Team Health Holdings, Inc. Announces Second Quarter 2015 Financial Results

Conference Call Date Changed to Today, August 4, 2015, at 9:00 a.m. (Eastern Time)

Aug 04, 2015, 08:15 ET from Team Health Holdings, Inc.

KNOXVILLE, Tenn., Aug. 4, 2015 /PRNewswire/ --

Second Quarter 2015 Highlights:

  • Net Revenue increased to $878.0 million; 30.1% over second quarter of 2014
  • Net earnings attributable to Team Health Holdings, Inc. ("Net earnings") were $28.9 million; $51.2 million after adjustments
  • Diluted net earnings per share of $0.39; Adjusted EPS of $0.70
  • Adjusted EBITDA increased 15.2% to $99.4 million

2015 Outlook:

  • Projected 2015 net revenue growth increased to a range of 24.0% to 26.0%; Adjusted EBITDA margin remains between 10.5% and 11.0%

Agreement with IPC Healthcare:

    • Company enters definitive agreement to acquire IPC Healthcare to create leading physician services organization

    Team Health Holdings, Inc. ("TeamHealth" or the "Company") (NYSE: TMH), a leading provider of outsourced physician staffing solutions for hospitals in the United States, today announced results for its second quarter of 2015.

    "We are extremely pleased with our financial results as we generated another quarter of double digit revenue, earnings and Adjusted EBITDA growth.  These results reflect our second straight quarter of revenue growth in excess of 30%, as we benefited from strong performance across all of our growth drivers and experienced continued strong momentum across our business," said TeamHealth President and Chief Executive Officer, Mike Snow.

    "Second quarter consolidated revenue growth was driven by positive contributions from acquisitions, net new contract sales, and same contract results.  Similar to our results in Q1, the Company continued to benefit from the significant number of transactions we closed in 2014 and 2015, as the financial performance of our recent acquisitions was the most significant driver of our revenue increase in the quarter.  Net new contracts were the second largest contributor to our revenue growth, as hospitals and physician groups are increasingly turning to TeamHealth for our best in class healthcare solutions.  In addition, we experienced robust patient volume growth and continued to see a reduction in the percentage of uninsured patients that we treat that helped contribute to solid same contract performance.  These results reflect our integrated and complementary approach to achieving our financial targets.

    "As a result of our financial performance in the first half of 2015, and our current expectations about operating trends and growth opportunities for the remainder of the year, we have increased our estimates for net revenue growth for fiscal year 2015 to range between $3.50 billion and $3.55 billion, reflecting an annual growth rate of 24.0% to 26.0%.  We continue to target an Adjusted EBITDA margin of between 10.5% and 11.0%.  We remain confident in our ability to execute in the current environment and provide support to our affiliated clinicians and hospital partners while achieving our operational and financial goals for 2015," concluded Mr. Snow.

    Agreement to Acquire IPC Healthcare

    In a separate announcement issued today, TeamHealth announced a definitive agreement to acquire IPC Healthcare Inc. ("IPC Healthcare") (Nasdaq: IPCM), a leading national acute hospitalist and post-acute provider organization, in an all-cash transaction with an enterprise value of approximately $1.6 billion or $80.25 per share.

    "This is an important strategic and logical next step for TeamHealth, and we have found the right partner in IPC Healthcare," said Mr. Snow.  "This combination brings together two physician-centric companies to create the leading physician services organization with an enhanced financial and strategic position that we believe will benefit our clinicians, hospital partners, employees and shareholders." 

     2015 Second Quarter Results

    Net revenue increased 30.1% to $878.0 million from $675.1 million in the second quarter of 2014.  Acquisitions contributed 20.5%, net sales growth contributed 5.1%, and same contract revenue contributed 4.4% of the increase in quarter-over-quarter growth in net revenue.  Within the acquisitions category, new hospital contracting opportunities that were initially developed by our sales and marketing process contributed 5.7% of overall net revenue growth between quarters. 

    Same contract revenue increased $29.6 million, or 4.7%, to $661.9 million from $632.3 million in the second quarter of 2014.  A 6.1% increase in same contract volumes contributed 4.4% to same contract growth while an increase in estimated collections on fee for service visits provided a 0.2% increase in same contract revenue growth between quarters.  The increase in estimated collections per visit was constrained by a reduction in Medicaid parity revenue in the current quarter.  Contract and other revenue contributed 0.1% to same contract revenue growth between quarters.  Acquisitions contributed $138.7 million of revenue growth and net new contract revenue increased by $34.6 million between quarters.  The benefit from Medicaid parity revenue recognized in the second quarter of 2015 was $0.4 million.  The second quarter of 2014 Medicaid parity revenue was $8.5 million, of which $8.0 million is same contract.  The decline in parity revenue between periods constrained consolidated revenue growth by 1.2% and same contract revenue growth by 1.3% between quarters.

    The components of net revenue include revenue from contracts that have been in effect for prior periods (same contracts) and from net, new and acquired contracts during the periods, as set forth in the table below:

    Three Months Ended June 30,

    2014

    2015

    % Increase

    Contribution to Overall Revenue Growth

    (in thousands)

    Same contracts:

    Fee for service revenue

    $

    480,270

    $

    509,567

    6.1

    %

    4.3

    %

    Contract and other revenue

    152,037

    152,334

    0.2

    %

    %

    Total same contracts

    632,307

    661,901

    4.7

    %

    4.4

    %

    New contracts, net of terminations:

    Fee for service revenue

    16,767

    52,048

    210.4

    %

    5.2

    %

    Contract and other revenue

    18,551

    17,882

    (3.6)%

    (0.1)%

    Total new contracts, net of terminations

    35,318

    69,930

    98.0

    %

    5.1

    %

    Acquired contracts:

    Fee for service revenue

    7,132

    124,169

    1,641.0

    %

    17.3

    %

    Contract and other revenue

    313

    21,955

    6,914.4

    %

    3.2

    %

    Total acquired contracts

    7,445

    146,124

    1,862.7

    %

    20.5

    %

    Consolidated:

    Fee for service revenue

    504,169

    685,784

    36.0

    %

    26.9

    %

    Contract and other revenue

    170,901

    192,171

    12.4

    %

    3.2

    %

    Total net revenue

    $

    675,070

    $

    877,955

    30.1

    %

    30.1

    %

    The following table reflects the visits and procedures included within fee for service revenues described in the table above:

    Three Months Ended June 30,

    2014

    2015

    % Increase

    (in thousands)

    Fee for service visits and procedures:

    Same contract

    2,793

    2,962

    6.1

    %

    New and acquired contracts, net of terminations

    163

    1,034

    534.4

    %

    Total fee for service visits and procedures

    2,956

    3,996

    35.2

    %

    Net earnings attributable to Team Health Holdings, Inc. ("Net earnings") for the quarter were $28.9 million, or $0.39 diluted net earnings per share, compared to net earnings of $30.2 million, or $0.42 diluted net earnings per share, in the second quarter of 2014.  The financial results for the second quarter of 2015 included $7.9 million of contingent purchase and other acquisition compensation expense ($7.0 million after-tax), and non-cash amortization expense of $21.2 million ($15.3 million after-tax).  Excluding these items, net earnings for the second quarter of 2015 would have been $51.2 million and Adjusted EPS would have been $0.70 per share.  Financial results for the second quarter of 2014 included $9.3 million of contingent purchase and other acquisition compensation expense ($6.4 million after-tax), and non-cash amortization expense of $11.1 million ($7.5 million after-tax).  Excluding these items, net earnings for the second quarter of 2014 would have been $44.1 million and Adjusted EPS would have been $0.61 per share.

    See "Non-GAAP Financial Measures Reconciliations" and "Adjusted Earnings Per Share" below for the definition of Adjusted EPS and its reconciliation to net earnings and diluted earnings per share attributable to Team Health Holdings, Inc.

    The following table set forth a reconciliation of diluted earnings per share to Adjusted EPS (note that some totals may not add due to rounding).

    Adjusted Earnings Per Share

    Three Months Ended June 30,

    2014

    2015

    (in thousands, except for share data)

    Diluted weighted average shares outstanding

    71,898

    73,602

    Net earnings and diluted net earnings per share attributable

    to Team Health Holdings, Inc., as reported

    $

    30,203

    $

    0.42

    $

    28,935

    $

    0.39

    Adjustments:

    Contingent purchase and other acquisition compensation

    expense, net of tax of $(2,883) and $(877) for 2014 and

    2015, respectively

    6,371

    0.09

    6,979

    0.09

    Amortization expense, net of tax of $(3,573) and $(5,859)

    for 2014 and 2015, respectively

    7,513

    0.10

    15,316

    0.21

    Net earnings and diluted earnings per share attributable to

     Team Health Holdings, Inc., as adjusted

    $

    44,087

    $

    0.61

    $

    51,230

    $

    0.70

    Cash flow provided by operations for the quarter was $15.6 million compared to $40.5 million in the second quarter of 2014.  There were $5.0 million of contingent purchase payments made in the second quarter of 2015 and $1.2 million contingent purchase payments in 2014.  Excluding the impact of the contingent purchase payments in 2015 and 2014, operating cash flows were $20.6 million in 2015 compared to $41.6 million in 2014.  The reduction in operating cash flow in the second quarter of 2015 reflects an increased level of accounts receivable funding associated with growth in the number of new and acquired contracts when compared to the prior year.  As of June 30, 2015, net accounts receivable were $601.0 million compared to $500.6 million as of December 31, 2014.  Net days in accounts receivable were 63.0 days compared to 59.0 days at December 31, 2014.

    Adjusted EBITDA for the quarter increased 15.2% to $99.4 million from $86.2 million in the second quarter of 2014, and Adjusted EBITDA margin was 11.3% in 2015 compared to 12.8% in 2014.  Excluding the impact of Medicaid parity in both periods (assuming an Adjusted EBITDA margin of approximately 70% on parity revenue), Adjusted EBITDA margin would have been 11.3% in the second quarter of 2015 and 12.0% in 2014.  See "Non-GAAP Financial Measures Reconciliations" and "Adjusted EBITDA" below for the definitions of Adjusted EBITDA Margin and Adjusted EBITDA and its reconciliation to net earnings attributable to Team Health Holdings, Inc.

    The following table sets forth a reconciliation of net earnings attributable to Team Health Holdings, Inc. to Adjusted EBITDA.

    Adjusted EBITDA

    Three Months Ended June 30,

    2014

    2015

    (In thousands)

    Net earnings attributable to Team Health Holdings, Inc.

    $

    30,203

    $

    28,935

    Interest expense, net

    3,429

    4,571

    Provision for income taxes

    19,630

    21,186

    Depreciation

    4,918

    5,560

    Amortization

    11,086

    21,175

    Other (income) expenses, net(a)

    (1,590)

    961

    Contingent purchase and other acquisition compensation expense(b)

    9,254

    7,856

    Transaction costs(c)

    1,609

    2,215

    Equity based compensation expense(d)

    6,374

    5,670

    Insurance subsidiaries interest income

    498

    519

    Severance and other charges

    833

    729

    Adjusted EBITDA

    $

    86,244

    $

    99,377

     

    a. 

    Reflects gain or loss on disposal of assets, realized gains on investments, and changes in fair value of investments associated with the Company's non-qualified retirement plan.

    b. 

    Reflects expense recognized for historical and estimated future contingent payments and other compensation expense associated with acquisitions.

    c. 

    Reflects expenses associated with accounting, legal, due diligence and other transaction fees related to acquisition activity.

    d.

    Reflects costs related to equity awards granted under the Team Health Holdings, Inc. 2009 Amended and Restated Stock Incentive Plan and the 2010 Nonqualified Stock Purchase Plan.

    As of June 30, 2015, the Company had cash and cash equivalents of approximately $51.3 million and total outstanding debt of $868.3 million.  The outstanding debt as of June 30, 2015 includes borrowings under its revolving credit facility in the amount of $279.5 million incurred to fund the Company's recently completed acquisitions.  As of June 30, 2015 the Company had $370.5 million of available borrowings under its revolving credit facilities (without giving effect to $6.4 million of undrawn letters of credit). 

    2015 First Six Month Results

    Net revenue in the six months ended June 30, 2015 increased 30.5% to $1.72 billion from $1.32 billion for the same period of 2014.  Acquisitions contributed 20.3%, same contract revenue contributed 5.6%, and net sales growth contributed 4.6% of the increase in year over year growth in net revenue.  Within the acquisitions category, new hospital contracting opportunities that were initially developed by our sales and marketing process contributed 5.5% of overall net revenue growth between years.

    Same contract revenue for the six months ended June 30, 2015 increased $73.6 million, or 6.1%, to $1.29 billion from $1.22 billion in the same period a year ago.  Increases in same contract volume of 7.6% contributed 5.5% to growth while a 0.5% increase in estimated collections on fee for service visits provided a 0.6% increase in same contract revenue growth between periods.  Contract and other revenue was flat between periods.  Acquisitions contributed $267.9 million of growth between periods and net new contract revenue increased by $60.3 million.  The benefit from Medicaid parity revenue recognized in the six months ended June 30, 2015 was $1.9 million, of which $0.7 million was same contract revenue compared to $17.3 million in 2014, of which $16.4 million was same contract revenue.  The decrease in Medicaid parity revenue constrained consolidated revenue growth by 1.2% and same contract revenue growth by 1.3% between periods. 

    The components of net revenue include revenue from contracts that have been in effect for prior periods (same contracts) and from net, new and acquired contracts during the periods, as set forth in the table below:

    Six Months Ended June 30,

    2014

    2015

    % Increase

    Contribution

    to Overall

    Revenue Growth

    (in thousands)

    Same contracts:

    Fee for service revenue

    $

    915,211

    $

    988,934

    8.1

    %

    5.6

    %

    Contract and other revenue

    300,381

    300,216

    (0.1)%

    %

    Total same contracts

    1,215,592

    1,289,150

    6.1

    %

    5.6

    %

    New contracts, net of terminations:

    Fee for service revenue

    44,235

    108,919

    146.2

    %

    4.9

    %

    Contract and other revenue

    43,987

    39,600

    (10.0)%

    (0.3)%

    Total new contracts, net of terminations

    88,222

    148,519

    68.3

    %

    4.6

    %

    Acquired contracts:

    Fee for service revenue

    12,070

    238,129

    1,872.9

    %

    17.2

    %

    Contract and other revenue

    836

    42,641

    5,000.6

    %

    3.2

    %

    Total acquired contracts

    12,906

    280,770

    2,075.5

    %

    20.3

    %

    Consolidated:

    Fee for service revenue

    971,516

    1,335,982

    37.5

    %

    27.7

    %

    Contract and other revenue

    345,204

    382,457

    10.8

    %

    2.8

    %

    Total net revenues

    $

    1,316,720

    $

    1,718,439

    30.5

    %

    30.5

    %

     

    The following table reflects the visits and procedures included within fee for service revenues described in the table above:

    Six Months Ended June 30,

    2014

    2015

    % Increase

    (in thousands)

    Fee for service visits and procedures:

    Same contract

    5,376

    5,782

    7.6

    %

    New and acquired contracts, net of terminations

    377

    2,039

    440.8

    %

    Total fee for service visits and procedures

    5,753

    7,821

    35.9

    %

    Net earnings attributable to Team Health Holdings, Inc. were $57.0 million in the six months ended June 30, 2015, or $0.78 diluted net earnings per share, compared to net earnings of $54.0 million, or $0.75 diluted net earnings per share, in the same period of 2014.  The 2015 financial results included $15.8 million ($13.8 million after-tax) of contingent purchase and other acquisition compensation expense, and non-cash amortization expense of $41.5 million ($29.8 million after-tax).  Excluding these items, net earnings for the six months of 2015 would have been $100.6 million and Adjusted EPS would have been $1.38 per share.  Financial results for the same period in 2014 included $19.4 million of contingent purchase and other acquisition compensation expense ($13.3 million after-tax), and non-cash amortization expense of $22.2 million ($15.1 million after-tax).  Excluding these adjustments, net earnings for the same period in 2014 would have been $82.4 million and Adjusted EPS would have been $1.15 per share. 

    See "Non-GAAP Financial Measures Reconciliations" and "Adjusted Earnings Per Share" below for the definition of Adjusted EPS and its reconciliation to net earnings and diluted earnings per share attributable to Team Health Holdings, Inc.

    The following tables set forth a reconciliation of diluted earnings per share to Adjusted EPS (note that some totals may not add due to rounding).

    Adjusted Earnings Per Share

    Six Months Ended June 30,

    2014

    2015

    (in thousands, except for share data)

    Diluted weighted average shares outstanding

    71,722

    73,137

    Net earnings and diluted net earnings per share attributable to Team Health Holdings, Inc., as reported

    $

    54,048

    0.75

    $

    56,989

    0.78

    Adjustments:

    Contingent purchase and other acquisition compensation expense, net of tax of $(6,064) and $(1,947) for 2014 and 2015, respectively

    13,334

    0.19

    13,813

    0.19

    Amortization expense, net of tax of $(7,161) and $(11,615) for 2014 and 2015, respectively

    15,051

    0.21

    29,837

    0.41

    Net earnings and diluted earnings per share attributable to Team Health Holdings, Inc., as adjusted

    $

    82,433

    $

    1.15

    $

    100,639

    $

    1.38

    Cash flow provided by operations for the six months ended June 30, 2015 was $18.2 million compared to $74.6 million in 2014.  There were $8.9 million contingent purchase payments in 2015 and $1.2 million contingent purchase payments in 2014.  Excluding the impact of the 2015 and 2014 contingent purchase payments, operating cash flows were $27.1 million in 2015 and $75.9 million in 2014.  The decline in operating cash flow between periods was due primarily to an increased level of accounts receivable funding associated with increased revenue growth in 2015.

    Adjusted EBITDA increased 19.4% to $188.7 million from $158.0 million in the six months ended June 30, 2014, and Adjusted EBITDA margin was 11.0% compared to 12.0% for the same period in 2014.  Excluding the impact of Medicaid parity in both years, Adjusted EBITDA margin would have been 10.9% in 2015 and 11.2% in 2014.  See "Non-GAAP Financial Measures Reconciliations" and "Adjusted EBITDA" below for the definitions of Adjusted EBITDA Margin and Adjusted EBITDA and its reconciliation to net earnings attributable to Team Health Holdings, Inc.

    The following table sets forth a reconciliation of net earnings attributable to Team Health Holdings, Inc. to Adjusted EBITDA.

    Adjusted EBITDA

    Six Months Ended June 30,

    2014

    2015

    (in thousands)

    Net earnings attributable to Team Health Holdings, Inc.

    $

    54,048

    $

    56,989

    Interest expense, net

    6,837

    8,560

    Provision for income taxes

    35,647

    42,341

    Depreciation

    9,489

    11,134

    Amortization

    22,212

    41,452

    Other (income) expenses, net(a)

    (3,750)

    (2,321)

    Contingent purchase and other acquisition compensation expense(b)

    19,398

    15,760

    Transaction costs(c)

    2,627

    3,301

    Equity based compensation expense(d)

    9,348

    9,213

    Insurance subsidiaries interest income

    998

    1,023

    Severance and other charges

    1,181

    1,247

    Adjusted EBITDA

    $

    158,035

    $

    188,699

     

    a. 

    Reflects gain or loss on sale of assets, realized gains on investments, and changes in fair value of investments associated with the Company's non-qualified retirement plan.

    b.

    Reflects expense recognized for historical and estimated future contingent payments and other compensation expense activity associated with acquisitions.

    c. 

    Reflects expenses associated with accounting, legal, due diligence and other transaction fees related to acquisition activities.

    d.

    Reflects costs related to options and restricted shares granted under the Team Health Holdings, Inc. 2009 Amended and Restated Stock Incentive Plan and the 2010 Nonqualified Stock Purchase Plan.

     

    Team Health Holdings, Inc.

    Consolidated Balance Sheets

    December 31, 2014

    June 30,

    2015

    (In thousands)

    ASSETS

    Current assets:

    Cash and cash equivalents

    $

    20,094

    $

    51,303

    Accounts receivable, less allowance for uncollectibles of $409,851 and $475,387 in 2014 and 2015, respectively

    500,633

    601,032

    Prepaid expenses and other current assets

    46,469

    55,969

    Receivables under insured programs

    23,623

    19,345

    Income tax receivable

    8,935

    4,968

    Total current assets

    599,754

    732,617

    Insurance subsidiaries' and other investments

    112,946

    103,192

    Property and equipment, net

    62,117

    67,537

    Other intangibles, net

    341,194

    336,601

    Goodwill

    724,979

    781,946

    Deferred income taxes

    21,113

    23,993

    Receivables under insured programs

    50,625

    64,742

    Other

    61,994

    59,946

    $

    1,974,722

    $

    2,170,574

    LIABILITIES AND SHAREHOLDERS' EQUITY

    Current liabilities:

    Accounts payable

    $

    40,616

    $

    45,817

    Accrued compensation and physician payable

    283,033

    269,955

    Other accrued liabilities

    153,137

    138,296

    Current maturities of long-term debt

    227,750

    305,750

    Deferred income taxes

    38,272

    36,170

    Total current liabilities

    742,808

    795,988

    Long-term debt, less current maturities

    577,500

    562,500

    Other non-current liabilities

    231,778

    286,660

    Shareholders' equity:

    Common stock, ($0.01 par value; 100,000 shares authorized, 71,283 and 72,390 shares issued and outstanding at December 31, 2014 and June 30, 2015, respectively)

    713

    724

    Additional paid-in capital

    696,996

    742,076

    Accumulated deficit

    (278,855)

    (221,866)

    Accumulated other comprehensive earnings

    1,695

    1,095

    Team Health Holdings, Inc. shareholders' equity

    420,549

    522,029

    Noncontrolling interests

    2,087

    3,397

    Total shareholders' equity including noncontrolling interests

    422,636

    525,426

    $

    1,974,722

    $

    2,170,574

    Team Health Holdings, Inc.

    Consolidated Statements of Comprehensive Earnings

    Three Months Ended June 30,

    2014

    2015

    (In thousands, except per share data)

    Net revenue before provision for uncollectibles

    $

    1,166,615

    $

    1,466,984

    Provision for uncollectibles

    491,545

    589,029

    Net revenue

    675,070

    877,955

    Cost of services rendered (exclusive of depreciation and amortization shown separately below)

    Professional service expenses

    510,070

    687,540

    Professional liability costs

    23,623

    27,279

    General and administrative expenses (includes contingent purchase and other acquisition compensation expense of $9,254 and $7,856 in 2014 and 2015, respectively)

    72,023

    78,586

    Other (income) expenses, net

    (1,590)

    961

    Depreciation

    4,918

    5,560

    Amortization

    11,086

    21,175

    Interest expense, net

    3,429

    4,571

    Transaction costs

    1,609

    2,215

    Earnings before income taxes

    49,902

    50,068

    Provision for income taxes

    19,630

    21,186

         Net earnings

    30,272

    28,882

    Net earnings (loss) attributable to noncontrolling interests

    69

    (53)

    Net earnings attributable to Team Health Holdings, Inc.

    $

    30,203

    $

    28,935

    Net earnings per share of Team Health Holdings, Inc.

    Basic

    $

    0.43

    $

    0.40

    Diluted

    $

    0.42

    $

    0.39

    Weighted average shares outstanding

    Basic

    70,154

    71,956

    Diluted

    71,898

    73,602

    Other comprehensive earnings (loss), net of tax:

    Net change in fair value of investments, net of tax of $248 and $(340) for 2014 and 2015, respectively

    461

    (573)

    Comprehensive earnings

    30,733

    28,309

    Comprehensive earnings (loss) attributable to noncontrolling interests

    69

    (53)

    Comprehensive earnings attributable to Team Health Holdings, Inc.

    $

    30,664

    $

    28,362

    Team Health Holdings, Inc.

    Consolidated Statements of Comprehensive Earnings

    Six Months Ended June 30,

    2014

    2015

    (In thousands, except per share data)

    Net revenues before provision for uncollectibles

    $

    2,270,788

    $

    2,865,273

    Provision for uncollectibles

    954,068

    1,146,834

    Net revenues

    1,316,720

    1,718,439

    Cost of services rendered (exclusive of depreciation and amortization shown separately below)

    Professional service expenses

    1,011,350

    1,351,005

    Professional liability costs

    43,918

    53,897

    General and administrative expenses (includes contingent purchase and other acquisition compensation expense of $19,398 and $15,760 in 2014 and 2015, respectively)

    134,200

    152,148

    Other (income) expenses, net

    (3,750)

    (2,321)

    Depreciation

    9,489

    11,134

    Amortization

    22,212

    41,452

    Interest expense, net

    6,837

    8,560

    Transaction costs

    2,627

    3,301

    Earnings before income taxes

    89,837

    99,263

    Provision for income taxes

    35,647

    42,341

      Net earnings

    54,190

    56,922

    Net earnings (loss) attributable to noncontrolling interests

    142

    (67)

    Net earnings attributable to Team Health Holdings, Inc.

    $

    54,048

    $

    56,989

    Net earnings per share of Team Health Holdings, Inc.

    Basic

    $

    0.77

    $

    0.80

    Diluted

    $

    0.75

    $

    0.78

    Weighted average shares outstanding

    Basic

    69,996

    71,666

    Diluted

    71,722

    73,137

    Other comprehensive earnings (loss), net of tax:

    Net change in fair value of investments, net of tax of $573 and $(337) for 2014 and 2015, respectively

    1,063

    (600)

    Comprehensive earnings

    55,253

    56,322

    Comprehensive earnings (loss) attributable to noncontrolling interests

    142

    (67)

    Comprehensive earnings attributable to Team Health Holdings, Inc.

    $

    55,111

    $

    56,389

     

     

    Team Health Holdings, Inc.

    Consolidated Statements of Cash Flow

    Three Months Ended June 30,

    2014

    2015

    (In thousands)

    Operating Activities

    Net earnings

    $

    30,272

    $

    28,882

    Adjustments to reconcile net earnings:

    Depreciation

    4,918

    5,560

    Amortization

    11,086

    21,175

    Amortization of deferred financing costs

    253

    364

    Equity based compensation expense

    6,374

    5,670

    Provision for uncollectibles

    491,545

    589,029

    Deferred income taxes

    (6,698)

    (10,140)

    Gain on sale of equipment

    (507)

    Equity in joint venture income

    (1,203)

    (938)

    Changes in operating assets and liabilities, net of acquisitions:

    Accounts receivable

    (510,485)

    (638,236)

    Prepaids and other assets

    (15,817)

    (14,443)

    Income tax accounts

    (13,330)

    (11,094)

    Accounts payable

    1,205

    (691)

    Accrued compensation and physician payable

    28,632

    29,210

    Contingent purchase liabilities

    7,616

    2,869

    Other accrued liabilities

    (418)

    (3,594)

    Professional liability reserves

    7,014

    12,008

    Net cash provided by operating activities

    40,457

    15,631

    Investing Activities

    Purchases of property and equipment

    (6,078)

    (7,532)

    Cash paid for acquisitions, net

    (4,063)

    (51,496)

    Proceeds from the sale of investments

    369

    Net proceeds from disposition of assets held for sale

    250

    Purchases of investments at insurance subsidiaries

    (19,513)

    (25,854)

    Proceeds from investments at insurance subsidiaries

    16,939

    32,920

    Net cash used in investing activities

    (12,715)

    (51,343)

    Financing Activities

    Payments on long-term debt

    (4,062)

    (3,750)

    Proceeds from revolving credit facility

    397,000

    Payments on revolving credit facility

    (345,000)

    Contributions from noncontrolling interests

    211

    357

    Distributions to noncontrolling interests

    (122)

    Proceeds from the issuance of common stock under stock purchase plans

    1,903

    3,445

    Proceeds from exercise of stock options

    6,729

    10,945

    Tax benefit from exercise of stock options

    4,393

    6,649

    Net cash provided by financing activities

    9,052

    69,646

    Net increase in cash and cash equivalents

    36,794

    33,934

    Cash and cash equivalents, beginning of period

    56,603

    17,369

    Cash and cash equivalents, end of period

    $

    93,397

    $

    51,303

    Supplemental cash flow information:

    Interest paid

    $

    3,680

    $

    5,058

    Taxes paid

    $

    35,606

    $

    36,456

     

    Team Health Holdings, Inc.

    Consolidated Statements of Cash Flows

    Six Months Ended June 30,

    2014

    2015

    (In thousands)

    Operating Activities

    Net earnings

    $

    54,190

    $

    56,922

    Adjustments to reconcile net earnings:

    Depreciation

    9,489

    11,134

    Amortization

    22,212

    41,452

    Amortization of deferred financing costs

    506

    727

    Equity based compensation expense

    9,348

    9,213

    Provision for uncollectibles

    954,068

    1,146,834

    Deferred income taxes

    (8,635)

    (14,578)

    Gain on sale of equipment

    (2,349)

    (400)

    Equity in joint venture income

    (2,130)

    (1,714)

    Changes in operating assets and liabilities, net of acquisitions:

    Accounts receivable

    (985,555)

    (1,244,045)

    Prepaids and other assets

    (8,460)

    (9,753)

    Income tax accounts

    (1,291)

    3,967

    Accounts payable

    1,146

    5,555

    Accrued compensation and physician payable

    984

    (10,710)

    Contingent purchase liabilities

    16,340

    6,872

    Other accrued liabilities

    1,774

    (2,178)

    Professional liability reserves

    12,993

    18,870

    Net cash provided by operating activities

    74,630

    18,168

    Investing Activities

    Purchases of property and equipment

    (11,997)

    (17,364)

    Sale of property and equipment

    2,776

    Cash paid for acquisitions, net

    (6,517)

    (84,792)

    Proceeds from the sale of investments

    6,560

    Net proceeds from disposition of assets held for sale

    269

    Purchases of investments at insurance subsidiaries

    (31,488)

    (44,935)

    Proceeds from investments at insurance subsidiaries

    25,283

    51,187

    Net cash used in investing activities

    (21,943)

    (89,075)

    Financing Activities

    Payments on long-term debt

    (8,125)

    (7,500)

    Proceeds from revolving credit facility

    27,500

    701,500

    Payments on revolving credit facility

    (27,500)

    (631,000)

    Contribution from noncontrolling interests

    211

    1,377

    Distributions to noncontrolling interests

    (122)

    Proceeds from the issuance of common stock under stock purchase plans

    1,903

    3,445

    Proceeds from exercise of stock options

    8,678

    20,519

    Tax benefit from exercise of stock options

    5,834

    13,775

    Net cash provided by financing activities

    8,379

    102,116

    Net increase in cash and cash equivalents

    61,066

    31,209

    Cash and cash equivalents, beginning of year

    32,331

    20,094

    Cash and cash equivalents, end of year

    $

    93,397

    $

    51,303

    Supplemental cash flow information:

    Interest paid

    $

    7,339

    $

    9,380

    Taxes paid

    $

    40,043

    $

    37,160

     

    Forward Looking Statements This press release contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 with respect to the financial condition, results of operations and businesses of the Company, IPC Healthcare and the combined businesses of the Company and IPC Healthcare.  Some of these statements can be identified by terms and phrases such as "anticipate," "believe," "intend," "estimate," "expect," "continue," "could," "should," "may," "plan," "project," "predict" and similar expressions. The Company cautions that such "forward looking statements," including without limitation, those relating to the acquisition being completed within the anticipated timeframe or at all, the realization of the expected benefits of the acquisition, the Company's, IPC Healthcare's and the combined business's future business prospects, revenue, working capital, professional liability expense, liquidity, capital needs, interest costs and income, wherever they occur in this press release or in other statements attributable to the Company or IPC Healthcare are necessarily estimates reflecting the judgment of the Company's and IPC Healthcare's senior management and involve a number of risks and uncertainties that could cause actual results to differ materially from those suggested by the "forward looking statements." Factors that could cause our actual results to differ materially from those expressed or implied in such "forward-looking statements," include but are not limited to the occurrence of any event that could give rise to a termination of the merger agreement, the risks that the proposed acquisition disrupts current plans and operations, current or future government regulation of the healthcare industry, exposure to professional liability lawsuits and governmental agency investigations, the adequacy of insurance coverage and insurance reserves, as well as those factors detailed from time to time in the Company's and IPC Healthcare's filings with the Securities and Exchange Commission.

    The Company's forward looking statements speak only as of the date hereof and the date they are made. The Company disclaims any intent or obligation to update "forward looking statements" made in this press release to reflect changed assumptions, the occurrence of unanticipated events, or changes to future operating results over time.

    Non-GAAP Financial Measures Reconciliations In this release we refer to Adjusted EBITDA, Adjusted EBITDA margin and Adjusted Earnings per Share ("Adjusted EPS") which are financial measures that are calculated and presented on the basis of methodologies other than in accordance with generally accepted accounting principles in the United States of America ("GAAP").  Adjusted EBITDA is defined as net earnings attributable to Team Health Holdings, Inc. before interest expense, taxes, depreciation and amortization, as further adjusted to exclude the non-cash items and the other adjustments shown in the table under "Adjusted EBITDA" in the release.  Adjusted EBITDA margin represents Adjusted EBITDA divided by net revenue.  Adjusted EPS is defined as diluted earnings per share attributable to Team Health Holdings, Inc. excluding non-cash and other adjustments, including the impact of contingent purchase and other acquisition compensation expense and amortization expense relating to purchase accounting for historical acquisitions and the other adjustments shown in the table under "Adjusted Earnings Per Share" in the release.  For a reconciliation of each of Adjusted EBITDA and Adjusted EPS to the most directly comparable GAAP measure, we refer you to the tables under "Adjusted EBITDA" and "Adjusted Earnings Per Share," respectively, contained in the release.

    Adjusted EBITDA We present Adjusted EBITDA as a supplemental measure of our performance.  We present Adjusted EBITDA because we believe it assists investors and analysts in comparing our performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance.

    Adjusted EBITDA is not a measurement of financial performance or liquidity under generally accepted accounting principles.  In evaluating our performance as measured by Adjusted EBITDA, management recognizes and considers the limitations of this measure.  Adjusted EBITDA does not reflect certain cash expenses that we are obligated to make, and although depreciation and amortization are non-cash charges, assets being depreciated and amortized will often have to be replaced in the future, and Adjusted EBITDA does not reflect any cash requirements for such replacements.  In addition, other companies in our industry may calculate Adjusted EBITDA differently than we do or may not calculate it at all, limiting its usefulness as a comparative measure.  Because of these limitations, Adjusted EBITDA should not be considered in isolation or as a substitute for net earnings, operating income, cash flows from operating, investing or financing activities, or any other measure calculated in accordance with generally accepted accounting principles.

    Adjusted Earnings Per Share We present Adjusted earnings per share attributable to Team Health Holdings, Inc. ("Adjusted EPS") as a supplemental measure of our performance.  We present Adjusted EPS because we believe that it assists investors in understanding the impact of acquisition-related costs on our earnings per share and comparing our performance across operating periods on a consistent basis and provides additional insight into our core earnings performance.  Adjusted EPS is not a measurement of financial performance or liquidity under generally accepted accounting principles.  In evaluating our performance as measured by Adjusted EPS, management recognizes and considers the limitations of this measure.  Adjusted EPS does not reflect certain cash expenses that we are obligated to make, and although contingent purchase and other acquisition compensation expense and amortization expense are non-cash charges in the period reported, such charges reflect historical or future cash payments in conjunction with our acquisition transactions.  In addition, other companies in our industry may calculate Adjusted EPS differently than we do or may not calculate it at all, limiting its usefulness as a comparative measure.  Because of these limitations, Adjusted EPS should not be considered in isolation or as a substitute for net earnings, operating income, basic and diluted earnings per share, cash flows from operating, investing or financing activities, or any other measure calculated in accordance with generally accepted accounting principles.

    Financial Supplement and Updated Conference Call Date & Time

    The information in this press release should be read in conjunction with a financial supplement that is available on our website at www.teamhealth.com.

    TeamHealth will now hold its conference call today, August 4, 2015, at 9:00 a.m. (Eastern Time).  The conference call can be accessed live over the phone by dialing 1-866-610-1072, or for international callers, 1-973-935-2840.  A replay will be available two hours after the call and can be accessed by dialing 1-855-859-2056, or for international callers, 1-404-537-3406.  The passcode for the live call and the replay is 4570732. The replay will be available until August 11, 2015.

    Interested investors and other parties may also listen to a simultaneous webcast of the conference call by logging onto the Investor Relations section of the Company's website at www.teamhealth.com.  The on-line replay will remain available for a limited time beginning immediately following the call.

    To learn more about TeamHealth, please visit the company's Web site at www.teamhealth.com.  TeamHealth uses its Web site as a channel of distribution for material Company information.  Financial and other material information regarding TeamHealth is routinely posted on the Company's Web site and is readily accessible.

    About TeamHealth  TeamHealth (Knoxville, Tenn.) (NYSE: TMH) is a leading provider of outsourced physician staffing solutions for hospitals in the United States.  Through its 21 regional locations and multiple service lines, TeamHealth's more than 14,000 affiliated healthcare professionals provide emergency medicine, hospital medicine, anesthesia, urgent care, and pediatric staffing and management services to approximately 1,000 civilian and military hospitals, clinics, and physician groups in 47 states.  In 2015, TeamHealth was named among "The World's Most Admired Companies" by Fortune Magazine and among "150 Great Places to Work in Healthcare" by Becker's Hospital Review.  In 2014, TeamHealth was named among "America's 100 Most Trustworthy Companies" by Forbes magazine.  Unless the context requires otherwise, references to "TeamHealth," "we," "our," "us" and the "Company" or "Organization" refer to Team Health Holdings, Inc., its  subsidiaries and its affiliates, including its affiliated medical groups, all of which are part of the TeamHealth system.  Separate subsidiaries or other affiliates of Team Health Holdings, Inc. carry out all operations and employ all employees within the TeamHealth system.  The terms "clinical providers," "TeamHealth physicians or providers," "affiliated providers," "our providers" or "our clinicians" and similar terms mean and include: (i) physicians and other healthcare providers who are employed by subsidiaries or other affiliated entities of Team Health Holdings, Inc., and (ii) physicians and other healthcare providers who contract with subsidiaries or other affiliated entities of Team Health Holdings, Inc.  All such physicians and other healthcare providers exercise their independent professional clinical judgment when providing clinical patient care.  Team Health Holdings, Inc. does not contract with physicians to provide medical services nor does it practice medicine in any way.  For more information about TeamHealth, visit www.teamhealth.com.

    INVESTOR CONTACT: David Jones Executive Vice President and Chief Financial Officer 865-293-5299

    MEDIA CONTACT: Pat Ball Senior Vice President, Strategic Resources Group 800-818-1498

    SOURCE Team Health Holdings, Inc.



RELATED LINKS

http://www.teamhealth.com