IASIS Healthcare Announces Second Quarter 2010 Results

FRANKLIN, Tenn.--(BUSINESS WIRE)-- IASIS Healthcare® LLC (“IASIS”) today announced financial and operating results for the fiscal second quarter and six months ended March 31, 2010.

Net revenue for the second quarter totaled $624.5 million, an increase of 7.9%, compared to $578.7 million in the prior year quarter. Adjusted EBITDA for the second quarter totaled $79.6 million, compared to $86.3 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 second quarter totaled $22.1 million, compared to $28.4 million in the prior year quarter.

Adjusted EBITDA was negatively affected by a $3.7 million decline at Health Choice, the Company’s Medicaid and Medicare managed health plan in Arizona. In addition, the prior year quarter included a reduction in other operating expenses of $4.0 million as a result of changes in prior period estimates for professional and general liability and workers’ compensation reserves, compared to only $1.0 million in the current year quarter. Adjusted EBITDA at Health Choice has been impacted by a slight decline in overall premium revenue on a per member per month basis, resulting in large part from changes in Medicaid funding by the state of Arizona, and rising medical costs, compared to the prior year quarter.

Admissions increased 0.8% and adjusted admissions decreased 0.4%, respectively, in the second quarter, compared to the prior year quarter. Net patient revenue per adjusted admission increased 4.7% in the second quarter, compared to the prior year quarter.

In commenting on quarterly results, David R. White, chairman and chief executive officer of IASIS Healthcare, said, “While we recognize the second quarter included certain challenges, we continue to believe we are well positioned for the future. In the midst of economic headwinds, including high unemployment and state budgetary issues, our solid track record of effective cost management has helped to maintain strong operating cash flows and strengthen our financial position. We believe these characteristics, along with the strategic use of capital over the recent past, will help us to navigate the uncertainty of a challenging economic environment.”

Net revenue for the six months ended March 31, 2010, totaled $1.3 billion, an increase of 9.9%, compared to $1.1 billion in the prior year period. Adjusted EBITDA for the six months ended March 31, 2010, totaled $151.4 million, compared to $153.1 million in the prior year period. Net earnings from continuing operations for the six months ended March 31, 2010, totaled $41.5 million, compared to $42.3 million in the prior year period.

Admissions and adjusted admissions increased 2.6% and 1.4%, respectively, in the six months ended March 31, 2010, compared to the prior year period. Net patient revenue per adjusted admission increased 4.2% in the six months ended March 31, 2010, compared to the prior year period.

A listen-only simulcast and 30-day replay of IASIS’ second 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 May 6, 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 2,884 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

March 31,

Six Months Ended

March 31,

  2010       2009     2010       2009  
Net revenue:
Acute care revenue $ 437,574 $ 421,179 $ 862,234 $ 819,626
Premium revenue   186,948     157,495     391,245     320,672  
Total net revenue 624,522 578,674 1,253,479 1,140,298
 
Costs and expenses:
Salaries and benefits (includes stock compensation of $2,128, $138, $2,249 and $279, respectively) 174,171 168,372 344,653 330,508
Supplies 68,425 63,753 133,834 123,579
Medical claims 160,094 126,598 338,661 263,600
Other operating expenses 88,683 77,953 173,275 157,303
Provision for bad debts 45,536 45,167 93,485 92,298
Rentals and leases 10,145 9,734 20,420 19,213
Interest expense, net 16,622 15,817 33,354 34,795
Depreciation and amortization 24,025 24,296 47,902 49,292
Management fees 1,250 1,250 2,500 2,500
Hurricane-related property damage   -     938     -     938  
Total costs and expenses 588,951 533,878 1,188,084 1,074,026
 

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

 

35,571 44,796 65,395 66,272
Gain (loss) on disposal of assets, net   (161 )   20     (57 )   1,313  
 

Earnings from continuing operations before income taxes

 

35,410 44,816 65,338 67,585
Income tax expense   13,270     16,449     23,861     25,260  
 
Net earnings from continuing operations 22,140 28,367 41,477 42,325

Earnings (loss) from discontinued operations, net of income taxes

 

  (25 )   211     21     (500 )
 
Net earnings 22,115 28,578 41,498 41,825

Net earnings attributable to non-controlling interests

  (2,033 )   (2,977 )   (4,061 )   (4,574 )
 
Net earnings attributable to IASIS Healthcare LLC $ 20,082   $ 25,601   $ 37,437   $ 37,251  

IASIS HEALTHCARE LLC

Consolidated Balance Sheets (Unaudited)

(in thousands)

   
March 31,

2010

Sept. 30,

2009

 
ASSETS
 
Current assets:
Cash and cash equivalents $ 158,511 $ 206,528
Accounts receivable, net 228,907 230,198
Inventories 52,601 50,492
Deferred income taxes 20,872 39,038
Prepaid expenses and other current assets   53,510   49,453
Total current assets 514,401 575,709
 
Property and equipment, net 980,916 997,353
Goodwill 717,920 717,920
Other intangible assets, net 28,500 30,000
Other assets, net   36,621   36,222
Total assets $ 2,278,358 $ 2,357,204
 
LIABILITIES AND EQUITY
 
Current liabilities:
Accounts payable $ 70,234 $ 68,552
Salaries and benefits payable 37,421 42,548
Accrued interest payable 12,503 12,511
Medical claims payable 122,606 113,519
Other accrued expenses and other current liabilities 68,210 65,701
Current portion of long-term debt and capital lease obligations   6,672   8,366
Total current liabilities 317,646 311,197
 
Long-term debt and capital lease obligations 1,048,146 1,051,471
Deferred income taxes 108,240 106,425
Other long-term liabilities 54,443 54,222
 
Non-controlling interests with redemption rights 72,527 72,527
 
Equity:
Member’s equity 666,954 750,932
Non-controlling interests   10,402   10,430
Total equity   677,356   761,362
Total liabilities and equity $ 2,278,358 $ 2,357,204

IASIS HEALTHCARE LLC

Consolidated Statements of Cash Flows (Unaudited)

(in thousands)

 
Six Months Ended

March 31,

  2010       2009  
Cash flows from operating activities:
Net earnings $ 41,498 $ 41,825
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization 47,902 49,292
Amortization of loan costs 1,564 1,498
Stock compensation costs 2,249 279
Deferred income taxes 19,589 9,530
Income tax benefit from stock compensation (1,770 ) -
Income tax benefit from parent company interest 3,275 -
Loss (gain) on disposal of assets, net 57 (1,313 )
Loss (earnings) from discontinued operations (21 ) 500
Hurricane-related property damage - 938
Changes in operating assets and liabilities, net of the effect of dispositions:
Accounts receivable, net 1,578 (29,695 )
Inventories, prepaid expenses and other current assets (6,165 ) 6,383
Accounts payable, other accrued expenses and other accrued liabilities   7,010     14,170  
Net cash provided by operating activities – continuing operations 116,766 93,407
Net cash provided by (used in) operating activities – discontinued operations   (199 )   1,124  
Net cash provided by operating activities   116,567     94,531  
 
Cash flows from investing activities:
Purchases of property and equipment, net (30,187 ) (49,272 )
Proceeds from sale of assets 36 4,973
Change in other assets, net   1,013     1,595  
Net cash used in investing activities – continuing operations (29,138 ) (42,704 )
Net cash provided by investing activities – discontinued operations   -     10  
Net cash used in investing activities   (29,138 )   (42,694 )
 
Cash flows from financing activities:
Payment of debt and capital lease obligations (5,138 ) (6,379 )
Distribution to parent company in connection with the repurchase of equity, net (124,962 ) -
Distributions to non-controlling interests (5,277 ) (2,919 )
Costs paid for the repurchase of partnership interests, net   (69 )   (1,341 )
Net cash used in financing activities   (135,446 )   (10,639 )
 
Change in cash and cash equivalents (48,017 ) 41,198
Cash and cash equivalents at beginning of period   206,528     80,738  
Cash and cash equivalents at end of period $ 158,511   $ 121,936  
 
Supplemental disclosure of cash flow information:
Cash paid for interest $ 31,837   $ 33,969  
Cash paid (received) for income taxes, net $ 6,188   $ (566 )

IASIS HEALTHCARE LLC

Segment Information (Unaudited)

(in thousands)

 
For the Quarter Ended March 31, 2010
Acute Care   Health Choice   Eliminations   Consolidated
Acute care revenue $ 437,574 $ - $ - $ 437,574
Premium revenue - 186,948 - 186,948
Revenue between segments   3,336     -   (3,336 )   -  
Net revenue 440,910 186,948 (3,336 ) 624,522
 
Salaries and benefits (excludes stock compensation) 167,096 4,947 - 172,043
Supplies 68,375 50 - 68,425
Medical claims - 163,430 (3,336 ) 160,094
Other operating expenses 82,604 6,079 - 88,683
Provision for bad debts 45,536 - - 45,536
Rentals and leases   9,780     365   -     10,145  
Adjusted EBITDA (1) 67,519 12,077 - 79,596
 
Interest expense, net 16,622 - - 16,622
Depreciation and amortization 23,137 888 - 24,025
Stock compensation 2,128 - - 2,128
Management fees   1,250     -   -     1,250  
 

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

 

24,382 11,189 - 35,571
Loss on disposal of assets, net   (161 )   -   -     (161 )
Earnings from continuing operations before income taxes $ 24,221   $ 11,189 $ -   $ 35,410  
 
For the Quarter Ended March 31, 2009
Acute Care Health Choice Eliminations Consolidated
Acute care revenue $ 421,179 $ - $ - $ 421,179
Premium revenue - 157,495 - 157,495
Revenue between segments   2,312     -   (2,312 )   -  
Net revenue 423,491 157,495 (2,312 ) 578,674
 
Salaries and benefits (excludes stock compensation) 163,285 4,949 - 168,234
Supplies 63,670 83 - 63,753
Medical claims - 128,910 (2,312 ) 126,598
Other operating expenses 70,611 7,342 - 77,953
Provision for bad debts 45,167 - - 45,167
Rentals and leases 9,302 432 - 9,734
Hurricane-related property damage   938     -   -     938  
Adjusted EBITDA (1) 70,518 15,779 - 86,297
 
Interest expense, net 15,817 - - 15,817
Depreciation and amortization 23,415 881 - 24,296
Stock compensation 138 - - 138

Management fees

  1,250     -   -     1,250  
 

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

 

29,898 14,898 - 44,796
Gain on disposal of assets, net   20     -   -     20  
Earnings from continuing operations before income taxes $ 29,918   $ 14,898 $ -   $ 44,816  

(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 Six Months Ended March 31, 2010
Acute Care   Health Choice   Eliminations   Consolidated
Acute care revenue $ 862,234 $ - $ - $ 862,234
Premium revenue - 391,245 - 391,245
Revenue between segments   6,012     -   (6,012 )   -  
Net revenue 868,246 391,245 (6,012 ) 1,253,479
 
Salaries and benefits (excludes stock compensation) 332,865 9,539 - 342,404
Supplies 133,737 97 - 133,834
Medical claims - 344,673 (6,012 ) 338,661
Other operating expenses 160,929 12,346 - 173,275
Provision for bad debts 93,485 - - 93,485
Rentals and leases   19,684     736   -     20,420  
Adjusted EBITDA (1) 127,546 23,854 - 151,400
 
Interest expense, net 33,354 - - 33,354
Depreciation and amortization 46,125 1,777 - 47,902
Stock compensation 2,249 - - 2,249
Management fees   2,500     -   -     2,500  
Earnings from continuing operations before loss on disposal of assets and income taxes 43,318 22,077 - 65,395
Loss on disposal of assets, net   (57 )   -   -     (57 )
Earnings from continuing operations before income taxes $ 43,261   $ 22,077 $ -   $ 65,338  
  For the Six Months Ended March 31, 2009
Acute Care   Health Choice   Eliminations   Consolidated
Acute care revenue $ 819,626 $ - $ - $ 819,626
Premium revenue - 320,672 - 320,672
Revenue between segments   4,009   -   (4,009 )   -
Net revenue 823,635 320,672 (4,009 ) 1,140,298
 
Salaries and benefits (excludes stock compensation) 320,376 9,853 - 330,229
Supplies 123,411 168 - 123,579
Medical claims - 267,609 (4,009 ) 263,600
Other operating expenses 144,396 12,907 - 157,303
Provision for bad debts 92,298 - - 92,298
Rentals and leases 18,403 810 - 19,213
Hurricane-related property damage   938   -   -     938
Adjusted EBITDA (1) 123,813 29,325 - 153,138
 
Interest expense, net 34,795 - - 34,795
Depreciation and amortization 47,540 1,752 - 49,292
Stock compensation 279 - - 279
Management fees   2,500   -   -     2,500
Earnings from continuing operations before gain on disposal of assets and income taxes 38,699 27,573 - 66,272
Gain on disposal of assets, net   1,313   -   -     1,313
Earnings from continuing operations before income taxes $ 40,012 $ 27,573 $ -   $ 67,585

(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
March 31,

Six Months Ended
March 31,

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 2,884 2,796 2,884 2,796
Average length of stay (days) 4.9 4.7 4.8 4.7
Occupancy rates (average beds in service) 49.0 % 49.7 % 48.0 % 48.2 %
Admissions 26,458 26,249 51,711 50,399
Percentage change 0.8 % 2.6 %
Adjusted admissions 42,932 43,101 84,999 83,835
Percentage change (0.4 )% 1.4 %
Patient days 128,336 123,257 248,887 236,954
Adjusted patient days 201,615 194,311 394,838 378,142
Outpatient revenue as a % of gross patient revenue 37.8 % 37.6 % 38.4 % 38.4 %

IASIS HEALTHCARE LLC

Supplemental Consolidated Statements of Operations Information (Unaudited)

(in thousands)

   

Quarter Ended
March 31,

 

Six Months
Ended March 31,

  2010     2009     2010     2009  
Consolidated Results
Net earnings from continuing operations $ 22,140 $ 28,367 $ 41,477 $ 42,325
Add:
Interest expense, net 16,622 15,817 33,354 34,795
Income tax expense 13,270 16,449 23,861 25,260
Depreciation and amortization 24,025 24,296 47,902 49,292
Stock compensation 2,128 138 2,249 279
Loss (gain) on disposal of assets, net 161 (20 ) 57 (1,313 )
Management fees   1,250   1,250     2,500   2,500  

Adjusted EBITDA (1)

$ 79,596 $ 86,297   $ 151,400 $ 153,138  

(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
Chief Financial Officer
615-844-2747
or
Media Contact:
Michele M. Peden
VP, Corporate Communications
615-467-1255

KEYWORDS:   United States  North America  Tennessee

INDUSTRY KEYWORDS:   Health  Hospitals  Nursing

MEDIA:

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