XNAS:LPNT LifePoint Hospitals Inc Quarterly Report 10-Q Filing - 6/30/2012

Effective Date 6/30/2012

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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 June 30, 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 July 20, 2012, the number of outstanding shares of the registrant’s Common Stock was 48,883,532.

 

 


 
 

i


 
 

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
June 30,
  Six Months Ended
June 30,
     2012   2011   2012   2011
Revenues before provision for doubtful accounts   $ 980.1     $ 873.4     $ 1,978.2     $ 1,762.0  
Provision for doubtful accounts     152.8       126.3       299.9       256.4  
Revenues     827.3       747.1       1,678.3       1,505.6  
Salaries and benefits     369.9       339.0       739.9       673.4  
Supplies     124.4       114.1       253.4       232.8  
Other operating expenses     195.7       163.1       384.2       324.7  
Other income     (1.5 )      (4.2 )      (2.7 )      (4.2 ) 
Depreciation and amortization     46.9       40.6       92.0       80.3  
Interest expense, net     25.7       28.1       51.2       57.3  
Impairment charge                 3.1        
       761.1       680.7       1,521.1       1,364.3  
Income from continuing operations before income taxes     66.2       66.4       157.2       141.3  
Provision for income taxes     24.3       25.3       58.4       53.7  
Income from continuing operations     41.9       41.1       98.8       87.6  
Income from discontinued operations, net of income taxes     0.1             0.2       0.3  
Net income     42.0       41.1       99.0       87.9  
Less: Net income attributable to noncontrolling interests     (1.7 )      (0.8 )      (2.6 )      (1.5 ) 
Net income attributable to LifePoint Hospitals, Inc.   $ 40.3     $ 40.3     $ 96.4     $ 86.4  
Basic earnings per share attributable to LifePoint Hospitals, Inc. stockholders:
                                   
Continuing operations   $ 0.85     $ 0.79     $ 2.04     $ 1.70  
Discontinued operations                 0.01       0.01  
Net income   $ 0.85     $ 0.79     $ 2.05     $ 1.71  
Diluted earnings per share attributable to LifePoint Hospitals, Inc. stockholders:
                                   
Continuing operations   $ 0.83     $ 0.77     $ 1.99     $ 1.66  
Discontinued operations                        
Net income   $ 0.83     $ 0.77     $ 1.99     $ 1.66  
Weighted average shares and dilutive securities outstanding:
                                   
Basic     47.3       51.1       47.1       50.6  
Diluted     48.4       52.3       48.4       51.9  
Amounts attributable to LifePoint Hospitals, Inc. stockholders:
                                   
Income from continuing operations, net of income taxes   $ 40.2     $ 40.3     $ 96.2     $ 86.1  
Income from discontinued operations, net of income taxes     0.1             0.2       0.3  
Net income   $ 40.3     $ 40.3     $ 96.4     $ 86.4  

 
 
See accompanying notes

1


 
 

TABLE OF CONTENTS

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

       
  Three Months Ended
June 30,
  Six Months Ended
June 30,
     2012   2011   2012   2011
Net income   $ 42.0     $ 41.1     $ 99.0     $ 87.9  
Other comprehensive income, net of income taxes:
                                   
Unrealized gains on changes in fair value of interest rate swap, net of income tax provisions of $1.4 and $2.8 for the three and six months ended June 30, 2011, respectively           2.6             5.1  
Other comprehensive income           2.6             5.1  
Comprehensive income     42.0       43.7       99.0       93.0  
Less: Net income attributable to noncontrolling interests     (1.7 )      (0.8 )      (2.6 )      (1.5 ) 
Comprehensive income attributable to LifePoint Hospitals, Inc.   $ 40.3     $ 42.9     $ 96.4     $ 91.5  

 
 
See accompanying notes

2


 
 

TABLE OF CONTENTS

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

   
  June 30,
2012
  December 31,
2011(a)
     (Unaudited)  
ASSETS
                 
Current assets:
                 
Cash and cash equivalents   $ 172.3     $ 126.2  
Accounts receivable, less allowances for doubtful accounts of $605.2 and $537.4 at June 30, 2012 and December 31, 2011, respectively     468.9       430.6  
Inventories     88.6       87.2  
Prepaid expenses     23.7       26.4  
Income taxes receivable           1.6  
Deferred tax assets     147.7       125.7  
Other current assets     31.3       42.3  
       932.5       840.0  
Property and equipment:
                 
Land     95.7       93.5  
Buildings and improvements     1,701.1       1,631.6  
Equipment     1,139.1       1,084.0  
Construction in progress (estimated costs to complete and equip after June 30, 2012 is $71.3)     95.2       105.7  
       3,031.1       2,914.8  
Accumulated depreciation     (1,166.6 )      (1,084.4 ) 
       1,864.5       1,830.4  
Deferred loan costs, net     18.8       21.7  
Intangible assets, net     86.0       89.5  
Other     20.6       19.8  
Goodwill     1,569.2       1,568.7  
Total assets   $ 4,491.6     $ 4,370.1  
LIABILITIES AND EQUITY
                 
Current liabilities:
                 
Accounts payable   $ 95.7     $ 99.6  
Accrued salaries     99.2       103.1  
Income taxes payable     30.9        
Other current liabilities     135.7       168.2  
Current maturities of long-term debt     2.0       1.9  
       363.5       372.8  
Long-term debt     1,609.6       1,595.4  
Deferred income tax liabilities     239.3       259.0  
Reserves for self-insurance claims and other liabilities     154.8       139.1  
Long-term income tax liability     18.5       18.0  
Total liabilities     2,385.7       2,384.3  
Redeemable noncontrolling interests     29.0       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; 63,932,881 and 63,233,088 shares issued at June 30, 2012 and December 31, 2011, respectively     0.6       0.6  
Capital in excess of par value     1,375.7       1,354.8  
Retained earnings     1,163.3       1,066.9  
Common stock in treasury, at cost, 15,074,973 and 14,925,875 shares at June 30, 2012 and December 31, 2011, respectively     (483.0 )      (477.1 ) 
Total LifePoint Hospitals, Inc. stockholders' equity     2,056.6       1,945.2  
Noncontrolling interests     20.3       14.4  
Total equity     2,076.9       1,959.6  
Total liabilities and equity   $ 4,491.6     $ 4,370.1  

(a) Derived from audited consolidated financial statements.

 
 
See accompanying notes

3


 
 

TABLE OF CONTENTS

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

       
  Three Months Ended
June 30,
  Six Months Ended
June 30,
     2012   2011   2012   2011
Cash flows from operating activities:
                                   
Net income   $ 42.0     $ 41.1     $ 99.0     $ 87.9  
Adjustments to reconcile net income to net cash provided by operating activities:
                                   
Income from discontinued operations     (0.1 )            (0.2 )      (0.3 ) 
Stock-based compensation     6.5       5.6       13.3       11.3  
Depreciation and amortization     46.9       40.6       92.0       80.3  
Amortization of physician minimum revenue guarantees     4.8       4.7       9.8       9.3  
Amortization of convertible debt discounts     6.4       6.0       12.7       11.9  
Amortization of deferred loan costs     1.4       1.5       2.9       3.0  
Impairment charge                 3.1        
Deferred income tax benefit     (17.1 )      (16.7 )      (38.6 )      (19.4 ) 
Reserve for self-insurance claims, net of payments     (7.5 )      2.3       (2.8 )      7.0  
Increase (decrease) in cash from operating assets and liabilities, net of effects from acquisitions and divestitures:
                                   
Accounts receivable     46.7       19.6       (35.7 )      5.1  
Inventories and other current assets     6.3       (2.0 )      7.3       (3.8 ) 
Accounts payable and accrued expenses     (11.2 )      (5.8 )      (18.1 )      (11.2 ) 
Income taxes payable/receivable     (21.4 )      (4.4 )      32.6       26.6  
Other     0.5             0.7       0.6  
Net cash provided by operating activities – continuing operations     104.2       92.5       178.0       208.3  
Net cash provided by (used in) operating activities – discontinued operations     0.1             (0.7 )      0.2  
Net cash provided by operating activities     104.3       92.5       177.3       208.5  
Cash flows from investing activities:
                                   
Purchases of property and equipment     (49.3 )      (48.6 )      (110.1 )      (104.5 ) 
Acquisitions, net of cash acquired           (24.8 )      (20.1 )      (26.5 ) 
Other     (0.1 )            (0.3 )      (0.9 ) 
Net cash used in investing activities     (49.4 )      (73.4 )      (130.5 )      (131.9 ) 
Cash flows from financing activities:
                                   
Repurchases of common stock     (0.4 )      (36.3 )      (5.9 )      (41.8 ) 
Payment of debt financing costs           (0.1 )            (0.1 ) 
Proceeds from exercise of stock options     1.6       17.0       5.5       34.5  
(Refunds of) proceeds from employee stock purchase plans
    (0.2 )      (0.1 )      0.5       0.6  
(Distributions to) proceeds from noncontrolling interests     (0.7 )      0.4       (1.4 )      (0.6 ) 
Sales of redeemable noncontrolling interests     1.6             1.6        
Capital lease payments and other     (0.6 )      (0.4 )      (1.0 )      (0.8 ) 
Net cash provided by (used in) financing activities     1.3       (19.5 )      (0.7 )      (8.2 ) 
Change in cash and cash equivalents     56.2       (0.4 )      46.1       68.4  
Cash and cash equivalents at beginning of period     116.1       276.2       126.2       207.4  
Cash and cash equivalents at end of period   $ 172.3     $ 275.8     $ 172.3     $ 275.8  
Supplemental disclosure of cash flow information:
                                   
Interest payments   $ 28.8     $ 32.1     $ 36.8     $ 44.0  
Capitalized interest   $ 0.5     $ 0.5     $ 1.3     $ 0.8  
Income tax payments   $ 63.0     $ 46.3     $ 64.6     $ 46.6  

 
 
See accompanying notes

4


 
 

TABLE OF CONTENTS

LIFEPOINT HOSPITALS, INC.
 
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
For the Six Months Ended June 30, 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                       96.4             2.6       99.0  
Exercise of stock options and tax benefits of stock-based awards     0.3             8.3                         8.3  
Stock activity in connection with employee stock purchase plan                 0.5                         0.5  
Stock-based compensation     0.5             13.3                         13.3  
Repurchases of common stock, at cost     (0.2 )                        (5.9 )            (5.9 ) 
Noncash change in noncontrolling interests as a result of acquisition and other                 (1.2 )                  4.7       3.5  
Cash distributions to noncontrolling interests                                   (1.4 )      (1.4 ) 
Balance at June 30, 2012     48.9     $ 0.6     $ 1,375.7     $ 1,163.3     $ (483.0 )    $ 20.3     $ 2,076.9  

(a) Derived from audited consolidated financial statements.

 
 
See accompanying notes

5


 
 

TABLE OF CONTENTS

LIFEPOINT HOSPITALS, INC.
 
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 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 June 30, 2012, on a consolidated basis, the Company operated 55 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 and six months ended June 30, 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 unaudited 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 1997 from 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 $1.7 million and $33.0 million of additional Medicare revenue during the three and six months ended June 30, 2012, respectively.

6


 
 

TABLE OF CONTENTS

LIFEPOINT HOSPITALS, INC.
 
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 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 and six months ended June 30, 2012 and 2011 (in millions):

               
  Three Months Ended June 30,   Six Months Ended June 30,
     2012   2011   2012   2011
     Amount   % of Revenues   Amount   % of Revenues   Amount   % of Revenues   Amount   % of Revenues
Medicare   $ 284.4       34.4 %    $ 262.1       35.1 %    $ 602.1       35.9 %    $ 536.6       35.6 % 
Medicaid     132.0       16.0       109.9       14.7       237.9       14.2       216.1       14.4  
HMOs, PPOs and other private insurers     391.2       47.3       352.0       47.1       793.8       47.3       710.1       47.2  
Self-pay     160.9  

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