IASIS Healthcare Announces First Quarter 2015 Results

FRANKLIN, Tenn.--()--IASIS Healthcare® LLC (“IASIS” or the “Company”) today announced financial and operating results for the fiscal first quarter ended December 31, 2014. The Company’s discontinued operations in the accompanying consolidated financial statements have been excluded from Consolidated Financial and Operating Data and Supplemental Consolidated Statements of Operations Information for the fiscal first quarters ended December 31, 2014 and 2013.

Key Financial & Operating Results

First Quarter Fiscal 2015

Total revenue for the first quarter totaled $686.7 million, an increase of 15.2% compared to $595.9 million in the prior year quarter. Adjusted EBITDA for the first quarter totaled $73.9 million, an increase of 15.3% compared to $64.1 million in the prior year quarter. Net earnings from continuing operations for the first quarter totaled $8.9 million, compared to $1.9 million in the prior year quarter.

Acute care revenue for the first quarter increased 4.6% compared to the prior year quarter. In the first quarter, admissions increased 3.1% and adjusted admissions increased 4.0%, each compared to the prior year quarter. Net patient revenue per adjusted admission in the first quarter increased 1.2% compared to the prior year quarter.

Premium and service revenues in our managed care risk platform for the first quarter, excluding the effect of $2.9 million of revenue associated with the federal health insurer fee, increased 44.5% compared to the prior year quarter. Total lives served across all managed care product lines increased 75.4% to 337,700, compared to 192,500 in the prior year quarter, while health plan lives increased 19.7% compared to the prior year quarter.

Cash Flow Analysis

Cash flows used in continuing operations for the first quarter ended December 31, 2014, totaled $11.2 million, compared to cash flows used in continuing operations of $61.2 million in the prior year quarter. Cash flows used in continuing operations for the quarter ended December 31, 2013, were affected by the payment of $22.3 million in income taxes and other transaction costs associated with the sale-leaseback of certain hospital real estate, along with delays in certain Texas and Arizona supplemental reimbursement.

“We are pleased with our first quarter results, which included improvements in volumes, revenue and EBITDA. Our results were driven by growth in our managed care services, as well as continued improvements in payor mix and local economic factors in our acute care markets,” said IASIS Healthcare President and Chief Executive Officer Carl Whitmer.

Conference Call

A listen-only simulcast of IASIS’ first quarter 2015 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 February 10, 2015. A copy of this press release will also be available on the Company’s Web site.

IASIS Healthcare is a healthcare services company that seeks to deliver high-quality, cost-effective healthcare through a broad and differentiated set of capabilities and assets that include acute care hospitals with related patient access points and a diversified managed care risk platform. With total annual revenue of approximately $2.5 billion, IASIS, headquartered in Franklin, Tennessee, owns and operates 15 acute care hospitals, one behavioral hospital and multiple other access points, including 136 physician clinics, multiple outpatient surgical units, imaging centers, and investments in urgent care centers and on-site employer-based clinics. Health Choice, the Company’s managed care risk platform, delivers services to more than 337,000 covered lives through its multiple health plans, accountable care networks and agreements to serve as a management services organization ("MSO") with third party insurers. 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, 2014, 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 net interest expense, income tax expense, depreciation and amortization, stock-based compensation, net gain (loss) on disposal of assets, and management fees. Management fees represent monitoring and advisory fees paid to management companies affiliated with TPG and JLL. 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 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 “adjusted EBITDA” as 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

December 31,

  2014       2013  
Revenues
Acute care revenue before provision for bad debts $ 553,916 $ 537,874
Less: Provision for bad debts   (89,352 )   (93,703 )
Acute care revenue 464,564 444,171
Premium and service revenues   222,101     151,719  
Total revenues 686,665 595,890
 
Costs and expenses

Salaries and benefits (includes stock-based compensation of $1,539 and $861, respectively)

 

229,730 214,266
Supplies 80,051 76,792
Medical claims 175,972 125,820
Rentals and leases 18,709 18,453
Other operating expenses 113,221 100,557
Medicare and Medicaid EHR incentives (3,415 ) (3,278 )
Interest expense, net 32,363 33,144
Depreciation and amortization 22,631 25,722
Management fees   1,250     1,250  
Total costs and expenses 670,512 592,726
 
Earnings from continuing operations before gain (loss)

on disposal of assets and income taxes

16,153 3,164
Gain (loss) on disposal of assets, net   (848 )   1,242  
 
Earnings from continuing operations before income taxes 15,305 4,406
Income tax expense   6,405     2,477  
 
Net earnings from continuing operations 8,900 1,929
Earnings (loss) from discontinued operations, net of income taxes   (1,500 )   7,061  
 
Net earnings 7,400 8,990
Net earnings attributable to non-controlling interests   (2,287 )   (3,788 )
 
Net earnings attributable to IASIS Healthcare LLC $ 5,113   $ 5,202  

   

IASIS HEALTHCARE LLC

Consolidated Balance Sheets (Unaudited)

(in thousands)

 
Dec. 31,

2014

Sept. 30,

2014

 
ASSETS
 
Current assets
Cash and cash equivalents $ 294,838 $ 341,180
Accounts receivable, net 317,137 305,654
Inventories 59,577 57,632
Deferred income taxes 2,523
Prepaid expenses and other current assets 228,616 235,155
Assets held for sale   48,354   50,151
Total current assets 948,522 992,295
 
Property and equipment, net 827,038 826,478
Goodwill 817,933 814,498
Other intangible assets, net 22,511 23,331
Other assets, net   63,002   62,362
Total assets $ 2,679,006 $ 2,718,964
 
LIABILITIES AND EQUITY
 
Current liabilities
Accounts payable $ 116,477 $ 127,953
Salaries and benefits payable 53,840 71,121
Accrued interest payable 9,849 28,820
Deferred income taxes 1,442
Medical claims payable 90,420 79,449
Other accrued expenses and current liabilities 62,390 73,497
Current portion of long-term debt, capital leases and other obligations 12,142 12,690
Liabilities held for sale   6,450   9,171
Total current liabilities 353,010 402,701
 
Long-term debt, capital leases and other obligations 1,838,474 1,841,110
Deferred income taxes 108,381 100,868
Other long-term liabilities 115,620 117,289
 
Non-controlling interests with redemption rights 108,195 108,156
 
Equity
Member’s equity 145,656 139,164
Non-controlling interests   9,670   9,676
Total equity   155,326   148,840
Total liabilities and equity $ 2,679,006 $ 2,718,964

 

IASIS HEALTHCARE LLC

Consolidated Statements of Cash Flows (Unaudited)

(in thousands)

 
Quarter Ended

December 31,

  2014       2013  
Cash flows from operating activities
Net earnings $ 7,400 $ 8,990
Adjustments to reconcile net earnings to net cash

used in operating activities:

Depreciation and amortization 22,631 25,722
Amortization of loan costs 1,971 1,853
Amortization of deferred gain from sale-leaseback (624 )
Change in physician minimum revenue guarantees 827 599
Stock-based compensation 1,539 861
Deferred income taxes 10,273 171
Loss (gain) on disposal of assets, net 848 (1,242 )
Loss (earnings) from discontinued operations, net 1,500 (7,061 )

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

 

Accounts receivable, net (11,810 ) (12,504 )
Inventories, prepaid expenses and other current assets 3,167 (5,518 )
Accounts payable, other accrued expenses and other accrued liabilities (48,965 ) (50,818 )

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

      (22,270 )
Net cash used in operating activities – continuing operations (11,243 ) (61,217 )
Net cash used in operating activities – discontinued operations   (234 )   (12,085 )
Net cash used in operating activities   (11,477 )   (73,302 )
 
Cash flows from investing activities
Purchases of property and equipment (23,410 ) (10,883 )
Cash paid for acquisitions, net (3,900 ) (1,038 )
Proceeds from sale of assets 265 425
Cash paid for sale-leaseback of real estate (3,100 )
Change in other assets, net   (2,100 )   (2,436 )
Net cash used in investing activities – continuing operations (29,145 ) (17,032 )
Net cash provided by (used in) investing activities – discontinued operations   (340 )   691  
Net cash used in investing activities   (29,485 )   (16,341 )
 
Cash flows from financing activities
Payment of long-term debt, capital leases and other obligations (3,560 ) (3,450 )
Distributions to non-controlling interests (1,853 ) (8,367 )
Cash received for the sale of non-controlling interests   39      
Net cash used in financing activities – continuing operations (5,374 ) (11,817 )
Net cash used in financing activities – discontinued operations   (6 )   (58 )
Net cash used in financing activities   (5,380 )   (11,875 )
 
Change in cash and cash equivalents (46,342 ) (101,518 )
Cash and cash equivalents at beginning of period   341,180     438,131  
Cash and cash equivalents at end of period $ 294,838   $ 336,613  
 
Supplemental disclosure of cash flow information
Cash paid for interest $ 50,116   $ 48,787  
Cash paid (received) for income taxes, net $ (162 ) $ 35,088  

 

IASIS HEALTHCARE LLC

Consolidated Financial and Operating Data (Unaudited)

 
Quarter Ended

December 31,

2014     2013  
Acute care operations (1)
Number of acute care hospital facilities at end of period 15 15
Licensed beds at end of period 3,604 3,600
Average length of stay (days) 5.0 5.0
Occupancy rates (average beds in service) 49.6 % 47.4 %
Admissions 25,868 25,096
Percentage change 3.1 %
Adjusted admissions 47,910 46,058
Percentage change 4.0 %
Patient days 129,843 124,275
Adjusted patient days 240,483 228,078
Surgeries 16,811 17,003
Emergency room visits 106,340 99,039
Outpatient revenue as a percentage of gross patient revenue 46.0 % 45.5 %
 
 
Managed care operations
Health plan lives 229,600 191,800
Management service organization (MSO) lives 88,300
Accountable care network lives 19,800   700  
Total lives 337,700 192,500

Medical loss ratio (2)

84.5 % 84.4 %
 

(1)  Excludes the Company’s Nevada and Florida operations, which are now reflected in discontinued operations in both periods.

 

(2)  Represents medical claims expense as a percentage of premium revenue (excludes the effect of service-related revenue and health insurer fee revenue) before the elimination of intercompany-related costs.

 

IASIS HEALTHCARE LLC

Supplemental Consolidated Statements of Operations Information (Unaudited)

(in thousands)

 
Quarter Ended

December 31,

2014   2013  
Consolidated Results
Net earnings from continuing operations $ 8,900 $ 1,929
Add:
Interest expense, net 32,363 33,144
Income tax expense 6,405 2,477
Depreciation and amortization 22,631 25,722
Stock-based compensation 1,539 861
Loss (gain) on disposal of assets, net 848 (1,242 )
Management fees   1,250   1,250  
Adjusted EBITDA $ 73,936 $ 64,141  

Contacts

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:
Cara Jackson, 615-467-1255
VP, Corporate Communications

Contacts

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:
Cara Jackson, 615-467-1255
VP, Corporate Communications