IASIS Healthcare LLC - FORM 8-K - EX-99.1 - EXHIBIT 99.1

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8-K - IASIS HEALTHCARE LLC 8-K - IASIS Healthcare LLC	a50686609.htm

Exhibit 99.1

IASIS Healthcare Announces Third Quarter 2013 Results

FRANKLIN, Tenn.--(BUSINESS WIRE)--August 7, 2013--IASIS Healthcare® LLC (“IASIS”) today announced financial and operating results for the fiscal third quarter and nine months ended June 30, 2013. On July 18, 2013, IASIS announced the signing of a definitive agreement to sell its Florida operations. Accordingly, the results of the Company’s Florida operations are classified as discontinued operations in the accompanying consolidated financial statements and have been excluded from segment information, consolidated financial and operating data and supplemental consolidated statements of operations information for the fiscal third quarter and nine months ended June 30, 2013 and 2012.

Third Quarter Fiscal 2013

Key Financial & Operating Results

Net revenue for the third quarter totaled $599.1 million, an increase of 3.7% compared to $577.6 million in the prior year quarter. Adjusted EBITDA for the third quarter totaled $68.5 million, compared to $66.3 million in the prior year quarter.

In the third quarter, admissions increased 0.9% and adjusted admissions increased 5.0%, each compared to the prior year quarter. Net patient revenue per adjusted admission in the third quarter increased 0.2% compared to the prior year quarter.

“We are pleased with our third quarter results and believe they highlight our disciplined approach to providing high quality, efficient care in a very dynamic industry,” said IASIS Healthcare President and Chief Executive Officer Carl Whitmer. “We continue to operate in an environment of unprecedented change, to which we are responding by focusing each of our markets on expense management, strategic growth opportunities and managed care initiatives, including population health management and other clinical integration partnerships, to further position our company for long-term success in the new era of healthcare delivery.”

Year-to-Date Fiscal 2013

Key Financial & Operating Results

Net revenue for the first nine months of fiscal 2013 totaled $1.8 billion, an increase of 2.7% compared to $1.7 billion in the prior year period. Adjusted EBITDA for the first nine months of fiscal 2013 totaled $195.8 million, compared to $218.8 million in the prior year period. A comparison of the nine month results to the prior year period is impacted by the following:

The net favorable impact of certain prior period Medicare related adjustments, which increased net revenue by $9.7 million and adjusted EBITDA by $6.3 million in the prior year period;
Continued reimbursement pressures in Texas resulted in Medicaid rate reductions and an additional $6.1 million of changes in other related reimbursement estimates associated with the Company’s Houston market in the first nine months of fiscal 2013 that are not expected to recur; and
Costs and start-up related losses associated with certain long-term strategic investments in the Company’s Houston market totaled $2.9 million.

For the first nine months of fiscal 2013, admissions increased 0.1% and adjusted admissions increased 3.4%, each compared to the prior year period. Net patient revenue per adjusted admission for the first nine months of fiscal 2013 increased 0.2% compared to the prior year period. Excluding the impact of the net favorable Medicare related adjustments in the prior year period, net patient revenue per adjusted admission for the first nine months of fiscal 2013 increased 1.0% compared to the adjusted prior year period.

Cash Flow Analysis

Cash flows provided by operations for the first nine months of fiscal 2013 totaled $10.2 million, compared to $18.8 million in the prior year period. Cash flows provided by operations in the first nine months of fiscal 2013 have been negatively affected by the state of Texas’ delay in funding reimbursement earned by Texas hospitals under certain supplemental reimbursement programs, including disproportionate share and uncompensated care programs, totaling $64.2 million through the end of the Company’s third quarter. Currently, IASIS expects to receive a portion of the funding under these supplemental reimbursement programs during the last quarter of fiscal 2013 and the first quarter of fiscal 2014.

A listen-only simulcast and 30-day replay of IASIS’ third quarter 2013 conference call will be available by clicking the “For Investors” link on the Company’s Web site at www.iasishealthcare.com beginning at 11:00 a.m. Eastern Time on August 7, 2013. A copy of this press release will also be available on the Company’s Web site.

IASIS Healthcare, located in Franklin, Tennessee, is a leading provider of high quality, affordable healthcare services in urban and suburban markets. With total annual net revenue of approximately $2.4 billion, IASIS owns and operates 19 acute care hospitals, one behavioral health hospital, several outpatient service facilities, more than 160 physician clinics, and Medicaid and Medicare managed health plans in Arizona and Utah that serve more than 176,000 members. IASIS’ healthcare facilities offer a variety of access points for convenient patient care in numerous regions across the U.S., including: Salt Lake City, Utah; Phoenix, Arizona; Tampa-St. Petersburg, Florida; five cities in Texas, including Houston and San Antonio; Las Vegas, Nevada; and West Monroe, Louisiana. For more information on IASIS, please visit the Company’s Web site at www.iasishealthcare.com.

Some of the statements we make in this press release are forward-looking within the meaning of the federal securities laws, which are intended to be covered by the safe harbors created thereby. Those forward-looking statements include all statements that are not historical statements of fact and those regarding our intent, belief or expectations including, but not limited to, future financial and operating results, the Company’s plans, objectives, expectations and other statements that are not historical facts. Forward-looking statements involve known and unknown risks and uncertainties that may cause actual results in future periods to differ materially from those anticipated in the forward-looking statements. These risk factors and uncertainties are more fully described in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2012, and other filings with the Securities and Exchange Commission.

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

Adjusted EBITDA represents net earnings from continuing operations before interest expense, income tax expense, depreciation and amortization, stock-based compensation, gain (loss) on disposal of assets and management fees. Management fees represent monitoring and advisory fees paid to TPG, the Company’s majority financial sponsor, and certain other members of IASIS Investment LLC. Credit agreement adjusted EBITDA reflects adjusted EBITDA as well as certain adjustments to net earnings permitted under the Company’s senior credit agreement. Pro forma adjusted EBITDA reflects credit agreement adjusted EBITDA, as well as certain non-recurring and prior period adjustments. Management routinely calculates and communicates adjusted EBITDA and believes that it is useful to investors because it is commonly used as an analytical indicator within the healthcare industry to evaluate hospital performance, allocate resources and measure leverage capacity and debt service ability. In addition, the Company uses adjusted EBITDA as a measure of performance for its business segments and for incentive compensation purposes. Management believes credit agreement adjusted EBITDA and pro forma adjusted EBITDA provide additional detail with respect to the Company’s operating performance and ability to service its indebtedness. None of adjusted EBITDA, credit agreement adjusted EBITDA or pro forma adjusted EBITDA should be considered as a measure of financial performance under generally accepted accounting principles, and the items excluded from such EBITDA measures are significant components in understanding and assessing financial performance. None of such EBITDA measures should be considered in isolation or as an alternative to net earnings, cash flows generated by operating, investing, or financing activities or other financial statement data presented in the consolidated financial statements as an indicator of financial performance or liquidity. Such EBITDA measures may not be comparable to similarly titled measures of other companies. A table describing adjusted EBITDA, credit agreement adjusted EBITDA and pro forma adjusted EBITDA and reconciling net earnings from continuing operations to such EBITDA measures is included in this press release in the attached Supplemental Consolidated Statements of Operations Information.

IASIS HEALTHCARE LLC Consolidated Statements of Operations (Unaudited) (in thousands)

	Quarter Ended June 30,						Nine Months Ended June 30,
		2013			2012			2013			2012
Net revenue
Acute care revenue before provision for bad debts	$	555,413		$	504,047		$	1,636,836		$	1,514,986
Less: Provision for bad debts		(96,090	)		(68,744	)		(267,014	)		(199,952	)
Acute care revenue		459,323			435,303			1,369,822			1,315,034
Premium revenue		139,804			142,323			422,059			430,229
Net revenue		599,127			577,626			1,791,881			1,745,263

Costs and expenses
Salaries and benefits (includes stock-based compensation of $947, $2,022, $2,946 and $3,964, respectively)		219,896			204,314			670,286			610,179
Supplies		79,462			75,350			240,724			227,070
Medical claims		116,640			116,366			348,556			349,290
Rentals and leases		13,992			11,857			40,635			34,112
Other operating expenses		106,456			105,484			309,987			317,843
Medicare and Medicaid EHR incentives		(4,827	)		–			(11,209	)		(8,036	)
Interest expense, net		32,771			33,606			99,987			104,076
Depreciation and amortization		24,492			26,345			72,606			78,884
Management fees		1,250			1,250			3,750			3,750
Total costs and expenses		590,132			574,572			1,775,322			1,717,168

Earnings from continuing operations before gain (loss) on disposal of assets and income taxes		8,995			3,054			16,559			28,095
Gain (loss) on disposal of assets, net		481			(240	)		649			414

Earnings from continuing operations before income taxes		9,476			2,814			17,208			28,509
Income tax expense (benefit)		3,850			(8,035	)		8,016			3,332

Net earnings from continuing operations		5,626			10,849			9,192			25,177
Earnings (loss) from discontinued operations, net of income taxes		(531	)		1,012			849			3,436

Net earnings		5,095			11,861			10,041			28,613
Net earnings attributable to non-controlling interests		(1,941	)		(1,082	)		(3,189	)		(5,324	)

Net earnings attributable to IASIS Healthcare LLC	$	3,154		$	10,779		$	6,852		$	23,289

IASIS HEALTHCARE LLC Consolidated Balance Sheets (Unaudited) (in thousands)

	June 30, 2013		Sept. 30, 2012

ASSETS

Current assets
Cash and cash equivalents	$	17,856	$	48,882
Accounts receivable, net		383,363		356,618
Inventories		56,304		67,650
Deferred income taxes		15,709		19,744
Prepaid expenses and other current assets		137,328		117,851
Assets held for sale		119,132		–
Total current assets		729,692		610,745

Property and equipment, net		1,067,551		1,171,657
Goodwill		816,726		818,424
Other intangible assets, net		26,701		29,161
Other assets, net		66,436		68,498
Total assets	$	2,707,106	$	2,698,485

LIABILITIES AND EQUITY

Current liabilities
Accounts payable	$	112,722	$	111,928
Salaries and benefits payable		53,192		65,390
Accrued interest payable		10,056		28,034
Medical claims payable		53,801		61,142
Other accrued expenses and other current liabilities		66,442		89,890
Current portion of long-term debt and capital lease obligations		12,710		13,387
Liabilities held for sale		2,963		–
Total current liabilities		311,886		369,771

Long-term debt and capital lease obligations		1,900,144		1,853,107
Deferred income taxes		138,286		120,961
Other long-term liabilities		99,594		104,110

Non-controlling interests with redemption rights		105,657		99,164

Equity
Member’s equity		141,789		141,589
Non-controlling interests		9,750		9,783
Total equity		151,539		151,372
Total liabilities and equity	$	2,707,106	$	2,698,485

IASIS HEALTHCARE LLC Consolidated Statements of Cash Flows (Unaudited) (in thousands)

	Nine Months Ended June 30,
		2013			2012
Cash flows from operating activities
Net earnings	$	10,041		$	28,613
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization		72,606			78,884
Amortization of loan costs		5,760			5,495
Stock-based compensation		2,946			3,964
Deferred income taxes		16,338			13,264
Income tax benefit from stock-based compensation		16			6
Income tax benefit from parent company interest		103			427
Fair value change in interest rate hedges		–			(1,410	)
Amortization of other comprehensive loss		–			2,057
Gain on disposal of assets, net		(649	)		(414	)
Earnings from discontinued operations, net		(849	)		(3,436	)
Changes in operating assets and liabilities, net of the effect of acquisitions and dispositions:
Accounts receivable, net		(22,880	)		(54,357	)
Inventories, prepaid expenses and other current assets		(21,628	)		(14,294	)
Accounts payable, other accrued expenses and other accrued liabilities		(55,578	)		(46,944	)
Net cash provided by operating activities – continuing operations		6,226			11,855
Net cash provided by operating activities – discontinued operations		3,967			6,960
Net cash provided by operating activities		10,193			18,815

Cash flows from investing activities
Purchases of property and equipment		(79,369	)		(73,317	)
Cash received for acquisitions, net		3,584			215
Proceeds from sale of assets		83			24
Change in other assets, net		251			2,488
Net cash used in investing activities – continuing operations		(75,451	)		(70,590	)
Net cash used in investing activities – discontinued operations		(4,318	)		(12,310	)
Net cash used in investing activities		(79,769	)		(82,900	)

Cash flows from financing activities
Payment of debt and capital lease obligations		(101,765	)		(10,734	)
Proceeds from revolving credit facilities		147,000			–
Debt financing costs incurred		(1,024	)		(998	)
Distributions to non-controlling interests		(5,504	)		(6,802	)
Cash received for the sale of non-controlling interests		849			–
Cash paid for the repurchase of non-controlling interests		(1,018	)		(341	)
Other		12			–
Net cash provided by (used in) financing activities		38,550			(18,875	)

Change in cash and cash equivalents		(31,026	)		(82,960	)
Cash and cash equivalents at beginning of period		48,882			147,327
Cash and cash equivalents at end of period	$	17,856		$	64,367

Supplemental disclosure of cash flow information
Cash paid for interest	$	111,687		$	117,960
Cash paid (received) for income taxes, net	$	2,122		$	(10,111	)

IASIS HEALTHCARE LLC Segment Information (Unaudited) (in thousands)

	For the Quarter Ended June 30, 2013
	Acute Care			Health Choice		Eliminations			Consolidated
Acute care revenue before provision for bad debts	$	555,413		$	–	$	–		$	555,413
Less: Provision for bad debts		(96,090	)		–		–			(96,090	)
Acute care revenue		459,323			–		–			459,323
Premium revenue		–			139,804		–			139,804
Revenue between segments		1,940			–		(1,940	)		–
Net revenue		461,263			139,804		(1,940	)		599,127

Salaries and benefits (excludes stock-based compensation)		212,859			6,090		–			218,949
Supplies		79,422			40		–			79,462
Medical claims		–			118,580		(1,940	)		116,640
Rentals and leases		13,597			395		–			13,992
Other operating expenses		100,463			5,993		–			106,456
Medicare and Medicaid EHR incentives		(4,827	)		–		–			(4,827	)
Adjusted EBITDA		59,749			8,706		–			68,455

Interest expense, net		32,771			–		–			32,771
Depreciation and amortization		23,463			1,029		–			24,492
Stock-based compensation		947			–		–			947
Management fees		1,250			–		–			1,250
Earnings from continuing operations before gain on disposal of assets and income taxes		1,318			7,677		–			8,995
Gain on disposal of assets, net		481			–		–			481
Earnings from continuing operations before income taxes	$	1,799		$	7,677	$	–		$	9,476

	For the Quarter Ended June 30, 2012
	Acute Care			Health Choice		Eliminations			Consolidated
Acute care revenue before provision for bad debts	$	504,047		$	–	$	–		$	504,047
Less: Provision for bad debts		(68,744	)		–		–			(68,744	)
Acute care revenue		435,303			–		–			435,303
Premium revenue		–			142,323		–			142,323
Revenue between segments		1,764			–		(1,764	)		–
Net revenue		437,067			142,323		(1,764	)		577,626

Salaries and benefits (excludes stock-based compensation)		196,929			5,363		–			202,292
Supplies		75,278			72		–			75,350
Medical claims		–			118,130		(1,764	)		116,366
Rentals and leases		11,507			350		–			11,857
Other operating expenses		100,229			5,255		–			105,484
Adjusted EBITDA		53,124			13,153		–			66,277

Interest expense, net		33,606			–		–			33,606
Depreciation and amortization		25,469			876		–			26,345
Stock-based compensation		2,022			–		–			2,022
Management fees		1,250			–		–			1,250
Earnings (loss) from continuing operations before loss on disposal of assets and income taxes		(9,223	)		12,277		–			3,054
Loss on disposal of assets, net		(240	)		–		–			(240	)
Earnings (loss) from continuing operations before income taxes	$	(9,463	)	$	12,277	$	–		$	2,814

IASIS HEALTHCARE LLC Segment Information (Unaudited) (in thousands)

	For the Nine Months Ended June 30, 2013
	Acute Care			Health Choice		Eliminations			Consolidated
Acute care revenue before provision for bad debts	$	1,636,836		$	–	$	–		$	1,636,836
Less: Provision for bad debts		(267,014	)		–		–			(267,014	)
Acute care revenue		1,369,822			–		–			1,369,822
Premium revenue		–			422,059		–			422,059
Revenue between segments		5,334			–		(5,334	)		–
Net revenue		1,375,156			422,059		(5,334	)		1,791,881

Salaries and benefits (excludes stock-based compensation)		649,720			17,620		–			667,340
Supplies		240,582			142		–			240,724
Medical claims		–			353,890		(5,334	)		348,556
Rentals and leases		39,443			1,192		–			40,635
Other operating expenses		292,488			17,499		–			309,987
Medicare and Medicaid EHR incentives		(11,209	)		–		–			(11,209	)
Adjusted EBITDA		164,132			31,716		–			195,848

Interest expense, net		99,987			–		–			99,987
Depreciation and amortization		69,510			3,096		–			72,606
Stock-based compensation		2,946			–		–			2,946
Management fees		3,750			–		–			3,750
Earnings (loss) from continuing operations before gain on disposal of assets and income taxes		(12,061	)		28,620		–			16,559
Gain on disposal of assets, net		649			–		–			649
Earnings (loss) from continuing operations before income taxes	$	(11,412	)	$	28,620	$	–		$	17,208

	For the Nine Months Ended June 30, 2012
	Acute Care			Health Choice		Eliminations			Consolidated
Acute care revenue before provision for bad debts	$	1,514,986		$	–	$	–		$	1,514,986
Less: Provision for bad debts		(199,952	)		–		–			(199,952	)
Acute care revenue		1,315,034			–		–			1,315,034
Premium revenue		–			430,229		–			430,229
Revenue between segments		5,213			–		(5,213	)		–
Net revenue		1,320,247			430,229		(5,213	)		1,745,263

Salaries and benefits (excludes stock-based compensation)		589,768			16,447		–			606,215
Supplies		226,885			185		–			227,070
Medical claims		–			354,503		(5,213	)		349,290
Rentals and leases		32,981			1,131		–			34,112
Other operating expenses		300,741			17,102		–			317,843
Medicaid EHR incentives		(8,036	)		–		–			(8,036	)
Adjusted EBITDA		177,908			40,861		–			218,769

Interest expense, net		104,076			–		–			104,076
Depreciation and amortization		76,208			2,676		–			78,884
Stock-based compensation		3,964			–		–			3,964
Management fees		3,750			–		–			3,750
Earnings (loss) from continuing operations before gain on disposal of assets and income taxes		(10,090	)		38,185		–			28,095
Gain on disposal of assets, net		414			–		–			414
Earnings (loss) from continuing operations before income taxes	$	(9,676	)	$	38,185	$	–		$	28,509

IASIS HEALTHCARE LLC Consolidated Financial and Operating Data (Unaudited)

	Quarter Ended June 30,				Nine Months Ended June 30,
	2013		2012		2013		2012
Consolidated Hospital Facilities ⁽¹⁾
Number of acute care hospital facilities at end of period	16		15		16		15
Licensed beds at end of period	3,804		3,704		3,804		3,704
Average length of stay (days)	5.1		5.0		5.1		4.9
Occupancy rates (average beds in service)	49.7	%	50.1	%	50.6	%	50.5	%
Admissions	27,155		26,920		82,643		82,597
Percentage change	0.9	%			0.1	%
Adjusted admissions	48,175		45,871		143,750		139,071
Percentage change	5.0	%			3.4	%
Patient days	138,108		134,251		421,159		407,102
Adjusted patient days	245,015		228,761		732,569		685,447
Outpatient revenue as a percentage of gross patient revenue	43.6	%	41.3	%	42.5	%	40.6	%

⁽¹⁾ Excludes the Company’s Florida operations, which are now reflected in discontinued operations.

IASIS HEALTHCARE LLC Supplemental Consolidated Statements of Operations Information (Unaudited) (in thousands)

	Quarter Ended June 30,						Nine Months Ended June 30,						Twelve Months Ended June 30,
		2013			2012			2013			2012			2013
Consolidated Results
Net earnings from continuing operations	$	5,626		$	10,849		$	9,192		$	25,177		$	11,780
Add:
Interest expense, net		32,771			33,606			99,987			104,076			133,902
Income tax expense (benefit)		3,850			(8,035	)		8,016			3,332			8,556
Depreciation and amortization		24,492			26,345			72,606			78,884			97,639
Stock-based compensation		947			2,022			2,946			3,964			9,059
Loss (gain) on disposal of assets, net		(481	)		240			(649	)		(414	)		(2,477	)
Management fees		1,250			1,250			3,750			3,750			5,000
Adjusted EBITDA		68,455			66,277			195,848			218,769			263,459
Savings related to strategic hospital cost initiatives		1,037			–			10,941			–			16,650
Costs savings associated with the restructuring of physician operations		89			–			1,862			–			2,800
Facilities opening and project start-up costs		–			–			1,842			–			3,988
Severance and other non-recurring restructuring costs		771			457			2,578			2,069			2,828
Acquisition related costs		347			394			1,104			652			2,106
Other items		28			(61	)		259			932			830
Credit agreement adjusted EBITDA ⁽¹⁾		70,727			67,067			214,434			222,422			292,661
Non-recurring and prior period adjustments ^{(2) (3)}		–			–			6,102			(6,286	)		1,445
Pro forma adjusted EBITDA ⁽⁴⁾	$	70,727		$	67,067		$	220,536		$	216,136		$	294,106

(1)		Includes adjustments allowed under the Company’s senior credit agreement.
(2)		Reflects non-recurring changes in reimbursement estimates in the nine months and twelve months ended June 30, 2013.
(3)		Reflects the net favorable impact of certain prior period Medicare related adjustments during the nine months ended June 30, 2012.
(4)		Reflects credit agreement adjusted EBITDA, plus the impact of certain non-recurring and prior period adjustments.

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

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