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Vanguard Health Systems Reports First Quarter Fiscal 2013 Results

(1) Adjusted EBITDA is defined as income (loss) before interest expense (net of interest income), income taxes, depreciation and amortization, non-controlling interests, gain or loss on disposal of assets, equity method income or loss, stock compensation, monitoring fees and expenses, realized gains or losses on investments, acquisition related expenses, debt extinguishment costs, impairment and restructuring charges, pension expense (credits) and discontinued operations, net of taxes. Adjusted EBITDA is not intended as a substitute for net income (loss) attributable to Vanguard Health Systems, Inc. stockholders, operating cash flows or other cash flow data determined in accordance with accounting principles generally accepted in the United States. Due to varying methods of calculation, Adjusted EBITDA as presented may not be comparable to similarly titled measures of other companies.

 
VANGUARD HEALTH SYSTEMS, INC.
Condensed Consolidated Balance Sheets (Unaudited)
(In millions)
 
ASSETS         June 30, 2012     September 30, 2012
Current assets:
Cash and cash equivalents $ 455.5 $ 330.2
Restricted cash 2.4 3.9

Accounts receivable, net of allowance for doubtful accounts of approximately $366.5 and $363.8, respectively

702.1 672.4
Inventories 97.0 96.8
Deferred tax assets 89.6 89.8
Prepaid expenses and other current assets   236.4     214.8  
Total current assets 1,583.0 1,407.9
Property, plant and equipment, net of accumulated depreciation 2,110.1 2,106.7
Goodwill 768.4 768.4
Intangible assets, net of accumulated amortization 89.0 87.5
Deferred tax assets, noncurrent 71.2 67.9
Investments in securities 51.8 56.8
Escrowed cash for capital commitments 20.3
Other assets   94.3     96.2  
Total assets $ 4,788.1   $ 4,591.4  
 
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable $ 390.6 $ 343.2
Accrued salaries and benefits 226.0 216.4
Accrued health plan claims and settlements 67.8 66.4
Accrued interest 73.2 35.8
Other accrued expenses and current liabilities 219.9 152.3
Current maturities of long-term debt   11.2     12.5  
Total current liabilities 988.7 826.6
Professional and general liability and workers compensation reserves 304.8 303.7
Unfunded pension liability 269.9 234.1
Other liabilities 174.7 161.5
Long-term debt, less current maturities 2,695.4 2,692.1
Commitments and contingencies
Redeemable non-controlling interests 53.1 54.2
Equity:

Vanguard Health Systems, Inc. stockholders’ equity:

Common stock 0.8 0.8
Additional paid-in capital 403.3 403.9
Accumulated other comprehensive loss (48.4 ) (47.2 )
Retained deficit   (60.6 )   (46.7 )

Total Vanguard Health Systems, Inc. stockholders’ equity

295.1 310.8
Non-controlling interests   6.4     8.4  
Total equity   301.5     319.2  
Total liabilities and equity $ 4,788.1   $ 4,591.4  
 
 
VANGUARD HEALTH SYSTEMS, INC.
Condensed Consolidated Statements of Cash Flows (Unaudited)
(In millions)
 
        Quarter ended
September 30,
2011     2012
Operating activities:
Net income (loss) $ (24.0 ) $ 14.9
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Loss (income) from discontinued operations 0.1 (0.1 )
Depreciation and amortization 62.6 65.6
Amortization of loan costs and accretion of principal on notes 5.7 3.3
Debt extinguishment costs 38.9
Acquisition related expenses 12.2
Stock compensation 0.7 2.2
Deferred income taxes (16.1 ) 2.9
Other (1.3 ) (0.7 )
Changes in operating assets and liabilities   (166.5 )   (144.6 )
Net cash used in operating activities - continuing operations (87.7 ) (56.5 )
Net cash provided by (used in) operating activities - discontinued operations   (0.1 )   0.1  
Net cash used in operating activities (87.8 ) (56.4 )
 
Investing activities:
Acquisitions and related expenses, net of cash acquired (210.1 ) (0.4 )
Capital expenditures (63.4 ) (82.7 )
Proceeds from sales of investments in securities 22.7 27.1
Purchases of investments in securities (21.0 ) (30.1 )
Net reimbursements from restricted cash and escrow fund 18.8
Other   2.2     1.5  
Net cash used in investing activities (269.6 ) (65.8 )
 
Financing activities:
Payments of long-term debt and capital leases (456.5 ) (3.1 )
Payments of debt issuance costs (0.2 )
Proceeds from the issuance of common stock 67.5
Payments of IPO costs (6.9 )
Payments of tender premiums on note redemptions (27.6 )
Distributions paid to non-controlling interests and other   (1.0 )   0.2  
Net cash used in financing activities   (424.5 )   (3.1 )
Net decrease in cash and cash equivalents (781.9 ) (125.3 )
Cash and cash equivalents, beginning of period   936.6     455.5  
Cash and cash equivalents, end of period $ 154.7   $ 330.2  
 
Supplemental cash flow information:
Net cash paid for interest $ 70.8   $ 85.0  
Net cash paid for income taxes $ 0.3   $ 4.0  
 
 
VANGUARD HEALTH SYSTEMS, INC.
Segment Information (Unaudited)
(In millions)
 
        Quarter ended September 30, 2011
Acute Care     % of     Health     % of        
Services Revenues Plans Revenues Eliminations Consolidated
Patient service revenues, net (1) $ 1,233.9 100.0 % $ % $ (8.6 ) $ 1,225.3
Premium revenues         211.0   100.0         211.0  
Total revenues 1,233.9 100.0 211.0 100.0 (8.6 ) 1,436.3
 

Salaries and benefits (excludes stock compensation)

655.2 53.1 9.1 4.3 664.3
Health plan claims expense (1) 173.3 82.1 (8.6 ) 164.7
Supplies 213.6 17.3 213.6
Other operating expenses 267.4 21.7 10.7 5.1 278.1

Medicare and Medicaid EHR incentives

  (3.1 ) (0.3 )             (3.1 )
Segment EBITDA (2) 100.8 8.2 17.9 8.5 118.7
Less:
Interest, net 46.1 3.7 (0.3 ) (0.1 ) 45.8
Depreciation and amortization 61.4 5.0 1.2 0.6 62.6
Equity method income (0.1 ) (0.1 )
Stock compensation 0.7 0.1 0.7
Gain on disposal of assets (1.2 ) (0.1 ) (1.2 )
Debt extinguishment costs 38.9 3.2 38.9
Acquisition related expenses 12.2 1.0 12.2
Impairment and restructuring charges (0.1 ) (0.1 )
Pension credits   (1.0 ) (0.1 )             (1.0 )

Income (loss) from continuing operations before income taxes

$ (56.1 ) (4.4 )% $ 17.0   8.1 % $   $ (39.1 )

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