e10vq
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
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þ |
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2009
or
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o |
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number: 000-51251
(Exact name of registrant as specified in its charter)
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Delaware
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20-1538254 |
(State or Other Jurisdiction of
Incorporation or Organization)
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(I.R.S. Employer
Identification No.) |
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103 Powell Court
Brentwood, Tennessee
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37027 |
(Address of Principal Executive Offices)
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(Zip Code) |
(615) 372-8500
(Registrants Telephone Number, Including Area Code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months
(or for such shorter period that the registrant was required to submit and post such files). Yes
o No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large
accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the
Exchange Act. (Check one):
Large accelerated filer þ |
Accelerated filer o |
Non-accelerated filer o (Do not check if a smaller reporting company) |
Smaller reporting company o |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of
the Exchange Act). Yes o No þ
As of October 31, 2009, the number of outstanding shares of Common Stock of LifePoint
Hospitals, Inc. was 54,771,593.
PART I FINANCIAL INFORMATION
Item 1. Financial Statements.
LIFEPOINT HOSPITALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Unaudited
(In millions, except per share amounts)
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Three Months Ended |
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Nine Months Ended |
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September 30, |
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September 30, |
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2009 |
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2008 |
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2009 |
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2008 |
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(as adjusted) |
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(as adjusted) |
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Revenues |
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$ |
745.0 |
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$ |
675.1 |
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$ |
2,215.8 |
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$ |
2,025.9 |
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Salaries and benefits |
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295.8 |
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265.6 |
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875.0 |
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797.5 |
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Supplies |
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102.3 |
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93.0 |
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304.2 |
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279.3 |
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Other operating expenses |
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134.4 |
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128.3 |
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405.7 |
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372.2 |
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Provision for doubtful accounts |
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98.7 |
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78.9 |
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281.1 |
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234.7 |
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Depreciation and amortization |
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35.1 |
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32.2 |
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106.1 |
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97.8 |
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Interest expense, net |
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25.5 |
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27.0 |
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77.2 |
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80.7 |
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Impairment charge |
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0.9 |
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1.2 |
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691.8 |
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625.9 |
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2,049.3 |
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1,863.4 |
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Income from continuing operations before income taxes |
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53.2 |
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49.2 |
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166.5 |
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162.5 |
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Provision for income taxes |
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20.5 |
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20.1 |
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64.2 |
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64.6 |
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Income from continuing operations |
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32.7 |
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29.1 |
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102.3 |
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97.9 |
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Discontinued operations, net of income taxes: |
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Loss from discontinued operations |
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(0.7 |
) |
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(3.3 |
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(3.9 |
) |
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(6.5 |
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Impairment charge |
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(16.8 |
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(14.5 |
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Loss on sale of hospital |
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(0.6 |
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(0.3 |
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Loss from discontinued operations |
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(0.7 |
) |
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(20.1 |
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(4.5 |
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(21.3 |
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Net income |
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32.0 |
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9.0 |
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97.8 |
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76.6 |
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Less: Net income attributable to noncontrolling
interests |
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(0.6 |
) |
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(0.5 |
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(1.7 |
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(1.6 |
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Net income attributable to LifePoint Hospitals, Inc. |
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$ |
31.4 |
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$ |
8.5 |
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$ |
96.1 |
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$ |
75.0 |
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Basic earnings (loss) per share attributable to
LifePoint Hospitals, Inc. stockholders: |
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Continuing operations |
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$ |
0.60 |
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$ |
0.55 |
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$ |
1.91 |
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$ |
1.82 |
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Discontinued operations |
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(0.01 |
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(0.39 |
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(0.08 |
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(0.40 |
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Net income |
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$ |
0.59 |
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$ |
0.16 |
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$ |
1.83 |
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$ |
1.42 |
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Diluted earnings (loss) per share attributable to
LifePoint Hospitals, Inc. stockholders: |
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Continuing operations |
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$ |
0.59 |
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$ |
0.54 |
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$ |
1.88 |
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$ |
1.80 |
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Discontinued operations |
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(0.01 |
) |
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(0.38 |
) |
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(0.08 |
) |
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(0.40 |
) |
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Net income |
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$ |
0.58 |
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$ |
0.16 |
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$ |
1.80 |
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$ |
1.40 |
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Weighted average shares and dilutive securities
outstanding: |
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Basic |
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53.0 |
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51.7 |
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52.7 |
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52.7 |
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Diluted |
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53.9 |
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52.8 |
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53.5 |
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53.7 |
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Amounts attributable to LifePoint Hospitals, Inc.
stockholders: |
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Income from continuing operations, net of income
taxes |
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$ |
32.1 |
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$ |
28.6 |
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$ |
100.6 |
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$ |
96.3 |
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Loss from discontinued operations, net of income
taxes |
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(0.7 |
) |
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(20.1 |
) |
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(4.5 |
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(21.3 |
) |
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Net income |
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$ |
31.4 |
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$ |
8.5 |
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$ |
96.1 |
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$ |
75.0 |
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See accompanying notes.
3
LIFEPOINT HOSPITALS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in millions, except per share amounts)
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September 30, |
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December 31, |
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2009 |
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2008 (a) |
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(Unaudited) |
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ASSETS
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Current assets: |
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Cash and cash equivalents |
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$ |
119.5 |
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$ |
75.7 |
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Accounts receivable, less allowances for doubtful accounts of $428.5 and $374.4
at September 30, 2009 and December 31, 2008, respectively |
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332.3 |
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315.9 |
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Inventories |
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72.5 |
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69.6 |
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Assets held for sale |
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21.6 |
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Prepaid expenses |
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14.0 |
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12.0 |
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Income taxes receivable |
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2.6 |
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19.9 |
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Deferred tax assets |
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124.0 |
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103.4 |
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Other current assets |
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20.3 |
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19.2 |
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685.2 |
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637.3 |
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Property and equipment: |
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Land |
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74.9 |
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71.1 |
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Buildings and improvements |
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1,355.4 |
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1,257.2 |
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Equipment |
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811.6 |
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737.9 |
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Construction in progress (estimated cost to complete and equip after September
30, 2009 is $71.0) |
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34.6 |
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39.7 |
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2,276.5 |
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2,105.9 |
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Accumulated depreciation |
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(786.4 |
) |
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(689.9 |
) |
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1,490.1 |
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1,416.0 |
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Deferred loan costs, net |
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25.5 |
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31.3 |
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Intangible assets, net |
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71.3 |
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68.8 |
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Other |
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5.4 |
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10.4 |
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Goodwill |
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1,524.2 |
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1,516.5 |
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Total assets |
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$ |
3,801.7 |
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$ |
3,680.3 |
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LIABILITIES AND EQUITY
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Current liabilities: |
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Accounts payable |
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$ |
72.1 |
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$ |
92.3 |
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Accrued salaries |
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76.6 |
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73.2 |
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Other current liabilities |
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111.9 |
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94.5 |
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Current maturities of long-term debt |
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1.1 |
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1.1 |
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261.7 |
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261.1 |
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Long-term debt |
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1,393.6 |
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1,392.1 |
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Deferred income tax liabilities |
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150.4 |
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153.2 |
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Reserves for self-insurance claims and other liabilities |
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139.4 |
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146.2 |
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Long-term income tax liability |
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60.3 |
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59.4 |
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Total liabilities |
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2,005.4 |
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2,012.0 |
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Redeemable noncontrolling interests |
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12.0 |
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12.8 |
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Equity: |
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LifePoint Hospitals, Inc. stockholders equity: |
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Preferred stock, $0.01 par value; 10,000,000 shares authorized; no shares issued |
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Common stock, $0.01 par value; 90,000,000 shares authorized; 60,250,679 and
58,787,009 shares issued at September 30, 2009 and December 31, 2008,
respectively |
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0.6 |
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0.6 |
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Capital in excess of par value |
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1,241.5 |
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1,212.6 |
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Accumulated other comprehensive loss |
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(21.7 |
) |
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(28.3 |
) |
Retained earnings |
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710.5 |
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614.4 |
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Common stock in treasury, at cost, 5,474,030 and 5,346,156 shares at
September 30, 2009 and December 31, 2008, respectively |
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(150.3 |
) |
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(147.3 |
) |
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Total LifePoint Hospitals, Inc. stockholders equity |
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1,780.6 |
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1,652.0 |
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Noncontrolling interests |
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3.7 |
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3.5 |
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Total equity |
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1,784.3 |
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1,655.5 |
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Total liabilities and equity |
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$ |
3,801.7 |
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$ |
3,680.3 |
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(a) |
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Derived from audited consolidated financial statements, as adjusted (see Note 2). |
See accompanying notes.
4
LIFEPOINT HOSPITALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Unaudited
(In millions)
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Three Months Ended |
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Nine Months Ended |
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September 30, |
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|
September 30, |
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|
2009 |
|
|
2008 |
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|
2009 |
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2008 |
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(as adjusted) |
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(as adjusted) |
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Cash flows from operating activities: |
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Net income |
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$ |
32.0 |
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$ |
9.0 |
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$ |
97.8 |
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$ |
76.6 |
|
Adjustments to reconcile net income to net cash provided by
operating activities: |
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Loss from discontinued operations |
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0.7 |
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20.1 |
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4.5 |
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21.3 |
|
Stock-based compensation |
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5.9 |
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5.5 |
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16.5 |
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17.6 |
|
ESOP expense (non-cash portion) |
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2.2 |
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6.1 |
|
Depreciation and amortization |
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|
35.1 |
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32.2 |
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106.1 |
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97.8 |
|
Amortization of physician minimum revenue guarantees |
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3.5 |
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2.6 |
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9.7 |
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6.8 |
|
Amortization of convertible debt discounts |
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5.3 |
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5.0 |
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15.6 |
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14.6 |
|
Amortization of deferred loan costs |
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2.1 |
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|
1.8 |
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5.8 |
|
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5.5 |
|
Deferred income tax benefit |
|
|
(14.2 |
) |
|
|
(13.0 |
) |
|
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(24.9 |
) |
|
|
(6.9 |
) |
Reserves for self-insurance claims, net of payments |
|
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0.7 |
|
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|
(0.2 |
) |
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11.8 |
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7.9 |
|
Increase (decrease) in cash from operating assets and
liabilities, net of effects from acquisitions and
divestitures: |
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|
Accounts receivable |
|
|
5.3 |
|
|
|
(9.5 |
) |
|
|
(10.1 |
) |
|
|
(12.3 |
) |
Inventories and other current assets |
|
|
(0.5 |
) |
|
|
(6.3 |
) |
|
|
(3.4 |
) |
|
|
(1.8 |
) |
Accounts payable and accrued expenses |
|
|
(13.4 |
) |
|
|
10.3 |
|
|
|
(19.1 |
) |
|
|
6.4 |
|
Income taxes payable/receivable |
|
|
6.3 |
|
|
|
21.5 |
|
|
|
17.3 |
|
|
|
17.5 |
|
Other |
|
|
1.5 |
|
|
|
0.9 |
|
|
|
1.7 |
|
|
|
3.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities continuing
operations |
|
|
70.3 |
|
|
|
82.1 |
|
|
|
229.3 |
|
|
|
260.3 |
|
Net cash provided by (used in) operating activities
discontinued operations |
|
|
3.9 |
|
|
|
(6.1 |
) |
|
|
1.0 |
|
|
|
(11.2 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities |
|
|
74.2 |
|
|
|
76.0 |
|
|
|
230.3 |
|
|
|
249.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of property and equipment |
|
|
(33.7 |
) |
|
|
(37.5 |
) |
|
|
(118.8 |
) |
|
|
(111.5 |
) |
Acquisitions, net of cash acquired |
|
|
|
|
|
|
(1.3 |
) |
|
|
(79.7 |
) |
|
|
(10.6 |
) |
Other |
|
|
|
|
|
|
(4.9 |
) |
|
|
3.9 |
|
|
|
(4.9 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities continuing operations |
|
|
(33.7 |
) |
|
|
(43.7 |
) |
|
|
(194.6 |
) |
|
|
(127.0 |
) |
Net cash provided by (used in) investing activities
discontinued operations |
|
|
9.1 |
|
|
|
|
|
|
|
19.5 |
|
|
|
(5.0 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities |
|
|
(24.6 |
) |
|
|
(43.7 |
) |
|
|
(175.1 |
) |
|
|
(132.0 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from borrowings |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.4 |
|
Payments on borrowings |
|
|
|
|
|
|
(10.0 |
) |
|
|
(13.5 |
) |
|
|
(10.0 |
) |
Repurchases of common stock |
|
|
(0.4 |
) |
|
|
(0.1 |
) |
|
|
(3.0 |
) |
|
|
(118.2 |
) |
Proceeds from exercise of stock options |
|
|
0.3 |
|
|
|
3.3 |
|
|
|
9.9 |
|
|
|
3.4 |
|
Proceeds from employee stock purchase plans |
|
|
0.6 |
|
|
|
0.5 |
|
|
|
1.0 |
|
|
|
0.8 |
|
Distributions to noncontrolling interests, net of proceeds |
|
|
(0.7 |
) |
|
|
(1.4 |
) |
|
|
(1.4 |
) |
|
|
(2.4 |
) |
Proceeds from (purchase of) redeemable noncontrolling
interests |
|
|
|
|
|
|
2.2 |
|
|
|
(0.8 |
) |
|
|
2.2 |
|
Capital lease payments and other |
|
|
(1.9 |
) |
|
|
0.1 |
|
|
|
(3.6 |
) |
|
|
(4.9 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in financing activities |
|
|
(2.1 |
) |
|
|
(5.4 |
) |
|
|
(11.4 |
) |
|
|
(118.7 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in cash and cash equivalents |
|
|
47.5 |
|
|
|
26.9 |
|
|
|
43.8 |
|
|
|
(1.6 |
) |
Cash and cash equivalents at beginning of period |
|
|
72.0 |
|
|
|
24.6 |
|
|
|
75.7 |
|
|
|
53.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period |
|
$ |
119.5 |
|
|
$ |
51.5 |
|
|
$ |
119.5 |
|
|
$ |
51.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flow information: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest payments |
|
$ |
15.7 |
|
|
$ |
17.5 |
|
|
$ |
54.4 |
|
|
$ |
58.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capitalized interest |
|
$ |
0.2 |
|
|
$ |
0.3 |
|
|
$ |
0.8 |
|
|
$ |
0.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income taxes paid, net |
|
$ |
24.9 |
|
|
$ |
13.3 |
|
|
$ |
68.5 |
|
|
$ |
55.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes.
5
LIFEPOINT HOSPITALS, INC.
CONDENSED CONSOLIDATED STATEMENT OF EQUITY
For the Nine Months Ended September 30, 2009
Unaudited
(In millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LifePoint Hospitals, Inc. Stockholders |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital in |
|
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock |
|
|
Excess of |
|
|
Comprehensive |
|
|
Retained |
|
|
Treasury |
|
|
Noncontrolling |
|
|
|
|
|
|
Shares |
|
|
Amount |
|
|
Par Value |
|
|
Income (loss) |
|
|
Earnings |
|
|
Stock |
|
|
Interests |
|
|
Total |
|
Balance at December 31, 2008 (a) |
|
|
53.4 |
|
|
$ |
0.6 |
|
|
$ |
1,212.6 |
|
|
$ |
(28.3 |
) |
|
$ |
614.4 |
|
|
$ |
(147.3 |
) |
|
$ |
3.5 |
|
|
$ |
1,655.5 |
|
Comprehensive income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
96.1 |
|
|
|
|
|
|
|
1.7 |
|
|
|
97.8 |
|
Net change in fair value of
interest rate swap, net of
tax provision of $3.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
104.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise of stock options and
tax benefits of stock-based
awards |
|
|
0.8 |
|
|
|
|
|
|
|
11.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11.3 |
|
Stock activity in connection
with employee stock purchase
plan |
|
|
|
|
|
|
|
|
|
|
1.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1.0 |
|
Stock-based compensation |
|
|
0.8 |
|
|
|
|
|
|
|
16.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16.5 |
|
Repurchases of common stock, at
cost |
|
|
(0.2 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3.0 |
) |
|
|
|
|
|
|
(3.0 |
) |
Cash proceeds from (cash
distributions to)
noncontrolling interests |
|
|
|
|
|
|
|
|
|
|
0.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1.5 |
) |
|
|
(1.4 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at September 30, 2009 |
|
|
54.8 |
|
|
$ |
0.6 |
|
|
$ |
1,241.5 |
|
|
$ |
(21.7 |
) |
|
$ |
710.5 |
|
|
$ |
(150.3 |
) |
|
$ |
3.7 |
|
|
$ |
1,784.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
Derived from audited consolidated financial statements, as adjusted (see Note 2). |
See accompanying notes.
6
LIFEPOINT HOSPITALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2009
Unaudited
Note 1. Basis of Presentation
LifePoint Hospitals, Inc., a Delaware corporation, acting through its subsidiaries, operates
general acute care hospitals in non-urban communities in the United States. Unless the context
otherwise indicates, LifePoint and its subsidiaries are referred to herein as LifePoint, the
Company, we, our, or us. At September 30, 2009, on a consolidated basis, the Companys
subsidiaries owned or leased 47 hospitals, serving non-urban communities in 17 states. Unless noted
otherwise, discussions in these notes pertain to the Companys continuing operations.
The accompanying unaudited condensed consolidated financial statements have been prepared in
accordance with United States generally accepted accounting principles (GAAP) for interim
financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and notes required by GAAP for complete
financial statements. In the opinion of management, all adjustments (consisting of normal recurring
adjustments) and disclosures considered necessary for a fair presentation have been included.
Operating results for the three and nine months ended September 30, 2009 are not necessarily
indicative of the results that may be expected for the year ending December 31, 2009. For further
information, refer to the consolidated financial statements and notes thereto included in the
Companys Annual Report on Form 10-K for the year ended December 31, 2008.
In June 2009, the Financial Accounting Standards Board (the FASB) issued Accounting
Standards Codification (ASC) 105-10, The FASB Accounting Standards CodificationTM and
the Hierarchy of Generally Accepted Accounting Principles, (ASC 105-10) which establishes the
FASB Accounting Standards CodificationTM (the Codification) as the single source of
authoritative accounting principles recognized by the FASB to be applied to nongovernmental
entities in the preparation of financial statements in conformity with GAAP. The Codification was
effective for financial statements issued for interim and annual periods ending after September 15,
2009. The Company adopted ASC 105-10 for its quarter ended September 30, 2009, and accordingly,
all references to GAAP provided in the notes to the Companys condensed consolidated financial statements
have been updated to conform to ASC 105-10.
The majority of the Companys expenses are cost of revenue items. Costs that could be
classified as general and administrative by the Company include LifePoint corporate overhead
costs, which were $24.4 million and $24.0 million for the three months ended September 30, 2009 and
2008, respectively, and $75.3 million and $71.5 million for the nine months ended September 30,
2009 and 2008, respectively.
Certain prior year amounts have been reclassified to conform to the current year presentation
for discontinued operations and for the Companys January 1, 2009 adoptions of ASC 810-10-65-1,
Transition Related to FASB Statement No. 160 Noncontrolling Interests in Consolidated Financial
Statementsan amendment of ARB No. 51, (ASC 810-10-65-1), and ASC 470-20, Debt with Conversion
and Other Options, (ASC 470-20), as further discussed in Note 2.
Note 2. New Accounting Standards
ASC 810-10-65-1, Transition Related to FASB Statement No. 160 Noncontrolling Interests in
Consolidated Financial Statementsan amendment of ARB No. 51
Effective January 1, 2009, the Company adopted ASC 810-10-65-1, which defines a noncontrolling
interest in a consolidated subsidiary as the portion of the equity (net assets) in a subsidiary
not attributable, directly or indirectly, to a parent and requires noncontrolling interests to be
presented as a separate component of equity in the consolidated balance sheet subject to ASC
480-10-S99-3, Classification and Measurement of Redeemable Securities, (ASC 480-10-S99-3). ASC
810-10-65-1 also modifies the presentation of net income by requiring earnings and other
comprehensive income to be attributed to controlling and noncontrolling interests.
7
LIFEPOINT HOSPITALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following is a summary of the changes the Company made as a result of the implementation
of this standard:
|
|
|
The Company reclassified a portion of its noncontrolling interests from the
mezzanine section of its accompanying condensed consolidated balance sheets to equity.
As of December 31, 2008, this reclassification totaled $3.5 million. Certain of the
Companys noncontrolling interests will continue to be classified in the mezzanine
section of its accompanying condensed consolidated balance sheets as these
noncontrolling interests include redemption features that cause these interests not to
meet the requirements for classification as equity in accordance with ASC 480-10-S99-3.
Redemption of these interests features would require the delivery of cash. |
|
|
|
|
Net income attributable to noncontrolling interests is no longer deducted to
arrive at net income. Instead, net income is attributed to the controlling and
noncontrolling interests in the accompanying condensed consolidated statements of
operations. As a result, net income for the three and nine months ended September 30,
2008 increased by $0.5 million and $1.6 million, respectively, from net income
previously reported. These changes had no impact on the Companys earnings per share
calculations. |
ASC 470-20, Debt with Conversion and Other Options
Effective January 1, 2009, the Company adopted the provisions of ASC 470-20 which specifies
that issuers of convertible debt instruments should separately account for the liability and equity
components in a manner that will reflect the entitys nonconvertible debt borrowing rate on the
instruments issuance date when interest cost is recognized. The Companys
31/2% Convertible Senior Subordinated Notes due May 15, 2014
(31/2% Notes) and its 31/4% Convertible Senior
Subordinated Debentures due August 15, 2025 (31/4% Debentures) are within
the scope of ASC 470-20. Therefore, the Company recorded the debt components of its
31/2% Notes and its 31/4% Debentures at fair value as
of the date of issuance and began amortizing the resulting discount as an increase to interest
expense over the expected life of the debt. The Company measured the fair value of the debt
components of its 31/2% Notes at issuance based on an effective interest rate
of 7.375% and its 31/4% Debentures at issuance based on an effective interest
rate of 6.500%. As a result, the Company has attributed $162.6 million of the proceeds received in
connection with the original issuances to the conversion feature of both of its convertible debt
instruments. This amount represents the excess proceeds received over the fair value of the debt at
the date of issuance and is included in capital in excess of par value in the accompanying
condensed consolidated balance sheets. Additionally, the Company recognized a deferred income tax
liability for the income tax effect of the adoption of the standard as an adjustment to capital in
excess of par value in the amount of $66.3 million. The implementation of ASC 470-20 resulted in a
decrease to the Companys net income and earnings per share for all periods presented. However,
there is no effect on the Companys cash interest payments.
8
LIFEPOINT HOSPITALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following is a summary of the line items impacted by the adoption of ASC 470-20 in the
Companys December 31, 2008 accompanying condensed consolidated balance sheet and accompanying
condensed consolidated statements of operations for the three and nine months ended September 30,
2008 (in millions, except per share amounts):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As Originally |
|
Adjustments for the |
|
As Currently |
|
|
Reported |
|
Adoption of ASC 470-20 |
|
Reported |
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed consolidated balance sheet as of
December 31, 2008: |
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt |
|
$ |
1,515.6 |
|
|
$ |
(123.5 |
) |
|
$ |
1,392.1 |
|
Deferred income tax liabilities |
|
$ |
103.1 |
|
|
$ |
50.1 |
|
|
$ |
153.2 |
|
Capital in excess of par value |
|
$ |
1,116.3 |
|
|
$ |
96.3 |
|
|
$ |
1,212.6 |
|
Retained earnings |
|
$ |
637.3 |
|
|
$ |
(22.9 |
) |
|
$ |
614.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed consolidated statement of operations for the
three months ended September 30, 2008: |
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net |
|
$ |
22.1 |
|
|
$ |
4.9 |
|
|
$ |
27.0 |
|
Provision for income taxes |
|
$ |
22.1 |
|
|
$ |
(2.0 |
) |
|
$ |
20.1 |
|
Net income attributable to LifePoint Hospitals, Inc. |
|
$ |
11.4 |
|
|
$ |
(2.9 |
) |
|
$ |
8.5 |
|
Basic earnings per share attributable to LifePoint
Hospitals, Inc. stockholders |
|
$ |
0.22 |
|
|
$ |
(0.06 |
) |
|
$ |
0.16 |
|
Diluted earnings per share attributable to
LifePoint Hospitals, Inc. stockholders |
|
$ |
0.22 |
|
|
$ |
(0.06 |
) |
|
$ |
0.16 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed consolidated statement of operations for the
nine months ended September 30, 2008: |
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net |
|
$ |
66.2 |
|
|
$ |
14.5 |
|
|
$ |
80.7 |
|
Provision for income taxes |
|
$ |
70.4 |
|
|
$ |
(5.8 |
) |
|
$ |
64.6 |
|
Net income attributable to LifePoint Hospitals, Inc. |
|
$ |
83.7 |
|
|
$ |
(8.7 |
) |
|
$ |
75.0 |
|
Basic earnings per share attributable to LifePoint
Hospitals, Inc. stockholders |
|
$ |
1.59 |
|
|
$ |
(0.17 |
) |
|
$ |
1.42 |
|
Diluted earnings per share attributable to
LifePoint Hospitals, Inc. stockholders |
|
$ |
1.56 |
|
|
$ |
(0.16 |
) |
|
$ |
1.40 |
|
The principal balance, unamortized discount and net carrying balance of the Companys
convertible debt instruments as of September 30, 2009 and December 31, 2008 were as follows (in
millions):
|
|
|
|
|
|
|
|
|
|
|
September 30, 2009 |
|
|
December 31, 2008 |
|
31/2% Notes: |
|
|
|
|
|
|
|
|
Principal balance |
|
$ |
575.0 |
|
|
$ |
575.0 |
|
Unamortized discount |
|
|
(86.0 |
) |
|
|
(97.4 |
) |
|
|
|
|
|
|
|
Net carrying balance |
|
$ |
489.0 |
|
|
$ |
477.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31/4% Debentures: |
|
|
|
|
|
|
|
|
Principal balance |
|
$ |
225.0 |
|
|
$ |
225.0 |
|
Unamortized discount |
|
|
(21.9 |
) |
|
|
(26.1 |
) |
|
|
|
|
|
|
|
Net carrying balance |
|
$ |
203.1 |
|
|
$ |
198.9 |
|
|
|
|
|
|
|
|
The Company is amortizing the discounts for its 31/2% Notes and
31/4% Debentures over the expected life of a similar liability that does not
have an associated equity component, in accordance with ASC 470-20. The Company is amortizing the
discount for its 31/2% Notes through May 2014, which is the maturity date of
these notes. In addition, the Company is amortizing the discount for its
31/4% Debentures through February 2013, which is the first date that the
holders of the 31/4% Debentures can redeem their debentures.
9
LIFEPOINT HOSPITALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the three and nine months ended September 30, 2009 and 2008, the contractual cash interest
expense and non-cash interest expense (discount amortization) for the Companys convertible debt
instruments were as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
31/2% Notes: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contractual cash interest expense |
|
$ |
5.0 |
|
|
$ |
5.0 |
|
|
$ |
15.1 |
|
|
$ |
15.1 |
|
Non-cash interest expense (discount
amortization) |
|
|
3.9 |
|
|
|
3.6 |
|
|
|
11.4 |
|
|
|
10.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest expense |
|
$ |
8.9 |
|
|
$ |
8.6 |
|
|
$ |
26.5 |
|
|
$ |
25.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31/4% Debentures: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contractual cash interest expense |
|
$ |
1.9 |
|
|
$ |
1.9 |
|
|
$ |
5.5 |
|
|
$ |
5.5 |
|
Non-cash interest expense (discount
amortization) |
|
|
1.4 |
|
|
|
1.4 |
|
|
|
4.2 |
|
|
|
4.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest expense |
|
$ |
3.3 |
|
|
$ |
3.3 |
|
|
$ |
9.7 |
|
|
$ |
9.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ASC 805-10, Business Combinations, (ASC 805-10) and ASC 805-20, Identifiable Assets and
Liabilities, and Any Noncontrolling Interest, (ASC 805-20)
On January 1, 2009, the Company adopted certain additional provisions of ASC 805-10, which
changes the manner in which the acquisition method of accounting is applied in a number of ways.
Acquisition costs are no longer considered part of the fair value of an acquisition and must be
expensed as incurred, noncontrolling interests are valued at fair value at the acquisition date,
restructuring costs associated with a business combination are generally expensed subsequent to the
acquisition date and changes in deferred tax asset valuation allowances and income tax
uncertainties after the acquisition date generally will affect income tax expense.
In April 2009, the FASB issued ASC 805-20 which amends the original guidance in Codification
Section 805-10 to require contingent assets acquired and liabilities assumed in a business
combination to be recognized at fair value on the acquisition date if the fair value can be
reasonably estimated during the measurement period. If fair value cannot be reasonably estimated
during the measurement period, the contingent asset or liability would be recognized in accordance
with ASC 450-10, Contingencies, and ASC 450-20, Loss Contingencies. Furthermore, ASC 805-20
eliminated the specific subsequent accounting guidance for contingent assets and liabilities from
ASC 805-10, without significantly revising the guidance in ASC 805-10. However, contingent
consideration arrangements of an acquiree assumed by the acquirer in a business combination would
still be initially and subsequently measured at fair value in accordance with ASC 805-10. ASC
805-20 was effective for all business combinations occurring on or after the beginning of the first
annual reporting period beginning on or after December 15, 2008. The Company adopted the provisions
of ASC 805-10 and ASC 805-20 for business combinations with an acquisition date on or after January
1, 2009, without a material impact to its condensed consolidated financial statements.
ASC 820-10, Fair Value Measurements and Disclosures, (ASC 820-10)
On January 1, 2008, the Company adopted certain provisions of ASC 820-10 related to its
interest rate swap agreement. ASC 820-10 is intended to increase consistency and comparability in
fair value measurements by defining fair value, establishing a framework for measuring fair value,
and expanding disclosures about fair value measurements. ASC 820-10 applies to other accounting
pronouncements that require or permit fair value measurements and was originally effective for
financial statements issued for fiscal years beginning after November 15, 2007 and interim periods
within those fiscal years. In February 2008, the FASB amended ASC 820-10 and removed certain
leasing transactions from the scope of ASC 820-10 and deferred the effective date of ASC 820-10 for
one year for certain nonfinancial assets and nonfinancial liabilities, except those that are
recognized or disclosed at fair value in the financial statements on a recurring basis. In October
2008, the FASB further amended ASC 820-10 to clarify the application of ASC 820-10 in an inactive
market and illustrate how an entity would determine fair value when the market for a financial
asset is not active.
10
LIFEPOINT HOSPITALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
On January 1, 2009, the Company adopted the provisions of ASC 820-10 related to its
nonfinancial assets and nonfinancial liabilities that are not required or permitted to be measured
at fair value on a recurring basis, which include those measured at fair value in goodwill
impairment testing, indefinite-lived intangible assets measured at fair value for impairment
assessment, nonfinancial long-lived assets measured at fair value for impairment assessment, asset
retirement obligations initially measured at fair value, and those initially measured at fair value
in a business combination.
In April 2009, the FASB further amended ASC 820-10 to provide additional guidance for
estimating fair value in accordance with the provision when the volume and level of activity for
the asset or liability have significantly decreased. The amendment re-emphasizes that regardless of
market conditions the fair value measurement is an exit price concept as defined in ASC 820-10.
Furthermore, the amendment clarifies and includes additional factors to consider in determining
whether there has been a significant decrease in market activity for an asset or liability and
provides additional clarification for estimating fair value when the market activity for an asset
or liability has declined significantly. The amendment does not include assets and liabilities
measured under Level 1 inputs and is to be applied prospectively to all fair value measurements
where appropriate. The Companys adoptions of the various provisions of ASC 820-10 did not have a
material impact to its condensed consolidated financial statements.
ASC 815-10, Derivatives and Hedging, (ASC 815-10)
On January 1, 2009, the Company adopted certain additional provisions of ASC 815-10, which
requires entities that use derivative instruments to provide qualitative disclosures about their
objectives and strategies for using such instruments, as well as any details of credit-risk-related
contingent features contained within derivatives. ASC 815-10 also requires entities to disclose
additional information about the amounts and location of derivatives located within the financial
statements, how the provisions of ASC 815-10 have been applied, and the impact that hedges have on
an entitys financial position, financial performance, and cash flows. Since the additional
provisions of ASC 815-10 require only additional disclosures concerning derivatives and hedging
activities, the adoption of these provisions did not affect the presentation of the Companys
financial position or results of operations. The Companys derivative instrument and hedging
activities are further described in Note 8.
ASC 825-10, Financial Instruments, (ASC 825-10)
On April 1, 2009, the Company adopted certain additional provisions of ASC 825-10 which
require publicly-traded companies, as defined in ASC 270-10, Interim Reporting, to provide
disclosures on the fair value of financial instruments in interim financial statements. The
Companys adoption of the additional provisions of ASC 825-10 did not have a material impact to its
condensed consolidated financial statements. The fair value of the Companys financial instruments
are further described below.
Cash and Cash Equivalents, Accounts Receivable and Accounts Payable. The carrying amounts
reported in the accompanying condensed consolidated balance sheets for cash and cash equivalents,
accounts receivable and accounts payable approximate fair value because of the short-term maturity
of these instruments.
LongTerm Debt. The Companys term B loans under its credit agreement (the Term B Loans),
31/2% Notes and 31/4% Debentures were the only
long-term debt instruments where the carrying amounts differed from their fair value as of
September 30, 2009 and December 31, 2008. The carrying amount and fair value of these instruments
as of September 30, 2009 and December 31, 2008 were as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying Amount |
|
Fair Value |
|
|
September 30, |
|
December 31, |
|
September 30, |
|
December 31, |
|
|
2009 |
|
2008 |
|
2009 |
|
2008 |
Term B Loans |
|
$ |
692.9 |
|
|
$ |
706.4 |
|
|
$ |
672.1 |
|
|
$ |
586.3 |
|
31/2% Notes, excluding unamortized discount |
|
$ |
575.0 |
|
|
$ |
575.0 |
|
|
$ |
495.2 |
|
|
$ |
387.3 |
|
31/4% Debentures, excluding unamortized discount |
|
$ |
225.0 |
|
|
$ |
225.0 |
|
|
$ |
195.8 |
|
|
$ |
162.0 |
|
The fair values of the Companys Term B Loans, 31/4% Debentures and
31/2% Notes were based on the quoted prices at September 30, 2009 and
December 31, 2008.
11
LIFEPOINT HOSPITALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Interest Rate Swap. The Company has designated its interest rate swap as a cash flow hedge
instrument, which is recorded in the Companys accompanying condensed consolidated balance sheets
at its fair value. The fair value of the Companys interest rate swap agreement is determined in
accordance with ASC 815-10 based on the amount at which it could be settled, which is referred to
in ASC 815-10 as the exit price. The exit price is based upon observable market assumptions and
appropriate valuation adjustments for credit risk. The Company has categorized its interest rate
swap as Level 2 in accordance with ASC 815-10.
The fair value of the Companys interest rate swap at September 30, 2009 and December 31, 2008
reflects a liability of approximately $34.9 million and $45.0 million, respectively, and is
included in reserves for self-insurance claims and other liabilities in the accompanying condensed
consolidated balance sheets. The Companys interest rate swap is further described in Note 8.
ASC 855-10, Subsequent Events, (ASC 855-10)
The Company adopted the provisions of ASC 855-10 effective June 30, 2009. ASC 855-10
established general standards of accounting for and disclosure of events that occur after the
balance sheet date but before financial statements are issued or are available to be issued. ASC
855-10 requires the Company to disclose the date through which the Company has evaluated subsequent
events and the basis for the date. See Note 11 for disclosure of the date through which subsequent
events have been disclosed.
Note 3. Acquisition
Effective February 1, 2009, the Company acquired Rockdale Medical Center (Rockdale), a 138
bed hospital located in Conyers, Georgia, from the Hospital Authority of Rockdale County and
Rockdale Medical Center, Inc. The Company funded the purchase price of Rockdale of $80.0 million
plus net working capital with available cash.
Under the acquisition method of accounting, in accordance with ASC 805-10, the purchase price
of Rockdale was allocated to the identifiable assets acquired and liabilities assumed based upon
their estimated fair values as of February 1, 2009. The excess of the purchase price over the
estimated fair value of the identifiable assets acquired and liabilities assumed was recorded as
goodwill. The results of operations of Rockdale are included in the Companys results of operations
beginning February 1, 2009.
The fair values of assets acquired and liabilities assumed at the date of acquisition were as
follows (in millions):
|
|
|
|
|
Accounts receivable |
|
$ |
12.2 |
|
Inventories |
|
|
2.1 |
|
Prepaid expenses and other current assets |
|
|
0.6 |
|
Property and equipment |
|
|
71.4 |
|
Goodwill |
|
|
8.6 |
|
|
|
|
|
Total assets acquired, excluding cash |
|
|
94.9 |
|
|
|
|
|
Accounts payable |
|
|
6.2 |
|
Accrued salaries |
|
|
3.6 |
|
Other current liabilities |
|
|
1.2 |
|
Capital leases |
|
|
1.3 |
|
|
|
|
|
Total liabilities assumed |
|
|
12.3 |
|
|
|
|
|
Net assets acquired |
|
$ |
82.6 |
|
|
|
|
|
The valuation of accounts receivable has been prepared on a preliminary basis. The Company is
currently assessing the valuation of the accounts receivable acquired and expects to finalize its
analysis during the fourth quarter of 2009. Once finalized, the Company will adjust the purchase
price allocation to reflect its final assessment.
Pursuant
to the asset purchase agreement for Rockdale, the Company has
committed to spend no less than $4.0 million in each
of the next three years and a total of at least $30.0 million during the next
six years on capital expenditures and imporvements.
12
LIFEPOINT HOSPITALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 4. Discontinued Operations
Effective May 1, 2009, the Company sold Doctors Hospital of Opelousas (Opelousas), a 171
bed facility located in Opelousas, Louisiana, for $13.7 million, including working capital.
Additionally, effective July 1, 2009, the Company sold Starke Memorial Hospital (Starke), a 53
bed facility located in Knox, Indiana, for $6.3 million, including working capital. In connection
with the Companys identification of Opelousas and Starke for disposal, it recognized an impairment
charge of $11.3 million and $5.5 million, respectively, during the three and nine months ended
September 30, 2008. Additionally, in connection with the Companys disposals of Opelousas and
Starke, it recognized a net loss on sale of $0.6 million, net of income tax benefits, for the nine
months ended September 30, 2009.
In March 2007, the Company signed a letter of intent to transfer substantially all of the
operating assets and net working capital of Colorado River Medical Center (Colorado River), a 25
bed facility located in Needles, California, to the Board of Trustees of Needles Desert Communities
Hospital (the Needles Board of Trustees) and to terminate the existing lease agreement between
the two parties. Effective April 1, 2008, the Company terminated the lease agreement and
transferred Colorado River to the Needles Board of Trustees. In connection with the signing of the
letter of intent in March 2007, the Company recognized an impairment charge of $8.7 million, net of
income taxes, for the year ended December 31, 2007. During the nine months ended September 30,
2008, the Company recognized a favorable impairment adjustment of $2.3 million, net of income
taxes, or $0.04 per diluted share, related to the reversal of a portion of the previously recognized
impairment charge for certain net working capital components that were ultimately excluded from the
assets transferred effective April 1, 2008.
The results of operations, net of income taxes, of Opelousas, Starke and Colorado River, as
well as the Companys other previously disposed facilities, are reflected in the accompanying
condensed consolidated financial statements as discontinued operations in accordance with ASC
360-10, Property, Plant, and Equipment.
Interest expense was allocated to discontinued operations based on the ratio of disposed net
assets to the sum of total net assets of the Company plus the Companys total outstanding debt. The
Company allocated to discontinued operations interest expense of $0.3 million for the three months
ended September 30, 2008 and $0.3 million and $0.9 million for the nine months ended September 30,
2009 and 2008, respectively. There were no allocations of interest expense to discontinued
operations for the three months ended September 30, 2009.
The revenues, loss before income taxes, and net loss, excluding impairment charge and loss on
sale of hospital of discontinued operations for the three and nine months ended September 30, 2009
and 2008 were as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
|
September 30, |
|
September 30, |
|
|
2009 |
|
2008 |
|
2009 |
|
2008 |
Revenues |
|
$ |
0.2 |
|
|
$ |
11.5 |
|
|
$ |
16.3 |
|
|
$ |
42.3 |
|
Loss before income tax benefits |
|
$ |
(1.1 |
) |
|
$ |
(5.0 |
) |
|
$ |
(6.8 |
) |
|
$ |
(10.1 |
) |
Net loss |
|
$ |
(0.7 |
) |
|
$ |
(3.3 |
) |
|
$ |
(3.9 |
) |
|
$ |
(6.5 |
) |
Note 5. Repurchases of Common Stock
In November 2007 and in August 2009, the Companys Board of Directors authorized the
repurchase of up to $150.0 million and $100.0 million, respectively, of outstanding shares of the
Companys common stock either in the open market or through privately negotiated transactions,
subject to market conditions, regulatory constraints and other factors. The November 2007
repurchase plan expired in November 2008. The August 2009 repurchase plan expires in January 2011.
The Company is not obligated to repurchase any specific number of shares under the August 2009
repurchase plan. During the nine months ended September 30, 2008, the Company repurchased
approximately 3.9 million shares for an aggregate purchase price, including commissions, of
approximately $103.7 million at an average purchase price of $26.57 per share under the November
2007 repurchase plan. These shares have been designated by the Company as treasury stock. There
were no repurchases under the November 2007 repurchase plan during the three months ended September
30, 2008. Additionally, there were no repurchases under the August 2009 repurchase plan during the
three and nine months ended September 30, 2009.
13
LIFEPOINT HOSPITALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Additionally, the Company redeems shares from employees upon vesting of the Companys Amended
and Restated 1998 Long-Term Incentive Plan (LTIP) and Management Stock Purchase Plan (MSPP)
stock awards for minimum statutory tax withholding purposes. The Company redeemed approximately 0.1
million shares of certain vested LTIP and MSPP shares for an aggregate price of approximately $3.0
million and $2.3 million, respectively, during both the nine months ended September 30, 2009 and 2008.
These shares have been designated by the Company as treasury stock.
Note 6. Goodwill and Intangible Assets
Goodwill
ASC 350-10, IntangiblesGoodwill and Other, requires goodwill and intangible assets with
indefinite lives to be tested at least annually for impairment and if certain events or changes in
circumstances indicate that an impairment loss may have been incurred, on an interim basis. The
Companys business comprises a single operating reporting unit for impairment test purposes. For
the purposes of these analyses, the Companys estimates of fair value are based on a combination of
the income approach, which estimates the fair value of the Company based on its future discounted
cash flows, and the market approach, which estimates the fair value of the Company based on
comparable market prices.
The Company performed its most recent goodwill impairment testing as of December 31, 2008 and
determined that a goodwill impairment charge was not required. However, the Company will continue
to monitor the relationship of its fair value to its book value as economic events and changes to
its stock price occur.
Contract-Based Physician Minimum Revenue Guarantees
The Company has committed to provide certain financial assistance pursuant to recruiting
agreements, or physician minimum revenue guarantees, with various physicians practicing in the
communities it serves. In consideration for a physician relocating to one of its communities and
agreeing to engage in private practice for the benefit of the respective community, the Company may
advance certain amounts of money to a physician to assist in establishing his or her practice.
The Company accounts for its physician minimum revenue guarantees in accordance with the
provisions of ASC 460-10, Guarantees, (ASC 460-10). In accordance with the provisions of ASC
460-10, the Company records a contract-based intangible asset and a related guarantee liability for
new physician minimum revenue guarantees. The contract-based intangible asset is amortized to other
operating expenses, in the accompanying condensed consolidated statements of operations, over the
period of the physician contract, which typically ranges from four to five years. As of September
30, 2009 and December 31, 2008, the Companys liability for contract-based physician minimum
revenue guarantees was $21.4 million and $22.2 million, respectively. These amounts are included in
other current liabilities in the Companys accompanying condensed consolidated balance sheets.
Non-Competition Agreements
The Company has entered into non-competition agreements with certain physicians and other
individuals which are amortized on a straight-line basis over the term of the agreements.
Certificates of Need
The construction of new facilities, the acquisition or expansion of existing facilities and
the addition of new services and certain equipment at the Companys facilities may be subject to
state laws that require prior approval by state regulatory agencies. These certificate of need laws
generally require that a state agency determine the public need and give approval prior to the
construction or acquisition of facilities or the addition of new services. The Company operates
hospitals in certain states that have adopted certificate of need laws. If the Company fails to
obtain necessary state approval, the Company will not be able to expand its facilities, complete
acquisitions or add new services at its facilities in these states. These intangible assets have
been determined to have indefinite lives and, accordingly, are not amortized.
14
LIFEPOINT HOSPITALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Summary of Intangible Assets
The following table provides information regarding the Companys intangible assets, which are
included in the accompanying condensed consolidated balance sheets (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross |
|
|
|
|
|
|
|
|
|
Carrying |
|
|
Accumulated |
|
|
Net |
|
Class of Intangible Asset |
|
Amount |
|
|
Amortization |
|
|
Total |
|
Amortized intangible assets: |
|
|
|
|
|
|
|
|
|
|
|
|
Contract-based physician minimum revenue guarantees: |
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2008 |
|
$ |
66.4 |
|
|
$ |
(16.2 |
) |
|
$ |
50.2 |
|
Additions, net of terminations |
|
|
10.4 |
|
|
|
2.6 |
|
|
|
13.0 |
|
Amortization expense |
|
|
|
|
|
|
(9.7 |
) |
|
|
(9.7 |
) |
|
|
|
|
|
|
|
|
|
|
Balance at September 30, 2009 |
|
$ |
76.8 |
|
|
$ |
(23.3 |
) |
|
$ |
53.5 |
|
|
|
|
|
|
|
|
|
|
|
Non-competition agreements: |
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2008 |
|
$ |
20.2 |
|
|
$ |
(8.1 |
) |
|
$ |
12.1 |
|
Additions |
|
|
0.2 |
|
|
|
|
|
|
|
0.2 |
|
Amortization expense |
|
|
|
|
|
|
(1.0 |
) |
|
|
(1.0 |
) |
|
|
|
|
|
|
|
|
|
|
Balance at September 30, 2009 |
|
$ |
20.4 |
|
|
$ |
(9.1 |
) |
|
$ |
11.3 |
|
|
|
|
|
|
|
|
|
|
|
Indefinite-lived intangible assets: |
|
|
|
|
|
|
|
|
|
|
|
|
Certificates of need: |
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2008 and September 30, 2009 |
|
$ |
6.5 |
|
|
$ |
|
|
|
$ |
6.5 |
|
|
|
|
|
|
|
|
|
|
|
Total intangible assets: |
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2008 |
|
$ |
93.1 |
|
|
$ |
(24.3 |
) |
|
$ |
68.8 |
|
Additions, net of terminations |
|
|
10.6 |
|
|
|
2.6 |
|
|
|
13.2 |
|
Amortization expense |
|
|
|
|
|
|
(10.7 |
) |
|
|
(10.7 |
) |
|
|
|
|
|
|
|
|
|
|
Balance at September 30, 2009 |
|
$ |
103.7 |
|
|
$ |
(32.4 |
) |
|
$ |
71.3 |
|
|
|
|
|
|
|
|
|
|
|
Note 7. Stock-Based Compensation
The Company issues stock options and other stock-based awards (nonvested stock, restricted
stock units, and deferred stock units) to key employees and directors under its LTIP, Outside
Directors Stock and Incentive Compensation Plan (ODSICP) and MSPP. The Company accounts for its
stock-based awards in accordance with the provisions of ASC 718-10 Compensation Stock
Compensation (ASC 718-10). In accordance with ASC 718-10, the Company recognizes compensation
expense based on the estimated grant date fair value of each stock-based award.
Stock Options
The Company estimated the fair value of stock options granted during the three and nine months
ended September 30, 2009 and 2008 using the Hull-White II (HW-II) lattice option valuation model
and a single option award approach. The Company is amortizing the fair value on a straight-line
basis over the requisite service period of the awards, which is the vesting period of three years.
The Company granted stock options to purchase 925,090 and 1,128,250 shares of the Companys common
stock to certain key employees under the LTIP during the nine months ended September 30, 2009 and
2008, respectively. The stock options that were granted during the nine months ended September 30,
2009 and 2008 vest 33.3% on each grant anniversary date over three years of continued employment.
15
LIFEPOINT HOSPITALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following table shows the weighted average assumptions the Company used to develop the
fair value estimates under its HW-II option valuation model and the resulting estimates of
weighted-average fair value per share of stock options granted during the nine months ended
September 30, 2009 and 2008:
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended |
|
|
|
September 30, |
|
|
|
2009 |
|
|
2008 |
|
Expected volatility |
|
|
40.3 |
% |
|
|
31.9 |
% |
Risk free interest rate (range) |
|
|
0.10% - 3.58 |
% |
|
|
1.07% - 3.89 |
% |
Expected dividends |
|
|
|
|
|
|
|
|
Average expected term (years) |
|
|
5.4 |
|
|
|
5.3 |
|
Fair value per share of stock options granted |
|
$ |
8.01 |
|
|
$ |
8.15 |
|
The total intrinsic value of stock options exercised during the nine months ended September
30, 2009 was $7.9 million. The Company received $0.3 million and $3.3 million in cash from stock
option exercises during the three months ended September 30, 2009 and 2008, respectively, and $9.9
million and $3.4 million during the nine months ended September 30, 2009 and 2008, respectively.
The actual tax benefit realized for the tax deductions from stock option exercises totaled $1.3
million during the three months ended September 30, 2008, and $3.2 million and $1.3 million during
the nine months ended September 30, 2009 and 2008, respectively. There were no actual tax benefits
realized for the tax deductions from stock option exercises during the three months ended September
30, 2009
As of September 30, 2009, there was $9.7 million of total estimated unrecognized compensation
cost related to stock option compensation arrangements. Total estimated unrecognized compensation
cost will be adjusted for future changes in estimated forfeitures. The Company expects to recognize
that cost over a weighted average period of 1.4 years.
Other Stock-Based Awards
The fair value of other stock-based awards is determined based on the closing price of the
Companys common stock on the day prior to the grant date. Stock-based compensation expense for the
Companys other stock-based awards is recorded equally over the vesting periods generally ranging
from six months to five years.
During the nine months ended September 30, 2009 and 2008, the Company granted 863,935 and
544,452 shares, respectively, of other stock-based awards under its LTIP, ODSICP and MSPP plans to
certain key employees and non-management members of the Board of Directors. Of the 863,935 other
stock-based awards granted during the nine months ended September 30, 2009, 333,925 ratably vest
over the three year period from the grant date; 395,248 cliff-vest three years from the grant date;
50,000 cliff-vest four years from the grant date; 50,000 cliff-vest five years from the grant date;
and 34,762 cliff-vest six months and one day from the grant date. Of the 544,452 other stock-based
awards granted during the nine months ended September 30, 2008, 516,452 cliff-vest three years from
the grant date and 28,000 vested six months and one day from the grant date. The weighted average
fair market value at the date of grant of the 863,935 and 544,452 shares of nonvested stock awards
was $20.71 and $24.97 per share, respectively.
Of the other stock-based awards granted under the LTIP during the nine months ended September
30, 2009 and 2008, 307,500 and 247,500 shares, respectively, are performance-based. In addition to
requiring continuing service of an employee, the vesting of these other stock-based awards is
contingent upon the satisfaction of certain financial goals, specifically related to the
achievement of targeted annual revenues and earnings goals within a three-year period. Under the
LTIP, if these goals are achieved, the other stock-based awards will cliff-vest three years after
the grant date. The fair value for each of these other stock-based awards was determined based on
the closing price of the Companys common stock on the day prior to the grant date and assumes that
the performance goals will be achieved. If these performance goals are not met, no compensation
expense will be recognized, and any previously recognized compensation expense will be reversed.
As of September 30, 2009, there was $19.0 million of total estimated unrecognized compensation
cost related to other stock-based awards granted under the LTIP, ODSICP and MSPP plans. Total
estimated unrecognized compensation cost will be adjusted for future changes in estimated
forfeitures. The Company expects to recognize that cost over a weighted average period of 1.8
years.
16
LIFEPOINT HOSPITALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Summary
The following table summarizes the Companys total stock-based compensation expense as well as
the total recognized tax benefits related thereto for the three and nine months ended September 30,
2009 and 2008 (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
September 30, |
|
|
September 30, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
Other stock-based awards |
|
$ |
4.2 |
|
|
$ |
3.8 |
|
|
$ |
11.4 |
|
|
$ |
12.0 |
|
Stock options |
|
|
1.7 |
|
|
|
1.7 |
|
|
|
5.1 |
|
|
|
5.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stock-based compensation expense |
|
$ |
5.9 |
|
|
$ |
5.5 |
|
|
$ |
16.5 |
|
|
$ |
17.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax benefits on stock-based compensation expense |
|
$ |
2.5 |
|
|
$ |
2.2 |
|
|
$ |
7.1 |
|
|
$ |
7.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company did not capitalize any stock-based compensation cost during the three and nine
months ended September 30, 2009 and 2008. As of September 30, 2009, there was $28.7 million of
total estimated unrecognized compensation cost related to all of the Companys stock compensation
arrangements. Total estimated unrecognized compensation cost may be adjusted for future changes in
estimated forfeitures. The Company expects to recognize that cost over a weighted-average period of
1.7 years.
Note 8. Interest Rate Swap
On June 1, 2006, the Company entered into an interest rate swap agreement with Citibank, N.A.
(Citibank) as counterparty. The interest rate swap agreement, as amended, was effective as of
November 30, 2006 and has a maturity date of May 30, 2011. The interest rate swap agreement
requires the Company to make quarterly fixed rate payments to Citibank calculated on a notional
amount as set forth in the table below at an annual fixed rate of 5.585% while Citibank is
obligated to make quarterly floating payments to the Company based on the three-month LIBOR on the
same referenced notional amount. Notwithstanding the terms of the interest rate swap transaction,
the Company is ultimately obligated for all amounts due and payable under its Credit Agreement, as
amended and restated, supplemented or otherwise modified from time to time (the Credit
Agreement), entered into on April 15, 2005, with Citicorp North America, Inc., as administrative
agent and the lenders party thereto, Bank of America, N.A., CIBC World Markets Corp., SunTrust Bank
and UBS Securities LLC, as co-syndication agents and Citigroup Global Markets Inc., as sole lead
arranger and sole book runner. The following table provides information regarding the notional
amounts in effect for the indicated date ranges for the Companys interest rate swap agreement:
|
|
|
|
|
|
|
Notional Amount |
Date Range |
|
(In millions) |
November 30, 2007 to November 28, 2008 |
|
$ |
750.0 |
|
November 28, 2008 to November 30, 2009 |
|
|
600.0 |
|
November 30, 2009 to November 30, 2010 |
|
|
450.0 |
|
November 30, 2010 to May 30, 2011 |
|
|
300.0 |
|
The Company entered into the interest rate swap agreement to mitigate the floating interest
rate risk on a portion of its outstanding borrowings under its Credit Agreement. ASC 815-10
requires companies to recognize all derivative instruments as either assets or liabilities at fair
value in a companys balance sheets. In accordance with ASC 815-10, the Company designates its
interest rate swap as a cash flow hedge. For derivative instruments that are designated and qualify
as cash flow hedges, the effective portion of the gain or loss on the derivative is reported as a
component of other comprehensive income (OCI) and reclassified into earnings in the same period
or periods during which the hedged transactions affects earnings. Gains and losses on the
derivative representing either hedge ineffectiveness or hedge components excluded from the
assessment of effectiveness are recognized in current earnings.
17
LIFEPOINT HOSPITALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The Company assesses the effectiveness of its interest rate swap on a quarterly basis. The
Company completed its quarterly assessments during the three and nine months ended September 30,
2009 and determined that its cash flow hedge was effective. The Company completed its quarterly
assessments during the three and nine months ended September 30, 2008 and determined that its cash
flow hedge was partially ineffective because the notional amount of the interest rate swap in
effect during the indicated periods exceeded the Companys outstanding borrowings under its
variable rate debt Credit Agreement.
At September 30, 2009 and December 31, 2008, the fair value and line item caption of the
Companys interest rate swap derivative instrument was as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet Location |
|
|
September 30, 2009 |
|
|
December 31, 2008 |
|
Derivative
designated as a
hedging instrument
under ASC 815-10: |
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swap |
|
Reserves for self-insurance claims and |
|
|
|
|
|
|
|
|
|
|
|
|
other liabilities |
|
|
|
$ |
34.9 |
|
|
$ |
45.0 |
|
|
|
|
|
|
|
|
|
|
|
|
The following table shows the effect of the Companys interest rate swap derivative instrument
qualifying and designated as a hedging instrument in cash flow hedges for the three and nine months
ended September 30, 2009 and 2008 (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Location of gain (loss) |
|
|
Amount of gain (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
recognized in Income on |
|
|
recognized in Income on |
|
|
|
Amount of gain (loss) |
|
|
Derivative (Ineffective |
|
|
Derivative (Ineffective |
|
|
|
recognized in OCI on |
|
|
Portion and Amount |
|
|
Portion and Amount |
|
|
|
Derivative (Effective |
|
|
Excluded from |
|
|
Excluded from |
|
|
|
Portion) |
|
|
Effectiveness Testing) |
|
|
Effectiveness Testing) |
|
|
|
For the Three |
|
|
For the Nine |
|
|
|
|
|
|
For the Three |
|
|
For the Nine |
|
|
|
Months Ended |
|
|
Months Ended |
|
|
|
|
|
|
Months Ended |
|
|
Months Ended |
|
|
|
September 30, |
|
|
September 30, |
|
|
|
|
|
|
September 30, |
|
|
September 30, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
|
|
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
Derivative in ASC
815-10 cash flow
hedging
relationships: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swap |
|
$ |
3.2 |
|
|
$ |
0.4 |
|
|
$ |
10.1 |
|
|
$ |
1.6 |
|
|
Interest expense, net |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
(0.6 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value
Since the Companys interest rate swap is not traded on a market exchange, the fair value is
determined using a valuation model that involves a discounted cash flow analysis on the expected
cash flows. This cash flow analysis reflects the contractual terms of the interest rate swap
agreement, including the period to maturity, and uses observable market-based inputs, including the
three-month LIBOR forward interest rate curve. The fair value of the Companys interest rate swap
agreement is determined by netting the discounted future fixed cash payments and the discounted
expected variable cash receipts. The variable cash receipts are based on the expectation of future
interest rates based on the observable market three-month LIBOR forward interest rate curve and the
notional amount being hedged. In addition, the Company incorporates credit valuation adjustments to
appropriately reflect both its own and Citibanks non-performance or credit risk in the fair value
measurements. The interest rate swap agreement exposes the Company to credit risk in the event of
non-performance by Citibank. However, the Company does not anticipate non-performance by Citibank.
The majority of the inputs used to value its interest rate swap agreement, including the
three-month LIBOR forward interest rate curve and market perceptions of the Companys credit risk
used in the credit valuation adjustments, are observable inputs available to a market participant.
As a result, the Company has determined that the interest rate swap valuation is classified in
Level 2 of the fair value hierarchy, in accordance with ASC 820-10.
18
LIFEPOINT HOSPITALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 9. Earnings (Loss) Per Share
The following table sets forth the computation of basic and diluted earnings (loss) per share
for the three and nine months ended September 30, 2009 and 2008 (dollars and shares in millions,
except per share amounts):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
September 30, |
|
|
September 30, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
Numerator for basic and diluted earnings per
share attributable to LifePoint Hospitals, Inc.: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations |
|
$ |
32.7 |
|
|
$ |
29.1 |
|
|
$ |
102.3 |
|
|
$ |
97.9 |
|
Less: Net income attributable to noncontrolling
interests |
|
|
(0.6 |
) |
|
|
(0.5 |
) |
|
|
(1.7 |
) |
|
|
(1.6 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations attributable to
LifePoint Hospitals, Inc. stockholders |
|
|
32.1 |
|
|
|
28.6 |
|
|
|
100.6 |
|
|
|
96.3 |
|
Loss from discontinued operations, net of income
taxes |
|
|
(0.7 |
) |
|
|
(20.1 |
) |
|
|
(4.5 |
) |
|
|
(21.3 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to LifePoint Hospitals, Inc. |
|
$ |
31.4 |
|
|
$ |
8.5 |
|
|
$ |
96.1 |
|
|
$ |
75.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding basic |
|
|
53.0 |
|
|
|
51.7 |
|
|
|
52.7 |
|
|
|
52.7 |
|
Effect of dilutive securities: stock options and
other stock-based awards |
|
|
0.9 |
|
|
|
1.1 |
|
|
|
0.8 |
|
|
|
1.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding diluted |
|
|
53.9 |
|
|
|
52.8 |
|
|
|
53.5 |
|
|
|
53.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings (loss) per share
attributable to LifePoint
Hospitals, Inc. stockholders: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations |
|
$ |
0.60 |
|
|
$ |
0.55 |
|
|
$ |
1.91 |
|
|
$ |
1.82 |
|
Discontinued operations |
|
|
(0.01 |
) |
|
|
(0.39 |
) |
|
|
(0.08 |
) |
|
|
(0.40 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
0.59 |
|
|
$ |
0.16 |
|
|
$ |
1.83 |
|
|
$ |
1.42 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings (loss) per
share attributable to LifePoint
Hospitals, Inc. stockholders: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations |
|
$ |
0.59 |
|
|
$ |
0.54 |
|
|
$ |
1.88 |
|
|
$ |
1.80 |
|
Discontinued operations |
|
|
(0.01 |
) |
|
|
(0.38 |
) |
|
|
(0.08 |
) |
|
|
(0.40 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
0.58 |
|
|
$ |
0.16 |
|
|
$ |
1.80 |
|
|
$ |
1.40 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Companys 31/2% Notes and 31/4% Debentures are
included in the calculation of diluted earnings per share whether or not the contingent
requirements have been met for conversion using the treasury stock method if the conversion price
of $51.79 and $61.22, respectively, is less than the average market price of the Companys common
stock for the period. Upon conversion, the par value is settled in cash, and only the conversion
premium is settled in shares of the Companys common stock. The impact of the
31/2% Notes and 31/4% Debentures have been excluded
because the effects would have been anti-dilutive for the three and nine months ended September 30,
2009 and 2008.
Note 10. Contingencies
Legal Proceedings and General Liability Claims
The Company is, from time to time, subject to claims and suits arising in the ordinary course
of business, including claims for damages for personal injuries, medical malpractice, breach of
contracts, wrongful restriction of or interference with physicians staff privileges and employment
related claims. In certain of these actions, plaintiffs request payment for damages, including
punitive damages that may not be covered by insurance. The Company is currently not a party to any
pending or threatened proceeding, which, in managements opinion, would have a material adverse
effect on the Companys business, financial condition or results of operations.
19
LIFEPOINT HOSPITALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In May 2009, the Companys hospital in Andalusia, Alabama (Andalusia Regional Hospital)
produced documents responsive to a request received from the U.S. Attorneys Office for the Western
District of New York regarding an investigation they are conducting with respect to the billing of
kyphoplasty procedures. Kyphoplasty is a surgical spine procedure that returns a compromised
vertebrae (either from trauma or osteoporotic disease process) to its previous height, reducing or
eliminating severe pain. It has been reported that other unaffiliated hospitals and hospital
operators in multiple states have received similar requests for information. The Company believes
that this investigation is related to the May 22, 2008 qui tam settlement between the same U.S.
Attorneys Office and the manufacturer and distributor of the product used in performing the
kyphoplasty procedure. The Company is cooperating with the governments investigation. In addition,
the Company is reviewing whether its hospitals have engaged in inappropriate billing for
kyphoplasty procedures.
Physician Commitments
The Company has committed to provide certain financial assistance pursuant to recruiting
agreements with various physicians practicing in the communities it serves. In consideration for a
physicians relocating to one of its communities and agreeing to engage in private practice for the
benefit of the respective community, the Company may advance certain amounts of money to a
physician, normally over a period of one year, to assist in establishing the physicians practice.
The Company has committed to advance a maximum amount of approximately $55.0 million at September
30, 2009. The actual amount of such commitments to be subsequently advanced to physicians is
estimated at $21.4 million at September 30, 2009 and often depends upon the financial results of a
physicians private practice during the guarantee period. Generally, amounts advanced under the
recruiting agreements may be forgiven pro rata over a period of 36 to 48 months contingent upon the
physician continuing to practice in the respective community. Pursuant to the Companys standard
physician recruiting agreement, any breach or non-fulfillment by a physician under the physician
recruiting agreement gives the Company the right to recover any payments made to the physician
under the agreement.
Capital Expenditure Commitments
The Company is reconfiguring some of its facilities to accommodate patient services more
effectively and is restructuring existing surgical capacity in some of its hospitals to permit
additional patient volume and a greater variety of services. The Company has incurred approximately
$34.6 million in uncompleted projects as of September 30, 2009, which is included as construction
in progress in the Companys accompanying condensed consolidated balance sheet. At September 30,
2009, the Company had projects under construction with an estimated cost to complete and equip of
approximately $71.0 million. The Company is subject to annual capital expenditure commitments in
connection with several of its facilities.
Acquisitions
The Company has historically acquired businesses with prior operating histories. Acquired
companies may have unknown or contingent liabilities, including liabilities for failure to comply
with healthcare laws and regulations, medical and general professional liabilities, workers
compensation liabilities, previous tax liabilities and unacceptable business practices. Although
the Company institutes policies designed to conform practices to its standards following completion
of acquisitions, there can be no assurance that the Company will not become liable for past
activities that may later be asserted to be improper by private plaintiffs or government agencies.
Although the Company generally seeks to obtain indemnification from prospective sellers covering
such matters, there can be no assurance that any such matter will be covered by indemnification, or
if covered, that such indemnification will be adequate to cover potential losses and fines.
Note 11. Subsequent Events
In accordance with the provisions of ASC 855-10, the Company evaluated all material events
occurring subsequent to the balance sheet date through the time of filing of this Form 10-Q with
the United States Securities and Exchange Commission on November 6, 2009, the date the financial
statements were issued, for events requiring disclosure or recognition in the Companys condensed
consolidated financial statements. There were no subsequent events requiring disclosure or
recognition in the Companys condensed consolidated financial statements.
20
Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.
We recommend that you read this discussion together with our unaudited condensed consolidated
financial statements and related notes included elsewhere in this report, as well as our Form 10-K
for the year ended December 31, 2008 (the 2008 Annual Report on Form 10-K). Unless otherwise
indicated, all relevant financial and statistical information included herein relates to our
continuing operations, inclusive of the operations of Rockdale beginning February 1, 2009, the
effective date of this acquisition
We make forward-looking statements in this report, other reports and in statements we file
with the United States Securities and Exchange Commission and/or release to the public. In
addition, our senior management makes forward-looking statements orally to analysts, investors, the
media and others. Broadly speaking, forward-looking statements include projections of our revenues;
net income; earnings per share; capital expenditures; cash flows; debt repayments; interest rates;
operating statistics and data or other financial items; descriptions of plans or objectives of our
management for future operations; services or growth plans including acquisitions, divestitures,
business strategies and initiatives; interpretations of Medicare and Medicaid laws and regulations
and their effect on our business; and descriptions of assumptions underlying or relating to any of
the foregoing.
In this report, for example, we make forward-looking statements, including statements
discussing our expectations about: future financial performance and condition; future liquidity and
capital resources; future cash flows; existing and future debt and equity structure; our strategic
goals; future acquisitions; our business strategy and operating philosophy, including the manner in
which potential acquisitions or divestitures are evaluated; costs of providing care to our
patients; changes in interest rates; our compliance with new and existing laws and regulations; the
performance of counterparties to our agreements; effect of credit ratings; professional fees;
increased costs of salaries and benefits; industry and general economic trends; reimbursement
changes; patient volumes and related revenues; future capital expenditures; the impact of changes
in our critical accounting estimates; claims and legal actions relating to professional liabilities
and other matters; the impact and applicability of new accounting standards; and physician
recruiting and retention.
Forward-looking statements discuss matters that are not historical facts. Because they discuss
future events or conditions, forward-looking statements often include words such as can, could,
may, should, believe, will, would, expect, project, estimate, seek, anticipate,
plan, intend, target, continue or similar expressions. You should not unduly rely on
forward-looking statements, which give our expectations about the future and are not guarantees.
Forward-looking statements speak only as of the date they are made. We do not undertake any
obligation to update our forward-looking statements to reflect events or circumstances after the
date of this document or to reflect the occurrence of unanticipated events.
There are several factors, some of which are beyond our control that could cause results to
differ significantly from our expectations. Some of these factors are described in Part I, Item 1A.
Risk Factors of our 2008 Annual Report on Form 10-K. Any factor described in our 2008 Annual Report
on Form 10-K could by itself, or together with one or more factors, adversely affect our business,
results of operations and/or financial condition. There may be factors not described in our 2008
Annual Report on Form 10-K that could also cause results to differ from our expectations.
Overview
We operate general acute care hospitals in non-urban communities in the United States. At
September 30, 2009, we owned or leased through our subsidiaries 47 hospitals, having a total of
5,544 licensed beds and serving non-urban communities in 17 states. Seven of our hospitals are
owned by third parties and leased by our subsidiaries. Effective February 1, 2009, we acquired
Rockdale, a 138 bed acute care hospital located in Conyers, Georgia. The results of operations of
Rockdale are included in our results of operations beginning February 1, 2009.
21
We generate revenues primarily through hospital services offered at our facilities. We
generated $745.0 million and $675.1 million in revenues during the three months ended September 30,
2009 and 2008, respectively, and $2,215.8 million and $2,025.9 million in revenues during the nine
months ended September 30, 2009 and 2008, respectively. For the three months ended September 30,
2009 and 2008, we derived 39.4% and 39.9%, respectively, and 40.1% and 41.0% for the nine months
ended September 30, 2009 and 2008, respectively, of our revenues collectively from the Medicare and
Medicaid programs. Payments made to our hospitals pursuant to the Medicare and Medicaid programs
for services rendered rarely exceed our costs for such services. As a result, we rely largely on
payments made by private or commercial payors, together with certain limited services provided to
Medicare recipients, to generate an operating profit.
Our hospitals typically provide the range of medical and surgical services commonly available
in hospitals in non-urban markets, although the services provided at any specific hospital depend
on factors such as community need for the service, whether physicians necessary to operate the
service line safely are members of the medical staff of that hospital, whether the service might be
economically viable, and any contractual or certificate of need restrictions that might exist.
Competitive and Regulatory Environment
The environment in which our hospitals operate is extremely competitive. Our hospitals face
competition from other acute care hospitals, including larger tertiary hospitals located in larger
markets and/or affiliated with universities; specialty hospitals that focus on one or a small
number of very lucrative service lines but that are not required to operate emergency departments;
stand-alone centers at which surgeries or diagnostic tests can be performed; and physicians on the
medical staffs of our hospitals. In many cases, our competitors focus on the service lines that
offer the highest margins. By doing so, our competitors can potentially draw the best-paying
business out of our hospitals. This, in turn, can reduce the overall operating profit of our
hospitals as we are often obligated to offer service lines that operate at a loss or that have much
lower profit margins. We continue to see the shift of increasingly complex procedures from the
inpatient to the outpatient setting and have also seen growth in the general shift of lower acuity
procedures to physician offices and other non-hospital outpatient settings. These trends have, to
some extent, offset our efforts to improve equivalent admission rates at many of our hospitals.
Our hospitals also face extreme competition in their efforts to recruit and retain physicians
on their medical staffs. It is widely recognized that the United States has a shortage of
physicians in certain practice areas, including specialists such as cardiologists and orthopedists,
in various areas of the country.
Our business and our hospitals are highly regulated, and the penalties for noncompliance are
severe. We are required to comply with extensive, extremely complicated and overlapping government
laws and regulations at the federal, state and local levels. These
laws and regulations govern every aspect of how our
hospitals conduct their operations, from what service lines must be offered in order to be licensed
as an acute care hospital, to whether our hospitals may employ
physicians, to how (and whether) our
hospitals may receive payments pursuant to the Medicare and Medicaid programs. The failure to
comply with these laws and regulations can result in severe penalties including criminal penalties
and civil sanctions, and the loss of our ability to receive reimbursements through the Medicare and
Medicaid programs.
Not only are our hospitals heavily regulated, the rules, regulations and laws to which they
are subject often change, with little or no notice, and are often interpreted and applied
differently by various regulatory agencies with authority to enforce such requirements. Each change
or conflicting interpretation may require our hospitals to make changes in their facilities,
equipment, personnel or services, and may also require that standard operating policies and
procedures be re-written and re-implemented. The cost of complying with such laws and regulations
is a significant component of our overall expenses. Further, this expense has grown in recent
periods due to the requirements of new regulations and the severity of the penalties associated
with non-compliance, and management believes compliance expenses will continue to grow in the
foreseeable future.
The hospital industry is also enduring a period where the costs of providing care are rising
faster than reimbursement rates. This places a premium on efficient operation, the ability to
reduce or control costs and the need to leverage the benefits of our organization across all of our
hospitals.
22
The healthcare industry continues to attract substantial legislative interest and public
attention, and the regulatory, enforcement and reimbursement environment could change substantially
during 2009. President Obama has said that healthcare reform is among his administrations highest
priorities, and the Senate Finance and Health, Education, Labor, and Pension Committees and the
House Committees on Ways and Means, Energy and Commerce, and Education and Labor have all approved
bills that would dramatically alter the U.S. healthcare system. All of the currently proposed
legislation is intended to provide coverage and access to substantially all Americans to increase
the quality of care provided and to reduce the rate of growth in healthcare expenditures. The
changes being considered include, among other things, reducing payments to Medicare Advantage
plans, expanding the Medicare programs use of value-based purchasing programs and tying hospital
payments to the satisfaction of certain quality criteria, reducing Medicare and Medicaid payments,
including disproportionate share payments, expanding Medicaid eligibility, and creating new public
health insurance options that would be based on Medicare payment or negotiated rates. A majority of
the proposed changes will not take effect until 2013. We cannot predict whether any of the current
healthcare reform legislation will be enacted, or if enacted, the overall impact such changes would
have on us. However, our management is closely monitoring these reform proposals as it becomes
more likely that legislation requiring substantial changes to the health care industry may be
enacted. We cannot predict the impact that the proposed healthcare reform plans would have on us,
and it is uncertain whether any major reform will be enacted in 2009.
Medicare Reimbursement
On October 30, 2009, the Centers for Medicare and Medicaid Services (CMS) issued its
hospital outpatient prospective payment system (OPPS) final rule for calendar year 2010. Among
other things, the OPPS final rule provides for a market basket update of 2.1% for hospitals that
meet the requirements of the Hospital Outpatient Quality Data Reporting Program and an update of
0.1% for hospitals that do not. The final rule also establishes a Medicare payment rate for
certain pulmonary and intensive cardiac rehabilitation services that are provided in an outpatient
setting and includes an adjustment for hospital pharmacy costs that will result in hospitals being
paid the average sale price plus 4.0% for most separately reimbursable drugs and biologicals.
After accounting for other adjustments, CMS estimates that Medicare outpatient payments to
hospitals will increase by 1.9% in 2010.
Health Information Practices
As discussed in our 2008 Annual Report on Form 10-K, we are subject to the privacy and
security requirements of the Health Insurance Portability and Accountability Act of 1996 (HIPAA).
The Health Information Technology for Economic and Clinical Health Act (the HITECH Act), which
was enacted as part of the American Recovery and Reinvestment Act of 2009, significantly expanded
the reach of HIPAA and greatly increased the penalties for violations of HIPAAs privacy and
security requirements. On August 24, 2009, the Secretary of the Department of Health and Human
Services (DHHS) issued regulations that clarified and explained the HITECH Acts requirements.
The regulations took effect on September 23, 2009, but DHHS has announced that it will delay
imposing penalties pursuant to the regulations until February 22, 2010. Compliance with these new
standards and the overlapping state laws regarding the protection of personal information requires
significant commitment and action by our facilities and could require us to make additional
expenditures in the future.
Business Strategy
We seek to fulfill our mission of Making Communities Healthier® by striving to
improve the quality and types of healthcare services available in our communities, provide
physicians with a positive environment in which to practice medicine, with access to necessary
equipment and resources, develop and provide a positive work environment for employees, expand each
hospitals role as a community asset, and improve each hospitals financial performance. We expect
our hospitals to be the place where patients choose to come for care, where physicians want to
practice medicine and where employees want to work.
23
We believe that growth opportunities remain in our existing markets. Growth at our hospitals
is dependent in part on how successful our hospitals are in their efforts to recruit physicians to
their respective medical staffs, whether such physicians are active members of such medical staffs
over a long period of time and whether and to what extent members of our hospitals medical staffs
admit patients to our hospitals. During 2008, we refined our recruiting process in an effort to
better identify and focus on those physicians most likely to desire to practice in our communities
and to better tailor our communications to the physicians who want to practice in non-urban
communities. Through the third quarter of 2009, we have continued to strive to improve our
recruiting and retention efforts including centralizing at our corporate office many of the
recruiting functions and efforts that have in the past been performed by vendors on a contract
basis.
The quality of healthcare services provided at our hospitals (and the perceived quality of
such services) is an increasingly important factor to patients when deciding where to seek
care and to physicians when deciding where to practice. Because in virtually every case
the core measure scores ascribed to our hospitals are determined based on the practice behaviors
of the physicians on our medical staffs, we have implemented new strategies to work with medical
staff members to improve scores at all of our hospitals, especially those that are below our average
or below managements expectation. Recently, we have seen improvements in our Hospital Consumer Assessment
of Healthcare Providers &
Systems (HCAHPS) scores,
an important measure of patients perspectives of
hospital care. We are committed to further improve our scores at our hospitals through targeted strategies,
including increased education, when necessary, awareness campaigns and hospital specific action plans.
In many of our markets, a significant portion of patients who require the services available
at acute care hospitals leave our markets to receive such care. We believe this fact presents an
opportunity for growth, and we are working with the hospitals in communities where this phenomenon
exists to implement new strategies or enhance existing strategies.
Additionally, we believe that growth can also be achieved by adding new service lines in our
existing markets, investing in new technologies desired by physicians and patients, and
demonstrating the quality of the care provided in our facilities. For the past two years, we have
undertaken redesigned operating reviews of our hospitals to pinpoint new service lines or
technologies that could reduce the outmigration of patients leaving our markets to receive health
care services. Where needed service lines have been identified, we have focused on recruiting the
physicians necessary to correctly operate such service lines. For example, our hospitals have
responded to physician interest in requests for hospitalists by introducing or strengthening
hospitalist programs where appropriate. Our hospitals have taken other steps, such as structured
efforts to solicit input from medical staff members and to promptly respond to legitimate unmet
physicians needs, to limit or offset the impact of outmigration and to grow.
While responsibly managing our operating expenses, we have also made significant, targeted
investments in our hospitals to add new technologies, modernize facilities and expand the services
available. These investments should assist in our efforts to attract and retain physicians, to
offset outmigration of patients and to make our hospitals more desirable to our employees and
potential patients.
We also continue to strive to improve our operating performance by improving on our revenue
cycle processes, making an even higher level of purchases through our group purchasing
organization, operating more efficiently and effectively, and working to appropriately standardize
our policies, procedures and practices across all of our affiliated hospitals. We also believe that
our position as the sole acute care hospital in virtually all of our communities has allowed us,
and will continue to allow us, in many cases to negotiate preferred reimbursement rates with
commercial insurance payors.
Additional Growth
The
acquisition of Rockdale, effective February 1, 2009, is consistent with our stated goal of seeking to acquire one to
three complimentary hospitals a year. Our intention is to acquire well-positioned hospitals in
growing areas of the United States that we believe are fairly priced and that could benefit from
our management and strategic initiatives. We believe that this growth by strategic acquisition can
supplement the growth we believe we can generate organically in our existing markets. Rockdales
revenues for the period from February 1, 2009 to September 30, 2009 were $84.8 million.
24
Revenue Sources
Our hospitals generate revenues by providing healthcare services to our patients. Depending
upon the patients medical insurance coverage, we are paid for these services by governmental
Medicare and Medicaid programs, commercial insurance, including managed care organizations, and
directly by the patient. The amounts we are paid for providing healthcare services to our patients
vary depending upon the payor. Governmental payors generally pay significantly less than the
hospitals customary charges for the services provided. Insured patients are generally not
responsible for any difference between customary hospital charges and the amounts received from
commercial insurance payors. However, insured patients are responsible for payments not covered by
insurance, such as exclusions, deductibles and co-payments.
Revenues from governmental payors, such as Medicare and Medicaid, are controlled by complex
rules and regulations that stipulate the amount a hospital is paid for providing healthcare
services. We must comply with these rules and regulations if we are to continue to be eligible to
participate in the Medicare and Medicaid programs. In addition, these rules and regulations are
subject to frequent changes as a result of legislative and administrative action and annual payment
adjustments on both the federal and the state levels.
Revenues from HMOs, PPOs and other private insurers are subject to contracts and other
arrangements that require us to discount the amounts we customarily charge for healthcare services.
These discounted arrangements often limit our ability to increase charges in response to increasing
costs. We actively negotiate with these payors in an effort to maintain or increase the pricing of
our healthcare services.
Self-pay revenues are primarily generated through the treatment of uninsured patients. Our
hospitals have experienced an increase in self-pay revenues during recent years as a result of a
combination of broad economic factors, including rising unemployment
in many of our markets, reductions in state Medicaid budgets, increasing
numbers of individuals and employers who choose not to purchase insurance and an increased amount
of copayments and deductibles to be made by patients instead of insurers.
In recent years, our hospitals have experienced a shift from inpatient
admissions to outpatient observations for a portion of our patient population.
We believe the reasons for this shift, include, but are not limited to, factors
that have affected many other hospital companies, including the
continuing competition from various
providers and utilization pressure by both governmental programs and commercial
insurance payors.
Other Events
On February 25, 2009, the Company entered into an Amended and Restated Rights Agreement by and
between us and American Stock Transfer & Trust Company, LLC as Rights Agent (the Amended Rights
Agreement). The Amended Rights Agreement extended the term of our Shareholder Rights Plan to
February 25, 2019, adjusted the exercise price of the preferred stock purchase rights associated
with our common stock (the Rights) and amended the definition of Beneficial Owner and
Beneficially Own to clarify that a person will be deemed to beneficially own any securities that
are the subject of specified derivative transactions.
Pursuant to the Amended Rights Agreement, each of the Rights, which were previously
distributed to our common stockholders, entitles the holder, if and when the Rights become
exercisable, to buy one one-thousandth of a share of our Series A Junior Participating Preferred
Stock for $125.00. Initially, the Rights will be represented by our Common Stock certificates and
will not be exercisable.
The Amended Rights Agreement is designed to deter coercive takeover tactics and to prevent an
acquiror from gaining control of the Company without offering a fair price to all of our
stockholders. The Rights will not prevent a takeover, but are designed to encourage anyone seeking
to acquire us to negotiate with our Board of Directors prior to attempting a takeover.
If any person or group becomes the beneficial owner of 15% or more of our common stock (which,
as provided in the Amended Rights Agreement, includes stock referenced in derivative transactions
and securities), then each Right not owned by such holder will entitle its holder to purchase, at
the Rights then-current exercise price, common shares having a market value of twice the Rights
then-current exercise price. In addition, if, after any person has become a 15% or more
stockholder, we are involved in a merger or other business combination transaction with another
person, each Right will entitle its holder (other than such 15% or more stockholder) to purchase,
at the Rights then-current exercise price, common shares of the acquiring company having a value
of twice the Rights then-current exercise price.
25
Results of Operations
The following definitions apply throughout the remaining portion of Managements Discussion
and Analysis of Financial Condition and Results of Operations:
Acquisition. Represents the results of Rockdale, which we acquired effective February 1, 2009.
Admissions. Represents the total number of patients admitted (in the facility for a period in
excess of 23 hours) to our hospitals and used by management and investors as a general measure of
inpatient volume.
bps. Basis point change.
Continuing operations. Continuing operations information includes the results of our Same-hospital
operations, our Acquisition and our corporate office and excludes the results of our hospitals that
have been disposed of.
ESOP. Employee stock ownership plan. The ESOP is a defined contribution retirement plan that covers
substantially all of our employees.
Effective tax rate. Provision for income taxes as a percentage of income from continuing operations
before income taxes less net income attributable to noncontrolling interests.
Emergency room visits. Represents the total number of hospital-based emergency room visits.
Equivalent admissions. Management and investors use equivalent admissions as a general measure of
combined inpatient and outpatient volume. We compute equivalent admissions by multiplying
admissions (inpatient volume) by the outpatient factor (the sum of gross inpatient revenue and
gross outpatient revenue and then dividing the resulting amount by gross inpatient revenue). The
equivalent admissions computation equates outpatient revenue to the volume measure (admissions)
used to measure inpatient volume resulting in a general measure of combined inpatient and
outpatient volume.
Net revenue days outstanding. We compute net revenue days outstanding by dividing our accounts
receivable net of allowance for doubtful accounts, by our revenue per day. Our revenue per day is
calculated by dividing our quarterly revenues, including revenues for held for sale / disposed of
hospitals, by the number of calendar days in the quarter.
Medicare case mix index. Refers to the acuity or severity of illness of an average Medicare patient
at our hospitals.
N/A. Not applicable.
Outpatient surgeries. Outpatient surgeries are those surgeries that do not require admission to our
hospitals.
Same-hospital. Same-hospital information includes the results of our corporate office and the same
46 hospitals operated during the three and nine months ended September 30, 2009 and 2008, and
excludes the results of our Acquisition and our hospitals that have been disposed of.
26
Operating Results Summary
The following table presents summaries of results of operations for the three and nine months
ended September 30, 2009 and 2008 (dollars in millions):
|
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|
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Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
|
|
|
|
|
|
% of |
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|
|
% of |
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|
|
|
|
|
% of |
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|
|
|
|
|
% of |
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|
|
Amount |
|
|
Revenues |
|
|
Amount |
|
|
Revenues |
|
|
Amount |
|
|
Revenues |
|
|
Amount |
|
|
Revenues |
|
Revenues |
|
$ |
745.0 |
|
|
|
100.0 |
% |
|
$ |
675.1 |
|
|
|
100.0 |
% |
|
$ |
2,215.8 |
|
|
|
100.0 |
% |
|
$ |
2,025.9 |
|
|
|
100.0 |
% |
|
|
|
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|
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|
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|
|
|
|
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|
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|
|
|
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|
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Salaries and benefits |
|
|
295.8 |
|
|
|
39.7 |
|
|
|
265.6 |
|
|
|
39.3 |
|
|
|
875.0 |
|
|
|
39.5 |
|
|
|
797.5 |
|
|
|
39.4 |
|
Supplies |
|
|
102.3 |
|
|
|
13.7 |
|
|
|
93.0 |
|
|
|
13.8 |
|
|
|
304.2 |
|
|
|
13.7 |
|
|
|
279.3 |
|
|
|
13.8 |
|
Other operating expenses |
|
|
134.4 |
|
|
|
18.0 |
|
|
|
128.3 |
|
|
|
19.0 |
|
|
|
405.7 |
|
|
|
18.3 |
|
|
|
372.2 |
|
|
|
18.3 |
|
Provision for doubtful
accounts |
|
|
98.7 |
|
|
|
13.3 |
|
|
|
78.9 |
|
|
|
11.7 |
|
|
|
281.1 |
|
|
|
12.7 |
|
|
|
234.7 |
|
|
|
11.6 |
|
Depreciation and
amortization |
|
|
35.1 |
|
|
|
4.8 |
|
|
|
32.2 |
|
|
|
4.8 |
|
|
|
106.1 |
|
|
|
4.8 |
|
|
|
97.8 |
|
|
|
4.8 |
|
Interest expense, net |
|
|
25.5 |
|
|
|
3.4 |
|
|
|
27.0 |
|
|
|
4.0 |
|
|
|
77.2 |
|
|
|
3.5 |
|
|
|
80.7 |
|
|
|
4.0 |
|
Impairment charge |
|
|
|
|
|
|
|
|
|
|
0.9 |
|
|
|
0.1 |
|
|
|
|
|
|
|
|
|
|
|
1.2 |
|
|
|
0.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
691.8 |
|
|
|
92.9 |
|
|
|
625.9 |
|
|
|
92.7 |
|
|
|
2,049.3 |
|
|
|
92.5 |
|
|
|
1,863.4 |
|
|
|
92.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing
operations before income
taxes |
|
|
53.2 |
|
|
|
7.1 |
|
|
|
49.2 |
|
|
|
7.3 |
|
|
|
166.5 |
|
|
|
7.5 |
|
|
|
162.5 |
|
|
|
8.0 |
|
Provision for income taxes |
|
|
20.5 |
|
|
|
2.7 |
|
|
|
20.1 |
|
|
|
3.0 |
|
|
|
64.2 |
|
|
|
2.9 |
|
|
|
64.6 |
|
|
|
3.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing
operations |
|
|
32.7 |
|
|
|
4.4 |
|
|
|
29.1 |
|
|
|
4.3 |
|
|
|
102.3 |
|
|
|
4.6 |
|
|
|
97.9 |
|
|
|
4.8 |
|
Less: Net income
attributable to
noncontrolling
interests |
|
|
(0.6 |
) |
|
|
(0.1 |
) |
|
|
(0.5 |
) |
|
|
|
|
|
|
(1.7 |
) |
|
|
(0.1 |
) |
|
|
(1.6 |
) |
|
|
(0.1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing
operations attributable
to LifePoint Hospitals,
Inc. |
|
$ |
32.1 |
|
|
|
4.3 |
% |
|
$ |
28.6 |
|
|
|
4.3 |
% |
|
$ |
100.6 |
|
|
|
4.5 |
% |
|
$ |
96.3 |
|
|
|
4.7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended September 30, 2009 and 2008
Revenues
The following table shows our revenues and the key drivers of our revenues for the periods
presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
|
|
|
September 30, |
|
Increase |
|
% Increase |
|
|
2009 |
|
2008 |
|
(Decrease) |
|
(Decrease) |
Continuing operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues (dollars in millions) |
|
$ |
745.0 |
|
|
$ |
675.1 |
|
|
$ |
69.9 |
|
|
|
10.4 |
% |
Admissions |
|
|
46,354 |
|
|
|
45,980 |
|
|
|
374 |
|
|
|
0.8 |
|
Equivalent admissions |
|
|
99,693 |
|
|
|
93,885 |
|
|
|
5,808 |
|
|
|
6.2 |
|
Revenues per equivalent admission |
|
$ |
7,474 |
|
|
$ |
7,191 |
|
|
$ |
283 |
|
|
|
3.9 |
|
Medicare case mix index |
|
|
1.29 |
|
|
|
1.26 |
|
|
|
0.03 |
|
|
|
2.4 |
|
Average length of stay (days) |
|
|
4.2 |
|
|
|
4.2 |
|
|
|
|
|
|
|
|
|
Inpatient surgeries |
|
|
14,036 |
|
|
|
13,997 |
|
|
|
39 |
|
|
|
0.3 |
|
Outpatient surgeries |
|
|
38,406 |
|
|
|
36,926 |
|
|
|
1,480 |
|
|
|
4.0 |
|
Emergency room visits |
|
|
242,878 |
|
|
|
219,852 |
|
|
|
23,026 |
|
|
|
10.5 |
|
Outpatient factor |
|
|
2.15 |
|
|
|
2.04 |
|
|
|
0.11 |
|
|
|
5.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Same-hospital: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues (dollars in millions) |
|
$ |
714.0 |
|
|
$ |
675.1 |
|
|
$ |
38.9 |
|
|
|
5.8 |
% |
Admissions |
|
|
44,278 |
|
|
|
45,980 |
|
|
|
(1,702 |
) |
|
|
(3.7 |
) |
Equivalent admissions |
|
|
95,376 |
|
|
|
93,885 |
|
|
|
1,491 |
|
|
|
1.6 |
|
Revenues per equivalent admission |
|
$ |
7,486 |
|
|
$ |
7,191 |
|
|
$ |
295 |
|
|
|
4.1 |
|
Medicare case mix index |
|
|
1.30 |
|
|
|
1.26 |
|
|
|
0.04 |
|
|
|
3.2 |
|
Average length of stay (days) |
|
|
4.2 |
|
|
|
4.2 |
|
|
|
|
|
|
|
|
|
Inpatient surgeries |
|
|
13,368 |
|
|
|
13,997 |
|
|
|
(629 |
) |
|
|
(4.5 |
) |
Outpatient surgeries |
|
|
36,704 |
|
|
|
36,926 |
|
|
|
(222 |
) |
|
|
(0.6 |
) |
Emergency room visits |
|
|
231,848 |
|
|
|
219,852 |
|
|
|
11,996 |
|
|
|
5.5 |
|
Outpatient factor |
|
|
2.15 |
|
|
|
2.04 |
|
|
|
0.11 |
|
|
|
5.4 |
|
27
The following table shows the sources of our revenues by payor for the periods presented,
expressed as a percentage of total revenues, including adjustments to estimated reimbursement
amounts:
|
|
|
|
|
|
|
|
|
|
|
Three Months |
|
|
Ended |
|
|
September 30, |
|
|
2009 |
|
2008 |
Medicare |
|
|
28.9 |
% |
|
|
30.2 |
% |
Medicaid |
|
|
10.5 |
|
|
|
9.7 |
|
HMOs, PPOs and other private insurers |
|
|
44.2 |
|
|
|
44.9 |
|
Self-Pay |
|
|
13.5 |
|
|
|
12.6 |
|
Other |
|
|
2.9 |
|
|
|
2.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
|
|
|
|
|
|
|
Revenue for the three months ended September 30, 2009 were $745.0 million, an increase of
$69.9 million, or 10.4%, over the same period last year. Of this increase $31.0 million, or 44.3%,
was attributable to our Acquisition. The remaining $38.9 million, or 55.7%, of the increase was
derived from our same-hospital operations.
Same-hospital admissions for the three months ended September 30, 2009 declined by 3.7% to
44,278 compared to 45,980 in the same period last year. We continue to experience declines in our
inpatient surgeries as well as a shift from inpatient admissions to outpatient observations for a
portion of our patient population.
Despite our declining inpatient admissions, same-hospital equivalent admissions for the three
months ended September 30, 2009 increased by 1.6% to 95,376 compared to 93,885 in the same period
last year. The equivalent admissions improvement is primarily a
result of increases in the utilization of our laboratory testing
services, an increase in our emergency room visits and increases in
our other higher
reimbursement outpatient diagnostic services, including CTs, MRIs and cardiac catheterizations.
These increases contributed to an increase in our same-hospital outpatient factor to 2.15 compared
to 2.04 in the same period last year. Our revenues per equivalent admission on a same-hospital
basis increased 4.1% to $7,486 during the three months ended September 30, 2009 as compared to
$7,191 for the same period last year. Similarly, these increases are
the result of increases in the utilization of our laboratory testing
services, an increase in our emergency rooms visits and increases in
our other higher reimbursement outpatient diagnostic services.
Additionally, we have experienced increases in the average acuity of our services provided, as
evidenced by a 3.2% increase in our Medicare case mix index on a
same-hospital basis to 1.30 as compared to 1.26 in the same period
last year, as well
as favorable commercial
pricing, including third party payor contracting and Medicares hospital market basket updates.
Expenses
Salaries and Benefits
The following table summarizes our salaries and benefits, man-hours per equivalent admission
and salaries and benefits per equivalent admission for the periods presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, |
|
|
|
|
|
|
|
|
|
|
% of |
|
|
|
|
|
% of |
|
Increase |
|
% Increase |
|
|
2009 |
|
Revenues |
|
2008 |
|
Revenues |
|
(Decrease) |
|
(Decrease) |
Salaries and benefits (dollars in millions) |
|
$ |
295.8 |
|
|
|
39.7 |
% |
|
$ |
265.6 |
|
|
|
39.3 |
% |
|
$ |
30.2 |
|
|
|
11.5 |
% |
Man-hours per equivalent admission |
|
|
92.6 |
|
|
|
N/A |
|
|
|
92.3 |
|
|
|
N/A |
|
|
|
0.3 |
|
|
|
0.3 |
% |
Salaries and benefits per equivalent admission |
|
$ |
2,924 |
|
|
|
N/A |
|
|
$ |
2,804 |
|
|
|
N/A |
|
|
$ |
120 |
|
|
|
4.3 |
% |
For the three months ended September 30, 2009, our salaries and benefits expense increased by
$30.2 million to $295.8 million, or 11.5%, as compared to $265.6 million for the same period last
year. Of this increase, $13.4 million, or 44.4%, was attributable to our Acquisition. Additionally,
our salaries and benefits expense increased for the three months ended September 30, 2009, as
compared to the same period last year, as a result of annual compensation increases for our
employees, higher benefit expenses plus the impact of an increasing number of employed physicians
and their related support staff.
28
Our benefit expenses have increased as a result of higher employee medical benefit costs as
well as an increase in our retirement plan expenses. Our retirement plan expenses, which increased
by $1.7 million during the three months ended September 30, 2009 as compared to the same period
last year, was the result of an absence of available ESOP share forfeitures, which reduced our
required cash contributions to our defined contribution retirement plan during the same period last
year.
Finally, the number of our employed physicians increased by 56 to 290 from 234 from the same
period last year and the number of employed physicians and their related support staff increased by
181 to 880 from 699 from the same period last year. The increase in our employed physicians and
their related support staff resulted in an increase of $6.6 million in our salaries and benefits
expense for the three months ended September 30, 2009 as compared to the same period last year. As
we continue to employ an increasing number of medical professionals, including physicians, we
anticipate that salaries and benefits as a percentage of revenues will increase in future periods.
Increases in our salaries and benefits expense were partially offset by improvements in our
contract labor expense, which is a component of salaries and benefits.
Supplies
The following table summarizes our supplies and supplies per equivalent admission for the
periods presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, |
|
|
|
|
|
|
|
|
|
|
% of |
|
|
|
|
|
% of |
|
Increase |
|
% Increase |
|
|
2009 |
|
Revenues |
|
2008 |
|
Revenues |
|
(Decrease) |
|
(Decrease) |
Supplies (dollars in millions) |
|
$ |
102.3 |
|
|
|
13.7 |
% |
|
$ |
93.0 |
|
|
|
13.8 |
% |
|
$ |
9.3 |
|
|
|
10.1 |
% |
Supplies per equivalent admission |
|
$ |
1,022 |
|
|
|
N/A |
|
|
$ |
987 |
|
|
|
N/A |
|
|
$ |
35 |
|
|
|
3.5 |
% |
For the three months ended September 30, 2009, our supplies expense increased to $102.3
million, or 10.1%, as compared to $93.0 million for the same period last year. Of this increase,
$4.7 million, or 50.5%, was attributable to our Acquisition. Additionally, our supplies per
equivalent admission increased 3.5% to $1,022 as compared to $987 for the same period last year.
Supplies per equivalent admission increased as a result of a higher utilization of more expensive
supplies in areas such as orthopedics, cardiac devices and spine and bone as well as an increase in
our pharmacy supplies expense. As a percentage of revenues, our supplies expense decreased slightly
to 13.7% for the three months ended September 30, 2009 as compared to 13.8% for the same period
last year, as a result of our continuing efforts to effectively manage our supply costs and
increased synergies based on our participation in a group purchasing organization.
Other Operating Expenses
The following table summarizes our other operating expenses for the periods presented (dollars
in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, |
|
|
|
|
|
|
|
|
|
|
|
|
|
% of |
|
|
|
|
|
|
% of |
|
|
Increase |
|
|
% Increase |
|
|
|
2009 |
|
|
Revenues |
|
|
2008 |
|
|
Revenues |
|
|
(Decrease) |
|
|
(Decrease) |
|
Professional fees |
|
$ |
18.9 |
|
|
|
2.5 |
% |
|
$ |
16.6 |
|
|
|
2.5 |
% |
|
$ |
2.3 |
|
|
|
14.2 |
% |
Utilities |
|
|
13.3 |
|
|
|
1.8 |
|
|
|
14.2 |
|
|
|
2.1 |
|
|
|
(0.9 |
) |
|
|
(6.6 |
) |
Repairs and maintenance |
|
|
16.0 |
|
|
|
2.2 |
|
|
|
14.6 |
|
|
|
2.2 |
|
|
|
1.4 |
|
|
|
9.8 |
|
Rents and leases |
|
|
7.1 |
|
|
|
1.0 |
|
|
|
6.7 |
|
|
|
1.0 |
|
|
|
0.4 |
|
|
|
5.9 |
|
Insurance |
|
|
9.7 |
|
|
|
1.3 |
|
|
|
10.4 |
|
|
|
1.5 |
|
|
|
(0.7 |
) |
|
|
(7.0 |
) |
Physician recruiting |
|
|
6.7 |
|
|
|
0.9 |
|
|
|
6.1 |
|
|
|
0.9 |
|
|
|
0.6 |
|
|
|
8.5 |
|
Contract services |
|
|
36.2 |
|
|
|
4.9 |
|
|
|
33.9 |
|
|
|
5.0 |
|
|
|
2.3 |
|
|
|
6.8 |
|
Non-income taxes |
|
|
10.5 |
|
|
|
1.4 |
|
|
|
10.4 |
|
|
|
1.5 |
|
|
|
0.1 |
|
|
|
0.7 |
|
Other |
|
|
16.0 |
|
|
|
2.0 |
|
|
|
15.4 |
|
|
|
2.3 |
|
|
|
0.6 |
|
|
|
3.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
134.4 |
|
|
|
18.0 |
% |
|
$ |
128.3 |
|
|
|
19.0 |
% |
|
$ |
6.1 |
|
|
|
4.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended September 30, 2009, our other operating expenses increased to
$134.4 million, or 4.6%, as compared to $128.3 million for the same period last year. Of this
increase, $4.8 million, or 78.7%, was attributable to our Acquisition. Of the remaining $1.3
million increase in other operating expenses, the majority was the result of increases in
professional fees.
29
As a shortage of physicians continues to become more acute, we have experienced increasing
professional fees in areas such as anesthesiology and emergency room physician coverage. We expect
this trend to continue and that professional fees as a percentage of revenues will increase in
future periods.
Provision for Doubtful Accounts
The following table summarizes our provision for doubtful accounts and related key indicators
for the periods presented (dollars in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, |
|
|
|
|
|
|
|
|
|
|
% of |
|
|
|
|
|
% of |
|
Increase |
|
% Increase |
|
|
2009 |
|
Revenues |
|
2008 |
|
Revenues |
|
(Decrease) |
|
(Decrease) |
Provision for doubtful accounts |
|
$ |
98.7 |
|
|
|
13.3 |
% |
|
$ |
78.9 |
|
|
|
11.7 |
% |
|
$ |
19.8 |
|
|
|
25.2 |
% |
Related key indicators: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charity care write-offs |
|
$ |
16.4 |
|
|
|
0.9 |
% |
|
$ |
13.4 |
|
|
|
0.8 |
% |
|
$ |
3.0 |
|
|
|
21.6 |
% |
Self-pay revenues, net of charity care
write-offs and uninsured discounts |
|
$ |
100.4 |
|
|
|
13.5 |
% |
|
$ |
85.1 |
|
|
|
12.6 |
% |
|
$ |
15.3 |
|
|
|
18.0 |
% |
Net revenue days outstanding (at end of period) |
|
|
41.0 |
|
|
|
N/A |
|
|
|
42.6 |
|
|
|
N/A |
|
|
|
(1.6 |
) |
|
|
(3.8 |
)% |
Our provision for doubtful accounts increased by $19.8 million, or 25.2%, to $98.7 million for
the three months ended September 30, 2009, as compared to the same period last year. This increase
was primarily the result of an increase in our self-pay revenues as there were significant
increases in unemployment in most of our communities within the past
year.
The majority of our same-hospital increases in self-pay
revenues were the result of increases in outpatient revenue primarily
driven by an increase in our emergency room visits.
This increase was
partially offset by an increase in both up-front cash collections and cash collections related to
our insured receivables for the three months ended September 30, 2009, as compared to the same
period last year. The provision for doubtful accounts relates principally to self-pay amounts due
from patients. The provision and allowance for doubtful accounts are critical accounting estimates
and are further discussed in Part II, Item 7. Managements Discussion and Analysis of Financial
Condition and Results of Operations, Critical Accounting Estimates, in our 2008 Annual Report on
Form 10-K.
Depreciation and Amortization
For the three months ended September 30, 2009, our depreciation and amortization expense
increased to $35.1 million, or 8.6%, as compared to $32.2 million for the same period last year. Of
this increase, $1.5 million, or 51.7%, was attributable to our Acquisition. Additionally, our
depreciation and amortization expense increased as a result of capital improvement projects and
upgrades of diagnostic equipment completed during the second half of 2008 and the first half of
2009. As a percentage of revenues, our depreciation and amortization remained consistent at 4.8%
for both the three months ended September 30, 2009 and 2008.
Interest Expense
Our interest expense decreased by $1.5 million, or 6.0%, to $25.5 million, for the three
months ended September 30, 2009, as compared to $27.0 million for the same period last year. The
decrease in interest expense for the three months ended September 30, 2009, as compared to the same
period last year was largely attributable to declines in interest rates that favorably impacted our
interest expense on our Term B loans. Additionally, as the notional amount of our interest rate
swap declined to $600.0 million on November 28, 2008, and a larger amount of our total outstanding
debt became subject to floating interest rates that were lower than in the same period last year.
This decrease was partially offset by an increase in our convertible debt interest expense. As a
result of our adoption of ASC 470-20, we recognized additional interest expense on our convertible
debt instruments of approximately $5.3 million and $5.0 million for the three months ended
September 30, 2009 and 2008, respectively. For a further discussion of the impact of our adoption
of ASC 470-20, please refer to Note 2 to our accompanying condensed consolidated financial
statements included elsewhere in this report. For a further discussion of our debt and
corresponding interest rates, see Liquidity and Capital Resources Debt.
30
Provision for Income Taxes
The provision for income taxes was $20.5 million, or 2.7% of revenues for the three months
ended September 30, 2009, as compared to $20.1 million, or 3.0% of revenues for the same period
last year. Our effective tax rate decreased to 39.1% for the three months ended September 30, 2009,
as compared to 41.3% for the same period last year. The decrease in our effective tax rate to 39.1%
for the three months ended September 30, 2009 was largely due to the absence of a sizable
non-deductible portion of non-cash ESOP expense for 2009 as compared to 2008. Additionally, our
effective tax rate decreased as a result of a lower projected state tax provision and reduced
projected deferred tax valuation allowances.
For the Nine Months Ended September 30, 2009 and 2008
Revenues
The following table shows our revenues and the key drivers of our revenues for the periods
presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended |
|
|
|
|
|
|
September 30, |
|
Increase |
|
% Increase |
|
|
2009 |
|
2008 |
|
(Decrease) |
|
(Decrease) |
Continuing operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues (dollars in millions) |
|
$ |
2,215.8 |
|
|
$ |
2,025.9 |
|
|
$ |
189.9 |
|
|
|
9.4 |
% |
Admissions |
|
|
141,587 |
|
|
|
143,039 |
|
|
|
(1,452 |
) |
|
|
(1.0 |
) |
Equivalent admissions |
|
|
295,492 |
|
|
|
284,218 |
|
|
|
11,274 |
|
|
|
4.0 |
|
Revenues per equivalent admission |
|
$ |
7,499 |
|
|
$ |
7,128 |
|
|
$ |
371 |
|
|
|
5.2 |
|
Medicare case mix index |
|
|
1.28 |
|
|
|
1.27 |
|
|
|
0.01 |
|
|
|
0.8 |
|
Average length of stay (days) |
|
|
4.3 |
|
|
|
4.3 |
|
|
|
|
|
|
|
|
|
Inpatient surgeries |
|
|
41,245 |
|
|
|
41,463 |
|
|
|
(218 |
) |
|
|
(0.5 |
) |
Outpatient surgeries |
|
|
113,697 |
|
|
|
108,982 |
|
|
|
4,715 |
|
|
|
4.3 |
|
Emergency room visits |
|
|
703,122 |
|
|
|
663,703 |
|
|
|
39,419 |
|
|
|
5.9 |
|
Outpatient factor |
|
|
2.09 |
|
|
|
1.99 |
|
|
|
0.10 |
|
|
|
5.0 |
|
|
Same-hospital: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues (dollars in millions) |
|
$ |
2,131.0 |
|
|
$ |
2,025.9 |
|
|
$ |
105.1 |
|
|
|
5.2 |
% |
Admissions |
|
|
135,814 |
|
|
|
143,039 |
|
|
|
(7,225 |
) |
|
|
(5.1 |
) |
Equivalent admissions |
|
|
284,123 |
|
|
|
284,218 |
|
|
|
(95 |
) |
|
|
|
|
Revenues per equivalent admission |
|
$ |
7,500 |
|
|
$ |
7,128 |
|
|
$ |
372 |
|
|
|
5.2 |
|
Medicare case mix index |
|
|
1.29 |
|
|
|
1.27 |
|
|
|
0.02 |
|
|
|
1.6 |
|
Average length of stay (days) |
|
|
4.3 |
|
|
|
4.3 |
|
|
|
|
|
|
|
|
|
Inpatient surgeries |
|
|
39,450 |
|
|
|
41,463 |
|
|
|
(2,013 |
) |
|
|
(4.9 |
) |
Outpatient surgeries |
|
|
108,677 |
|
|
|
108,982 |
|
|
|
(305 |
) |
|
|
(0.3 |
) |
Emergency room visits |
|
|
674,720 |
|
|
|
663,703 |
|
|
|
11,017 |
|
|
|
1.7 |
|
Outpatient factor |
|
|
2.09 |
|
|
|
1.99 |
|
|
|
0.10 |
|
|
|
5.0 |
|
The following table shows the sources of our revenues by payor for the periods presented,
expressed as a percentage of total revenues, including adjustments to estimated reimbursement
amounts:
|
|
|
|
|
|
|
|
|
|
|
Nine Months |
|
|
Ended |
|
|
September 30, |
|
|
2009 |
|
2008 |
Medicare |
|
|
29.8 |
% |
|
|
31.4 |
% |
Medicaid |
|
|
10.3 |
|
|
|
9.6 |
|
HMOs, PPOs and other private insurers |
|
|
44.1 |
|
|
|
44.2 |
|
Self-Pay |
|
|
13.1 |
|
|
|
12.0 |
|
Other |
|
|
2.7 |
|
|
|
2.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
|
|
|
|
|
|
|
31
Revenue for the nine months ended September 30, 2009 were $2,215.8 million, an increase
of $189.9 million, or 9.4%, over the same period last year. Of this increase $84.9 million, or
44.7%, was attributable to our Acquisition. The remaining $105.0 million, or 55.3%, of the
increase was derived from our same-hospital operations.
Same-hospital admissions for the nine months ended September 30, 2009 declined by 5.1% to
135,814 compared to 143,039 in the same period last year. We continue to experience declines in
our inpatient surgeries as well as a shift from inpatient admissions to outpatient observations for
a portion of our patient population.
Same-hospital equivalent admissions for the nine months ended September 30, 2009 were
consistent at 284,123 compared to 284,218 in the same period last year. Despite declining
inpatient admissions, our same-hospital equivalent admissions remained consistent primarily as a
result of increases in the utilization of our laboratory testing
services, an increase in our emergency room visits and increases in our
other higher reimbursement outpatient diagnostic services, including CTs, MRIs
and cardiac catheterizations. These increases contributed to an increase in our same-hospital
outpatient factor to 2.09 compared to 1.99 in the same period last year. Our revenues per
equivalent admission on a same-hospital basis increased 5.2% to $7,500 during the nine months ended
September 30, 2009 as compared to $7,128 for the same period last year. Similarly, these increases
are the result of increases in the utilization of our laboratory testing
services, an increase in emergency room visits and increases in our
other higher reimbursement outpatient diagnostic services.
Additionally, we have experienced
increases in the average acuity of our services provided, as
evidenced by a 1.6% increase in our Medicare case mix index on a
same-hospital basis to 1.29 as compared to 1.27 in the same period
last year,
as well as
favorable commercial pricing, including third party payor contracting and Medicares
hospital market basket updates.
Additionally, during the nine months ended September 30, 2009, we recognized approximately
$5.0 million in revenues related to the favorable settlement of
a Kentucky Medicaid rate appeal that covered the period July 1, 2004 through June 30, 2009.
Expenses
Salaries and Benefits
The following table summarizes our salaries and benefits, man-hours per equivalent admission
and salaries and benefits per equivalent admission for the periods presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, |
|
|
|
|
|
|
|
|
|
|
% of |
|
|
|
|
|
% of |
|
Increase |
|
% Increase |
|
|
2009 |
|
Revenues |
|
2008 |
|
Revenues |
|
(Decrease) |
|
(Decrease) |
Salaries and benefits (dollars in millions) |
|
$ |
875.0 |
|
|
|
39.5 |
% |
|
$ |
797.5 |
|
|
|
39.4 |
% |
|
$ |
77.5 |
|
|
|
9.7 |
% |
Man-hours per equivalent admission |
|
|
92.0 |
|
|
|
N/A |
|
|
|
92.0 |
|
|
|
N/A |
|
|
|
|
|
|
|
|
% |
Salaries and benefits per equivalent admission |
|
$ |
2,944 |
|
|
|
N/A |
|
|
$ |
2,793 |
|
|
|
N/A |
|
|
$ |
151 |
|
|
|
5.4 |
% |
For the nine months ended September 30, 2009, our salaries and benefits expense increased by
$77.5 million to $875.0 million, or 9.7%, as compared to $797.5 million for the same period last
year. Of this increase, $36.8 million, or 47.5%, was attributable to our Acquisition. Additionally,
our salaries and benefits expense increased for the nine months ended September 30, 2009 as
compared to the same period last year as a result of annual compensation increases for our
employees, higher benefit expenses plus the impact of an increasing number of employed physicians
and their related support staff.
Our benefit expenses have increased as a result of higher employee medical benefit costs as well as an increase
in our retirement plan expenses. Our retirement plan expenses, which increased by $5.6 million during the nine
months ended September 30, 2009 as compared to the same period last year, was the result of an absence of
available ESOP share forfeitures, which reduced our required
cash contributions to our defined contribution retirement plan during the same period last year.
Finally, the number of our employed physicians increased by 56 to 290 from 234 from the same
period last year and the number of employed physicians and their related support staff increased
by 181 to 880 from 699 from the same period last year.
The increase in our employed physicians and their related support staff resulted in an increase
of $15.3 million in our salaries and benefits expense for the nine months ended September 30, 2009 as
compared to the same period last year. As we continue to employ an increasing number of medical
professionals, including physicians, we anticipate that salaries and benefits as a percentage of
revenues will increase in future periods. Increases in our salaries and benefits expense were
partially offset by improvements in
our contract labor expense, which is a component of salaries and benefits.
32
Supplies
The following table summarizes our supplies and supplies per equivalent admission for the
periods presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, |
|
|
|
|
|
|
|
|
|
|
% of |
|
|
|
|
|
% of |
|
Increase |
|
% Increase |
|
|
2009 |
|
Revenues |
|
2008 |
|
Revenues |
|
(Decrease) |
|
(Decrease) |
Supplies (dollars in millions) |
|
$ |
304.2 |
|
|
|
13.7 |
% |
|
$ |
279.3 |
|
|
|
13.8 |
% |
|
$ |
24.9 |
|
|
|
9.0 |
% |
Supplies per equivalent admission |
|
$ |
1,026 |
|
|
|
N/A |
|
|
$ |
980 |
|
|
|
N/A |
|
|
$ |
46 |
|
|
|
4.7 |
% |
For the nine months ended September 30, 2009, our supplies expense increased by $24.9 million
to $304.2 million, or 9.0%, as compared to $279.3 million for the same period last year. Of this
increase, $13.4 million, or 53.8%, was attributable to our Acquisition. Additionally, our supplies
per equivalent admission increased 4.7% to $1,026, as compared to $980 for the same period last
year. Supplies per equivalent admission increased as a result of a higher utilization of more
expensive supplies in areas such as orthopedics, cardiac devices and spine and bone. As a
percentage of revenues, our supplies expense decreased slightly to 13.7% for the nine months ended
September 30, 2009 as compared to 13.8% for the same period last year, as a result of our
continuing efforts to effectively manage our supply costs and increased synergies based on our
participation in a group purchasing organization.
Other Operating Expenses
The following table summarizes our other operating expenses for the periods presented (dollars
in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, |
|
|
|
|
|
|
|
|
|
|
|
|
|
% of |
|
|
|
|
|
|
% of |
|
|
Increase |
|
|
% Increase |
|
|
|
2009 |
|
|
Revenues |
|
|
2008 |
|
|
Revenues |
|
|
(Decrease) |
|
|
(Decrease) |
|
Professional fees. |
|
$ |
54.1 |
|
|
|
2.4 |
% |
|
$ |
47.8 |
|
|
|
2.3 |
% |
|
$ |
6.3 |
|
|
|
13.4 |
% |
Utilities |
|
|
38.4 |
|
|
|
1.7 |
|
|
|
38.6 |
|
|
|
1.9 |
|
|
|
(0.2 |
) |
|
|
(0.6 |
) |
Repairs and maintenance |
|
|
48.5 |
|
|
|
2.2 |
|
|
|
42.1 |
|
|
|
2.1 |
|
|
|
6.4 |
|
|
|
15.1 |
|
Rents and leases |
|
|
21.3 |
|
|
|
1.0 |
|
|
|
19.5 |
|
|
|
1.0 |
|
|
|
1.8 |
|
|
|
9.4 |
|
Insurance |
|
|
35.1 |
|
|
|
1.6 |
|
|
|
31.6 |
|
|
|
1.6 |
|
|
|
3.5 |
|
|
|
11.0 |
|
Physician recruiting |
|
|
18.2 |
|
|
|
0.8 |
|
|
|
16.2 |
|
|
|
0.8 |
|
|
|
2.0 |
|
|
|
12.1 |
|
Contract services |
|
|
108.7 |
|
|
|
4.9 |
|
|
|
101.4 |
|
|
|
4.9 |
|
|
|
7.3 |
|
|
|
7.2 |
|
Non-income taxes |
|
|
31.0 |
|
|
|
1.4 |
|
|
|
29.1 |
|
|
|
1.4 |
|
|
|
1.9 |
|
|
|
6.4 |
|
Other |
|
|
50.4 |
|
|
|
2.3 |
|
|
|
45.9 |
|
|
|
2.3 |
|
|
|
4.5 |
|
|
|
9.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
405.7 |
|
|
|
18.3 |
% |
|
$ |
372.2 |
|
|
|
18.3 |
% |
|
$ |
33.5 |
|
|
|
9.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the nine months ended September 30, 2009, our other operating expenses increased to $405.7
million, or 9.0%, as compared to $372.2 million for the same period last year. Of this increase,
$12.4 million, or 37.0%, was attributable to our Acquisition. Of the remaining $21.1 million
increase in other operating expenses, the majority was the result of increases in
professional fees, repairs and maintenance, insurance, contract services and other expenses.
As a shortage of physicians continues to become more acute, we have experienced increasing
professional fees in areas such as radiology, anesthesiology, emergency room physician coverage and
hospitalists. We expect this trend to continue and that professional fees as a percentage of
revenues will increase in future periods.
Our repairs and maintenance expense increased primarily as a result of an increase in new
diagnostic equipment covered under maintenance contracts, the higher cost of maintaining equipment
as warranties expire and a number of repair projects at many of our hospitals.
The increase in our insurance expense during the nine months ended September 30, 2009, as
compared to the same period last year, was the result of an increase in our reserves for
professional and general liability claims. Specifically, we have increased our estimated exposure
on certain potential and outstanding claims covered under our professional and general liability
insurance program as well as claims covered under our captive insurance company.
33
Our contract services expense increased primarily as a result of our Acquisition as well as
increases in our charitable program expenses and legal fees.
Provision for Doubtful Accounts
The following table summarizes our provision for doubtful accounts and related key indicators
for the periods presented (dollars in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, |
|
|
|
|
|
|
|
|
|
|
% of |
|
|
|
|
|
% of |
|
Increase |
|
% Increase |
|
|
2009 |
|
Revenues |
|
2008 |
|
Revenues |
|
(Decrease) |
|
(Decrease) |
Provision for doubtful accounts |
|
$ |
281.1 |
|
|
|
12.7 |
% |
|
$ |
234.7 |
|
|
|
11.6 |
% |
|
$ |
46.4 |
|
|
|
19.8 |
% |
Related key indicators: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charity care write-offs |
|
$ |
44.9 |
|
|
|
0.8 |
% |
|
$ |
40.0 |
|
|
|
0.8 |
% |
|
$ |
4.9 |
|
|
|
12.1 |
% |
Self-pay revenues, net of
charity care write-offs and
uninsured discounts |
|
$ |
289.5 |
|
|
|
13.1 |
% |
|
$ |
242.4 |
|
|
|
12.0 |
% |
|
$ |
47.1 |
|
|
|
19.4 |
% |
Net revenue days outstanding (at
end of period) |
|
|
41.0 |
|
|
|
N/A |
|
|
|
42.6 |
|
|
|
N/A |
|
|
|
(1.6 |
) |
|
|
(3.8 |
)% |
Our provision for doubtful accounts increased by $46.4 million, or 19.8%, to $281.1 million
for the nine months ended September 30, 2009, as compared to $234.7 million in the same period last
year. This increase was primarily the result of an increase in our self-pay revenues as there were
significant increases in unemployment in most of our communities within the past year.
The majority of our same-hospital increases in self-pay
revenues were the result of increases in outpatient revenue primarily
driven by an increase in our emergency room visits.
This
increase was partially offset by an increase in both up-front cash collections and cash collections
related to our insured receivables for the nine months ended September 30, 2009, as compared to the
same period last year. The provision for doubtful accounts relates principally to self-pay amounts
due from patients. The provision and allowance for doubtful accounts are critical accounting
estimates and are further discussed in Part II, Item 7. Managements Discussion and Analysis of
Financial Condition and Results of Operations, Critical Accounting Estimates, in our 2008 Annual
Report on Form 10-K.
Depreciation and Amortization
For the nine months ended September 30, 2009, our depreciation and amortization expense
increased to $106.1 million, or 8.5%, as compared to $97.8 million for the same period last year.
Of this increase, $3.8 million, or 45.8%, was attributable to our Acquisition. Additionally, our
depreciation and amortization expense increased as a result of capital improvement projects and
upgrades of diagnostic equipment completed during the second half of 2008 and the first half of
2009. As a percentage of revenues, our depreciation and amortization remained consistent at 4.8%
for both the nine months ended September 30, 2009 and 2008.
Interest Expense
Our interest expense decreased by $3.5 million, or 4.5%, to $77.2 million for the nine months
ended September 30, 2009 as compared to $80.7 million for the same period last year. The decrease
in interest expense for the nine months ended September 30, 2009, as compared to the same period
last year was largely attributable to declines in interest rates that favorably impacted our
interest expense on our Term B loans. Additionally, as the notional amount of our interest rate
swap declined to $600.0 million on November 28, 2008, and a larger amount of our total outstanding
debt became subject to floating interest rates that were lower than in the same period last year.
This decrease was partially offset by an increase in our convertible debt interest expense. As a
result of our adoption of ASC 470-20, we recognized additional interest expense on our convertible
debt instruments of approximately $15.6 million and $14.6 million for the nine months ended
September 30, 2009 and 2008, respectively. For a further discussion of the impact of our adoption
of ASC 470-20, please refer to Note 2 to our accompanying condensed consolidated financial
statements included elsewhere in this report. For a further discussion of our debt and
corresponding interest rates, see Liquidity and Capital Resources Debt.
34
Provision for Income Taxes
The provision for income taxes was $64.2 million, or 2.9% of revenues for the nine months
ended September 30, 2009, as compared to $64.6 million, or 3.2% of revenues for the same period
last year. Our effective tax rate decreased to 39.0% for the nine months ended September 30, 2009,
as compared to 40.2% for the same period last year. The decrease in our effective tax rate to 39.0%
for the nine months ended September 30, 2009 was largely due to the absence of a sizable
non-deductible portion of non-cash ESOP expense for 2009 as compared to 2008. Additionally, our
effective tax rate decreased as a result of a lower projected state tax provision and reduced
projected deferred tax valuation allowances.
Liquidity and Capital Resources
Liquidity
Our primary sources of liquidity are cash flows provided by our operations and our debt
borrowings. We believe that our internally generated cash flows and the amounts available under our
debt agreements will be adequate to service existing debt, finance internal growth, expend funds on
capital expenditures and fund certain small to mid-size hospital acquisitions.
The following table presents summarized cash flow information for the three and nine months
ended September 30, 2009 and 2008 (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
September 30, |
|
|
September 30, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
Net cash flows provided by continuing operations |
|
$ |
70.3 |
|
|
$ |
82.1 |
|
|
$ |
229.3 |
|
|
$ |
260.3 |
|
Less: Purchase of property and equipment |
|
|
(33.7 |
) |
|
|
(37.5 |
) |
|
|
(118.8 |
) |
|
|
(111.5 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Free operating cash flow |
|
|
36.6 |
|
|
|
44.6 |
|
|
|
110.5 |
|
|
|
148.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisitions, net of cash acquired |
|
|
|
|
|
|
(1.3 |
) |
|
|
(79.7 |
) |
|
|
(10.6 |
) |
Proceeds from borrowings |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.4 |
|
Payments on borrowings |
|
|
|
|
|
|
(10.0 |
) |
|
|
(13.5 |
) |
|
|
(10.0 |
) |
Repurchases of common stock |
|
|
(0.4 |
) |
|
|
(0.1 |
) |
|
|
(3.0 |
) |
|
|
(118.2 |
) |
Proceeds from exercise of stock options |
|
|
0.3 |
|
|
|
3.3 |
|
|
|
9.9 |
|
|
|
3.4 |
|
Distributions to noncontrolling interests, net of
proceeds |
|
|
(0.7 |
) |
|
|
(1.4 |
) |
|
|
(1.4 |
) |
|
|
(2.4 |
) |
Proceeds from the issuance (purchase) of redeemable
noncontrolling interests |
|
|
|
|
|
|
2.2 |
|
|
|
(0.8 |
) |
|
|
2.2 |
|
Capital lease payments and other |
|
|
(1.9 |
) |
|
|
0.1 |
|
|
|
(3.6 |
) |
|
|
(4.9 |
) |
Other |
|
|
0.6 |
|
|
|
(4.4 |
) |
|
|
4.9 |
|
|
|
(4.1 |
) |
Cash flows from operations used in discontinued
operations |
|
|
3.9 |
|
|
|
(6.1 |
) |
|
|
1.0 |
|
|
|
(11.2 |
) |
Cash flows from investing activities provided by
(used in) discontinued operations |
|
|
9.1 |
|
|
|
|
|
|
|
19.5 |
|
|
|
(5.0 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in cash and cash equivalents |
|
$ |
47.5 |
|
|
$ |
26.9 |
|
|
$ |
43.8 |
|
|
$ |
(1.6 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
The non-GAAP metric of free operating cash flow is an important liquidity measure for us. Our
computation of free operating cash flow consists of net cash flows provided by continuing
operations less cash flows used for the purchase of property and equipment. Our cash flows provided
by continuing operating activities during the three and nine months ended September 30, 2009, were
negatively impacted by an increase in cash payments made for income taxes, differences in the
timing of payments for salaries and wages and accounts payable, and additional cash payments made
for operating activities related to our Acquisition as compared to the three and nine months ended
September 30, 2008.
We believe that free operating cash flow is useful to investors and management as a measure of
the ability of our business to generate cash and to repay and incur additional debt. Computations
of free operating cash flow may differ from company to company. Therefore, free operating cash flow
should be used as a complement to, and in conjunction with, our condensed consolidated statements
of cash flows presented in our condensed consolidated financial statements included elsewhere in
this report.
35
Capital Expenditures
We have also made significant, targeted investments at our hospitals to add new technologies,
modernize facilities and expand the services available. These investments should assist in our
efforts to attract and retain physicians, to offset outmigration of patients and to make our
hospitals more desirable to our employees and potential patients.
The following table reflects our capital expenditures for the three and nine months ended
September 30, 2009 and 2008 (dollars in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
September 30, |
|
|
September 30, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
Capital projects |
|
$ |
21.1 |
|
|
$ |
28.0 |
|
|
$ |
79.4 |
|
|
$ |
78.6 |
|
Routine |
|
|
9.9 |
|
|
|
9.1 |
|
|
|
30.9 |
|
|
|
31.3 |
|
Information systems |
|
|
2.7 |
|
|
|
0.4 |
|
|
|
8.5 |
|
|
|
1.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
33.7 |
|
|
$ |
37.5 |
|
|
$ |
118.8 |
|
|
$ |
111.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation expense |
|
$ |
34.8 |
|
|
$ |
31.9 |
|
|
$ |
105.2 |
|
|
$ |
96.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratio of capital expenditures to depreciation expense |
|
|
96.8 |
% |
|
|
117.6 |
% |
|
|
112.9 |
% |
|
|
115.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
We have a formal and intensive review procedure for the authorization of capital expenditures.
The most important financial measure of acceptability for a discretionary capital project is
whether its projected discounted cash flow return on investment exceeds our projected cost of
capital for that project. We expect to continue to invest in information systems, modern
technologies, emergency room and operating room expansions, the construction of medical office
buildings for physician expansion and the reconfiguration of the flow of patient care.
Debt
An analysis and roll-forward of our long-term debt, including current portion, for the nine
months ended September 30, 2009 is as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of |
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
Payments of |
|
|
Convertible Debt |
|
|
|
|
|
|
September 30, |
|
|
|
2008 |
|
|
Borrowings |
|
|
Discounts |
|
|
Other (a) |
|
|
2009 |
|
Senior Secured Credit Facilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Term B Loans |
|
$ |
706.4 |
|
|
$ |
(13.5 |
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
692.9 |
|
Revolving Loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Province 71/2% Senior Subordinated
Notes |
|
|
6.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6.1 |
|
31/4% Debentures |
|
|
225.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
225.0 |
|
31/2% Notes |
|
|
575.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
575.0 |
|
Unamortized discounts on 31/4%
Debentures and 31/2% Notes |
|
|
(123.5 |
) |
|
|
|
|
|
|
15.6 |
|
|
|
|
|
|
|
(107.9 |
) |
Capital leases |
|
|
4.2 |
|
|
|
(1.9 |
) |
|
|
|
|
|
|
1.3 |
|
|
|
3.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
1,393.2 |
|
|
$ |
(15.4 |
) |
|
$ |
15.6 |
|
|
$ |
1.3 |
|
|
$ |
1,394.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
Represents the assumption of capital lease obligations in connection with the Companys
acquisition of Rockdale effective February 1, 2009. |
36
We use leverage, or our total debt to total capitalization ratio, to make financing decisions.
The following table illustrates our financial statement leverage and the classification of our debt
at September 30, 2009 and December 31, 2008 (dollars in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, |
|
|
December 31, |
|
|
Increase |
|
|
|
2009 |
|
|
2008 |
|
|
(Decrease) |
|
Current portion of long-term debt |
|
$ |
1.1 |
|
|
$ |
1.1 |
|
|
$ |
|
|
Long-term debt |
|
|
1,393.6 |
|
|
|
1,392.1 |
|
|
|
1.5 |
|
Unamortized discounts of convertible debt instruments (a) |
|
|
107.9 |
|
|
|
123.5 |
|
|
|
(15.6 |
) |
|
|
|
|
|
|
|
|
|
|
Total debt, excluding unamortized discounts of
convertible debt instruments |
|
|
1,502.6 |
|
|
|
1,516.7 |
|
|
|
(14.1 |
) |
Total LifePoint Hospitals, Inc. stockholders equity (a). |
|
|
1,780.6 |
|
|
|
1,652.0 |
|
|
|
128.6 |
|
|
|
|
|
|
|
|
|
|
|
Total capitalization |
|
$ |
3,283.2 |
|
|
$ |
3,168.7 |
|
|
$ |
114.5 |
|
|
|
|
|
|
|
|
|
|
|
Total debt to total capitalization |
|
|
45.8 |
% |
|
|
47.9 |
% |
|
(210bps) |
|
|
|
|
|
|
|
|
|
|
Percentage of: |
|
|
|
|
|
|
|
|
|
|
|
|
Fixed rate debt, excluding unamortized discounts of
convertible debt instruments (a) |
|
|
53.9 |
% |
|
|
53.4 |
% |
|
|
|
|
Variable rate debt (b) |
|
|
46.1 |
|
|
|
46.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of: |
|
|
|
|
|
|
|
|
|
|
|
|
Senior debt |
|
|
46.4 |
% |
|
|
46.8 |
% |
|
|
|
|
Subordinated debt, excluding unamortized discounts of
convertible debt instruments (a) |
|
|
53.6 |
|
|
|
53.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
Effective January 1, 2009, we adopted the provisions of ASC 470-20. The adoption of ASC
470-20 required us to retrospectively restate prior periods to separately reflect the
liability and equity components of our convertible debt instruments and to recognize interest
expense for the related debt at our market rate of borrowing for non-convertible debt
instruments as opposed to the explicit rate of our convertible debt instruments. Please refer
to Note 2 to our accompanying condensed consolidated financial statements included elsewhere
in this report for an additional discussion of the impact the adoption of ASC 470-20 had on
our total debt and stockholders equity. |
|
(b) |
|
The above calculation does not consider the effect of our interest rate swap. Our interest
rate swap mitigates a portion of our floating rate risk on our outstanding variable rate
borrowings which converts our variable rate debt to an annual fixed rate of 5.585%. Our
interest rate swap decreases our variable rate debt as a percentage of our outstanding debt
from 46.1% to 6.2% as of September 30, 2009 and from 46.6% to 7.0% as of December 31, 2008.
Please refer to Note 8 to our accompanying consolidated financial statements included
elsewhere in this report for a discussion of our interest rate swap agreement. |
Capital Resources
Senior Secured Credit Facilities
Terms
Our credit agreement with Citicorp North America, Inc. (CITI), as administrative agent, and
a syndicate of lenders (the Credit Agreement), as amended, provides for secured term A loans up
to $250.0 million (the Term A Loans), term B loans up to $1,450.0 million (the Term B Loans)
and revolving loans of up to $350.0 million (the Revolving Loans). In addition, the Credit
Agreement provides that we may request additional tranches of Term B Loans up to $400.0 million and
additional tranches of Revolving Loans up to $100.0 million, subject to Lender approval. The Term B
Loans mature on April 15, 2012 and are scheduled to be repaid beginning June 30, 2011 in four
installments totaling $692.9 million. The Term A Loans and Revolving Loans both mature on April 15,
2010. The Credit Agreement is guaranteed on a senior secured basis by our subsidiaries with certain
limited exceptions. The Term B Loans are subject to additional mandatory prepayments with a certain
percentage of excess cash flow as specifically defined in the Credit Agreement. Additionally, the
Credit Agreement provides for the issuance of letters of credit up to $75.0 million. Issued letters
of credit reduce the amounts available under our Revolving Loans. We anticipate working on a
maturity date extension for our Revolving Loans during the remainder of 2009 and the first quarter
of 2010.
37
Letters of Credit and Availability
As of September 30, 2009, we had $43.0 million in letters of credit outstanding that were
related to the self-insured retention level of our general and professional liability insurance and
workers compensation programs as security for payment of claims. Under the terms of the Credit
Agreement, Revolving Loans available for borrowing were $407.0 million as of September 30, 2009,
including the $100.0 million available under the additional tranche. Under the terms of the Credit
Agreement, the amount of Term A Loans and Term B Loans available for borrowing was $250.0 million
and $400.0 million, respectively, as of September 30, 2009, all of which is available under the
additional tranches.
Interest Rates
Interest on the outstanding balances of the Term B Loans is payable, at our option, at CITIs
base rate (the alternate base rate or ABR) plus a margin of 0.625% and/or at an adjusted London
Interbank Offered Rate (Adjusted LIBOR) plus a margin of 1.625%. Interest on the Revolving Loans
is payable at ABR plus a margin for ABR Revolving Loans or Adjusted LIBOR plus a margin for
eurodollar Revolving Loans. The margin on ABR Revolving Loans ranges from 0.25% to 1.25% based on
the total leverage ratio being less than 2.00:1.00 to greater than 4.50:1.00. The margin on the
eurodollar Revolving Loans ranges from 1.25% to 2.25% based on the total leverage ratio being less
than 2.00:1.00 to greater than 4.50:1.00.
As of September 30, 2009, the applicable annual interest rate under the Term B Loans was
2.02%, which was based on the 90-day Adjusted LIBOR plus the applicable margin. The 90-day Adjusted
LIBOR was 0.39% at September 30, 2009. The weighted-average applicable annual interest rate for the
three months and nine months ended September 30, 2009 under the Term B Loans was 2.22% and 2.81%,
respectively.
Covenants
The Credit Agreement requires us to satisfy certain financial covenants, including a minimum
interest coverage ratio and a maximum total leverage ratio. The minimum interest coverage ratio can
be no less than 3.50:1.00 for all periods ending after December 31, 2005. These calculations are
based on the trailing four quarters. The maximum total leverage ratios cannot exceed 4.00:1.00 for
the periods ending on September 30, 2009 through December 31, 2009 and 3.75:1.00 for the periods
ending thereafter. In addition, on an annualized basis, we are limited with respect to amounts we
may spend on capital expenditures. Such amounts cannot exceed 10.0% of revenues for all years
ending after December 31, 2006.
The financial covenant requirements and ratios are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Level at |
|
|
Requirement |
|
September 30, 2009 |
Minimum Interest Coverage Ratio |
|
|
³3.50:1.00 |
|
|
|
6.23 |
|
Maximum Total Leverage Ratio |
|
|
£4.00:1.00 |
|
|
|
3.11 |
|
In addition, the Credit Agreement contains customary affirmative and negative covenants, which
among other things, limit our ability to incur additional debt, create liens, pay dividends, effect
transactions with our affiliates, sell assets, pay subordinated debt, merge, consolidate, enter
into acquisitions and effect sale leaseback transactions.
Our Credit Agreement does not contain provisions that would accelerate the maturity date of
the loans under the Credit Agreement upon a downgrade in our credit rating. However, a downgrade in
the our credit rating could adversely affect our ability to obtain other capital sources in the
future and could increase our cost of borrowings.
38
31/2% Convertible Senior Subordinated Notes due May 15, 2014
Our 31/2% Notes bear interest at the rate of 31/2%
per year, payable semi-annually on May 15 and November 15. The 31/2% Notes
are convertible prior to March 15, 2014 under the following circumstances: (1) if the price of our
common stock reaches a specified threshold during specified periods; (2) if the trading price of
the 31/2% Notes is below a specified threshold; or (3) upon the occurrence of
specified corporate transactions or other events. On or after March 15, 2014, holders may convert
their 31/2% Notes at any time prior to the close of business on the scheduled
trading day immediately preceding May 15, 2014, regardless of whether any of the foregoing
circumstances has occurred.
Subject to certain exceptions, we will deliver cash and shares of our common stock upon
conversion of each $1,000 principal amount of our 31/2% Notes as follows: (i)
an amount in cash (the principal return) equal to the sum of, for each of the 20 volume-weighted
average price trading days during the conversion period, the lesser of the daily conversion value
for such volume-weighted average price trading day and $50; and (ii) a number of shares in an
amount equal to the sum of, for each of the 20 volume-weighted average price trading days during
the conversion period, any excess of the daily conversion value above $50. Our ability to pay the
principal return in cash is subject to important limitations imposed by the Credit Agreement and
other credit facilities or indebtedness we may incur in the future. If we do not make any payments
we are obligated to make under the terms of the 31/2% Notes, holders may
declare an event of default.
The initial conversion rate is 19.3095 shares of our common stock per $1,000 principal amount
of the 31/2% Notes (subject to certain events). This represents an initial
conversion price of approximately $51.79 per share of the Companys common stock. In addition, if
certain corporate transactions that constitute a change of control occur prior to maturity, we will
increase the conversion rate in certain circumstances.
Upon the occurrence of a fundamental change (as specified in the indenture), each holder of
the 31/2% Notes may require us to purchase some or all of the
31/2% Notes at a purchase price in cash equal to 100% of the principal amount
of the 31/2% Notes surrendered, plus any accrued and unpaid interest.
The indenture for the 31/2% Notes does not contain any financial
covenants or any restrictions on the payment of dividends, the incurrence of senior or secured debt
or other indebtedness, or the issuance or repurchase of securities by us. The indenture contains no
covenants or other provisions to protect holders of the 31/2% Notes in the
event of a highly leveraged transaction or other events that do not constitute a fundamental
change.
31/4% Convertible Senior Subordinated Debentures due August 15, 2025
Our 31/4% Debentures bear interest at the rate of
31/4% per year, payable semi-annually on February 15 and August 15. The
31/4% Debentures are convertible (subject to certain limitations imposed by
the Credit Agreement) under the following circumstances: (1) if the price of our common stock
reaches a specified threshold during the specified periods; (2) if the trading price of the
31/4% Debentures is below a specified threshold; (3) if the
31/4% Debentures have been called for redemption; or (4) if specified
corporate transactions or other specified events occur. Subject to certain exceptions, we will
deliver cash and shares of our common stock, as follows: (i) an amount in cash (the principal
return) equal to the lesser of (a) the principal amount of the 31/4%
Debentures surrendered for conversion and (b) the product of the conversion rate and the average
price of our common stock, as set forth in the indenture governing the securities (the conversion
value); and (ii) if the conversion value is greater than the principal return, an amount in shares
of our common stock. Our ability to pay the principal return in cash is subject to important
limitations imposed by the Credit Agreement and other indebtedness we may incur in the future.
Based on the terms of the Credit Agreement, in certain circumstances, even if any of the foregoing
conditions to conversion have occurred, the 31/4% Debentures will not be
convertible, and holders of the 31/4% Debentures will not be able to declare
an event of default under the 31/4% Debentures.
39
The initial conversion rate for the 31/4% Debentures is 16.3345 shares
of our common stock per $1,000 principal amount of 31/4% Debentures (subject
to adjustment in certain events). This is equivalent to a conversion price of $61.22 per share of
common stock. In addition, if certain corporate transactions that constitute a change of control
occur on or prior to February 20, 2013, we will increase the conversion rate in certain
circumstances, unless such transaction constitutes a public acquirer change of control and we elect
to modify the conversion rate into public acquirer common stock.
On or after February 20, 2013, we may redeem for cash some or all of the
31/4% Debentures at any time at a price equal to 100% of the principal amount
of the 31/4% Debentures to be purchased, plus any accrued and unpaid
interest. Holders may require us to purchase for cash some or all of the
31/4% Debentures on February 15, 2013, February 15, 2015 and February 15,
2020 or upon the occurrence of a fundamental change, at 100% of the principal amount of the
31/4% Debentures to be purchased, plus any accrued and unpaid interest.
The indenture for the 31/4% Debentures does not contain any financial
covenants or any restrictions on the payment of dividends, the incurrence of senior or secured debt
or other indebtedness, or the issuance or repurchase of securities by us. The indenture contains no
covenants or other provisions to protect holders of the 31/4% Debentures in
the event of a highly leveraged transaction or fundamental change.
Interest Rate Swap
We have an interest rate swap agreement with Citibank as counterparty that requires us to make
quarterly fixed rate payments to Citibank calculated on a notional amount at an annual fixed rate
of 5.585% while Citibank is obligated to make quarterly floating payments to us based on the
three-month LIBOR on the same referenced notional amount. We have designated our interest rate swap
as a cash flow hedge instrument, which is recorded in our consolidated balance sheets at its fair
value in accordance with ASC 815-10 based on the amount at which it could be settled, which is
referred to in ASC 815-10 as the exit price. The exit price is based upon observable market
assumptions and appropriate valuation adjustments for credit risk. We have categorized our interest
rate swap as Level 2 in accordance with ASC 815-10. Please refer to Note 8 to our accompanying
condensed consolidated financial statements included elsewhere in this report for a further
discussion of our interest rate swap agreement.
Liquidity and Capital Resources Outlook
We expect the level of capital expenditures in 2009 to be in a range of $160.0 million to
$180.0 million. We have large projects in process at a number of our facilities. We are
reconfiguring some of our hospitals to more effectively accommodate patient services and are
restructuring existing surgical capacity in some of our hospitals to permit additional patient
volume and a greater variety of services. At September 30, 2009, we had projects under construction
with an estimated additional cost to complete and equip of approximately $71.0 million. We
anticipate funding these expenditures through cash provided by operating activities, available cash
and borrowings available under our credit arrangements.
Our business strategy contemplates the selective acquisition of additional hospitals and other
healthcare service providers, and we regularly review potential acquisitions. These acquisitions
may, however, require additional financing. We regularly evaluate opportunities to sell additional
equity or debt securities, obtain credit facilities from lenders or restructure our long-term debt
or equity for strategic reasons or to further strengthen our financial position. The sale of
additional equity or convertible debt securities could result in additional dilution to our
stockholders.
In August 2009, our Board of Directors authorized the repurchase of up to $100.0 million of
outstanding shares of our common stock either in the open market or through privately negotiated
transactions, subject to certain limitation. The repurchase plan expires in January 2011, however,
we are not obligated to repurchase any specific number of shares under the program.
We believe that cash generated from our operations and borrowings available under our credit
arrangements will be sufficient to meet our working capital needs, the purchase prices for any
potential facility acquisitions, planned capital expenditures and other expected operating needs
over the next twelve months and into the foreseeable future prior to the maturity dates of our
outstanding debt.
40
Contractual Obligations
We have various contractual obligations, which are recorded as liabilities in our condensed
consolidated financial statements. Other items, such as certain purchase commitments and other
executory contracts, are not recognized as liabilities in our condensed consolidated financial
statements but are required to be disclosed. For example, we are required to make certain minimum
lease payments for the use of property under certain of our operating lease agreements. During the
three months ended September 30, 2009, there were no material changes in our contractual
obligations as presented in our 2008 Annual Report on Form 10-K.
Off-Balance Sheet Arrangements
We had standby letters of credit outstanding of approximately $43.0 million as of September
30, 2009, all of which relate to the self-insured retention levels of our professional and general
liability insurance and workers compensation programs as security for the payment of claims.
Critical Accounting Estimates
The preparation of financial statements in accordance with GAAP requires us to make estimates
and assumptions that affect reported amounts and related disclosures. We consider an accounting
estimate to be critical if:
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it requires assumptions to be made that were uncertain at the time the estimate was
made; and |
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changes in the estimate or different estimates that could have been made could have a
material impact on our consolidated results of operations or financial condition. |
Our critical accounting estimates are more fully described in our Annual Report on Form 10-K
for the year ended December 31, 2008 and continue to include the following areas:
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Revenue recognition/Allowance for contractual discounts; |
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Allowance for doubtful accounts and provision for doubtful accounts; |
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Goodwill impairment analysis; |
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Professional and general liability claims; |
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Accounting for stock-based compensation; and |
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Accounting for income taxes. |
Recently Issued Accounting Pronouncements
Please refer to Note 2 to our accompanying condensed consolidated financial statements
included elsewhere in this report for a discussion of the impact of recently issued accounting
pronouncements.
41
Contingencies
Please refer to Note 10 to our accompanying condensed consolidated financial statements
included elsewhere in this report for a discussion of our material financial contingencies,
including:
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Legal proceedings and general liability claims; |
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Physician commitments; |
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Capital expenditure commitments; and |
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Acquisitions. |
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
Interest Rates
The following discussion relates to our exposure to market risk based on changes in interest
rates:
Outstanding Debt
We have an interest rate swap to manage our exposure to changes in interest rates. The
interest rate swap converts a portion of our indebtedness to a fixed rate with a notional amount of
$600.0 million at September 30, 2009 at an annual fixed rate of 5.585%. Accordingly, we are
slightly exposed to market risk related to fluctuations in interest rates. The notional amount of
the swap agreement represents a balance used to calculate the exchange of cash flows and is not an
asset or liability. Any market risk or opportunity associated with this swap agreement is offset by
the opposite market impact on the related debt. Our interest rate swap agreement exposes us to
credit risk in the event of non-performance by Citibank. However, we do not anticipate
non-performance by Citibank.
As of September 30, 2009, we had outstanding debt, excluding $107.9 million of unamortized
discounts on our convertible debt instruments, of $1,502.6 million, 46.1%, or $692.9 million, of
which was subject to variable rates of interest. However, our interest rate swap decreases our
variable rate debt as a percentage of our outstanding debt from 46.1% to 6.2% as of September 30,
2009.
Our Term B Loans, 31/2% Notes and 31/4% Debentures
were the only long-term debt instruments where the carrying amounts differed from their fair value
as of December 31, 2008 and September 30, 2009. The carrying amount and fair value of these
instruments as of December 31, 2008 and September 30, 2009 were as follows (in millions):
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Carrying Amount |
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Fair Value |
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September 30, |
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December 31, |
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September 30, |
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December 31, |
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2009 |
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2008 |
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2009 |
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2008 |
Term B Loans |
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$ |
692.9 |
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$ |
706.4 |
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$ |
672.1 |
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$ |
586.3 |
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31/2% Notes, excluding unamortized discount |
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$ |
575.0 |
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$ |
575.0 |
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$ |
495.2 |
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$ |
387.3 |
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31/4% Debentures, excluding unamortized discount |
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$ |
225.0 |
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$ |
225.0 |
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$ |
195.8 |
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$ |
162.0 |
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The fair values of our Term B Loans, 31/4% Debentures and
31/2% Notes were based on the quoted prices at September 30, 2009 and
December 31, 2008.
Cash Balances
Certain of our outstanding cash balances are invested overnight with high credit quality
financial institutions. We do not hold direct investments in auction rate securities,
collateralized debt obligations, structured investment vehicles or mortgage-backed securities. We
do not have significant exposure to changing interest rates on invested cash at September 30, 2009.
As a result, the interest rate market risk implicit in these investments at September 30, 2009, if
any, is low.
42
Item 4. Controls and Procedures.
We carried out an evaluation, under the supervision and with the participation of management,
including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the
design and operation of our disclosure controls and procedures as of the end of the period covered
by this report pursuant to Rule 13a-15 of the Exchange Act. Based upon that evaluation, our Chief
Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures
were effective in ensuring that information required to be disclosed by us (including our
consolidated subsidiaries) in reports that we file or submit under the Exchange Act is recorded,
processed, summarized and reported on a timely basis.
There has been no change in our internal control over financial reporting during the three
months ended September 30, 2009 that has materially affected, or is reasonably likely to materially
affect, our internal control over financial reporting.
43
PART II OTHER INFORMATION
Item 1. Legal Proceedings.
We are, from time to time, subject to claims and suits arising in the ordinary course of
business, including claims for damages for personal injuries, medical malpractice, breach of
contracts, wrongful restriction of or interference with physicians staff privileges and employment
related claims. In certain of these actions, plaintiffs request payment for damages, including
punitive damages that may not be covered by insurance. We are currently not a party to any pending
or threatened proceeding, which, in managements opinion, would have a material adverse effect on
our business, financial condition or results of operations.
In May 2009, our hospital in Andalusia, Alabama (Andalusia Regional Hospital) produced
documents responsive to a request received from the U.S. Attorneys Office for the Western District
of New York regarding an investigation they are conducting with respect to the billing of
kyphoplasty procedures. Kyphoplasty is a surgical spine procedure that returns a compromised
vertebrae (either from trauma or osteoporotic disease process) to its previous height, reducing or
eliminating severe pain. It has been reported that other unaffiliated hospitals and hospital
operators in multiple states have received similar requests for information. We believe that this
investigation is related to the May 22, 2008 qui tam settlement between the same U.S. Attorneys
Office and the manufacturer and distributor of the product used in performing the kyphoplasty
procedure. We are cooperating with the governments investigation. In addition, we are reviewing
whether our hospitals have engaged in inappropriate billing for kyphoplasty procedures.
Item 1A. Risk Factors.
There have been no material changes in our risk factors from those disclosed in our Annual
Report on Form 10-K for the year ended December 31, 2008.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
The following table summarizes our share repurchase activity by month for the three months
ended September 30, 2009:
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Total Number |
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Approximate |
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of Shares |
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Dollar Value |
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Purchased as |
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of Shares that |
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Weighted |
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Part of a |
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May Yet be |
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Total Number |
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Average |
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Publicly |
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Purchased |
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of Shares |
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Price Paid |
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Announced |
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Under the |
Period |
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Purchased |
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per Share |
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Program (b) |
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Program (b) |
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(In millions) |
July 1, 2009 to July 31, 2009 (a) |
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3,955 |
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$ |
26.38 |
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$ |
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August 1, 2009 to August 31, 2009 (a) |
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2,645 |
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$ |
25.09 |
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$ |
100.0 |
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September 1, 2009 to September 30, 2009 (a) |
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7,971 |
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$ |
26.57 |
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$ |
100.0 |
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Total |
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14,571 |
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$ |
26.25 |
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$ |
100.0 |
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(a) |
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These relate to shares redeemed for tax withholding purposes upon vesting of certain
previously granted stock awards under the LTIP and MSPP plans. |
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(b) |
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In August 2009, our Board of Directors authorized the repurchase of up to $100.0 million of
outstanding shares of our common stock either in the open market or through privately
negotiated transactions, subject to certain limitations. We are not obligated to repurchase
any specific number of shares under the program, which expires in January 2011. No
repurchases had been made under the August 2009 repurchase program as of September 30, 2009. |
44
Item 6. Exhibits.
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Exhibit |
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Number |
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Description |
3.1
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Amended and Restated Certificate of Incorporation (incorporated by
reference from exhibits to the Registration Statement on Form S-8 filed on
April 19, 2005, File No. 333-124093). |
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3.2
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Second Amended and Restated Bylaws (incorporated by reference from exhibits
to the Current Report on Form 8-K dated October 16, 2006, File No.
000-51251). |
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3.3
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Amendment No. 1 to the Second Amended and Restated Bylaws (incorporated by
reference from exhibits to the Current Report on Form 8-K dated May 20,
2008, File No. 000-51251). |
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31.1
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Certification of the Chief Executive Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002. |
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31.2
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Certification of the Chief Financial Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002. |
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32.1
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Certification of the Chief Executive Officer Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002. |
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32.2
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Certification of the Chief Financial Officer Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002. |
45
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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LifePoint Hospitals, Inc.
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By: |
/s/ Michael S. Coggin
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Michael S. Coggin |
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Chief Accounting Officer
(Principal Accounting Officer) |
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Date: November 6, 2009
46
EXHIBIT INDEX
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Exhibit |
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|
Number |
|
Description |
3.1
|
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Amended and Restated Certificate of Incorporation (incorporated by
reference from exhibits to the Registration Statement on Form S-8 filed on
April 19, 2005, File No. 333-124093). |
|
|
|
3.2
|
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Second Amended and Restated Bylaws (incorporated by reference from exhibits
to the Current Report on Form 8-K dated October 16, 2006, File No.
000-51251). |
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3.3
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Amendment No. 1 to the Second Amended and Restated Bylaws (incorporated by
reference from exhibits to the Current Report on Form 8-K dated May 20,
2008, File No. 000-51251). |
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31.1
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Certification of the Chief Executive Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002. |
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31.2
|
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Certification of the Chief Financial Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002. |
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32.1
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Certification of the Chief Executive Officer Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002. |
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32.2
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|
Certification of the Chief Financial Officer Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002. |