IASIS Healthcare Announces Third Quarter 2010 Results

FRANKLIN, Tenn.--(BUSINESS WIRE)-- IASIS Healthcare® LLC (“IASIS”) today announced financial and operating results for the fiscal third quarter and nine months ended June 30, 2010.

Net revenue for the third quarter totaled $638.0 million, an increase of 6.0%, compared to $601.6 million in the prior year quarter. Adjusted EBITDA for the third quarter totaled $76.6 million, compared to $78.7 million in the prior year quarter. A table describing adjusted EBITDA and reconciling net earnings from continuing operations to adjusted EBITDA is included in this press release in the attached Supplemental Consolidated Statements of Operations Information. Net earnings from continuing operations for the third quarter totaled $21.7 million, compared to $23.2 million in the prior year quarter.

Admissions and adjusted admissions decreased 1.0% and 0.3%, respectively, in the third quarter, compared to the prior year quarter. Net patient revenue per adjusted admission increased 5.5% in the third quarter, compared to the prior year quarter.

Net revenue for the nine months ended June 30, 2010, totaled $1.9 billion, an increase of 8.6%, compared to $1.7 billion in the prior year period. Adjusted EBITDA for the nine months ended June 30, 2010, totaled $228.0 million, compared to $231.8 million in the prior year period. Net earnings from continuing operations for the nine months ended June 30, 2010, totaled $63.2 million, compared to $65.6 million in the prior year period.

Admissions and adjusted admissions increased 1.4% and 0.8%, respectively, in the nine months ended June 30, 2010, compared to the prior year period. Net patient revenue per adjusted admission increased 4.6% in the nine months ended June 30, 2010, compared to the prior year period.

Operating cash flows for the nine months ended June 30, 2010, were $113.9 million, compared to $172.4 million in the prior year period. Included in current year operating cash flows is the impact of the delay of Health Choice’s June capitation payment totaling $64.7 million by the Arizona Health Care Cost Containment System in connection with a state-wide effort in Arizona to manage the State’s fiscal budget issues. This payment was received in July 2010. Adjusting for the delayed payment, operating cash flows would have been $178.6 million for the nine months ended June 30, 2010.

In commenting on results, David R. White, chairman and chief executive officer of IASIS Healthcare, said, “We are proud of the fact that our long-term commitments to operational excellence and the strategic deployment of capital have provided IASIS with a stable platform that continues today. Despite economic headwinds, including unemployment, continued shifts in payor mix and escalating state budgetary issues – all of which are affecting our top line and earnings, our balance sheet and margins remain strong in each operating segment.”

A listen-only simulcast and 30-day replay of IASIS’ third quarter 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 5, 2010. A copy of this press release will also be available on the Company’s Web site.

IASIS, located in Franklin, Tennessee, is a leading owner and operator of medium-sized acute care hospitals in high-growth urban and suburban markets. The Company operates its hospitals with a strong community focus by offering and developing healthcare services targeted to the needs of the markets it serves, promoting strong relationships with physicians and working with local managed care plans. IASIS owns or leases 15 acute care hospital facilities and one behavioral health hospital facility with a total of 2,886 beds in service and has total annual net revenue of approximately $2.5 billion. These hospital facilities are located in six regions: Salt Lake City, Utah; Phoenix, Arizona; Tampa-St. Petersburg, Florida; three cities in Texas, including San Antonio; Las Vegas, Nevada; and West Monroe, Louisiana. IASIS also owns and operates a Medicaid and Medicare managed health plan in Phoenix that serves more than 199,000 members. 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, 2009 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.

IASIS HEALTHCARE LLC Consolidated Statements of Operations (Unaudited) (in thousands)
			Quarter Ended June 30,								Nine Months Ended June 30,
				2010				2009				2010				2009
Net revenue:
Acute care revenue			$	438,211			$	417,880			$	1,300,445			$	1,237,506
Premium revenue				199,777				183,738				591,022				504,410
Total net revenue				637,988				601,618				1,891,467				1,741,916
Costs and expenses:
Salaries and benefits (includes stock compensation of $118, $141, $2,367 and $420, respectively)				170,035				164,879				514,688				495,387
Supplies				66,333				63,950				200,167				187,529
Medical claims				172,031				158,919				510,692				422,519
Other operating expenses				93,579				79,708				266,854				237,011
Provision for bad debts				49,416				45,594				142,901				137,892
Rentals and leases				10,067				10,008				30,487				29,221
Interest expense, net				16,711				16,334				50,065				51,129
Depreciation and amortization				24,007				24,217				71,909				73,509
Management fees				1,250				1,250				3,750				3,750
Hurricane-related property damage				–				–				–				938
Total costs and expenses				603,429				564,859				1,791,513				1,638,885
Earnings from continuing operations before gain (loss) on disposal of assets and income taxes				34,559				36,759				99,954				103,031
Gain (loss) on disposal of assets, net				(149	)			184				(206	)			1,497
Earnings from continuing operations before income taxes				34,410				36,943				99,748				104,528
Income tax expense				12,683				13,715				36,544				38,975
Net earnings from continuing operations				21,727				23,228				63,204				65,553
Earnings (loss) from discontinued operations, net of income taxes				(384	)			167				(363	)			(333	)
Net earnings				21,343				23,395				62,841				65,220
Net earnings attributable to non-controlling interests				(2,002	)			(2,666	)			(6,063	)			(7,240	)
Net earnings attributable to IASIS Healthcare LLC			$	19,341			$	20,729			$	56,778			$	57,980

IASIS HEALTHCARE LLC Consolidated Balance Sheets (Unaudited) (in thousands)
			June 30, 2010			Sept. 30, 2009
ASSETS
Current assets:
Cash and cash equivalents			$	130,160		$	206,528
Accounts receivable, net				221,327			230,198
Inventories				53,476			50,492
Deferred income taxes				11,130			39,038
Prepaid expenses and other current assets				121,379			49,453
Total current assets				537,472			575,709
Property and equipment, net				980,797			997,353
Goodwill				717,920			717,920
Other intangible assets, net				27,750			30,000
Other assets, net				35,522			36,222
Total assets			$	2,299,461		$	2,357,204
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable			$	71,821		$	68,552
Salaries and benefits payable				45,369			42,548
Accrued interest payable				2,128			12,511
Medical claims payable				110,556			113,519
Other accrued expenses and other current liabilities				85,389			65,701
Current portion of long-term debt and capital lease obligations				6,705			8,366
Total current liabilities				321,968			311,197
Long-term debt and capital lease obligations				1,046,480			1,051,471
Deferred income taxes				103,352			106,425
Other long-term liabilities				56,212			54,222
Non-controlling interests with redemption rights				72,527			72,527
Equity:
Member’s equity				688,576			750,932
Non-controlling interests				10,346			10,430
Total equity				698,922			761,362
Total liabilities and equity			$	2,299,461		$	2,357,204

IASIS HEALTHCARE LLC Consolidated Statements of Cash Flows (Unaudited) (in thousands)
			Nine Months Ended June 30,
				2010				2009
Cash flows from operating activities:
Net earnings			$	62,841			$	65,220
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization				71,909				73,509
Amortization of loan costs				2,356				2,257
Stock compensation costs				2,367				420
Deferred income taxes				23,839				11,792
Income tax benefit from stock compensation				(1,770	)			–
Income tax benefit from parent company interest				4,989				–
Loss (gain) on disposal of assets, net				206				(1,497	)
Loss from discontinued operations				363				333
Hurricane-related property damage				–				938
Changes in operating assets and liabilities, net of the effect of acquisitions and dispositions:
Accounts receivable, net				9,154				(18,854	)
Inventories, prepaid expenses and other current assets				(74,909	)			(2,491	)
Accounts payable, other accrued expenses and other accrued liabilities				13,137				39,231
Net cash provided by operating activities – continuing operations				114,482				170,858
Net cash provided by (used in) operating activities – discontinued operations				(567	)			1,548
Net cash provided by operating activities				113,915				172,406
Cash flows from investing activities:
Purchases of property and equipment, net				(53,465	)			(66,608	)
Cash paid for acquisition, net				–				(1,521	)
Proceeds from sale of assets				50				5,240
Change in other assets, net				1,856				1,832
Net cash used in investing activities – continuing operations				(51,559	)			(61,057	)
Net cash provided by investing activities – discontinued operations				–				10
Net cash used in investing activities				(51,559	)			(61,047	)
Cash flows from financing activities:
Payment of debt and capital lease obligations				(6,772	)			(53,672	)
Distribution to parent company in connection with the repurchase of equity, net				(124,962	)			–
Distributions to non-controlling interests				(6,921	)			(4,721	)
Costs paid for the repurchase of partnership interests, net				(69	)			(1,379	)
Net cash used in financing activities				(138,724	)			(59,772	)
Change in cash and cash equivalents				(76,368	)			51,587
Cash and cash equivalents at beginning of period				206,528				80,738
Cash and cash equivalents at end of period			$	130,160			$	132,325
Supplemental disclosure of cash flow information:
Cash paid for interest			$	58,145			$	60,519
Cash paid for income taxes, net			$	7,513			$	3,834

IASIS HEALTHCARE LLC Segment Information (Unaudited) (in thousands)
			For the Quarter Ended June 30, 2010
			Acute Care				Health Choice			Eliminations				Consolidated
Acute care revenue			$	438,211			$	–		$	–			$	438,211
Premium revenue				–				199,777			–				199,777
Revenue between segments				2,319				–			(2,319	)			–
Net revenue				440,530				199,777			(2,319	)			637,988
Salaries and benefits (excludes stock compensation)				165,051				4,866			–				169,917
Supplies				66,293				40			–				66,333
Medical claims				–				174,350			(2,319	)			172,031
Other operating expenses				87,451				6,128			–				93,579
Provision for bad debts				49,416				–			–				49,416
Rentals and leases				9,650				417			–				10,067
Adjusted EBITDA (1)				62,669				13,976			–				76,645
Interest expense, net				16,711				–			–				16,711
Depreciation and amortization				23,115				892			–				24,007
Stock compensation				118				–			–				118
Management fees				1,250				–			–				1,250
Earnings from continuing operations before loss on disposal of assets and income taxes				21,475				13,084			–				34,559
Loss on disposal of assets, net				(149	)			–			–				(149	)
Earnings from continuing operations before income taxes			$	21,326			$	13,084		$	–			$	34,410
			For the Quarter Ended June 30, 2009
			Acute Care				Health Choice			Eliminations				Consolidated
Acute care revenue			$	417,880			$	–		$	–			$	417,880
Premium revenue				–				183,738			–				183,738
Revenue between segments				2,542				–			(2,542	)			–
Net revenue				420,422				183,738			(2,542	)			601,618
Salaries and benefits (excludes stock compensation)				159,838				4,900			–				164,738
Supplies				63,905				45			–				63,950
Medical claims				–				161,461			(2,542	)			158,919
Other operating expenses				75,876				3,832			–				79,708
Provision for bad debts				45,594				–			–				45,594
Rentals and leases				9,635				373			–				10,008
Adjusted EBITDA (1)				65,574				13,127			–				78,701
Interest expense, net				16,334				–			–				16,334
Depreciation and amortization				23,320				897			–				24,217
Stock compensation				141				–			–				141
Management fees				1,250				–			–				1,250
Earnings from continuing operations before gain on disposal of assets and income taxes				24,529				12,230			–				36,759
Gain on disposal of assets, net				184				–			–				184
Earnings from continuing operations before income taxes			$	24,713			$	12,230		$	–			$	36,943
(1) Adjusted EBITDA represents net earnings from continuing operations before interest expense, income tax expense, depreciation and amortization, stock compensation, gain (loss) 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.  Adjusted EBITDA should not be considered as a measure of financial performance under generally accepted accounting principles (“GAAP”), and the items excluded from adjusted EBITDA are significant components in understanding and assessing financial performance.  Adjusted EBITDA should not 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.  Adjusted EBITDA, as presented, differs from what is defined under the Company’s senior secured credit facilities and may not be comparable to similarly titled measures of other companies.

IASIS HEALTHCARE LLC Segment Information (Unaudited) (in thousands)
			For the Nine Months Ended June 30, 2010
			Acute Care				Health Choice			Eliminations				Consolidated
Acute care revenue			$	1,300,445			$	–		$	–			$	1,300,445
Premium revenue				–				591,022			–				591,022
Revenue between segments				8,331				–			(8,331	)			–
Net revenue				1,308,776				591,022			(8,331	)			1,891,467
Salaries and benefits (excludes stock compensation)				497,916				14,405			–				512,321
Supplies				200,030				137			–				200,167
Medical claims				–				519,023			(8,331	)			510,692
Other operating expenses				248,380				18,474			–				266,854
Provision for bad debts				142,901				–			–				142,901
Rentals and leases				29,334				1,153			–				30,487
Adjusted EBITDA (1)				190,215				37,830			–				228,045
Interest expense, net				50,065				–			–				50,065
Depreciation and amortization				69,240				2,669			–				71,909
Stock compensation				2,367				–			–				2,367
Management fees				3,750				–			–				3,750
Earnings from continuing operations before loss on disposal of assets and income taxes				64,793				35,161			–				99,954
Loss on disposal of assets, net				(206	)			–			–				(206	)
Earnings from continuing operations before income taxes			$	64,587			$	35,161		$	–			$	99,748
			For the Nine Months Ended June 30, 2009
			Acute Care				Health Choice			Eliminations				Consolidated
Acute care revenue			$	1,237,506			$	–		$	–			$	1,237,506
Premium revenue				–				504,410			–				504,410
Revenue between segments				6,551				–			(6,551	)			–
Net revenue				1,244,057				504,410			(6,551	)			1,741,916
Salaries and benefits (excludes stock compensation)				480,214				14,753			–				494,967
Supplies				187,316				213			–				187,529
Medical claims				–				429,070			(6,551	)			422,519
Other operating expenses				220,272				16,739			–				237,011
Provision for bad debts				137,892				–			–				137,892
Rentals and leases				28,038				1,183			–				29,221
Hurricane–related property damage				938				–			–				938
Adjusted EBITDA (1)				189,387				42,452			–				231,839
Interest expense, net				51,129				–			–				51,129
Depreciation and amortization				70,860				2,649			–				73,509
Stock compensation				420				–			–				420
Management fees				3,750				–			–				3,750
Earnings before gain on disposal of assets and income taxes				63,228				39,803			–				103,031
Gain on disposal of assets, net				1,497				–			–				1,497
Earnings from continuing operations before income taxes			$	64,725			$	39,803		$	–			$	104,528
(1) Adjusted EBITDA represents net earnings from continuing operations before interest expense, income tax expense, depreciation and amortization, stock compensation, gain (loss) 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.  Adjusted EBITDA should not be considered as a measure of financial performance under GAAP, and the items excluded from adjusted EBITDA are significant components in understanding and assessing financial performance.  Adjusted EBITDA should not 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.  Adjusted EBITDA, as presented, differs from what is defined under the Company’s senior secured credit facilities and may not be comparable to similarly titled measures of other companies.

IASIS HEALTHCARE LLC Consolidated Financial and Operating Data (Unaudited)
			Quarter Ended June 30,						Nine Months Ended June 30,
			2010			2009			2010			2009
Consolidated Hospital Facilities
Number of acute care hospital facilities at end of period			15			15			15			15
Beds in service at end of period			2,886			2,789			2,886			2,789
Average length of stay (days)			4.8			4.7			4.8			4.7
Occupancy rates (average beds in service)			45.9	%		46.2	%		46.9	%		47.5	%
Admissions			24,968			25,229			76,679			75,628
Percentage change			(1.0	%)					1.4	%
Adjusted admissions			42,655			42,780			127,654			126,615
Percentage change			(0.3	%)					0.8	%
Patient days			120,515			117,378			369,402			354,332
Adjusted patient days			198,439			191,157			593,277			569,299
Outpatient revenue as a % of gross patient revenue			40.7	%		39.6	%		39.1	%		38.8	%

IASIS HEALTHCARE LLC Supplemental Consolidated Statements of Operations Information (Unaudited) (in thousands)
			Quarter Ended June 30,							Nine Months Ended June 30,
				2010			2009				2010			2009
Consolidated Results
Net earnings from continuing operations			$	21,727		$	23,228			$	63,204		$	65,553
Add:
Interest expense, net				16,711			16,334				50,065			51,129
Income tax expense				12,683			13,715				36,544			38,975
Depreciation and amortization				24,007			24,217				71,909			73,509
Stock compensation				118			141				2,367			420
Loss (gain) on disposal of assets, net				149			(184	)			206			(1,497	)
Management fees				1,250			1,250				3,750			3,750
Adjusted EBITDA (1)			$	76,645		$	78,701			$	228,045		$	231,839
(1) Adjusted EBITDA represents net earnings from continuing operations before interest expense, income tax expense, depreciation and amortization, stock compensation, loss (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.  Adjusted EBITDA should not be considered as a measure of financial performance under GAAP, and the items excluded from adjusted EBITDA are significant components in understanding and assessing financial performance.  Adjusted EBITDA should not 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.  Adjusted EBITDA, as presented, differs from what is defined under the Company’s senior secured credit facilities and may not be comparable to similarly titled measures of other companies.

CONTACT:

IASIS Healthcare LLC
Investor Contact:
W. Carl Whitmer
President
or
John M. Doyle, 615-844-2747
Chief Financial Officer
or
Media Contact:
Michele M. Peden, 615-467-1255
VP, Corporate Communications

KEYWORDS:   United States  North America  Tennessee

INDUSTRY KEYWORDS:   Health  Hospitals  Other Health  Nursing

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