Community Health Systems, Inc. Announces First Quarter 2006 Results with Net Operating Revenues up 13%.BRENTWOOD Brentwood, city and district, England Brentwood, city (1991 pop. 51,212) and district, Essex, SE England. Brentwood is mainly residential but produces some agricultural equipment, film, and prefabricated concrete. , Tenn. -- Community Health Systems, Inc. (NYSE NYSE See: New York Stock Exchange :CYH CYH Check Your Head (youth driven organization in Canada) CYH Consider Yourself Hugged ) today announced financial and operating results for the first quarter ended March 31, 2006. Net operating revenues operating revenue Revenue from any regular source. Revenue from sales is adjusted for discounts and returns when calculating operating revenue. Compare other revenue. for the quarter ended March 31, 2006, totaled $1.027 billion, a 13.0% increase compared with $908.3 million for the same period last year. Income from continuing operations continuing operations Parts of a business that are expected to be maintained as an ongoing segment of an overall business operation. Income and losses from continuing operations are reported separately if any segments have been discontinued during the increased 16.7% to $57.3 million, or $0.58 per share (diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. ), on 98.2 million weighted average shares outstanding for the quarter ended March 31, 2006, compared with $49.1 million, or $0.52 per share (diluted), on 98.1 million weighted average shares outstanding for the same period last year. Net income increased to $54.0 million, or $0.55 per share (diluted), for the quarter ended March 31, 2006, compared with $36.0 million, or $0.39 per share (diluted), for the same period last year. Loss on discontinued operations Discontinued operations Divisions of a business that have been sold or written off and that no longer are maintained by the business. for the quarter ended March 31, 2006, consists of an after-tax af·ter-tax also af·ter·tax adj. Relating to or being that which remains after payment, especially of income taxes: after-tax profits. loss of approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $3.2 million, or $0.03 per share (diluted), related primarily to the sale of one hospital in March of 2006, which was designated as being held for sale at December December: see month. 31, 2005. The first quarter 2006 results include additional compensation expense of $3.2 million, or $0.02 per diluted share, resulting from stock-based compensation calculated under SFAS SFAS Statement of Financial Accounting Standards SFAS Special Forces Assessment and Selection SFAS Student Financial Aid Services SFAS Sport Fishing Association of Singapore SFAS Safety Features Actuation System SFAS Statewide Fixed Assets System No. 123(R), "Share-Based Payment". Adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become for the first quarter of 2006 was $158.5 million, compared with $143.8 million for the same period last year, representing a 10.2% increase. Adjusted EBITDA is EBITDA adjusted to exclude discontinued operations and minority interest in earnings. The Company uses adjusted EBITDA as a measure of liquidity. Net cash provided by operating activities for the first quarter of 2006 was $90.8 million, compared with $148.7 million for the same period last year. The consolidated con·sol·i·date v. con·sol·i·dat·ed, con·sol·i·dat·ing, con·sol·i·dates v.tr. 1. To unite into one system or whole; combine: financial results for the quarter ended March 31, 2006, reflect a 4.6% increase in total admissions compared with the same period last year. This increase is primarily attributable attributable emanating from or pertaining to attribute. attributable proportion see attributable risk (below). attributable risk to hospitals acquired during 2006 and 2005. On a same-store basis, admissions decreased 2.4% and adjusted admissions decreased 0.9%, compared with the same period last year. The absence of a flu season
res·pi·ra·to·ry adj. Of, relating to, used in, or affecting respiration. - related volume contributed to these decreases compared to a strong season last year. On a same-store basis, net operating revenues increased 6.8%, compared with the same period last year. Commenting on the results, Wayne Wayne, city (1990 pop. 19,899), Wayne co., SE Mich., a suburb of Detroit, on the Lower Rouge River; inc. as a village 1869, and with surrounding areas as a city 1960. It has automobile and aircraft industries and other varied manufactures. T. Smith, chairman, president and chief executive officer of Community Health Systems, Inc. stated, "The first quarter marks a very strong start to 2006. For the first time in Community Health Systems' operating history, the Company exceeded $1 billion in quarterly revenues. In addition to our impressive top-line growth, we have compiled an enviable en·vi·a·ble adj. So desirable as to arouse envy: "the enviable English quality of being able to be mute without unrest" Henry James. track record of consistently meeting our earnings targets. Our continued profitability and operating execution reflects our ability to leverage our proven centralized cen·tral·ize v. cen·tral·ized, cen·tral·iz·ing, cen·tral·iz·es v.tr. 1. To draw into or toward a center; consolidate. 2. and standardized standardized pertaining to data that have been submitted to standardization procedures. standardized morbidity rate see morbidity rate. standardized mortality rate see mortality rate. operating platform in our hospitals." On March 1, 2006, the Company completed the acquisition of Forrest City Forrest City, city (1990 pop. 13,364), seat of St. Francis co., E central Ark., at the foot of Crowley's Ridge; inc. 1871. It is a rail and trade center in an agricultural (cotton, rice, vegetables, peaches) area. There is also diversified manufacturing. Hospital, a 118 bed acute care hospital located in Forrest City, Arkansas Forrest City is a city in St. Francis County, Arkansas, United States. It was named as a result of General Nathan Bedford Forrest using the location as a campsite for a construction crew soon after the Civil War. . The Company is the sole provider of acute care hospital services in the Forrest City, Arkansas, market. On April 1, 2006, the Company completed the acquisition of two hospitals from the Baptist Baptist Member of a group of Protestant Christians who hold that only adult believers should be baptized and that it must be done by immersion. During the 17th century two groups of Baptists emerged in England: General Baptists, who held that Christ's atonement applied to Health System, Birmingham, Alabama Birmingham (pronounced [ˈbɝmɪŋˌhæm]) is the largest city in the U.S. state of Alabama and is the county seat of Jefferson County. : Baptist Medical Center - DeKalb DeKalb (dēkălb), city (1990 pop. 34,925), DeKalb co., N Ill., in a farm area; inc. 1861. The city is a distribution center with manufactures that include plastics, electrical equipment, and agricultural silos. (134 beds) located in Fort Payne, Alabama Fort Payne is a city in DeKalb County, Alabama, United States. At the 2000 census the population was 12,938. The city is the county seat of DeKalb County. It is home to the band Alabama, and bills itself as the "Official Sock Capital of the World. and Baptist Medical Center - Cherokee Cherokee, Native American language Cherokee, language belonging to the Iroquoian branch of the Hokan-Siouan linguistic family. See Native American languages. (60 beds) located in Centre, Alabama Centre is a city in Cherokee County, Alabama, United States. At the 2000 census the population was 3,216. The city is the county seat of Cherokee County. Geography Centre is located at 34°9'33.052" North, 85°40'29.071" West (34.159181, -85. . Each hospital is the sole provider of hospital services in its community. "Our acquisition pace has continued to be strong and steady through the first quarter of this year," Smith added. "More importantly, with the definitive agreements we have pending and other active opportunities in our pipeline, the market looks very favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. for 2006. Our track record demonstrates that we are well positioned to make the most of these opportunities. We are very pleased with these trends in our business as we continue to build our portfolio of hospitals and extend our business model to more communities. We look forward to another successful year for Community Health Systems." Included on pages 9, 10 and 11 of this press release is a table setting forth selected information concerning the consolidated results of the Company for the year ended December 31, 2005, and updated projected consolidated operating results of the Company for the year ending December 31, 2006. Located in the Nashville, Tennessee “Nashville” redirects here. For other uses, see Nashville (disambiguation). Nashville is the capital and the second most populous city of the U.S. state of Tennessee, after Memphis. , suburb suburb, a community in an outlying section of a city or, more commonly, a nearby, politically separate municipality with social and economic ties to the central city. In the 20th cent. of Brentwood, Community Health Systems, Inc. is a leading operator of general acute care hospitals in non-urban communities throughout the country. Through its subsidiaries, the Company currently owns, leases or operates 73 hospitals in 21 states. Its hospitals offer a broad range of inpatient inpatient /in·pa·tient/ (in´pa-shent) a patient who comes to a hospital or other health care facility for diagnosis or treatment that requires an overnight stay. in·pa·tient n. medical and surgical services, outpatient outpatient /out·pa·tient/ (-pa-shent) a patient who comes to the hospital, clinic, or dispensary for diagnosis and/or treatment but does not occupy a bed. out·pa·tient n. treatment and skilled nursing care. Shares in Community Health Systems, Inc. are traded on the New York Stock Exchange New York Stock Exchange (NYSE) World's largest marketplace for securities. The exchange began as an informal meeting of 24 men in 1792 on what is now Wall Street in New York City. under the symbol "CYH". Community Health Systems, Inc. will hold a conference call to discuss this press release on Thursday Thursday: see week. , April 27, 2006, at 10:30 a.m. Central, 11:30 a.m. Eastern. Investors will have the opportunity to listen to a live Internet Internet Publicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the broadcast of the conference call by clicking on the Investor Relations Investor relations The process by which the corporation communicates with its investors. link of the Company's website at www.chs.net, or at www.earnings.com. To listen to the live call, please go to the website at least fifteen minutes early to register, download To receive a file transmitted over a network. In any communications session, "download" means receive, and "upload" means send. The download/upload often implies a big/little scenario, in which data is being downloaded from the "big" server into the "little" user's computer. , and install any necessary audio software. For those who cannot listen to the live broadcast, a replay will be available shortly after the call and continue through May 27, 2006. A copy of the Company's Form 8-K Form 8-K The form required by the SEC when a publicly held company incurs any event that might affect its financial situation or the share value of its stock. Form 8-K See 8-K. (including this press release) and conference call slide show will also be available on the Company's website at www.chs.net. Statements contained in this news release regarding expected operating results, acquisition transactions and other events are forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. that involve risk and uncertainties. Actual future events or results may differ materially from these statements. Readers are referred to the documents filed by Community Health Systems, Inc. with the Securities and Exchange Commission, including the Company's annual report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. and, current reports on Form 8-K. These filings identify important risk factors and other uncertainties that could cause actual results to differ from those contained in the forward-looking statements. The Company undertakes no obligation to revise or update any forward-looking statements, or to make any other forward-looking statements, whether as a result of new information, future events or otherwise.
COMMUNITY HEALTH SYSTEMS, INC.
Financial Highlights
(Unaudited)
(In thousands, except per share amounts)
Three Months Ended
March 31,
-------------------------
2006 2005(a)
----------- -----------
Net operating revenues $1,026,562 $ 908,263
Adjusted EBITDA(e) $ 158,458 $ 143,782
Income from continuing operations $ 57,254 $ 49,079
Net income $ 54,038 $ 35,988
Income from continuing operations
per share-basic $ 0.59 $ 0.56
Income from continuing operations
per share-diluted $ 0.58(b) $ 0.52(c)
Net income per share - basic $ 0.56 $ 0.41
Net income per share - diluted $ 0.55 $ 0.39(c)
Weighted average number of shares
outstanding - basic 96,552 87,926
Weighted average number of shares
outstanding - diluted 98,209(d) 98,087(d)
Net cash provided by operating activities $ 90,814 $ 148,709
(a) Pursuant to Statement of Financial Accounting Standards ("SFAS")
No. 144, the Company has restated the first quarter 2005 financial
statements and statistical results to reflect the reclassification
as discontinued operations of one hospital designated as being
held-for-sale during the second quarter of 2005, which was
subsequently sold in March of 2006. Four hospitals were previously
classified as discontinued operations in 2005.
(b) Includes additional compensation expense of $0.02 per share
(diluted) resulting from stock-based compensation calculated under
SFAS No. 123(R) "Share-Based Payment". The Company adopted SFAS
No. 123(R) beginning January 1, 2006, using the modified
prospective application transition method.
(c) For purposes of calculating earnings per share for the quarter
ended March 31, 2005, the convertible notes are dilutive and
accordingly after tax interest expense of $2.2 million per quarter
is excluded from the calculation of earnings and 8.6 million
shares are added to the number of shares outstanding to calculate
fully diluted earnings per share.
(d) Adjusted to include assumed exercise of employee stock options and
assumed conversion of convertible notes. As of March 31, 2006, all
of the convertible notes have been redeemed. 8,569,593 shares of
common stock of the Company were issued upon conversion of the
outstanding notes and $0.4 million of the notes were redeemed in
exchange for cash. There was no impact on earnings per share
(diluted) as a result of this conversion since weighted average
number of shares outstanding-diluted for the three months ended
March 31, 2005 included the shares issuable upon conversion of the
convertible notes.
(e) EBITDA consists of income before interest, income taxes, and
depreciation and amortization. Adjusted EBITDA is EBITDA adjusted
to exclude discontinued operations and minority interest in
earnings. The Company has from time to time sold minority
interests in certain of its subsidiaries or acquired subsidiaries
with existing minority interest ownership positions. The Company
believes that it is useful to present adjusted EBITDA because it
excludes the portion of EBITDA attributable to these third party
interests and clarifies for investors the Company's portion of
EBITDA generated by continuing operations. The Company uses
adjusted EBITDA as a measure of liquidity. The Company has
included this measure because it believes it provides investors
with additional information about the Company's ability to incur
and service debt and make capital expenditures. Adjusted EBITDA is
the basis for a key component in the determination of the
Company's compliance with some of the covenants under the
Company's senior secured credit facility, as well as to determine
the interest rate and commitment fee payable under the senior
secured credit facility.
Adjusted EBITDA is not a measurement of financial performance or
liquidity under generally accepted accounting principles. It
should not be considered in isolation or as a substitute for net
income, operating income, cash flows from operating, investing or
financing activities, or any other measure calculated in
accordance with generally accepted accounting principles. The
items excluded from adjusted EBITDA are significant components in
understanding and evaluating financial performance and liquidity.
This calculation of adjusted EBITDA may not be comparable to
similarly titled measures reported by other companies.
The following table reconciles adjusted EBITDA, as defined, to net
cash provided by operating activities as derived directly from the
consolidated financial statements for the three months ended March
31, 2006 and 2005 (in thousands):
Three Months Ended
March 31,
------------------
2006 2005
-------- --------
Adjusted EBITDA $158,458 $143,782
Interest expense, net (21,787) (22,781)
Provision for income taxes (36,298) (31,238)
Loss from operations of hospitals sold and
lease termination, net of taxes (657) (5,473)
Depreciation and amortization of
discontinued operations - 1,340
Other non-cash expenses, net (1,299) 25
Net changes in operating assets and liabilities,
net of effects of acquisitions (7,603) 63,054
-------- --------
Net cash provided by operating activities $ 90,814 $148,709
======== ========
COMMUNITY HEALTH SYSTEMS, INC.
Condensed Consolidated Statements of Income
(Unaudited)
(In thousands, except per share amounts)
Three Months Ended
March 31,
----------------------
2006 2005
---------- ----------
Net operating revenues $1,026,562 $ 908,263
---------- ----------
Operating expenses:
Salaries and benefits 407,668 360,233
Provision for bad debts 107,591 93,051
Supplies 122,820 112,656
Other operating expenses 207,043 178,064
Rent 22,982 20,477
Depreciation and amortization 42,506 39,797
Minority interests in earnings 613 887
---------- ----------
Total expenses 911,223 805,165
---------- ----------
Income from operations 115,339 103,098
Interest expense, net 21,787 22,781
---------- ----------
Income from continuing operations
before income taxes 93,552 80,317
Provision for income taxes 36,298 31,238
---------- ----------
Income from continuing operations 57,254 49,079
---------- ----------
Discontinued operations, net of taxes;
Loss from operations (657) (5,473)
Loss on sale of hospitals (2,559) (7,618)
---------- ----------
Loss on discontinued operations (3,216) (13,091)
---------- ----------
Net income $ 54,038 $ 35,988
========== ==========
Income from continuing operations per share-
basic $ 0.59 $ 0.56
========== ==========
Income from continuing operations per share-
diluted $ 0.58 $ 0.52
========== ==========
Net income per share - basic $ 0.56 $ 0.41
========== ==========
Net income per share - diluted $ 0.55 $ 0.39
========== ==========
Weighted average number of shares
outstanding:
Basic 96,552 87,926
---------- ----------
Diluted 98,209 98,087
---------- ----------
Net Income per share calculation:
Net income $ 54,038 $ 35,988
Add - Convertible notes interest, net of taxes 135 2,189
---------- ----------
Adjusted net income $ 54,173 $ 38,177
========== ==========
Weighted average number of shares
outstanding - basic 96,552 87,926
Add effect of dilutive securities:
Stock awards 1,068 1,579
Convertible notes 589 8,582
---------- ----------
Weighted average number of shares
outstanding - diluted 98,209 98,087
========== ==========
COMMUNITY HEALTH SYSTEMS, INC.
Selected Operating Data
(Unaudited)
($ in thousands)
For the Three Months Ended
March 31,
--------------------------------
Consolidated
--------------------------------
2006 2005 % Change
----------- --------- ----------
Number of hospitals (at end of
period) 71 67
Licensed beds (at end of period) 8,074 7,580
Beds in service (at end of period) 6,528 6,175
Admissions 78,966 75,490 4.6%
Adjusted admissions 143,168 134,513 6.4%
Patient days 333,249 319,499 4.3%
Average length of stay (days) 4.2 4.2
Occupancy rate (average beds in
service) 57.0% 58.7%
Net operating revenues $ 1,026,562 $908,263 13.0%
Net inpatient revenue as a % of total
net operating revenues 50.9% 51.9%
Net outpatient revenue as a % of
total net operating revenues 47.8% 47.0%
Income from operations $ 115,339 $103,098 11.9%
Income from operations as a % of net
operating revenues 11.2% 11.4%
Depreciation and amortization $ 42,506 $ 39,797
Minority interest in earnings $ 613 $ 887
Liquidity Data:
Adjusted EBITDA $ 158,458 $143,782 10.2%
Adjusted EBITDA as a % of net
operating revenues 15.4% 15.8%
Net cash provided by operating
activities $ 90,814 $148,709
Net cash provided by operating
activities as a % of net operating
revenue 8.8% 16.4%
For the Three Months Ended
March 31,
--------------------------------
Same-Store
--------------------------------
2006 2005 % Change
----------- --------- ----------
Number of hospitals (at end of
period) 67 67
Licensed beds (at end of period) 7,509 7,580
Beds in service (at end of period) 6,183 6,175
Admissions 73,703 75,490 -2.4%
Adjusted admissions 133,266 134,513 -0.9%
Patient days 310,266 319,499 -2.9%
Average length of stay (days) 4.2 4.2
Occupancy rate (average beds in
service) 56.9% 58.7%
Net operating revenues $ 970,036 $908,153 6.8%
Net inpatient revenue as a % of total
net operating revenues 50.9% 51.9%
Net outpatient revenue as a % of
total net operating revenues 47.8% 47.0%
Income from operations $ 114,810 $103,302 11.1%
Income from operations as a % of net
operating revenues 11.8% 11.4%
Depreciation and amortization $ 40,344 $ 39,628
Minority interest in earnings $ 958 $ 887
Liquidity Data:
Adjusted EBITDA
Adjusted EBITDA as a % of net
operating revenues
Net cash provided by operating
activities
Net cash provided by operating
activities as a % of net operating
revenue
-----
Continuing operating results and statistical data exclude discontinued
operations for all periods presented.
COMMUNITY HEALTH SYSTEMS, INC.
Condensed Consolidated Balance Sheets
(Unaudited)
(in thousands)
March 31, December 31,
2006 2005
----------- -----------
ASSETS
Current assets
Cash and cash equivalents $ 111,951 $ 104,108
Patient accounts receivable, net of
allowance for doubtful accounts of
$340,847 and $346,024 at March 31, 2006
and December 31, 2005, respectively 699,067 656,029
Supplies 94,864 95,200
Deferred income taxes 4,128 4,128
Prepaid expenses and taxes 32,445 33,377
Other current assets 53,455 36,494
----------- -----------
Total current assets 995,910 929,336
----------- -----------
Property and equipment 2,175,228 2,128,639
Less accumulated depreciation and
amortization (547,770) (517,648)
----------- -----------
Property and equipment, net 1,627,458 1,610,991
----------- -----------
Goodwill 1,267,557 1,259,816
----------- -----------
Other assets, net 158,364 149,202
----------- -----------
Total assets $ 4,049,289 $ 3,949,345
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current maturities of long-term debt $ 19,284 $ 19,124
Accounts payable 158,190 189,940
Current income taxes payable 31,822 19,811
Accrued interest 11,062 8,591
Accrued liabilities 252,238 215,064
----------- -----------
Total current liabilities 472,596 452,530
----------- -----------
Long-term debt 1,516,269 1,648,500
----------- -----------
Deferred income taxes 157,579 157,579
----------- -----------
Other long-term liabilities 139,818 126,159
----------- -----------
Stockholders' equity
Preferred stock, $.01 par value per share,
100,000,000 shares authorized,
none issued - -
Common stock, $.01 par value per share,
300,000,000 shares authorized;
99,443,600 shares issued and 98,468,051
shares outstanding at March 31, 2006 and
94,539,837 shares issued and 93,564,288
shares outstanding at December 31, 2005 994 945
Additional paid-in capital 1,334,789 1,208,930
Treasury stock, at cost, 975,549 shares at
March 31, 2006 and December 31, 2005 (6,678) (6,678)
Unearned stock-based compensation - (13,204)
Accumulated other comprehensive income 20,491 15,191
Retained earnings 413,431 359,393
----------- -----------
Total stockholders' equity 1,763,027 1,564,577
----------- -----------
Total liabilities and stockholders' equity $ 4,049,289 $ 3,949,345
=========== ===========
COMMUNITY HEALTH SYSTEMS, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(in thousands)
Three Months Ended
March 31,
------------------
2006 2005
-------- --------
Cash flows from operating activities
Net income $ 54,038 $ 35,988
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 42,506 41,137
Minority interest in earnings 613 887
Stock-based compensation expense 3,651 496
Loss on sale of hospitals 3,937 6,295
Excess tax benefits relating to stock-based
compensation (4,360) -
Other non-cash expenses, net (590) (471)
Changes in operating assets and liabilities, net
of effects of acquisitions and divestitures:
Patient accounts receivable (42,326) (11,510)
Supplies, prepaid expenses and other current
assets 2,798 1,849
Accounts payable, accrued liabilities and
income taxes 28,371 66,025
Other 2,176 8,013
-------- --------
Net cash provided by operating activities 90,814 148,709
-------- --------
Cash flows from investing activities
Acquisitions of facilities and other related
equipment (17,448) (24,854)
Purchases of property and equipment (39,704) (33,166)
Disposition of hospitals 500 51,861
Proceeds from sale of equipment 34 2,131
Increase in other assets (22,425) (7,237)
-------- --------
Net cash used in investing activities (79,043) (11,265)
-------- --------
Cash flows from financing activities
Proceeds from exercise of stock options 1,919 15,958
Excess tax benefits relating to stock-based
compensation 4,360 -
Stock buy-back (8,112) (4,390)
Deferred financing costs (16) (749)
Redemption of convertible notes (128) -
Proceeds from minority investors in joint
ventures 3,060 1,383
Redemption of minority investments in joint
ventures (530) (290)
Distributions to minority investors in joint
ventures (596) (382)
Borrowings under credit agreement - -
Repayments of long-term indebtedness (3,885) (13,025)
-------- --------
Net cash provided by (used in) financing
activities (3,928) (1,495)
-------- --------
Net change in cash and cash equivalents 7,843 135,949
Cash and cash equivalents at beginning of period 104,108 82,498
-------- --------
Cash and cash equivalents at end of period $111,951 $218,447
======== ========
Regulation FD Disclosure
The following table sets forth selected information concerning the
consolidated operating results of the Company for the year ended
December 31, 2005, and the Company's updated projected consolidated
operating results of the Company for the year ending December 31,
2006. These projections are based on the Company's historical
operating performance, current trends and other assumptions that the
Company believes are reasonable at this time.
The following is provided as guidance to analysts and investors:
2005
Actual Results Adjusted
for Pro-forma Effect 2006
of Stock-Based Projection
Compensation Expense Range
-----------------------------------------
Net operating revenues (in
millions) $3,738 $4,225 to $4,275
Adjusted EBITDA (in millions) $556 $620 to $645
Income from continuing
operations per share - diluted $1.91 $2.16 to $2.21
Same hospitals annual
admissions growth 2.1% 1.0% to 2.0%
Weighted average diluted shares
(in millions) 98.6 99 to 100
Acquisitions of new hospitals 5 5 to 7
Income from Continuing
Operations Per Share -
Diluted:
-------------------------------
1st quarter ended March 31 $0.50 $0.58 (actual)
2nd quarter ending June 30 $0.46 $0.51 to $0.53
3rd quarter ending September 30 $0.44 $0.50 to $0.51
4th quarter ending December 31 $0.51 $0.56 to $0.58
The following assumptions were used in developing the guidance provided above: --For comparative purposes, the 2005 actual results have been restated to include pro-forma stock-based stock option compensation expense of $17.6 million, or $0.11 per share (diluted) as if SFAS No. 123(R) was adopted on January January: see month. 1, 2005, and reflected in the Company's reported earnings for 2005. Adjusted EBITDA and income from continuing operations per share - diluted, as reported in 2005 were $573.2 million and $2.02 per share, respectively. The quarterly income from continuing operations per share-diluted, as reported in 2005 were $0.52 (1st qtr.), $0.49 (2nd qtr.), $0.47 (3rd qtr) and $0.54 (4th qtr.). --On January 1, 2006, the Company adopted SFAS No. 123(R), using the modified mod·i·fy v. mod·i·fied, mod·i·fy·ing, mod·i·fies v.tr. 1. To change in form or character; alter. 2. prospective application transition method. For the year ending December 31, 2006, the Company anticipates recognizing stock - based compensation expense of approximately $20 million, or $0.13 per diluted share as compared to $5 million, or $0.03 per diluted share recognized for the year ended December 31, 2005 under APB APB See Accounting Principles Board (APB). No. 25. Thus, the 2006 projected results does include additional stock - based compensation expense of $15 million, or $0.10 per diluted share. --Expressed as a percentage of net operating revenue, provision for bad debts is projected to be approximately 10.2% to 10.5% for 2006. --Capital expenditures are as follows (in millions):
Actual Guidance
2005 2006
-------------- ---------------
Total $200 $250 to $260
--Expressed as a percent of net operating revenues, total depreciation and amortization is projected to be approximately 4.2% to 4.6% for 2006; however, this is a fixed cost and the percentages may vary as revenue varies. The adoption of FASB FASB See: Financial Accounting Standards Board FASB See Financial Accounting Standards Board (FASB). Interpretation No. 45-3 (Entitled en·ti·tle tr.v. en·ti·tled, en·ti·tling, en·ti·tles 1. To give a name or title to. 2. To furnish with a right or claim to something: Minimum Revenue Guarantees Granted to a Business or Its Owners), requiring the Company to begin capitalizing and amortizing certain elements of its physician recruitment recruitment /re·cruit·ment/ (re-krldbomact´ment) 1. the gradual increase to a maximum in a reflex when a stimulus of unaltered intensity is prolonged. 2. costs, is not expected to have a material impact on earnings during 2006. --Expressed as a percentage of income before income taxes, provision for income tax is projected to be approximately 38.5% to 39.0% for 2006. --The Company is exposed to London London, city, Canada London, city (1991 pop. 303,165), SE Ont., Canada, on the Thames River. The site was chosen in 1792 by Governor Simcoe to be the capital of Upper Canada, but York was made capital instead. London was settled in 1826. Inter-Bank Offer Rate ("LIBOR LIBOR See: London Interbank Offered Rate LIBOR See London interbank offered rate (LIBOR). ") based interest rates, which have been increasing over the past two years. The following is a summary of the three-month LIBOR rates at various dates:
December 31, 2003 1.15188%
December 31, 2004 2.56438%
December 31, 2005 4.53625%
March 31, 2006 5.00000%
To partially offset the rise in LIBOR rates, the Company is currently a party to ten separate interest swap agreements to limit the effect of changes in interest rates on a portion of the Company's long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. borrowings. On each of the swaps, the Company receives a variable rate of interest based on the three-month LIBOR, in exchange for the payment by the Company of a fixed rate of interest. Currently, the Company pays on a quarterly basis a margin above LIBOR of 175 basis points for revolver revolver: see small arms. revolver Pistol with a revolving cylinder that provides multishot action. Some early versions, known as pepperboxes, had several barrels, but as early as the 17th century pistols were being made with a revolving chamber to loans and term loans under the senior secured credit facility. For the purpose of providing 2006 projection projection, in psychology: see defense mechanism. See rear-projection TV, front-projection TV and LCD panel. (theory) projection - In domain theory, a function, f, which is (a) idempotent, i.e. range guidance, the Company has assumed that future LIBOR rates for borrowings under the Company's $1.625 billion Senior Secured Credit Facility will increase based on market quotations of the forward yield curve and other economic forecasts. --The following table reconciles adjusted EBITDA, as defined, to the Company's estimated net cash provided by operating activities as presented in the guidance shown on page 9:
2005
Actual Results
Adjusted for
Pro-forma
Stock-Based
Compensation 2006 Projection Range
Expense (in millions)
------------------------------------
Adjusted EBITDA $556 $620 $645
Taxes and interest expense (209) (226) (235)
Other non-cash expenses and net
changes in operating assets and
liabilities 64 36 40
Net cash provided by operating
activities $411 $430 $450
============== ========== ==========
The projections set forth in this report constitute forward-looking statements within the meaning of Section 27A of the Securities Act, Section 21E of the Exchange Act and the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995. Although the Company believes that these forward-looking statements are based on reasonable assumptions, these assumptions are inherently subject to significant economic and competitive uncertainties and contingencies Contingencies (ISSN 1048-9851) is the bimonthly magazine of the American Academy of Actuaries, providing a large and diverse readership with general interest and technical articles on a wide range of issues related to the actuarial profession. , which are difficult or impossible to predict accurately and are beyond the control of the Company. Accordingly, the Company cannot give any assurance that its expectations will in fact occur and cautions that actual results may differ materially from those in the forward-looking statements. A number of factors could affect the future results of the Company or the healthcare industry generally and could cause the Company's expected results to differ materially from those expressed in this filing. These factors include, among other things: --general economic and business conditions, both nationally and in the regions in which we operate; --demographic changes; --existing governmental regulations and changes in, or the failure to comply with, governmental regulations; --legislative proposals for healthcare reform; --the impact of the Medicare Medicare, national health insurance program in the United States for persons aged 65 and over and the disabled. It was established in 1965 with passage of the Social Security Amendments and is now run by the Centers for Medicare and Medicaid Services. Prescription Drug prescription drug Prescription medication Pharmacology An FDA-approved drug which must, by federal law or regulation, be dispensed only pursuant to a prescription–eg, finished dose form and active ingredients subject to the provisos of the Federal Food, Drug, , Improvement and Modernization modernization Transformation of a society from a rural and agrarian condition to a secular, urban, and industrial one. It is closely linked with industrialization. As societies modernize, the individual becomes increasingly important, gradually replacing the family, Act of 2003, which includes specific reimbursement Reimbursement Payment made to someone for out-of-pocket expenses has incurred. changes for small urban and non-urban hospitals; --our ability, where appropriate, to enter into managed care provider arrangements and the terms of these arrangements; --changes in inpatient or outpatient Medicare and Medicaid Medicare and Medicaid U.S. government programs in effect since 1966. Medicare covers most people 65 or older and those with long-term disabilities. Part A, a hospital insurance plan, also pays for home health visits and hospice care. payment levels; --uncertainty regarding the application of the Health Insurance Portability and Accountability Act The Health Insurance Portability and Accountability Act (HIPAA) was enacted by the U.S. Congress in 1996. According to the Centers for Medicare and Medicaid Services (CMS) website, Title I of HIPAA protects health insurance coverage for workers and their families when of 1996 regulations; --increases in wages as a result of inflation or competition for highly technical positions and rising supply cost due to market pressure from pharmaceutical companies and new product releases; --liability and other claims asserted against us, including self-insured self-insured Self fund Health insurance adjective Referring to the practice of carrying an individual health insurance policy for oneself; self insurance is usually more expensive than group insurance malpractice malpractice, failure to provide professional services with the skill usually exhibited by responsible and careful members of the profession, resulting in injury, loss, or damage to the party contracting those services. claims; --competition; --our ability to attract and retain qualified personnel, key management, physicians, nurses and other health care workers; --trends toward treatment of patients in less acute or specialty A contract under seal. A specialty is a written document that has been sealed and delivered and is given as security for the payment of a specifically indicated debt. healthcare settings, including ambulatory surgery centers ambulatory surgery center A free-standing center that performs various types of surgery or specialty hospitals; --changes in medical or other technology; --changes in generally accepted accounting principles The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting ; --the availability and terms of capital to fund additional acquisitions or replacement facilities; --our ability to successfully acquire and integrate additional hospitals; --our ability to obtain adequate levels of general and professional liability insurance; --potential adverse impact of known and unknown government investigations; --timeliness of reimbursement payments received under government programs; and --the other risk factors set forth in our public filings with the Securities and Exchange Commission. The consolidated operating results for the quarter ended March 31, 2006, are not necessarily indicative indicative: see mood. of the results that may be experienced for any future quarter or for any future fiscal year, including this fiscal year. The Company cautions that the projections for calendar year 2006 set forth herein are given as of the date hereof here·of adv. Of this. hereof Adverb Formal or law of or concerning this Adv. 1. hereof - of or concerning this; "the twigs hereof are physic" based on currently available information. The Company is not undertaking any obligation to update these projections as conditions change or other information becomes available. |
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