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	a50772050.htm

Exhibit 99.1

IASIS Healthcare Announces Fourth Quarter and Year-End 2013 Results

FRANKLIN, Tenn.--(BUSINESS WIRE)--December 19, 2013--IASIS Healthcare® LLC (“IASIS”) today announced financial and operating results for the fiscal fourth quarter and year ended September 30, 2013. Effective October 1, 2013, IASIS completed the sale of 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 fourth quarters and years ended September 30, 2013 and 2012.

Key Financial & Operating Results

Fourth Quarter Fiscal 2013

Net revenue for the fourth quarter totaled $584.7 million, an increase of 0.4% compared to $582.5 million in the prior year quarter. Adjusted EBITDA for the fourth quarter totaled $65.0 million, compared to $64.1 million in the prior year quarter.

In the fourth quarter, admissions declined 4.0% and adjusted admissions increased 1.8%, each compared to the prior year quarter. Net patient revenue per adjusted admission in the fourth quarter decreased 1.9% compared to the prior year quarter.

“We are pleased that our fourth quarter and year-end results demonstrate our ability to effectively and efficiently manage our business in the face of an ongoing challenging operating environment,” said IASIS Healthcare President and Chief Executive Officer Carl Whitmer. “Despite additional reimbursement cuts, generally soft inpatient volumes and growing uncompensated care, our operations teams were able to continue to improve our clinical performance scores – all while reducing our expenses and achieving major milestones in our strategic roadmap.”

Whitmer added, “As we look forward, we believe the work we have undertaken over the past several years to truly integrate our proven population health management experience with our demonstrated operations efficiency has positioned IASIS Healthcare for long-term success in the new era of value-based healthcare delivery.”

Year-to-Date Fiscal 2013

Net revenue for the year ended September 30, 2013, totaled $2.4 billion, an increase of 2.1% compared to $2.3 billion in the prior year. Adjusted EBITDA for the year ended September 30, 2013, totaled $260.8 million, compared to $282.8 million in the prior year. A comparison of the results for fiscal year 2013 to the prior year 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 fiscal 2012;
Continued reimbursement pressures in Texas, resulting 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 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 totaling $2.9 million.

For the year ended September 30, 2013, admissions declined 1.0% and adjusted admissions increased 2.9%, each compared to the prior year. Net patient revenue per adjusted admission for the year ended September 30, 2013, decreased 0.3% compared to the prior year. Excluding the impact of the net favorable Medicare related adjustments in the prior year, net patient revenue per adjusted admission for the year ended September 30, 2013, increased 0.3% compared to the adjusted prior year.

Cash Flow Analysis

As previously announced, IASIS closed two transactions during the fiscal fourth quarter ended September 30, 2013, a sale-leaseback of the real estate at three of its facilities and the sale of its Florida operations, that raised gross proceeds totaling $427.0 million.

Cash flows provided by operations for the year ended September 30, 2013, totaled $95.3 million, compared to $41.9 million in the prior year. Cash flows provided by operations in the year ended September 30, 2013, have been negatively affected by the state of Texas’ delay in funding reimbursement earned by Texas hospitals under certain supplemental Medicaid reimbursement programs, including disproportionate share and uncompensated care programs, totaling $66.8 million through the end of the Company’s fiscal year 2013. IASIS received approximately $27.0 million of funding under these supplemental reimbursement programs during the first quarter of fiscal 2014 and expects to receive the balance during the first half of fiscal 2014.

Conference Call

A listen-only simulcast and 30-day replay of IASIS’ fourth quarter and year-end 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 December 19, 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 and manager 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 16 acute care hospitals, one behavioral health hospital, several outpatient service facilities, more than 145 physician clinics, and Health Choice, a provider-owned, managed care organization and insurer delivering healthcare services to more than 179,000 members through multiple health plans, integrated delivery systems and managed care solutions. IASIS offers a variety of access points for convenient patient care in numerous regions across the U.S., including: Salt Lake City, Utah; Phoenix, Arizona; 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 (loss) from continuing operations before interest expense, income tax expense (benefit), 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 (loss) 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 September 30,						Year Ended September 30,
	2013			2012			2013			2012
Net revenue
Acute care revenue before provision for bad debts	$	546,130		$	526,186		$	2,182,966		$	2,041,124
Less: Provision for bad debts		(103,491	)		(82,554	)		(370,505	)		(282,506	)
Acute care revenue		442,639			443,632			1,812,461			1,758,618
Premium revenue		142,093			138,913			564,152			569,142
Net revenue		584,732			582,545			2,376,613			2,327,760

Costs and expenses
Salaries and benefits (includes stock-based compensation of $909, $6,113, $3,855 and $10,077, respectively)		225,795			223,210			896,081			833,389
Supplies		75,229			75,745			315,953			302,815
Medical claims		118,738			116,835			467,294			466,125
Rentals and leases		14,522			10,483			55,157			44,595
Other operating expenses		97,673			112,647			407,660			430,490
Medicare and Medicaid EHR incentives		(11,316	)		(14,342	)		(22,525	)		(22,426	)
Interest expense, net		33,222			33,914			133,209			137,990
Depreciation and amortization		25,003			25,033			97,609			103,917
Management fees		1,250			1,250			5,000			5,000
Total costs and expenses		580,116			584,775			2,355,438			2,301,895

Earnings (loss) from continuing operations before gain (loss) on disposal of assets and income taxes		4,616			(2,230	)		21,175			25,865
Gain (loss) on disposal of assets, net		(9,626	)		1,829			(8,977	)		2,243

Earnings (loss) from continuing operations before income taxes		(5,010	)		(401	)		12,198			28,108
Income tax expense (benefit)		(2,582	)		(760	)		5,434			2,572

Net earnings (loss) from continuing operations		(2,428	)		359			6,764			25,536
Earnings from discontinued operations, net of income taxes		2,886			2,616			3,735			6,052

Net earnings		458			2,975			10,499			31,588
Net earnings attributable to non-controlling interests		(4,026	)		(3,388	)		(7,215	)		(8,712	)

Net earnings (loss) attributable to IASIS Healthcare LLC	$	(3,568	)	$	(413	)	$	3,284		$	22,876


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

	Sept. 30, 2013		Sept. 30, 2012

ASSETS

Current assets
Cash and cash equivalents	$	438,131	$	48,882
Accounts receivable, net		371,006		356,618
Inventories		57,781		67,650
Deferred income taxes		26,096		19,744
Prepaid expenses and other current assets		126,412		117,851
Assets held for sale		119,141		–
Total current assets		1,138,567		610,745

Property and equipment, net		833,169		1,171,657
Goodwill		816,410		818,424
Other intangible assets, net		25,957		29,161
Other assets, net		66,162		68,498
Total assets	$	2,880,265	$	2,698,485

LIABILITIES AND EQUITY

Current liabilities
Accounts payable	$	129,542	$	111,928
Salaries and benefits payable		62,884		65,390
Accrued interest payable		27,519		28,034
Medical claims payable		57,514		61,142
Other accrued expenses and other current liabilities		92,553		89,890
Current portion of long-term debt and capital lease obligations		13,221		13,387
Advance from divestiture		144,803		–
Liabilities held for sale		3,208		–
Total current liabilities		531,244		369,771

Long-term debt and capital lease obligations		1,852,822		1,853,107
Deferred income taxes		115,592		120,961
Other long-term liabilities		123,120		104,110

Non-controlling interests with redemption rights		105,464		99,164

Equity
Member’s equity		142,262		141,589
Non-controlling interests		9,761		9,783
Total equity		152,023		151,372
Total liabilities and equity	$	2,880,265	$	2,698,485


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

	Year Ended September 30,
	2013			2012
Cash flows from operating activities
Net earnings	$	10,499		$	31,588
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization		97,609			103,917
Amortization of loan costs		7,612			7,309
Stock-based compensation		3,855			10,077
Deferred income taxes		(3,933	)		13,576
Income tax benefit from exercise of employee stock options		16			6
Income taxes related to parent company interest		489			(191	)
Fair value change in interest rate hedges		–			(1,410	)
Amortization of other comprehensive loss		–			2,057
Loss (gain) on disposal of assets, net		8,977			(2,243	)
Earnings from discontinued operations, net		(3,735	)		(6,052	)
Changes in operating assets and liabilities, net of the effect of acquisitions and dispositions:
Accounts receivable, net		(7,947	)		(63,321	)
Inventories, prepaid expenses and other current assets		(13,368	)		(44,929	)
Accounts payable, other accrued expenses and other accrued liabilities		2,726			(17,573	)
Net cash provided by operating activities – continuing operations		102,800			32,811
Net cash provided by (used in) operating activities – discontinued operations		(7,455	)		9,046
Net cash provided by operating activities		95,345			41,857

Cash flows from investing activities
Purchases of property and equipment		(107,344	)		(98,278	)
Cash received (paid) for acquisitions, net		2,996			(8,163	)
Cash advance on divestiture		144,803			–
Cash received in sale-leaseback of real estate		277,983			–
Proceeds from sale of assets		88			30
Change in other assets, net		695			4,949
Net cash provided by (used in) investing activities – continuing operations		319,221			(101,462	)
Net cash used in investing activities – discontinued operations		(4,441	)		(14,419	)
Net cash provided by (used in) investing activities		314,780			(115,881	)

Cash flows from financing activities
Payment of debt and capital lease obligations		(178,500	)		(14,177	)
Proceeds from revolving credit facilities		165,000			–
Debt financing costs incurred		(1,024	)		(998	)
Distributions to non-controlling interests		(6,012	)		(8,666	)
Cash received for the sale of non-controlling interests		849			–
Cash paid for the repurchase of non-controlling interests		(1,211	)		(589	)
Other		22			9
Net cash used in financing activities		(20,876	)		(24,421	)

Change in cash and cash equivalents		389,249			(98,445	)
Cash and cash equivalents at beginning of period		48,882			147,327
Cash and cash equivalents at end of period	$	438,131		$	48,882

Supplemental disclosure of cash flow information
Cash paid for interest	$	125,613		$	132,134
Cash received for income taxes, net	$	16,181		$	13,946


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

	For the Quarter Ended September 30, 2013
	Acute Care			Health Choice		Eliminations			Consolidated
Acute care revenue before provision for bad debts	$	546,130		$	–	$	–		$	546,130
Less: Provision for bad debts		(103,491	)		–		–			(103,491	)
Acute care revenue		442,639			–		–			442,639
Premium revenue		–			142,093		–			142,093
Revenue between segments		1,758			–		(1,758	)		–
Net revenue		444,397			142,093		(1,758	)		584,732

Salaries and benefits (excludes stock-based compensation)		218,521			6,365		–			224,886
Supplies		75,188			41		–			75,229
Medical claims		–			120,496		(1,758	)		118,738
Rentals and leases		14,170			352		–			14,522
Other operating expenses		91,724			5,949		–			97,673
Medicare and Medicaid EHR incentives		(11,316	)		–		–			(11,316	)
Adjusted EBITDA		56,110			8,890		–			65,000

Interest expense, net		33,222			–		–			33,222
Depreciation and amortization		23,951			1,052		–			25,003
Stock-based compensation		909			–		–			909
Management fees		1,250			–		–			1,250
Earnings (loss) from continuing operations before loss on disposal of assets and income taxes		(3,222	)		7,838		–			4,616
Loss on disposal of assets, net		(9,626	)		–		–			(9,626	)
Earnings (loss) from continuing operations before income taxes	$	(12,848	)	$	7,838	$	–		$	(5,010	)

	For the Quarter Ended September 30, 2012
	Acute Care			Health Choice		Eliminations			Consolidated
Acute care revenue before provision for bad debts	$	526,186		$	–	$	–		$	526,186
Less: Provision for bad debts		(82,554	)		–		–			(82,554	)
Acute care revenue		443,632			–		–			443,632
Premium revenue		–			138,913		–			138,913
Revenue between segments		1,879			–		(1,879	)		–
Net revenue		445,511			138,913		(1,879	)		582,545

Salaries and benefits (excludes stock-based compensation)		212,017			5,080		–			217,097
Supplies		75,702			43		–			75,745
Medical claims		–			118,714		(1,879	)		116,835
Rentals and leases		10,081			402		–			10,483
Other operating expenses		107,271			5,376		–			112,647
Medicare and Medicaid EHR incentives		(14,342	)		–		–			(14,342	)
Adjusted EBITDA		54,782			9,298		–			64,080

Interest expense, net		33,914			–		–			33,914
Depreciation and amortization		23,825			1,208		–			25,033
Stock-based compensation		6,113			–		–			6,113
Management fees		1,250			–		–			1,250
Earnings (loss) from continuing operations before gain on disposal of assets and income taxes		(10,320	)		8,090		–			(2,230	)
Gain on disposal of assets, net		1,829			–		–			1,829
Earnings (loss) from continuing operations before income taxes	$	(8,491	)	$	8,090	$	–		$	(401	)


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

	For the Year Ended September 30, 2013
	Acute Care			Health Choice		Eliminations			Consolidated
Acute care revenue before provision for bad debts	$	2,182,966		$	–	$	–		$	2,182,966
Less: Provision for bad debts		(370,505	)		–		–			(370,505	)
Acute care revenue		1,812,461			–		–			1,812,461
Premium revenue		–			564,152		–			564,152
Revenue between segments		7,092			–		(7,092	)		–
Net revenue		1,819,553			564,152		(7,092	)		2,376,613

Salaries and benefits (excludes stock-based compensation)		868,241			23,985		–			892,226
Supplies		315,770			183		–			315,953
Medical claims		–			474,386		(7,092	)		467,294
Rentals and leases		53,613			1,544		–			55,157
Other operating expenses		384,212			23,448		–			407,660
Medicare and Medicaid EHR incentives		(22,525	)		–		–			(22,525	)
Adjusted EBITDA		220,242			40,606		–			260,848

Interest expense, net		133,209			–		–			133,209
Depreciation and amortization		93,461			4,148		–			97,609
Stock-based compensation		3,855			–		–			3,855
Management fees		5,000			–		–			5,000
Earnings (loss) from continuing operations before loss on disposal of assets and income taxes		(15,283	)		36,458		–			21,175
Loss on disposal of assets, net		(8,977	)		–		–			(8,977	)
Earnings (loss) from continuing operations before income taxes	$	(24,260	)	$	36,458	$	–		$	12,198

	For the Year Ended September 30, 2012
	Acute Care			Health Choice		Eliminations			Consolidated
Acute care revenue before provision for bad debts	$	2,041,124		$	–	$	–		$	2,041,124
Less: Provision for bad debts		(282,506	)		–		–			(282,506	)
Acute care revenue		1,758,618			–		–			1,758,618
Premium revenue		–			569,142		–			569,142
Revenue between segments		7,092			–		(7,092	)		–
Net revenue		1,765,710			569,142		(7,092	)		2,327,760

Salaries and benefits (excludes stock-based compensation)		801,785			21,527		–			823,312
Supplies		302,587			228		–			302,815
Medical claims		–			473,217		(7,092	)		466,125
Rentals and leases		43,062			1,533		–			44,595
Other operating expenses		408,012			22,478		–			430,490
Medicare and Medicaid EHR incentives		(22,426	)		–		–			(22,426	)
Adjusted EBITDA		232,690			50,159		–			282,849

Interest expense, net		137,990			–		–			137,990
Depreciation and amortization		100,033			3,884		–			103,917
Stock-based compensation		10,077			–		–			10,077
Management fees		5,000			–		–			5,000
Earnings (loss) from continuing operations before gain on disposal of assets and income taxes		(20,410	)		46,275		–			25,865
Gain on disposal of assets, net		2,243			–		–			2,243
Earnings (loss) from continuing operations before income taxes	$	(18,167	)	$	46,275	$	–		$	28,108


IASIS HEALTHCARE LLC Consolidated Financial and Operating Data (Unaudited)

	Quarter Ended September 30,				Year Ended September 30,
	2013		2012		2013		2012
Consolidated Hospital Facilities ⁽¹⁾
Number of acute care hospital facilities at end of period	16		16		16		16
Licensed beds at end of period	3,803		3,732		3,803		3,732
Average length of stay (days)	5.0		5.0		5.1		5.0
Occupancy rates (average beds in service)	47.7	%	50.8	%	49.8	%	50.1	%
Admissions	26,568		27,681		109,211		110,278
Percentage change	(4.0	%)			(1.0	%)
Adjusted admissions	48,600		47,762		192,276		186,822
Percentage change	1.8	%			2.9	%
Patient days	133,712		139,283		554,871		546,385
Adjusted patient days	244,597		240,325		976,900		925,630
Outpatient revenue as a percentage of gross patient revenue	45.3	%	42.0	%	43.2	%	41.0	%

⁽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 September 30,						Year Ended September 30,
	2013			2012			2013		2012
Consolidated Results
Net earnings (loss) from continuing operations	$	(2,428	)	$	359		$	6,764	$	25,536
Add:
Interest expense, net		33,222			33,914			133,209		137,990
Income tax expense (benefit)		(2,582	)		(760	)		5,434		2,572
Depreciation and amortization		25,003			25,033			97,609		103,917
Stock-based compensation		909			6,113			3,855		10,077
Loss (gain) on disposal of assets, net		9,626			(1,829	)		8,977		(2,243	)
Management fees		1,250			1,250			5,000		5,000
Adjusted EBITDA		65,000			64,080			260,848		282,849
Savings related to strategic hospital cost initiatives		–			–			10,941		–
Costs savings associated with the restructuring of physician operations		–			–			1,862		–
Facilities opening and project start-up costs		–			–			1,842		–
Severance and other non-recurring restructuring costs		953			251			3,531		2,319
Acquisition related costs		159			1,022			1,714		1,675
Other items		–			(19	)		259		911
Credit agreement adjusted EBITDA ⁽¹⁾		66,112			65,334			280,997		287,754
Non-recurring and prior period adjustments ^{(2) (3)}		–			–			6,102		(6,286	)
Pro forma adjusted EBITDA ⁽⁴⁾	$	66,112		$	65,334		$	287,099	$	281,468

(1) Includes adjustments allowed under the Company’s senior credit agreement.
(2) Reflects non-recurring changes in reimbursement estimates in the year ended September 30, 2013.
(3) Reflects the net favorable impact of certain prior period Medicare related adjustments during the year ended September 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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