IASIS Healthcare LLC - FORM 8-K - EX-99.1 - EXHIBIT 99.1 - May 6, 2014

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Exhibit 99.1

IASIS Healthcare Announces Second Quarter 2014 Results

FRANKLIN, Tenn.--(BUSINESS WIRE)--May 6, 2014--IASIS Healthcare® LLC (“IASIS” or the “Company”) today announced financial and operating results for the fiscal second quarter and six months ended March 31, 2014.

Key Financial & Operating Results

Second Quarter Fiscal 2014

Net revenue for the second quarter totaled $648.1 million, an increase of 7.7% compared to $601.8 million in the prior year quarter. Adjusted EBITDAR, which excludes rent expense associated with the sale-leaseback of certain hospital real estate, for the second quarter totaled $68.5 million, compared to $63.3 million in the prior year quarter. Included in adjusted EBITDAR for the current period second quarter was $3.5 million of compensation expense associated with a special bonus paid to certain members of the Company’s leadership team in recognition of the execution of certain recent strategic initiatives. The prior year quarter’s results were negatively impacted by $6.1 million of changes in reimbursement estimates associated with the Company’s Houston market.

In the second quarter, admissions decreased 3.6% and adjusted admissions decreased 0.2%, each compared to the prior year quarter. Net patient revenue per adjusted admission in the second quarter increased 4.0% compared to the prior year quarter. Excluding the prior year impact of the $6.1 million of changes in reimbursement estimates, net patient revenue per adjusted admission increased 2.6% compared to the prior year quarter.

In Health Choice’s operations for the second quarter ended March 31, 2014, total lives enrolled across all health plan product lines increased 11.3% to 207,174, compared to 186,128 in the prior year.

Cash flows provided by continuing operations for the quarter ended March 31, 2014, totaled $36.9 million, compared to cash flows provided by continuing operations of $24.5 million in the prior year quarter.

“We are pleased that our second quarter results further demonstrate our ability to effectively and efficiently provide high-quality, affordable care to the communities we serve – even in the midst of continued volume softness in the acute care segment and investments in new growth opportunities in the Health Choice segment. Additionally, Medicaid expansion in Arizona is yielding positive results for both our health plan and hospitals in the market,” said IASIS Healthcare President and Chief Executive Officer Carl Whitmer. “Beyond these results, we are excited about our ongoing transformation from a hospital company to a healthcare services company intently focused on integrating our strong provider network of facilities and physicians with our proven managed care solutions at Health Choice.”

Whitmer added, “As a result, we firmly believe we are a unique healthcare delivery system poised for long-term success under the new era of expanded coverage and value-based reimbursement.”

Year-to-Date Fiscal 2014

Net revenue for the first six months of fiscal 2014 totaled $1.26 billion, an increase of 5.9% compared to $1.19 billion in the prior year period. Adjusted EBITDAR, which includes the same $3.5 million of compensation expense previously discussed, for the first six months of fiscal 2014 totaled $134.3 million, compared to $127.4 million in the prior year period. Additionally, the prior year period was impacted by the same $6.1 million of changes in reimbursement estimates previously discussed.

For the first six months of fiscal 2014, admissions decreased 3.9% and adjusted admissions decreased 0.2%, each compared to the prior year period. Net patient revenue per adjusted admission for the first six months of fiscal 2014 increased 3.4% compared to the prior year period. Excluding the prior year impact of the $6.1 million of changes in reimbursement estimates, net patient revenue per adjusted admission increased 2.7% compared to the prior year period.

Cash flows used in continuing operations for the first six months of fiscal 2014 totaled $27.1 million, compared to cash flows provided by continuing operations of $21.8 million in the prior year period. Cash flows used in operations in fiscal 2014 were impacted by the payment of income taxes, transaction fees and other costs, including additional rent expense, associated with the Company’s recent sale-leaseback of certain hospital real estate and the timing of payments related to Texas Medicaid supplemental reimbursement.

Conference Call

A listen-only simulcast and 30-day replay of IASIS’ second quarter 2014 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 May 6, 2014. 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 139 physician clinics, and Health Choice, a provider-owned, managed care organization and insurer delivering healthcare services to over 227,000 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, 2013, 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 EBITDAR represents adjusted EBITDA before rent expense associated with the sale-leaseback of certain hospital real estate. Adjusted EBITDA represents net earnings (loss) 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. 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. Neither adjusted EBITDAR nor adjusted EBITDA should be considered as a measure of financial performance under generally accepted accounting principles, and the items excluded from such EBITDAR and EBITDA measures are significant components in understanding and assessing financial performance. Neither EBITDAR nor 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 EBITDAR and EBITDA measures may not be comparable to similarly titled measures of other companies. A table describing adjusted EBITDAR and adjusted EBITDA and reconciling net earnings (loss) from continuing operations to such EBITDAR and 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

March 31,

  Six Months Ended

March 31,

2014   2013 2014   2013
Net revenue

Acute care revenue before provision for bad debts

$ 571,128 $ 544,290 $ 1,136,461 $ 1,081,422
Less: Provision for bad debts   (95,992 )   (85,869 )   (198,494 )   (170,923 )
Acute care revenue 475,136 458,421 937,967 910,499
Premium revenue   172,995     143,401     324,714     282,255  
Net revenue 648,131 601,822 1,262,681 1,192,754
 
Costs and expenses
Salaries and benefits (includes stock-based compensation of $3,493, $862, $4,354 and $1,999, respectively) 241,194 229,521 467,437 450,392
Supplies 81,051 81,266 163,026 161,263
Medical claims 144,991 118,573 270,811 231,916
Rentals and leases 18,495 13,848 37,633 26,644
Other operating expenses 105,171 101,176 210,079 203,530
Medicare and Medicaid EHR incentives (4,013 ) (5,019 ) (7,443 ) (6,383 )
Interest expense, net 32,890 33,388 66,050 67,216
Depreciation and amortization 22,186 23,893 48,584 48,113
Management fees   1,250     1,250     2,500     2,500  
Total costs and expenses 643,215 597,896 1,258,677 1,185,191
 

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

4,916 3,926 4,004 7,563
Gain (loss) on disposal of assets, net   (476 )   75     768     168  
 

Earnings from continuing operations before income taxes

4,440 4,001 4,772 7,731
Income tax expense   2,917     2,577     3,867     4,166  
 
Net earnings from continuing operations 1,523 1,424 905 3,565

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

  (4,940 )   (547 )   4,668     1,380  
 
Net earnings (loss) (3,417 ) 877 5,573 4,945
Net (earnings) loss attributable to non-controlling interests   (2,616 )   351     (6,404 )   (1,248 )
 

Net earnings (loss) attributable to IASIS Healthcare LLC

$ (6,033 ) $ 1,228   $ (831 ) $ 3,697  
 
 
 

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

 
  March 31,

2014

  Sept. 30,

2013

 
ASSETS
 
Current assets
Cash and cash equivalents $ 341,610 $ 438,131
Accounts receivable, net 353,171 371,006
Inventories 57,732 57,781
Deferred income taxes 19,413 26,096
Prepaid expenses and other current assets 170,435 126,412
Assets held for sale   –   119,141
Total current assets 942,361 1,138,567
 
Property and equipment, net 826,441 833,169
Goodwill 815,585 816,410
Other intangible assets, net 24,322 25,957
Other assets, net   62,787   66,162
Total assets $ 2,671,496 $ 2,880,265
 
LIABILITIES AND EQUITY
 
Current liabilities
Accounts payable $ 112,507 $ 129,542
Salaries and benefits payable 62,805 62,884
Accrued interest payable 27,485 27,519
Medical claims payable 62,182 57,514
Other accrued expenses and other current liabilities 57,256 92,553
Current portion of long-term debt and capital lease obligations 12,871 13,221
Advance from divestiture – 144,803
Liabilities held for sale   –   3,208
Total current liabilities 335,106 531,244
 
Long-term debt and capital lease obligations 1,847,055 1,852,822
Deferred income taxes 114,802 115,592
Other long-term liabilities 119,464 123,120
 
Non-controlling interests with redemption rights 108,179 105,464
 
Equity
Member’s equity 137,124 142,262
Non-controlling interests   9,766   9,761
Total equity   146,890   152,023
Total liabilities and equity $ 2,671,496 $ 2,880,265
 
 
 

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

 
  Six Months Ended

March 31,

2014   2013
Cash flows from operating activities
Net earnings $ 5,573 $ 4,945

Adjustments to reconcile net earnings to net cash provided by (used in) operating activities:

Depreciation and amortization 48,584 48,113
Amortization of loan costs 3,706 3,907
Amortization of deferred gain from sale-leaseback (1,248 ) –
Stock-based compensation 4,354 1,999
Deferred income taxes 2,941 4,960
Income tax benefit from exercise of employee stock options – 16
Gain on disposal of assets, net (768 ) (168 )
Earnings from discontinued operations, net (4,668 ) (1,380 )

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

Accounts receivable, net (18,873 ) (23,046 )
Inventories, prepaid expenses and other current assets (42,956 ) (53 )
Accounts payable, other accrued expenses and other accrued liabilities (1,516 ) (17,517 )

Income taxes and other transaction costs payable related to sale-leaseback of real estate

  (22,270 )   –  
Net cash provided by (used in) operating activities – continuing operations (27,141 ) 21,776
Net cash provided by (used in) operating activities – discontinued operations   (7,059 )   5,121  
Net cash provided by (used in) operating activities   (34,200 )   26,897  
 
Cash flows from investing activities
Purchases of property and equipment (42,204 ) (57,406 )
Cash paid for acquisitions, net (1,038 ) (1,088 )
Proceeds from sale of assets 1,507 14
Change in other assets, net 357 (2,001 )
Other, net   (3,025 )   –  
Net cash used in investing activities – continuing operations (44,403 ) (60,481 )
Net cash provided by (used in) investing activities – discontinued operations   384     (3,591 )
Net cash used in investing activities   (44,019 )   (64,072 )
 
Cash flows from financing activities
Payment of debt and capital lease obligations (6,851 ) (6,488 )
Debt financing costs incurred – (1,024 )
Distributions to non-controlling interests (11,046 ) (4,601 )
Cash received for the sale of non-controlling interests – 848
Cash paid for the repurchase of non-controlling interests   (405 )   (442 )
Net cash used in financing activities   (18,302 )   (11,707 )
 
Change in cash and cash equivalents (96,521 ) (48,882 )
Cash and cash equivalents at beginning of period   438,131     48,882  
Cash and cash equivalents at end of period $ 341,610   $ –  
 
Supplemental disclosure of cash flow information
Cash paid for interest $ 62,378   $ 63,471  
Cash paid (received) for income taxes, net $ 36,530   $ (284 )
 
 
 

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

 
  For the Quarter Ended March 31, 2014
Acute Care   Health Choice   Eliminations   Consolidated
Acute care revenue before provision for bad debts $ 571,128 $ – $ – $ 571,128
Less: Provision for bad debts   (95,992 )   –   –     (95,992 )
Acute care revenue 475,136 – – 475,136
Premium revenue – 172,995 – 172,995
Revenue between segments   3,069     –   (3,069 )   –  
Net revenue 478,205 172,995 (3,069 ) 648,131
 

Salaries and benefits

(excludes stock-based compensation)

230,011 7,690 – 237,701
Supplies 81,007 44 – 81,051
Medical claims – 148,060 (3,069 ) 144,991
Rentals and leases

(excludes sale-leaseback rent expense)

14,372 354 – 14,726
Other operating expenses 97,373 7,798 – 105,171
Medicare and Medicaid EHR incentives   (4,013 )   –   –     (4,013 )
Adjusted EBITDAR 59,455 9,049 – 68,504
Sale-leaseback rent expense   3,769     –   –     3,769  
Adjusted EBITDA 55,686 9,049 – 64,735
 
Interest expense, net 32,890 – – 32,890
Depreciation and amortization 21,138 1,048 – 22,186
Stock-based compensation 3,493 – – 3,493
Management fees   1,250     –   –     1,250  
Earnings (loss) from continuing operations before loss on disposal of assets and income taxes (3,085 ) 8,001 – 4,916
Loss on disposal of assets, net   (476 )   –   –     (476 )

Earnings (loss) from continuing operations before income taxes

$ (3,561 ) $ 8,001 $ –   $ 4,440  
 
 
For the Quarter Ended March 31, 2013
Acute Care Health Choice Eliminations Consolidated
Acute care revenue before provision for bad debts $ 544,290 $ – $ – $ 544,290
Less: Provision for bad debts   (85,869 )   –   –     (85,869 )
Acute care revenue 458,421 – – 458,421
Premium revenue – 143,401 – 143,401
Revenue between segments   1,827     –   (1,827 )   –  
Net revenue 460,248 143,401 (1,827 ) 601,822
 
Salaries and benefits

(excludes stock-based compensation)

222,895 5,764 – 228,659
Supplies 81,218 48 – 81,266
Medical claims – 120,400 (1,827 ) 118,573
Rentals and leases

(excludes sale-leaseback rent expense)

13,444 404 – 13,848
Other operating expenses 95,427 5,749 – 101,176
Medicare and Medicaid EHR incentives   (5,019 )   –   –     (5,019 )
Adjusted EBITDAR 52,283 11,036 – 63,319
Sale-leaseback rent expense   –     –   –     –  
Adjusted EBITDA 52,283 11,036 – 63,319
 
Interest expense, net 33,388 – – 33,388
Depreciation and amortization 22,861 1,032 – 23,893
Stock-based compensation 862 – – 862
Management fees   1,250     –   –     1,250  
Earnings (loss) from continuing operations before gain on disposal of assets and income taxes (6,078 ) 10,004 – 3,926
Gain on disposal of assets, net   75     –   –     75  

Earnings (loss) from continuing operations before income taxes

$ (6,003 ) $ 10,004 $ –   $ 4,001  
 
 
 

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

 
  For the Six Months Ended March 31, 2014
Acute Care   Health Choice   Eliminations   Consolidated
Acute care revenue before provision for bad debts $ 1,136,461 $ – $ – $ 1,136,461
Less: Provision for bad debts   (198,494 )   –   –     (198,494 )
Acute care revenue 937,967 – – 937,967
Premium revenue – 324,714 – 324,714
Revenue between segments   5,277     –   (5,277 )   –  
Net revenue 943,244

324,714

(5,277 ) 1,262,681
 
Salaries and benefits

(excludes stock-based compensation)

448,352 14,731 – 463,083
Supplies 162,923 103 – 163,026
Medical claims – 276,088 (5,277 ) 270,811
Rentals and leases

(excludes sale-leaseback rent expense)

28,153 717 – 28,870
Other operating expenses 194,695 15,384 – 210,079
Medicare and Medicaid EHR incentives   (7,443 )   –   –     (7,443 )
Adjusted EBITDAR 116,564 17,691 – 134,255
Sale-leaseback rent expense   8,763     –   –     8,763  
Adjusted EBITDA 107,801 17,691 – 125,492
 
Interest expense, net 66,050 – – 66,050
Depreciation and amortization 46,479 2,105 – 48,584
Stock-based compensation 4,354 – – 4,354
Management fees   2,500     –   –     2,500  
Earnings (loss) from continuing operations before gain on disposal of assets and income taxes (11,582 ) 15,586 – 4,004
Gain on disposal of assets, net   768     –   –     768  

Earnings (loss) from continuing operations before income taxes

$ (10,814 ) $ 15,586 $ –   $ 4,772  
 
 
For the Six Months Ended March 31, 2013
Acute Care Health Choice Eliminations Consolidated
Acute care revenue before provision for bad debts $ 1,081,422 $ – $ – $ 1,081,422
Less: Provision for bad debts   (170,923 )   –   –     (170,923 )
Acute care revenue 910,499 – – 910,499
Premium revenue – 282,255 – 282,255
Revenue between segments   3,394     –   (3,394 )   –  
Net revenue 913,893 282,255 (3,394 ) 1,192,754
 
Salaries and benefits

(excludes stock-based compensation)

436,863 11,530 – 448,393
Supplies 161,161 102 – 161,263
Medical claims – 235,310 (3,394 ) 231,916
Rentals and leases

(excludes sale-leaseback rent expense)

25,847 797 – 26,644
Other operating expenses 192,024 11,506 – 203,530
Medicare and Medicaid EHR incentives   (6,383 )   –   –     (6,383 )
Adjusted EBITDAR 104,381 23,010 – 127,391
Sale-leaseback rent expense   –     –   –     –  
Adjusted EBITDA 104,381 23,010 – 127,391
 
Interest expense, net 67,216 – – 67,216
Depreciation and amortization 46,046 2,067 – 48,113
Stock-based compensation 1,999 – – 1,999
Management fees   2,500     –   –     2,500  
Earnings (loss) from continuing operations before gain on disposal of assets and income taxes (13,380 ) 20,943 – 7,563
Gain on disposal of assets, net   168     –   –     168  

Earnings (loss) from continuing operations before income taxes

$ (13,212 ) $ 20,943 $ –   $ 7,731  
 
 
 
 

IASIS HEALTHCARE LLC
Consolidated Financial and Operating Data (Unaudited)

 
  Quarter Ended

March 31,

 

Six Months Ended

March 31,

2014   2013 2014   2013
Consolidated Hospital Facilities (1)

Number of acute care hospital facilities at end of period

16 16 16 16
Licensed beds at end of period 3,778 3,804 3,778 3,804
Average length of stay (days) 5.2 5.2 5.2 5.1
Occupancy rates (average beds in service) 51.7 % 52.8 % 50.2 % 51.0 %
Admissions 26,951 27,968 53,331 55,488
Percentage change (3.6 )% (3.9 )%
Adjusted admissions 47,647 47,754 95,431 95,580
Percentage change (0.2 )% (0.2 )%
Patient days 140,812 145,009 276,435 283,051
Adjusted patient days 248,944 247,594 494,656 487,563
Outpatient revenue as a percentage of gross patient revenue 43.4 % 41.4 % 44.1 % 41.9 %
 

(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

March 31,

  Six Months Ended

March 31,

2014   2013 2014   2013
Consolidated Results
Net earnings from continuing operations $ 1,523 $ 1,424 $ 905 $ 3,565
Add:
Interest expense, net 32,890 33,388 66,050 67,216
Income tax expense 2,917 2,577 3,867 4,166
Depreciation and amortization 22,186 23,893 48,584 48,113
Sale-leaseback rent expense 3,769 – 8,763 –
Stock-based compensation 3,493 862 4,354 1,999
Loss (gain) on disposal of assets, net 476 (75 ) (768 ) (168 )
Management fees   1,250     1,250     2,500     2,500  
Adjusted EBITDAR 68,504 63,319 134,255 127,391
Sale-leaseback rent expense   (3,769 )   –     (8,763 )   –  
Adjusted EBITDA $ 64,735   $ 63,319   $ 125,492   $ 127,391  
 
 

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

IASIS Healthcare LLC Reports