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8-K - 8-K - Capella Healthcare, Inc.d809435d8k.htm

Exhibit 99.1

 

LOGO

FOR IMMEDIATE RELEASE

 

INVESTOR CONTACT:      MEDIA CONTACT:
Denise Warren      Beth Wright
EVP/CFO      VP – Communications
615-764-3013      615-764-3010

Capella Healthcare, Inc. Reports Third Quarter 2014 Results

Third Quarter Adjusted EBITDA Increases by 13.7% over Prior Year Period

Raises Full Year 2014 Adjusted EBITDA Guidance to $100 Million to $103 Million

Franklin, Tennessee – October 31, 2014 – Capella Healthcare, Inc. (“Capella”) today announced results for the three months and nine months ended September 30, 2014. In one of its strongest quarters during the past two years, Capella’s Adjusted EBITDA increased 13.7% over the prior year period.

Three Months Ended September 30, 2014

For the three months ended September 30, 2014, revenues from continuing operations were $195.1 million, up 5.6% from $184.8 million for the same period a year ago. Adjusted EBITDA for the three months ended September 30, 2014, increased 13.7% to $30.8 million compared with $27.1 million for the same period a year ago.

For the three months ended September 30, 2014, admissions decreased 2.7% while adjusted admissions increased 2.1% for the same prior year period. Revenue per adjusted admission increased 3.4%.

Nine Months Ended September 30, 2014

For the nine months ended September 30, 2014, revenues from continuing operations were $569.8 million, up 4.6% from $545.0 million for the same period a year ago. Adjusted EBITDA for the nine months ended September 30, 2014, increased 8.1% to $77.0 million compared with $71.2 million for the same period a year ago.

For the nine months ended September 30, 2014, admissions decreased 3.2% while adjusted admissions decreased 0.4% for the same prior year period. Revenue per adjusted admission increased 5.0%.

“We are pleased with our solid third quarter results, which demonstrate significant and sustained progress in our key initiatives,” said Michael A. Wiechart, president and chief executive officer of Capella. “Our third quarter operating results were driven by our recent investments in advanced outpatient services which have yielded record outpatient revenue growth and improved payer mix. More importantly, our hospitals continue to perform very well against national benchmarks in key quality metrics that demonstrate their commitment to patient safety, quality of care and patient satisfaction. I commend our hospital leaders for doing an exceptional job making patient care excellence their top priority. And, with the recent signing of a definitive agreement to acquire Carolina Pines Regional Medical Center in Hartsville, SC, it has been a very productive quarter and positions the company well to continue to add value to the communities we are privileged to serve.”

Capella announced on October 13th that it signed an agreement with subsidiaries of Community Health Systems, Inc. (NYSE: CYH) to acquire ownership interest in Carolina Pines Regional Medical Center and its related outpatient services. Contingent upon customary regulatory approvals, the transaction is expected to be completed during the fourth quarter.

 

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About Capella Healthcare

Based in Franklin, Tennessee, Capella 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. Capella 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, conference ID#: 2823 4647. 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.CapellaHealthcare.com. A copy of the Company’s Form 10-Q for the quarterly period ended September 30, 2014 may be obtained via the Company’s website when filed with the Securities and Exchange Commission.

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 September 30,  
     2013     2014  
     Amount     % of
Revenue
    Amount     % of
Revenue
 

Revenue before provision for bad debts

   $ 210.1        $ 216.7     

Provision for bad debts

     (25.3       (21.6  
  

 

 

     

 

 

   

Revenues

     184.8          195.1     

Salaries & benefits

     84.7        45.8     88.9        45.6

Supplies

     31.5        17.0        33.4        17.1   

Other operating expenses

     47.4        25.6        48.4        24.8   

Other income

     (5.2     (2.8     (5.6     (2.9

Management fees

     —          —          —          —     

Interest, net

     13.7        7.4        13.2        6.8   

Depreciation and amortization

     11.9        6.4        10.7        5.5   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income from continuing operations before income taxes

     0.8        0.4        6.1        3.1   

Income taxes

     0.8        0.4        1.1        0.6   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income from continuing operations

     —          —          5.0        2.6   

Loss from discontinued operations, net of tax

     (5.0     (2.7     (0.4     (0.2
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

     (5.0     (2.7     4.6        2.4   

Less: Net income (loss) attributable to non-controlling interests

     0.1        0.1        (0.1     (0.1
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) attributable to Capella Healthcare, Inc.

   $ (5.1     (2.8 )%    $ 4.7        2.4
  

 

 

   

 

 

   

 

 

   

 

 

 

 

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Capella Healthcare, Inc.

Condensed Consolidated Statements of Operations (Unaudited)

(Dollars in millions)

 

     Nine Months Ended September 30,  
     2013     2014  
     Amount     % of
Revenue
    Amount     % of
Revenue
 

Revenue before provision for bad debts

   $ 618.6        $ 630.8     

Provision for bad debts

     (73.6       (61.0  
  

 

 

     

 

 

   

Revenues

     545.0          569.8     

Salaries & benefits

     252.9        46.4     269.2        47.2

Supplies

     91.1        16.7        95.4        16.7   

Other operating expenses

     138.6        25.4        145.0        25.4   

Other income

     (5.5     (1.0     (9.9     (1.7

Management fees

     0.1        —          0.1        —     

Interest, net

     41.0        7.5        40.8        7.2   

Depreciation and amortization

     33.2        6.1        33.2        5.8   
  

 

 

   

 

 

   

 

 

   

 

 

 

Loss from continuing operations before income taxes

     (6.4     (1.2     (4.0     (0.7

Income taxes

     3.2        0.6        2.8        0.5   
  

 

 

   

 

 

   

 

 

   

 

 

 

Loss from continuing operations

     (9.6     (1.8     (6.8     (1.2

Loss from discontinued operations, net of tax

     (7.8     (1.4     (3.1     (0.5
  

 

 

   

 

 

   

 

 

   

 

 

 

Net loss

     (17.4     (3.2     (9.9     (1.7

Less: Net loss attributable to non-controlling interests

     (0.2     —          (0.2     —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Net loss attributable to Capella Healthcare, Inc.

   $ (17.2     (3.2 )%    $ (9.7     (1.7 )% 
  

 

 

   

 

 

   

 

 

   

 

 

 

 

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Capella Healthcare, Inc.

Condensed Consolidated Balance Sheets

(Dollars in millions)

 

           (Unaudited)  
     December 31,
2013
    September 30,
2014
 
ASSETS     

Current Assets:

    

Cash and cash equivalents

   $ 26.4      $ 0.5   

Accounts receivable, net

     126.3        129.5   

Inventories

     24.3        24.9   

Prepaid expenses and other current assets

     11.6        11.2   

Deferred tax assets

     2.5        0.2   

Assets held for sale

     13.1        —     
  

 

 

   

 

 

 

Total current assets

     204.2        166.3   

Property and equipment, net

     456.1        440.8   

Goodwill

     133.6        133.7   

Intangible assets, net

     13.2        12.6   

Other assets, net

     23.7        24.4   
  

 

 

   

 

 

 

Total assets

   $ 830.8      $ 777.8   
  

 

 

   

 

 

 
LIABILITIES AND STOCKHOLDER’S DEFICIT     

Current liabilities:

    

Accounts payable

   $ 28.5      $ 32.6   

Salaries and benefits payable

     23.8        25.5   

Accrued interest

     23.3        11.7   

Other accrued liabilities

     32.7        19.8   

Capital leases and long-term debt, current portion

     49.6        3.6   

Revolving line of credit

     —          21.0   

Liabilities held for sale

     1.9        —     
  

 

 

   

 

 

 

Total current liabilities

     159.8        114.2   

Capital leases and long-term debt, net of current portion

     507.8        506.4   

Deferred income taxes

     17.3        17.4   

Other liabilities

     28.4        30.8   

Redeemable non-controlling interests

     21.4        19.9   

Due to parent

     210.9        213.6   

Stockholder’s deficit:

    

Common stock

     —          —     

Retained deficit

     (114.8     (124.5
  

 

 

   

 

 

 

Total stockholder’s deficit

     (114.8     (124.5
  

 

 

   

 

 

 

Total liabilities and stockholder’s deficit

   $ 830.8      $ 777.8   
  

 

 

   

 

 

 

 

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Capella Healthcare, Inc.

Condensed Consolidated Statements of Cash Flows (Unaudited)

(Dollars in millions)

 

     For the Nine Months Ended September 30,  
     2013     2014  

Operating activities:

    

Net loss

   $ (17.4   $ (9.9

Adjustments to reconcile net loss to net cash provided by operating activities:

    

Loss from discontinued operations

     7.8        3.1   

Depreciation and amortization

     33.2        33.2   

Amortization of loan costs and debt discount

     3.0        2.9   

Provision for bad debts

     73.6        61.0   

Deferred income taxes

     2.4        2.4   

Stock-based compensation

     0.6        3.7   

Changes in operating assets and liabilities, net of divestitures

     (93.3     (79.7
  

 

 

   

 

 

 

Net cash provided by operating activities - continuing operations

     9.9        16.7   

Net cash used in operating activities - discontinued operations

     (2.9     (3.2
  

 

 

   

 

 

 

Net cash provided by operating activities

     7.0        13.5   

Investing activities:

    

Purchases of property and equipment, net

     (21.5     (17.6

Proceeds from disposition of healthcare businesses

     1.6       11.2   

Other investing activities

     —         (0.6
  

 

 

   

 

 

 

Net cash used in investing activities

     (19.9     (7.0

Financing activities:

    

Payments on capital leases and other obligations

     (6.2     (49.0

Borrowings from revolving credit facility

     —          35.0   

Repayments of revolving credit facility

     —          (14.0

Payments of refinancing costs and fees

     —         (2.1

Advances to Parent

     —          (1.0

Distributions to non-controlling interests

     (0.8     (1.4

Sale (repurchase) of non-controlling interests

     (0.2     0.1   
  

 

 

   

 

 

 

Net cash used in financing activities

     (7.2     (32.4

Net decrease in cash and cash equivalents

     (20.1     (25.9

Cash and cash equivalents at beginning of period

     33.3        26.4   
  

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $ 13.2      $ 0.5   
  

 

 

   

 

 

 

 

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Capella Healthcare, Inc.

Supplemental Non-GAAP Disclosures

Adjusted EBITDA – Reported (Unaudited)

(Dollars in millions)

 

     Three Months Ended September 30,     Nine Months Ended September 30,  
     2013     2014     2013     2014  

Net income (loss) attributable to Capella Healthcare, Inc.

   $ (5.1   $ 4.7      $ (17.2   $ (9.7

Interest, net

     13.7        13.2        41.0        40.8   

Income taxes

     0.8        1.1        3.2        2.8   

Depreciation and amortization

     11.9        10.7        33.2        33.2   

Non-controlling interests

     0.1        (0.1     (0.2     (0.2

Business development and refinancing related costs

     0.6        0.4        2.7        1.4   

Stock-based compensation, non-cash

     0.1        0.4        0.6        3.7   

Stock-based compensation, cash

     —         —          —          1.8   

Management fee to related party

     —          —          0.1        0.1   

Discontinued operations, net of taxes

     5.0        0.4        7.8        3.1   
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA (1)

   $ 27.1      $ 30.8      $ 71.2      $ 77.0   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

(1) Adjusted EBITDA is defined as income (loss) before interest expense, income taxes, depreciation and amortization, non-controlling interests, business development and refinancing 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.

 

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Capella Healthcare, Inc.

Operating Statistics (1) (Unaudited)

 

     Three Months Ended     Nine Months Ended  
     September 30,     September 30,  
     2013      2014      % change     2013      2014      % change  

Total Consolidated:

                

Admissions

     10,643         10,356         (2.7 )%      32,096         31,083         (3.2 )% 

Adjusted Admissions

     22,961         23,434         2.1     68,476         68,184         (0.4 )% 

Revenue per adjusted admission

   $ 8,053       $ 8,325         3.4   $ 7,961       $ 8,357         5.0

Inpatient Surgery

     2,490         2,319         (6.9 )%      7,243         6,781         (6.4 )% 

Outpatient Surgery

     5,683         5,794         2.0     17,129         16,898         (1.3 )% 

Emergency Room Visits

     55,669         58,814         5.6     166,219         169,040         1.7

 

(1) All hospital statistics are on a continuing operations basis and exclude facilities classified as discontinued operations.

 

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