and year-end 2012 conference call will be available by clicking the “For Investors” link on the Company’s Web site at www.iasishealthcare.com beginning at 11:00 a.m. Eastern Time on December 6, 2012. A copy of this press release will also be available on the Company’s Web site.

IASIS Healthcare, located in Franklin, Tennessee, is a leading provider of high quality, affordable healthcare services in urban and suburban markets. With total annual net revenue of approximately $2.5 billion, IASIS owns and operates 19 acute care hospitals, one behavioral health hospital facility, several outpatient service facilities, more than 160 physician clinics, and Medicaid and Medicare managed health plans in Arizona and Utah that serve more than 178,000 members. IASIS’ healthcare facilities offer a variety of access points for convenient patient care in numerous regions across the U.S., including: Salt Lake City, Utah; Phoenix, Arizona; Tampa-St. Petersburg, Florida; five cities in Texas, including Houston and San Antonio; Las Vegas, Nevada; and West Monroe, Louisiana. For more information on IASIS, please visit the Company’s Web site at www.iasishealthcare.com.

Some of the statements we make in this press release are forward-looking within the meaning of the federal securities laws, which are intended to be covered by the safe harbors created thereby. Those forward-looking statements include all statements that are not historical statements of fact and those regarding our intent, belief or expectations including, but not limited to, future financial and operating results, the Company’s plans, objectives, expectations and other statements that are not historical facts. Forward-looking statements involve known and unknown risks and uncertainties that may cause actual results in future periods to differ materially from those anticipated in the forward-looking statements. These risk factors and uncertainties are more fully described in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2011, and other filings with the Securities and Exchange Commission.

Although we believe that the assumptions underlying the forward-looking statements contained in this press release are reasonable, any of these assumptions could prove to be inaccurate, and, therefore, there can be no assurance that the forward-looking statements included in this press release will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, you should not regard the inclusion of such information as a representation by the Company or any other person that our objectives and plans will be achieved. We undertake no obligation to publicly release any revisions to any forward-looking statements contained herein to reflect events and circumstances occurring after the date hereof or to reflect the occurrence of unanticipated events.

Adjusted EBITDA represents net earnings from continuing operations before interest expense, income tax expense, depreciation and amortization, stock-based compensation, gain (loss) on disposal of assets, loss on extinguishment of debt and management fees. Management fees represent monitoring and advisory fees paid to TPG, the Company’s majority financial sponsor, and certain other members of IASIS Investment LLC. Management routinely calculates and communicates adjusted EBITDA and believes that it is useful to investors because it is commonly used as an analytical indicator within the healthcare industry to evaluate hospital performance, allocate resources and measure leverage capacity and debt service ability. In addition, the Company uses adjusted EBITDA as a measure of performance for its business segments and for incentive compensation purposes. Adjusted EBITDA should not be considered as a measure of financial performance under generally accepted accounting principles, and the items excluded from adjusted EBITDA are significant components in understanding and assessing financial performance. Adjusted EBITDA should not be considered in isolation or as an alternative to net earnings, cash flows generated by operating, investing, or financing activities or other financial statement data presented in the consolidated financial statements as an indicator of financial performance or liquidity. Adjusted EBITDA, as presented, differs from what is defined under the Company’s senior secured credit facilities and may not be comparable to similarly titled measures of other companies. A table describing adjusted EBITDA and reconciling net earnings from continuing operations to adjusted EBITDA is included in this press release in the attached Supplemental Consolidated Statements of Operations Information.

         

IASIS HEALTHCARE LLC

Consolidated Statements of Operations (Unaudited)

(in thousands)

 
Quarter Ended

September 30,

Year Ended

September 30,

2012 2011 2012 2011
Net revenue

Acute care revenue before provision for bad debts

$ 584,500 $ 540,226 $ 2,283,126 $ 2,023,387
Less: Provision for bad debts   (90,429 )   (69,163 )   (316,653 )   (244,263 )
Acute care revenue 494,071 471,063 1,966,473 1,779,124
Premium revenue   138,913     176,392     569,142     757,309  
Net revenue 632,984 647,455 2,535,615 2,536,433
 
Costs and expenses

Salaries and benefits (includes stock-based compensation of $6,113, $317, $10,077 and $1,681, respectively)

249,380 221,679 938,471 818,742
Supplies 85,118 78,846 342,039 316,277
Medical claims 116,835 145,568 466,125 630,203
Rentals and leases 11,733 11,982 49,370 46,211
Other operating expenses 119,868 115,816 470,733 431,070
Medicare and Medicaid EHR incentives (14,527 ) (917 ) (23,213 ) (9,042 )
Interest expense, net 33,933 35,100 138,054 96,084
Depreciation and amortization 27,836 29,299 114,358 104,241
Management fees 1,250 1,250 5,000 5,000
Loss on extinguishment of debt   –     –     –     23,075  
Total costs and expenses 631,426 638,623 2,500,937 2,461,861
 

Earnings from continuing operations before gain (loss) on disposal of assets and income taxes

1,558 8,832 34,678 74,572
Gain (loss) on disposal of assets, net   1,961     (669 )   2,406     102  
 

Earnings from continuing operations before income taxes

3,519 8,163 37,084 74,674
Income tax expense   540     3,296     5,833     27,374  
 
Net earnings from continuing operations 2,979 4,867 31,251 47,300

Earnings (loss) from discontinued operations, net of income taxes

  (4 )   468     337     (5,601 )
 
Net earnings 2,975 5,335 31,588 41,699

Net earnings attributable to non-controlling interests

  (3,388 )   (2,283 )   (8,712 )   (10,338 )
 

Net earnings (loss) attributable to IASIS Healthcare LLC

$ (413 ) $ (3,052 ) $ 22,876   $ 31,361  
     

 

IASIS HEALTHCARE LLC

Consolidated Balance Sheets (Unaudited)

(in thousands)

 
Sept. 30,

2012

Sept. 30,

2011

 
ASSETS
 
Current assets
Cash and cash equivalents $ 48,882 $ 147,327
Accounts receivable, net 339,749 277,932
Inventories 67,650 68,330
Deferred income taxes 19,744 40,415
Prepaid expenses and other current assets   117,851   72,914
Total current assets 593,876 606,918
 
Property and equipment, net 1,171,657 1,167,920
Goodwill 818,424 808,651
Other intangible assets, net 29,161 32,779
Other assets, net   68,498   63,509
Total assets $ 2,681,616 $ 2,679,777
 
LIABILITIES AND EQUITY
 
Current liabilities
Accounts payable $ 101,706 $ 92,805
Salaries and benefits payable 65,390 58,379
Accrued interest payable 28,034 30,045
Medical claims payable 61,142 85,723
Other accrued expenses and other current liabilities 83,243 100,830
Current portion of long-term debt and capital lease obligations   13,387   14,020
Total current liabilities 352,902 381,802
 
Long-term debt and capital lease obligations 1,853,107 1,864,749
Deferred income taxes 120,961 131,018
Other long-term liabilities 104,110 78,441
 
Non-controlling interests with redemption rights 99,164 95,977
 
Equity
Member’s equity 141,589 118,000
Non-controlling interests   9,783   9,790
Total equity   151,372   127,790
Total liabilities and equity $ 2,681,616 $ 2,679,777
   

IASIS HEALTHCARE LLC

Consolidated Statements of Cash Flows (Unaudited)

(in thousands)

 
Year Ended

September 30,

2012   2011
Cash flows from operating activities
Net earnings $ 31,588 $ 41,699

Adjustments to reconcile net earnings to net cash provided by operating activities:

Depreciation and amortization 114,358 104,241
Amortization of loan costs 7,309 4,887
Stock-based compensation 10,077 1,681
Deferred income taxes 15,443 6,597
Income tax benefit from stock-based compensation 6 –
Income taxes related to parent company interest (191 ) 6,981
Fair value change in interest rate hedges (1,410 ) (1,589 )
Amortization of other comprehensive loss 2,057 942
Gain on disposal of assets, net (2,406 ) (102 )
Loss on extinguishment of debt – 23,075
Loss (earnings) from discontinued operations, net (337 ) 5,601

Changes in operating assets and liabilities, net of the effect of acquisitions and dispositions:

Accounts receivable, net (62,623 ) (18,593 )
Inventories, prepaid expenses and other current assets (46,124 ) (2,480 )
Accounts payable, other accrued expenses and other accrued liabilities   (25,883 )   (27,837 )
Net cash provided by operating activities – continuing operations 41,864 145,103
Net cash used in operating activities – discontinued operations   (7 )   (8,002 )
Net cash provided by operating activities   41,857     137,101  
 
Cash flows from investing activities
Purchases of property and equipment, net (112,372 ) (98,316 )
Cash paid for acquisitions, net (8,912 ) (151,697 )
Proceeds from sale of assets 225 154
Change in other assets, net   5,178     99  
Net cash used in investing activities   (115,881 )   (249,760 )
 
Cash flows from financing activities
Proceeds from refinancing – 1,863,730
Payment of debt and capital lease obligations (14,177 ) (1,053,147 )
Debt financing costs incurred (998 ) (52,254 )
Distributions to parent company – (632,866 )
Distributions to non-controlling interests (8,666 ) (8,842 )
Costs paid for the repurchase of non-controlling interests, net (589 ) (1,146 )
Other   9     –  
Net cash provided by (used in) financing activities   (24,421 )   115,475  
 
Change in cash and cash equivalents (98,445 ) 2,816
Cash and cash equivalents at beginning of period   147,327     144,511  
Cash and cash equivalents at end of period $ 48,882   $ 147,327  
 
Supplemental disclosure of cash flow information
Cash paid for interest $ 132,134   $ 74,774  
Cash paid (received) for income taxes, net $ (13,946 ) $ 17,608  
   

IASIS HEALTHCARE LLC

Segment Information (Unaudited)

(in thousands)

 
For the Quarter Ended September 30, 2012
Acute Care   Health Choice   Eliminations   Consolidated

Acute care revenue before provision for bad debts

$ 584,500 $ – $ – $ 584,500
Less: Provision for bad debts   (90,429 )   –   –     (90,429 )
Acute care revenue 494,071 – – 494,071
Premium revenue – 138,913 – 138,913
Revenue between segments   1,879     –   (1,879 )   –  
Net revenue 495,950 138,913 (1,879 ) 632,984
 

Salaries and benefits (excludes stock-based compensation)

238,187 5,080 – 243,267
Supplies 85,075 43 – 85,118
Medical claims – 118,714 (1,879 ) 116,835
Rentals and leases 11,331 402 – 11,733
Other operating expenses 114,492 5,376 – 119,868
Medicare and Medicaid EHR incentives   (14,527 )   –   –     (14,527 )
Adjusted EBITDA 61,392 9,298 – 70,690
 
Interest expense, net 33,933 – – 33,933
Depreciation and amortization 26,628 1,208 – 27,836
Stock-based compensation 6,113 – – 6,113
Management fees   1,250     –   –     1,250  

Earnings (loss) from continuing operations before gain on disposal of assets and income taxes

(6,532 ) 8,090 – 1,558
Gain on disposal of assets, net   1,961     –   –     1,961  

Earnings (loss) from continuing operations before income taxes

$ (4,571 ) $ 8,090 $ –   $ 3,519  
 
For the Quarter Ended September 30, 2011
Acute Care Health Choice Eliminations Consolidated
Acute care revenue before provision

for bad debts

$ 540,226 $ – $ – $ 540,226
Less: Provision for bad debts   (69,163 )   –   –     (69,163 )
Acute care revenue 471,063 – – 471,063
Premium revenue – 176,392 – 176,392
Revenue between segments   2,019     –   (2,019 )   –  
Net revenue 473,082 176,392 (2,019 ) 647,455
 

Salaries and benefits (excludes stock-based compensation)

216,439 4,923 – 221,362
Supplies 78,802 44 – 78,846
Medical claims – 147,587 (2,019 ) 145,568
Rentals and leases 11,595 387 – 11,982
Other operating expenses 109,369 6,447 – 115,816
Medicare and Medicaid EHR incentives   (917 )   –   –     (917 )
Adjusted EBITDA 57,794 17,004 – 74,798
 
Interest expense, net 35,100 – – 35,100
Depreciation and amortization 28,412 887 – 29,299
Stock-based compensation 317 – – 317
Management fees   1,250     –   –     1,250  

Earnings (loss) from continuing operations before loss on disposal of assets and income taxes

(7,285 ) 16,117 – 8,832
Loss on disposal of assets, net   (669 )   –   –     (669 )

Earnings (loss) from continuing operations before income taxes

$ (7,954 ) $ 16,117 $ –   $ 8,163  
   

IASIS HEALTHCARE LLC

Segment Information (Unaudited)

(in thousands)

 
For the Year Ended September 30, 2012
Acute Care   Health Choice   Eliminations   Consolidated

Acute care revenue before provision for bad debts

$ 2,283,126 $ – $ – $ 2,283,126
Less: Provision for bad debts   (316,653 )   –   –     (316,653 )
Acute care revenue 1,966,473 – – 1,966,473
Premium revenue – 569,142 – 569,142
Revenue between segments   7,092     –   (7,092 )   –  
Net revenue 1,973,565 569,142 (7,092 ) 2,535,615
 

Salaries and benefits (excludes stock-based compensation)

906,867 21,527 – 928,394
Supplies 341,811 228 – 342,039
Medical claims – 473,217 (7,092 ) 466,125
Rentals and leases 47,837 1,533 – 49,370
Other operating expenses 448,255 22,478 – 470,733
Medicare and Medicaid EHR incentives   (23,213 )   –   –     (23,213 )
Adjusted EBITDA 252,008 50,159 – 302,167
 
Interest expense, net 138,054 – – 138,054
Depreciation and amortization 110,474 3,884 – 114,358
Stock-based compensation 10,077 – – 10,077
Management fees   5,000     –   –     5,000  
Earnings (loss) from continuing operations before gain on disposal of assets and

income taxes

(11,597 ) 46,275 – 34,678
Gain on disposal of assets, net   2,406     –   –     2,406  

Earnings (loss) from continuing operations before income taxes

$ (9,191 ) $ 46,275 $ –   $ 37,084  
 
For the Year Ended September 30, 2011
Acute Care Health Choice Eliminations Consolidated

Acute care revenue before provision for bad debts

$ 2,023,387 $ – $ – $ 2,023,387
Less: Provision for bad debts   (244,263 )   –   –     (244,263 )
Acute care revenue 1,779,124 – – 1,779,124
Premium revenue – 757,309 – 757,309
Revenue between segments   10,551     –   (10,551 )   –  
Net revenue 1,789,675 757,309 (10,551 ) 2,536,433
 

Salaries and benefits (excludes stock-based compensation)

796,667 20,394 – 817,061
Supplies 316,076 201 – 316,277
Medical claims – 640,754 (10,551 ) 630,203
Rentals and leases 44,586 1,625 – 46,211
Other operating expenses 405,282 25,788 – 431,070
Medicare and Medicaid EHR incentives   (9,042 )   –   –     (9,042 )
Adjusted EBITDA 236,106 68,547 – 304,653
 
Interest expense, net 96,084 – – 96,084
Depreciation and amortization 100,685 3,556 – 104,241
Stock-based compensation 1,681 – – 1,681
Management fees 5,000 – – 5,000
Loss on extinguishment of debt   23,075     –   –     23,075  
Earnings from continuing operations before gain on disposal of assets and income taxes 9,581 64,991 – 74,572
Gain on disposal of assets, net   102     –   –     102  

Earnings from continuing operations before income taxes

$ 9,683   $ 64,991 $ –   $ 74,674  
     

IASIS HEALTHCARE LLC

Consolidated Financial and Operating Data (Unaudited)

 
Quarter Ended

September 30,

Year Ended

September 30,

2012     2011   2012     2011  
Consolidated Hospital Facilities

Number of acute care hospital facilities at end of period

19 18 19 18
Licensed beds at end of period 4,461 4,365 4,461 4,365
Average length of stay (days) 5.0 4.8 5.0 4.9
Occupancy rates (average beds in service) 49.3 % 47.8 % 49.2 % 48.4 %
Admissions 31,524 31,368 126,640 115,837
Percentage change 0.5 % 9.3 %
Adjusted admissions 54,608 53,540 215,305 195,999
Percentage change 2.0 % 9.9 %
Patient days 158,938 150,430 630,878 564,651
Adjusted patient days 275,324 256,757 1,072,576 955,402

Outpatient revenue as a percentage of gross patient revenue

42.3 % 41.4 % 41.2 % 40.9 %
Same-Facility Hospitals (1) (2)

Number of acute care hospital facilities at end of period

19 18 18 17
Licensed beds at end of period 4,461 4,365 3,669 3,573
Average length of stay (days) 5.0 4.8 5.0 4.9
Occupancy rates (average beds in service) 49.3 % 47.8 % 48.0 % 47.5 %
Admissions 31,524 31,368 110,147 108,743
Percentage change 0.5 % 1.3 %
Adjusted admissions 54,608 53,540 190,029 184,708
Percentage change 2.0 % 2.9 %
Patient days 158,938 150,430 545,895 529,782
Adjusted patient days 275,324 256,757 941,794 899,874
Outpatient revenue as a percentage of gross patient revenue 42.3 % 41.4 % 42.0 % 41.1 %
 

(1) Years ended September 30, 2012 and 2011, exclude the impact of the St. Joseph Medical Center acquisition effective May 1, 2011.

(2) Quarter and year ended September 30, 2012, include operating results of Wadley Regional Medical Center at Hope, located in Hope, Arkansas.

     

IASIS HEALTHCARE LLC

Supplemental Consolidated Statements of Operations Information (Unaudited)

(in thousands)

 
Quarter Ended

September 30,

Year Ended

September 30,

2012   2011 2012   2011
Consolidated Results
Net earnings from continuing operations $ 2,979 $ 4,867 $ 31,251 $ 47,300
Add:
Interest expense, net 33,933 35,100 138,054 96,084
Income tax expense 540 3,296 5,833 27,374
Depreciation and amortization 27,836 29,299 114,358 104,241
Stock-based compensation 6,113 317 10,077 1,681
Loss (gain) on disposal of assets, net (1,961 ) 669 (2,406 ) (102 )
Management fees 1,250 1,250 5,000 5,000
Loss on extinguishment of debt   –     –   –     23,075  
Adjusted EBITDA $ 70,690   $ 74,798 $ 302,167   $ 304,653  

CONTACT:
IASIS Healthcare LLC
Investor Contact:
W. Carl Whitmer, 615-844-2747
President and Chief Executive Officer
or
John M. Doyle, 615-844-2747
Chief Financial Officer
or
Media Contact:
Michele M. Simpson, 615-467-1255
VP, Corporate Communications

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