Attached files
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EXCEL - IDEA: XBRL DOCUMENT - LEGACY LIFEPOINT HEALTH, INC. | Financial_Report.xls |
EX-32.1 - EXHIBIT 32.1 - LEGACY LIFEPOINT HEALTH, INC. | v191786_ex32-1.htm |
EX-31.1 - EXHIBIT 31.1 - LEGACY LIFEPOINT HEALTH, INC. | v191786_ex31-1.htm |
EX-31.2 - EXHIBIT 31.2 - LEGACY LIFEPOINT HEALTH, INC. | v191786_ex31-2.htm |
EX-32.2 - EXHIBIT 32.2 - LEGACY LIFEPOINT HEALTH, INC. | v191786_ex32-2.htm |
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
Form
10-Q
(Mark
One)
|
|
x
|
QUARTERLY REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For
the quarterly period ended June 30, 2010
|
|
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: 000-51251
LifePoint
Hospitals, Inc.
(Exact
name of registrant as specified in its charter)
Delaware
|
20-1538254
|
(State
or Other Jurisdiction of
|
(I.R.S.
Employer
|
Incorporation
or Organization)
|
Identification
No.)
|
103
Powell Court
|
|
Brentwood,
Tennessee
|
37027
|
(Address
of Principal Executive Offices)
|
(Zip
Code)
|
(615)
372-8500
(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 (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes x No £
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). Yes x No £
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large
accelerated filer x
|
Accelerated
filer £
|
Non-accelerated
filer £
|
Smaller
reporting company £
|
(Do
not check if a smaller reporting
company)
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes £ No x
As of
July 26, 2010, the number of outstanding shares of Common Stock of LifePoint
Hospitals, Inc. was 54,226,185.
TABLE
OF CONTENTS
PART
I — FINANCIAL INFORMATION
|
||
Item
1.
|
Financial
Statements
|
3
|
Item
2.
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
18
|
Item
3.
|
Quantitative
and Qualitative Disclosures about Market
Risk
|
42
|
Item
4.
|
Controls
and
Procedures
|
43
|
PART
II — OTHER INFORMATION
|
||
Item
1.
|
Legal
Proceedings
|
44
|
Item
1A.
|
Risk
Factors
|
44
|
Item
2.
|
Unregistered
Sales of Equity Securities and Use of
Proceeds
|
44
|
Item
6.
|
Exhibits
|
46
|
2
PART
I — FINANCIAL INFORMATION
Item 1. Financial
Statements.
LIFEPOINT
HOSPITALS, INC.
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
Unaudited
(In
millions, except per share amounts)
Three Months Ended
June 30,
|
Six Months Ended
June 30,
|
|||||||||||||||
2010
|
2009
|
2010
|
2009
|
|||||||||||||
Revenues
|
$ | 790.6 | $ | 735.3 | $ | 1,576.8 | $ | 1,470.8 | ||||||||
Salaries
and benefits
|
307.0 | 292.7 | 610.3 | 579.2 | ||||||||||||
Supplies
|
109.2 | 102.3 | 217.6 | 201.9 | ||||||||||||
Other
operating expenses
|
145.3 | 138.6 | 285.7 | 271.3 | ||||||||||||
Provision
for doubtful accounts
|
105.0 | 92.2 | 207.1 | 182.4 | ||||||||||||
Depreciation
and amortization
|
36.7 | 35.9 | 72.8 | 71.0 | ||||||||||||
Interest
expense, net
|
25.9 | 25.9 | 51.0 | 51.7 | ||||||||||||
729.1 | 687.6 | 1,444.5 | 1,357.5 | |||||||||||||
Income
from continuing operations before income taxes
|
61.5 | 47.7 | 132.3 | 113.3 | ||||||||||||
Provision
for income taxes
|
23.3 | 18.2 | 49.9 | 43.7 | ||||||||||||
Income
from continuing operations
|
38.2 | 29.5 | 82.4 | 69.6 | ||||||||||||
Discontinued
operations, net of income taxes:
|
||||||||||||||||
Income
(loss) from discontinued operations
|
0.1 | (2.1 | ) | (0.3 | ) | (3.2 | ) | |||||||||
Loss
on sale of hospital
|
— | (0.6 | ) | — | (0.6 | ) | ||||||||||
Income
(loss) from discontinued operations
|
0.1 | (2.7 | ) | (0.3 | ) | (3.8 | ) | |||||||||
Net
income
|
38.3 | 26.8 | 82.1 | 65.8 | ||||||||||||
Less:
Net income attributable to noncontrolling interests
|
(0.7 | ) | (0.5 | ) | (1.6 | ) | (1.1 | ) | ||||||||
Net
income attributable to LifePoint Hospitals, Inc.
|
$ | 37.6 | $ | 26.3 | $ | 80.5 | $ | 64.7 | ||||||||
Basic
earnings (loss) per share attributable to LifePoint Hospitals, Inc.
stockholders:
|
||||||||||||||||
Continuing
operations
|
$ | 0.71 | $ | 0.55 | $ | 1.52 | $ | 1.31 | ||||||||
Discontinued
operations
|
— | (0.05 | ) | (0.01 | ) | (0.08 | ) | |||||||||
Net
income
|
$ | 0.71 | $ | 0.50 | $ | 1.51 | $ | 1.23 | ||||||||
Diluted
earnings (loss) per share attributable to LifePoint Hospitals, Inc.
stockholders:
|
||||||||||||||||
Continuing
operations
|
$ | 0.69 | $ | 0.54 | $ | 1.48 | $ | 1.29 | ||||||||
Discontinued
operations
|
— | (0.05 | ) | — | (0.08 | ) | ||||||||||
Net
income
|
$ | 0.69 | $ | 0.49 | $ | 1.48 | $ | 1.21 | ||||||||
Weighted
average shares and dilutive securities outstanding:
|
||||||||||||||||
Basic
|
53.2 | 52.8 | 53.2 | 52.5 | ||||||||||||
Diluted
|
54.4 | 53.6 | 54.5 | 53.3 | ||||||||||||
Amounts
attributable to LifePoint Hospitals, Inc. stockholders:
|
||||||||||||||||
Income
from continuing operations, net of income taxes
|
$ | 37.5 | $ | 29.0 | $ | 80.8 | $ | 68.5 | ||||||||
Loss
from discontinued operations, net of income taxes
|
0.1 | (2.7 | ) | (0.3 | ) | (3.8 | ) | |||||||||
Net
income
|
$ | 37.6 | $ | 26.3 | $ | 80.5 | $ | 64.7 |
See
accompanying notes.
3
LIFEPOINT
HOSPITALS, INC.
CONDENSED
CONSOLIDATED BALANCE SHEETS
(Dollars
in millions, except per share amounts)
June 30,
2010
|
December 31,
2009(a)
|
|||||||
(Unaudited)
|
||||||||
ASSETS
|
||||||||
Current
assets:
|
||||||||
Cash
and cash equivalents
|
$ | 199.7 | $ | 187.2 | ||||
Accounts
receivable, less allowances for doubtful accounts of $463.6 and $433.2 at
June 30, 2010 and December 31, 2009, respectively
|
356.8 | 325.2 | ||||||
Inventories
|
77.7 | 75.3 | ||||||
Prepaid
expenses
|
16.4 | 12.0 | ||||||
Income
taxes receivable
|
— | 10.0 | ||||||
Deferred
tax assets
|
131.2 | 121.3 | ||||||
Other
current assets
|
21.4 | 23.1 | ||||||
803.2 | 754.1 | |||||||
Property
and equipment:
|
||||||||
Land
|
76.4 | 75.5 | ||||||
Buildings
and improvements
|
1,405.5 | 1,377.0 | ||||||
Equipment
|
874.5 | 840.9 | ||||||
Construction
in progress (estimated cost to complete and equip after June 30, 2010 is
$40.9)
|
34.5 | 19.9 | ||||||
2,390.9 | 2,313.3 | |||||||
Accumulated
depreciation
|
(879.1 | ) | (813.9 | ) | ||||
1,511.8 | 1,499.4 | |||||||
Deferred
loan costs, net
|
23.4 | 23.0 | ||||||
Intangible
assets, net
|
74.6 | 68.6 | ||||||
Other
|
20.2 | 5.2 | ||||||
Goodwill
|
1,525.7 | 1,523.0 | ||||||
Total
assets
|
$ | 3,958.9 | $ | 3,873.3 | ||||
LIABILITIES
AND EQUITY
|
||||||||
Current
liabilities:
|
||||||||
Accounts
payable
|
$ | 73.6 | $ | 77.3 | ||||
Accrued
salaries
|
77.3 | 81.8 | ||||||
Income
taxes payable
|
31.0 | — | ||||||
Interest
rate swap
|
18.5 | — | ||||||
Other
current liabilities
|
102.8 | 108.1 | ||||||
Current
maturities of long-term debt
|
55.4 | 1.0 | ||||||
358.6 | 268.2 | |||||||
Long-term
debt
|
1,355.8 | 1,398.8 | ||||||
Deferred
income tax liabilities
|
169.3 | 176.9 | ||||||
Reserves
for self-insurance claims and other liabilities
|
110.6 | 135.3 | ||||||
Long-term
income tax liability
|
55.6 | 51.3 | ||||||
Total
liabilities
|
2,049.9 | 2,030.5 | ||||||
Redeemable
noncontrolling interests
|
16.4 | 12.0 | ||||||
Equity:
|
||||||||
LifePoint
Hospitals, Inc. stockholders’ equity:
|
||||||||
Preferred
stock, $0.01 par value; 10,000,000 shares authorized; no shares
issued
|
— | — | ||||||
Common
stock, $0.01 par value; 90,000,000 shares
authorized; 61,172,616 and 60,262,399 shares issued
at June 30, 2010 and December 31, 2009, respectively
|
0.6 | 0.6 | ||||||
Capital
in excess of par value
|
1,271.1 | 1,246.4 | ||||||
Accumulated
other comprehensive loss
|
(11.0 | ) | (17.4 | ) | ||||
Retained
earnings
|
829.0 | 748.5 | ||||||
Common
stock in treasury, at cost, 6,964,157 and 5,476,930 shares at June 30,
2010 and December 31, 2009, respectively
|
(200.9 | ) | (150.4 | ) | ||||
Total
LifePoint Hospitals, Inc. stockholders’ equity
|
1,888.8 | 1,827.7 | ||||||
Noncontrolling
interests
|
3.8 | 3.1 | ||||||
Total
equity
|
1,892.6 | 1,830.8 | ||||||
Total
liabilities and equity
|
$ | 3,958.9 | $ | 3,873.3 |
(a)
|
Derived
from audited consolidated financial
statements.
|
See
accompanying notes.
4
LIFEPOINT
HOSPITALS, INC.
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
Unaudited
(Dollars
in millions)
Three Months ended
June 30,
|
Six Months
Ended June 30,
|
|||||||||||||||
2010
|
2009
|
2010
|
2009
|
|||||||||||||
Cash
flows from operating activities:
|
||||||||||||||||
Net
income
|
$ | 38.3 | $ | 26.8 | $ | 82.1 | $ | 65.8 | ||||||||
Adjustments
to reconcile net income to net cash provided by operating
activities:
|
||||||||||||||||
(Income)
loss from discontinued operations
|
(0.1 | ) | 2.7 | 0.3 | 3.8 | |||||||||||
Stock-based
compensation
|
5.3 | 4.7 | 11.1 | 10.6 | ||||||||||||
Depreciation
and amortization
|
36.7 | 35.9 | 72.8 | 71.0 | ||||||||||||
Amortization
of physician minimum revenue guarantees
|
4.1 | 3.1 | 8.0 | 6.2 | ||||||||||||
Amortization
of convertible debt discounts
|
5.5 | 5.2 | 11.0 | 10.3 | ||||||||||||
Amortization
of deferred loan costs
|
1.6 | 1.8 | 4.0 | 3.7 | ||||||||||||
Deferred
income tax benefit
|
(12.6 | ) | (4.7 | ) | (16.7 | ) | (10.7 | ) | ||||||||
Reserves
for self-insurance claims, net of payments
|
0.2 | 5.5 | 4.3 | 11.1 | ||||||||||||
Increase
(decrease) in cash from operating assets and liabilities, net of effects
from acquisitions and divestitures:
|
||||||||||||||||
Accounts
receivable
|
(1.7 | ) | 6.0 | (26.4 | ) | (15.4 | ) | |||||||||
Inventories
and other current assets
|
(2.1 | ) | (3.2 | ) | (2.5 | ) | (2.9 | ) | ||||||||
Accounts
payable and accrued expenses
|
(0.7 | ) | 3.1 | (19.7 | ) | (5.7 | ) | |||||||||
Income
taxes payable/receivable
|
10.1 | (20.2 | ) | 39.7 | 11.0 | |||||||||||
Other
|
— | 0.4 | 0.1 | 0.2 | ||||||||||||
Net
cash provided by operating activities — continuing
operations
|
84.6 | 67.1 | 168.1 | 159.0 | ||||||||||||
Net
cash used in operating activities — discontinued
operations
|
(0.5 | ) | (1.4 | ) | (0.7 | ) | (2.9 | ) | ||||||||
Net
cash provided by operating activities
|
84.1 | 65.7 | 167.4 | 156.1 | ||||||||||||
Cash
flows from investing activities:
|
||||||||||||||||
Purchase
of property and equipment
|
(39.6 | ) | (42.0 | ) | (73.6 | ) | (85.1 | ) | ||||||||
Acquisitions,
net of cash acquired
|
(25.8 | ) | (1.5 | ) | (42.7 | ) | (79.7 | ) | ||||||||
Proceeds
from sale of business
|
— | 3.9 | — | 3.9 | ||||||||||||
Net
cash used in investing activities – continuing operations
|
(65.4 | ) | (39.6 | ) | (116.3 | ) | (160.9 | ) | ||||||||
Net
cash provided by investing activities – discontinued
operations
|
— | 10.4 | — | 10.4 | ||||||||||||
Net
cash used in investing activities
|
(65.4 | ) | (29.2 | ) | (116.3 | ) | (150.5 | ) | ||||||||
Cash
flows from financing activities:
|
||||||||||||||||
Payments
on borrowings
|
— | (13.5 | ) | — | (13.5 | ) | ||||||||||
Repurchases
of common stock
|
(41.5 | ) | (1.0 | ) | (50.5 | ) | (2.6 | ) | ||||||||
Payment
of debt financing costs
|
— | — | (4.4 | ) | — | |||||||||||
Proceeds
from exercise of stock options
|
4.3 | 7.9 | 13.5 | 9.6 | ||||||||||||
Proceeds
from employee stock purchase plans
|
— | — | 0.6 | 0.4 | ||||||||||||
Distributions
to noncontrolling interests
|
(0.4 | ) | (0.3 | ) | (0.9 | ) | (0.7 | ) | ||||||||
(Purchase
of) proceeds from redeemable noncontrolling interests
|
(0.3 | ) | (0.8 | ) | 3.9 | (0.8 | ) | |||||||||
Capital
lease payments and other
|
(0.5 | ) | (1.3 | ) | (0.8 | ) | (1.7 | ) | ||||||||
Net
cash used in financing activities
|
(38.4 | ) | (9.0 | ) | (38.6 | ) | (9.3 | ) | ||||||||
Change
in cash and cash equivalents
|
(19.7 | ) | 27.5 | 12.5 | (3.7 | ) | ||||||||||
Cash
and cash equivalents at beginning of period
|
219.4 | 44.5 | 187.2 | 75.7 | ||||||||||||
Cash
and cash equivalents at end of period
|
$ | 199.7 | $ | 72.0 | $ | 199.7 | $ | 72.0 | ||||||||
Supplemental
disclosure of cash flow information:
|
||||||||||||||||
Interest
payments
|
$ | 21.4 | $ | 22.5 | $ | 34.7 | $ | 38.7 | ||||||||
Capitalized
interest
|
$ | 0.2 | $ | 0.3 | $ | 0.3 | $ | 0.6 | ||||||||
Income
taxes paid, net
|
$ | 25.7 | $ | 43.1 | $ | 26.8 | $ | 43.6 |
See accompanying notes.
5
LIFEPOINT
HOSPITALS, INC.
CONDENSED
CONSOLIDATED STATEMENT OF EQUITY
For
the Six Months Ended June 30, 2010
Unaudited
(Dollars
in millions)
LifePoint Hospitals, Inc. Stockholders
|
||||||||||||||||||||||||||||||||
Common Stock
|
Capital in
Excess of
|
Accumulated
Other
Comprehensive
|
Retained
|
Treasury
|
Noncontrolling
|
|||||||||||||||||||||||||||
Shares
|
Amount
|
Par Value
|
Income (loss)
|
Earnings
|
Stock
|
Interests
|
Total
|
|||||||||||||||||||||||||
Balance
at December 31, 2009 (a)
|
54.8 | $ | 0.6 | $ | 1,246.4 | $ | (17.4 | ) | $ | 748.5 | $ | (150.4 | ) | $ | 3.1 | $ | 1,830.8 | |||||||||||||||
Comprehensive
income:
|
||||||||||||||||||||||||||||||||
Net
income
|
— | — | — | — | 80.5 | — | 1.6 | 82.1 | ||||||||||||||||||||||||
Net
change in fair value of interest rate swap, net of tax provision of
$3.4
|
— | — | — | 6.4 | — | — | — | 6.4 | ||||||||||||||||||||||||
Total
comprehensive income
|
88.5 | |||||||||||||||||||||||||||||||
Exercise
of stock options, including tax benefits of stock-based awards and
other
|
0.5 | — | 13.4 | — | — | — | — | 13.4 | ||||||||||||||||||||||||
Stock
activity in connection with employee stock purchase plan
|
— | — | 0.6 | — | — | — | — | 0.6 | ||||||||||||||||||||||||
Stock-based
compensation
|
0.4 | — | 11.1 | — | — | — | — | 11.1 | ||||||||||||||||||||||||
Repurchases
of common stock, at cost
|
(1.5 | ) | — | — | — | — | (50.5 | ) | — | (50.5 | ) | |||||||||||||||||||||
Cash
distributions to noncontrolling interests
|
— | — | ( 0.4 | ) | — | — | — | (0.9 | ) | (1.3 | ) | |||||||||||||||||||||
Balance
at June 30, 2010
|
54.2 | $ | 0.6 | $ | 1,271.1 | $ | (11.0 | ) | $ | 829.0 | $ | (200.9 | ) | $ | 3.8 | $ | 1,892.6 |
____________
(a)
|
Derived
from audited consolidated financial
statements.
|
See accompanying notes.
6
LIFEPOINT
HOSPITALS, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June
30, 2010
Unaudited
Note 1. Basis of
Presentation
LifePoint
Hospitals, Inc., a Delaware corporation, acting through its subsidiaries,
operates general acute care hospitals in non-urban communities in the United
States. Unless the context otherwise indicates, LifePoint Hospitals, Inc. and
its subsidiaries are referred to herein as “LifePoint” or the “Company.” At June
30, 2010, on a consolidated basis, the Company’s subsidiaries owned or leased 48
hospitals, serving non-urban communities in 17 states. Unless noted otherwise,
discussions in these notes pertain to the Company’s continuing operations, which
exclude the results of those facilities that have been previously
disposed.
The
accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with United States generally accepted accounting
principles (“GAAP”) for interim financial information and with the instructions
to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include
all of the information and notes required by GAAP for complete financial
statements. In the opinion of management, all adjustments, consisting of normal
recurring adjustments, and disclosures considered necessary for a fair
presentation have been included. Operating results for the three and six months
ended June 30, 2010 are not necessarily indicative of the results that may be
expected for the year ending December 31, 2010. For further information, refer
to the consolidated financial statements and notes thereto included in the
Company’s Annual Report on Form 10-K for the year ended December 31,
2009.
The
majority of the Company’s expenses are “cost of revenue” items. Costs that could
be classified as “general and administrative” by the Company would include
LifePoint corporate overhead costs, which were $28.6 million and $24.7 million
for the three months ended June 30, 2010 and 2009, respectively, and $54.5
million and $51.1 million for the six months ended June 30, 2010 and 2009,
respectively.
Note 2. Repurchases of Common
Stock
In August
2009, the Company’s Board of Directors authorized the repurchase of up to $100.0
million of outstanding shares of the Company’s common stock either in the open
market or through privately negotiated transactions, subject to market
conditions, regulatory constraints and other factors (the “Repurchase Plan”).
The Repurchase Plan expires in February 2011, and the Company is not
obligated to repurchase any specific number of shares. On March 16,
2010, the Company entered into a trading plan in accordance with the United
States Securities and Exchange Commission (the “SEC”) Rule 10b5-1 to facilitate
repurchases of its common stock (the “Trading Plan”). The Trading
Plan became effective on March 17, 2010 and expired on May 7,
2010. There were no repurchases under the Trading Plan. In
connection with the Repurchase Plan, the Company repurchased approximately 1.1
million and 1.3 million shares for an aggregate purchase price, including
commissions, of approximately $40.1 million and $45.3 million at an average
purchase price of $34.33 and $34.15 per share, respectively, for the three and
six months ended June 30, 2010. These shares have been designated by the Company
as treasury stock.
Additionally,
the Company redeems shares from employees for minimum statutory tax withholding
purposes upon vesting of certain stock wards granted pursuant to the Company’s
Amended and Restated 1998 Long-Term Incentive Plan (“LTIP”) and the Amended and
Restated Management Stock Purchase Plan (“MSPP”). The Company redeemed
approximately 0.1 million shares of certain vested LTIP and MSPP shares during
each of the three months ended June 30, 2010 and 2009 for an aggregate price of
approximately $1.4 million and $1.0 million, respectively, and 0.2 million
shares of certain vested LTIP and MSPP shares during each of the six months
ended June 30, 2010 and 2009 for an aggregate price of approximately $5.2
million and $2.6 million, respectively. These shares have been designated by the
Company as treasury stock.
7
Note 3. Fair Values of Financial
Instruments
In
accordance with Accounting Standards Codification (“ASC”) 825-10, “Financial
Instruments”, the fair value of the Company’s financial instruments are further
described below.
Cash
and Cash Equivalents, Accounts Receivable and Accounts Payable
The
carrying amounts reported in the accompanying condensed consolidated balance
sheets for cash and cash equivalents, accounts receivable and accounts payable
approximate fair value because of the short-term maturity of these
instruments.
Long-Term
Debt
The
Company’s term B loans (the “Term B Loans”) under its credit agreement with
Citicorp North America, Inc. as administrative agent, and a syndicate of lenders
(the “Credit Agreement”), 3½% Convertible Senior Subordinated Notes due May 15,
2014 (the “3½% Notes”) and 3¼% Convertible Senior Subordinated Debentures due
August 15, 2025 (the “3¼% Debentures”) were the only long-term debt instruments
where the carrying amounts differed from their fair value as of June 30, 2010
and December 31, 2009. The carrying amount and fair value of these instruments
as of June 30, 2010 and December 31, 2009 were as follows (in
millions):
Carrying Amount
|
Fair Value
|
|||||||||||||||
June 30,
2010
|
December 31,
2009
|
June 30,
2010
|
December 31,
2009
|
|||||||||||||
Term
B Loans
|
$ | 692.9 | $ | 692.9 | $ | 662.9 | $ | 673.8 | ||||||||
3½%
Notes, excluding unamortized discount
|
$ | 575.0 | $ | 575.0 | $ | 530.4 | $ | 536.2 | ||||||||
3¼%
Debentures, excluding unamortized discount
|
$ | 225.0 | $ | 225.0 | $ | 209.0 | $ | 206.2 |
The fair
values of the Company’s Term B Loans, 3½% Notes and 3¼% Debentures were based on
the quoted prices at June 30, 2010 and December 31, 2009. Effective
February 26, 2010, the Company amended its existing Credit Agreement, as further
described in Note 7, and extended the maturity date and increased the applicable
interest rate for a portion of the Term B Loans. This amendment impacted the
determination of the fair value of the Company’s Term B Loans at June 30,
2010.
Interest
Rate Swap
The
Company has designated its interest rate swap as a cash flow hedge instrument,
which is recorded in the Company’s accompanying condensed consolidated balance
sheets at its fair value. The fair value of the Company’s interest rate swap
agreement is determined in accordance with ASC 815-10, “Derivatives and
Hedging”, (“ASC 815-10”), based on the amount at which it could be settled,
which is referred to in ASC 815-10 as the exit price. The exit price is based
upon observable market assumptions and appropriate valuation adjustments for
credit risk. The Company has categorized its interest rate swap as Level 2 in
accordance with ASC 815-10.
The fair
value of the Company’s interest rate swap at June 30, 2010 and December 31, 2009
reflects a liability of approximately $18.5 million and $28.3 million,
respectively. The interest rate swap is included as a current
liability under the caption interest rate swap at June 30, 2010 and as a
long-term liability included as a component of reserves for self-insurance
claims and other liabilities at December 31, 2009 in the accompanying condensed
consolidated balance sheets. The Company’s interest rate swap is further
described in Note 7.
8
Note
4. Acquisitions
Effective May 1, 2010, the Company
acquired Clark Regional Medical Center (“Clark”), a 100 bed hospital located in
Winchester, Kentucky. In connection with the acquisition of Clark,
the Company entered into a lease agreement for the existing Clark hospital, the
Company acquired certain operating assets and working capital for $10.1 million,
of which $1.3 million has been allocated to
goodwill. Additionally, the Company has committed to spend an
additional $60.0 million to build and equip a new hospital to replace the
current hospital facility. The Company anticipates opening the replacement
hospital approximately 18 to 24 months after construction
begins. The Company expects to begin construction during the
fourth quarter of 2010. The
results of operations of Clark are included in the Company’s results of
operations beginning May 1, 2010.
The
Company has entered into an agreement to purchase the assets of Sumner Regional
Health Systems (“Sumner Systems”) for $145.0 million, plus net working
capital. Sumner Systems includes Sumner Regional Medical Center, a
155 bed hospital located in Gallatin, Tennessee, Trousdale Medical Center, a 25
bed hospital located in Hartsville, Tennessee and Riverview Regional Medical
Center, a two campus hospital system with a combined 88 beds in Carthage,
Tennessee. In connection with the Company’s entry into the agreement
to purchase the assets of Sumner Systems, the Company made an escrow deposit of
approximately $15.4 million which is included in other assets in the
accompanying condensed consolidated balance sheet as of June 30,
2010. The Company has committed to invest an additional $60.0 million
in capital expenditures and improvements over the 10 year period following the
closing of the Sumner Systems transaction. The closing of the Sumner
Systems transaction is subject to various closing conditions, and there can be
no assurance when such conditions will be met, if at all.
Additionally,
during the six months ended June 30, 2010, the Company completed certain
ancillary service-line acquisitions, including physician practices, totaling
$17.2 million, of which $8.9 million was allocated to non-competition
agreements.
Note 5. Goodwill and Intangible
Assets
Goodwill
ASC
350-10, “Intangibles — Goodwill and Other”, requires goodwill and
intangible assets with indefinite lives to be tested at least annually for
impairment and, if certain events or changes in circumstances indicate that an
impairment loss may have been incurred, on an interim basis. The Company’s
business comprises a single operating reporting unit for impairment test
purposes. For the purposes of these analyses, the Company’s estimates of fair
value are based on a combination of the income approach, which estimates the
fair value of the Company based on its future discounted cash flows, and the
market approach, which estimates the fair value of the Company based on
comparable market prices. The Company performed its most recent goodwill
impairment testing as of October 1, 2009 and did not incur an impairment
charge.
9
Summary
of Intangible Assets
The
following table provides information regarding the Company’s intangible assets,
which are included in the accompanying condensed consolidated balance sheets as
of June 30, 2010 and December 31, 2009 (in millions):
June 30,
|
December 31,
|
|||||||
2010
|
2009
|
|||||||
Amortized
intangible assets:
|
||||||||
Contract-based
physician minimum revenue guarantees
|
||||||||
Gross
carrying amount
|
$ | 82.4 | $ | 77.5 | ||||
Accumulated
amortization
|
(33.0 | ) | (26.4 | ) | ||||
Net
total
|
49.4 | 51.1 | ||||||
Non-competition
agreements
|
||||||||
Gross
carrying amount
|
29.3 | 20.4 | ||||||
Accumulated
amortization
|
(10.6 | ) | (9.4 | ) | ||||
Net
total
|
18.7 | 11.0 | ||||||
Total
amortized intangible assets
|
||||||||
Gross
carrying amount
|
111.7 | 97.9 | ||||||
Accumulated
amortization
|
(43.6 | ) | (35.8 | ) | ||||
Net
total
|
68.1 | 62.1 | ||||||
Indefinite-lived
intangible assets:
|
||||||||
Certificates
of need
|
6.5 | 6.5 | ||||||
Total
intangible assets:
|
||||||||
Gross
carrying amount
|
118.2 | 104.4 | ||||||
Accumulated
amortization
|
(43.6 | ) | (35.8 | ) | ||||
Net
total
|
$ | 74.6 | $ | 68.6 |
Contract-Based
Physician Minimum Revenue Guarantees
The
Company has committed to provide certain financial assistance pursuant to
recruiting agreements, or “physician minimum revenue guarantees,” with various
physicians practicing in the communities it serves. In consideration for a
physician relocating to one of its communities and agreeing to engage in private
practice for the benefit of the respective community, the Company may advance
certain amounts of money to a physician to assist in establishing his or her
practice.
The
Company accounts for its physician minimum revenue guarantees in accordance with
the provisions of ASC 460-10, “Guarantees”, (“ASC 460-10”). In accordance with
ASC 460-10, the Company records a contract-based intangible asset and a related
guarantee liability for new physician minimum revenue guarantees. The
contract-based intangible asset is amortized as a component of other operating
expenses, in the accompanying condensed consolidated statements of operations,
over the period of the physician contract, which typically ranges from four to
five years. As of June 30, 2010 and December 31, 2009, the Company’s liability
for contract-based physician minimum revenue guarantees was $18.0 million and
$18.7 million, respectively. These amounts are included in other current
liabilities in the Company’s accompanying condensed consolidated balance
sheets.
Non-Competition
Agreements
The
Company has entered into non-competition agreements with certain physicians and
other individuals which are amortized on a straight-line basis over the term of
the agreements.
10
Certificates
of Need
The
construction of new facilities, the acquisition or expansion of existing
facilities and the addition of new services and certain equipment at the
Company’s facilities may be subject to state laws that require prior approval by
state regulatory agencies. These certificate of need laws generally require that
a state agency determine the public need and give approval prior to the
construction or acquisition of facilities or the addition of new services. The
Company operates hospitals in certain states that have adopted certificate of
need laws.
Note 6. Stock-Based
Compensation
The
Company issues stock options and other stock-based awards (nonvested stock,
restricted stock units, performance awards and deferred stock units) to key
employees and non-employee directors under its LTIP, MSPP and the Amended and
Restated Outside Directors Stock and Incentive Compensation Plan (“ODSICP”). The
Company accounts for its stock-based awards in accordance with the provisions of
ASC 718-10 “Compensation — Stock Compensation” (“ASC 718-10”). In
accordance with ASC 718-10, the Company recognizes stock-based compensation
expense based on the estimated grant date fair value of each stock-based
award.
Stock
Options
The
Company estimated the fair value of stock options granted during the three and
six months ended June 30, 2010 and 2009 using the Hull-White II (“HW-II”)
lattice option valuation model and a single option award approach. The Company
is amortizing the fair value on a straight-line basis over the requisite service
period of the awards, which is the vesting period of three years. The Company
granted stock options to purchase 1,241,313 and 874,725 shares of the Company’s
common stock to certain key employees under the LTIP during the six months ended
June 30, 2010 and 2009, respectively. The stock options that were granted during
the six months ended June 30, 2010 and 2009 vest 33.3% on each grant anniversary
date over three years of continued employment.
The
following table shows the weighted average assumptions the Company used to
develop the fair value estimates under its HW-II option valuation model and the
resulting estimates of weighted-average fair value per share of stock options
granted during the six months ended June 30, 2010 and 2009:
Six Months Ended
June 30,
|
||||||||
2010
|
2009
|
|||||||
Expected
volatility
|
40.0 | % | 40.2 | % | ||||
Risk
free interest rate (range)
|
0.06% - 3.69 | % | 0.10% - 2.92 | % | ||||
Expected
dividends
|
— | — | ||||||
Average
expected term (years)
|
5.4 | 5.4 | ||||||
Fair
value per share of stock options granted
|
$ | 11.23 | $ | 7.92 |
The total
intrinsic value of stock options exercised during the six months ended June 30,
2010 and 2009 was $1.4 million and $7.9 million, respectively. The Company
received $4.3 million and $7.9 million during the three months ended June 30,
2010 and 2009, respectively, and $13.5 million and $9.6 million during the six
months ended June 30, 2010 and 2009, respectively, in cash from stock option
exercises. The actual tax benefit realized for the tax deductions from stock
option exercises totaled $2.3 million and $3.2 million during the three and six
months ended June 30, 2009, respectively. There was a nominal amount
of tax benefit realized for the tax deductions from stock option exercises
during the three and six months ended June 30, 2010.
11
As of
June 30, 2010, there was $15.5 million of total estimated unrecognized
compensation cost related to stock option compensation arrangements. Total
estimated unrecognized compensation cost will be adjusted for future changes in
estimated forfeitures. The Company expects to recognize that cost over a
weighted average period of 1.6 years.
Other
Stock-Based Awards
The fair
value of other stock-based awards is determined based on the closing price of
the Company’s common stock on the day prior to the grant date. Stock-based
compensation expense for the Company’s other stock-based awards is recorded
equally over the vesting periods of such awards generally ranging from six
months to five years.
During
the six months ended June 30, 2010 and 2009, the Company granted 481,347 and
830,668 shares, respectively, of other stock-based awards under its LTIP, MSPP
and ODSICP plans to certain key employees and non-employee directors. Of the
481,347 other stock-based awards granted during the six months ended June 30,
2010, 347,622 cliff-vest three years from the grant date, 106,250 ratably vest
over the three year period from the grant date and 27,475 cliff-vest six months
and one day from the grant date. Of the 830,668 nonvested shares granted during
the six months ended June 30, 2009, 358,406 ratably vest over the three year
period from the grant date; 337,500 cliff-vest three years from the grant date;
50,000 cliff-vest four years from the grant date; 50,000 cliff-vest five years
from the grant date; and 34,762 cliff-vested six months and one day from the
grant date. The weighted average fair market value at the date of grant of the
481,347 and 830,668 shares of nonvested stock awards was $30.43 and $21.31 per
share, respectively.
Of the
other stock-based awards granted under the LTIP during the six months ended June
30, 2010, 317,000 shares are performance-based. In addition to requiring
continuing service of an employee, the vesting of these other stock-based awards
is contingent upon the satisfaction of certain financial goals, specifically
related to the achievement of targeted annual revenues and earnings goals within
a three-year period. Under the LTIP, if these goals are achieved, the other
stock-based awards will cliff-vest three years after the grant date. Of the
other stock-based awards granted under the LTIP during the six months ended June
30, 2009, 307,500 were performance-based. The performance criteria
for these awards have been certified as met by the Compensation Committee of the
Company’s Board of Directors, however, these awards are still subject to
continuing service requirements and contain three year cliff-vesting after the
grant date provisions. The fair value for each of these other
stock-based awards was determined based on the closing price of the Company’s
common stock on the day prior to the grant date and assumes that the performance
goals will be achieved. If the performance goals are not met for the
performance-based awards granted during the six months ended June 30, 2010, no
compensation expense will be recognized, and any previously recognized
compensation expense will be reversed.
Notwithstanding
the aforementioned vesting requirements, the nonvested stock awards and
performance-based awards granted under the LTIP become fully vested upon the
death or disability of the participant. Additionally, in the event of
termination without cause of a participant, the nonvested stock awards and
performance-based awards otherwise subject to cliff-vesting become vested in a
percentage equal to the number of full months of continuous employment following
the date of grant through the date of termination divided by the total number of
months in the vesting period, and in the case of performance-based awards, only
in the event that the performance goals are attained.
As of
June 30, 2010, there was $20.4 million of total estimated unrecognized
compensation cost related to other stock-based awards granted under the LTIP,
MSPP and ODSICP plans. Total estimated unrecognized compensation cost will be
adjusted for future changes in estimated forfeitures. The Company expects to
recognize that cost over a weighted average period of 1.9
years.
12
Summary
The
following table summarizes the Company’s total stock-based compensation expense
as well as the total recognized tax benefits related thereto for the three and
six months ended June 30, 2010 and 2009 (in millions):
Three Months Ended
June 30,
|
Six Months Ended
June 30,
|
|||||||||||||||
2010
|
2009
|
2010
|
2009
|
|||||||||||||
Other
stock-based awards
|
$ | 3.1 | $ | 3.2 | $ | 6.9 | $ | 7.2 | ||||||||
Stock
options
|
2.2 | 1.5 | 4.2 | 3.4 | ||||||||||||
Total
stock-based compensation expense
|
$ | 5.3 | $ | 4.7 | $ | 11.1 | $ | 10.6 | ||||||||
Tax
benefit on stock-based compensation expense
|
$ | 2.1 | $ | 2.1 | $ | 4.4 | $ | 4.6 |
The
Company did not capitalize any stock-based compensation cost during the three
month and six months ended June 30, 2010 or 2009. As of June 30, 2010, there was
$35.9 million of total estimated unrecognized compensation cost related to all
of the Company’s stock compensation arrangements. Total estimated unrecognized
compensation cost may be adjusted for future changes in estimated forfeitures.
The Company expects to recognize that cost over a weighted-average period of 1.8
years.
Note
7. Long-Term Debt
Credit
Agreement
Effective
February 26, 2010, the Company amended its existing Credit Agreement. The
amendment extends the maturity date of $443.7 million of the Company’s $692.9
million outstanding Term B Loans from April 15, 2012 to April 15, 2015 and the
maturity date of the $350.0 million of capacity available under the Company’s
revolving loans (the “Revolving Loans”) from April 15, 2010 to December 15,
2012. The maturity date for the extended portion of the Term B Loans is
contingent upon the refinancing of the Company’s outstanding 3½% Notes beyond
their current maturity date of May 15, 2014. In the event the Company does not
refinance its 3½% Notes, the extended portion of the Term B Loans mature on
February 13, 2014. For consideration of the extension in maturity dates, the
amendment increases the applicable interest rates from an adjusted London
Interbank Offered Rate (“Adjusted LIBOR”) plus a margin of 1.625% to an Adjusted
LIBOR plus a margin of 2.750% for the extended Term B Loans. Additionally, the
amendment increases the applicable interest rates from an Adjusted LIBOR plus a
margin of 1.750% to an Adjusted LIBOR plus a margin of 2.750% for outstanding
Revolving Loans, subject to adjustment for changes in the Company’s maximum
total leverage ratio calculations. Furthermore, the amendment increases the
unused credit capacity fee applicable to the Revolving Loans from 0.375% to
0.625%. The remaining $249.2 million outstanding under the Company’s Term B
Loans that were not extended retain their original maturity dates and interest
rates.
Interest
Rate Swap
The
Company has an interest rate swap agreement with Citibank, N.A. (“Citibank”) as
counterparty that matures on May 30, 2011. The interest rate swap agreement
requires the Company to make quarterly fixed rate payments to Citibank
calculated on a notional amount as set forth in the table below at an annual
fixed rate of 5.585% while Citibank is obligated to make quarterly floating
payments to the Company based on the three-month LIBOR on the same referenced
notional amount. Notwithstanding the terms of the interest rate swap
transaction, the Company is ultimately obligated for all amounts due and payable
under its Credit Agreement.
13
The
following table provides information regarding the notional amounts in effect
for the indicated date ranges for the Company’s interest rate swap
agreement:
Date Range
|
Notional Amount
(In millions)
|
|||
November
28, 2008 to November 30, 2009
|
$ | 600.0 | ||
November
30, 2009 to November 30, 2010
|
450.0 | |||
November
30, 2010 to May 30, 2011
|
300.0 |
The
Company entered into the interest rate swap agreement to mitigate the floating
interest rate risk on a portion of its outstanding borrowings under its Credit
Agreement. ASC 815-10 requires companies to recognize all derivative instruments
as either assets or liabilities at fair value in a company’s balance sheets. In
accordance with ASC 815-10, the Company designates its interest rate swap as a
cash flow hedge. For derivative instruments that are designated and qualify as
cash flow hedges, the effective portion of the gain or loss on the derivative is
reported as a component of other comprehensive income (“OCI”) and reclassified
into earnings in the same period or periods during which the hedged transactions
affects earnings. Gains and losses on the derivative representing either hedge
ineffectiveness or hedge components excluded from the assessment of
effectiveness are recognized in current earnings. The Company assesses the
effectiveness of its interest rate swap on a quarterly basis. The Company
completed its quarterly assessments during each of the quarters for the three
and six months ended June 30, 2010 and 2009 and determined that its cash flow
hedge was effective.
As of
June 30, 2010 and December 31, 2009, the fair value and line item caption of the
Company’s interest rate swap derivative instrument was as follows (in
millions):
Balance Sheet Location
|
June 30, 2010
|
December 31, 2009
|
||||||||
Derivative
designated as a hedging instrument under ASC 815-10:
|
||||||||||
Interest
rate swap
|
Interest
rate swap
|
$ | 18.5 | $ | — | |||||
Reserves
for self-insurance claims and other liabilities
|
$ | — | $ | 28.3 |
The
following table shows the effect of the Company’s interest rate swap derivative
instrument qualifying and designated as a hedging instrument in cash flow hedges
for the three and six months ended June 30, 2010 and 2009 (in
millions):
Amount of gain (loss)
recognized in OCI on
Derivative (Effective
Portion)
|
Location of gain (loss)
recognized in Income on
Derivative (Ineffective
Portion and Amount
Excluded from
Effectiveness Testing)
|
Amount of gain (loss)
recognized in Income on
Derivative (Ineffective
Portion and Amount
Excluded from
Effectiveness Testing)
|
|||||||||||||||||||||||||||||||
For the Three
Months Ended
June 30,
|
For the Six
Months Ended
June 30,
|
For the Three
Months Ended
June 30,
|
For the Six
Months Ended
June 30,
|
||||||||||||||||||||||||||||||
2010
|
2009
|
2010
|
2009
|
2010
|
2009
|
2010
|
2009
|
||||||||||||||||||||||||||
Derivative
in ASC 815-10 cash flow hedging relationships:
|
|||||||||||||||||||||||||||||||||
Interest
rate swap
|
$ | 6.0 | $ | 4.9 | $ | 9.8 | $ | 6.9 |
Interest
expense, net
|
$ | — | $ | — | $ | — | $ | — |
Since the
Company’s interest rate swap is not traded on a market exchange, the fair value
is determined using a valuation model that involves a discounted cash flow
analysis on the expected cash flows. This cash flow analysis reflects the
contractual terms of the interest rate swap agreement, including the period to
maturity, and uses observable market-based inputs, including the three-month
LIBOR forward interest rate curve. The fair value of the Company’s interest rate
swap agreement is determined by netting the discounted future fixed cash
payments and the discounted expected variable cash receipts. The variable cash
receipts are based on the expectation of future interest rates based on the
observable market three-month LIBOR forward interest rate curve and the notional
amount being hedged.
14
The
observable market three-month LIBOR forward interest rates used are as
follows:
Settlement Date
|
Three-month LIBOR
Forward Interest Rates
|
|||
August
31, 2010
|
0.53781 | % | ||
November
30, 2010
|
0.62403 | |||
February
28, 2011
|
0.74706 | |||
May
30, 2011
|
0.81102 |
In
addition, the Company incorporates credit valuation adjustments to appropriately
reflect both its own and Citibank’s non-performance or credit risk in the fair
value measurements. The interest rate swap agreement exposes the Company to
credit risk in the event of non-performance by Citibank. However, the Company
does not anticipate non-performance by Citibank. The majority of the inputs used
to value its interest rate swap agreement, including the three-month LIBOR
forward interest rate curve and market perceptions of the Company’s credit risk
used in the credit valuation adjustments, are observable inputs available to a
market participant. As a result, the Company has determined that the interest
rate swap valuation is classified in Level 2 of the fair value hierarchy, in
accordance with ASC 820-10, “Fair Value Measurements and
Disclosures.”
Note 8. Discontinued
Operations
Effective
May 1, 2009, the Company sold Doctors’ Hospital of Opelousas (“Opelousas”), a
171 bed facility located in Opelousas, Louisiana, for $13.7 million, including
working capital. Additionally, effective July 1, 2009, the Company sold Starke
Memorial Hospital (“Starke”), a 53 bed facility located in Knox, Indiana, for
$6.3 million, including working capital.
The
results of operations, net of income taxes, of Opelousas and Starke, as well as
the Company’s other previously disposed facilities, are reflected in the
accompanying condensed consolidated financial statements as discontinued
operations in accordance with ASC 360-10, “Property, Plant, and
Equipment.”
Interest
expense is allocated to discontinued operations based on the ratio of disposed
net assets to the sum of total net assets of the Company plus the Company’s
total outstanding debt. The Company allocated to discontinued operations
interest expense of $0.3 million during the six months ended June 30, 2009.
There were no allocations of interest expense to discontinued operations for the
three months ended June 30, 2010 and 2009 or the six months ended June 30,
2010.
The
revenues, income (loss) before income taxes, and net income (loss) of
discontinued operations for the three and six months ended June 30, 2010 and
2009 were as follows (in millions):
Three Months Ended
June 30,
|
Six Months Ended
June 30,
|
|||||||||||||||
2010
|
2009
|
2010
|
2009
|
|||||||||||||
Revenues
|
$ | (0.1 | ) | $ | 5.3 | $ | (0.5 | ) | $ | 16.1 | ||||||
Income
(loss) before income tax benefits
|
$ | 0.2 | $ | (4.0 | ) | $ | (0.4 | ) | $ | (5.7 | ) | |||||
Net
income (loss)
|
$ | 0.1 | $ | (2.1 | ) | $ | (0.3 | ) | $ | (3.2 | ) |
15
Note 9. Earnings (Loss) Per
Share
The
following table sets forth the computation of basic and diluted earnings (loss)
per share for the three and six months ended June 30, 2010 and 2009 (dollars and
shares in millions, except per share amounts):
Three Months Ended
June 30,
|
Six Months Ended
June 30,
|
|||||||||||||||
2010
|
2009
|
2010
|
2009
|
|||||||||||||
Numerator
for basic and diluted earnings per share attributable to LifePoint
|
||||||||||||||||
Hospitals,
Inc.:
|
||||||||||||||||
Income
from continuing operations
|
$ | 38.2 | $ | 29.5 | $ | 82.4 | $ | 69.6 | ||||||||
Less:
Net income attributable to noncontrolling interests
|
(0.7 | ) | (0.5 | ) | (1.6 | ) | (1.1 | ) | ||||||||
Income
from continuing operations attributable to LifePoint Hospitals, Inc.
stockholders
|
37.5 | 29.0 | 80.8 | 68.5 | ||||||||||||
Income
(loss) from discontinued operations, net of income taxes
|
0.1 | (2.7 | ) | (0.3 | ) | (3.8 | ) | |||||||||
Net
income attributable to LifePoint Hospitals, Inc.
|
$ | 37.6 | $ | 26.3 | $ | 80.5 | $ | 64.7 | ||||||||
Denominator:
|
||||||||||||||||
Weighted
average shares outstanding — basic
|
53.2 | 52.8 | 53.2 | 52.5 | ||||||||||||
Effect
of dilutive securities: stock options and other stock-based
awards
|
1.2 | 0.8 | 1.3 | 0.8 | ||||||||||||
Weighted
average shares outstanding — diluted
|
54.4 | 53.6 | 54.5 | 53.3 | ||||||||||||
Basic
earnings (loss) per share attributable to LifePoint Hospitals, Inc.
stockholders:
|
||||||||||||||||
Continuing
operations
|
$ | 0.71 | $ | 0.55 | $ | 1.52 | $ | 1.31 | ||||||||
Discontinued
operations
|
— | (0.05 | ) | (0.01 | ) | (0.08 | ) | |||||||||
Net
income
|
$ | 0.71 | $ | 0.50 | $ | 1.51 | $ | 1.23 | ||||||||
Diluted
earnings (loss) per share attributable to LifePoint Hospitals, Inc.
stockholders:
|
||||||||||||||||
Continuing
operations
|
$ | 0.69 | $ | 0.54 | $ | 1.48 | $ | 1.29 | ||||||||
Discontinued
operations
|
— | (0.05 | ) | — | (0.08 | ) | ||||||||||
Net
income
|
$ | 0.69 | $ | 0.49 | $ | 1.48 | $ | 1.21 |
The
Company’s 3½% Notes and 3¼% Debentures are included in the calculation of
diluted earnings per share whether or not the contingent requirements have been
met for conversion using the treasury stock method if the conversion price of
$51.79 and $61.22, respectively, is less than the average market price of the
Company’s common stock for the period. Upon conversion, the par value is settled
in cash, and only the conversion premium is settled in shares of the Company’s
common stock. The impacts of the 3½% Notes and 3¼% Debentures have been excluded
because the effects would have been anti-dilutive for the three and six months
ended June 30, 2010 and 2009.
Note 10.
Contingencies
Legal
Proceedings and General Liability Claims
The
Company is, from time to time, subject to claims and suits arising in the
ordinary course of business, including claims for damages for personal injuries,
medical malpractice, breach of contracts, wrongful restriction of or
interference with physicians’ staff privileges and employment related claims. In
certain of these actions, plaintiffs request payment for damages, including
punitive damages that may not be covered by insurance. The Company is currently
not a party to any pending or threatened proceeding, which, in management’s
opinion, would have a material adverse effect on the Company’s business,
financial condition or results of operations.
16
In May
2009, the Company’s Andalusia Regional Hospital located in Andalusia, Alabama
produced documents responsive to a request received from the U.S. Attorney’s
Office for the Western District of New York regarding an investigation they are
conducting with respect to the billing of kyphoplasty procedures. Kyphoplasty is
a surgical spine procedure that returns a compromised vertebra (either from
trauma or osteoporotic disease process) to its previous height, reducing or
eliminating severe pain. It has been reported that other unaffiliated hospitals
and hospital operators in multiple states have received similar requests for
information. The Company believes that this investigation is related to the May
22, 2008 qui tam settlement between the same U.S. Attorney’s Office and the
manufacturer and distributor of the product used in performing the kyphoplasty
procedure.
Based on
a review of the number of the kyphoplasty procedures performed at all of the
Company’s hospitals, as part of its effort to cooperate with the U.S. Attorney’s
Office, by letter dated January 20, 2010 the Company’s management identified to
the U.S. Attorney’s Office four additional facilities at which the number of
inpatient kyphoplasty procedures approximated those performed at Andalusia
Regional Hospital. The Company’s management is continuing to cooperate with the
government’s investigation and is reviewing whether its hospitals have engaged
in inappropriate billing for kyphoplasty procedures.
Physician
Commitments
The
Company has committed to provide certain financial assistance pursuant to
recruiting agreements with various physicians practicing in the communities it
serves. In consideration for a physician’s relocating to one of its communities
and agreeing to engage in private practice for the benefit of the respective
community, the Company may advance certain amounts of money to a physician,
normally over a period of one year, to assist in establishing the physician’s
practice. The Company has committed to advance a maximum amount of approximately
$38.8 million at June 30, 2010. The actual amount of such commitments to be
subsequently advanced to physicians is estimated at $18.0 million and often
depends upon the financial results of a physician’s private practice during the
guarantee period. Generally, amounts advanced under the recruiting agreements
may be forgiven pro rata over a period of 36 to 48 months contingent upon the
physician continuing to practice in the respective community. Pursuant to the
Company’s standard physician recruiting agreement, any breach or non-fulfillment
by a physician under the physician recruiting agreement gives the Company the
right to recover any payments made to the physician under the
agreement.
Capital
Expenditure Commitments
The
Company is reconfiguring some of its facilities to accommodate patient services
more effectively, restructuring existing surgical capacity in some of its
hospitals to permit additional patient volume and a greater variety of services,
and implementing various information system initiatives in its efforts to comply
with the Health Information Technology for Economic and Clinical Health Act (the
“HITECH Act”). The Company has incurred approximately $34.5 million in
uncompleted projects as of June 30, 2010, which is included as construction in
progress in the Company’s accompanying condensed consolidated balance sheet. At
June 30, 2010, the Company had uncompleted projects with an estimated cost to
complete and equip of approximately $40.9 million. The Company is subject to
annual capital expenditure commitments in connection with several of its
facilities.
Note
11. Subsequent Events
In
accordance with the provisions of ASC 855-10, “Subsequent Events”, the Company
evaluated all material events occurring subsequent to the balance sheet date for
events requiring disclosure or recognition in the Company’s consolidated
financial statements.
17
Item 2. Management’s
Discussion and Analysis of Financial Condition and Results of
Operations.
We
recommend that you read this discussion together with our unaudited condensed
consolidated financial statements and related notes included elsewhere in this
report, as well as our Annual Report on Form 10-K for the year ended December
31, 2009 (the “2009 Annual Report on Form 10-K”). Unless otherwise indicated,
all relevant financial and statistical information included herein relates to
our continuing operations. Additionally, unless the context indicates otherwise,
LifePoint Hospitals, Inc. and its subsidiaries are referred to in this section
as “we,” “our,” or “us.”
We make
forward-looking statements in this report, other reports and in statements we
file with the SEC and/or release to the public. In addition, our senior
management makes forward-looking statements orally to analysts, investors, the
media and others. Broadly speaking, forward-looking statements include:
projections of our revenues, net income, earnings per share, capital
expenditures, cash flows, debt repayments, interest rates, operating statistics
and data or other financial items; descriptions of plans or objectives of our
management for future operations, services or growth plans including
acquisitions, divestitures, business strategies and initiatives; interpretations
of Medicare and Medicaid laws and regulations and their effect on our business;
and descriptions of assumptions underlying or relating to any of the
foregoing.
In this
report, for example, we make forward-looking statements, including statements
discussing our expectations about: future financial performance and condition;
future liquidity and capital resources; future cash flows; existing and future
debt and equity structure; our strategic goals; future acquisitions; our
business strategy and operating philosophy, including an evaluation of growth
strategies for existing markets and for potential acquisitions; costs of
providing care to our patients; changes in interest rates; our compliance with
new and existing laws and regulations; the impact of national healthcare reform;
the performance of counterparties to our agreements; effect of credit ratings;
professional fees; increased costs of salaries and benefits; industry and
general economic trends; reimbursement changes; patient volumes and related
revenues; future capital expenditures, including capital expenditures related to
information systems; the impact of changes in our critical accounting estimates;
claims and legal actions relating to professional liabilities, governmental
investigations and other matters; and physician recruiting and retention,
including trends in physician employment.
Forward-looking
statements discuss matters that are not historical facts. Because they discuss
future events or conditions, forward-looking statements often include words such
as “can,” “could,” “may,” “should,” “believe,” “will,” “would,” “expect,”
“project,” “estimate,” “seek,” “anticipate,” “intend,” “target,” “continue” or
similar expressions. You should not unduly rely on forward-looking statements,
which give our expectations about the future and are not guarantees.
Forward-looking statements speak only as of the date they are made. We do not
undertake any obligation to update our forward-looking statements to reflect
events or circumstances after the date of this document or to reflect the
occurrence of unanticipated events.
There are
several factors, some beyond our control that could cause results to differ
significantly from our expectations. Some of these factors are described in Part
I, Item 1A. Risk
Factors of our 2009 Annual Report on Form 10-K and in Part II, Item 1A.
Risk Factors of our
quarterly report on Form 10-Q for the three months ended March 31, 2010. Any
factor described in our 2009 Annual Report on Form 10-K and in our quarterly
report on Form 10-Q for the three months ended March 31, 2010 could by itself,
or together with one or more factors, adversely affect our business, results of
operations or financial condition. There may be factors not described in our
2009 Annual Report on Form 10-K, in our quarterly report on Form 10-Q for the
three months ended March 31, 2010 or in this report that could also cause
results to differ from our expectations.
Overview
We
operate general acute care hospitals in non-urban communities in the United
States. At June 30, 2010, we owned or leased through our subsidiaries 48
hospitals, having a total of 5,622 licensed beds, and serving communities in 17
states. Eight of our hospitals are owned by third parties and leased by our
subsidiaries.
18
We
generate revenues primarily through hospital services offered at our facilities.
We generated $790.6 million and $735.3 million during the three months ended
June 30, 2010 and 2009, respectively, and $1,576.8 million and $1,470.8 million
during the six months ended June 30, 2010 and 2009, respectively, in revenues
from continuing operations. For the three months ended June 30, 2010 and 2009,
we derived 40.3% and 39.8%, respectively, and 40.6% and 40.5% for the six months
ended June 30, 2010 and 2009, respectively, of our revenues collectively from
the Medicare and Medicaid programs. Payments made to our hospitals pursuant to
the Medicare and Medicaid programs for services rendered rarely exceed our costs
for such services. As a result, we rely largely on payments made by private or
commercial payors, together with certain limited services provided to Medicare
recipients, to generate an operating profit.
Our
hospitals typically provide the range of medical and surgical services commonly
available in hospitals in non-urban markets, although the services provided at
any specific hospital depend on factors such as community need for the service,
whether physicians necessary to operate the service line safely are members of
the medical staff of that hospital, whether the service might be economically
viable, and any contractual or certificate of need restrictions that might
exist.
Competitive
and Regulatory Environment
The
environment in which our hospitals operate is extremely competitive. Our
hospitals face competition from other acute care hospitals, including larger
tertiary hospitals located in larger markets and/or affiliated with
universities; specialty hospitals that focus on one or a small number of very
lucrative service lines but that are not required to operate emergency
departments; stand-alone centers at which surgeries or diagnostic tests can be
performed; and physicians on the medical staffs of our hospitals. In many cases,
our competitors focus on the service lines that offer the highest margins. By
doing so, our competitors can potentially draw the best-paying business out of
our hospitals. This, in turn, can reduce the overall operating profit of our
hospitals as we are often obligated to offer service lines that operate at a
loss or that have much lower profit margins. We continue to see the shift of
increasingly complex procedures from the inpatient to the outpatient setting and
have also seen growth in the general shift of lower acuity procedures to
physician offices and other non-hospital outpatient settings. These trends have,
to some extent, offset our efforts to improve equivalent admission rates at many
of our hospitals.
Our
hospitals also face extreme competition in their efforts to recruit and retain
physicians on their medical staffs. It is widely recognized that the United
States has a shortage of physicians in certain practice areas, including
specialists such as cardiologists, oncologists, urologists and orthopedists, in
various areas of the country. This fact, and our ability to overcome these
shortages, is directly relevant to our growth strategies as cardiologists,
oncologists, urologists and orthopedists are often the physicians in highest
demand in communities where our hospitals are located.
Our
business and our hospitals are highly regulated, and the penalties for
noncompliance are severe. We are required to comply with extensive, extremely
complicated and overlapping government laws and regulations at the federal,
state and local levels. These laws and regulations govern every aspect of how
our hospitals conduct their operations, from what service lines must be offered
in order to be licensed as an acute care hospital, to whether our hospitals may
employ physicians, and to how (and whether) our hospitals may receive payments
pursuant to the Medicare and Medicaid programs. The failure to comply with these
laws and regulations can result in severe penalties including criminal
penalties, and civil sanctions, and the loss of our ability to receive
reimbursements through the Medicare and Medicaid programs.
19
Not only
are our hospitals heavily regulated, the rules, regulations and laws to which
they are subject often change, with little or no notice, and are often
interpreted and applied differently by various regulatory agencies with
authority to enforce such requirements. Each change or conflicting
interpretation may require our hospitals to make changes in their facilities,
equipment, personnel or services, and may also require that standard operating
policies and procedures be re-written and re-implemented. The cost of complying
with such laws and regulations is a significant component of our overall
expenses. Further, this expense has grown in recent periods due to the
requirements of new regulations and the severity of the penalties associated
with non-compliance, and management believes compliance expenses will continue
to grow in the foreseeable future.
The
hospital industry is also enduring a period where the costs of providing care
are rising faster than reimbursement rates. This places a premium on efficient
operation, the ability to reduce or control costs and the need to leverage the
benefits of our organization across all of our hospitals.
Health
Care Reform
The
Patient Protection and Affordable Care Act and the Health Care Education
Reconciliation Act of 2010 (collectively, the “Acts”) were signed into law by
President Obama on March 23, 2010, and March 30, 2010, respectively. The Acts
dramatically alter the United States health care system and are intended to
decrease the number of uninsured Americans and reduce overall health care costs.
The Acts attempt to achieve these goals by, among other things, requiring most
Americans to obtain health insurance, expanding Medicare and Medicaid
eligibility, reducing Medicare and Medicaid payments, including disproportionate
share payments, expanding the Medicare program’s use of value-based purchasing
programs, tying hospital payments to the satisfaction of certain quality
criteria, and bundling payments to hospitals and other providers. The Acts also
contain a number of measures that are intended to reduce fraud and abuse in the
Medicare and Medicaid programs, such as requiring the use of recovery audit
contractors in the Medicaid program and generally prohibiting physician-owned
hospitals from adding new physician owners or increasing the number of beds and
operating rooms for which they are licensed. Two of our facilities, Havasu
Regional Medical Center and Western Plains Medical Complex, have physician
ownership and are subject to the ownership and expansion restrictions contained
in the Acts. Because a majority of the measures contained in the Acts do not
take effect until 2013 and 2014 and most of the rules and regulations that
implement the provisions of the Acts have not been adopted or proposed, it is
difficult to predict the impact the Acts will have on our facilities. However,
it is possible that the implementation or interpretation of such rules and
regulations or the provisions of the Acts could have an adverse effect on our
financial condition and results of operations.
Medicare
Reimbursement
Medicare
payment methodologies have been, and can be expected to continue to be,
significantly revised based on cost containment and policy
considerations. These revisions will likely be more frequent and
significant as the changes and cost-saving measures required by the Acts are
implemented.
20
Medicare
Inpatient Prospective Payment System
On June 2, 2010, the Centers for Medicare and Medicaid
Services (“CMS”) published a notice
regarding the final Medicare inpatient prospective payment system (“IPPS”)
payment rates for federal fiscal year (“FFY”) 2010. The notice
implemented changes that were made to the Medicare program’s reimbursement for
hospital inpatient services in FFY 2010 by the Acts. Among other things, the
notice decreased, for discharges occurring on or after April 1, 2010, the IPPS
market basket update by 0.25%, from 2.10%
to 1.85% for hospitals that successfully report the quality measures included in
the Reporting Hospital Quality Data for Annual Payment Update (“RHQDAPU”)
program and from 0.10% to -0.15% for
hospitals that do not. The notice also decreased the IPPS outlier
fixed-loss cost threshold for discharges occurring on or after April 1, 2010,
from $23,140 to $23,135.
On July
30, 2010, CMS issued its IPPS final rule for FFY 2011, which begins on October
1, 2010. Among other things, the final rule provides a market basket
update of 2.6% but reduces the update by 0.25% to 2.35% as required by the
Acts. The market basket update will be reduced by an additional 2.0%
to 0.35% for hospitals that do not successfully
report the 2011 quality measures included in the RHQDAPU
program. The final rule also decreases the IPPS outlier
fixed-loss cost threshold to $23,075 and adds 10 new RHQDAPU quality
measures which our hospitals would be required to
report in order to receive the full market
basket increase in FFY 2012. In
addition to the market basket, outlier fixed-loss cost threshold, and RHQDAPU
program updates, the final rule also, as required by Transitional Medical
Assistance, Abstinence Education, and Qualifying Individuals Programs Extension
Act of 2007 (the “TMA Act”), reduces IPPS payment rates in FFY 2011 by an
additional 2.9% to account for the increase in spending that CMS believes is
solely the result of changes in hospital coding and discharge classification
practices that occurred in connection with the implementation of the Medicare
severity diagnosis-related group (“MS-DRG”) system. Although CMS did not specify
any additional reductions for FFY 2012, it indicated that the 2.9% reduction in
FFY 2011 would only recover half of the increase in spending that is required to
be recouped under the TMA Act and that it would need to make additional IPPS
payment reductions in the future. Overall, CMS anticipates that the payment
changes in the final IPPS rule will decrease Medicare operating payments to
acute care hospitals by 0.4% or $440 million in FFY 2011.
Medicare
Inpatient Rehabilitation Facility Prospective Payment
System
On July
22, 2010, CMS published its Medicare inpatient rehabilitation facility (“IRF”)
update notice for FFY 2011. After applying the 0.25% reduction required by the
Acts, the notice increased IRF prospective payment system (“IRF PPS”) payments
by an amount equal to a market basket increase of 2.25% and increased the IRF
PPS outlier threshold amount to $11,410. CMS estimates that the
updates contained in the FFY 2011 IRF PPS notice will increase Medicare payments
to IRFs by $135.0 million in FFY 2011.
Medicare
Inpatient Psychiatric Facility Prospective Payment System
On April
30, 2010, CMS published its Medicare inpatient psychiatric facility (“IPF”)
prospective payment system update for rate year (“RY”) 2011, which began on July
1, 2010. Among other things, the notice included a market basket
increase of 2.4%, which will be reduced by 0.25% as required by the
Acts. The notice also reduced the standardized federal per diem base
rate by 2.66% to account for changes in IPF practices, such as coding for
comorbid medical conditions that do not reflect actual increases in patient
acuity and set the outlier fixed dollar loss threshold amount at
$6,372. CMS estimates that the updates contained in the notice will
increase payments to IPFs by $95.0 million from RY 2010 to RY 2011.
21
Medicare
Outpatient Prospective Payment System
On July
2, 2010 CMS issued a notice regarding the final Medicare hospital outpatient
prospective payment system (“OPPS”) rates for calendar year (“CY”) 2010 to
implement changes in Medicare’s reimbursement policies for hospital outpatient
services that were required by the Acts and its proposed hospital OPPS rule for
CY 2011. Effective as of January 1, 2010, for CY 2010, the notice
reduced the hospital operating market basket increase factor from 2.1% to 1.85%
for hospitals that satisfy the requirements of the Hospital Outpatient Quality
Data Reporting Program (“HOPQDRP”) and from 0.1% to -0.15% for hospitals that do
not. With respect to CY 2011 rates, the proposed OPPS rule would
provide a market basket increase of 2.15% for hospitals that satisfy the HOPQDRP
requirements (after incorporating the adjustments required by the Acts) and
0.15% for hospitals that do not. The proposed rule would also waive
the Medicare deductibles and copayments for certain preventative services that
are reimbursed under OPPS, modify the Medicare program’s supervision
requirements for certain outpatient therapeutic services and add six additional
quality measures to the list of items that a hospital must report to the HOPQDRP
in order to receive the full market basket update in CY 2012. CMS
anticipates that the OPPS proposed rule for CY 2011 will increase expenditures
under OPPS by $3.9 billion from CY 2010 to CY 2011.
Medicare
Home Health Prospective Payment System
On July
23, 2010, CMS published the Medicare home health prospective payment system
(“HH-PPS”) proposed rule for CY 2011. Among other things, the
proposed rule, after taking into account the 1% reduction required by the Acts,
would provide a 1.4% market basket update to the HH-PPS for home health agencies
that submit the quality data required by CMS and a -0.6% market basket update
for home health agencies that do not. The proposed rule also includes
a 3.79% reduction to the national standardized 60-day episode payment rates and
non-routine medical supply (“NRS”) factor for both CY 2011 and CY 2012 to offset
the additional growth that has occurred in the aggregate home health case mix
and that is not associated with any underlying changes in the medical conditions
of home health patients. The proposed rule also includes a 3.00%
rural add-on to the national standardized 60-day episode rate, national
per-visit rates, low utilization payment adjustment and add-on payment, and NRS
conversion factor when home health services are provided in rural
areas. When combined with other changes that are being made to
existing HH-PPS outlier policy by the Acts, CMS estimates that the HH-PPS
proposed rule for CY 2011 will result in a 4.75% or $900 million decrease in
Medicare payments to home health agencies in CY 2011.
Adoption
of Electronic Health Records
The
HITECH Act was enacted into law on February 17, 2009 as part of the American
Recovery and Reinvestment Act of 2009. The HITECH Act includes
provisions designed to increase the use of Electronic Health Records (“EHR”) by
both physicians and hospitals. Beginning with FFY 2011 and
extending through FFY 2016, eligible hospitals and critical access
hospitals (“CAH”) participating in the Medicare and Medicaid programs are
eligible for reimbursement incentives based on successfully demonstrating
meaningful use of its certified EHR technology. Conversely, those
hospitals that do not successfully demonstrate meaningful use of EHR technology
are subject to reductions in reimbursements beginning in FFY
2015. On July 13, 2010, the Secretary of Department of Health and
Human Services (“DHHS”) released final meaningful use
regulations. Meaningful use criteria are divided into three distinct
stages, I, II and III. The final rules specify the initial criteria
for physicians, eligible hospitals, and CAHs necessary to qualify for incentive
payments; calculation of the incentive payment amounts; payment adjustments
under Medicare for covered professional services and inpatient hospital
services, eligible hospitals and CAHs failing to demonstrate meaningful use of
certified EHR technology; and other program participation
requirements.
We intend
to comply with the EHR meaningful use requirements of the HITECH Act in time to
qualify for the maximum available incentive payments. Our compliance
will result in significant costs including professional services focused on
successfully designing and implementing our EHR solutions along with costs
associated with the hardware and software components of the
project. We continue to refine our budgeted costs and the expected
reimbursement improvements associated with our EHR initiatives. We
currently estimate that at a minimum total costs incurred to comply will be
recovered through improved reimbursement amounts over the projected lifecycle of
this initiative.
22
Privacy
and Security Regulations
The
HITECH Act also contains a number of provisions that significantly expand the
reach of the Health Insurance Portability and Accountability Act of 1996
(“HIPAA”). For example, the HITECH Act imposes varying civil monetary penalties
and creates a private cause of action for state attorneys general for certain
HIPAA violations, extends HIPAA’s security provisions to business associates,
and creates new security breach notification requirements. On August 24, 2009,
DHHS issued regulations that clarified and explained the HITECH Act’s
requirements. The regulations took effect on September 23, 2009.
On July
14, 2010, DHHS issued a notice of proposed rulemaking to modify the HIPAA
privacy, security and enforcement regulations to further align with the HITECH
Act's statutory changes. These changes will require substantial operational
changes for HIPAA covered entities and their business
associates. Among other things, the proposed regulations would
provide for new requirements for business associate agreements and a transition
period for compliance, set new limits on the use and disclosure of health
information for marketing and fundraising, prohibit the sale of patient health
information without patient authorization, enhance individuals’ rights to obtain
electronic copies of their medical records and restrict the disclosure of
certain information, add new requirements for notices of privacy practices,
modify restrictions on authorizations for the use of health information for
research, and implement new changes to the HIPAA enforcement
regulations.
Compliance
with these new and proposed standards and the overlapping state laws regarding
the protection of personal information requires significant commitment and
action by our facilities, and we may incur significant costs in implementing the
policies and systems required to comply.
Business
Strategy
We seek
to fulfill our mission of Making Communities Healthier® by striving to improve
the quality and types of healthcare services available in our communities,
provide physicians with a positive environment in which to practice medicine,
with access to necessary equipment and resources, develop and provide a positive
work environment for employees, expand each hospital’s role as a community
asset, and improve each hospital’s financial performance. We expect our
hospitals to be the place where patients choose to come for care, where
physicians want to practice medicine and where employees want to
work.
We believe that growth opportunities
remain in our existing markets. Growth at our hospitals is dependent in part on
how successful our hospitals are in their efforts to recruit physicians to their
respective medical staffs, whether such physicians are active members of such
medical staffs over a long period of time and whether and to what extent members
of our hospitals’ medical staffs admit patients to our hospitals. During 2009
and throughout the first half of 2010, we continued to refine our recruiting
process in an effort to
better identify and focus on those physicians most likely to desire to practice
in our communities and to better tailor our communications to the physicians who
want to practice in non-urban communities. Beginning in 2008 and throughout
2009, we added additional resources at our corporate office to better coordinate
and enhance our recruiting functions.
The
quality of healthcare services provided at our hospitals (and the perceived
quality of such services) is an increasingly important factor to patients when
deciding where to seek care and to physicians when deciding where to practice.
Because in virtually every case the CMS core measure scores ascribed to our
hospitals is impacted by the practice decisions of the physicians on our medical
staffs, we have implemented new strategies to work with medical staff members to
improve scores at all of our hospitals, especially those that are below our
average or below management’s expectation. Recently, we have seen improvements
in our CMS core measure scores and Hospital Consumer Assessment of Healthcare
Providers & Systems scores, an important measure of patients’ perspectives
of hospital care. We are committed to further improve our scores at our
hospitals through targeted strategies, including increased education, when
necessary, awareness campaigns and hospital specific action plans.
23
In many
of our markets, a significant portion of patients who require the services
available at acute care hospitals leave our markets to receive such care. We
believe this fact presents an opportunity for growth, and we are working with
the hospitals in communities where this phenomenon exists to implement new
strategies or enhance existing strategies.
Additionally,
we believe that growth can also be achieved by adding new service lines in our
existing markets, investing in new technologies desired by physicians and
patients, and demonstrating the quality of care provided in our facilities. For
the past two years, we have undertaken redesigned operating reviews of our
hospitals to pinpoint new service lines or technologies that could reduce the
outmigration of patients leaving our markets to receive healthcare services.
Where needed service lines have been identified, we have focused on recruiting
the physicians necessary to correctly operate such service lines. For example,
our hospitals have responded to physician interest in requests for hospitalists
by introducing or strengthening hospitalist programs where appropriate. Our
hospitals have taken other steps, such as structured efforts to solicit input
from medical staff members and to promptly respond to legitimate unmet
physicians needs, to limit or offset the impact of outmigration and to
grow.
While
responsibly managing our operating expenses, we have also made significant,
targeted investments in our hospitals to add new technologies, modernize
facilities and expand the services available. These investments should assist in
our efforts to attract and retain physicians, to offset outmigration of patients
and to make our hospitals more desirable to our employees and potential
patients.
We also
continue to strive to improve our operating performance by improving on our
revenue cycle processes, making an even higher level of purchases through our
group purchasing organization, operating more efficiently and effectively, and
working to appropriately standardize our policies, procedures and practices
across all of our affiliated hospitals. We also believe that our position as the
sole acute care hospital in virtually all of our communities has allowed us, and
will continue to allow us, in many cases to negotiate preferred reimbursement
rates with commercial insurance payors.
Additional
Growth
Our
recent acquisition of certain assets associated with Clark, our lease and
operation of the existing Clark hospital facility effective May 1, 2010, our
commitment to build and equip a replacement hospital facility for Clark as well
as our entry into an agreement to purchase the Sumner Systems is consistent with
our stated goal of seeking to identify and acquire one to three complimentary
hospitals a year. Our intention is to acquire well-positioned hospitals in
growing areas of the United States that we believe are fairly priced and that
could benefit from our management and strategic initiatives. We believe that
this growth by strategic acquisition can supplement the growth we believe we can
generate organically in our existing markets.
Revenue
Sources
Our hospitals generate revenues by
providing healthcare services to our patients. Depending upon the patient’s
medical insurance coverage, we are paid for these services by governmental
Medicare and Medicaid programs, commercial insurance, including managed care
organizations, and directly by the patient. The amounts we are paid for
providing healthcare services to our patients vary depending upon the
payor. Governmental payors generally pay
significantly less than the hospital’s customary charges for the services
provided. Insured patients are generally not responsible for any difference
between customary hospital charges and the amounts received from commercial
insurance payors. However, insured patients are responsible for payments not
covered by insurance, such as exclusions, deductibles and
co-payments.
Revenues
from governmental payors, such as Medicare and Medicaid, are controlled by
complex rules and regulations that stipulate the amount a hospital is paid for
providing healthcare services. We must comply with these rules and regulations
if we are to continue to be eligible to participate in the Medicare and Medicaid
programs. In addition, these rules and regulations are subject to frequent
changes as a result of legislative and administrative action and annual payment
adjustments on both the federal and the state levels.
24
Revenues
from HMOs, PPOs and other private insurers are subject to contracts and other
arrangements that require us to discount the amounts we customarily charge for
healthcare services. These discounted arrangements often limit our ability to
increase charges in response to increasing costs. We actively negotiate with
these payors in an effort to maintain or increase the pricing of our healthcare
services.
Self-pay
revenues are primarily generated through the treatment of uninsured patients.
Our hospitals have experienced an increase in self-pay revenues during recent
years as well as during the first half of 2010 as a result of a combination of
broad economic factors, including rising unemployment in many of our markets,
reductions in state Medicaid budgets and increasing numbers of individuals and
employers who choose not to purchase insurance.
In recent
periods, our business has experienced a shift in revenue from inpatient
admissions to outpatient procedures. This trend has occurred due to a
variety of factors including our strategic focus on improving our emergency
departments and diagnostic lines of business. In addition, our
hospitals have experienced a shift from inpatient admissions to outpatient
observations for a portion of our patient population. We believe the reasons for
this shift which has affected many other hospital companies, include, but are
not limited to, the continuing competition from various providers and
utilization pressure by both governmental programs and commercial insurance
payors.
25
Results
of Operations
The
following definitions apply throughout the remaining portion of Management’s Discussion and Analysis
of Financial Condition and Results of Operations:
Admissions.
Represents the total number of patients admitted (in the facility
for a period in excess of 23 hours) to our hospitals and used by management and
investors as a general measure of inpatient volume.
bps. Basis point
change.
Continuing operations.
Continuing operations information excludes the results of our
hospitals that have been disposed.
Effective tax
rate. Provision for income taxes as a percentage of income
from continuing operations before income taxes less net income attributable to
noncontrolling interests.
Emergency room visits.
Represents the total number of hospital-based emergency room
visits.
Equivalent admissions.
Management and investors use equivalent admissions as a general
measure of combined inpatient and outpatient volume. We compute equivalent
admissions by multiplying admissions (inpatient volume) by the outpatient factor
(the sum of gross inpatient revenue and gross outpatient revenue and then
dividing the resulting amount by gross inpatient revenue). The equivalent
admissions computation “equates” outpatient revenue to the volume measure
(admissions) used to measure inpatient volume resulting in a general measure of
combined inpatient and outpatient volume.
Net revenue days
outstanding. We compute net revenue days outstanding by
dividing our accounts receivable net of allowance for doubtful accounts, by our
revenue per day. Our revenue per day is calculated by dividing our quarterly
revenues, including revenues for held for sale / disposed of hospitals, by the
number of calendar days in the quarter.
Medicare case mix index.
Refers to the acuity or severity of illness of an average Medicare
patient at our hospitals.
N/A. Not
applicable.
Outpatient surgeries.
Outpatient surgeries are those surgeries that do not require
admission to our hospitals.
Same-hospital. Same-hospital
information includes the results of the same 47 hospitals operated during the
three and six months ended June 30, 2010 and 2009, includes the results of
Rockdale Medical Center, a 138 bed hospital located in Conyers, Georgia, which
we acquired effective February 1, 2009 and excludes the results of Clark, which
we entered into an agreement to operate effective May 1, 2010, as well as our
hospitals that have been disposed.
26
Operating
Results Summary
The
following table presents summaries of results of operations for the three and
six months ended June 30, 2010 and 2009 (dollars in millions):
Three Months Ended June 30,
|
Six Months Ended June 30,
|
|||||||||||||||||||||||||||||||
2010
|
2009
|
2010
|
2009
|
|||||||||||||||||||||||||||||
Amount
|
%
of
Revenues
|
Amount
|
%
of
Revenues
|
Amount
|
%
of
Revenues
|
Amount
|
%
of
Revenues
|
|||||||||||||||||||||||||
Revenues
|
$ | 790.6 | 100.0 | % | $ | 735.3 | 100.0 | % | $ | 1,576.8 | 100.0 | % | $ | 1,470.8 | 100.0 | % | ||||||||||||||||
Salaries
and benefits
|
307.0 | 38.8 | 292.7 | 39.8 | 610.3 | 38.7 | 579.2 | 39.4 | ||||||||||||||||||||||||
Supplies
|
109.2 | 13.8 | 102.3 | 13.9 | 217.6 | 13.8 | 201.9 | 13.7 | ||||||||||||||||||||||||
Other
operating expenses
|
145.3 | 18.4 | 138.6 | 18.9 | 285.7 | 18.2 | 271.3 | 18.4 | ||||||||||||||||||||||||
Provision
for doubtful accounts
|
105.0 | 13.3 | 92.2 | 12.5 | 207.1 | 13.1 | 182.4 | 12.4 | ||||||||||||||||||||||||
Depreciation
and
amortization
|
36.7 | 4.6 | 35.9 | 4.9 | 72.8 | 4.6 | 71.0 | 4.9 | ||||||||||||||||||||||||
Interest
expense, net
|
25.9 | 3.3 | 25.9 | 3.5 | 51.0 | 3.2 | 51.7 | 3.5 | ||||||||||||||||||||||||
729.1 | 92.2 | 687.6 | 93.5 | 1,444.5 | 91.6 | 1,357.5 | 92.3 | |||||||||||||||||||||||||
Income
from continuing operations before income taxes
|
61.5 | 7.8 | 47.7 | 6.5 | 132.3 | 8.4 | 113.3 | 7.7 | ||||||||||||||||||||||||
Provision
for income taxes
|
23.3 | 2.9 | 18.2 | 2.5 | 49.9 | 3.2 | 43.7 | 3.0 | ||||||||||||||||||||||||
Income
from continuing operations
|
38.2 | 4.9 | 29.5 | 4.0 | 82.4 | 5.2 | 69.6 | 4.7 | ||||||||||||||||||||||||
Less:
Net income attributable to noncontrolling interests
|
(0.7 | ) | (0.1 | ) | (0.5 | ) | — | (1.6 | ) | (0.1 | ) | (1.1 | ) | (0.1 | ) | |||||||||||||||||
Income
from continuing operations attributable to LifePoint Hospitals,
Inc.
|
$ | 37.5 | 4.8 | % | $ | 29.0 | 4.0 | % | $ | 80.8 | 5.1 | % | $ | 68.5 | 4.6 | % |
For
the Three Months Ended June 30, 2010 and 2009
Revenues
The
following table shows our revenues and the key drivers of our revenues for the
three months ended June 30, 2010 and 2009:
Three
Months Ended
June 30,
|
Increase
|
%
Increase
|
||||||||||||||
2010
|
2009
|
(Decrease)
|
(Decrease)
|
|||||||||||||
Continuing
operations:
|
||||||||||||||||
Revenues
(dollars in millions)
|
$ | 790.6 | $ | 735.3 | $ | 55.3 | 7.5 | % | ||||||||
Admissions
|
45,723 | 45,714 | 9 | — | ||||||||||||
Equivalent
admissions
|
100,348 | 97,405 | 2,943 | 3.0 | ||||||||||||
Revenues
per equivalent admission
|
$ | 7,879 | $ | 7,549 | $ | 330 | 4.4 | |||||||||
Medicare
case mix index
|
1.28 | 1.30 | (0.02 | ) | (1.5 | ) | ||||||||||
Average
length of stay (days)
|
4.4 | 4.3 | 0.1 | 2.3 | ||||||||||||
Inpatient
surgeries
|
13,264 | 13,391 | (127 | ) | (0.9 | ) | ||||||||||
Outpatient
surgeries
|
39,336 | 38,732 | 604 | 1.6 | ||||||||||||
Emergency
room visits
|
237,446 | 233,556 | 3,890 | 1.7 | ||||||||||||
Outpatient
factor
|
2.19 | 2.13 | 0.06 | 2.8 | ||||||||||||
Same-hospital:
|
||||||||||||||||
Revenues
(dollars in millions)
|
$ | 781.5 | $ | 735.3 | $ | 46.2 | 6.3 | % | ||||||||
Admissions
|
45,287 | 45,714 | (427 | ) | (0.9 | ) | ||||||||||
Equivalent
admissions
|
98,952 | 97,405 | 1,547 | 1.6 | ||||||||||||
Revenues
per equivalent admission
|
$ | 7,898 | $ | 7,549 | $ | 349 | 4.6 | |||||||||
Medicare
case mix index
|
1.29 | 1.30 | (0.01 | ) | (0.8 | ) | ||||||||||
Average
length of stay (days)
|
4.3 | 4.3 | — | — | ||||||||||||
Inpatient
surgeries
|
13,150 | 13,391 | (241 | ) | (1.8 | ) | ||||||||||
Outpatient
surgeries
|
38,583 | 38,732 | (149 | ) | (0.4 | ) | ||||||||||
Emergency
room visits
|
233,195 | 233,556 | (361 | ) | (0.2 | ) | ||||||||||
Outpatient
factor
|
2.18 | 2.13 | 0.05 | 2.3 |
27
The
following table shows the sources of our revenues by payor for the three months
ended June 30, 2010 and 2009, expressed as a percentage of total revenues,
including adjustments to estimated reimbursement amounts:
Three
Months
Ended
June 30,
|
||||||||
2010
|
2009
|
|||||||
Medicare
|
29.2 | % | 29.7 | % | ||||
Medicaid
|
11.1 | 10.1 | ||||||
HMOs,
PPOs and other private insurers
|
41.6 | 44.5 | ||||||
Self-Pay
|
14.5 | 13.0 | ||||||
Other
|
3.6 | 2.7 | ||||||
100.0 | % | 100.0 | % |
For the
three months ended June 30, 2010 revenues increased to $790.6 million, or 7.5%,
on a continuing operations basis and to $781.5 million, or 6.3%, on a
same-hospital basis as compared to $735.3 million for the same period last
year. On a same-hospital basis, our admissions declined slightly by
0.9% to 45,287 during the three months ended June 30, 2010, as compared to
45,714 for the same period last year. For the three months ended June
30, 2010, we continued to experience declines in our inpatient surgeries as well
as a shift from inpatient admissions to outpatient observations for a portion of
our patient population on a same-hospital basis.
Despite
our same-hospital declining inpatient admissions, same-hospital equivalent
admissions for the three months ended June 30, 2010 increased by 1.6% to 98,952
as compared to 97,405 for the same period last year. This improvement
in our same-hospital equivalent admissions is primarily as a result of increases
in the acuity of our emergency room visits as well as higher intensity in our
outpatient surgeries and increased cardiovascular
services. Additionally, for the three months ended June 30, 2010, our
revenues increased as a result of the impact of favorable commercial pricing,
inclusive of improvements in our third party payor contracting and benefits
associated with Medicare’s hospital market basket updates. As a result of these
factors, we experienced increases in our revenues per equivalent admission on a
same-hospital basis by 4.6% to $7,898 during the three months ended June 30,
2010, as compared to $7,549 for the same period last year.
Expenses
Salaries
and Benefits
The
following table summarizes our salaries and benefits, man-hours per equivalent
admission and salaries and benefits per equivalent admission for the three
months ended June 30, 2010 and 2009:
Three Months Ended June 30,
|
||||||||||||||||||||||||
2010
|
%
of
Revenues
|
2009
|
%
of
Revenues
|
Increase
|
%
Increase
|
|||||||||||||||||||
Salaries
and benefits (dollars in millions)
|
$ | 307.0 | 38.8 | % | $ | 292.7 | 39.8 | % | $ | 14.3 | 4.9 | % | ||||||||||||
Man-hours
per equivalent admission
|
95.3 | N/A | 93.1 | N/A | 2.2 | 2.4 | % | |||||||||||||||||
Salaries
and benefits per equivalent admission
|
$ | 3,051 | N/A | $ | 3,019 | N/A | $ | 32 | 1.0 | % |
For the
three months ended June 30, 2010, our salaries and benefits expense increased to
$307.0 million, or 4.9%, on a continuing operations basis and to $302.3 million,
or 3.3%, on a same-hospital basis as compared to $292.7 million for the same
period last year. This increase in our same-hospital salaries and
benefits expense is primarily as a result of the impact of an increasing number
of employed physicians and their related support staff.
On a
same-hospital basis, the number of our employed physicians, including
hospitalists, increased by 45, or 17.7%, to 299 from the same period last year,
and the number of employed physicians and their related support staff increased
by 140, or 17.2%, to 955 from the same period last year. The increase in our
employed physicians and their related support staff resulted in an increase of
$5.6 million in our salaries and benefits expense for the three months ended
June 30, 2010 as compared to the same period last year. As we continue to employ
an increasing number of medical professionals, including physicians, we
anticipate that salaries and benefits as a percentage of revenues will increase
in future periods. Increases in our salaries and benefits expense were partially
offset by reductions in our contract labor expense, which is a component of
salaries and benefits.
28
Supplies
The
following table summarizes our supplies and supplies per equivalent admission
for the three months ended June 30, 2010 and 2009:
Three Months Ended June 30,
|
||||||||||||||||||||||||
2010
|
%
of
Revenues
|
2009
|
%
of
Revenues
|
Increase
|
%
Increase
|
|||||||||||||||||||
Supplies
(dollars in millions)
|
$ | 109.2 | 13.8 | % | $ | 102.3 | 13.9 | % | $ | 6.9 | 6.8 | % | ||||||||||||
Supplies
per equivalent admission
|
$ | 1,089 | N/A | $ | 1,048 | N/A | $ | 41 | 3.9 | % |
For the
three months ended June 30, 2010, our supplies expense increased to $109.2
million, or 6.8% on a continuing operations basis and to $108.1 million, or
5.7%, on a same-hospital basis as compared to $102.3 million for the same period
last year. This increase for the three months ended June 30, 2010 was
primarily a result of an increase in our supplies expense per equivalent
admission to $1,089, or 3.9%, as compared to $1,048 for the same period last
year. Supplies per equivalent admission increased as a result of a
higher utilization of more expensive supplies, predominantly cardiac devices and
cancer related supplies, as well as an increase in our pharmacy supplies
expense. As a percentage of revenues, our supplies expense decreased slightly to
13.8% for the three months ended June 30, 2010 as compared to 13.9% for the same
period last year, as a result of our continuing efforts to effectively manage
our supply costs and increased synergies based on our participation in a group
purchasing organization.
Other
Operating Expenses
The
following table summarizes our other operating expenses for the three months
ended June 30, 2010 and 2009 (dollars in millions):
Three Months Ended June 30,
|
||||||||||||||||||||||||
2010
|
%
of
Revenues
|
2009
|
%
of
Revenues
|
Increase
|
%
Increase
|
|||||||||||||||||||
Professional
fees
|
$ | 19.7 | 2.5 | % | $ | 18.6 | 2.5 | % | $ | 1.1 | 6.1 | % | ||||||||||||
Utilities
|
12.6 | 1.6 | 12.3 | 1.7 | 0.3 | 2.0 | ||||||||||||||||||
Repairs
and maintenance
|
17.2 | 2.2 | 16.9 | 2.3 | 0.3 | 1.9 | ||||||||||||||||||
Rents
and leases
|
6.2 | 0.8 | 6.9 | 1.0 | (0.7 | ) | (11.2 | ) | ||||||||||||||||
Insurance
|
11.6 | 1.5 | 13.3 | 1.8 | (1.7 | ) | (12.8 | ) | ||||||||||||||||
Physician
recruiting
|
6.2 | 0.8 | 5.2 | 0.7 | 1.0 | 18.5 | ||||||||||||||||||
Contract
services
|
38.2 | 4.8 | 37.0 | 5.0 | 1.2 | 3.2 | ||||||||||||||||||
Non-income
taxes
|
12.6 | 1.6 | 10.1 | 1.4 | 2.5 | 24.5 | ||||||||||||||||||
Other
|
21.0 | 2.6 | 18.3 | 2.5 | 2.7 | 15.3 | ||||||||||||||||||
$ | 145.3 | 18.4 | % | $ | 138.6 | 18.9 | % | $ | 6.7 | 4.8 | % |
For the
three months ended June 30, 2010, our other operating expenses increased to
$145.3 million, or 4.8% on a continuing operations basis and to $143.3 million,
or 3.3%, on a same-hospital basis as compared to $138.6 million for the same
period last year. This increase for the three months ended June 30, 2010 was
primarily a result of increases in professional fees, contract services,
non-income taxes and other expenses, partially offset by a decrease in our
insurance expense.
As a
shortage of physicians continues to become more acute, we have experienced
increasing professional fees in areas such as radiology, anesthesiology and
hospitalists. We expect this trend to continue and that professional fees as a
percentage of revenues will increase in future periods.
Our
contract services expense increased primarily as a result of increased accounts
receivable collection fees, transcription fees and fees related to our
conversion of the clinical and patient accounting information system
applications at certain hospitals.
Additionally,
our non-income taxes increased primarily as a result of increases in property
taxes and indigent care taxes experienced at certain hospitals in various
states. Finally, our other expenses increased as a result of
additional training and implementation expenses from various information system
initiatives in our efforts to comply with the HITECH Act as well as additional
legal fees related to our recent and pending acquisitions, including Clark,
Sumner Systems and certain auxillary service-line acquisitions.
29
These
increases were partially offset by a decrease in our insurance
expense. Our insurance expense decreased compared to the same period
last year primarily because of unfavorable claim development for our
professional and general liability claims experienced during the same period
last year that was not experienced for the three months ended June 30,
2010.
Provision
for Doubtful Accounts
The
following table summarizes our provision for doubtful accounts and related key
indicators for the three months ended June 30, 2010 and 2009 (dollars in
millions):
Three Months Ended June 30,
|
||||||||||||||||||||||||
2010
|
%
of
Revenues
|
2009
|
%
of
Revenues
|
Increase
(Decrease)
|
%
Increase
(Decrease)
|
|||||||||||||||||||
Provision
for doubtful accounts (dollars in millions)
|
$ | 105.0 | 13.3 | % | $ | 92.2 | 12.5 | % | $ | 12.8 | 14.0 | % | ||||||||||||
Related
key indicators:
|
||||||||||||||||||||||||
Charity
care write-offs (dollars in millions)
|
$ | 13.1 | 1.7 | % | $ | 16.1 | 2.2 | % | $ | (3.0 | ) | (19.0 | )% | |||||||||||
Self-pay
revenues, net of charity care write-offs and uninsured discounts (dollars
in millions)
|
$ | 114.4 | 14.5 | % | $ | 95.8 | 13.0 | % | $ | 18.6 | 19.4 | % | ||||||||||||
Net
revenue days outstanding (at end of period)
|
41.1 | N/A | 41.8 | N/A | (0.7 | ) | (1.7 | )% |
For the
three months ended June 30, 2010, our provision for doubtful accounts increased
by $12.8 million, or 14.0%, to $105.0 million on a continuing operations basis
and by $12.3 million, or 13.5%, to $104.5 million on a same-hospital basis as
compared to the same period last year. This increase was primarily the result of
increases in self-pay revenues during the three months ended June 30, 2010.
Self-pay revenues increased $18.6 million over the same period last year and
represented 14.5% of revenues, as compared to 13.0% of revenues in the same
period last year. Self- pay revenues continued to increase for both our
inpatient and outpatient services, which were primarily driven by high levels of
unemployment in the majority of our communities. Our increased provision for
doubtful accounts was partially offset by an increase in both up-front cash
collections and cash collections related to our insured receivables for the
three months ended June 30, 2010, as compared to the same period last year. The
provision for doubtful accounts relates principally to self-pay amounts due from
patients. The provision and allowance for doubtful accounts are critical
accounting estimates and are further discussed in Part II, Item 7. Management’s Discussion and Analysis
of Financial Condition and Results of Operations, “Critical Accounting
Estimates,” in our 2009 Annual Report on Form 10-K.
Depreciation
and Amortization
For the
three months ended June 30, 2010, our depreciation and amortization expense
increased to $36.7 million, or 2.1%, as compared to $35.9 million for the same
period last year. Our depreciation and amortization expense increased
primarily as a result of capital improvement projects completed during 2009 and
the first half of 2010 as well as an increase in amortization expense for
certain non-compete agreements as a result of ancillary service-line
acquisitions completed during the first half of 2010.
Interest
Expense
Our
interest expense remained comparable at $25.9 million for both the three months
ended June 30, 2010 and 2009. For a further discussion of our debt
and corresponding interest rates, see “Liquidity and Capital Resources —
Debt.”
30
Provision
for Income Taxes
The
provision for income taxes was $23.3 million, or 2.9% of revenues for the three
months ended June 30, 2010, as compared to $18.2 million, or 2.5% of revenues
for the same period last year. The $5.1 million increase is primarily the result
of increased pretax book income from continuing operations for the three months
ended June 30, 2010 as compared to the same period last year. The
effective tax rate decreased to 38.3% for the three months ended June 30, 2010
compared to 38.5% for the same period last year. The decrease in the effective
tax rate to 38.3% was primarily the result of a decrease in interest expense
related to our long-term income tax liability in accordance with ASC 740-10,
“Income Taxes” (“ASC 740-10”), and a lower projected state effective tax rate
for the three months ended June 30, 2010 compared to the same period last
year.
For
the Six Months Ended June 30, 2010 and 2009
Revenues
The
following table shows our revenues and the key drivers of our revenues for the
six months ended June 30, 2010 and 2009:
Six
Months Ended
June 30,
|
Increase
|
%
Increase
|
||||||||||||||
2010
|
2009
|
(Decrease)
|
(Decrease)
|
|||||||||||||
Continuing
operations:
|
||||||||||||||||
Revenues
(dollars in millions)
|
$ | 1,576.8 | $ | 1,470.8 | $ | 106.0 | 7.2 | % | ||||||||
Admissions
|
95,015 | 95,233 | (218 | ) | (0.2 | ) | ||||||||||
Equivalent
admissions
|
201,052 | 195,799 | 5,253 | 2.7 | ||||||||||||
Revenues
per equivalent admission
|
$ | 7,843 | $ | 7,512 | $ | 331 | 4.4 | |||||||||
Medicare
case mix index
|
1.30 | 1.29 | 0.01 | 0.8 | ||||||||||||
Average
length of stay (days)
|
4.4 | 4.3 | 0.1 | 2.3 | ||||||||||||
Inpatient
surgeries
|
26,806 | 27,209 | (403 | ) | (1.5 | ) | ||||||||||
Outpatient
surgeries
|
76,292 | 75,291 | 1,001 | 1.3 | ||||||||||||
Emergency
room visits
|
459,478 | 460,244 | (766 | ) | (0.2 | ) | ||||||||||
Outpatient
factor
|
2.12 | 2.06 | 0.06 | 2.9 | ||||||||||||
Same-hospital:
|
||||||||||||||||
Revenues
(dollars in millions)
|
$ | 1,567.7 | $ | 1,470.8 | $ | 96.9 | 6.6 | % | ||||||||
Admissions
|
94,579 | 95,233 | (654 | ) | (0.7 | ) | ||||||||||
Equivalent
admissions
|
199,656 | 195,799 | 3,857 | 2.0 | ||||||||||||
Revenues
per equivalent admission
|
$ | 7,852 | $ | 7,512 | $ | 340 | 4.5 | |||||||||
Medicare
case mix index
|
1.30 | 1.29 | 0.01 | 0.8 | ||||||||||||
Average
length of stay (days)
|
4.4 | 4.3 | 0.01 | 2.3 | ||||||||||||
Inpatient
surgeries
|
26,692 | 27,209 | (517 | ) | (1.9 | ) | ||||||||||
Outpatient
surgeries
|
75,539 | 75,291 | 248 | 0.3 | ||||||||||||
Emergency
room visits
|
455,227 | 460,244 | (5,017 | ) | (1.1 | ) | ||||||||||
Outpatient
factor
|
2.11 | 2.06 | 0.05 | 2.4 |
The
following table shows the sources of our revenues by payor for the six months
ended June 30, 2010 and 2009, expressed as a percentage of total revenues,
including adjustments to estimated reimbursement amounts:
Six
Months
Ended
June 30,
|
||||||||
2010
|
2009
|
|||||||
Medicare
|
29.9 | % | 30.3 | % | ||||
Medicaid
|
10.7 | 10.2 | ||||||
HMOs,
PPOs and other private insurers
|
42.0 | 44.2 | ||||||
Self-Pay
|
14.1 | 12.7 | ||||||
Other
|
3.3 | 2.6 | ||||||
100.0 | % | 100.0 | % |
31
For the
six months ended June 30, 2010, revenues increased to $1,576.8 million, or 7.2%,
on a continuing operations basis and to $1,567.7 million, or 6.6%, on a
same-hospital basis as compared to $1,470.8 million for the same period last
year. On a same-hospital basis, our admissions declined slightly by
0.7% to 94,579 during the six months ended June 30, 2010, as compared to 95,233
for the same period last year. We continue to experience declines in
our inpatient surgeries as well as a shift from inpatient admissions to
outpatient observations for a portion of our patient population on a
same-hospital basis.
Despite
our same-hospital declining inpatient admissions, same-hospital equivalent
admissions for the six months ended June 30, 2010 increased by 2.0% to 199,656
as compared to 195,799 for the same period last year. This
improvement in our same-hospital equivalent admissions is primarily as a result
of increases in the acuity of our emergency room visits as well as higher
intensity in our outpatient surgeries and increased cardiovascular
services. These increases contributed to an increase in our
same-hospital outpatient factor to 2.11 compared to 2.06 in the same period last
year. On a same-hospital basis, our revenues per equivalent admission increased
4.5% to $7,852 during the six months ended June 30, 2010 as compared to $7,512
for the same period last year. Similarly, these increases are the result of
increases in our higher reimbursement outpatient diagnostic services.
Additionally, we have experienced an increase in the average acuity of our
services provided, as evidenced by a 0.8% increase in our Medicare case mix
index to 1.30 as compared to 1.29 in the same period last year on both a
continuing and same-hospital basis, as well as favorable commercial pricing,
including third party payor contracting and Medicare’s hospital market basket
updates.
Expenses
Salaries
and Benefits
The
following table summarizes our salaries and benefits, man-hours per equivalent
admission and salaries and benefits per equivalent admission for the six months
ended June 30, 2010 and 2009:
Six Months Ended June 30,
|
||||||||||||||||||||||||
2010
|
% of
Revenues
|
2009
|
%
of
Revenues
|
Increase
|
%
Increase
|
|||||||||||||||||||
Salaries
and benefits (dollars in millions)
|
$ | 610.3 | 38.7 | % | $ | 579.2 | 39.4 | % | $ | 31.1 | 5.4 | % | ||||||||||||
Man-hours
per equivalent admission
|
94.1 | N/A | 91.8 | N/A | 2.3 | 2.6 | % | |||||||||||||||||
Salaries
and benefits per equivalent admission
|
$ | 3,035 | N/A | $ | 2,954 | N/A | $ | 81 | 2.7 | % |
For the six months ended June 30, 2010,
our salaries and benefits expense increased to $610.3 million, or 5.4%, on a
continuing operations basis and to $605.6 million, or 4.6%, on a same-hospital
basis as compared to $579.2 million for the same period last
year. This increase is primarily as a result of the impact of an
increasing number of employed physicians and their related support staff and
higher employee medical benefit expenses. The increase in our employed physicians
and their related support staff resulted in an increase of $12.1 million in our
salaries and benefits expense for the six months ended June 30, 2010 as compared
to the same period last year. As we continue to employ an increasing number of
medical professionals, including physicians, we anticipate that salaries and
benefits as a percentage of revenues will increase in future periods. Increases
in our salaries and benefits expense were partially offset by reductions in our
contract labor expense, which is a component of salaries and
benefits.
32
Supplies
The
following table summarizes our supplies and supplies per equivalent admission
for the six months ended June 30, 2010 and 2009:
Six Months Ended June 30,
|
||||||||||||||||||||||||
2010
|
%
of
Revenues
|
2009
|
%
of
Revenues
|
Increase
|
%
Increase
|
|||||||||||||||||||
Supplies
(dollars in millions)
|
$ | 217.6 | 13.8 | % | $ | 201.9 | 13.7 | % | $ | 15.7 | 7.8 | % | ||||||||||||
Supplies
per equivalent admission
|
$ | 1,082 | N/A | $ | 1,028 | N/A | $ | 54 | 5.3 | % |
For the
six months ended June 30, 2010, our supplies expense increased to $217.6
million, or 7.8% on a continuing operations basis, and to $216.5 million, or
7.2%, on a same-hospital basis, as compared to $201.9 million for the same
period last year. This increase for the six months ended June 30,
2010 was primarily a result of an increase in our supplies expense per
equivalent admission to $1,082, or 5.3%, as compared to $1,028 for the same
period last year. Supplies per equivalent admission increased as a
result of a higher utilization of more expensive supplies in areas such as
orthopedics, cardiac devices and spine and bone as well as an increase in our
pharmacy supplies expense.
Other
Operating Expenses
The
following table summarizes our other operating expenses for the six months ended
June 30, 2010 and 2009 (dollars in millions):
Six Months Ended June 30,
|
||||||||||||||||||||||||
2010
|
%
of
Revenues
|
2009
|
%
of
Revenues
|
Increase
(Decrease)
|
%
Increase
(Decrease)
|
|||||||||||||||||||
Professional
fees
|
$ | 39.0 | 2.5 | % | $ | 35.2 | 2.4 | % | $ | 3.8 | 10.7 | % | ||||||||||||
Utilities
|
25.2 | 1.6 | 25.1 | 1.7 | 0.1 | 0.4 | ||||||||||||||||||
Repairs
and maintenance
|
34.2 | 2.2 | 32.5 | 2.2 | 1.7 | 5.3 | ||||||||||||||||||
Rents
and leases
|
12.8 | 0.8 | 14.2 | 1.0 | (1.4 | ) | (10.3 | ) | ||||||||||||||||
Insurance
|
23.6 | 1.5 | 25.4 | 1.7 | (1.8 | ) | (7.0 | ) | ||||||||||||||||
Physician
recruiting
|
12.2 | 0.8 | 11.5 | 0.8 | 0.7 | 5.5 | ||||||||||||||||||
Contract
services
|
75.4 | 4.8 | 72.5 | 4.9 | 2.9 | 4.0 | ||||||||||||||||||
Non-income
taxes
|
24.8 | 1.6 | 20.5 | 1.4 | 4.3 | 21.0 | ||||||||||||||||||
Other
|
38.5 | 2.4 | 34.4 | 2.3 | 4.1 | 11.9 | ||||||||||||||||||
$ | 285.7 | 18.2 | % | $ | 271.3 | 18.4 | % | $ | 14.4 | 5.3 | % |
For the
six months ended June 30, 2010, our other operating expenses increased to $285.7
million, or 5.3% on a continuing operations basis, and to $283.7 million, or
4.5%, on a same-hospital basis, as compared to $271.3 million for the same
period last year. This increase for the six months ended June 30, 2010 was
primarily a result of increases in professional fees, contract services,
non-income taxes and other expenses, partially offset by a decrease in our
insurance expense.
As a
shortage of physicians continues to become more acute, we have experienced
increasing professional fees in areas such as radiology, anesthesiology,
emergency room physician coverage and hospitalists. We expect this trend to
continue and that professional fees as a percentage of revenues will increase in
future periods.
Our
contract services expense increased primarily as a result of increased accounts
receivable collection fees, transcription fees and fees related to our
conversion of the clinical and patient accounting information system
applications at certain hospitals.
Additionally,
our non-income taxes increased primarily as a result of increases in property
taxes and indigent care taxes experienced at certain hospitals in various
states. Finally, our other expenses increased as a result of
additional training and implementation expenses as a result of our
implementation of various information system initiatives in our efforts to
comply with the HITECH Act as well as additional legal fees related to our
recent and pending acquisitions, including Clark, Sumner Systems and certain
auxillary service-line acquisitions.
33
These
increases were partially offset by a decrease in our insurance
expense. Our insurance expense decreased compared to the same period
last year primarily because of unfavorable claim development for our
professional and general liability claims experienced during the same period
last year that was not experienced for the six months ended June 30,
2010.
Provision
for Doubtful Accounts
The
following table summarizes our provision for doubtful accounts and related key
indicators for the six months ended June 30, 2010 and 2009:
Six Months Ended June 30,
|
||||||||||||||||||||||||
2010
|
%
of
Revenues
|
2009
|
%
of
Revenues
|
Increase
(Decrease)
|
%
Increase
(Decrease)
|
|||||||||||||||||||
Provision
for doubtful accounts (dollars in millions)
|
$ | 207.1 | 13.1 | % | $ | 182.4 | 12.4 | % | $ | 24.7 | 13.6 | % | ||||||||||||
Related
key indicators:
|
||||||||||||||||||||||||
Charity
care write-offs (dollars in millions)
|
$ | 27.0 | 1.7 | % | $ | 28.5 | 1.9 | % | $ | (1.5 | ) | (5.4 | )% | |||||||||||
Self-pay
revenues, net of charity care write-offs and uninsured discounts (dollars
in millions)
|
$ | 221.8 | 14.1 | % | $ | 186.6 | 12.7 | % | $ | 35.2 | 18.9 | % | ||||||||||||
Net
revenue days outstanding (at end of period)
|
41.1 | N/A | 41.8 | N/A | (0.7 | ) | (1.7 | )% |
For the
six months ended June 30, 2010, our provision for doubtful accounts increased by
$24.7 million, or 13.6%, to $207.1 million on a continuing operations basis and
by $24.2 million, or 13.3%, to $206.6 million on a same-hospital basis as
compared to the same period last year. This increase was primarily the result of
increases in self-pay revenues during the six months ended June 30, 2010.
Self-pay revenues increased $35.2 million over the same period last year and
represents 14.1% of revenues as compared to 12.7% of revenues in the same period
last year. Self- pay revenues continued to increase for both our inpatient and
outpatient services which were primarily driven by high levels of unemployment
in the majority of our communities. Our increased provision for doubtful
accounts was partially offset by an increase in both up-front cash collections
and cash collections related to our insured receivables for the six months ended
June 30, 2010, as compared to the same period last year. The provision for
doubtful accounts relates principally to self-pay amounts due from patients. The
provision and allowance for doubtful accounts are critical accounting estimates
and are further discussed in Part II, Item 7. Management’s Discussion and Analysis
of Financial Condition and Results of Operations, “Critical Accounting
Estimates,” in our 2009 Annual Report on Form 10-K.
Depreciation
and Amortization
For the
six months ended June 30, 2010, our depreciation and amortization expense
increased to $72.8 million, or 2.4%, as compared to $71.0 million for the same
period last year. Our depreciation and amortization expense increased
primarily as a result of capital improvement projects completed during 2009 and
the first half of 2010 as well as an increase in amortization expense for
certain non-compete agreements as a result of ancillary service-line
acquisitions completed during the first half of 2010.
Interest
Expense
Our
interest expense decreased by $0.7 million, or 1.3%, to $51.0 million, for the
six months ended June 30, 2010, as compared to $51.7 million for the same period
last year. The decrease in interest expense for the six months ended June 30,
2010, as compared to the same period last year was largely attributable to
declines in interest rates that favorably impacted our interest expense on our
Term B Loans. Additionally, as the notional amount of our interest rate swap has
continued to decline, a larger portion of our total outstanding debt has become
subject to floating interest rates that were lower for the six months ended June
30, 2010 as compared to the same period last year. For a further discussion of
our debt and corresponding interest rates, see “Liquidity and Capital
Resources — Debt.”
34
Provision
for Income Taxes
The
provision for income taxes was $49.9 million, or 3.2% of revenues for the six
months ended June 30, 2010, as compared to $43.7 million, or 3.0% of revenues
for the same period last year. The $6.2 million increase is primarily the result
of increased pretax book income from continuing operations for the six months
ended June 30, 2010 as compared to the same period last year. The
effective tax rate decreased to 38.2% for the six months ended June 30, 2010
compared to 38.9% for the same period last year. The decrease in the effective
tax rate to 38.2% was primarily the result of a decrease in interest expense
related to our long-term income tax liability in accordance with ASC 740-10, and
a lower projected state effective tax rate for the six months ended June 30,
2010 compared to the same period last year.
Liquidity
and Capital Resources
Liquidity
Our
primary sources of liquidity are cash flows provided by our operations and our
debt borrowings. We believe that our internally generated cash flows and the
amounts available under our debt agreements will be adequate to service existing
debt, finance internal growth and fund capital expenditures and certain small to
mid-size hospital acquisitions.
The
following table presents summarized cash flow information for the three and six
months ended June 30, 2010 and 2009 (in millions):
Three
Months Ended
June 30,
|
Six
Months Ended
June 30,
|
|||||||||||||||
2010
|
2009
|
2010
|
2009
|
|||||||||||||
Net
cash flows provided by continuing operations
|
$ | 84.6 | $ | 67.1 | $ | 168.1 | $ | 159.0 | ||||||||
Less:
Purchase of property and equipment
|
(39.6 | ) | (42.0 | ) | (73.6 | ) | (85.1 | ) | ||||||||
Free
operating cash flow
|
45.0 | 25.1 | 94.5 | 73.9 | ||||||||||||
Acquisitions,
net of cash acquired
|
(25.8 | ) | (1.5 | ) | (42.7 | ) | (79.7 | ) | ||||||||
Payments
on borrowings
|
— | (13.5 | ) | — | (13.5 | ) | ||||||||||
Proceeds
from exercise of stock options
|
4.3 | 7.9 | 13.5 | 9.6 | ||||||||||||
Repurchases
of common stock
|
(41.5 | ) | (1.0 | ) | (50.5 | ) | (2.6 | ) | ||||||||
Other
|
(1.2 | ) | 1.5 | (1.6 | ) | 1.1 | ||||||||||
Cash
flows from operations used in discontinued operations
|
(0.5 | ) | (1.4 | ) | (0.7 | ) | (2.9 | ) | ||||||||
Cash
flows from investing activities provided by (used in) discontinued
operations
|
— | 10.4 | — | 10.4 | ||||||||||||
Increase
(decrease) in cash and cash equivalents
|
$ | (19.7 | ) | $ | 27.5 | $ | 12.5 | $ | (3.7 | ) |
The
non-GAAP metric of free operating cash flow is an important liquidity measure
for us. Our computation of free operating cash flow consists of net cash flows
provided by continuing operations less cash flows used for the purchase of
property and equipment. Our cash flows for the three months ended June 30, 2010
were positively impacted by an increase in income from continuing operations and
the timing and amount of cash payments made for income taxes. These
increases were partially offset by an increase in cash payments for professional
and general liability claims and the timing of collection of certain
receivables. Our cash flows for the six months ended June 30, 2010
were positively impacted by an increase in income from continuing operations and
the timing and amount of cash payments made for income taxes. These
increases were partially offset by an increase in cash payments for professional
and general liability claims and salaries and benefits and the timing of
collection of certain receivables.
We
believe that free operating cash flow is useful to investors and management as a
measure of the ability of our business to generate cash and to repay and incur
additional debt. Computations of free operating cash flow may differ from
company to company. Therefore, free operating cash flow should be used as a
complement to, and in conjunction with, our condensed consolidated statements of
cash flows presented in our condensed consolidated financial statements included
elsewhere in this report.
35
Capital
Expenditures
We have
also made significant, targeted investments at our hospitals to add new
technologies, modernize facilities and expand the services available. These
investments should assist in our efforts to attract and retain physicians, to
offset outmigration of patients and to make our hospitals more desirable to our
employees and potential patients.
The
following table reflects our capital expenditures for the three and six months
ended June 30, 2010 and 2009 (dollars in millions):
Three
Months Ended
June 30,
|
Six
Months Ended
June 30,
|
|||||||||||||||
2010
|
2009
|
2010
|
2009
|
|||||||||||||
Capital
projects
|
$ | 15.4 | $ | 29.0 | $ | 33.7 | $ | 58.3 | ||||||||
Routine
|
12.4 | 9.5 | 19.8 | 21.0 | ||||||||||||
Information
systems
|
11.8 | 3.5 | 20.1 | 5.8 | ||||||||||||
$ | 39.6 | $ | 42.0 | $ | 73.6 | $ | 85.1 | |||||||||
Depreciation
expense
|
$ | 36.0 | $ | 35.6 | $ | 71.6 | $ | 70.4 | ||||||||
Ratio
of capital expenditures to depreciation expense
|
110.0 | % | 118.0 | % | 103.0 | % | 120.9 | % |
We have a
formal and intensive review procedure for the authorization of capital
expenditures. The most important financial measure of acceptability for a
discretionary capital project is whether its projected discounted cash flow
return on investment exceeds our projected cost of capital for that project. We
expect to continue to invest in information systems, modern technologies,
emergency room and operating room expansions, the construction of medical office
buildings for physician expansion and the reconfiguration of the flow of patient
care. During the first half of 2010, we have experienced a significant increase
in our spending related to information systems as the result of various
initiatives and requirements, including the HITECH Act. We anticipate increasing our spending
related to information systems during the remainder of 2010 as compared to
2009.
Debt
An
analysis and roll-forward of our long-term debt, including current portion, for
the six months ended June 30, 2010 is as follows (in millions):
December
31,
2009
|
Payments
of
Borrowings
|
Other
|
Amortization
of
Convertible
Debt
Discounts
|
June 30,
2010
|
||||||||||||||||
Senior
Secured Credit Facilities:
|
||||||||||||||||||||
Term
B Loans
|
$ | 692.9 | $ | — | $ | — | $ | — | $ | 692.9 | ||||||||||
Revolving
Loans
|
— | — | — | — | — | |||||||||||||||
Province
7½% Senior Subordinated Notes
|
6.1 | — | — | — | 6.1 | |||||||||||||||
3¼%
Debentures
|
225.0 | — | — | — | 225.0 | |||||||||||||||
3½%
Notes
|
575.0 | — | — | — | 575.0 | |||||||||||||||
Unamortized
discounts on 3¼% Debentures and 3½% Notes
|
(102.4 | ) | — | — | 11.0 | (91.4 | ) | |||||||||||||
Capital
leases
|
3.2 | (0.7 | ) | 1.1 | — | 3.6 | ||||||||||||||
$ | 1,399.8 | $ | (0.7 | ) | $ | 1.1 | $ | 11.0 | $ | 1,411.2 |
36
We use
leverage, or our total debt to total capitalization ratio, to make financing
decisions. The following table illustrates our financial statement leverage and
the classification of our debt as of June 30, 2010 and December 31, 2009
(dollars in millions):
June
30,
2010
|
December
31,
2009
|
Increase
(Decrease)
|
||||||||||
Current
portion of long-term debt
|
$ | 55.4 | $ | 1.0 | $ | 54.4 | ||||||
Long-term
debt
|
1,355.8 | 1,398.8 | (43.0 | ) | ||||||||
Unamortized
discounts of convertible debt instruments
|
91.4 | 102.4 | (11.0 | ) | ||||||||
Total
debt, excluding unamortized discounts of convertible debt
instruments
|
1,502.6 | 1,502.2 | 0.4 | |||||||||
Total
LifePoint Hospitals, Inc. stockholders’ equity
|
1,888.8 | 1,827.7 | 61.1 | |||||||||
Total
capitalization
|
$ | 3,391.4 | $ | 3,329.9 | $ | 61.5 | ||||||
Total
debt to total capitalization
|
44.3 | % | 45.1 | % |
(80)bps
|
|||||||
Percentage
of:
|
||||||||||||
Fixed
rate debt, excluding unamortized discounts of convertible debt
instruments
|
53.9 | % | 53.9 | % | ||||||||
Variable
rate debt (a)
|
46.1 | 46.1 | ||||||||||
100.0 | % | 100.0 | % | |||||||||
Percentage
of:
|
||||||||||||
Senior
debt
|
46.4 | % | 46.3 | % | ||||||||
Subordinated
debt, excluding unamortized discounts of convertible debt
instruments
|
53.6 | 53.7 | ||||||||||
100.0 | % | 100.0 | % |
____________
(a)
|
The
above calculation does not consider the effect of our interest rate swap.
Our interest rate swap mitigates a portion of our floating rate risk on
our outstanding variable rate borrowings which converts our variable rate
debt to an annual fixed rate of 5.585%. Our interest rate swap decreases
our variable rate debt as a percentage of our outstanding debt from 46.1%
to 16.2% as of June 30, 2010 and December 31, 2009. Please refer to Note 7
to our accompanying condensed consolidated financial statements included
elsewhere in this report for a discussion of our interest rate swap
agreement.
|
Credit
Agreement
Effective
February 26, 2010, we amended our existing Credit Agreement. The amendment
extends the maturity date of $443.7 million of our $692.9 million outstanding
Term B Loans from April 15, 2012 to April 15, 2015 and the maturity date of the
$350.0 million of capacity available under our Revolving Loans from April 15,
2010 to December 15, 2012. The maturity date for the extended portion of the
Term B Loans is contingent upon refinancing our outstanding 3½% Notes beyond
their current maturity date of May 15, 2014. In the event we do not refinance
our 3½% Notes, the extended portion of the Term B Loans mature on February 13,
2014. For consideration of the extension in maturity dates, the amendment
increases the applicable interest rates from an Adjusted LIBOR plus a margin of
1.625% to an Adjusted LIBOR plus a margin of 2.750% for the extended Term B
Loans and from an Adjusted LIBOR plus a margin of 1.750% to an Adjusted LIBOR
plus a margin of 2.750% for outstanding Revolving Loans. Additionally, the
amendment increases the unused credit capacity fee applicable to the Revolving
Loans from 0.375% to 0.625%. The remaining $249.2 million outstanding under our
Term B Loans that were not extended retain their original maturity dates and
interest rates.
Terms
Our Credit Agreement, as
amended, as of June 30, 2010 provided for Term B Loans up to $1,450.0
million and Revolving Loans of up to $350.0 million. In addition, through June
30, 2010, the Credit Agreement provided that we may request additional tranches of Term B Loans up
to $400.0 million, subject to lender approval.
37
Assuming
we do not refinance our 3½% Notes, our Term B Loans mature on February 13, 2014
with repayment dates and amounts as follows (dollars in millions):
June
30, 2011
|
$ | 54.4 | ||
September
30, 2011
|
65.4 | |||
December
31, 2011
|
65.4 | |||
April
15,
2012
|
64.0 | |||
February
13, 2014
|
443.7 | |||
$ | 692.9 |
Additionally,
Term B Loans are subject to additional mandatory prepayments with a certain
percentage of excess cash flow as specifically defined in the Credit Agreement.
The Revolving Loans mature on December 15, 2012, and the Term A Loans matured on
April 15, 2010. The Credit Agreement is guaranteed on a senior secured basis by
our subsidiaries with certain limited exceptions. The Credit Agreement provides
for the issuance of letters of credit up to $75.0 million. Issued letters of
credit reduce the amounts available under our Revolving Loans.
Letters
of Credit and Availability
As of
June 30, 2010, we had $31.2 million in letters of credit outstanding that were
related to the self-insured retention level of our general and professional
liability insurance and workers’ compensation programs as security for payment
of claims. Under the terms of the Credit Agreement, Revolving Loans available
for borrowing were $318.8 million as of June 30, 2010. Under the terms of the
Credit Agreement, the amount of Term B Loans available for borrowing was $400.0
million as of June 30, 2010, all of which is available under the additional
tranches.
Interest
Rates
Interest
on the outstanding balances of the Term B Loans is payable at an Adjusted LIBOR
plus a margin of 1.625% and Adjusted LIBOR plus a margin of 2.750% for $249.2
million and $443.7 million, respectively, of the outstanding portion of our Term
B Loans. Interest on the Revolving Loans is payable at our option at either an
adjusted base rate (“ABR Revolving Loans”) or an Adjusted LIBOR plus a margin.
The margin on ABR Revolving Loans ranges from 1.00% to 1.75% based on the total
leverage ratio being less than 2.00:1.00 to greater than 3.50:1.00. The margin
on the Adjusted LIBOR Revolving Loans ranges from 2.00% to 2.75% based on the
total leverage ratio being less than 2.00:1.00 to greater than
3.50:1.00.
As of
June 30, 2010, the applicable weighted average annual interest rate under the
Term B Loans was 2.85%, which was based on the 90-day Adjusted LIBOR plus the
applicable margins. The 90-day Adjusted LIBOR was 0.50% at June 30, 2010. The
weighted-average applicable annual interest rate for the three and six months
ended June 30, 2010 under the Term B Loans was 2.76% and 2.46%,
respectively.
Covenants
The
Credit Agreement requires us to satisfy certain financial covenants, including a
minimum interest coverage ratio and a maximum total leverage ratio, as set forth
in the Credit Agreement. The minimum interest coverage ratio can be no less than
3.50:1.00 for all periods ending after December 31, 2005. These calculations are
based on the trailing four quarters. The maximum total leverage ratios cannot
exceed 4.00:1.00 for the periods ending on March 31, 2010 through December 31,
2010 and 3.75:1.00 for the periods ending thereafter. In addition, on an
annualized basis, we are limited with respect to amounts we may spend on capital
expenditures. Such amounts cannot exceed 10.0% of annual revenues.
38
The
financial covenant requirements and ratios are as follows:
Requirement
|
Level
at
June 30, 2010
|
|||||||
Minimum
Interest Coverage Ratio
|
≥3.50:1.00
|
7.05 | ||||||
Maximum
Total Leverage Ratio
|
≤4.00:1.00
|
2.93 | ||||||
In
addition, the Credit Agreement contains customary affirmative and negative
covenants, which among other things, limit our ability to incur additional debt,
create liens, pay dividends, effect transactions with our affiliates, sell
assets, pay subordinated debt, merge, consolidate, enter into acquisitions and
effect sale leaseback transactions.
Our
Credit Agreement does not contain provisions that would accelerate the maturity
date of the loans under the Credit Agreement upon a downgrade in our credit
rating. However, a downgrade in our credit rating could adversely affect our
ability to obtain other capital sources in the future and could increase our
cost of borrowings.
3½% Convertible
Senior Subordinated Notes due May 15, 2014
Our 3½%
Notes bear interest at the rate of 3½% per year, payable semi-annually on May 15
and November 15. The 3½% Notes are convertible prior to March 15, 2014 under the
following circumstances: (1) if the price of our common stock reaches a
specified threshold during specified periods; (2) if the trading price of the
3½% Notes is below a specified threshold; or (3) upon the occurrence of
specified corporate transactions or other events. On or after March 15, 2014,
holders may convert their 3½% Notes at any time prior to the close of business
on the scheduled trading day immediately preceding May 15, 2014, regardless of
whether any of the foregoing circumstances has occurred.
Subject
to certain exceptions, we will deliver cash and shares of our common stock upon
conversion of each $1,000 principal amount of our 3½% Notes as follows: (i) an
amount in cash (the “principal return”) equal to the sum of, for each of the 20
volume-weighted average price trading days during the conversion period, the
lesser of the daily conversion value for such volume-weighted average price
trading day and $50; and (ii) a number of shares in an amount equal to the sum
of, for each of the 20 volume-weighted average price trading days during the
conversion period, any excess of the daily conversion value above $50. Our
ability to pay the principal return in cash is subject to important limitations
imposed by the Credit Agreement and other credit facilities or indebtedness we
may incur in the future. If we do not make any payments we are obligated to make
under the terms of the 3½% Notes, holders may declare an event of
default.
The
initial conversion rate is 19.3095 shares of our common stock per $1,000
principal amount of the 3½% Notes (subject to certain events). This represents
an initial conversion price of approximately $51.79 per share of the Company’s
common stock. In addition, if certain corporate transactions that constitute a
change of control occur prior to maturity, we will increase the conversion rate
in certain circumstances.
Upon the
occurrence of a fundamental change (as specified in the indenture), each holder
of the 3½% Notes may require us to purchase some or all of the 3½% Notes at a
purchase price in cash equal to 100% of the principal amount of the 3½% Notes
surrendered, plus any accrued and unpaid interest.
The
indenture for the 3½% Notes does not contain any financial covenants or any
restrictions on the payment of dividends, the incurrence of senior or secured
debt or other indebtedness, or the issuance or repurchase of securities by us.
The indenture contains no covenants or other provisions to protect holders of
the 3½% Notes in the event of a highly leveraged transaction or other events
that do not constitute a fundamental change.
39
3¼% Convertible
Senior Subordinated Debentures due August 15, 2025
Our 3¼%
Debentures bear interest at the rate of 3¼% per year, payable semi-annually on
February 15 and August 15. The 3¼% Debentures are convertible (subject to
certain limitations imposed by the Credit Agreement) under the following
circumstances: (1) if the price of our common stock reaches a specified
threshold during the specified periods; (2) if the trading price of the 3¼%
Debentures is below a specified threshold; (3) if the 3¼% Debentures have been
called for redemption; or (4) if specified corporate transactions or other
specified events occur. Subject to certain exceptions, we will deliver cash and
shares of our common stock, as follows: (i) an amount in cash (the “principal
return”) equal to the lesser of (a) the principal amount of the 3¼% Debentures
surrendered for conversion and (b) the product of the conversion rate and the
average price of our common stock, as set forth in the indenture governing the
securities (“the conversion value”); and (ii) if the conversion value is greater
than the principal return, an amount in shares of our common stock. Our ability
to pay the principal return in cash is subject to important limitations imposed
by the Credit Agreement and other indebtedness we may incur in the future. Based
on the terms of the Credit Agreement, in certain circumstances, even if any of
the foregoing conditions to conversion have occurred, the 3¼% Debentures will
not be convertible, and holders of the 3¼% Debentures will not be able to
declare an event of default under the 3¼% Debentures.
The
initial conversion rate for the 3¼% Debentures is 16.3345 shares of our common
stock per $1,000 principal amount of 3¼% Debentures (subject to adjustment in
certain events). This is equivalent to a conversion price of $61.22 per share of
common stock. In addition, if certain corporate transactions that constitute a
change of control occur on or prior to February 20, 2013, we will increase the
conversion rate in certain circumstances, unless such transaction constitutes a
public acquirer change of control and we elect to modify the conversion rate
into public acquirer common stock.
On or
after February 20, 2013, we may redeem for cash some or all of the 3¼%
Debentures at any time at a price equal to 100% of the principal amount of the
3¼% Debentures to be purchased, plus any accrued and unpaid interest. Holders
may require us to purchase for cash some or all of the 3¼% Debentures on
February 15, 2013, February 15, 2015 and February 15, 2020 or upon the
occurrence of a fundamental change, at 100% of the principal amount of the 3¼%
Debentures to be purchased, plus any accrued and unpaid interest.
The
indenture for the 3¼% Debentures does not contain any financial covenants or any
restrictions on the payment of dividends, the incurrence of senior or secured
debt or other indebtedness, or the issuance or repurchase of securities by us.
The indenture contains no covenants or other provisions to protect holders of
the 3¼% Debentures in the event of a highly leveraged transaction or fundamental
change.
Interest
Rate Swap
We have
an interest rate swap agreement with Citibank as counterparty that requires us
to make quarterly fixed rate payments to Citibank calculated on a notional
amount at an annual fixed rate of 5.585% while Citibank is obligated to make
quarterly floating payments to us based on the three-month LIBOR on the same
referenced notional amount. We have designated our interest rate swap as a cash
flow hedge instrument, which is recorded in our consolidated balance sheets at
its fair value in accordance with ASC 815-10 based on the amount at which it
could be settled, which is referred to in ASC 815-10 as the exit price. The exit
price is based upon observable market assumptions and appropriate valuation
adjustments for credit risk. We have categorized our interest rate swap as Level
2 in accordance with ASC 815-10. Please refer to Note 7 to our accompanying
condensed consolidated financial statements included elsewhere in this report
for a further discussion of our interest rate swap agreement.
Liquidity
and Capital Resources Outlook
We expect
the level of capital expenditures in 2010 to be consistent with capital
expenditures incurred in 2009. We have large projects in process at a number of
our facilities. We are reconfiguring some of our hospitals to more effectively
accommodate patient services, restructuring existing surgical capacity in some
of our hospitals to permit additional patient volume and a greater variety of
services, and implementing various information system initiatives in our efforts
to comply with the HITECH Act. At June 30, 2010, we had uncompleted projects
with an estimated additional cost to complete and equip of approximately $40.9
million. We anticipate funding these expenditures through cash provided by
operating activities, available cash and borrowings available under our credit
arrangements.
40
Our
business strategy contemplates the selective acquisition of additional hospitals
and other healthcare service providers, and we regularly review potential
acquisitions. These acquisitions may, however, require additional financing. We
regularly evaluate opportunities to sell additional equity or debt securities,
obtain credit facilities from lenders or restructure our long-term debt or
equity for strategic reasons or to further strengthen our financial position.
The sale of additional equity or convertible debt securities could result in
additional dilution to our stockholders.
In
connection with our entry into an agreement to lease and operate Clark effective
May 1, 2010, we have committed to spend an additional approximate $60.0 million
to build and equip a new hospital to replace the current hospital facility. We
anticipate opening the new hospital approximately 18 to 24 months after
construction begins. We expect to begin construction during the
fourth quarter of 2010.
We
believe that cash generated from our operations and borrowings available under
our credit arrangements will be sufficient to meet our working capital needs,
the purchase prices for any potential facility acquisitions, planned capital
expenditures and other expected operating needs over the next twelve months and
into the foreseeable future prior to the maturity dates of our outstanding
debt.
Contractual
Obligations
We have
various contractual obligations, which are recorded as liabilities in our
condensed consolidated financial statements. Other items, such as certain
purchase commitments and other executory contracts, are not recognized as
liabilities in our condensed consolidated financial statements but are required
to be disclosed. For example, we are required to make certain minimum lease
payments for the use of property under certain of our operating lease
agreements.
During
the three months ended June 30, 2010, there were no material changes to the
contractual obligations disclosure in our 2009 Annual Report on Form 10-K and
our quarterly report on Form 10-Q for the three months ended March 31, 2010,
except for the additional approximate $60.0 million we have committed to spend
to build and equip a replacement hospital at Clark, as mentioned above in Liquidity and Capital Resources
Outlook.
Off-Balance
Sheet Arrangements
We had
standby letters of credit outstanding of approximately $31.2 million as of June
30, 2010, all of which relates to the self-insured retention levels of our
professional and general liability insurance and workers compensation programs
as security for the payment of claims.
Critical
Accounting Estimates
The
preparation of financial statements in accordance with GAAP requires us to make
estimates and assumptions that affect reported amounts and related disclosures.
We consider an accounting estimate to be critical if:
|
•
|
it
requires assumptions to be made that were uncertain at the time the
estimate was made; and
|
|
•
|
changes
in the estimate or different estimates that could have been made could
have a material impact on our consolidated results of operations or
financial condition.
|
Our
critical accounting estimates are more fully described in our 2009 Annual Report
on Form 10-K and continue to include the following areas:
|
•
|
Revenue
recognition/Allowance for contractual
discounts;
|
|
•
|
Allowance
for doubtful accounts and provision for doubtful
accounts;
|
41
|
•
|
Goodwill
impairment analysis;
|
|
•
|
Reserves
for self-insurance claims;
|
|
•
|
Accounting
for stock-based compensation; and
|
|
•
|
Accounting
for income taxes.
|
Contingencies
Please
refer to Note 10 to our accompanying condensed consolidated financial statements
included elsewhere in this report for a discussion of our material financial
contingencies, including:
|
•
|
Legal
proceedings and general liability
claims;
|
|
•
|
Physician
commitments; and
|
|
•
|
Capital
expenditure commitments.
|
Item 3. Quantitative and
Qualitative Disclosures about Market Risk.
Interest
Rates
The
following discussion relates to our exposure to market risk based on changes in
interest rates:
Outstanding
Debt
We have
an interest rate swap to manage our exposure to changes in interest rates. The
interest rate swap converts a portion of our indebtedness to a fixed rate with a
notional amount of $450.0 million at June 30, 2010 at an annual fixed rate of
5.585%. Accordingly, we are slightly exposed to market risk related to
fluctuations in interest rates. The notional amount of the swap agreement
represents a balance used to calculate the exchange of cash flows and is not an
asset or liability. Any market risk or opportunity associated with this swap
agreement is offset by the opposite market impact on the related debt. Our
interest rate swap agreement exposes us to credit risk in the event of
non-performance by Citibank. However, we do not anticipate non-performance by
Citibank.
As of
June 30, 2010, we had outstanding debt, excluding $91.4 million of unamortized
discounts on our convertible debt instruments, of $1,502.6 million, 46.1%, or
$692.9 million, of which was subject to variable rates of interest. However, our
interest rate swap decreases our variable rate debt as a percentage of our
outstanding debt from 46.1% to 16.2% as of June 30, 2010.
Our Term
B Loans, 3½% Notes and 3¼% Debentures were the only long-term debt instruments
where the carrying amounts differed from their fair value as of June 30, 2010
and December 31, 2009. The carrying amount and fair value of these instruments
as of June 30, 2010 and December 31, 2009 were as follows (in
millions):
Carrying Amount
|
Fair Value
|
|||||||||||||||
June
30,
|
December
31,
|
June
30,
|
December
31,
|
|||||||||||||
2010
|
2009
|
2010
|
2009
|
|||||||||||||
Term
B Loans
|
$ | 692.9 | $ | 692.9 | $ | 662.9 | $ | 673.8 | ||||||||
3½%
Notes, excluding unamortized discounts
|
$ | 575.0 | $ | 575.0 | $ | 530.4 | $ | 536.2 | ||||||||
3¼%
Debentures, excluding unamortized discounts
|
$ | 225.0 | $ | 225.0 | $ | 209.0 | $ | 206.2 |
The fair
values of our Term B Loans, 3¼% Debentures and 3½% Notes were based on the
quoted prices at June 30, 2010 and December 31, 2009. Effective February 26,
2010, we amended our existing Credit Agreement and extended the maturity date
and increased the applicable interest rate for a portion of the Term B
Loans. The amendment, effective February 26, 2010, impacted the
determination of fair value of our Term B Loans at June 30, 2010.
42
Cash
Balances
Certain
of our outstanding cash balances are invested overnight with high credit quality
financial institutions. We do not hold direct investments in auction rate
securities, collateralized debt obligations, structured investment vehicles or
mortgage-backed securities. We do not have significant exposure to changing
interest rates on invested cash at June 30, 2010. As a result, the interest rate
market risk implicit in these investments at June 30, 2010, if any, is
low.
Item 4. Controls and
Procedures.
We
carried out an evaluation, under the supervision and with the participation of
management, including our Chief Executive Officer and Chief Financial Officer,
of the effectiveness of the design and operation of our disclosure controls and
procedures as of the end of the period covered by this report pursuant to Rule
13a-15 of the Exchange Act. Based upon that evaluation, our Chief Executive
Officer and Chief Financial Officer concluded that our disclosure controls and
procedures were effective in ensuring that information required to be disclosed
by us (including our consolidated subsidiaries) in reports that we file or
submit under the Exchange Act is recorded, processed, summarized and reported on
a timely basis.
There has
been no change in our internal control over financial reporting during the three
months ended June 30, 2010 that has materially affected, or is reasonably likely
to materially affect, our internal control over financial
reporting.
43
PART
II — OTHER INFORMATION
Item 1. Legal
Proceedings.
We are,
from time to time, subject to claims and suits arising in the ordinary course of
business, including claims for damages for personal injuries, medical
malpractice, breach of contracts, wrongful restriction of or interference with
physicians’ staff privileges and employment related claims. In certain of these
actions, plaintiffs request payment for damages, including punitive damages that
may not be covered by insurance. We are currently not a party to any pending or
threatened proceeding, which, in management’s opinion, would have a material
adverse effect on our business, financial condition or results of
operations.
In May
2009, Andalusia Regional Hospital our hospital located in Andalusia, Alabama
produced documents responsive to a request received from the U.S. Attorney’s
Office for the Western District of New York regarding an investigation they are
conducting with respect to the billing of kyphoplasty procedures. Kyphoplasty is
a surgical spine procedure that returns a compromised vertebra (either from
trauma or osteoporotic disease process) to its previous height, reducing or
eliminating severe pain. It has been reported that other unaffiliated hospitals
and hospital operators in multiple states have received similar requests for
information. We believe that this investigation is related to the May 22, 2008
qui tam settlement between the same U.S. Attorney’s Office and the manufacturer
and distributor of the product used in performing the kyphoplasty
procedure.
Based on
a review of the number of the kyphoplasty procedures performed at all of our
hospitals, as part of our effort to cooperate with the U.S. Attorney’s Office,
by letter dated January 20, 2010 we identified to the U.S. Attorney’s Office
four additional facilities at which the number of inpatient kyphoplasty
procedures approximated those performed at Andalusia Regional Hospital. We are
continuing to cooperate with the government’s investigation and are reviewing
whether our hospitals have engaged in inappropriate billing for kyphoplasty
procedures.
Item 1A. Risk
Factors.
There
have been no material changes in our risk factors from those disclosed in our
2009 Annual Report on Form 10-K and our quarterly report on Form 10-Q for the
three months ended March 31, 2010.
Item 2. Unregistered
Sales of Equity Securities and Use of Proceeds.
In August
2009, our Board of Directors authorized the repurchase of up to $100.0 million
of outstanding shares of our common stock either in the open market or through
privately negotiated transactions, subject to market conditions, regulatory
constraints and other factors. The Repurchase Plan expires in February 2011, and
we are not obligated to repurchase any specific number of shares. On
March 16, 2010, we entered into a trading plan in accordance with the SEC Rule
10b5-1 to facilitate repurchases of our common stock. The Trading
Plan became effective on March 17, 2010 and expired on May 7,
2010. There were no repurchases under the Trading Plan. In
connection with the Repurchase Plan, we repurchased approximately 1.1 million
and 1.3 million shares for an aggregate purchase price, including commissions,
of approximately $40.1 million and $45.3 million at an average purchase price of
$34.33 and $34.15 per share, respectively, for the three and six months ended
June 30, 2010. We have designated these shares as treasury stock.
Additionally,
we redeem shares from employees for minimum statutory tax withholding purposes
upon vesting of certain stock wards granted pursuant to our LTIP and MSPP. We
redeemed approximately 0.1 million shares of certain vested LTIP and MSPP shares
during each of the three months ended June 30, 2010 and 2009 for an aggregate
price of approximately $1.4 million and $1.0 million, respectively, and 0.2
million shares of certain vested LTIP and MSPP shares during each of the six
months ended June 30, 2010 and 2009 for an aggregate price of approximately $5.2
million and $2.6 million, respectively. We have designated these shares as
treasury stock.
44
The
following table summarizes our share repurchase activity by month for the three
months ended June 30, 2010:
Period
|
Total
Number
of
Shares
Purchased
|
Weighted
Average
Price
Paid
per Share
|
Total
Number
of
Shares
Purchased
as
Part
of a
Publicly
Announced
Program
|
Approximate
Dollar
Value
of
Shares that
May Yet be
Purchased
Under
the
Program
|
||||||||||||
(In
millions)
|
||||||||||||||||
April
1, 2010 to April 30, 2010
|
22,122 | $ | 38.17 | — | $ | 94.8 | ||||||||||
May
1, 2010 to May 31, 2010
|
936,574 | $ | 34.45 | 916,755 | $ | 63.2 | ||||||||||
June
1, 2010 to June 30, 2010
|
250,000 | $ | 33.86 | 250,000 | $ | 54.7 | ||||||||||
Total
|
1,208,696 | $ | 34.40 | 1,166,755 | $ | 54.7 |
45
Item 6. Exhibits.
Exhibit
Number
|
Description
|
|
3.1
|
Amended
and Restated Certificate of Incorporation (incorporated by reference from
exhibits to the Registration Statement on Form S-8 filed on April 19,
2005, File No. 333-124093).
|
|
3.2
|
Second
Amended and Restated Bylaws (incorporated by reference from exhibits to
the LifePoint Hospitals, Inc. Current Report on Form 8-K dated October 16,
2006, File No. 000-51251).
|
|
3.3
|
Amendment
No. 1 to the Second Amended and Restated Bylaws of LifePoint Hospitals,
Inc. (incorporated by reference from exhibits to the LifePoint Hospitals,
Inc. Current Report on Form 8-K dated May 20, 2008, File No.
000-51251).
|
|
10.1
|
Amendment,
dated April 27, 2010, to the LifePoint Hospitals, Inc. Amended and
Restated 1998 Long-Term Incentive Plan (incorporated by reference from
Appendix B to the LifePoint Hospitals, Inc. Proxy Statement filed April
29, 2010, File No. 000-51251).*
|
|
10.2
|
Amendment,
dated June 8, 2010, to the LifePoint Hospitals, Inc. Amended and Restated
1998 Long-Term Incentive Plan (incorporated by reference from Appendix A
to the LifePoint Hospitals, Inc. Proxy Statement filed April 29, 2010,
File No. 000-51251).*
|
|
10.3
|
Amendment,
dated April 27, 2010, to the LifePoint Hospitals, Inc. Amended and
Restated Management Stock Purchase Plan (incorporated by reference from
Appendix D to the LifePoint Hospitals, Inc. Proxy Statement filed April
29, 2010, File No. 000-51251).*
|
|
10.4
|
Amendment,
dated June 8, 2010, to the LifePoint Hospitals, Inc. Amended and Restated
Management Stock Purchase Plan (incorporated by reference from Appendix C
to the LifePoint Hospitals, Inc. Proxy Statement filed April 29, 2010,
File No. 000-51251).*
|
|
10.5
|
Amendment,
dated April 27, 2010, to the LifePoint Hospitals, Inc. Amended and
Restated Outside Directors Stock and Incentive Compensation Plan, dated
May 14, 2008 (incorporated by reference from Appendix F to the LifePoint
Hospitals, Inc. Proxy Statement filed April 29, 2010, File No.
000-51251).*
|
|
10.6
|
Amendment,
dated June 8, 2010, to the LifePoint Hospitals, Inc. Amended and Restated
Outside Directors and Incentive Compensation Plan, dated May 14, 2008
(incorporated by reference from Appendix E to the LifePoint Hospitals,
Inc. Proxy Statement filed April 29, 2010, File No.
000-51251).*
|
|
31.1
|
Certification
of the Chief Executive Officer of LifePoint Hospitals, Inc. Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
31.2
|
Certification
of the Chief Financial Officer of LifePoint Hospitals, Inc. Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
32.1
|
Certification
of the Chief Executive Officer of LifePoint Hospitals, Inc. Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
32.2
|
Certification
of the Chief Financial Officer of LifePoint Hospitals, Inc. Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
101.INS
|
XBRL
Instance Document.**
|
|
101.SCH
|
XBRL
Taxonomy Extension Schema Document.**
|
|
101.CAL
101.DEF
|
XBRL
Taxonomy Calculation Linkbase Document.**
XBRL
Taxonomy Definition Linkbase Document.**
|
|
101.LAB
|
XBRL
Taxonomy Label Linkbase Document.**
|
|
101.PRE
|
XBRL
Taxonomy Presentation Linkbase
Document.**
|
*
|
Management
Compensation Plan or Arrangement
|
|||
** | Furnished electronically herewith |
46
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
LifePoint Hospitals, Inc. | |||
|
By:
|
/s/ Michael S. Coggin | |
Michael S. Coggin | |||
Senior Vice President and | |||
Chief
Accounting Officer
(Principal Accounting Officer)
|
Date:
August 2, 2010
47
EXHIBIT
INDEX
Exhibit
Number
|
Description
|
|
3.1
|
Amended
and Restated Certificate of Incorporation (incorporated by reference from
exhibits to the Registration Statement on Form S-8 filed on April 19,
2005, File No. 333-124093).
|
|
3.2
|
Second
Amended and Restated Bylaws (incorporated by reference from exhibits to
the LifePoint Hospitals, Inc. Current Report on Form 8-K dated October 16,
2006, File No. 000-51251).
|
|
3.3
|
Amendment
No. 1 to the Second Amended and Restated Bylaws of LifePoint Hospitals,
Inc. (incorporated by reference from exhibits to the LifePoint Hospitals,
Inc. Current Report on Form 8-K dated May 20, 2008, File No.
000-51251).
|
|
10.1
|
Amendment,
dated April 27, 2010, to the LifePoint Hospitals, Inc. Amended and
Restated 1998 Long-Term Incentive Plan (incorporated by reference from
Appendix B to the LifePoint Hospitals, Inc. Proxy Statement filed April
29, 2010, File No. 000-51251).*
|
|
10.2
|
Amendment,
dated June 8, 2010, to the LifePoint Hospitals, Inc. Amended and Restated
1998 Long-Term Incentive Plan (incorporated by reference from Appendix A
to the LifePoint Hospitals, Inc. Proxy Statement filed April 29, 2010,
File No. 000-51251).*
|
|
10.3
|
Amendment,
dated April 27, 2010, to the LifePoint Hospitals, Inc. Amended and
Restated Management Stock Purchase Plan (incorporated by reference from
Appendix D to the LifePoint Hospitals, Inc. Proxy Statement filed April
29, 2010, File No. 000-51251).*
|
|
10.4
|
Amendment,
dated June 8, 2010, to the LifePoint Hospitals, Inc. Amended and Restated
Management Stock Purchase Plan (incorporated by reference from Appendix C
to the LifePoint Hospitals, Inc. Proxy Statement filed April 29, 2010,
File No. 000-51251).*
|
|
10.5
|
Amendment,
dated April 27, 2010, to the LifePoint Hospitals, Inc. Amended and
Restated Outside Directors Stock and Incentive Compensation Plan, dated
May 14, 2008 (incorporated by reference from Appendix F to the LifePoint
Hospitals, Inc. Proxy Statement filed April 29, 2010, File No.
000-51251).*
|
|
10.6
|
Amendment,
dated June 8, 2010, to the LifePoint Hospitals, Inc. Amended and Restated
Outside Directors and Incentive Compensation Plan, dated May 14, 2008
(incorporated by reference from Appendix E to the LifePoint Hospitals,
Inc. Proxy Statement filed April 29, 2010, File No.
000-51251).*
|
|
31.1
|
Certification
of the Chief Executive Officer of LifePoint Hospitals, Inc. Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
31.2
|
Certification
of the Chief Financial Officer of LifePoint Hospitals, Inc. Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
32.1
|
Certification
of the Chief Executive Officer of LifePoint Hospitals, Inc. Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
32.2
|
Certification
of the Chief Financial Officer of LifePoint Hospitals, Inc. Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
101.INS
|
XBRL
Instance Document.**
|
|
101.SCH
|
XBRL
Taxonomy Extension Schema Document.**
|
|
101.CAL
101.DEF
|
XBRL
Taxonomy Calculation Linkbase Document.**
XBRL
Taxonomy Definition Linkbase Document.**
|
|
101.LAB
|
XBRL
Taxonomy Label Linkbase Document.**
|
|
101.PRE
|
XBRL
Taxonomy Presentation Linkbase
Document.**
|
*
|
Management
Compensation Plan or Arrangement
|
|||
** | Furnished electronically herewith |