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8-K - 8-K - 21st Century Oncology Holdings, Inc.a16-17400_18k.htm

Exhibit 99.1

 

 

21ST CENTURY ONCOLOGY HOLDINGS, INC.

 

21st Century Oncology Contact:

Investor Contact:

LeAnne M. Stewart

The Ruth Group

Chief Financial Officer

Nick Laudico

239-931-7281

646-536-7030

leanne.stewart@21co.com

nlaudico@theruthgroup.com

 

 

 

Brandon Vazquez

 

646-536-7032

 

bvazquez@theruthgroup.com

 

21ST CENTURY ONCOLOGY HOLDINGS INC. REPORTS FOURTH QUARTER AND FULL YEAR 2015 FINANCIAL RESULTS

 

COMPLETES FINANCIAL RESTATEMENT

 

FORT MYERS, FL, August XX, 2016 — 21st Century Oncology Holdings, Inc. (“21C” or the “Company”), the leading global, physician-led provider of integrated cancer care services, announced today its financial results for the fourth quarter and full year ended December 31, 2015 and announced the completion of the restatement of financial results for the years ended December 31, 2012, 2013 and 2014, the unaudited condensed consolidated financial statements as of and for each of the interim periods within the years ended December 31, 2012, 2013 and 2014 and for the interim periods ended March 31, June 30, and September 30, 2015.

 

Fourth Quarter 2015 and Full Year 2015 Results

 

Total revenues for the fourth quarter of 2015 were $263.1 million, down 1.3% as compared to total revenues of $266.6 million in the same quarter of 2014. Revenue growth from acquired and new operations was offset by approximately $3.3 million relative to the effect of simulation code bundling. Net income for the fourth quarter was $7.0 million versus a net loss of $28.3 million for the same period in the prior year. The improvement in net income resulted from a fair market value adjustment for embedded derivatives.

 

Pro-forma adjusted EBITDA in the fourth quarter of 2015 was $38.8 million, or 14.7% of total pro-forma revenues, as compared to $30.7 million, or 11.5% of total pro-forma revenues, in the fourth quarter of 2014. The primary contributor to the pro-forma adjusted EBITDA improvement was a $6.2 million reduction in compensation expense and $5.1 million improvement in bad debt offset by the $3.5 million decrease in total revenues.

 

Total radiation oncology treatments per day during the fourth quarter increased 1.8% over the same period in the prior year and same market radiation oncology treatments per day for the quarter declined 2.0% compared to the same period in the prior year. As previously disclosed,

 



 

the Company has experienced a decrease in treatments per case for breast and lung diagnoses, as a result of technological innovations.

 

Net patient service revenue per radiation oncology treatment declined 1.1% in the fourth quarter of 2015 relative to the same period last year. This was largely driven by the simulation code for IMRT cases being bundled with the planning code. The impact of the bundling code change in the fourth quarter of 2015 was $3.3 million.

 

Total revenues for full year 2015 were $1,079.2 million as compared to $1,018.2 million in 2014. The net loss for 2015 was $126.8 million as compared to a net loss of $352.7 million in 2014. The improvement in the net loss was due to recording a $229.5 million impairment loss in 2014.

 

Total pro-forma revenues for full year 2015 were $1,080.3 million, an increase of 5.2% year over year. Pro-forma adjusted EBITDA was $159.1 million for 2015, an increase of 12.9% as compared to $141.0 million in 2014. The increase in pro-forma adjusted EBITDA was primarily driven by a $53.3 million increase in total pro-forma revenues offset by a $34.5 million increase in salaries and benefits. Pro-forma adjusted EBITDA margin for 2015 increased 1.0% as compared to 2014.

 

Total radiation oncology treatments per day for 2015 increased 4.2% year over year, reflecting the impact of strategic acquisitions made earlier in 2015. Same market radiation oncology treatments per day decreased 1.6% year over year due to the reduction in treatments per case, particularly breast and lung diagnoses. For 2015, net patient service revenue per radiation oncology treatment declined 1.9% and same market net patient service revenue per radiation oncology treatment declined 0.6%, each as compared to 2014, due to the impact of the simulation code change.

 

Dr. Daniel Dosoretz, Founder, President and Chief Executive Officer, commented, “We finished the fourth quarter and full year 2015 with positive momentum in our business. We are pleased with our performance against the backdrop of headwinds from simulation code bundling and a reduction in treatments per day due to advances in hypo-fractionated external beam radiotherapy and stereotactic radiosurgery.”

 

Restatement of Financial Results

 

On March 24, 2016, the Board of Directors of 21C (the “Board”) determined that the financial statements for all interim periods and years ended December 31, 2012, 2013 and 2014 as well as the first three periods of 2015, should be restated. The restatement was primarily related to revenue recognition matters, accounts receivable reconciliation issues and income and non-income tax matters with respect to operations in Latin America as well as to give effect to refunds and payment adjustments that the Company recorded in connection with electronic health records incentive payments received under the Health Information Technology for Economic and Clinical Health Act (HITECH).

 

Management remains committed to remediating the material weaknesses identified in its internal controls over financial reporting as well as other areas of risk that led to the restatement of financial results. Several specific remediation initiatives have already been implemented and we believe on-going efforts will continue to improve the effectiveness of our internal control environment.

 



 

Robert L. Rosner, Chairman of the Board of Directors and Chair of The Executive Committee, said, “While the last nine months have included some unique challenges for 21C, the Board and management believe we will emerge from this process a stronger and more focused organization. After a diligent and comprehensive review, we have identified areas in our financial and compliance procedures in need of remediation and have constructed a robust plan to address those issues. The Company is thoroughly committed to executing that plan and maintaining the highest levels of compliance going forward. The importance of these initiatives has been and will continue to be communicated to every 21C employee.”

 

Debt Agreements

 

On August 15, 2016, 21C entered into amendment and waiver agreements with certain creditors. The agreements, among other things, waive the event of default for failure to file financial statements for the year ended December 31, 2015 until September 10, 2016, and waive the event of default for failure to file financial statements for the quarters ended March 31, and June 30, 2016 until September 30, 2016. The amendment agreements require 21C to complete three separate capital events to receive the lessor of, 1) net cash proceeds from the issuance or sale of 21C’s capital stock or from other equity investments and/or sales of assets for a total aggregate amount of $125.0 million, or 2) an amount such that following the third capital event 21C’s cash and cash equivalents plus unused revolving loan commitments equals at least $120.0 million and 21C’s consolidated leverage ratio is not greater than 6.4 to 1.0. The amendment agreements also require the Company to maintain minimum liquidity of $40.0 million.

 

Reimbursement

 

The United States Congress unanimously passed the Patient Access and Medicare Protection Act (S. 2425) which freezes radiation oncology freestanding payment rates for treatment delivery and image guidance codes in 2017 and 2018 at levels set for 2016. The bill was signed into law by President Obama on December 28, 2015. In 2019, CMS will transition to a new episodic alternative payment model. The legislation requires the Secretary of Health and Human Services to submit to Congress a report on the development of an episodic alternative payment model for reimbursement under the Medicare program within 18 months.

 

Dr. Dosoretz, concluded, “We applaud Congress and President Obama for their dedication to working together with the industry to advance payment reform and achieve payment predictability while ensuring patient access to quality cancer care. This is an exceptional example of how bipartisan collaboration can deliver a meaningful benefit to patients in need of the most advanced technologies available in radiation therapy. We look forward to working with policymakers over the next few years on developing an alternative payment model which will provide continued access to sophisticated radiation therapy treatment for patients for years to come.”

 

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, 2015, the Company operated 181 treatment centers, including 145 centers located in 17 U.S. states and 36 centers located in seven countries in Latin America.

 

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. 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, state and federal investigations, claims and litigation matters, 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)

 

 

 

December 31,

 

December 31,

 

 

 

2015

 

2014

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

 

$

65,211

 

$

99,082

 

Restricted cash

 

195

 

7,283

 

Marketable securities

 

1,078

 

 

Accounts receivable, net

 

122,355

 

121,799

 

Prepaid expenses

 

7,822

 

8,728

 

Inventories

 

3,918

 

3,162

 

Income taxes receivable

 

4,966

 

4,432

 

Deferred income taxes

 

 

1,771

 

Other

 

15,732

 

8,291

 

Total current assets

 

221,277

 

254,548

 

 

 

 

 

 

 

Equity investments in joint ventures

 

1,214

 

1,646

 

Property and equipment, net

 

238,585

 

269,570

 

Real estate subject to finance obligation

 

12,631

 

22,552

 

Goodwill

 

498,680

 

476,559

 

Intangible assets, net

 

70,115

 

81,385

 

Embedded derivative & other financial instrument features of Series A convertible redeemable preferred stock

 

17,883

 

 

Other assets

 

65,971

 

47,184

 

Deferred income taxes

 

1,888

 

 

Total assets

 

$

1,128,244

 

$

1,153,444

 

 

 

 

 

 

 

LIABILITIES AND DEFICIT

 

 

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Accounts payable

 

$

59,888

 

$

62,507

 

Accrued expenses

 

111,653

 

88,604

 

Income taxes payable

 

2,501

 

1,326

 

Current portion of long-term debt

 

1,048,260

 

26,350

 

Current portion of finance obligation

 

283

 

433

 

Other current liabilities

 

14,265

 

19,512

 

Total current liabilities

 

1,236,850

 

198,732

 

Long-term debt, less current portion

 

49,233

 

940,771

 

Finance obligation, less current portion

 

13,318

 

23,610

 

Embedded derivative & other financial instrument features of Series A convertible redeemable preferred stock

 

19,911

 

15,843

 

Other long-term liabilities

 

70,928

 

71,985

 

Deferred income taxes

 

3,887

 

4,834

 

Total liabilities

 

1,394,127

 

1,255,775

 

 

 

 

 

 

 

Series A convertible redeemable preferred stock, $0.001 par value, $1,000 stated value, 3,500,000 authorized, 385,000 issued and outstanding at December 31, 2015 and 2014

 

389,514

 

319,997

 

Noncontrolling interests - redeemable

 

19,233

 

15,273

 

 

 

 

 

 

 

Commitments and Contingencies

 

 

 

 

 

 

 

 

 

 

 

Equity:

 

 

 

 

 

Common stock, $0.01 par value, 1,000,000 shares authorized 1,059 and 1,028 shares issued and outstanding at December 31, 2015 and December 31, 2014, respectively

 

 

 

Additional paid-in capital

 

579,920

 

634,930

 

Retained deficit

 

(1,226,298

)

(1,091,449

)

Accumulated other comprehensive loss, net of tax

 

(54,574

)

(36,920

)

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

 

(700,952

)

(493,439

)

Noncontrolling interests - nonredeemable

 

26,322

 

55,838

 

Total deficit

 

(674,630

)

(437,601

)

Total liabilities and deficit

 

$

1,128,244

 

$

1,153,444

 

 



 

21ST CENTURY ONCOLOGY HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(in thousands)

 

 

 

Three Months Ended

 

Years Ended

 

 

 

December 31,

 

December 31,

 

 

 

2015

 

2014

 

2015

 

2014

 

 

 

 

 

 

 

 

 

 

 

Revenues:

 

 

 

 

 

 

 

 

 

Net patient service revenue

 

$

244,249

 

$

245,962

 

$

1,000,126

 

$

938,488

 

Management fees

 

14,458

 

16,797

 

59,719

 

67,012

 

Other revenue

 

4,417

 

3,828

 

19,382

 

12,682

 

Total revenues

 

263,124

 

266,587

 

1,079,227

 

1,018,182

 

 

 

 

 

 

 

 

 

 

 

Expenses:

 

 

 

 

 

 

 

 

 

Salaries and benefits

 

142,498

 

148,714

 

579,492

 

545,025

 

Medical supplies

 

25,091

 

26,360

 

98,654

 

97,367

 

Facility rent expenses

 

17,843

 

15,582

 

68,664

 

63,111

 

Other operating expenses

 

17,753

 

15,749

 

64,750

 

61,784

 

General and administrative expenses

 

33,450

 

33,550

 

174,791

 

135,819

 

Depreciation and amortization

 

22,265

 

21,397

 

89,040

 

86,583

 

Provision for doubtful accounts

 

843

 

5,908

 

14,526

 

19,253

 

Interest expense, net

 

24,239

 

25,620

 

98,075

 

113,279

 

(Gain) loss on the sale/disposal of property and equipment

 

(548

)

(137

)

(751

)

119

 

Electronic health records incentive income

 

(39

)

(93

)

(39

)

(93

)

Gain on BP settlement

 

(1,699

)

 

(7,495

)

 

Gain on insurance recoveries

 

(291

)

 

(1,655

)

 

Impairment loss

 

 

 

 

229,526

 

Early extinguishment of debt

 

 

 

37,390

 

8,558

 

Equity initial public offering expenses

 

 

 

 

4,905

 

Loss on sale leaseback transaction

 

 

 

 

135

 

Fair value adjustment of earn-out liabilities

 

(1,293

)

1,015

 

(1,811

)

1,627

 

Fair value adjustment of embedded derivatives and other financial instruments

 

(26,841

)

837

 

(17,919

)

837

 

Loss on foreign currency transactions

 

367

 

384

 

904

 

678

 

Gain on foreign currency derivative contracts

 

 

 

 

(4

)

Total expenses

 

253,638

 

294,886

 

1,196,616

 

1,368,509

 

 

 

 

 

 

 

 

 

 

 

Income (loss) before income taxes and equity interest in net income (loss) of joint ventures

 

9,486

 

(28,299

)

(117,389

)

(350,327

)

Income tax expense

 

2,456

 

78

 

9,654

 

2,319

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) before equity interest in net income (loss) of joint ventures

 

7,030

 

(28,377

)

(127,043

)

(352,646

)

Equity interest in net (loss) income of joint ventures, net of tax

 

(1

)

111

 

201

 

(50

)

Net income (loss)

 

7,029

 

(28,266

)

(126,842

)

(352,696

)

 

 

 

 

 

 

 

 

 

 

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

 

(1,397

)

(75

)

(8,007

)

(4,595

)

 

 

 

 

 

 

 

 

 

 

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

 

5,632

 

(28,341

)

(134,849

)

(357,291

)

 

 

 

 

 

 

 

 

 

 

Other comprehensive loss, net of tax:

 

 

 

 

 

 

 

 

 

Net periodic benefit cost of pension plan

 

(366

)

(91

)

(366

)

(91

)

Unrealized loss on foreign currency translation

 

(13,269

)

(552

)

(19,683

)

(12,098

)

Other comprehensive loss

 

(13,635

)

(643

)

(20,049

)

(12,189

)

 

 

 

 

 

 

 

 

 

 

Comprehensive loss

 

(6,606

)

(28,909

)

(146,891

)

(364,885

)

Comprehensive (income) loss attributable to noncontrolling interests- redeemable and non-redeemable

 

(13

)

59

 

(5,612

)

(3,224

)

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

 

$

(6,619

)

$

(28,850

)

$

(152,503

)

$

(368,109

)

 



 

21ST CENTURY ONCOLOGY HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

 

 

 

Years Ended

 

 

 

December 31,

 

 

 

2015

 

2014

 

Cash flows from operating activities

 

 

 

 

 

Net loss

 

$

(126,842

)

$

(352,696

)

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

 

 

 

 

 

Depreciation and amortization

 

89,040

 

86,583

 

Deferred rent expense

 

676

 

774

 

Deferred income taxes

 

(278

)

(783

)

Stock-based compensation

 

8

 

106

 

Provision for doubtful accounts

 

14,526

 

19,253

 

(Gain) loss on the sale/disposal of property and equipment

 

(751

)

119

 

Gain on insurance recoveries

 

(291

)

 

Loss on sale leaseback transaction

 

 

135

 

Gain on the sale of marketable securities

 

(3

)

 

Impairment loss

 

 

229,526

 

Early extinguishment of debt

 

37,390

 

8,558

 

Equity initial public offering expenses

 

 

4,905

 

Gain on the sale of an interest in a joint venture

 

 

 

Loss on foreign currency transactions

 

450

 

348

 

Gain on foreign currency derivative contracts

 

 

(4

)

Fair value adjustment of earn-out liabilities

 

(1,811

)

1,627

 

Fair value adjustment of embedded derivatives and other financial instruments

 

(17,919

)

837

 

Amortization of debt discount

 

1,706

 

2,483

 

Amortization of loan costs

 

4,708

 

6,277

 

Paid in kind interest on notes payable

 

757

 

 

Equity interest in net (earnings) loss of joint ventures

 

(201

)

50

 

Distribution received from unconsolidated joint ventures

 

106

 

221

 

Pension plan contributions

 

(1,756

)

(1,587

)

Changes in operating assets and liabilities:

 

 

 

 

 

Accounts receivable and other current assets

 

(31,636

)

(35,108

)

Income taxes payable

 

972

 

(3,453

)

Inventories

 

(1,680

)

8

 

Prepaid expenses and other assets

 

5,331

 

3,677

 

Accounts payable

 

500

 

514

 

Accrued deferred compensation

 

1,444

 

1,522

 

Accrued expenses / other liabilities

 

33,998

 

11,321

 

 

 

 

 

 

 

Net cash provided by (used in) operating activities

 

8,444

 

(14,787

)

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

 

Purchase of property and equipment

 

(40,936

)

(56,659

)

Acquisition of medical practices

 

(34,205

)

(50,245

)

Restricted cash associated with medical practice acquisitions

 

7,088

 

(3,181

)

Proceeds from the sale of equity interest in a joint venture

 

 

 

Proceeds from the sale of property and equipment

 

1,680

 

96

 

Proceeds from insurance recoveries

 

291

 

 

Purchase of marketable securities

 

(5,687

)

 

Sale of marketable securities

 

4,612

 

 

Repayments from (loans to) employees

 

186

 

(1,226

)

Contribution of capital to joint venture entities

 

 

(620

)

Distribution received from joint venture entities

 

496

 

 

Proceeds from foreign currency derivative contracts

 

 

26

 

Company owned life insurance policies

 

(1,302

)

(1,265

)

Change in other assets and other liabilities

 

(340

)

(765

)

 

 

 

 

 

 

Net cash used in investing activities

 

(68,117

)

(113,839

)

 



 

21ST CENTURY ONCOLOGY HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

 

 

 

Years Ended

 

 

 

December 31,

 

 

 

2015

 

2014

 

Cash flows from financing activities

 

 

 

 

 

Proceeds from issuance of debt

 

1,047,871

 

169,845

 

Principal repayments of debt

 

(944,437

)

(268,377

)

Repayments of finance obligation

 

(219

)

(278

)

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

 

743

 

1,250

 

Proceeds from noncontrolling interest holders - redeemable and non-redeemable

 

3,230

 

259

 

Purchase of noncontrolling interest - non-redeemable

 

(16,233

)

 

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

 

(5,174

)

(3,599

)

Payments for contingent considerations

 

(8,537

)

 

Payments of costs for equity securities offering

 

 

(4,905

)

Payment of call premium on long-term debt

 

(24,877

)

 

Payments of loan costs

 

(26,481

)

(2,436

)

 

 

 

 

 

 

Net cash provided by financing activities

 

25,886

 

210,622

 

 

 

 

 

 

 

Effect of exchange rate changes on cash and cash equivalents

 

(84

)

(42

)

 

 

 

 

 

 

Net (decrease) increase in cash and cash equivalents

 

(33,871

)

81,954

 

Cash and cash equivalents, beginning of period

 

99,082

 

17,128

 

 

 

 

 

 

 

Cash and cash equivalents, end of period

 

$

65,211

 

$

99,082

 

 

 

 

 

 

 

Supplemental disclosure of noncash investing and financing activities

 

 

 

 

 

Interest paid

 

$

99,253

 

$

101,149

 

Income taxes paid

 

$

11,467

 

$

7,585

 

Finance obligation related to real estate projects

 

$

1,898

 

$

7,790

 

Derecognition of finance obligation related to real estate projects

 

$

12,215

 

$

4,119

 

Capital lease obligations related to the purchase of equipment

 

$

2,408

 

$

17,625

 

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

 

$

2,865

 

$

3,049

 

Noncash vendor credits

 

$

1,500

 

$

 

Issuance of notes payable relating to the acquisition of medical practices

 

$

5,522

 

$

2,000

 

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

 

$

 

$

2,970

 

Capital lease obligations related to the acquisition of medical practices

 

$

3,166

 

$

47,796

 

Change in earn-out accruals

 

$

13,572

 

$

11,052

 

Amounts payable to sellers in the purchase of a medical practice

 

$

150

 

$

249

 

Noncash dividend declared to noncontrolling interest

 

$

97

 

$

194

 

Noncash issuance of noncontrolling interest

 

$

56

 

$

 

Step up in basis of joint venture interests

 

$

688

 

$

 

Issuance of notes payable relating to the purchase of SFRO noncontrolling interest

 

$

14,560

 

$

 

Issuance of equity units relating to the purchase of SFRO noncontrolling interest

 

$

14,500

 

$

 

Accrued dividends on Series A convertible preferred stock, accrued at effective rate

 

$

55,074

 

$

12,683

 

Accretion of redemption value on Series A convertible preferred stock

 

$

17,447

 

$

3,457

 

Change in additional paid-in capital from sale/purchase of interest in subsidiaries

 

$

2,315

 

$

 

Noncash contribution of capital by noncontrolling interest holders

 

$

 

$

37

 

 



 

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,

 

 

 

2015

 

2014

 

2015

 

2014

 

(in thousands):

 

 

 

 

 

 

 

 

 

Total revenues

 

$

263,124

 

$

266,587

 

$

1,079,227

 

$

1,018,182

 

Pro-forma full period effect of acquisitions (a)

 

 

 

1,075

 

8,819

 

Total pro-forma revenues

 

$

263,124

 

$

266,587

 

$

1,080,302

 

$

1,027,001

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

$

5,632

 

$

(28,341

)

$

(134,849

)

$

(357,291

)

Income tax expense

 

2,456

 

78

 

9,654

 

2,319

 

Interest expense, net

 

24,239

 

25,620

 

98,075

 

113,279

 

Depreciation and amortization

 

22,265

 

21,397

 

89,040

 

86,583

 

Gain on BP settlement

 

(1,699

)

 

(7,495

)

 

Impairment loss

 

 

 

 

229,526

 

Early extinguishment of debt

 

 

 

37,390

 

8,558

 

Equity initial public offering expenses

 

 

 

 

4,905

 

Loss on sale leaseback transaction

 

 

 

 

135

 

Fair value adjustment of noncontrolling interest

 

 

 

 

 

 

 

 

 

Fair value adjustment of earn-out liabilities

 

(1,293

)

1,015

 

(1,811

)

1,627

 

Fair value adjustment of embedded derivatives and other financial instruments

 

(26,841

)

837

 

(17,919

)

837

 

Gain on foreign currency derivative contracts

 

 

 

 

(4

)

Net income attributable to noncontrolling interests, net of cash distributions

 

295

 

(1,473

)

2,833

 

996

 

Other expenses (b)

 

8,153

 

4,036

 

14,298

 

15,324

 

Non-cash expenses (c)

 

1,066

 

1,148

 

4,359

 

4,238

 

Sale-lease back adjustments (d)

 

(289

)

(441

)

(1,049

)

(1,403

)

Acquisition-related costs (e)

 

3,205

 

2,261

 

6,712

 

12,216

 

Litigation matters (f)

 

1,579

 

2,108

 

59,354

 

6,530

 

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

 

 

2,482

 

 

11,861

 

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

 

 

 

543

 

742

 

 

 

 

 

 

 

 

 

 

 

Pro-Forma Adjusted EBITDA (1)

 

$

38,768

 

$

30,727

 

$

159,135

 

$

140,978

 

 

 

 

 

 

 

 

 

 

 

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

 

14.7

%

11.5

%

14.7

%

13.7

%

 


(1) Pro-Forma Adjusted EBITDA, as defined per the Credit Agreement dated as of April 30, 2015, calculated as income (loss) before interest expense (net of interest income), income taxes, depreciation and amortization, net income attributable to noncontrolling interests, net of cash distributions, 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 2015 and 2014.  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) Other expenses include management fees accrued to our sponsor, Vestar Capital Partners, 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. Expenses related to the costs associated with the Company’s tradename and rebranding initiatives and expenses associated with idle / closed radiation therapy facilities, costs associated with the CMS Medicare freeze.

 



 

(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) Litigation matters relate to loss contingency reserves related to the Medicare investigative matters and costs associated with the termination of physicians.

 

(g) 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

 

 

 

Year Ended

 

 

 

 

 

December 31,

 

%

 

December 31,

 

%

 

Operating Metrics

 

2015

 

2014

 

Change

 

2015

 

2014

 

Change

 

Number of operating days

 

64

 

64

 

0.0

%

255

 

255

 

0.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Domestic

 

 

 

 

 

 

 

 

 

 

 

 

 

Radiation oncology treatment plans (total) (1)

 

8,770

 

8,708

 

0.7

%

36,251

 

34,190

 

6.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Radiation oncology treatments per day (total)

 

3,184

 

3,127

 

1.8

%

3,245

 

3,114

 

4.2

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net patient service revenue per radiation oncology treatment (total)

 

$

750

 

$

759

 

-1.1

%

$

750

 

$

765

 

-1.9

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Radiation oncology treatment plans (same market) (1),(2)

 

8,386

 

8,696

 

-3.6

%

33,854

 

33,823

 

0.1

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Radiation oncology treatments per day (same market) (2)

 

3,049

 

3,112

 

-2.0

%

3,020

 

3,070

 

-1.6

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net patient service revenue per radiation oncology treatment (same market) (2)

 

$

753

 

$

753

 

0.0

%

$

756

 

$

760

 

-0.6

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

International

 

 

 

 

 

 

 

 

 

 

 

 

 

Total number of open cases

 

4,564

 

4,395

 

3.8

%

18,598

 

17,756

 

4.7

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue per radiation oncology case

 

$

6,676

 

$

5,899

 

13.2

%

$

6,340

 

$

5,126

 

23.7

%

 

 

 

Three Months Ended

 

 

 

Year Ended

 

 

 

 

 

December 31,

 

 

 

December 31,

 

 

 

Revenue Details

 

2015

 

2014

 

 

 

2015

 

2014

 

 

 

Net patient service revenue per Consolidated Statements of Operations and Comprehensive Loss

 

$

244,249

 

$

245,962

 

 

 

$

1,000,126

 

$

938,488

 

 

 

Less net patient service revenue ICC

 

(78,323

)

(88,830

)

 

 

(333,977

)

(320,841

)

 

 

Less net patient service revenue professional services

 

(1,980

)

(2,003

)

 

 

(8,161

)

(8,063

)

 

 

Plus net patient service revenue unconsolidated MSAs (3)

 

19,344

 

22,590

 

 

 

80,795

 

88,925

 

 

 

Less international net patient service revenue

 

(30,470

)

(25,926

)

 

 

(117,903

)

(91,021

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Domestic freestanding net patient service revenue

 

$

152,820

 

$

151,793

 

0.7

%

$

620,880

 

$

607,488

 

2.2

%

 

 

 

December 31,

 

 

 

 

 

 

 

 

 

Center Details

 

2015

 

2014

 

 

 

 

 

 

 

 

 

Radiation therapy centers - freestanding (domestic)

 

133

 

133

 

 

 

 

 

 

 

 

 

Radiation therapy centers - freestanding (international)

 

36

 

36

 

 

 

 

 

 

 

 

 

Radiation therapy centers - professional / other

 

12

 

11

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total radiation therapy centers

 

181

 

180

 

 

 

 

 

 

 

 

 

 


(1) Total radiation oncology treatment plans represents the number of prescriptions issued by the physicians to start the treatment process.

 

(2) Same market is defined as markets that have been open in excess of 12 months. This includes in market acquisitions and conversion of existing professional only relationships to freestanding.

 

(3) Medical services agreement