News Column

IASIS Healthcare Announces Third Quarter 2014 Results

August 12, 2014

FRANKLIN, Tenn.--(BUSINESS WIRE)-- IASIS Healthcare® LLC (“IASIS” or the “Company”) today announced financial and operating results for the fiscal third quarter and nine months ended June 30, 2014.

Key Financial & Operating Results

Third Quarter Fiscal 2014

Net revenue for the third quarter totaled $673.2 million, an increase of 12.4% compared to $599.1 million in the prior year quarter. Adjusted EBITDAR, which excludes rent expense associated with the sale-leaseback of certain hospital real estate, for the third quarter totaled $70.4 million, compared to $68.5 million in the prior year quarter. Included in adjusted EBITDAR for the third quarter was $2.0 million in start-up related costs associated with Health Choice’s new third-party administration and management services organization businesses. Excluding these start-up related costs, adjusted EBITDAR would have increased 5.8% over the prior year quarter.

In the third quarter, adjusted admissions increased 1.9% and admissions decreased 3.1%, each compared to the prior year quarter. Net patient revenue per adjusted admission in the third quarter increased 1.3% compared to the prior year quarter.

In Health Choice’s operations for the third quarter, premium revenue excluding the impact of the new health insurer fee revenue (“HIF”) increased 40.4% compared to the prior year quarter, and total lives enrolled across all health plan product lines increased 14.5% to 213,032, compared to 186,111 in the prior year quarter.

Cash flows provided by continuing operations for the quarter ended June 30, 2014, totaled $22.5 million, compared to cash flows used in continuing operations of $14.6 million in the prior year quarter.

“We are pleased with these solid financial results, led by continued improvements and growth in our core operations and new investment growth in our Health Choice segment," said IASIS Healthcare President and Chief Executive Officer Carl Whitmer. “Improved margins in our major markets underscore early benefits of improving economic fundamentals, including positive results from Medicaid expansion for Health Choice and our Arizona hospitals. We continue to be intently focused on integrating our strong provider networks with Health Choice’s proven managed care solutions to further enhance our longstanding ability to provide high quality, affordable care to the communities we serve.”

Year-to-Date Fiscal 2014

Net revenue for the first nine months of fiscal 2014 totaled $1.94 billion, an increase of 8.0% compared to $1.79 billion in the prior year period. Adjusted EBITDAR for the first nine months of fiscal 2014, totaled $204.7 million, compared to $195.8 million in the prior year period. Adjusted EBITDAR for the first nine months of fiscal 2014 includes $3.0 million in start-up related costs at Health Choice and $3.5 million of compensation expense associated with a special bonus paid to certain members of the Company’s leadership team in recognition of the completion of certain strategic initiatives. Additionally, the prior year period was negatively impacted by $6.1 million of changes in reimbursement estimates associated with the Company’s Houston market.

For the first nine months of fiscal 2014, adjusted admissions increased 0.7% and admissions decreased 3.4%, each compared to the prior year period. Net patient revenue per adjusted admission for the first nine months of fiscal 2014 increased 2.5% compared to the prior year period.

Cash flows used in continuing operations for the first nine months of fiscal 2014 totaled $3.4 million, compared to cash flows provided by continuing operations of $8.9 million in the prior year period. Cash flows used in operations for the first nine months of fiscal 2014 were impacted by the payment of $22.3 million in income taxes and other transaction costs, as well as additional rent payments of $16.9 million, both associated with the Company’s recent sale-leaseback of certain hospital real estate, and the continued delay of certain supplemental and other payments from the states of Texas and Arizona, most of which is expected to be collected in the fourth fiscal quarter of 2014 and first fiscal quarter of 2015.

Conference Call

A listen-only simulcast and 30-day replay of IASIS’ third quarter 2014 conference call will be available by clicking the “For Investors” link on the Company’s Web site at www.iasishealthcare.com beginning at 11:00 a.m. Eastern Time on August 12, 2014. A copy of this press release will also be available on the Company’s Web site.

IASIS Healthcare, located in Franklin, Tennessee, is a leading provider and manager of high-quality, affordable healthcare services in urban and suburban markets. With total annual net revenue of approximately $2.5 billion, IASIS owns and operates 16 acute care hospitals, one behavioral health hospital, several outpatient service facilities, 137 physician clinics, and Health Choice, a provider-owned, managed care organization and insurer delivering healthcare services to over 266,000 members through multiple health plans, integrated delivery systems and managed care solutions. IASIS offers a variety of access points for convenient patient care in numerous regions across the U.S., including: Salt Lake City, Utah; Phoenix, Arizona; five cities in Texas, including Houston and San Antonio; Las Vegas, Nevada; and West Monroe, Louisiana. For more information on IASIS, please visit the Company’s Web site at www.iasishealthcare.com.

Some of the statements we make in this press release are forward-looking within the meaning of the federal securities laws, which are intended to be covered by the safe harbors created thereby. Those forward-looking statements include all statements that are not historical statements of fact and those regarding our intent, belief or expectations including, but not limited to, future financial and operating results, the Company’s plans, objectives, expectations and other statements that are not historical facts. Forward-looking statements involve known and unknown risks and uncertainties that may cause actual results in future periods to differ materially from those anticipated in the forward-looking statements. These risk factors and uncertainties are more fully described in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2013, and other filings with the Securities and Exchange Commission.

Although we believe that the assumptions underlying the forward-looking statements contained in this press release are reasonable, any of these assumptions could prove to be inaccurate, and, therefore, there can be no assurance that the forward-looking statements included in this press release will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, you should not regard the inclusion of such information as a representation by the Company or any other person that our objectives and plans will be achieved. We undertake no obligation to publicly release any revisions to any forward-looking statements contained herein to reflect events and circumstances occurring after the date hereof or to reflect the occurrence of unanticipated events.

Adjusted EBITDAR represents adjusted EBITDA before rent expense associated with the sale-leaseback of certain hospital real estate. Adjusted EBITDA represents net earnings (loss) from continuing operations before interest expense, income tax expense, depreciation and amortization, stock-based compensation and related expenses, gain on disposal of assets and management fees. Management fees represent monitoring and advisory fees paid to TPG, the Company’s majority financial sponsor, and certain other members of IASIS Investment LLC. Management routinely calculates and communicates adjusted EBITDA and believes that it is useful to investors because it is commonly used as an analytical indicator within the healthcare industry to evaluate hospital performance, allocate resources and measure leverage capacity and debt service ability. In addition, the Company uses adjusted EBITDA as a measure of performance for its business segments and for incentive compensation purposes. Neither adjusted EBITDAR nor adjusted EBITDA should be considered as a measure of financial performance under generally accepted accounting principles, and the items excluded from such EBITDAR and EBITDA measures are significant components in understanding and assessing financial performance. Neither EBITDAR nor EBITDA measures should be considered in isolation or as an alternative to net earnings, cash flows generated by operating, investing, or financing activities or other financial statement data presented in the consolidated financial statements as an indicator of financial performance or liquidity. Such EBITDAR and EBITDA measures may not be comparable to similarly titled measures of other companies. A table describing adjusted EBITDAR and adjusted EBITDA and reconciling net earnings (loss) from continuing operations to such EBITDAR and EBITDA measures is included in this press release in the attached Supplemental Consolidated Statements of Operations Information.


 

IASIS HEALTHCARE LLC

Consolidated Statements of Operations (Unaudited)

(in thousands)

 
    Quarter Ended

June 30,

    Nine Months Ended

June 30,

2014     20132014     2013
Net revenue

Acute care revenue before provision for bad debts

$ 556,318$ 555,413$ 1,692,779$ 1,636,836

Less: Provision for bad debts

(83,437 ) (96,090 ) (281,931 ) (267,014 )
Acute care revenue 472,881 459,323 1,410,848 1,369,822
Premium revenue 200,281   139,804   524,995   422,059  
Net revenue 673,162 599,127 1,935,843 1,791,881
 
Costs and expenses
Salaries and benefits (includes stock-based compensation of $4,442, $947, $8,796 and $2,946, respectively) 234,546 219,896 701,983 670,286
Supplies 80,411 79,462 243,437 240,724
Medical claims 165,943 116,640 436,754 348,556
Rentals and leases 18,796 13,992 56,429 40,635
Other operating expenses 114,933 106,456 325,012 309,987
Medicare and Medicaid EHR incentives (2,790 ) (4,827 ) (10,233 ) (11,209 )
Interest expense, net 32,275 32,771 98,325 99,987
Depreciation and amortization 23,276 24,492 71,860 72,606

Management fees

1,250   1,250   3,750   3,750  
Total costs and expenses 668,640 590,132 1,927,317 1,775,322
 

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

4,522 8,995 8,526 16,559
Gain on disposal of assets, net 332   481   1,100   649  
 

Earnings from continuing operations before income taxes

4,854 9,476 9,626 17,208
Income tax expense 6,331   3,850   10,198 ?? 8,016  
 

Net earnings (loss) from continuing operations

(1,477 ) 5,626 (572 ) 9,192
Earnings (loss) from discontinued operations, net of income taxes (2,847 ) (531 ) 1,821   849  
 
Net earnings (loss) (4,324 ) 5,095 1,249 10,041

Net earnings attributable to non-controlling interests

(2,453 ) (1,941 ) (8,857 ) (3,189 )
 
Net earnings (loss) attributable to

IASIS Healthcare LLC

$ (6,777 ) $ 3,154   $ (7,608 ) $ 6,852  
 


 

IASIS HEALTHCARE LLC

Consolidated Balance Sheets (Unaudited)

(in thousands)

 
    June 30,

2014

    Sept. 30,

2013

 
ASSETS
 
Current assets
Cash and cash equivalents $ 317,643$ 438,131
Accounts receivable, net 336,649 371,006
Inventories 58,282 57,781
Deferred income taxes 15,491 26,096
Prepaid expenses and other current assets 181,224 126,412
Assets held for sale 119,141
Total current assets 909,289 1,138,567
 
Property and equipment, net 843,138 833,169
Goodwill 815,585 816,410
Other intangible assets, net 23,497 25,957
Other assets, net 60,445 66,162
Total assets $ 2,651,954$ 2,880,265
 
LIABILITIES AND EQUITY
 
Current liabilities
Accounts payable $ 119,355$ 129,542
Salaries and benefits payable 53,295 62,884
Accrued interest payable 9,682 27,519
Medical claims payable 69,108 57,514
Other accrued expenses and other current liabilities 61,308 92,553
Current portion of long-term debt and capital lease obligations 13,180 13,221
Advance from divestiture 144,803
Liabilities held for sale 3,208
Total current liabilities 325,928 531,244
 
Long-term debt and capital lease obligations 1,843,788 1,852,822
Deferred income taxes 114,460 115,592
Other long-term liabilities 117,482 123,120
 
Non-controlling interests with redemption rights 108,325 105,464
 
Equity
Member’s equity 132,263 142,262
Non-controlling interests 9,708 9,761
Total equity 141,971 152,023
Total liabilities and equity $ 2,651,954$ 2,880,265
 


 

IASIS HEALTHCARE LLC

Consolidated Statements of Cash Flows (Unaudited)

(in thousands)

 
    Nine Months Ended

June 30,

2014     2013
Cash flows from operating activities
Net earnings $ 1,249 $ 10,041

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

Depreciation and amortization 71,860 72,606
Amortization of loan costs 5,559 5,760
Change in physician minimum revenue guarantees 2,266 2,718
Amortization of deferred gain from sale-leaseback (1,872 )
Stock-based compensation 8,796 2,946
Deferred income taxes (1,934 ) 16,338
Income tax benefit from exercise of employee stock options 16
Income tax benefit from parent company 9 103
Gain on disposal of assets, net (1,100 ) (649 )
Earnings from discontinued operations, net (1,821 ) (849 )

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

Accounts receivable, net (4,544 ) (22,880 )
Inventories, prepaid expenses and other current assets (41,570 ) (21,628 )
Accounts payable, other accrued expenses and other accrued liabilities (18,011 ) (55,578 )

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

  (22,270 )    
Net cash provided by (used in) operating activities – continuing operations (3,383 ) 8,944
Net cash provided by (used in) operating activities – discontinued operations   (7,161 )   3,967  
Net cash provided by (used in) operating activities   (10,544 )   12,911  
 
Cash flows from investing activities
Purchases of property and equipment (81,402 ) (79,369 )
Cash received (paid) for acquisitions, net (1,038 ) 3,584
Proceeds from sale of assets 1,510 83
Change in other assets, net (173 ) (2,467 )
Other, net   (3,025 )    
Net cash used in investing activities – continuing operations (84,128 ) (78,169 )
Net cash provided by (used in) investing activities – discontinued operations   28     (4,318 )
Net cash used in investing activities   (84,100 )   (82,487 )
 
Cash flows from financing activities
Payment of debt and capital lease obligations (10,184 ) (101,765 )
Proceeds from revolving credit facilities 147,000
Debt financing costs incurred (1,024 )
Distributions to non-controlling interests (13,222 ) (5,504 )
Cash received for the sale of non-controlling interests 849
Cash paid for the repurchase of non-controlling interests (600 ) (1,018 )
Other   (1,838 )   12  
Net cash provided by (used in) financing activities   (25,844 )   38,550  
 
Change in cash and cash equivalents (120,488 ) (31,026 )
Cash and cash equivalents at beginning of period   438,131     48,882  
Cash and cash equivalents at end of period $ 317,643   $ 17,856  
 
Supplemental disclosure of cash flow information
Cash paid for interest $ 111,176   $ 111,687  
Cash paid for income taxes, net $ 39,030   $ 2,122  
 


   

IASIS HEALTHCARE LLC

Segment Information (Unaudited)

(in thousands)

 
For the Quarter Ended June 30, 2014

Acute Care

    Health Choice     Eliminations     Consolidated
Acute care revenue before provision for bad debts $ 556,318 $ $ $ 556,318
Less: Provision for bad debts   (83,437 )         (83,437 )
Acute care revenue 472,881 472,881
Premium revenue 200,281 200,281
Revenue between segments   3,262       (3,262 )    
Net revenue 476,143 200,281 (3,262 ) 673,162
 
Salaries and benefits (excludes stock-based compensation) 221,175 8,929 230,104
Supplies 80,341 70 80,411
Medical claims 169,205 (3,262 ) 165,943

Rentals and leases (excludes sale-leaseback rent expense)

13,870 448 14,318
Other operating expenses (excludes expenses related to stock-based compensation) 101,706 13,059 114,765
Medicare and Medicaid EHR incentives   (2,790 )         (2,790 )
Adjusted EBITDAR 61,841 8,570 70,411
Sale-leaseback rent expense   4,478           4,478  
Adjusted EBITDA 57,363 8,570 65,933
 
Interest expense, net 32,275 32,275
Depreciation and amortization 22,244 1,032 23,276
Stock-based compensation and related expenses 4,610 4,610
Management fees   1,250           1,250  
Earnings (loss) from continuing operations before gain on disposal of assets and income taxes (3,016 ) 7,538 4,522
Gain on disposal of assets, net   332           332  

Earnings (loss) from continuing operations before income taxes

$ (2,684 ) $ 7,538 $   $ 4,854  
 
For the Quarter Ended June 30, 2013
Acute CareHealth ChoiceEliminationsConsolidated
Acute care revenue before provision for bad debts $ 555,413 $ $ $ 555,413
Less: Provision for bad debts   (96,090 )         (96,090 )
Acute care revenue 459,323 459,323
Premium revenue 139,804 139,804
Revenue between segments   1,940       (1,940 )    
Net revenue 461,263 139,804 (1,940 ) 599,127
 
Salaries and benefits (excludes stock-based compensation) 212,859 6,090 218,949
Supplies 79,422 40 79,462
Medical claims 118,580 (1,940 ) 116,640

Rentals and leases (excludes sale-leaseback rent expense)

13,597 395 13,992
Other operating expenses 100,463 5,993 106,456
Medicare and Medicaid EHR incentives   (4,827 )         (4,827 )
Adjusted EBITDAR 59,749 8,706 68,455
Sale-leaseback rent expense              
Adjusted EBITDA 59,749 8,706 68,455
 
Interest expense, net 32,771 32,771
Depreciation and amortization 23,463 1,029 24,492
Stock-based compensation 947 947
Management fees   1,250           1,250  

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

1,318 7,677 8,995
Gain on disposal of assets, net   481           481  

Earnings from continuing operations before income taxes

$ 1,799   $ 7,677 $   $ 9,476  
 


   

IASIS HEALTHCARE LLC

Segment Information (Unaudited)

(in thousands)

 
For the Nine Months Ended June 30, 2014
Acute Care    

Health Choice

    Eliminations     Consolidated
Acute care revenue before provision for bad debts $ 1,692,779 $ $ $ 1,692,779

Less: Provision for bad debts

  (281,931 )         (281,931 )
Acute care revenue 1,410,848 1,410,848
Premium revenue 524,995 524,995
Revenue between segments   8,539       (8,539 )    
Net revenue 1,419,387 524,995 (8,539 ) 1,935,843
 
Salaries and benefits (excludes stock-based compensation) 669,527 23,660 693,187
Supplies 243,264 173 243,437
Medical claims 445,293 (8,539 ) 436,754

Rentals and leases (excludes sale-leaseback rent expense)

42,023 1,165 43,188
Other operating expenses (excludes expenses related to stock-based compensation) 296,401 28,443 324,844
Medicare and Medicaid EHR incentives   (10,233 )         (10,233 )
Adjusted EBITDAR 178,405 26,261 204,666
Sale-leaseback rent expense   13,241           13,241  
Adjusted EBITDA 165,164 26,261 191,425
 
Interest expense, net 98,325 98,325
Depreciation and amortization 68,723 3,137 71,860
Stock-based compensation and related expenses 8,964 8,964
Management fees   3,750           3,750  
Earnings (loss) from continuing operations before gain on disposal of assets and income taxes (14,598 ) 23,124 8,526
Gain on disposal of assets, net   1,100           1,100  

Earnings (loss) from continuing operations before income taxes

$ (13,498 ) $ 23,124 $   $ 9,626  
 
For the Nine Months Ended June 30, 2013
Acute CareHealth ChoiceEliminationsConsolidated
Acute care revenue before provision for bad debts $ 1,636,836 $ $ $ 1,636,836
Less: Provision for bad debts   (267,014 )         (267,014 )
Acute care revenue 1,369,822 1,369,822
Premium revenue 422,059 422,059
Revenue between segments   5,334       (5,334 )    
Net revenue 1,375,156 422,059 (5,334 ) 1,791,881
 
Salaries and benefits (excludes stock-based compensation) 649,720 17,620 667,340
Supplies 240,582 142 240,724
Medical claims 353,890 (5,334 ) 348,556

Rentals and leases (excludes sale-leaseback rent expense)

39,443 1,192 40,635
Other operating expenses 292,488 17,499 309,987
Medicare and Medicaid EHR incentives   (11,209 )         (11,209 )
Adjusted EBITDAR 164,132 31,716 195,848
Sale-leaseback rent expense              
Adjusted EBITDA 164,132 31,716 195,848
 
Interest expense, net 99,987 99,987
Depreciation and amortization 69,510 3,096 72,606
Stock-based compensation 2,946 2,946
Management fees   3,750           3,750  

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

(12,061 ) 28,620 16,559
Gain on disposal of assets, net   649           649  

Earnings (loss) from continuing operations before income taxes

$ (11,412 ) $ 28,620 $   $ 17,208  
 


       

IASIS HEALTHCARE LLC

Consolidated Financial and Operating Data (Unaudited)

 
Quarter Ended

June 30,

Nine Months Ended

June 30,

2014    

2013

2014    

2013

Consolidated Hospital Facilities

Number of acute care hospital facilities at end of period

16 16 16 16
Licensed beds at end of period 3,778 3,804 3,778 3,804
Average length of stay (days) 5.1 5.1 5.2 5.1
Occupancy rates (average beds in service) 48.5 % 49.7 % 49.6 % 50.6 %
Admissions 26,307 27,155 79,796 82,643
Percentage change (3.1 )% (3.4 )%
Adjusted admissions 49,103 48,175 144,790 143,750
Percentage change 1.9 % 0.7 %
Patient days 133,488 138,108 409,923 421,159
Adjusted patient days 249,162 245,015 743,804 732,569
Outpatient revenue as a percentage of gross patient revenue 46.4 % 43.6 % 44.9 % 42.5 %
 


       

IASIS HEALTHCARE LLC

Supplemental Consolidated Statements of Operations Information (Unaudited)

(in thousands)

 
Quarter Ended

June 30,

Nine Months Ended

June 30,

2014     20132014     2013
Consolidated Results

Net earnings (loss) from continuing operations

$ (1,477 ) $ 5,626 $ (572 ) $ 9,192
Add:
Interest expense, net 32,275 32,771 98,325 99,987
Income tax expense 6,331 3,850 10,198 8,016
Depreciation and amortization 23,276 24,492 71,860 72,606
Sale-leaseback rent expense 4,478 13,241
Stock-based compensation and related expenses 4,610 947 8,964 2,946
Gain on disposal of assets, net (332 ) (481 ) (1,100 ) (649 )
Management fees   1,250     1,250     3,750     3,750  
Adjusted EBITDAR 70,411 68,455 204,666 195,848
Sale-leaseback rent expense   4,478         13,241      
Adjusted EBITDA $ 65,933   $ 68,455   $ 191,425   $ 195,848  
 





IASIS Healthcare LLC

Investor Contact:

W. Carl Whitmer, 615-844-2747

President and Chief Executive Officer

or

John M. Doyle, 615-844-2747

Chief Financial Officer


Source: IASIS Healthcare LLC


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