Vanguard Health Systems, Inc. (ticker: VHS, exchange: NYSE Archipelago Exchange (.N))
News Release -
31-Oct-2011
Vanguard Health Systems Reports First Quarter Fiscal 2012 Results Outlook for Fiscal Year 2012 Issued
NASHVILLE, TN, Oct 31, 2011 (MARKETWIRE via COMTEX) -- Vanguard Health Systems, Inc. (NYSE: VHS) today announced financial
and operating results for the first fiscal quarter ended September
30, 2011 and issued its outlook for fiscal year 2012.
First Quarter Fiscal 2012 Key Metrics (all percentage changes compare
Q1 FY2012 to Q1 FY2011):
Consolidated:
-- Total revenues increased 67.4 percent
-- Net loss attributable to Vanguard Health Systems, Inc. stockholders
was $19.2 million, or $0.26 per share, which included a pre-tax charge
of $38.9 million, or $0.34 per share net of taxes, related to the
redemption of substantially all of our outstanding 10.375% senior
discount notes due 2016 with the proceeds from the initial public
offering and the exercise of the underwriters' over-allotment option,
and a pre-tax charge of $12.2 million, or $0.10 per share net of
taxes, related to expenses incurred to complete our acquisition of
Valley Baptist Health System effective September 1, 2011
-- Adjusted EBITDA increased 58.0 percent to $122.8 million
Same Hospital:
-- Total revenues (including health plan revenues) were flat with net
patient service revenues up 1.7 percent and health plan premium
revenues down 4.4 percent
-- Adjusted discharges increased 2.2 percent
-- Discharges declined 1.0 percent
Discussion of Results
The increase in consolidated total revenues during the first quarter
of 2012 was primarily attributable to the acquisition of The Detroit
Medical Center in January 2011. The increase in same hospital net
patient service revenues during the current year quarter was
primarily comprised of a 2.2 percent increase in adjusted discharges
and a 0.6 percent decrease in net patient revenue per adjusted
discharge. As previously disclosed, we elected to early adopt
accounting guidance that results in the classification of the
provision for doubtful accounts as a revenue deduction instead of an
operating expense, and such guidance has been applied to both the
current year and prior year financial statements. Revenues from our
health plan operating segment decreased 4.4 percent during the
current year quarter as a result of capitation rate decreases at
Phoenix Health Plan ("PHP") implemented by the Arizona Health Care
Cost Containment System since the first quarter of fiscal 2011 and a
change in PHP's enrollee population mix during the current year
quarter compared to the prior year quarter.
Net loss attributable to Vanguard Health Systems, Inc. stockholders
was $19.2 million, or $0.26 per share, during the first quarter of
fiscal 2012 compared to net income attributable to Vanguard Health
Systems, Inc. stockholders of $1.2 million, or $0.02 per diluted
share, during the prior year quarter. This change was primarily
attributable to the debt extinguishment costs related to the senior
discount notes redemption and acquisition related expenses discussed
above. Adjusted EBITDA increased 58.0 percent to $122.8 million
during the current year quarter. A reconciliation of Adjusted EBITDA,
a non-GAAP financial measure, to net income (loss) attributable to
Vanguard Health Systems, Inc. stockholders for the fiscal quarters
ended September 30, 2010 and 2011 is included in this release.
Due to the significant acquisitions we completed during fiscal 2011
and during the first quarter of fiscal 2012, most cost and expense
line items are not comparable between the quarters. Same hospital
uncompensated care as a percentage of net patient revenues (prior to
the uncompensated care deductions) increased from 16.0 percent to
20.5 percent during the first quarter of fiscal 2012 as a result of
an increase in uninsured discharges as a percentage of total
discharges and price increases implemented since the first quarter of
fiscal 2011.
Cash flows from operating activities decreased $188.0 million during
the first quarter of fiscal 2012 compared to the prior year quarter,
primarily due to working capital increases of $227.7 million,
including a $23.2 million increase in interest and income tax
payments, the payment of fiscal 2011 incentive compensation and
adverse changes to net accounts receivable days and net accounts
payable days. Capital expenditures increased 42.2 percent to $63.4
million during the current year quarter. As of September 30, 2011,
our cash balance was $154.7 million, our outstanding debt was
$2,346.2 million and we had $220.6 million of borrowing capacity
under our revolving credit facility.
Outlook for Fiscal Year 2012
We are issuing the following outlook for our fiscal year ended June
30, 2012 operating results:
Projected Adjusted EBITDA $520 million to $545 million
Projected net income attributable to
Vanguard Health Systems, Inc.
stockholders, excluding debt
extinguishment costs and
acquisition related expenses $56.3 million to $69.1 million
Projected diluted earnings per share
attributable to Vanguard Health
Systems, Inc. stockholders,
excluding debt extinguishment costs
and acquisition related expenses $0.71 to $0.86 per diluted share
We have included a reconciliation in this release for the high end and
low end estimates for each of these projected fiscal year ended June
30, 2012 measures. The outlook projections are based upon
management's current expectations and should be read in conjunction
with the cautionary statement about forward-looking information
below.
Acquisition of Valley Baptist Health System
As previously announced, effective September 1, 2011, we acquired
substantially all of the assets of the Valley Baptist Health System
including hospitals with a combined 866 licensed beds located in
Harlingen, Texas and Brownsville, Texas. We paid approximately $201.4
million in cash at closing to acquire the net assets. In addition to
the cash investment, we also assumed certain of the seller's debt and
issued a 49% interest in the partnership to the seller. We funded the
cash investment with cash on hand. The acquisition includes a working
capital settlement provision that we expect to settle later in fiscal
2012.
Earnings Conference Call
We will host a conference call at 11:00 a.m. EDT on November 1, 2011.
All interested parties are invited to access a live webcast of the
conference call on our website at http://investor.vanguardhealth.com
or at www.earnings.com. If you are unable to participate during the
live webcast, the webcast will be available on a replay basis at
http://investor.vanguardhealth.com for 90 days.
We own and operate 28 acute care and specialty hospitals and
complementary facilities and services in Chicago, Illinois; Detroit,
Michigan; Phoenix, Arizona; San Antonio, Texas; the Rio Grande Valley
in southern Texas; and Massachusetts. Our strategy is to develop
locally branded, comprehensive healthcare delivery networks in urban
markets.
Cautionary Statement about Preliminary Results and Other
Forward-Looking Information
This press release contains "forward-looking statements" within the
meaning of the federal securities laws that are intended to be
covered by the safe harbors created thereby. Forward-looking
statements are those statements that are based upon management's
current plans and expectations as opposed to historical and current
facts and are often identified in this release by use of words
including but not limited to "may," "believe," "will," "project,"
"expect," "estimate," "anticipate," and "plan." These statements are
based upon estimates and assumptions made by our management that,
although believed to be reasonable, are subject to numerous factors,
risks and uncertainties that could cause actual outcomes and results
to be materially different from those expressed in any
forward-looking statements.
These factors, risks and uncertainties include, but are not limited
to, our high degree of leverage and interest rate risk; our ability
to incur substantially more debt; operating and financial
restrictions in our debt agreements; our ability to generate cash
necessary to service our debt; weakened economic conditions and
volatile capital markets; potential liability related to disclosures
of relationships between physicians and our hospitals; post-payment
claims reviews by governmental agencies that could result in
additional costs to us; our ability to grow our business and
successfully implement our business strategies; our ability to
successfully integrate the acquisition of substantially all of the
assets of The Detroit Medical Center, Valley Baptist Health System
and future acquisitions or to recognize expected synergies from such
acquisitions; potential acquisitions could be costly, unsuccessful or
subject us to unexpected liabilities; conflicts of interest that may
arise as a result of our control by a small number of stockholders;
the highly competitive nature of the healthcare industry;
governmental regulation of the healthcare industry, including
potential reductions to Medicare and Medicaid reimbursement levels in
general and with respect to the impact of the Budget Control Act of
2011 and other future deficit reduction plans; pressures to contain
costs by managed care organizations and other insurers and our
ability to negotiate acceptable terms with these third party payers;
our ability to attract and retain qualified management and healthcare
professionals, including physicians and nurses; the currently unknown
effect on us of the major federal healthcare reforms enacted by
Congress in March 2010 or other potential additional federal or state
healthcare reforms; future governmental investigations; our inability
to adequately enhance our facilities with technologically advanced
equipment could adversely affect our revenues and market position;
the availability of capital to fund our corporate growth strategy and
improvements to our existing facilities; potential lawsuits or other
claims asserted against us; our ability to maintain or increase
patient membership and control costs of our managed healthcare plans;
changes in general economic conditions nationally and regionally in
the markets served by us; our exposure to the increased amounts of
and collection risks associated with uninsured accounts and the
co-pay and deductible portions of insured accounts; dependence on our
senior management team and local management personnel; volatility of
professional and general liability insurance for us and the
physicians who practice at our hospitals and increases in the
quantity and severity of professional liability claims; our ability
to achieve operating and financial targets and to maintain and
increase patient volumes and control the costs of providing services,
including salaries and benefits, supplies and other operating
expenses; increased compliance costs from further government
regulation of healthcare and our failure to comply, or allegations of
our failure to comply, with applicable laws and regulations; the
geographic concentration of our operations; technological and
pharmaceutical improvements that increase the cost of providing, or
reduce the demand for, healthcare services and shift demand for
inpatient services to outpatient settings; a failure of our
information systems would adversely impact our ability to manage our
operations; costs and compliance risks associated with Section 404 of
the Sarbanes-Oxley Act of 2002; material non-cash charges to earnings
from impairment of goodwill associated with declines in the fair
market values of our reporting units; volatility of materials and
labor costs for, or state efforts to regulate, potential construction
projects that may be necessary for future growth; changes in
accounting practices; our ability to demonstrate meaningful use of
certified electronic health record technology and to recognize
revenues for the related Medicare or Medicaid incentive payments; and
those factors, risks and uncertainties detailed in our filings from
time to time with the Securities and Exchange Commission, including,
among others, our Annual Reports on Form 10-K and Quarterly Reports
on Form 10-Q.
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 us that our
objectives and plans anticipated by the forward-looking statements
will occur or be achieved, or if any of them do, what impact they
will have on our results of operations and financial condition.
Except as required by law, we undertake no obligation to publicly
update or revise any forward-looking statements contained herein
whether as a result of new information, future events or otherwise.
We use our company web site to provide important information to
investors about the company, including the posting of important
announcements regarding financial performance and corporate
developments.
VANGUARD HEALTH SYSTEMS, INC.
Condensed Consolidated Statements of Operations (Unaudited)
(In millions, except share and per share amounts)
Quarter ended September 30,
-----------------------------------------
2010 2011
------------------- -------------------
Patient service revenues $ 693.3 80.4% $ 1,358.7 94.1%
Less: Provision for doubtful
accounts (51.8) (6.0) (126.2) (8.7)
--------- -------- --------- --------
Patient services revenues, net 641.5 74.4 1,232.5 85.4
Premium revenues 220.6 25.6 211.0 14.6
--------- -------- --------- --------
Total revenues 862.1 100.0 1,443.5 100.0
Costs and expenses:
Salaries and benefits
(includes stock compensation
of $1.2 and $0.7,
respectively) 354.8 41.2 665.0 46.1
Health plan claims expense 174.1 20.2 164.7 11.4
Supplies 121.0 14.0 213.6 14.8
Purchased services 51.0 5.9 127.0 8.8
Non-income taxes 16.2 1.9 34.5 2.4
Rents and leases 11.0 1.3 18.0 1.3
Other operating expenses 57.5 6.7 98.6 6.8
Depreciation and amortization 37.2 4.3 62.6 4.3
Interest, net 34.8 4.0 45.8 3.2
Acquisition related expenses 3.7 0.4 12.2 0.8
Debt extinguishment costs - - 38.9 2.7
Other 1.1 0.1 (2.4) (0.2)
--------- -------- --------- --------
Total costs and expenses 862.4 100.0 1,478.5 102.4
--------- -------- --------- --------
Loss from continuing operations
before income taxes (0.3) (0.0) (35.0) (2.4)
Income tax benefit 2.4 0.2 13.6 0.9
--------- -------- --------- --------
Income (loss) from continuing
operations 2.1 0.2 (21.4) (1.5)
Income (loss) from discontinued
operations, net of taxes 0.1 - (0.1) -
--------- -------- --------- --------
Net income (loss) 2.2 0.2 (21.5) (1.5)
Net loss (income) attributable
to non-controlling interests (1.0) (0.1) 2.3 0.2
--------- -------- --------- --------
Net income (loss) attributable
to Vanguard Health Systems,
Inc. stockholders $ 1.2 0.1% $ (19.2) (1.3)%
========= ======== ========= ========
Per share data:
Basic:
Continuing operations $ 0.03 $ (0.26)
Discontinued operations - -
--------- ---------
Net income (loss)
attributable to Vanguard
Health Systems, Inc.
stockholders $ 0.03 $ (0.26)
========= =========
Diluted:
Continuing operations $ 0.02 $ (0.26)
Discontinued operations - -
--------- ---------
Net income (loss)
attributable to Vanguard
Health Systems, Inc.
stockholders $ 0.02 $ (0.26)
========= =========
Weighted average shares
outstanding (in thousands):
Basic 44,635 74,854
========= =========
Diluted 48,603 74,854
========= =========
VANGUARD HEALTH SYSTEMS, INC.
Supplemental Financial Information (Unaudited)
Reconciliation of Adjusted EBITDA to Net Income (Loss) Attributable to
Vanguard Health Systems, Inc. Stockholders
(In millions)
Quarter ended September 30,
------------------------------
2010 2011
-------------- --------------
Net income (loss) attributable to Vanguard
Health Systems, Inc. stockholders $ 1.2 $ (19.2)
Interest, net 34.8 45.8
Income tax benefit (2.4) (13.6)
Depreciation and amortization 37.2 62.6
Non-controlling interests 1.0 (2.3)
Gain on disposal of assets - (1.2)
Equity method income (0.3) (0.1)
Stock compensation 1.2 0.7
Monitoring fees and expenses 1.4 -
Acquisition related expenses 3.7 12.2
Debt extinguishment costs - 38.9
Impairment and restructuring charges - (0.1)
Pension credits - (1.0)
Discontinued operations, net of taxes (0.1) 0.1
-------------- --------------
Adjusted EBITDA (1) $ 77.7 $ 122.8
============== ==============
______________
(1) Adjusted EBITDA is defined as income (loss) before interest expense
(net of interest income), income taxes, depreciation and amortization,
non-controlling interests, gain or loss on disposal of assets, equity
method income, stock compensation, monitoring fees and expenses,
realized gains or losses on investments, acquisition related expenses,
debt extinguishment costs, impairment and restructuring charges,
pension expense (credits) and discontinued operations, net of taxes.
Adjusted EBITDA is not intended as a substitute for net income (loss)
attributable to Vanguard Health Systems, Inc. stockholders, operating
cash flows or other cash flow data determined in accordance with
accounting principles generally accepted in the United States. Due to
varying methods of calculation, Adjusted EBITDA as presented may not be
comparable to similarly titled measures of other companies.
VANGUARD HEALTH SYSTEMS, INC.
Supplemental Financial Information (Unaudited) (Continued)
Reconciliation of Certain Projected Fiscal Year 2012 Information
(In millions, except share and per share amounts)
Low High
------------ -----------
Net income attributable to Vanguard Health
Systems, Inc. stockholders $ 24.0 $ 37.8
Interest, net 169.0 169.0
Income tax expense 14.1 24.2
Depreciation and amortization 259.0 260.0
Acquisition related expenses 12.3 12.3
Debt extinguishment costs 38.9 38.9
Other 2.7 2.8
------------ ------------
Adjusted EBITDA (1) $ 520.0 $ 545.0
============ ============
Low High
------------ -----------
Net income attributable to Vanguard Health
Systems, Inc. stockholders $ 24.0 $ 37.8
Debt extinguishment costs, net of taxes 24.5 23.8
Acquisition related expenses, net of taxes 7.8 7.5
------------ ------------
Net income attributable to Vanguard Health
Systems, Inc. stockholders, excluding debt
extinguishment costs and acquisition related
expenses $ 56.3 $ 69.1
============ ===========
Net income attributable to Vanguard Health
Systems, Inc. stockholders, excluding debt
extinguishment costs and acquisition related
expenses $ 56.3 $ 69.1
Diluted weighted average shares outstanding (in
thousands) 79,000 80,000
------------ ------------
Diluted earnings per share attributable to
Vanguard Health Systems Inc. stockholders,
excluding debt extinguishment costs and
acquisition related expenses $ 0.71 $ 0.86
============ ============
______________
(1) Adjusted EBITDA is defined as income (loss) before interest expense
(net of interest income), income taxes, depreciation and amortization,
non-controlling interests, gain or loss on disposal of assets, equity
method income, stock compensation, monitoring fees and expenses,
realized gains or losses on investments, acquisition related expenses,
debt extinguishment costs, impairment and restructuring charges,
pension expense (credits) and discontinued operations, net of taxes.
Adjusted EBITDA is not intended as a substitute for net income (loss)
attributable to Vanguard Health Systems, Inc. stockholders, operating
cash flows or other cash flow data determined in accordance with
accounting principles generally accepted in the United States. Due to
varying methods of calculation, Adjusted EBITDA as presented may not be
comparable to similarly titled measures of other companies.
VANGUARD HEALTH SYSTEMS, INC.
Condensed Consolidated Balance Sheets
(In millions)
Recasted (Unaudited)
June 30, September 30,
ASSETS 2011 2011
-------------- --------------
Current assets:
Cash and cash equivalents $ 936.6 $ 154.7
Restricted cash 2.3 2.4
Accounts receivable, net of allowance for
doubtful accounts of approximately $205.0
and $251.2 at June 30, 2011 and September
30, 2011, respectively 484.4 563.6
Inventories 83.9 91.9
Deferred tax assets 91.1 86.5
Prepaid expenses and other current assets 157.9 240.4
-------------- --------------
Total current assets 1,756.2 1,139.5
Property, plant and equipment, net of
accumulated depreciation 1,830.5 2,020.6
Goodwill 755.6 756.1
Intangible assets, net of accumulated
amortization 94.0 83.8
Deferred tax assets, noncurrent 27.5 47.9
Investments in securities 63.3 58.4
Other assets 65.8 72.5
-------------- --------------
Total assets $ 4,592.9 $ 4,178.8
============== ==============
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable $ 314.3 $ 313.7
Accrued salaries and benefits 248.9 218.7
Accrued health plan claims and settlements 114.9 119.5
Accrued interest 62.3 31.1
Other accrued expenses and current
liabilities 218.3 177.0
Current maturities of long-term debt 461.8 13.9
-------------- --------------
Total current liabilities 1,420.5 873.9
Professional and general liability and
workers compensation reserves 289.7 299.7
Pension benefit obligation 188.0 176.7
Other liabilities 125.8 160.4
Long-term debt, less current maturities 2,325.8 2,332.3
Commitments and contingencies
Redeemable non-controlling interests - 51.4
Equity:
Vanguard Health Systems, Inc.
stockholders' equity:
Common stock 0.7 0.8
Additional paid-in capital 330.5 396.3
Accumulated other comprehensive income 20.6 18.8
Retained deficit (116.8) (136.0)
-------------- --------------
Total Vanguard Health Systems, Inc.
stockholders' equity 235.0 279.9
Non-controlling interests 8.1 4.5
-------------- --------------
Total equity 243.1 284.4
-------------- --------------
Total liabilities and equity $ 4,592.9 $ 4,178.8
============== ==============
VANGUARD HEALTH SYSTEMS, INC.
Condensed Consolidated Statements of Cash Flows (Unaudited)
(In millions)
Quarter ended September 30,
------------------------------
2010 2011
-------------- --------------
Operating activities:
Net income (loss) $ 2.2 $ (21.5)
Adjustments to reconcile net income (loss)
to net cash provided by (used in) operating
activities:
Loss (income) from discontinued operations (0.1) 0.1
Depreciation and amortization 37.2 62.6
Amortization of loan costs and accretion
of principal on notes 1.9 5.7
Stock compensation 1.2 0.7
Gain on disposal of assets - (1.2)
Deferred income taxes (3.1) (14.5)
Acquisition related expenses 3.7 12.2
Debt extinguishment costs - 38.9
Impairment and restructuring charges - (0.1)
Changes in working capital, net of the
impact of acquisitions 57.1 (170.6)
-------------- --------------
Net cash provided by (used in) operating
activities - continuing operations 100.1 (87.7)
Net cash provided by (used in) operating
activities - discontinued operations 0.1 (0.1)
-------------- --------------
Net cash provided by (used in) operating
activities 100.2 (87.8)
Investing activities:
Acquisitions and related expenses (49.5) (210.1)
Capital expenditures (44.6) (63.4)
Proceeds from asset dispositions - 2.2
Proceeds from sales of investments - 22.7
Purchases of investments - (21.0)
Other 0.1 -
-------------- --------------
Net cash used in investing activities (94.0) (269.6)
Financing activities:
Payments of long-term debt and capital
leases (2.0) (456.5)
Proceeds from the issuance of stock - 67.5
Proceeds from the issuance of debt 216.6 -
Payments of refinancing costs and fees (5.5) -
Payments of tender premiums and note
redemption costs - (27.6)
Payments of IPO related costs - (6.9)
Distributions paid to non-controlling
interests and other (1.1) (1.0)
-------------- --------------
Net cash provided by (used in) financing
activities 208.0 (424.5)
-------------- --------------
Net increase (decrease) in cash and cash
equivalents 214.2 (781.9)
Cash and cash equivalents, beginning of year 257.6 936.6
-------------- --------------
Cash and cash equivalents, end of year $ 471.8 $ 154.7
============== ==============
Net cash paid for interest $ 48.4 $ 70.8
============== ==============
Net cash paid (received) for income taxes $ (0.5) $ 0.3
============== ==============
VANGUARD HEALTH SYSTEMS, INC.
Segment Information (Unaudited)
(In millions)
Quarter ended September 30, 2010
------------------------------------------------------------
Acute
Care % of Health % of Elimina Consoli
Services Revenues Plans Revenues tions dated
--------- --------- -------- --------- ------- -------
Patient service
revenues(1) $ 704.1 107.9% $ - -% $ (10.8) $ 693.3
Less: Provision
for doubtful
accounts (51.8) (7.9) - - - (51.8)
---------- -------- -------- --------- ------- -------
Patient service
revenues, net 652.3 100.0 - - (10.8) 641.5
Premium
revenues - - 220.6 100.0 - 220.6
---------- -------- -------- --------- ------- -------
Total
revenues 652.3 100.0 220.6 100.0 (10.8) 862.1
Salaries and
benefits
(excludes
stock
compensation) 345.4 53.0 8.2 3.7 - 353.6
Health plan
claims
expense(1) - - 184.9 83.8 (10.8) 174.1
Supplies 121.0 18.5 - - - 121.0
Other operating
expenses 125.2 19.2 10.5 4.8 - 135.7
---------- -------- ---------- --------- ------- -------
Total
operating
expenses 591.6 90.7 203.6 92.3 (10.8) 784.4
---------- -------- ---------- --------- ------- -------
Segment
EBITDA(2) 60.7 9.3 17.0 7.7 - 77.7
Less:
Interest, net 35.1 5.4 (0.3) (0.1) - 34.8
Depreciation
and
amortization 36.1 5.5 1.1 0.5 - 37.2
Equity method
income (0.3) (0.0) - - - (0.3)
Stock
compensation 1.2 0.2 - - - 1.2
Monitoring
fees and
expenses 1.4 0.2 - - - 1.4
Acquisition
related
expenses 3.7 0.5 - - - 3.7
--------- --------- -------- --------- ------- -------
Income (loss)
from
continuing
operations
before income
taxes $ (16.5) (2.5)% $ 16.2 7.3% $ - $ (0.3)
========= ========= ======== ========= ======= =======
______________
(1) Vanguard eliminates in consolidation those patient service revenues
earned by its healthcare facilities attributable to services provided
to enrollees in its owned health plans and eliminates the corresponding
medical claims expenses incurred by the health plans for those
services.
(2) Segment EBITDA is defined as income (loss) from continuing operations
before income taxes less interest expense (net of interest income),
depreciation and amortization, equity method income, stock
compensation, gain or loss on disposal of assets, realized gains or
losses on investments, monitoring fees and expenses, acquisition
related expenses, debt extinguishment costs, impairment and
restructuring charges and pension expense (credits). Management uses
Segment EBITDA to measure performance for Our segments and develop
strategic objectives and operating plans for those segments. Segment
EBITDA eliminates the uneven effect of non-cash depreciation of
tangible assets and amortization of intangible assets, much of which
results from acquisitions accounted for under the purchase method of
accounting. Segment EBITDA also eliminates the effects of changes in
interest rates which management believes relate to general trends in
global capital markets, but are not necessarily indicative of the
operating performance of Our segments. Management believes that Segment
EBITDA provides useful information about the financial performance of
Our segments to investors, lenders, financial analysts and rating
agencies. Additionally, management believes that investors and lenders
view Segment EBITDA as an important factor in making investment
decisions concerning Vanguard. Segment EBITDA is not a substitute for
net income (loss), operating cash flows or other cash flow statement
data determined in accordance with accounting principles generally
accepted in the United States. Segment EBITDA, as presented, may not be
comparable to similar measures of other companies.
VANGUARD HEALTH SYSTEMS, INC.
Segment Information (Unaudited) (Continued)
(In millions)
Quarter ended September 30, 2011
-----------------------------------------------------------
Acute
Care % of Health % of Eliminat Consolid
Services Revenues Plans Revenues ions ated
-------- -------- -------- -------- -------- --------
Patient service
revenues(1) $1,367.3 110.2% $ - -% $ (8.6) $1,358.7
Less: Provision
for doubtful
accounts (126.2) (10.2) - - - (126.2)
-------- -------- -------- -------- -------- --------
Patient service
revenues, net 1,241.1 100.0 - - (8.6) 1,232.5
Premium
revenues - - 211.0 100.0 - 211.0
-------- -------- -------- -------- -------- --------
Total
revenues 1,241.1 100.0 211.0 100.0 (8.6) 1,443.5
Salaries and
benefits
(excludes
stock
compensation) 655.2 52.8 9.1 4.3 - 664.3
Health plan
claims
expense(1) - - 173.3 82.1 (8.6) 164.7
Supplies 213.6 17.2 - - - 213.6
Other operating
expenses 267.4 21.5 10.7 5.1 - 278.1
-------- -------- -------- -------- -------- --------
Total
operating
expenses 1,136.2 91.5 193.1 91.5 (8.6) 1,320.7
-------- -------- -------- -------- -------- --------
Segment
EBITDA(2) 104.9 8.5 17.9 8.5 - 122.8
Less:
Interest, net 46.1 3.7 (0.3) (0.1) - 45.8
Depreciation
and
amortization 61.4 5.0 1.2 0.6 - 62.6
Gain on
disposal of
assets (1.2) (0.1) - - - (1.2)
Equity method
income (0.1) (0.0) - - - (0.1)
Stock
compensation 0.7 0.1 - - - 0.7
Acquisition
related
expenses 12.2 1.0 - - - 12.2
Debt
extinguishment
costs 38.9 3.1 - - - 38.9
Impairment
and
restructuring
charges (0.1) (0.0) - - - (0.1)
Pension
credits (1.0) (0.1) - - - (1.0)
------- -------- ------- -------- ------- -------
Income (loss)
from
continuing
operations
before income
taxes $ (52.0) (4.2)% $ 17.0 8.0% $ - $ (35.0)
======== ======== ======== ======== ======== ========
______________
(1) Vanguard eliminates in consolidation those patient service revenues
earned by its healthcare facilities attributable to services provided
to enrollees in its owned health plans and eliminates the corresponding
medical claims expenses incurred by the health plans for those
services.
(2) Segment EBITDA is defined as income (loss) from continuing operations
before income taxes less interest expense (net of interest income),
depreciation and amortization, equity method income, stock
compensation, gain or loss on disposal of assets, realized gains or
losses on investments, monitoring fees and expenses, acquisition
related expenses, debt extinguishment costs, impairment and
restructuring charges and pension expense (credits). Management uses
Segment EBITDA to measure performance for Our segments and develop
strategic objectives and operating plans for those segments. Segment
EBITDA eliminates the uneven effect of non-cash depreciation of
tangible assets and amortization of intangible assets, much of which
results from acquisitions accounted for under the purchase method of
accounting. Segment EBITDA also eliminates the effects of changes in
interest rates which management believes relate to general trends in
global capital markets, but are not necessarily indicative of the
operating performance of Our segments. Management believes that Segment
EBITDA provides useful information about the financial performance of
Our segments to investors, lenders, financial analysts and rating
agencies. Additionally, management believes that investors and lenders
view Segment EBITDA as an important factor in making investment
decisions concerning Vanguard. Segment EBITDA is not a substitute for
net income (loss), operating cash flows or other cash flow statement
data determined in accordance with accounting principles generally
accepted in the United States. Segment EBITDA, as presented, may not be
comparable to similar measures of other companies.
VANGUARD HEALTH SYSTEMS, INC.
Selected Operating Statistics
(Unaudited)
Quarter ended
CONSOLIDATED: September 30,
------------------------
2010 2011 % Change
----------- ----------- ----------
Number of hospitals at end of period 17 28
Licensed beds at end of period 4,490 7,064
Discharges 44,977 68,161 51.5%
Adjusted discharges 80,858 125,320 55.0
Average length of stay 4.15 4.34 4.6
Patient days 186,448 296,079 58.8
Adjusted patient days 335,188 544,366 62.4
Net patient revenue per adjusted
discharge $ 7,747 $ 9,337 20.5
Inpatient surgeries 9,757 16,077 64.8
Outpatient surgeries 19,403 29,976 54.5
Emergency room visits 173,165 292,778 69.1%
Uncompensated care as a percentage of
net patient revenues
(prior to these uncompensated care
deductions) 16.2% 17.5%
Net patient revenue payer mix (1):
Medicare 27.3% 26.6%
Medicaid 7.8 14.7
Managed Medicare 15.8 10.2
Managed Medicaid 10.5 10.6
Managed care 37.1 35.1
Commercial 1.1 1.4
Self pay 0.4 1.4
----------- -----------
Total 100.0% 100.0%
=========== ===========
______________
(1) Net patient revenue payer mix as presented includes the impact of the
reclassification of the provision for doubtful accounts to a revenue
deduction instead of an operating expense.
Discharges by payer:
Medicare 27.7% 28.3%
Medicaid 10.2 10.4
Managed Medicare 15.2 12.3
Managed Medicaid 14.9 17.8
Managed care 25.9 23.2
Commercial 0.4 0.5
Self pay 5.7 7.5
----------- -----------
Total 100.0% 100.0%
=========== ===========
VANGUARD HEALTH SYSTEMS, INC.
Selected Operating Statistics
(Unaudited) (Continued)
Quarter ended
SAME HOSPITAL: September 30,
------------------------
2010 2011 % Change
----------- ----------- ----------
Number of hospitals at end of period 15 15
Licensed beds at end of period 4,032 3,947
Total revenues (including health plan
revenues) (in millions) $ 819.7 $ 820.1 0.1%
Net patient service revenues (in
millions) $ 599.1 $ 609.1 1.7
Discharges 42,005 41,565 (1.0)
Adjusted discharges 75,592 77,232 2.2
Average length of stay 4.12 4.02 (2.4)
Patient days 172,976 167,014 (3.4)
Adjusted patient days 311,288 310,328 (0.3)
Net patient revenue per adjusted
discharge $ 7,757 $ 7,709 (0.6)
Inpatient surgeries 9,128 9,015 (1.2)
Outpatient surgeries 18,343 17,762 (3.2)
Emergency room visits 160,880 169,992 5.7%
Uncompensated care as a percentage of
net patient revenues
(prior to these uncompensated care
deductions) 16.0% 20.5%
Net patient revenue payer mix (1):
Medicare 26.2% 25.5%
Medicaid 7.8 7.2
Managed Medicare 16.1 16.3
Managed Medicaid 10.5 9.6
Managed care 38.3 39.9
Commercial 1.0 1.3
Self pay 0.1 0.2
----------- -----------
Total 100.0% 100.0%
=========== ===========
______________
(1) Net patient revenue payer mix as presented includes the impact of the
reclassification of the provision for doubtful accounts to a revenue
deduction instead of an operating expense.
Discharges by payer:
Medicare 27.3% 26.3%
Medicaid 8.8 8.2
Managed Medicare 16.0 17.2
Managed Medicaid 15.7 15.4
Managed care 26.3 25.9
Commercial 0.4 0.5
Self pay 5.5 6.5
----------- -----------
Total 100.0% 100.0%
=========== ===========
Contact:
Vanguard Health Systems, Inc.
Gary Willis
Senior Vice President and Chief Accounting Officer
(615) 665-6098
SOURCE: Vanguard Health Systems, Inc.
|
Vanguard Health Systems, Inc.
