The Rating Outlook is Stable
Bond payments are secured by a pledge of gross revenues of the obligated group and by a first-lien mortgage on
KEY RATING DRIVERS
ROBUST LIQUIDITY METRICS: Liquidity metrics remain strong with 255.5 days cash on hand and 18.9x cushion ratio exceeding Fitch's 'A' respective category medians of 196.3 days and 15.6x. Projected capital spending in fiscal 2014 may pressure liquidity metrics depending on cash flow.
COMPRESSED PROFITABILITY: Operating profitability was pressured in fiscal 2013 (
MODERATE DEBT BURDEN: PHS' debt burden remains moderate with maximum annual debt service (MADS) equal to 3.4% of revenues in fiscal 2013. However, due to the decline in profitability, MADS coverage by EBITDA dropped to 2.9x in fiscal 2013 and is now light relative to Fitch's 'A' category median of 3.8x.
LEADING MARKET SHARE: PHS holds a leading market share of approximately 50% in its primary service area (PSA). The opening of a new cancer center in
ROBUST LIQUIDITY METRICS
Despite elevated levels of capital spending in fiscal years 2012 and 2013 PHS has maintained robust liquidity metrics. Unrestricted cash and investments equaled
Operating profitability compressed in fiscal 2013 with operating EBITDA margin decreasing to 9.5% from 11.4% in fiscal 2012. The compression was primarily due to sequestration cuts and declining volumes. Inpatient admissions decreased 1.4% while total surgeries decreased 4.3% year over year. Management implemented cost reduction strategies including labor productivity initiatives and the transfer of employees to a defined contribution pension plan from a defined benefit plan. Operating EBITDA margin remained relatively the same at 9.7% in the six-month interim period ending
MODERATE DEBT BURDEN
Leverage and debt burden metrics remain moderate with 42.1% debt-to-capitalization at
LEADING MARKET SHARE
PHS has sole community provider status in its region and holds a leading market share of approximately 50% in its primary service area. The system's competitive position was further strengthened by the opening of its new cancer center in
PHS covenants to provide annual and quarterly disclosure. Disclosure is provided on the Municipal Securities Rulemaking Board's EMMA System.
Additional information is available at 'www.fitchratings.com'.
--'Nonprofit Hospitals and Health Systems Rating Criteria', dated
U.S. Nonprofit Hospitals and Health Systems Rating Criteria
Tel: +1 212-908-0526
Source: Fitch Ratings
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