UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

 

Form 10-Q

 

(Mark One)
þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2012

or

o		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

 

LifePoint Hospitals, Inc.

(Exact Name of Registrant as Specified in its Charter)

Delaware		20-1538254
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

103 Powell Court Brentwood, Tennessee		37027
(Address Of Principal Executive Offices)		(Zip Code)

(615) 372-8500

(Registrant’s 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 þ 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:

Large accelerated filer þ		Accelerated filer o		Non-accelerated filer o		Smaller reporting company o
		(Do not check if a smaller reporting company)

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 April 20, 2012, the number of outstanding shares of the registrant’s Common Stock was 48,767,191.

TABLE OF CONTENTS

LIFEPOINT HOSPITALS, INC.
  
TABLE OF CONTENTS

PART I — FINANCIAL INFORMATION
Item 1. Financial Statements			1
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			24
Item 3. Quantitative and Qualitative Disclosures About Market Risk			45
Item 4. Controls and Procedures			46
PART II — OTHER INFORMATION
Item 1. Legal Proceedings			47
Item 1A. Risk Factors			47
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			47
Item 6. Exhibits			49

TABLE OF CONTENTS

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements.

LIFEPOINT HOSPITALS, INC.
  
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Unaudited
(In millions, except per share amounts)

		Three Months Ended March 31,
		2012				2011
Revenues before provision for doubtful accounts		$	998.1			$	888.6
Provision for doubtful accounts			147.1				130.1
Revenues			851.0				758.5
Salaries and benefits			370.0				334.4
Supplies			129.0				118.7
Other operating expenses			188.5				161.6
Other income			(1.2	)			—
Depreciation and amortization			45.1				39.7
Interest expense, net			25.5				29.2
Impairment charge			3.1				—
			760.0				683.6
Income from continuing operations before income taxes			91.0				74.9
Provision for income taxes			34.1				28.4
Income from continuing operations			56.9				46.5
Income from discontinued operations, net of income taxes			0.1				0.3
Net income			57.0				46.8
Less: Net income attributable to noncontrolling interests			(0.9	)			(0.7	)
Net income attributable to LifePoint Hospitals, Inc.		$	56.1			$	46.1
Basic earnings per share attributable to LifePoint Hospitals, Inc. stockholders:
Continuing operations		$	1.19			$	0.91
Discontinued operations			—				0.01
Net income		$	1.19			$	0.92
Diluted earnings per share attributable to LifePoint Hospitals, Inc. stockholders:
Continuing operations		$	1.16			$	0.89
Discontinued operations			—				—
Net income		$	1.16			$	0.89
Weighted average shares and dilutive securities outstanding:
Basic			47.0				50.2
Diluted			48.3				51.6
Amounts attributable to LifePoint Hospitals, Inc. stockholders:
Income from continuing operations, net of income taxes		$	56.0			$	45.8
Income from discontinued operations, net of income taxes			0.1				0.3
Net income		$	56.1			$	46.1

 
 
See accompanying notes

TABLE OF CONTENTS

LIFEPOINT HOSPITALS, INC.
  
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Unaudited
(In millions)

		Three Months Ended March 31,
		2012				2011
Net income		$	57.0			$	46.8
Other comprehensive income, net of income taxes:
Unrealized gains on changes in fair value of interest rate swap, net of income tax provision of $1.4 million for the three months ended March 31, 2011			—				2.5
Other comprehensive income			—				2.5
Comprehensive income			57.0				49.3
Less: Net income attributable to noncontrolling interests			(0.9	)			(0.7	)
Comprehensive income attributable to LifePoint Hospitals, Inc.		$	56.1			$	48.6

 
 
See accompanying notes

TABLE OF CONTENTS

LIFEPOINT HOSPITALS, INC.
  
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in millions, except per share amounts)

		March 31, 2012				December 31, 2011(a)
		(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents		$	116.1			$	126.2
Accounts receivable, less allowances for doubtful accounts of $573.8 and $537.4 at March 31, 2012 and December 31, 2011, respectively			508.9				430.6
Inventories			86.7				87.2
Prepaid expenses			27.3				26.4
Income taxes receivable			—				1.6
Deferred tax assets			136.4				125.7
Other current assets			44.4				42.3
			919.8				840.0
Property and equipment:
Land			93.5				93.5
Buildings and improvements			1,676.1				1,631.6
Equipment			1,107.9				1,084.0
Construction in progress (estimated costs to complete and equip after March 31, 2012 is $73.8)			77.8				105.7
			2,955.3				2,914.8
Accumulated depreciation			(1,123.8	)			(1,084.4	)
			1,831.5				1,830.4
Deferred loan costs, net			20.2				21.7
Intangible assets, net			87.8				89.5
Other			39.9				19.8
Goodwill			1,568.8				1,568.7
Total assets		$	4,468.0			$	4,370.1
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable		$	96.2			$	99.6
Accrued salaries			93.1				103.1
Income taxes payable			52.4				—
Other current liabilities			165.8				168.2
Current maturities of long-term debt			1.9				1.9
			409.4				372.8
Long-term debt			1,601.3				1,595.4
Deferred income tax liabilities			248.0				259.0
Reserves for self-insurance claims and other liabilities			143.0				139.1
Long-term income tax liability			18.3				18.0
Total liabilities			2,420.0				2,384.3
Redeemable noncontrolling interests			26.2				26.2
Equity:
LifePoint Hospitals, Inc. stockholders’ equity:
Preferred stock, $0.01 par value; 10,000,000 shares authorized; no shares issued			—				—
Common stock, $0.01 par value; 90,000,000 shares authorized; 63,817,966 and 63,233,088 shares issued at March 31, 2012 and December 31, 2011, respectively			0.6				0.6
Capital in excess of par value			1,366.2				1,354.8
Retained earnings			1,123.0				1,066.9
Common stock in treasury, at cost, 15,064,951 and 14,925,875 shares at March 31, 2012 and December 31, 2011, respectively			(482.6	)			(477.1	)
Total LifePoint Hospitals, Inc. stockholders’ equity			2,007.2				1,945.2
Noncontrolling interests			14.6				14.4
Total equity			2,021.8				1,959.6
Total liabilities and equity		$	4,468.0			$	4,370.1

 
 
See accompanying notes

TABLE OF CONTENTS

LIFEPOINT HOSPITALS, INC.
  
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Unaudited
(In millions)

		Three Months Ended March 31,
		2012				2011
Cash flows from operating activities:
Net income		$	57.0			$	46.8
Adjustments to reconcile net income to net cash provided by operating activities:
Income from discontinued operations			(0.1	)			(0.3	)
Stock-based compensation			6.8				5.7
Depreciation and amortization			45.1				39.7
Amortization of physician minimum revenue guarantees			5.0				4.6
Amortization of convertible debt discounts			6.3				5.9
Amortization of deferred loan costs			1.5				1.5
Impairment charge			3.1				—
Deferred income tax benefit			(21.5	)			(2.7	)
Reserve for self-insurance claims, net of payments			4.7				4.7
Increase (decrease) in cash from operating assets and liabilities, net of effects from acquisitions and divestitures:
Accounts receivable			(82.4	)			(14.5	)
Inventories and other current assets			1.0				(1.8	)
Accounts payable and accrued expenses			(6.9	)			(5.4	)
Income taxes payable/receivable			54.0				31.0
Other			0.2				0.6
Net cash provided by operating activities – continuing operations			73.8				115.8
Net cash (used in) provided by operating activities – discontinued operations			(0.8	)			0.2
Net cash provided by operating activities			73.0				116.0
Cash flows from investing activities:
Purchases of property and equipment			(60.8	)			(55.9	)
Acquisitions, net of cash acquired			(20.1	)			(1.7	)
Other			(0.2	)			(0.9	)
Net cash used in investing activities			(81.1	)			(58.5	)
Cash flows from financing activities:
Repurchases of common stock			(5.5	)			(5.5	)
Proceeds from exercise of stock options			3.9				17.5
Proceeds from employee stock purchase plans			0.7				0.7
Distributions to noncontrolling interests			(0.7	)			(1.0	)
Capital lease payments and other			(0.4	)			(0.4	)
Net cash (used in) provided by financing activities			(2.0	)			11.3
Change in cash and cash equivalents			(10.1	)			68.8
Cash and cash equivalents at beginning of period			126.2				207.4
Cash and cash equivalents at end of period		$	116.1			$	276.2
Supplemental disclosure of cash flow information:
Interest payments		$	8.0			$	11.9
Capitalized interest		$	0.8			$	0.3
Income tax payments		$	1.6			$	0.3

 
 
See accompanying notes

TABLE OF CONTENTS

LIFEPOINT HOSPITALS, INC.
  
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
For the Three Months Ended March 31, 2012
Unaudited
(In millions)

		LifePoint Hospitals, Inc. Stockholders
		Common Stock								Capital in Excess of Par Value				Retained Earnings				Treasury Stock				Noncontrolling Interests				Total
		Shares				Amount
Balance at December 31, 2011(a)			48.3			$	0.6			$	1,354.8			$	1,066.9			$	(477.1	)		$	14.4			$	1,959.6
Net income			—				—				—				56.1				—				0.9				57.0
Exercise of stock options and tax benefits of stock-based awards			0.2				—				3.9				—				—				—				3.9
Stock activity in connection with employee stock purchase plan			—				—				0.7				—				—				—				0.7
Stock-based compensation			0.5				—				6.8				—				—				—				6.8
Repurchases of common stock, at cost			(0.2	)			—				—				—				(5.5	)			—				(5.5	)
Cash distributions to noncontrolling interests			—				—				—				—				—				(0.7	)			(0.7	)
Balance at March 31, 2012			48.8			$	0.6			$	1,366.2			$	1,123.0			$	(482.6	)		$	14.6			$	2,021.8

 
 
See accompanying notes

TABLE OF CONTENTS

LIFEPOINT HOSPITALS, INC.
  
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2012
Unaudited

Note 1. Organization and Basis of Presentation

Organization

LifePoint Hospitals, Inc., a Delaware corporation, acting through its subsidiaries, operates general acute care hospitals primarily in non-urban communities in the United States (“U.S.”). Unless the context otherwise indicates, LifePoint Hospitals, Inc. and its subsidiaries are referred to herein as the “Company.” At March 31, 2012, on a consolidated basis, the Company operated 54 hospital campuses in 18 states. Unless noted otherwise, discussions in these notes pertain to the Company’s continuing operations, which exclude the results of those facilities that have previously been disposed.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. 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 months ended March 31, 2012 are not necessarily indicative of the results that may be expected for the year ending December 31, 2012. For further information, refer to the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011.

Note 2. Revenue Recognition and Accounts Receivable

The Company recognizes revenues in the period in which services are performed. Accounts receivable primarily consist of amounts due from third-party payors and patients. The Company’s ability to collect outstanding receivables is critical to its results of operations and cash flows. Amounts the Company receives for treatment of patients covered by governmental programs such as Medicare and Medicaid and other third-party payors such as health maintenance organizations (“HMOs”), preferred provider organizations (“PPOs”) and other private insurers are generally less than the Company’s established billing rates. Additionally, to provide for accounts receivable that could become uncollectible in the future, the Company establishes an allowance for doubtful accounts to reduce the carrying value of such receivables to their estimated net realizable value. Accordingly, the revenues and accounts receivable reported in the Company’s accompanying condensed consolidated financial statements are recorded at the net amount expected to be received.

On April 5, 2012, a settlement agreement (the “Rural Floor Settlement”) was signed between the U.S. Department of Health and Human Services (“HHS”), the Secretary of HHS, the Centers for Medicare and Medicaid Services (“CMS”) and a large number of healthcare service providers, including the Company’s hospitals. The Rural Floor Settlement is intended to resolve all claims that have been brought or could have been brought relating to CMS’s calculation of the rural floor budget neutrality adjustment that was created by the Balanced Budget Act of 1997from federal fiscal year 1998 through and including federal fiscal year 2011 for healthcare service providers that participated in certain court cases and group appeals. As a result of the Rural Floor Settlement, the Company recognized $31.3 million of additional Medicare revenue during the three months ended March 31, 2012.

TABLE OF CONTENTS

LIFEPOINT HOSPITALS, INC.
  
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2012
Unaudited

Note 2. Revenue Recognition and Accounts Receivable  – (continued)

The Company’s revenues before provision for doubtful accounts by payor and approximate percentages of revenues were as follows for the three months ended March 31, 2012 and 2011 (in millions):

		Three Months Ended March 31,
		2012								2011
		Amount				Ratio				Amount				Ratio
Medicare		$	317.7				37.3	%		$	274.5				36.2	%
Medicaid			105.9				12.5				106.2				14.0
HMOs, PPOs and other private insurers			402.6				47.3				358.1				47.2
Self-pay			159.8				18.8				141.2				18.6
Other			12.1				1.4				8.6				1.2
Revenues before provision for doubtful accounts			998.1				117.3				888.6				117.2
Provision for doubtful accounts			(147.1	)			(17.3	)			(130.1	)			(17.2	)
Revenues		$	851.0				100.0	%		$	758.5				100.0	%

To properly account for accounts receivable that could become uncollectible in the future, the Company establishes an allowance for doubtful accounts to reduce the carrying value of such receivables to their estimated net realizable value. The primary uncertainty lies with uninsured patient receivables and deductibles, co-payments or other amounts due from individual patients.

The Company has an established process to determine the adequacy of the allowance for doubtful accounts that relies on a number of analytical tools and benchmarks to arrive at a reasonable allowance. No single statistic or measurement determines the adequacy of the allowance for doubtful accounts. Some of the analytical tools that the Company utilizes include, but are not limited to, historical cash collection experience, revenue trends by payor classification and revenue days in accounts receivable. Accounts receivable are written off after collection efforts have been followed in accordance with the Company’s policies.

The following is a summary of the Company’s activity in the allowance for doubtful accounts for the three months ended March 31, 2012 (in millions):

Balance at January 1, 2012		$	537.4
Additions recognized as a reduction to revenues			147.1
Accounts written off, net of recoveries			(110.7	)
Balance at March 31, 2012		$	573.8

The allowances for doubtful accounts as a percent of gross accounts receivable, net of contractual discounts were 53.0% and 55.5% as of March 31, 2012 and December 31, 2011, respectively. The decrease in this percentage from December 31, 2011 to March 31, 2012 is in part due to the Company’s recognition of approximately $31.3 million in Medicare revenue as a result of the Rural Floor Settlement and is included under the caption “Accounts receivable, less allowance for doubtful accounts” in the accompanying condensed consolidated balance sheet at March 31, 2012. Additionally, as of March 31, 2012 and December 31, 2011, the allowances for doubtful accounts plus certain contractual allowances related to self-pay patients as a percentage of self-pay receivables were 86.9% and 86.7%, respectively.

TABLE OF CONTENTS

LIFEPOINT HOSPITALS, INC.
  
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2012
Unaudited

Note 3. General and Administrative Costs

The majority of the Company’s expenses are “cost of revenue” items. Costs that could be classified as “general and administrative” by the Company would include its corporate overhead costs, which were $40.2 million and $31.6 million for the three months ended March 31, 2012 and 2011, respectively.

Note 4. Fair Value of Financial Instruments

In accordance with Accounting Standards Codification (“ASC”) 825-10, “Financial Instruments”, the fair value of the Company’s financial instruments are further described as follows.

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.

Long-Term Debt

The Company’s term B loans (the “Term B Loans”) under its credit agreement with Citicorp North America, Inc., as administrative agent and a syndicate of lenders (the “Credit Agreement”), 6.625% unsecured senior notes due October 1, 2020 (the “6.625% Senior Notes”), 3½% convertible senior subordinated notes due May 15, 2014 (the “3½% Notes”) and 3¼% convertible senior subordinated debentures due August 15, 2025 (the “3¼% Debentures”) are the Company’s long-term debt instruments where the carrying amounts are different from their fair value. The carrying amount and fair value of these instruments as of March 31, 2012 and December 31, 2011 were as follows (in millions):

		Carrying Amount								Fair Value
		March 31, 2012				December 31, 2011				March 31, 2012				December 31, 2011
Term B Loans		$	443.7			$	443.7			$	442.0			$	432.6
6.625% Senior Notes		$	400.0			$	400.0			$	425.0			$	413.0
3½% Notes, excluding unamortized discount		$	575.0			$	575.0			$	600.9			$	592.3
3¼% Debentures, excluding unamortized discount		$	225.0			$	225.0			$	229.5			$	230.3

The fair values of the Term B Loans and the 6.625% Senior Notes were estimated based on the average bid and ask price as determined using published rates. The fair values of the 3½% Notes and the 3¼% Debentures were estimated based on the quoted market prices determined using the closing share price of the Company’s common stock.

Note 5. Goodwill and Intangible Assets

Goodwill

The Company accounts for its acquisitions in accordance with ASC 805-10, “Business Combinations” using the acquisition method of accounting. Goodwill represents the excess of the cost of an acquired entity over the net amounts assigned to assets acquired and liabilities assumed. In accordance with ASC 350-10, “Intangibles — Goodwill and Other” goodwill and intangible assets with indefinite lives are reviewed by the Company at least annually for impairment. The Company’s business comprises a single operating reporting unit for impairment test purposes. For the purposes of these analyses, the Company’s 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 annual impairment test as of October 1, 2011 and did not incur an impairment charge.

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LIFEPOINT HOSPITALS, INC.
  
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2012
Unaudited

Note 5. Goodwill and Intangible Assets  – (continued)

Intangible Assets

Summary of Intangible Assets

The following table provides information regarding the Company’s intangible assets, which are included in the accompanying condensed consolidated balance sheets at March 31, 2012 and December 31, 2011 (in millions):

		March 31, 2012				December 31, 2011
Amortized intangible assets:
Contract-based physician minimum revenue guarantees
Gross carrying amount		$	93.7			$	92.5
Accumulated amortization			(50.2	)			(48.7	)
Net total			43.5				43.8
Non-competition agreements
Gross carrying amount			32.8				32.8
Accumulated amortization			(16.3	)			(15.2	)
Net total			16.5				17.6
Favorable payor contracts
Gross carrying amount			2.4				2.4
Accumulated amortization			(0.6	)			(0.3	)
Net total			1.8				2.1
Total amortized intangible assets
Gross carrying amount			128.9				127.7
Accumulated amortization			(67.1	)			(64.2	)
Net total			61.8				63.5
Indefinite-lived intangible assets:
Certificates of need and certificates of need exemptions			23.9				23.9
Licenses, provider numbers, accreditations and other			2.1				2.1
Net total			26.0				26.0
Total intangible assets:
Gross carrying amount			154.9				153.7
Accumulated amortization			(67.1	)			(64.2	)
Net total		$	87.8			$	89.5

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.

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LIFEPOINT HOSPITALS, INC.
  
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2012
Unaudited

Note 5. Goodwill and Intangible Assets  – (continued)

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 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 and included as an expense under the caption “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 March 31, 2012 and December 31, 2011, the Company’s liability for contract-based physician minimum revenue guarantees was $14.4 million and $13.6 million, respectively. These amounts are included as a current liability under the caption “Other current liabilities” in the Company’s 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 and Certificates of Need Exemptions

The construction of new facilities, the acquisition or expansion of existing facilities and the addition of new services and certain equipment at the Company’s 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. The Company has determined that these intangible assets have an indefinite useful life.

Licenses, Provider Numbers, Accreditations and Other

To operate hospitals, the Company must obtain certain licenses, provider numbers and accreditations from federal, state and other accrediting agencies. The Company has determined that these intangible assets have an indefinite useful life.

Note 6. Interest Rate Swap and Comprehensive Income

Through May 30, 2011, the Company had an interest rate swap agreement in effect with Citibank, N.A. (“Citibank”) as counterparty. Effective May 30, 2011, the Company’s interest rate swap agreement matured. Prior to its maturity, the interest rate swap agreement required the Company to make quarterly fixed rate payments to Citibank calculated on a notional amount at an annual fixed rate of 5.585% while Citibank was obligated to make quarterly floating payments to the Company based on the three-month London Interbank Offer Rate (“LIBOR”) on the same referenced notional amount. The notional amount in effect during 2011 through May 30, 2011 was $300.0 million.

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. In accordance with ASC 815-10 “Derivatives and Hedging”, the Company designated 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 and reclassified into earnings in the same period or periods during which the hedged transactions affect 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. For the three months ended March 31, 2011, the Company assessed the effectiveness of its interest rate swap and determined the hedge to be effective. Changes in the fair value of the Company’s interest rate swap resulted in pretax comprehensive gains of $3.9 million, or $2.5 million net of taxes for the three months ended March 31, 2011.

TABLE OF CONTENTS

LIFEPOINT HOSPITALS, INC.
  
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2012
Unaudited

Note 6. Interest Rate Swap and Comprehensive Income  – (continued)

Since the Company’s interest rate swap was not traded on a market exchange, the fair value was determined using a valuation model that involved a discounted cash flow analysis on the expected cash flows. This cash flow analysis reflected the contractual terms of the interest rate swap agreement, including the period to maturity, and used observable market-based inputs, including the three-month LIBOR forward interest rate curve. The fair value of the Company’s interest rate swap agreement was determined by netting the discounted future fixed cash payments and the discounted expected variable cash receipts. The variable cash receipts were 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 incorporated credit valuation adjustments to appropriately reflect both its own and Citibank’s non-performance or credit risk in the fair value measurements. The interest rate swap agreement exposed the Company to credit risk in the event of 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 Company’s credit risk used in the credit valuation adjustments, were observable inputs available to a market participant. As a result, the Company made the determination that the interest rate swap valuation was categorized as Level 2 in the fair value hierarchy, in accordance with ASC 820-10 “Fair Value Measurements and Disclosures”.

Note 7. Common Stock in Treasury and Repurchases of Common Stock

The Company’s Board of Directors has authorized the repurchase of outstanding shares of its common stock either in the open market or through privately negotiated transactions, subject to market conditions, regulatory constraints and other customary factors in accordance with repurchase plans adopted in 2010 and 2011. The 2010 repurchase plan provided for the repurchase of up to $150.0 million shares of the Company’s common stock, and the Company has repurchased all shares authorized for repurchase under this plan. The 2011 plan provides for the repurchase of up to $250.0 million shares of the Company’s common stock. The Company is not obligated to repurchase any specific number of shares under its 2011 repurchase plan.

In connection with the 2011 repurchase plan, the Company repurchased a nominal number of shares for an aggregate purchase price, including commissions, of $0.1 million at an average purchase price of $35.01 per share for the three months ended March 31, 2012. There were no repurchases made in accordance with stock repurchase plans during the three months ended March 31, 2011. Through March 31, 2012, the Company had repurchased approximately 1.8 million shares for an aggregate purchase price, including commissions, of approximately $65.2 million in accordance with the 2011 repurchase plan. As of March 31, 2012, the Company had remaining authority to repurchase up to an additional $184.8 million in shares in accordance with the 2011 repurchase plan. The Company has designated the shares repurchased in accordance with the repurchase plans as treasury stock.

Additionally, the Company redeems shares from employees for minimum statutory tax withholding purposes upon vesting of certain stock awards granted pursuant to the Company’s Amended and Restated 1998 Long-Term Incentive Plan (“LTIP”) and Amended and Restated Management Stock Purchase Plan (“MSPP”). The Company redeemed approximately 0.2 and 0.1 million shares of certain vested LTIP and MSPP shares during the three months ended March 31, 2012 and 2011 for an aggregate price of approximately $5.4 million and $5.5 million, respectively. The Company has designated these shares as treasury stock.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2012
Unaudited

Note 8. Stock-Based Compensation

Overview

The Company issues stock-based awards, including stock options and other stock-based awards (nonvested stock, restricted stock, restricted stock units, performance shares and deferred stock units) to certain officers, employees and non-employee directors in accordance with the Company’s various stockholder-approved stock-based compensation plans. The Company accounts for its stock-based awards in accordance with the provisions of ASC 718-10 “Compensation — Stock Compensation”, (“ASC 718-10”) and accordingly recognizes compensation expense over each of the stock-based award’s requisite service period based on the estimated grant date fair value.

Stock Options

The Company granted options to purchase 789,800 and 717,365 shares of the Company’s common stock to certain officers and employees in accordance with the LTIP during the three months ended March 31, 2012 and 2011, respectively. Options to purchase shares granted to the Company’s officers and employees in accordance with the LTIP were granted with an exercise price equal to the fair market value of the Company’s common stock on the day prior to the grant date. The options granted during the three months ended March 31, 2012 and 2011 become ratably exercisable beginning one year from the date of grant to three years after the date of grant and expire ten years from the date of grant.

The Company estimated the fair value of stock options granted using the Hull-White II (“HW-II”) lattice option valuation model and a single option award approach. The Company uses the HW-II because it considers characteristics of fair value option pricing, such as an option’s contractual term and the probability of exercise before the end of the contractual term. In addition, the complications surrounding the expected term of an option are material, as indicated in ASC 718-10. Given the Company’s relatively large pool of unexercised options, the Company believes a lattice model that specifically addresses this fact and models a full term of exercises is the most appropriate and reliable means of valuing its stock options. 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 stock options vest 33.3% on each grant anniversary date over three years of continued employment.

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 three months ended March 31, 2012 and 2011:

		Three Months Ended March 31,
		2012				2011
Expected volatility			36.0	%			36.0	%
Risk free interest rate (range)			0.03% – 1.97	%			0.11% – 3.58	%
Expected dividends			—				—
Average expected term (years)			5.3				5.3
Fair value per share of stock options granted		$	12.18			$	11.77

The total intrinsic value of stock options exercised during the three months ended March 31, 2012 and 2011 was $1.1 million and $5.5 million, respectively. The Company received $3.9 million and $17.5 million in cash from stock option exercises for the three months ended March 31, 2012 and 2011, respectively. The actual tax benefit realized for the tax deductions from stock option exercises totaled $0.1 million and $0.3 million for the three months ended March 31, 2012 and 2011, respectively.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2012
Unaudited

Note 8. Stock-Based Compensation  – (continued)

As of March 31, 2012, there was $18.0 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 1.6 years.

Other Stock-Based Awards

The Company granted 459,574 and 435,694 shares of nonvested stock awards to certain officers and employees in accordance with the LTIP and MSPP during the three months ended March 31, 2012 and 2011, respectively. The fair value of other stock-based awards is determined based on the closing price of the Company’s common stock on the day prior to the grant date. The nonvested stock awards granted during the three months ended March 31, 2012 and 2011 have either cliff-vesting periods from the grant date of three years or ratable vesting periods beginning one year from the date of grant to three years after the date of grant.

Of the nonvested stock awards granted during the three months ended March 31, 2012 and 2011, 320,000 and 297,000, respectively, were performance-based. In addition to requiring continuing service of an employee, the vesting of these nonvested stock awards is contingent upon the satisfaction of certain financial goals, specifically related to the achievement of targeted annual revenues or earnings goals within a three-year period. If these goals are achieved, the nonvested stock awards will cliff-vest three years after the grant date. The performance criteria for the 297,000 performance-based nonvested stock awards granted during 2011 have been certified as met by the Compensation Committee of the Company’s Board of Directors, however, these awards are still subject to continuing service requirements and the three year cliff-vesting provisions. For purposes of estimating compensation expense for the performance-based nonvested stock awards granted during the three months ended March 31, 2012, the Company has assumed that the performance goals will be achieved. If the performance goals are not met for the performance-based awards granted during the three months ended March 31, 2012, no compensation expense will be recognized, and any previously recognized compensation expense will be reversed.

Notwithstanding the specific grant vesting requirements, nonvested stock awards and performance-based awards granted under the LTIP become fully vested upon the death or disability of the participant. Additionally, in the event of termination without cause of a participant, the nonvested stock awards and performance-based awards otherwise subject to cliff-vesting become vested in a percentage equal to the number of full months of continuous employment following the date of grant through the date of termination divided by the total number of months in the vesting period, and in the case of performance-based awards, only in the event that the performance goals are attained.

The Company received $0.7 million for the issuance of nonvested stock in accordance with the MSPP during each of the three months ended March 31, 2012 and 2011.

As of March 31, 2012, there was $26.6 million of total estimated unrecognized compensation cost related to other stock-based awards granted in accordance with the LTIP and MSPP. 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 2.1 years.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2012
Unaudited

Note 8. Stock-Based Compensation  – (continued)

The following table summarizes the Company’s total stock-based compensation expense as well as the total recognized tax benefits related thereto for the three months ended March 31, 2012 and 2011 (in millions):

		Three Months Ended March 31,
		2012				2011
Other stock-based awards		$	4.0			$	3.2
Stock options			2.8				2.5
Total stock-based compensation expense		$	6.8			$	5.7
Tax benefits on stock-based compensation expense		$	2.7			$	2.4

The Company did not capitalize any stock-based compensation cost during the three months ended March 31, 2012 or 2011. As of March 31, 2012, there was $44.6 million of total estimated unrecognized compensation cost related to all of the Company’s stock-based 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 1.9 years.

Note 9. Commitments and 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 management’s opinion, would have a material adverse effect on the Company’s business, financial condition or results of operations.

In May 2009, the Company’s hospital in Andalusia, Alabama (Andalusia Regional Hospital) produced documents responsive to a request received from the U.S. Attorney’s 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 vertebra (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. Attorney’s Office and the manufacturer and distributor of the product used in performing the kyphoplasty procedure.

Based on a review of the number of the kyphoplasty procedures performed at all of the Company’s other hospitals, as part of its effort to cooperate with the U.S. Attorney’s Office, by letter dated January 20, 2010 the Company’s management identified to the U.S. Attorney’s Office four additional facilities at which the number of inpatient kyphoplasty procedures approximated those performed at Andalusia Regional Hospital. The Company’s management has completed its review of the relevant medical records and is continuing to cooperate with the government’s investigation.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2012
Unaudited

Note 9. Commitments and Contingencies  – (continued)

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 physician’s 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 physician’s practice. The Company has committed to advance a maximum amount of approximately $40.2 million at March 31, 2012. The actual amount of such commitments to be subsequently advanced to physicians is estimated at $14.4 million and often depends upon the financial results of a physician’s 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 Company’s 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 hospitals to more effectively accommodate patient services and to provide for a greater variety of services, as well as implementing various information system initiatives in its efforts to comply with the Health Information Technology for Economic and Clinical Health Act. The Company has incurred approximately $77.8 million in costs related to uncompleted projects as of March 31, 2012, which is included under the caption “Construction in progress” in the Company’s accompanying condensed consolidated balance sheet. At March 31, 2012, these uncompleted projects had an estimated cost to complete and equip of approximately $73.8 million. Additionally, the Company is subject to annual capital expenditure commitments in connection with several of its facilities.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2012
Unaudited

Note 10. Earnings Per Share

The following table sets forth the computation of basic and diluted earnings per share for the three months ended March 31, 2012 and 2011 (dollars and shares in millions, except per share amounts):

		Three Months Ended March 31,
		2012				2011
Numerator for basic and diluted earnings per share attributable to LifePoint Hospitals, Inc.:
Income from continuing operations		$	56.9			$	46.5
Less: Net income attributable to noncontrolling interests			(0.9	)			(0.7	)
Income from continuing operations attributable to LifePoint Hospitals, Inc. stockholders			56.0				45.8
Income from discontinued operations, net of income taxes			0.1				0.3
Net income attributable to LifePoint Hospitals, Inc.		$	56.1			$	46.1
Denominator:
Weighted average shares outstanding – basic			47.0				50.2
Effect of dilutive securities: stock options and other stock-based awards			1.3				1.4
Weighted average shares outstanding – diluted			48.3				51.6
Basic earnings per share attributable to LifePoint Hospitals, Inc. stockholders:
Continuing operations		$	1.19			$	0.91
Discontinued operations			—				0.01
Net income		$	1.19			$	0.92
Diluted earnings per share attributable to LifePoint Hospitals, Inc. stockholders:
Continuing operations		$	1.16			$	0.89
Discontinued operations			—				—
Net income		$	1.16			$	0.89

The 3½% Notes and the 3¼% Debentures are included in the calculation of diluted earnings per share whether or not the contingent requirements have been met for conversion if the conversion price of $51.79 and $61.22, respectively, is less than the average market price of the Company’s 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 Company’s common stock. The impact of the 3½% Notes and the 3¼% Debentures has been excluded because the effects would have been anti-dilutive for the three months ended March 31, 2012 and 2011.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2012
Unaudited

Note 11. Subsequent Event

Effective April 1, 2012, the Company, through its joint venture with Duke University Health System, acquired an 80% interest in Twin County Regional Hospital (“Twin County”), located in Galax, Virginia for approximately $20.0 million, including 80% of the net working capital. The purchase price of Twin County, which was paid on March 30, 2012, is reflected as a deposit and is included under the caption “Other assets” in the accompanying condensed consolidated balance sheet at March 31, 2012.

Note 12. Guarantor and Non-Guarantor Supplementary Information

The 6.625% Senior Notes are jointly and severally guaranteed on an unsecured senior basis by substantially all of the Company’s existing subsidiaries that guarantee the Credit Agreement. The following presents the condensed consolidating financial information for the parent issuer, guarantor subsidiaries, non-guarantor subsidiaries, certain eliminations and the Company for the three months ended March 31, 2012 and 2011 and as of March 31, 2012 and December 31, 2011:

LIFEPOINT HOSPITALS, INC.
Condensed Consolidating Statements of Operations
For the Three Months Ended March 31, 2012
(In millions)

		Parent Issuer				Guarantors				Non- Guarantors				Eliminations				Consolidated
Revenues before provision for doubtful accounts		$	—			$	887.3			$	110.8			$	—			$	998.1
Provision for doubtful accounts			—				126.0				21.1				—				147.1
Revenues			—				761.3				89.7				—				851.0
Salaries and benefits			6.8				327.5				35.7				—				370.0
Supplies			—				111.3				17.7				—				129.0
Other operating expenses			—				171.4				17.1				—				188.5
Other income			—				(1.2	)			—				—				(1.2	)
Equity in earnings of affiliates			(67.8	)			—				—				67.8				—
Depreciation and amortization			—				38.7				6.4				—				45.1
Interest expense, net			6.5				18.0				1.0				—				25.5
Impairment charge			—				3.1				—				—				3.1
Management (income) fees			—				(2.1	)			2.1				—				—
			(54.5	)			666.7				80.0				67.8				760.0
Income from continuing operations before taxes			54.5				94.6				9.7				(67.8	)			91.0
(Benefit) provision for income taxes			(1.6	)			35.7				—				—				34.1
Income from continuing operations			56.1				58.9				9.7				(67.8	)			56.9
Income from discontinued operations, net of taxes			—				0.1				—				—				0.1
Net income			56.1				59.0				9.7				(67.8	)			57.0
Less: Net income attributable to noncontrolling interests			—				(0.3	)			(0.6	)			—				(0.9	)
Net income attributable to LifePoint Hospitals, Inc.		$	56.1			$	58.7			$	9.1			$	(67.8	)		$	56.1

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LIFEPOINT HOSPITALS, INC.
  
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2012
Unaudited

Note 12. Guarantor and Non-Guarantor Supplementary Information  – (continued)

LIFEPOINT HOSPITALS, INC.
Condensed Consolidating Statements of Operations
For the Three Months Ended March 31, 2011
(In millions)

		Parent Issuer				Guarantors				Non- Guarantors				Eliminations				Consolidated
Revenues before provision for doubtful accounts		$	—			$	808.3			$	80.3			$	—			$	888.6
Provision for doubtful accounts			—				119.7				10.4				—				130.1
Revenues			—				688.6				69.9				—				758.5
Salaries and benefits			5.7				304.5				24.2				—				334.4
Supplies			—				105.2				13.5				—				118.7
Other operating expenses			—				150.4				11.2				—				161.6
Equity in earnings of affiliates			(62.3	)			—				—				62.3				—
Depreciation and amortization			—				36.2				3.5				—				39.7
Interest expense, net			11.6				17.3				0.3				—				29.2
Management (income) fees			—				(2.4	)			2.4				—				—
			(45.0	)			611.2				55.1				62.3				683.6
Income from continuing operations before taxes			45.0				77.4				14.8				(62.3	)			74.9
(Benefit) provision for income taxes			(1.1	)			29.5				—				—				28.4
Income from continuing operations			46.1				47.9				14.8				(62.3	)			46.5
Income from discontinued operations, net of taxes			—				0.3				—				—				0.3
Net income			46.1				48.2				14.8				(62.3	)			46.8
Less: Net income attributable to noncontrolling interests			—				(0.2	)			(0.5	)			—				(0.7	)
Net income attributable to LifePoint Hospitals, Inc.		$	46.1			$	48.0			$	14.3			$	(62.3	)		$	46.1

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2012
Unaudited

Note 12. Guarantor and Non-Guarantor Supplementary Information  – (continued)

LIFEPOINT HOSPITALS, INC.
Condensed Consolidating Statements of Comprehensive Income
For the Three Months Ended March 31, 2011
(In millions)

		Parent Issuer				Guarantors				Non- Guarantors				Eliminations				Consolidated
Net income		$	46.1			$	48.2			$	14.8			$	(62.3	)		$	46.8
Other comprehensive income, net of income taxes:
Unrealized gains on changes in fair value of interest rate swap			2.5				—				—				—				2.5
Other comprehensive income			2.5				—				—				—				2.5
Comprehensive income			48.6				48.2				14.8				(62.3	)			49.3
Less: Net income attributable to noncontrolling interests			—				(0.2	)			(0.5	)			—				(0.7	)
Comprehensive income attributable to LifePoint Hospitals, Inc.		$	48.6			$	48.0			$	14.3			$	(62.3	)		$	48.6

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LIFEPOINT HOSPITALS, INC.
  
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2012
Unaudited

Note 12. Guarantor and Non-Guarantor Supplementary Information  – (continued)

LIFEPOINT HOSPITALS, INC.
Condensed Consolidating Balance Sheets
March 31, 2012
(In millions)

		Parent Issuer				Guarantors				Non- Guarantors				Eliminations				Consolidated
ASSETS
Current assets:
Cash and cash equivalents		$	—			$	96.7			$	19.4			$	—			$	116.1
Accounts receivable, net			—				443.7				65.2				—				508.9
Inventories			—				76.7				10.0				—				86.7
Prepaid expenses			—				25.1				2.2				—				27.3
Deferred tax assets			136.4				—				—				—				136.4
Other current assets			—				44.3				0.1				—				44.4
			136.4				686.5				96.9				—				919.8
Property and equipment:
Land			—				74.4				19.1				—				93.5
Buildings and improvements			—				1,492.2				183.9				—				1,676.1
Equipment			—				1,034.8				73.1				—				1,107.9
Construction in progress			—				73.8				4.0				—				77.8
			—				2,675.2				280.1				—				2,955.3
Accumulated depreciation			—				(1,062.2	)			(61.6	)			—				(1,123.8	)
			—				1,613.0				218.5				—				1,831.5
Deferred loan costs, net			20.2				—				—				—				20.2
Intangible assets, net			—				47.5				40.3				—				87.8
Investments in subsidiaries			1,535.7				—				—				(1,535.7	)			—
Other			1.0				36.8				2.1				—				39.9
Goodwill			—				1,430.0				138.8				—				1,568.8
Total assets		$	1,693.3			$	3,813.8			$	496.6			$	(1,535.7	)		$	4,468.0
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable		$	—			$	86.3			$	9.9			$	—			$	96.2
Accrued salaries			—				82.7				10.4				—				93.1
Income taxes payable			52.4				—				—				—				52.4
Other current liabilities			23.8				130.8				11.2				—				165.8
Current maturities of long-term debt			—				1.4				0.5				—				1.9
			76.2				301.2				32.0				—				409.4
Long-term debt			1,594.5				5.7				1.1				—				1,601.3
Intercompany			(2,250.9	)			2,178.4				72.5				—				—
Deferred income tax liabilities			248.0				—				—				—				248.0
Reserves for self-insurance claims and other liabilities			—				117.8				25.2				—				143.0
Long-term income tax liability			18.3				—				—				—				18.3
Total liabilities			(313.9	)			2,603.1				130.8				—				2,420.0
Redeemable noncontrolling interests			—				—				26.2				—				26.2
Total LifePoint Hospitals, Inc. stockholders’ equity			2,007.2				1,209.1				326.6				(1,535.7	)			2,007.2
Noncontrolling interests			—				1.6				13.0								14.6
Total equity			2,007.2				1,210.7				339.6				(1,535.7	)			2,021.8
Total liabilities and equity		$	1,693.3			$	3,813.8			$	496.6			$	(1,535.7	)		$	4,468.0

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LIFEPOINT HOSPITALS, INC.
  
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2012
Unaudited

Note 12. Guarantor and Non-Guarantor Supplementary Information  – (continued)

LIFEPOINT HOSPITALS, INC.
Condensed Consolidating Balance Sheets
December 31, 2011
(In millions)

		Parent Issuer				Guarantors				Non- Guarantors				Eliminations				Consolidated
ASSETS
Current assets:
Cash and cash equivalents		$	—			$	106.2			$	20.0			$	—			$	126.2
Accounts receivable, net			—				373.6				57.0				—				430.6
Inventories			—				75.4				11.8				—				87.2
Prepaid expenses			0.1				24.7				1.6				—				26.4
Income taxes receivable			1.6				—				—				—				1.6
Deferred tax assets			125.7				—				—				—				125.7
Other current assets			—				42.3				—				—				42.3
			127.4				622.2				90.4				—				840.0
Property and equipment:
Land			—				74.1				19.4				—				93.5
Buildings and improvements			—				1,427.5				204.1				—				1,631.6
Equipment			—				991.3				92.7				—				1,084.0
Construction in progress			—				102.6				3.1				—				105.7
			—				2,595.5				319.3				—				2,914.8
Accumulated depreciation			—				(1,001.2	)			(83.2	)			—				(1,084.4	)
			—				1,594.3				236.1				—				1,830.4
Deferred loan costs, net			21.7				—				—				—				21.7
Intangible assets, net			—				46.7				42.8				—				89.5
Investments in subsidiaries			1,467.9				—				—				(1,467.9	)			—
Other			1.0				16.7				2.1				—				19.8
Goodwill			—				1,413.1				155.6				—				1,568.7
Total assets		$	1,618.0			$	3,693.0			$	527.0			$	(1,467.9	)		$	4,370.1
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable		$	—			$	88.5			$	11.1			$	—			$	99.6
Accrued salaries			—				94.3				8.8				—				103.1
Other current liabilities			14.0				141.1				13.1				—				168.2
Current maturities of long-term debt			—				1.5				0.4				—				1.9
			14.0				325.4				33.4				—				372.8
Long-term debt			1,588.2				6.0				1.2				—				1,595.4
Intercompany			(2,206.4	)			2,151.4				55.0				—				—
Deferred income tax liabilities			259.0				—				—				—				259.0
Reserves for self-insurance claims and other liabilities			—				113.2				25.9				—				139.1
Long-term income tax liability			18.0				—				—				—				18.0
Total liabilities			(327.2	)			2,596.0				115.5				—				2,384.3
Redeemable noncontrolling interests			—				—				26.2				—				26.2
Total LifePoint Hospitals, Inc. stockholders’ equity			1,945.2				1,095.5				372.4				(1,467.9	)			1,945.2
Noncontrolling interests			—				1.5				12.9				—				14.4
Total equity			1,945.2				1,097.0				385.3				(1,467.9	)			1,959.6
Total liabilities and equity		$	1,618.0			$	3,693.0			$	527.0			$	(1,467.9	)		$	4,370.1

TABLE OF CONTENTS

LIFEPOINT HOSPITALS, INC.
  
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2012
Unaudited

Note 12. Guarantor and Non-Guarantor Supplementary Information  – (continued)

LIFEPOINT HOSPITALS, INC.
Condensed Consolidating Statements of Cash Flows
For the Three Months Ended March 31, 2012
(In millions)

		Parent Issuer				Guarantors				Non- Guarantors				Eliminations				Consolidated
Cash flows from operating activities:
Net income		$	56.1			$	59.0			$	9.7			$	(67.8	)		$	57.0
Adjustments to reconcile net income to net cash provided by operating activities:
Income from discontinued operations			—				(0.1	)			—				—				(0.1	)
Equity in earnings of affiliates			(67.8	)			—				—				67.8				—
Stock-based compensation			6.8				—				—				—				6.8
Depreciation and amortization			—				38.7				6.4				—				45.1
Amortization of physician minimum revenue guarantees			—				4.7				0.3				—				5.0
Amortization of convertible debt discounts			6.3				—				—				—				6.3
Amortization of deferred loan costs			1.5				—				—				—				1.5
Impairment charge			—				3.1				—				—				3.1
Deferred income tax benefit			(21.5	)			—				—				—				(21.5	)
Reserve for self-insurance claims, net of payments			—				4.4				0.3				—				4.7
Increase (decrease) in cash from operating assets and liabilities, net of effects of acquisitions and divestitures:
Accounts receivable			—				(68.3	)			(14.1	)			—				(82.4	)
Inventories and other current assets			0.1				1.5				(0.6	)			—				1.0
Accounts payable and accrued expenses			9.8				(17.8	)			1.1				—				(6.9	)
Income taxes payable/receivable			54.0				—				—				—				54.0
Other			—				0.3				(0.1	)			—				0.2
Net cash provided by operating activities – continuing operations			45.3				25.5				3.0				—				73.8
Net cash used in operating activities – discontinued operations			—				(0.8	)			—				—				(0.8	)
Net cash provided by operating activities			45.3				24.7				3.0				—				73.0
Cash flows from investing activities:
Purchases of property and equipment			—				(58.2	)			(2.6	)			—				(60.8	)
Acquisitions, net of cash acquired			—				(20.1	)			—				—				(20.1	)
Other			—				(0.2	)			—				—				(0.2	)
Net cash used in investing activities			—				(78.5	)			(2.6	)			—				(81.1	)
Cash flows from financing activities:
Repurchases of common stock			(5.5	)			—				—				—				(5.5	)
Proceeds from exercise of stock options			3.9				—				—				—				3.9
Proceeds from employee stock purchase plans			0.7				—				—				—				0.7
Proceeds from (distributions to) noncontrolling interests			—				0.3				(1.0	)			—				(0.7	)
Change in intercompany balances with affiliates, net			(44.4	)			44.4				—				—				—
Capital lease payments and other			—				(0.4	)			—				—				(0.4	)
Net cash (used in) provided by financing activities			(45.3	)			44.3				(1.0	)			—				(2.0	)
Change in cash and cash equivalents			—				(9.5	)			(0.6	)			—				(10.1	)
Cash and cash equivalents at beginning of period			—				106.2				20.0				—				126.2
Cash and cash equivalents at end of period		$	—			$	96.7			$	19.4			$	—			$	116.1

TABLE OF CONTENTS

LIFEPOINT HOSPITALS, INC.
  
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2012
Unaudited

Note 12. Guarantor and Non-Guarantor Supplementary Information  – (continued)

LIFEPOINT HOSPITALS, INC.
Condensed Consolidating Statements of Cash Flows
For the Three Months Ended March 31, 2011
(In millions)

		Parent Issuer				Guarantors				Non- Guarantors				Eliminations				Consolidated
Cash flows from operating activities:
Net income		$	46.1			$	48.2			$	14.8			$	(62.3	)		$	46.8
Adjustments to reconcile net income to net cash provided by operating activities:
Income from discontinued operations			—				(0.3	)			—				—				(0.3	)
Equity in earnings of affiliates			(62.3	)			—				—				62.3				—
Stock-based compensation			5.7				—				—				—				5.7
Depreciation and amortization			—				36.2				3.5				—				39.7
Amortization of physician minimum revenue guarantees			—				4.1				0.5				—				4.6
Amortization of convertible debt discounts			5.9				—				—				—				5.9
Amortization of deferred loan costs			1.5				—				—				—				1.5
Deferred income tax benefit			(2.7	)			—				—				—				(2.7	)
Reserve for self-insurance claims, net of payments			—				7.8				(3.1	)			—				4.7
Increase (decrease) in cash from operating assets and liabilities, net of effects of acquisitions and divestitures:
Accounts receivable			—				(9.0	)			(5.5	)			—				(14.5	)
Inventories and other current assets			—				(1.4	)			(0.4	)			—				(1.8	)
Accounts payable and accrued expenses			9.6				(14.5	)			(0.5	)			—				(5.4	)
Income taxes payable/receivable			31.0				—				—				—				31.0
Other			(0.2	)			0.5				0.3				—				0.6
Net cash provided by operating activities – continuing operations			34.6				71.6				9.6				—				115.8
Net cash provided by operating activities – discontinued operations			—				0.2				—				—				0.2
Net cash provided by operating activities			34.6				71.8				9.6				—				116.0
Cash flows from investing activities:
Purchases of property and equipment			—				(52.6	)			(3.3	)			—				(55.9	)
Acquisitions, net of cash acquired			—				(1.7	)			—				—				(1.7	)
Other			(1.0	)			0.1				—				—				(0.9	)
Net cash used in investing activities			(1.0	)			(54.2	)			(3.3	)			—				(58.5	)
Cash flows from financing activities:
Repurchases of common stock			(5.5	)			—				—				—				(5.5	)
Proceeds from exercise of stock options			17.5				—				—				—				17.5
Proceeds from employee stock purchase plans			0.7				—				—				—				0.7
Proceeds from (distributions to) noncontrolling interests			—				0.3				(1.3	)			—				(1.0	)
Change in intercompany balances with affiliates, net			(46.3	)			51.5				(5.2	)			—				—
Capital lease payments and other			—				(0.4	)			—				—				(0.4	)
Net cash (used in) provided by financing activities			(33.6	)			51.4				(6.5	)			—				11.3
Change in cash and cash equivalents			—				69.0				(0.2	)			—				68.8
Cash and cash equivalents at beginning of period			—				197.1				10.3				—				207.4
Cash and cash equivalents at end of period		$	—			$	266.1			$	10.1			$	—			$	276.2