IASIS Healthcare Announces Fourth Quarter and Year-End 2010 Results

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

Net revenue for the fourth quarter totaled $629.9 million, an increase of 1.6%, compared to $620.1 million in the prior year quarter. Adjusted EBITDA for the fourth quarter totaled $62.8 million, compared to $68.1 million in the prior year quarter. Net earnings from continuing operations for the fourth quarter totaled $12.6 million, compared to a net loss from continuing operations of $27.3 million in the prior year quarter, which included a $64.6 million non-cash charge for the impairment of goodwill.

In the fourth quarter, admissions decreased 1.3% and adjusted admissions increased 0.1%, compared to the prior year quarter. Net patient revenue per adjusted admission increased 1.3% in the fourth quarter, compared to the prior year quarter.

Net revenue for the year ended September 30, 2010, totaled $2.5 billion, an increase of 6.8%, compared to $2.4 billion in the prior year. Adjusted EBITDA for the year ended September 30, 2010, totaled $290.8 million, compared to $299.9 million in the prior year. Net earnings from continuing operations for the year ended September 30, 2010, totaled $75.8 million, compared to $38.3 million in the prior year, which includes the impact of the Company’s non-cash charge related to the impairment of its goodwill.

For the year ended September 30, 2010, admissions and adjusted admissions increased 0.7% and 0.6%, respectively, compared to the prior year. Net patient revenue per adjusted admission increased 3.8% for the year ended September 30, 2010, compared to the prior year.

In commenting on results, W. Carl Whitmer, president and chief executive officer of IASIS Healthcare, said, “The effect of industry-wide pressures, including volume softness, payor mix shifts and Medicaid reimbursement cuts, created a challenging 2010 year. Despite these obstacles, our ability to generate significant cash flows, expand in new and existing markets, and maintain a strong financial position highlights the strength of our company. Our new executive management team is now in place, and we are very excited about the future of our company. As we move into 2011, we are committed to executing a strategy that continues to expand our footprint, build an infrastructure that supports growth, provide high-quality patient care and focus on operational excellence.”

A listen-only simulcast and 30-day replay of IASIS’ fourth quarter and year-end 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 December 7, 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 17 acute care hospital facilities and one behavioral health hospital facility with a total of 3,570 licensed beds and has total annual net revenue of approximately $2.5 billion. These hospital facilities are located in seven regions: Salt Lake City, Utah; Phoenix, Arizona; Tampa-St. Petersburg, Florida; four cities in Texas, including San Antonio; Las Vegas, Nevada; West Monroe, Louisiana; and Woodland Park, Colorado. 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.

Adjusted EBITDA represents net earnings from continuing operations before interest expense, income tax expense, depreciation and amortization, impairment of goodwill, 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, 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. 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.

IASIS HEALTHCARE LLC

Consolidated Statements of Operations (Unaudited)

(in thousands)

   
Quarter Ended

September 30,

Year Ended

September 30,

  2010       2009     2010       2009  
Net revenue:
Acute care revenue $ 428,899 $ 424,963 $ 1,729,344 $ 1,662,469
Premium revenue   201,040     195,093     792,062     699,503  
Total net revenue 629,939 620,056 2,521,406 2,361,972
 
Costs and expenses:
Salaries and benefits (includes stock compensation of $120, $141, $2,487 and $561, respectively) 171,615 165,534 686,303 660,921
Supplies 66,378 63,044 266,545 250,573
Medical claims 167,959 170,241 678,651 592,760
Other operating expenses 97,062 88,724 363,916 325,735
Provision for bad debts 54,779 54,671 197,680 192,563
Rentals and leases 9,468 9,906 39,955 39,127
Interest expense, net 16,745 16,761 66,810 67,890
Depreciation and amortization 24,197 23,953 96,106 97,462
Management fees 1,250 1,250 5,000 5,000
Impairment of goodwill 64,639 64,639
Hurricane-related property damage               938  
Total costs and expenses 609,453 658,723 2,400,966 2,297,608
 

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

 

20,486

(38,667

)

120,440

64,364

Gain (loss) on disposal of assets, net   314     (32 )   108     1,465  
 
Earnings (loss) from continuing operations

before income taxes

20,800 (38,699 ) 120,548 65,829
Income tax expense (benefit)   8,171     (11,399 )   44,715     27,576  
 
Net earnings (loss) from continuing operations 12,629 (27,300 ) 75,833 38,253
Earnings (loss) from discontinued operations,

net of income taxes

  (724 )   157     (1,087 )   (176 )
 
Net earnings (loss) 11,905 (27,143 ) 74,746 38,077
Net earnings attributable to non-controlling interests   (2,216 )   (2,747 )   (8,279 )   (9,987 )
 
Net earnings (loss) attributable to IASIS Healthcare LLC $ 9,689   $ (29,890 ) $ 66,467   $ 28,090  

IASIS HEALTHCARE LLC

Consolidated Balance Sheets (Unaudited)

(in thousands)

   
Sept. 30,

2010

Sept. 30,

2009

 
ASSETS
 
Current assets:
Cash and cash equivalents $ 144,511 $ 206,528
Accounts receivable, net 209,173 230,198
Inventories 53,842 50,492
Deferred income taxes 15,881 39,038
Prepaid expenses and other current assets   65,340   49,453
Total current assets 488,747 575,709
 
Property and equipment, net 985,291 997,353
Goodwill 718,243 717,920
Other intangible assets, net 27,000 30,000
Deposit for acquisition 97,891
Other assets, net   36,022   36,222
Total assets $ 2,353,194 $ 2,357,204
 
LIABILITIES AND EQUITY
 
Current liabilities:
Accounts payable $ 78,931 $ 68,552
Salaries and benefits payable 38,110 42,548
Accrued interest payable 12,536 12,511
Medical claims payable 111,373 113,519
Other accrued expenses and other current liabilities 106,614 65,701
Current portion of long-term debt and capital lease obligations   6,691   8,366
Total current liabilities 354,255 311,197
 
Long-term debt and capital lease obligations 1,044,887 1,051,471
Deferred income taxes 109,272 106,425
Other long-term liabilities 60,162 54,222
 
Non-controlling interests with redemption rights 72,112 72,527
 
Equity:
Member’s equity 702,135 750,932
Non-controlling interests   10,371   10,430
Total equity   712,506   761,362
Total liabilities and equity $ 2,353,194 $ 2,357,204

IASIS HEALTHCARE LLC

Consolidated Statements of Cash Flows (Unaudited)

(in thousands)

 
Year Ended

September 30,

  2010       2009  
Cash flows from operating activities:
Net earnings $ 74,746 $ 38,077
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization 96,106 97,462
Amortization of loan costs 3,163 3,029
Stock compensation costs 2,487 561
Deferred income taxes 30,473 (5,572 )
Income tax benefit from stock compensation (1,770 )
Income tax benefit from parent company interest 8,554 27,344
Gain on disposal of assets, net (108 ) (1,465 )
Loss from discontinued operations 1,087 176
Impairment of goodwill 64,639
Hurricane-related property damage 938

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

 

Accounts receivable, net

21,279

(7,302

)
Inventories, prepaid expenses and other current assets (19,227 ) 6,728

Accounts payable, other accrued expenses and other accrued liabilities

  41,957     45,884  
Net cash provided by operating activities – continuing operations 258,747 270,499
Net cash provided by (used in) operating activities – discontinued operations   (1,508 )   1,472  
Net cash provided by operating activities   257,239     271,971  
 
Cash flows from investing activities:
Purchases of property and equipment, net (81,268 ) (87,720 )
Cash paid for acquisitions, net (98,305 ) (1,941 )
Proceeds from sale of assets 57 5,252
Change in other assets, net   3,043     1,823  
Net cash used in investing activities – continuing operations (176,473 ) (82,586 )
Net cash provided by investing activities – discontinued operations       10  
Net cash used in investing activities   (176,473 )   (82,576 )
 
Cash flows from financing activities:
Payment of debt and capital lease obligations (8,378 ) (55,476 )
Distribution to parent company in connection with the repurchase of equity, net (124,962 )
Distributions to non-controlling interests (8,984 ) (6,750 )
Costs paid for the repurchase of non-controlling interests, net   (459 )   (1,379 )
Net cash used in financing activities   (142,783 )   (63,605 )
 
Change in cash and cash equivalents (62,017 ) 125,790
Cash and cash equivalents at beginning of period   206,528     80,738  
Cash and cash equivalents at end of period $ 144,511   $ 206,528  
 
Supplemental disclosure of cash flow information:
Cash paid for interest $ 63,762   $ 66,136  
Cash paid for income taxes, net $ 13,528   $ 4,104  

IASIS HEALTHCARE LLC

Segment Information (Unaudited)

(in thousands)

 
For the Quarter Ended September 30, 2010
Acute Care   Health Choice   Eliminations   Consolidated
Acute care revenue $ 428,899 $ $ $ 428,899
Premium revenue 201,040 201,040
Revenue between segments   3,474     (3,474 )  
Net revenue 432,373 201,040 (3,474 ) 629,939
 
Salaries and benefits (excludes stock compensation) 166,751 4,744 171,495
Supplies 66,317 61 66,378
Medical claims 171,433 (3,474 ) 167,959
Other operating expenses 90,924 6,138 97,062
Provision for bad debts 54,779 54,779
Rentals and leases   9,075   393       9,468
Adjusted EBITDA 44,527 18,271 62,798
 
Interest expense, net 16,745 16,745
Depreciation and amortization 23,304 893 24,197
Stock compensation 120 120
Management fees   1,250         1,250

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

 

3,108

17,378

20,486

Gain on disposal of assets, net   314         314

Earnings from continuing operations before income taxes

 

$

3,422

$

17,378

$

 

$

20,800

  For the Quarter Ended September 30, 2009
Acute Care   Health Choice   Eliminations   Consolidated
Acute care revenue $ 424,963 $ $ $ 424,963
Premium revenue 195,093 195,093
Revenue between segments   2,765         (2,765 )    
Net revenue 427,728 195,093 (2,765 ) 620,056
 
Salaries and benefits (excludes stock compensation) 161,118 4,275 165,393
Supplies 62,994 50 63,044
Medical claims 173,006 (2,765 ) 170,241
Other operating expenses 82,532 6,192 88,724
Provision for bad debts 54,671 54,671
Rentals and leases   9,525     381         9,906  
Adjusted EBITDA 56,888 11,189 68,077
 
Interest expense, net 16,761 16,761
Depreciation and amortization 23,154 799 23,953
Impairment of goodwill 64,639 64,639
Stock compensation 141 141
Management fees   1,250             1,250  
Earnings (loss) from continuing operations before gain (loss) on disposal of assets and income taxes (49,057 ) 10,390 (38,667 )
Gain (loss) on disposal of assets, net   119     (151 )       (32 )

Earnings (loss) from continuing operations before income taxes

 

$ (48,938 ) $ 10,239   $   $ (38,699 )

IASIS HEALTHCARE LLC

Segment Information (Unaudited)

(in thousands)

 
For the Year Ended September 30, 2010
Acute Care   Health Choice   Eliminations   Consolidated
Acute care revenue $ 1,729,344 $ $ $ 1,729,344
Premium revenue 792,062 792,062
Revenue between segments   11,805     (11,805 )  
Net revenue 1,741,149 792,062 (11,805 ) 2,521,406
 
Salaries and benefits (excludes stock compensation) 664,667 19,149 683,816
Supplies 266,347 198 266,545
Medical claims 690,456 (11,805 ) 678,651
Other operating expenses 339,304 24,612 363,916
Provision for bad debts 197,680 197,680
Rentals and leases   38,409   1,546       39,955
Adjusted EBITDA 234,742 56,101 290,843
 
Interest expense, net 66,810 66,810
Depreciation and amortization 92,544 3,562 96,106
Stock compensation 2,487 2,487
Management fees   5,000         5,000
Earnings from continuing operations before gain on disposal of assets and income taxes 67,901 52,539 120,440
Gain on disposal of assets, net   108         108

Earnings from continuing operations before income taxes

 

$ 68,009 $ 52,539 $   $ 120,548
  For the Year Ended September 30, 2009
Acute Care   Health Choice   Eliminations   Consolidated
Acute care revenue $ 1,662,469 $ $ $ 1,662,469
Premium revenue 699,503 699,503
Revenue between segments   9,316       (9,316 )  
Net revenue 1,671,785 699,503 (9,316 ) 2,361,972
 
Salaries and benefits (excludes stock compensation) 641,332 19,028 660,360
Supplies 250,310 263 250,573
Medical claims 602,076 (9,316 ) 592,760
Other operating expenses 302,804 22,931 325,735
Provision for bad debts 192,563 192,563
Rentals and leases 37,563 1,564 39,127
Hurricane–related property damage   938           938
Adjusted EBITDA 246,275 53,641 299,916
 
Interest expense, net 67,890 67,890
Depreciation and amortization 94,014 3,448 97,462
Impairment of goodwill 64,639 64,639
Stock compensation 561 561
Management fees   5,000           5,000
Earnings before gain (loss) on disposal of assets and income taxes 14,171 50,193 64,364
Gain (loss) on disposal of assets, net   1,616   (151 )       1,465

Earnings from continuing operations before income taxes

 

$ 15,787 $ 50,042   $   $ 65,829

IASIS HEALTHCARE LLC

Consolidated Financial and Operating Data (Unaudited)

   
Quarter Ended

September 30,

Year Ended

September 30,

2010   2009 2010   2009
Consolidated Hospital Facilities
Number of acute care hospital facilities at end of period 15 15 15 15
Licensed beds at end of period 3,185 3,162 3,185 3,162
Average length of stay (days) 4.8 4.7 4.8 4.7
Occupancy rates (average beds in service) 45.3% 44.8% 46.6% 46.5%
Admissions 25,119 25,455 101,798 101,083
Percentage change (1.3%) 0.7%
Adjusted admissions 43,158 43,106 170,812 169,721
Percentage change 0.1% 0.6%
Patient days 119,872 119,269 489,274 473,601
Adjusted patient days 197,680 192,935 790,958 762,234
Outpatient revenue as a % of gross patient revenue 40.8% 39.7% 39.6% 39.0%

IASIS HEALTHCARE LLC

Supplemental Consolidated Statements of Operations Information (Unaudited)

(in thousands)

   
Quarter Ended

September 30,

Year Ended

September 30,

  2010       2009     2010       2009  
Consolidated Results
Net earnings (loss) from continuing operations $ 12,629 $ (27,300 ) $ 75,833 $ 38,253
Add:
Interest expense, net 16,745 16,761 66,810 67,890
Income tax expense (benefit) 8,171 (11,399 ) 44,715 27,576
Depreciation and amortization 24,197 23,953 96,106 97,462
Impairment of goodwill 64,639 64,639
Stock compensation 120 141 2,487 561
Loss (gain) on disposal of assets, net (314 ) 32 (108 ) (1,465 )
Management fees   1,250     1,250     5,000     5,000  
Adjusted EBITDA $ 62,798   $ 68,077   $ 290,843   $ 299,916  



CONTACT:

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
or
Media Contact:
Michele M. Peden, 615-467-1255
VP, Corporate Communications

KEYWORDS:   United States  North America  Tennessee

INDUSTRY KEYWORDS:   Health  Hospitals

MEDIA:

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