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| 8-K - 8-K - Capella Healthcare, Inc. | d689602d8k.htm |
Exhibit 99.1
FOR IMMEDIATE RELEASE
| INVESTOR CONTACT: | MEDIA CONTACT: | |||||
| Denise Warren | Beth Wright | |||||
| EVP/CFO | VP – Communications | |||||
| 615-764-3013 | 615-764-3010 | |||||
Capella Healthcare, Inc. Announces Fourth Quarter & Year End 2013 Results
Franklin, Tennessee. March 7, 2014 – Capella Healthcare, Inc. (“Capella”) today announced financial and operating results for the fourth quarter and year ended December 31, 2013.
For the fourth quarter ended December 31, 2013, revenue from continuing operations was $177.3 million, up 0.7% from $176.1 million for the same period a year ago. Adjusted revenue from continuing operations was $181.8 million, up 3.2% from $176.1 million for the same period a year ago. Pro forma Adjusted EBITDA for the fourth quarter ended December 31, 2013, was $23.8 million, down from $25.9 million for the same period a year ago.
For the year ended December 31, 2013, revenue from continuing operations was $722.3 million, up 0.6% from $718.2 million for the same period a year ago. Adjusted revenue from continuing operations was $726.8 million, up, 3.2% from $704.6 million for the same period a year ago. Pro forma Adjusted EBITDA for 2013 decreased 2.0% to $95.0 million, compared with $96.8 million for the same period a year ago.
The financial results for the fourth quarter and full year ended December 31, 2013, include an additional increase in the Company’s bad debt expense as well as related charges for the reorganization of the corporate support center.
The Company experienced what it believes to be an unusual increase in both aged self-pay accounts greater than 360 days old, as well as an increase in patient co-payments and deductibles. As a result, the Company elected to add $4.5 million of additional bad debt expense in 2013.
Also during the fourth quarter, the Company undertook a reorganization of its corporate resources to realign its human capital and service infrastructure. This restructuring involved the elimination of several executive level positions in favor of adding staff level positions to better support affiliated hospitals. In addition, several roles and reporting alignments were changed or consolidated. As a result, the Company recorded reorganization related charges of approximately $2.9 million to Salaries, Wages and Benefits during the quarter.
Adjusted revenue and pro forma adjusted EBITDA exclude: (1) the impact of the Company’s additional bad debt expense; (2) the impact of the Company’s reorganization charges; (3) transaction and stock compensation expenses; and (3) the impact of the out-of-period portion of the state of Oklahoma’s Supplemental Hospital Offset Payment Program (SHOPP) and the Medicare rural floor settlement in 2012. A table reflecting the Company’s adjusted revenue and adjusted EBITDA is included in this press release.
Commenting on the results, Michael Wiechart, President and Chief Executive Officer of Capella Healthcare, Inc. said, “Throughout a challenging 2013, our hospitals continued to show significant and sustained quality improvement as well as revenue growth. I commend our hospital leaders for doing an excellent job focusing on providing high quality care and outstanding constituency satisfaction, our most important priorities, while managing expenses effectively. We were also pleased last year with our second consecutive ranking on Modern Healthcare’s list of fastest growing healthcare companies, for which we give full credit to those who serve our patients.”
“We are on the leading edge of a massive transformation of the health care system. This new era of value-based care – with an intense focus on quality, collaboration and cost-effectiveness – provides both tremendous opportunities and significant challenges. Our corporate reorganization puts us in an even better position to leverage the growth opportunities ahead as well as to more effectively support our hospitals’ quality, safety and patient satisfaction initiatives.”
About Capella Healthcare
Based in Franklin, Tennessee, Capella Healthcare owns and/or operates general acute-care hospitals in six states. With the philosophy that all health care is local, Capella collaborates with each hospital’s medical staff, board and community leadership to take care to the next level. The Company has access to significant leadership and financial resources, reinvesting in its family of hospitals to strengthen and expand services and facilities. For more information visit the website at www.CapellaHealthcare.com.
Conference Call
Capella will host a conference call for investors at 9:00 a.m. Central time today. All interested investors are invited to access the call by dialing: 877-806-6964, passcode: 5852213. A replay of the call will be available for a period of 30 days, beginning approximately one hour after the call has concluded. Instructions to access the audio recording can be found on the Investor Relations section of the Company’s website at www.CapellaHealth.com. A copy of the Company’s Form 10-K for the period ended December 31, 2013 may be obtained via the Company’s website when filed with the Securities and Exchange Commission.
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Cautionary Statement about Preliminary Results and other Forward-Looking Information
This press release contains forward-looking statements based on current management expectations. Numerous risks, uncertainties and other factors may cause actual results to differ materially from those expressed in any forward-looking statements. These factors include, but are not limited to, (1) the impact of healthcare reform and other changes in government programs; (2) spending cuts resulting from the Budget Control Act of 2011; (3) the impact of the economy; (4) growth of uninsured and “patient due” accounts and a deterioration in the collectability of these accounts; (5) federal or state programs that reduce our Medicare or Medicaid payments; (6) the reduction or elimination of payments from third-party payors or the inability to negotiate contracts or maintain satisfactory relationships with third-party payors; (7) controls designed to reduce inpatient services may reduce our revenue; (8) any shortage of qualified professional and staff personnel; (9) our ability to recruit and retain quality physicians; (10) the loss of the services of one or more of our executive management team; (11) our ability to comply with extensive laws and government regulations, including fraud and abuse laws; (12) competition from other hospitals or healthcare providers, including physicians; (13) concentration of revenue in a small number of states, which makes us particularly sensitive to regulatory and economic changes in those states; (14) our access to licensed information systems and the ability to integrate changes to our existing information systems or information systems of acquired hospitals; (15) liabilities for professional liability and other claims brought against our facilities; (16) potential legal and reputational risk as a result of our access to personal information of our patients; (17) state efforts to regulate the construction or expansion of healthcare facilities; (18) the industry trend toward value-based purchasing; (19) our substantial indebtedness and ability to generate cash flow to service or refinance our indebtedness; and (20) other risk factors described in our annual report on Form 10-K for the year ended December 31, 2013 filed with the Securities and Exchange Commission. Many of the factors that will determine our future results are beyond our ability to control or predict. In light of the significant uncertainties inherent in the forward-looking statements contained herein, readers should not place undue reliance on forward-looking statements, which reflect management’s views only as of the date hereof. We undertake no obligation to revise or update any forward-looking statements, or to make any other forward-looking statements, whether as a result of new information, future events or otherwise.
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Capella Healthcare, Inc.
Condensed Consolidated Statements of Operations (Unaudited)
(Dollars in millions)
| Three Months Ended December 31, | ||||||||||||||||
| 2012 | 2013 | |||||||||||||||
| Amount | % of Revenue |
Amount | % of Revenue |
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| Revenue |
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| Revenue before provision for bad debts |
$ | 200.7 | $ | 209.9 | ||||||||||||
| Provision for bad debts |
(24.6 | ) | (32.6 | ) | ||||||||||||
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| Revenue |
176.1 | 177.3 | ||||||||||||||
| Operating Expenses |
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| Salaries & benefits |
82.9 | 47.1 | % | 89.9 | 50.7 | % | ||||||||||
| Supplies |
29.3 | 16.6 | % | 32.0 | 18.0 | % | ||||||||||
| Other operating expenses |
44.6 | 25.3 | % | 46.9 | 26.5 | % | ||||||||||
| Other income |
(5.2 | ) | -3.0 | % | (7.1 | ) | -4.0 | % | ||||||||
| Management fees |
0.1 | 0.1 | % | 0.1 | 0.1 | % | ||||||||||
| Interest, net |
13.6 | 7.7 | % | 14.0 | 7.9 | % | ||||||||||
| Depreciation and amortization |
11.6 | 6.6 | % | 11.0 | 6.2 | % | ||||||||||
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| Total costs and expenses |
176.9 | 100.5 | % | 186.8 | 105.4 | % | ||||||||||
| Loss from continuing operations before income taxes |
(0.8 | ) | -0.5 | % | (9.5 | ) | -5.4 | % | ||||||||
| Income taxes |
0.3 | 0.2 | % | 0.8 | 0.5 | % | ||||||||||
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| Loss from continuing operations |
(1.1 | ) | -0.6 | % | (10.3 | ) | -5.8 | % | ||||||||
| Loss from discontinued operations, net of tax |
(9.8 | ) | -5.6 | % | (3.6 | ) | -2.0 | % | ||||||||
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| Net loss |
(10.9 | ) | -6.2 | % | (13.9 | ) | -7.8 | % | ||||||||
| Less: Net income attributable to non- controlling interests |
1.1 | 0.6 | % | 0.7 | 0.4 | % | ||||||||||
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| Net loss attributable to Capella Healthcare, Inc. |
$ | (12.0 | ) | -6.8 | % | $ | (14.6 | ) | -8.2 | % | ||||||
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Capella Healthcare, Inc.
Condensed Consolidated Statements of Operations (Unaudited)
(Dollars in millions)
| Twelve Months Ended December 31, | ||||||||||||||||
| 2012 | 2013 | |||||||||||||||
| Amount | % of Revenue |
Amount | % of Revenue |
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| Revenue |
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| Revenue before provision for bad debts |
$ | 802.3 | $ | 828.5 | ||||||||||||
| Provision for bad debts |
(84.1 | ) | (106.2 | ) | ||||||||||||
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| Revenue |
718.2 | 722.3 | ||||||||||||||
| Operating Expenses |
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| Salaries & benefits |
333.2 | 46.4 | % | 342.8 | 47.5 | % | ||||||||||
| Supplies |
114.8 | 16.0 | % | 123.1 | 17.0 | % | ||||||||||
| Other operating expenses |
177.7 | 24.7 | % | 185.5 | 25.7 | % | ||||||||||
| Other income |
(6.4 | ) | -0.9 | % | (12.6 | ) | -1.7 | % | ||||||||
| Management fees |
0.2 | 0.0 | % | 0.2 | 0.0 | % | ||||||||||
| Interest, net |
53.1 | 7.4 | % | 55.0 | 7.6 | % | ||||||||||
| Depreciation and amortization |
37.8 | 5.3 | % | 44.2 | 6.1 | % | ||||||||||
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| Total costs and expenses |
710.4 | 98.9 | % | 738.2 | 102.2 | % | ||||||||||
| Income (loss) from continuing operations before income taxes |
7.8 | 1.1 | % | (15.9 | ) | -2.2 | % | |||||||||
| Income taxes |
3.0 | 0.4 | % | 4.0 | 0.6 | % | ||||||||||
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| Income (loss) from continuing operations |
4.8 | 0.7 | % | (19.9 | ) | -2.8 | % | |||||||||
| Loss from discontinued operations, net of tax |
(17.6 | ) | -2.5 | % | (11.4 | ) | -1.6 | % | ||||||||
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| Net loss |
(12.8 | ) | -1.8 | % | (31.3 | ) | -4.3 | % | ||||||||
| Less: Net income (loss) attributable to non- controlling interests |
1.3 | 0.2 | % | 0.5 | 0.1 | % | ||||||||||
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| Net loss attributable to Capella Healthcare, Inc. |
$ | (14.1 | ) | -2.0 | % | $ | (31.8 | ) | -4.4 | % | ||||||
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Capella Healthcare, Inc.
Condensed Consolidated Balance Sheets
(Dollars in millions)
| (Unaudited) | ||||||||
| December 31, | December 31, | |||||||
| 2012 | 2013 | |||||||
| ASSETS | ||||||||
| Current Assets: |
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| Cash and cash equivalents |
$ | 33.3 | $ | 26.4 | ||||
| Accounts receivable, net |
123.5 | 126.3 | ||||||
| Inventories |
24.8 | 24.3 | ||||||
| Prepaid expenses and other current assets |
4.9 | 5.0 | ||||||
| Other receivables |
6.6 | 6.6 | ||||||
| Deferred tax assets |
1.7 | 2.5 | ||||||
| Assets held for sale |
— | 13.1 | ||||||
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| Total current assets |
194.8 | 204.2 | ||||||
| Property and equipment, net |
473.6 | 456.1 | ||||||
| Goodwill |
136.0 | 133.6 | ||||||
| Intangible assets, net |
10.7 | 13.2 | ||||||
| Other assets, net |
29.3 | 23.7 | ||||||
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| Total assets |
$ | 844.4 | $ | 830.8 | ||||
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| LIABILITIES AND STOCKHOLDER’S DEFICIT | ||||||||
| Current liabilities: |
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| Accounts payable |
$ | 31.1 | $ | 28.5 | ||||
| Salaries and benefits payable |
23.1 | 23.8 | ||||||
| Accrued interest |
23.3 | 23.3 | ||||||
| Other accrued liabilities |
20.9 | 32.7 | ||||||
| Current portion of long-term debt |
8.4 | 49.6 | ||||||
| Liabilities held for sale |
— | 1.9 | ||||||
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| Total current liabilities |
106.8 | 159.8 | ||||||
| Long-term debt |
543.4 | 507.8 | ||||||
| Deferred income taxes |
14.1 | 17.3 | ||||||
| Other liabilities |
30.3 | 28.4 | ||||||
| Redeemable non-controlling interests |
21.1 | 21.4 | ||||||
| Due to parent |
210.5 | 210.9 | ||||||
| Stockholder’s deficit: |
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| Common stock |
— | — | ||||||
| Retained deficit |
(81.8 | ) | (114.8 | ) | ||||
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| Total stockholder’s deficit |
(81.8 | ) | (114.8 | ) | ||||
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| Total liabilities and stockholder’s deficit |
$ | 844.4 | $ | 830.8 | ||||
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Capella Healthcare, Inc.
Condensed Consolidated Statements of Cash Flows (Unaudited)
(Dollars in millions)
| ` | For the Year Ended December 31, | |||||||
| 2012 | 2013 | |||||||
| Operating activities: |
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| Net loss |
$ | (12.8 | ) | $ | (31.3 | ) | ||
| Adjustments to reconcile net loss to net cash provided by operating activities: |
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| Loss from discontinued operations |
17.6 | 11.4 | ||||||
| Depreciation and amortization |
37.8 | 44.2 | ||||||
| Amortization of loan costs and debt discount |
3.9 | 4.0 | ||||||
| Provision for bad debts |
84.1 | 106.2 | ||||||
| Deferred income taxes |
2.0 | 3.1 | ||||||
| Stock-based compensation |
1.0 | 0.8 | ||||||
| Changes in working capital, net of acquisitions |
(87.1 | ) | (104.7 | ) | ||||
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| Net cash provided by operating activities - continuing operations |
46.5 | 33.7 | ||||||
| Net cash used in operating activities - discontinued operations |
(2.5 | ) | (2.9 | ) | ||||
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| Net cash provided by operating activities |
44.0 | 30.8 | ||||||
| Investing activities: |
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| Acquisition of healthcare businesses |
(26.0 | ) | — | |||||
| Purchases of property and equipment, net |
(32.9 | ) | (26.3 | ) | ||||
| Proceeds from disposition of healthcare businesses |
12.4 | 1.6 | ||||||
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| Net cash used in investing activities - continuing operations |
(46.5 | ) | (24.7 | ) | ||||
| Net cash used in investing activities - discontinued operations |
(0.9 | ) | (2.1 | ) | ||||
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| Net cash used in investing activities |
(47.4 | ) | (26.8 | ) | ||||
| Financing activities: |
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| Payments on capital leases and other obligations |
(2.7 | ) | (9.8 | ) | ||||
| Advances (to) from Parent |
(0.4 | ) | 0.3 | |||||
| Payment of debt issue costs |
(0.2 | ) | — | |||||
| Distributions to non-controlling interests |
(1.7 | ) | (1.2 | ) | ||||
| Repurchase of non-controlling interests |
(1.1 | ) | (0.2 | ) | ||||
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| Net cash used in financing activities - continuing operations |
(6.1 | ) | (10.9 | ) | ||||
| Net cash provided by financing activities - discontinued operations |
0.4 | — | ||||||
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| Net cash used in financing activities |
(5.7 | ) | (10.9 | ) | ||||
| Net decrease in cash and cash equivalents |
(9.1 | ) | (6.9 | ) | ||||
| Cash and cash equivalents, beginning of period |
42.4 | 33.3 | ||||||
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| Cash and cash equivalents, end of period |
$ | 33.3 | $ | 26.4 | ||||
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Capella Healthcare, Inc.
Supplemental Non-GAAP Disclosures
Adjusted Revenue – Reported (Unaudited)
Adjusted EBITDA – Reported (Unaudited)
(Dollars in millions)
| Three Months Ended December 31, | For the Year Ended December 31, | |||||||||||||||
| 2012 | 2013 | 2012 | 2013 | |||||||||||||
| Reported Revenue |
$ | 176.1 | $ | 177.3 | $ | 718.2 | $ | 722.3 | ||||||||
| Impact of SHOPP & rural floor settlement |
— | — | (13.6 | ) | — | |||||||||||
| Additional increase to bad debt expense |
— | 4.5 | — | 4.5 | ||||||||||||
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| Adjusted Revenue |
$ | 176.1 | $ | 181.8 | $ | 704.6 | $ | 726.8 | ||||||||
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| Net loss attributable to Capella Healthcare, Inc. |
$ | (12.0 | ) | $ | (14.6 | ) | $ | (14.1 | ) | $ | (31.8 | ) | ||||
| Interest, net |
13.6 | 14.0 | 53.1 | 55.0 | ||||||||||||
| Income taxes |
0.3 | 0.8 | 3.0 | 4.0 | ||||||||||||
| Depreciation and amortization |
11.6 | 11.0 | 37.8 | 44.2 | ||||||||||||
| Non-controlling interests |
1.1 | 0.7 | 1.3 | 0.5 | ||||||||||||
| Acquisition-related expenses |
1.2 | 0.6 | 5.4 | 3.3 | ||||||||||||
| Stock-based compensation |
0.2 | 0.2 | 1.0 | 0.8 | ||||||||||||
| Management fee to related party |
0.1 | 0.1 | 0.2 | 0.2 | ||||||||||||
| Discontinued operations, net of taxes |
9.8 | 3.6 | 17.6 | 11.4 | ||||||||||||
| Adjusted EBITDA (1) |
$ | 25.9 | $ | 16.4 | $ | 105.3 | $ | 87.6 | ||||||||
| Impact of SHOPP & rural floor settlement |
— | — | (8.5 | ) | — | |||||||||||
| Additional increase to bad debt expense |
— | 4.5 | — | 4.5 | ||||||||||||
| Reorganization related charges |
— | 2.9 | — | 2.9 | ||||||||||||
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| Pro forma Adjusted EBITDA (2) |
$ | 25.9 | $ | 23.8 | $ | 96.8 | $ | 95.0 | ||||||||
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| (1) | Adjusted EBITDA is defined as income (loss) before interest expense, income taxes, depreciation and amortization, non-controlling interests, acquisition-related expenses, stock-based compensation, management fee to related party and discontinued operations, net of taxes. Adjusted EBITDA is not intended as a substitute for net income (loss) attributable to Capella Healthcare, Inc. stockholders, operating cash flows or other cash flow data determined in accordance with accounting principles generally accepted in the United States. Due to varying methods of calculation, Adjusted EBITDA as presented may not be comparable to similarly titled measures of other companies. |
| (2) | Reflects Adjusted EBITDA, plus the impact of certain non-recurring, out of period, and other adjustments. |
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Capella Healthcare, Inc.
Operating Statistics (1) (Unaudited)
| For the Three Months Ended | For the Twelve Months Ended | |||||||||||||||||||||||
| December 31, | December 31, | |||||||||||||||||||||||
| 2012 | 2013 | % change | 2012 | 2013 | % change | |||||||||||||||||||
| Total Consolidated: |
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| Admissions |
10,897 | 9,990 | -8.3 | % | 43,713 | 42,086 | -3.7 | % | ||||||||||||||||
| Adjusted Admissions |
22,564 | 21,706 | -3.8 | % | 91,770 | 90,207 | -1.7 | % | ||||||||||||||||
| Revenue per adjusted admission |
$ | 7,807 | $ | 8,169 | 4.6 | % | $ | 7,827 | $ | 8,007 | 2.3 | % | ||||||||||||
| Inpatient Surgery |
2,474 | 2,261 | -8.6 | % | 9,733 | 9,504 | -2.4 | % | ||||||||||||||||
| Outpatient Surgery |
5,579 | 5,747 | 3.0 | % | 22,074 | 22,876 | 3.6 | % | ||||||||||||||||
| Emergency Room Visits |
55,967 | 52,032 | -7.0 | % | 219,519 | 218,251 | -0.6 | % | ||||||||||||||||
| (1) | All hospital statistics are on a continuing operations basis and exclude all facilities classified under discontinued operations. |
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