Attached files

file filename
8-K - 8-K - 21st Century Oncology Holdings, Inc.a15-7086_18k.htm

Exhibit 99.1

 

 

21ST CENTURY ONCOLOGY HOLDINGS, INC.

 

21st Century Oncology Contact:

Investor Contact:

Richard Lewis

The Ruth Group

SVP, CFO for U.S. Operations

Nick Laudico

239-931-7281

646-536-7030

richard.lewis@21co.com

nlaudico@theruthgroup.com

 

 

 

Courtney Dugan

 

646-536-7024

 

cdugan@theruthgroup.com

 

21ST CENTURY ONCOLOGY HOLDINGS INC. REPORTS FOURTH QUARTER AND FULL YEAR 2014 FINANCIAL RESULTS

 

Fourth Quarter 2014 Highlights:

 

·                  Total pro-forma revenues of $269.5  million, a 28.8% year-over-year increase

·                  7th consecutive quarter of growth in same store freestanding treatments per day, up 2.3% year-over-year

·                  4th consecutive quarter of Pro Forma Adjusted EBITDA margin expansion — 13.8% of total pro-forma revenues

·                  International cases increased 5.0% versus prior year period

·                  OnCure Holdings, Inc. (“Oncure”) and South Florida Radiation Oncology (“SFRO”) continue to perform ahead of expectations

 

Full Year 2014 Highlights:

 

·                  Pro-forma revenues surpass $1.0 billion, increasing 22.5%

·                  Domestic same store treatments per day increased 2.6%

·                  International revenues approaching $100 million, cases increased 10.4%

·                  Pro Forma Adjusted EBITDA of $150.9 million

·                  Reduced debt by $200 million with proceeds from Canada Pension Plan Investment Board (“CPPIB”) investment

 

Recent Developments:

 

·                  Entered into new region of Northwestern U.S. through joint venture with Northwest Cancer Clinic, LLC (“NWCC”) in January, 2015

·                  SFRO added two centers, enhancing its coordination of care and ability to leverage resources

·                  Established formal affiliations with the University of Florida (“UF”) and the University of California Los Angeles (“UCLA”)

 



 

FORT MYERS, FL, March 18, 2015 — 21st Century Oncology Holdings, Inc. (“21C or the “Company”), the leading global, physician-led provider of integrated cancer care (“ICC”) services, announced today its financial results for the fourth quarter and full year ended December 31, 2014.

 

Dr. Daniel Dosoretz, Founder and Chief Executive Officer, commented, “We closed 2014 with continued growth in same store freestanding treatments which resulted in our fourth consecutive quarter of year-over-year Pro Forma Adjusted EBITDA margin expansion. We expect these trends of treatment growth and EBITDA margin expansion will continue into 2015. A major Company milestone occurred in September 2014 when we received a $325 million cash equity investment from CPPIB.  During the remainder of the year we used these proceeds to reduce debt by $200 million, bolster liquidity, complete a successful OnCure capital upgrade program, and enter 2015 with a large joint venture in attractive new markets. The resulting deleveraging and liquidity improvement enabled us to maintain our focus during the final months of the year on organic growth, operational improvements, integration execution, improving results in underperforming markets, and expense management.”

 

Dr. Dosoretz continued, “I am very pleased with our operational results, both domestic and international, during the fourth quarter. Early indications in 2015 show continued organic momentum. We were able to build upon the third quarter and achieve steady same store treatment growth in the fourth quarter of 2.3%, our seventh consecutive quarter of same store growth. Completed case volume increased again this quarter, driven by organic growth and continued significant contributions from our two largest acquisitions, OnCure and SFRO, which closed in October 2013 and February 2014 respectively. Importantly, we believe that they will continue to provide incremental organic growth opportunities via the leveraging of 21C’s clinical leadership, scale, infrastructure, and ICC model. Additionally, in early January we announced a joint venture with Northwest Cancer Clinic, LLC (“NWCC”), expanding our geographical reach into a brand new region in the Northwestern U.S, one of the fastest growing regions in the country. We look forward to updating our stakeholders on additional strategic opportunities currently in the development stage. We remain focused on continued EBITDA growth through 2015 and into 2016 with marketing efforts focused on our key physician communities further complimented by ICC expansion where it is warranted.”

 

“For the full year, we achieved a 22.5% year-over-year increase in total pro forma revenue and total Pro Forma Adjusted EBITDA of $150.9 million, a year-over-year increase of 27.3%. In 2014, total international cases increased 10.4%, and we expect international revenues to surpass $100 million in 2015. During 2014, we added a net of 123 new physicians. Also during the year we added a net of 17 additional centers, 14 of which are domestic and 3 international. We entered 2015 with the same focus on executing our strategy of organic growth combined with prudently taking advantage of attractive strategic de-leveraging acquisitions and joint ventures in order to continue delivering integrated cancer care at academic quality and create compelling value for our steadily expanding patient population,” added Dr. Dosoretz.

 

Fourth Quarter 2014 Results

 

Total pro-forma revenues for the fourth quarter of 2014 were $269.5 million, compared to total pro-forma revenues of $209.2 million in the same quarter of 2013, driven by the Company’s acquisition activity and organic growth.

 



 

Domestic same store treatments per day increased 2.3% in the fourth quarter of 2014 while same store freestanding revenues increased 2.0%. The growth was primarily driven by the continued expansion of our physician network and strong growth in our key markets. Domestic same store therapy revenue per treatment decreased 0.3% in the fourth quarter of 2014, primarily due to an increased shift in payor mix to Medicare replacement products.

 

Total Relative Value Units (RVUs) per day increased by 22.4% in the fourth quarter versus the same period of the prior year due to acquisitions, same store treatment growth and service mix. On a same store basis, RVUs increased 0.2% versus the same period last year. Adjusted earnings before interest, taxes, depreciation, amortization, stock-based compensation and other non-cash and pro forma items (“Pro Forma Adjusted EBITDA”) in the fourth quarter of 2014 was $37.2 million, or 13.8% of total revenues, up 36.6% compared to $27.2 million, or 13.0% of total pro forma revenues, in the fourth quarter of 2013. A reconciliation of net loss attributable to 21C, determined in accordance with generally accepted accounting principles to Pro Forma Adjusted EBITDA and total revenues, determined in accordance with generally accepted accounting principles, to total pro forma revenues for the quarters ended December 31, 2014 and 2013 is included in the attached supplemental financial information.

 

Income tax expense in the fourth quarter of 2014 was $0.1 million, compared to an income tax benefit of $25.3 million in the fourth quarter of 2013. The net loss for the fourth quarter of 2014 was $22.7 million, compared to a net loss of $14.3 million in the fourth quarter of 2013.

 

Full Year 2014 Results

 

Total pro forma revenues for the full year ended December 31, 2014 were $1.0 billion, an increase of 22.5% compared to $845.3 million in revenues for the full year 2013. Full year 2014 pro forma revenues include $8.8 million in revenue contribution from acquisitions, as if the acquisitions had closed on January 1, 2014. The increase in revenue was principally due to increased domestic census, acquisitions, stronger results from joint ventures, and international revenue growth.

 

Domestic same store treatments per day increased 2.6% for the full year 2014. This was driven by expansion of our ICC model as well as physician and center-level marketing efforts resulting in an increased patient census. Domestic same store therapy revenue per treatment increased 2.5% compared to 2013.

 

Pro Forma Adjusted EBITDA for the full year 2014 was $150.9 million, or 14.6% of total pro forma revenues, compared to $118.6 million, or 14.0% of total pro forma revenues for the full year 2013.  Pro Forma Adjusted EBITDA margins increased in the current quarter versus the prior year period primarily due to the Company’s focus on expense management. A reconciliation of net loss attributable to 21C, determined in accordance with generally accepted accounting principles to Pro Forma Adjusted EBITDA and total revenues, determined in accordance with generally accepted accounting principles, to total pro forma revenues for the full years ended December 31, 2014 and 2013 is included in the attached supplemental financial information.

 

Income tax expense for the full year 2014 was $5.2 million, compared to an income tax benefit of $20.4 million in 2013. The net loss for the full year 2014 was $343.2 million, compared to a

 



 

net loss of $78.2 million for the full year 2013. The net loss for the full year 2014 included impairment charges of $229.5 million, attributable to revisions of the Company’s financial forecasts largely as a result of reductions in reimbursement and limited capital resources during the second quarter of 2014 that resulted in a write down of goodwill, trade name and an investment in a joint venture to their implied fair values.

 

Recent Developments

 

On January 2, 2015, 21C entered into a joint venture with NWCC.  21C acquired an 80% interest in a newly-formed joint venture entity, with NWCC’s current physician leader, Sheila Rege, M.D., holding a 20% equity interest. This joint venture expands 21C’s geographical exposure into a new market in the Northwestern U.S., one of the fastest growing regions in the country, with future expansion opportunities via satellite offices and ICC expansion in the region.

 

SFRO completed the purchase of a center in Hollywood, Florida, which was previously under a management agreement and another center in downtown West Palm Beach at the Good Samaritan Medical Center.

 

During the first quarter of 2015 the Company finalized arrangements with two prestigious universities.  21C will in conjunction with UF provide medical and administrative services in the Jacksonville, Florida market and in southern California 21C will partner with UCLA and coordinate care for our mutual patients in convenient community-based locations.

 

Conference Call

 

The Company will host a conference call on Thursday, March 19, 2015 at 12:30 p.m. Eastern Time, during which management will discuss its financial results in further detail. The dial-in numbers are (877) 407-9039 for domestic callers and (201) 689-8470 for international callers.  In addition, a telephonic replay of the call will be available until April 3, 2015.  The replay dial-in numbers are (877) 870-5176 for domestic callers and (858) 384-5517 for international callers.  Please use the conference ID number 13604274 to access the replay.

 

A live webcast and webcast replay of the call will also be available from the Events section on the corporate web site at www.21co.com.

 

About 21st Century Oncology Holdings, Inc.

 

21st Century Oncology Holdings, Inc. is the largest global, physician led provider of integrated cancer care services. The Company offers a comprehensive range of cancer treatment services, focused on delivering academic quality, cost-effective patient care in personal and convenient settings. As of December 31, 2014, the Company operated 180 treatment centers, including 144 centers located in 16 U.S. states and 36 centers located in six countries in Latin America.  (Source: 21st Century Oncology Holdings, Inc.)

 

Forward-Looking Statements

 

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Act of 1934, as amended.  Statements preceded by, followed by or that otherwise include the words “believes”, “expects”,

 



 

“anticipates”, “intends”, “projects”, “estimates”, “plans”, “may increase”, “forecast” and similar expressions or future or conditional verbs such as “will”, “should”, “would”, “may” and “could” are generally forward-looking in nature and not historical facts. Forward-looking statements are based on management’s current expectations or beliefs about the Company’s future plans, expectations and objectives, including, but not limited to, the Company’s expected financial results and estimates for 2015 and the effects of the CMS’s Final Rule for the 2015 Physician Fee Schedule on its results.  These forward-looking statements are not historical facts and are subject to risks and uncertainties that could cause the actual results to differ materially from those projected in these forward-looking statements including, but not limited to reductions in Medicare reimbursement, healthcare reform, decreases in payments by managed care organizations and other commercial payers and other risk factors that may be described from time to time in the Company’s filings with the Securities and Exchange Commission.  Readers of this release are cautioned not to place undue reliance on forward-looking statements contained herein, which speak only as of the date stated, or if no date is stated, as of the date of this press release. The Company undertakes no obligation to publicly update or revise the forward-looking statements contained herein to reflect changed events or circumstances after the date of this release, unless required by law.

 



 

21ST CENTURY ONCOLOGY HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share amounts)

(unaudited)

 

 

 

December 31,

 

December 31,

 

 

 

2014

 

2013

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

 

$

99,167

 

$

17,462

 

Restricted cash

 

7,051

 

3,768

 

Accounts receivable, net

 

137,807

 

117,044

 

Prepaid expenses

 

8,728

 

7,577

 

Inventories

 

4,526

 

4,393

 

Deferred income taxes

 

227

 

375

 

Other

 

7,457

 

12,534

 

Total current assets

 

264,963

 

163,153

 

 

 

 

 

 

 

Equity investments in joint ventures

 

1,646

 

2,555

 

Property and equipment, net

 

270,757

 

240,371

 

Real estate subject to finance obligation

 

22,552

 

19,239

 

Goodwill

 

469,596

 

578,013

 

Intangible assets, net

 

81,680

 

85,025

 

Other assets

 

35,530

 

39,835

 

Total assets

 

$

1,146,724

 

$

1,128,191

 

 

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Accounts payable

 

$

57,635

 

$

57,613

 

Accrued expenses

 

82,609

 

64,021

 

Income taxes payable

 

2,114

 

2,372

 

Current portion of long-term debt

 

26,350

 

17,536

 

Current portion of finance obligation

 

433

 

317

 

Other current liabilities

 

19,687

 

12,237

 

Total current liabilities

 

188,828

 

154,096

 

Long-term debt, less current portion

 

940,771

 

974,130

 

Finance obligation, less current portion

 

23,610

 

20,333

 

Embedded derivative features of Series A convertible redeemable preferred stock

 

15,843

 

 

Other long-term liabilities

 

51,079

 

38,453

 

Deferred income taxes

 

4,480

 

4,498

 

Total liabilities

 

1,224,611

 

1,191,510

 

 

 

 

 

 

 

Series A convertible redeemable preferred stock, $0.001 par value, $1,000 stated value, 3,500,000 and -0- authorized, 385,000 and -0- issued and outstanding at December 31, 2014 and 2013, respectively

 

328,926

 

 

Noncontrolling interests - redeemable

 

49,797

 

15,899

 

 

 

 

 

 

 

Commitments and Contingencies

 

 

 

 

 

 

 

 

 

 

 

Equity:

 

 

 

 

 

Common stock, $0.01 par value, 1,000,000 and 1,028 shares authorized 1,028 shares issued and outstanding at December 31, 2014 and 2013, respectively

 

 

 

Additional paid-in capital

 

626,001

 

650,879

 

Retained deficit

 

(1,067,487

)

(718,237

)

Accumulated other comprehensive loss, net of tax

 

(38,690

)

(26,393

)

Total 21st Century Oncology Holdings, Inc. shareholder’s deficit

 

(480,176

)

(93,751

)

Noncontrolling interests - nonredeemable

 

23,566

 

14,533

 

Total deficit

 

(456,610

)

(79,218

)

Total liabilities and equity

 

$

1,146,724

 

$

1,128,191

 

 



 

21ST CENTURY ONCOLOGY HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(in thousands)

(unaudited)

 

 

 

Three Months Ended

 

Years Ended

 

 

 

December 31,

 

December 31,

 

 

 

2014

 

2013

 

2014

 

2013

 

 

 

 

 

 

 

 

 

 

 

Revenues:

 

 

 

 

 

 

 

 

 

Net patient service revenue

 

$

248,636

 

$

189,524

 

$

946,897

 

$

715,999

 

Management fees

 

16,797

 

11,139

 

67,012

 

11,139

 

Other revenue

 

4,076

 

2,727

 

12,513

 

9,378

 

Total revenues

 

269,509

 

203,390

 

1,026,422

 

736,516

 

 

 

 

 

 

 

 

 

 

 

Expenses:

 

 

 

 

 

 

 

 

 

Salaries and benefits

 

148,714

 

115,380

 

545,025

 

409,352

 

Medical supplies

 

26,360

 

18,474

 

97,367

 

64,640

 

Facility rent expenses

 

15,519

 

13,280

 

63,048

 

45,565

 

Other operating expenses

 

15,700

 

12,474

 

61,735

 

45,629

 

General and administrative expenses

 

33,272

 

38,055

 

135,257

 

106,887

 

Depreciation and amortization

 

21,429

 

18,645

 

86,701

 

65,195

 

Provision for doubtful accounts

 

5,368

 

3,289

 

18,713

 

12,146

 

Interest expense, net

 

25,620

 

24,378

 

113,279

 

86,747

 

Electronic health records incentive income

 

(2,783

)

(1,698

)

(2,783

)

(1,698

)

Impairment loss

 

 

 

229,526

 

 

Early extinguishment of debt

 

 

 

8,558

 

 

Equity initial public offering expenses

 

 

 

4,905

 

 

Loss on sale leaseback transaction

 

 

313

 

135

 

313

 

Fair value adjustment of earn-out liability

 

1,015

 

130

 

1,627

 

130

 

Fair value adjustment of embedded derivative

 

837

 

 

837

 

 

Gain on the sale of an interest in a joint venture

 

 

 

 

(1,460

)

Loss on foreign currency transactions

 

240

 

117

 

557

 

1,283

 

Loss (gain) on foreign currency derivative contracts

 

 

158

 

(4

)

467

 

Total expenses

 

291,291

 

242,995

 

1,364,483

 

835,196

 

 

 

 

 

 

 

 

 

 

 

Loss before income taxes

 

(21,782

)

(39,605

)

(338,061

)

(98,680

)

Income tax expense (benefit)

 

946

 

(25,281

)

5,159

 

(20,432

)

 

 

 

 

 

 

 

 

 

 

Net loss

 

(22,728

)

(14,324

)

(343,220

)

(78,248

)

 

 

 

 

 

 

 

 

 

 

Net income attributable to noncontrolling interests- redeemable and non-redeemable

 

(1,440

)

(601

)

(6,030

)

(1,966

)

 

 

 

 

 

 

 

 

 

 

Net loss attributable to 21st Century Oncology Holdings, Inc. shareholder

 

(24,168

)

(14,925

)

(349,250

)

(80,214

)

 

 

 

 

 

 

 

 

 

 

Other comprehensive loss:

 

 

 

 

 

 

 

 

 

Unrealized loss on fair value of pension plan assets

 

(91

)

 

(91

)

 

Unrealized loss on foreign currency translation

 

(918

)

(6,425

)

(13,514

)

(16,242

)

Other comprehensive loss

 

(1,009

)

(6,425

)

(13,605

)

(16,242

)

 

 

 

 

 

 

 

 

 

 

Comprehensive loss:

 

(23,737

)

(20,749

)

(356,825

)

(94,490

)

Comprehensive income attributable to noncontrolling interests- redeemable and non-redeemable

 

(1,220

)

(137

)

(4,722

)

(653

)

Comprehensive loss attributable to 21st Century Oncology Holdings, Inc. shareholder

 

$

(24,957

)

$

(20,886

)

$

(361,547

)

$

(95,143

)

 



 

21ST CENTURY ONCOLOGY HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

 

 

 

Years Ended

 

 

 

December 31,

 

 

 

2014

 

2013

 

Cash flows from operating activities

 

 

 

 

 

Net loss

 

$

(343,220

)

$

(78,248

)

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

 

 

 

 

 

Depreciation

 

72,914

 

55,430

 

Amortization

 

13,787

 

9,765

 

Deferred rent expense

 

711

 

973

 

Deferred income taxes

 

(329

)

(27,908

)

Stock-based compensation

 

106

 

597

 

Provision for doubtful accounts

 

18,713

 

12,146

 

Loss on the sale/disposal of property and equipment

 

119

 

336

 

Loss on sale leaseback transaction

 

135

 

313

 

Impairment loss

 

229,526

 

 

Early extinguishment of debt

 

8,558

 

 

Equity initial public offering expenses

 

4,905

 

 

Gain on the sale of an interest in a joint venture

 

 

(1,460

)

Loss on foreign currency transactions

 

348

 

143

 

(Gain) loss on foreign currency derivative contracts

 

(4

)

467

 

Fair value adjustment of earn-out liability

 

1,627

 

 

Fair value adjustment of embedded derivative

 

837

 

 

Amortization of debt discount

 

2,483

 

1,191

 

Amortization of loan costs

 

6,277

 

5,595

 

Equity interest in net loss of joint ventures

 

50

 

454

 

Distribution received from unconsolidated joint ventures

 

221

 

21

 

Pension plan contributions

 

(1,587

)

 

Changes in operating assets and liabilities:

 

 

 

 

 

Accounts receivable and other current assets

 

(42,218

)

(42,570

)

Income taxes payable

 

(500

)

20

 

Inventories

 

(88

)

(102

)

Prepaid expenses

 

3,339

 

3,544

 

Accounts payable and other current liabilities

 

346

 

29,373

 

Accrued deferred compensation

 

1,522

 

1,344

 

Accrued expenses / other current liabilities

 

6,054

 

16,999

 

 

 

 

 

 

 

Net cash used in operating activities

 

(15,368

)

(11,577

)

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

 

Purchase of property and equipment

 

(56,563

)

(40,744

)

Acquisition of medical practices

 

(50,245

)

(68,659

)

Restricted cash associated with medical practice acquisitions

 

(3,283

)

(3,768

)

Proceeds from the sale of equity interest in a joint venture

 

 

1,460

 

Proceeds from the sale of property and equipment

 

96

 

78

 

Loans to employees

 

(888

)

(212

)

Contribution of capital to joint venture entities

 

(620

)

(992

)

Purchase of noncontrolling interest - non-redeemable

 

 

(1,509

)

Proceeds (payment) of foreign currency derivative contracts

 

26

 

(171

)

Premiums on life insurance policies

 

(1,265

)

(1,234

)

Change in other assets and other liabilities

 

(765

)

(2,212

)

 

 

 

 

 

 

Net cash used in investing activities

 

(113,507

)

(117,963

)

 



 

21ST CENTURY ONCOLOGY HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

 

 

 

Years Ended

 

 

 

December 31,

 

 

 

2014

 

2013

 

Cash flows from financing activities

 

 

 

 

 

Proceeds from issuance of debt

 

169,845

 

306,063

 

Principal repayments of debt

 

(268,377

)

(171,432

)

Repayments of finance obligation

 

(278

)

(182

)

Proceeds from issuance of Series A convertible redeemable preferred stock

 

325,000

 

 

Payments of issue costs related to the issuance of preferred stock

 

(6,137

)

 

Proceeds from issuance of noncontrolling interest

 

1,250

 

 

Proceeds from noncontrolling interest holders - redeemable and non-redeemable

 

259

 

765

 

Cash distributions to noncontrolling interest holders - redeemable and non-redeemable

 

(3,599

)

(2,211

)

Payments of costs for equity securities offering

 

(4,905

)

 

Payments of loan costs

 

(2,436

)

(1,359

)

 

 

 

 

 

 

Net cash provided by financing activities

 

210,622

 

131,644

 

 

 

 

 

 

 

Effect of exchange rate changes on cash and cash equivalents

 

(42

)

(52

)

 

 

 

 

 

 

Net increase in cash and cash equivalents

 

81,705

 

2,052

 

Cash and cash equivalents, beginning of period

 

17,462

 

15,410

 

 

 

 

 

 

 

Cash and cash equivalents, end of period

 

$

99,167

 

$

17,462

 

 

 

 

 

 

 

Supplemental disclosure of noncash transactions

 

 

 

 

 

Interest paid

 

$

101,149

 

$

78,750

 

Income taxes paid

 

$

7,585

 

$

9,364

 

Finance obligation related to real estate projects

 

$

7,790

 

$

7,580

 

Derecognition of finance obligation related to real estate projects

 

$

4,119

 

$

3,940

 

Capital lease obligations related to the purchase of equipment

 

$

17,625

 

$

3,054

 

Medical equipment and service contract component related to the acquisition of medical equipment through accounts payable

 

$

3,049

 

$

 

Issuance of notes payable relating to the acquisition of medical practices

 

$

2,000

 

$

2,097

 

Liability relating to the escrow debt and purchase price of medical practices

 

$

2,970

 

$

 

Capital lease obligations related to the acquisition of medical practices

 

$

47,796

 

$

10,903

 

Earn-out accrual related to the acquisition of medical practices

 

$

11,052

 

$

7,950

 

Amounts payable to sellers in the purchase of a medical practice

 

$

249

 

$

 

Noncash dividend declared to noncontrolling interest

 

$

194

 

$

77

 

Accrued dividends on Series A convertible preferred stock

 

$

23,078

 

$

 

Accretion of redemption value on Series A convertible preferred stock

 

$

1,991

 

$

 

Noncash deconsolidation of noncontrolling interest

 

$

 

$

9

 

Noncash contribution of capital by noncontrolling interest holders

 

$

37

 

$

4,235

 

Termination of prepaid services by noncontrolling interest holder

 

$

 

$

2,551

 

Issuance of notes payable relating to the earn-out liability in the acquisition of Medical Developers

 

$

 

$

2,679

 

Issuance of equity LLC units relating to the earn-out liability in the acquisition of Medical Developers

 

$

 

$

705

 

Issuance of senior secured notes related to the acquisition of medical practices

 

 

 

$

75,000

 

Reserve claim liability related to the acquisition of medical practices

 

 

 

$

3,682

 

Noncash dividend declared from unconsolidated joint venture

 

 

 

$

150

 

Step up basis in joint venture interest

 

 

 

$

83

 

Costs incurred for professional fees relating to issuance of equity securities

 

 

 

$

1,323

 

 



 

21ST CENTURY ONCOLOGY HOLDINGS, INC.

Supplemental Financial Information (Unaudited)

Reconciliation of Total Pro-forma Revenue and Pro-forma Adjusted EBITDA to Net Loss Attributable

to 21st Century Oncology Holdings, Inc. Shareholder

 

 

 

Three Months Ended

 

Years Ended

 

 

 

December 31,

 

December 31,

 

(in thousands):

 

2014

 

2013

 

2014

 

2013

 

Total revenues

 

$

269,509

 

$

203,390

 

$

1,026,422

 

$

736,516

 

Pro-forma full period effect of acquisitions (a)

 

 

5,820

 

8,819

 

108,767

 

Total pro-forma revenues

 

$

269,509

 

$

209,210

 

$

1,035,241

 

$

845,283

 

 

 

 

 

 

 

 

 

 

 

Net loss attributable to 21st Century Oncology Holdings, Inc. shareholder

 

$

(24,168

)

$

(14,925

)

$

(349,250

)

$

(80,214

)

Income tax expense (benefit)

 

946

 

(25,281

)

5,159

 

(20,432

)

Interest expense, net

 

25,620

 

24,378

 

113,279

 

86,747

 

Depreciation and amortization

 

21,429

 

18,645

 

86,701

 

65,195

 

Impairment loss

 

 

 

229,526

 

 

Early extinguishment of debt

 

 

 

8,558

 

 

Equity initial public offering expenses

 

 

 

4,905

 

 

Gain on the sale of an interest in a joint venture

 

 

 

 

(1,460

)

Loss on sale leaseback transaction

 

 

313

 

135

 

313

 

Fair value adjustment of earn-out liability

 

1,015

 

130

 

1,627

 

130

 

Fair value adjustment of embedded derivative

 

837

 

 

837

 

 

Loss (gain) on foreign currency derivative contracts

 

 

158

 

(4

)

467

 

Management fees (b)

 

875

 

546

 

1,285

 

1,252

 

Non-cash expenses (c)

 

1,085

 

1,093

 

4,175

 

4,282

 

Sale-lease back adjustments (d)

 

(441

)

(322

)

(1,403

)

(1,339

)

Acquisition-related costs (e)

 

2,261

 

11,346

 

12,216

 

18,648

 

Other expenses (f)

 

2,797

 

2,256

 

9,734

 

6,554

 

Litigation settlement (g)

 

2,108

 

4,965

 

6,530

 

6,822

 

Tradename / rebranding initiative (h)

 

 

333

 

622

 

1,044

 

Expenses associated with idle / closed treatment facilities (i)

 

363

 

1,771

 

3,683

 

3,901

 

Expenses associated with note-holder negotiations and management of liquidity (j)

 

2,482

 

 

11,861

 

 

Pro-forma full period effect of acquisition EBITDA (a)

 

 

1,830

 

742

 

26,681

 

 

 

 

 

 

 

 

 

 

 

Pro-forma Adjusted EBITDA (1)

 

$

37,209

 

$

27,236

 

$

150,918

 

$

118,591

 

 

 

 

 

 

 

 

 

 

 

Pro-forma Adjusted EBITDA as a percentage of total pro-forma revenues

 

13.8

%

13.0

%

14.6

%

14.0

%

 


(1) Pro-forma Adjusted EBITDA is defined as income (loss) before interest expense (net of interest income), income taxes, depreciation and amortization, gain on the sale of an interest in a joint venture, loss on sale leaseback transaction, early extinguishment of debt, fair value adjustment of earn-out liability, fair value adjustment of embedded derivative, impairment loss, foreign currency derivative contract loss (gain), management fees accrued to our sponsor, non-cash expenses including costs relating to stock compensation, amortization of straight-line rent and amortization of capital expenditures relating to repairs and maintenance, non-cash equipment rent, sale-lease back adjustments, acquisition-related costs, other expenses including loss on sale of assets, severance payments related to termination of employee staff reductions, tail premiums on termed physicians, franchise taxes, costs relating to consulting services on Medicare reimbursement, litigation settlements with physicians, costs associated with tradename and rebranding initiatives, expenses associated with idle / closed radiation therapy treatment facilities and pro-forma full period effect of acquisition EBITDA.

 

(a) Pro-forma amounts related to adjustments to total revenues and Pro-forma Adjusted EBITDA to reflect the full period effect of our acquisitions and Value Added Services contracts completed during 2014 and 2013.  The adjustments reflect the impact to our total revenues and Pro-forma Adjusted EBITDA as if the acquisitions and Value Added Services contracts had occurred at the beginning of the year.

 

(b) Management fees are fees accrued to our sponsor, Vestar Capital Partners.

 

(c) Non-cash expenses including costs relating to stock compensation, amortization of straight-line rent, amortization of capital expenditures relating to warranty arrangements amortized to repairs and maintenance and non-cash equipment rent.

 

(d) Sale-lease back adjustments relates to the adjustment of benefit derived from the classification of operating leases as finance obligations reflecting a reclassification of interest expense and depreciation and amortization expense as rent expense.

 



 

(e) Acquisition related costs associated with ASC 805, “Business Combinations”, including professional fees, corporate development, integration and due diligence costs relating to the acquisition of medical practices.

 

(f) Other expenses include loss on sale of assets, severance payments related to termination of employee staff reductions, tail premiums paid on terminated physicians, franchise taxes and costs relating to consulting services on Medicare reimbursement.

 

(g) Litigation settlement relates to costs associated with the termination of physicians and loss contingency reserves related to the Medicare diagnostic testing matter.

 

(h) Expenses related to the costs associated with the Company’s tradename and rebranding initiatives.

 

(i) Expenses associated with idle / closed radiation therapy treatment facilities.

 

(j) Expenses associated with negotiating with note-holders, recapitalization support agreement and legal and consulting fees associated with management of liquidity.

 

We believe the Pro-forma Adjusted EBITDA provides useful information about our financial performance to investors, lenders, financial analysts and rating agencies since these groups have historically used EBITDA-related measures in the healthcare industry, along with other measures, to estimate the value of a company, to make informed investment decisions, to evaluate a company’s leverage capacity and its ability to meet its debt service requirements.  Pro-forma Adjusted EBITDA eliminates the uneven effect of non-cash depreciation of tangibles assets and amortization of intangible assets, much of which results from acquisitions accounted for under the purchase method of accounting.  Pro-forma Adjusted EBITDA is also used by us to measure individual performance for incentive compensation purposes and as an analytical indicator for purposes of allocating resources to our operating business and assessing their performance, both internally and relative to our peers, as well as to evaluate the performance of our operating management teams, and for purposes in the calculation of debt covenants and related disclosures.

 

Pro-forma Adjusted EBITDA is not intended as a substitute for net income (loss) attributable to 21st Century Oncology Holdings, Inc. shareholder, 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, Pro-forma Adjusted EBITDA as presented may not be comparable to similarly titled measures of other companies.

 



 

21ST CENTURY ONCOLOGY HOLDINGS, INC.

KEY OPERATING STATISTICS

(unaudited)

 

 

 

Three Months Ended

 

 

 

Years Ended

 

 

 

 

 

December 31,

 

%

 

December 31,

 

%

 

United States

 

2014

 

2013

 

Change

 

2014

 

2013

 

Change

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Number of treatment days

 

64

 

64

 

 

 

255

 

255

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total RVUs - freestanding centers

 

4,039,986

 

3,301,276

 

22.4

%

15,919,121

 

11,615,189

 

37.1

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

RVUs per day - freestanding centers

 

63,125

 

51,582

 

22.4

%

62,428

 

45,550

 

37.1

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Percentage change in RVUs per day - freestanding centers - same store basis

 

0.2

%

0.3

%

 

 

-0.4

%

-3.5

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total treatments - freestanding centers

 

200,109

 

160,377

 

24.8

%

796,067

 

546,951

 

45.5

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Treatments per day - freestanding centers

 

3,127

 

2,506

 

24.8

%

3,122

 

2,145

 

45.5

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Percentage change in revenue per treatment - freestanding centers - same store basis

 

-0.3

%

-7.3

%

 

 

2.5

%

-6.2

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Percentage change in treatments per day - freestanding centers - same store basis

 

2.3

%

7.9

%

 

 

2.6

%

4.3

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Percentage change in freestanding revenues - same store basis

 

2.0

%

0.0

%

 

 

5.1

%

-2.2

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total radiation oncology cases completed *

 

7,808

 

6,437

 

21.3

%

31,440

 

21,928

 

43.4

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue per radiation oncology case

 

$

19,216

 

$

18,702

 

 

 

$

18,749

 

$

19,058

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Treatment centers - freestanding (global)

 

169

 

155

 

9.0

%

 

 

 

 

 

 

Treatment centers - professional / other (global)

 

11

 

8

 

37.5

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total treatment centers

 

180

 

163

 

10.4

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Days sales outstanding at quarter end

 

37

 

31

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net patient service revenue (global) - professional services only (in thousands)

 

$

87,128

 

$

59,904

 

 

 

$

318,047

 

$

219,721

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net patient service revenue (global) - excluding physician practice expense (in thousands)

 

$

271,227

 

$

204,696

 

 

 

$

1,035,822

 

$

731,171

 

 

 

 


*       Total cases completed represents a count of patients that have completed their course of treatment. Total case counts are based on legacy and acquired clinical systems.

 

 

 

Three Months Ended

 

 

 

Years Ended

 

 

 

 

 

December 31,

 

%

 

December 31,

 

%

 

International

 

2014

 

2013

 

Change

 

2014

 

2013

 

Change

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total number of new cases

 

4,395

 

4,187

 

5.0

%

17,756

 

16,090

 

10.4

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue per radiation oncology case

 

$

6,376

 

$

5,550

 

 

 

$

5,588

 

$

5,659