Team Health Holdings, Inc. Announces Third Quarter 2015 Financial Results and Provides Update on IPC Healthcare Transaction

Nov 03, 2015, 16:05 ET from TeamHealth

KNOXVILLE, Tenn., Nov. 3, 2015 /PRNewswire/ --

Third Quarter 2015 Highlights:

  • Net Revenue increased to $899.2 million; 26.2% over third quarter of 2014
  • Net earnings attributable to Team Health Holdings, Inc. ("Net earnings") were $35.4 million; $50.0 million after adjustments
  • Diluted net earnings per share of $0.48; Adjusted EPS of $0.68
  • Adjusted EBITDA increased 13.6% to $101.1 million

2015 Outlook:

  • Projected 2015 net revenue growth increased to a range of 25.0% to 26.0%; Adjusted EBITDA margin remains between 10.5% and 11.0%

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 third 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. 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.

"Third quarter consolidated revenue growth was driven by positive contributions from acquisitions, net new contract sales, and same contract results.  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 again the largest driver of our revenue increase between quarters.  Net new contracts were the second largest contributor to our revenue growth, as hospitals and physician groups nationwide continue to turn to TeamHealth for our best in class healthcare solutions.  Same contract revenue growth was due primarily to a 3.3% increase in fee for service volume between quarters. These results reflect our integrated and complementary approach to achieving our financial targets," said Mr. Snow.

"As a result of our financial performance thus far in 2015, and our current expectations about operating trends and growth opportunities for the remainder of the year, we are increasing our expectations for net revenue growth for fiscal year 2015 to range between $3.52 billion and $3.55 billion, reflecting an annual growth rate of 25.0% 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 continue 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," said Mr. Snow.

"As we look ahead, we are enthusiastic about our company's prospects and remain confident in our strategic plan and ability to grow value for our stockholders. The integration of IPC Healthcare is a critical element of our plan, and the deal remains on track to close in the fourth quarter of 2015. Teams comprised of leaders from both TeamHealth and IPC are hard at work planning for the integration of the two organizations. The combination brings together two physician-centric companies to create the leading physician services organization spanning multiple specialties with an enhanced financial and strategic position that we believe will benefit our clinicians, hospital partners, employees and shareholders," concluded Mr. Snow.

2015 Third Quarter Results

Net revenue increased 26.2% to $899.2 million from $712.2 million in the third quarter of 2014.  Acquisitions contributed 19.2%, net sales growth contributed 4.4%, and same contract revenue contributed 2.7% 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 4.7% of overall net revenue growth between quarters. 

Same contract revenue increased $19.0 million, or 2.9%, to $672.9 million from $653.9 million in the third quarter of 2014.  A 3.3% increase in same contract volumes contributed 2.5% to same contract growth while an increase in estimated collections on fee for service visits provided a 0.6% increase in same contract revenue growth between quarters. Contract and other revenue constrained same contract revenue growth by 0.2% between quarters.  Acquisitions contributed $136.5 million of revenue growth and net new contract revenue increased by $31.4 million between quarters.

The benefit from Medicaid parity revenue recognized in the third quarter of 2015 was $0.2 million.  The third quarter of 2014 Medicaid parity revenue was $10.4 million, of which $9.8 million was same contract.  The decline in parity revenue between periods constrained consolidated revenue growth by 1.4% and same contract revenue growth by 1.5% 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 September 30,

2014

2015

% Increase

Contribution to Overall Revenue Growth

(in thousands)

Same contracts:

Fee for service revenue

$

504,193

$

524,203

4.0

%

2.8

%

Contract and other revenue

149,709

148,664

(0.7)

%

(0.1)

%

Total same contracts

653,902

672,867

2.9

%

2.7

%

New contracts, net of terminations:

Fee for service revenue

27,725

56,568

104.0

%

4.0

%

Contract and other revenue

19,167

21,769

13.6

%

0.4

%

Total new contracts, net of terminations

46,892

78,337

67.1

%

4.4

%

Acquired contracts:

Fee for service revenue

10,691

126,721

1,085.3

%

16.3

%

Contract and other revenue

756

21,256

2,711.6

%

2.9

%

Total acquired contracts

11,447

147,977

1,192.7

%

19.2

%

Consolidated:

Fee for service revenue

542,609

707,492

30.4

%

23.1

%

Contract and other revenue

169,632

191,689

13.0

%

3.1

%

Total net revenue

$

712,241

$

899,181

26.2

%

26.2

%

 

 

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

Three Months Ended September 30,

2014

2015

% Increase

(in thousands)

Fee for service visits and procedures:

Same contract

2,925

3,023

3.3

%

New and acquired contracts, net of terminations

197

994

404.6

%

Total fee for service visits and procedures

3,122

4,017

28.7

%

 

 

Net earnings attributable to Team Health Holdings, Inc. ("Net earnings") for the quarter were $35.4 million, or $0.48 diluted net earnings per share, compared to net earnings of $27.6 million, or $0.38 diluted net earnings per share, in the third quarter of 2014.  The financial results for the third quarter of 2015 included a credit of $3.5 million of contingent purchase and other acquisition compensation expense ($3.1 million after-tax), non-cash amortization expense of $20.6 million ($15.1 million after-tax) and $2.6 million in non-tax-deductible transaction costs related to the proposed IPC Healthcare, Inc. (IPC) merger.  Excluding these items, net earnings for the third quarter of 2015 would have been $50.0 million and Adjusted EPS would have been $0.68 per share.  Included in the 2015 third quarter results is an elevated level of severance costs of $3.3 million, or $0.03 per share. Financial results for the third quarter of 2014 included $3.1 million of contingent purchase and other acquisition compensation expense ($2.4 million after-tax), non-cash amortization expense of $13.0 million ($8.8 million after-tax), and a $7.1 million increase in prior year professional liability loss reserves ($4.4 million after tax).  Excluding these items, net earnings for the third quarter of 2014 would have been $43.2 million and Adjusted EPS would have been $0.60 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 sets 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 September 30,

2014

2015

(in thousands, except for share data)

Diluted weighted average shares outstanding

72,331

73,687

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

$

27,586

$

0.38

$

35,442

$

0.48

Adjustments:

Contingent purchase and other acquisition compensation expense, net of tax of $(680) and $439 for 2014 and 2015, respectively

2,406

0.03

(3,091)

(0.04)

Amortization expense, net of tax of $(4,184) and $(5,530) for 2014 and 2015, respectively

8,807

0.12

15,103

0.20

IPC transaction costs, net of tax of $(0) for 2015

2,582

0.04

Professional liability loss reserve adjustments associated with prior years, net of tax of $(2,729) for 2014

4,359

0.06

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

$

43,158

$

0.60

$

50,036

$

0.68

 

 

Cash flow provided by operations for the quarter was $113.8 million compared to $32.1 million in the third quarter of 2014.  There were $3.4 million of contingent purchase payments made in the third quarter of 2015 and $20.7 million contingent purchase payments in 2014.  Excluding the impact of the contingent purchase payments in 2015 and 2014, operating cash flows increased by $64.3 million to $117.1 million in 2015 compared to $52.8 million in 2014.  The increase in operating cash flows between quarters reflects an increase in profitability and a reduction in accounts receivable and working capital funding requirements compared to the prior year.  As of September 30, 2015, net accounts receivable were $577.3 million compared to $500.6 million as of December 31, 2014.  Net days in accounts receivable were 60.4 days compared to 59.0 days at December 31, 2014.

Adjusted EBITDA for the quarter increased 13.6% to $101.1 million from $89.0 million in the third quarter of 2014, and Adjusted EBITDA margin was 11.2% in 2015 compared to 12.5% 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 11.2% in the third quarter of 2015 and 11.6% 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 September 30,

2014

2015

(In thousands)

Net earnings attributable to Team Health Holdings, Inc.

$

27,586

$

35,442

Interest expense, net

3,921

5,572

Provision for income taxes

20,895

22,837

Depreciation

5,826

6,290

Amortization

12,991

20,633

Other (income) expenses, net(a)

292

2,137

Contingent purchase and other acquisition compensation expense(b)

3,086

(3,530)

Transaction costs(c)

3,107

3,869

Equity based compensation expense(d)

3,345

3,985

Insurance subsidiaries interest income

503

535

Professional liability loss reserve adjustments associated with prior years

7,088

Severance and other charges

381

3,343

Adjusted EBITDA

$

89,021

$

101,113

     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, including costs associated with the IPC Healthcare, Inc. transaction of $2.6 million.

 

     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 September 30, 2015, the Company had cash and cash equivalents of approximately $18.2 million and total outstanding debt of $755.0 million.  The outstanding debt as of September 30, 2015 includes borrowings under its revolving credit facility in the amount of $170.0 million incurred primarily to fund the Company's recently completed acquisitions.  As of September 30, 2015 the Company had $480.0 million of available borrowings under its revolving credit facilities (without giving effect to $6.4 million of undrawn letters of credit). 

2015 First Nine Month Results

Net revenue in the nine months ended September 30, 2015 increased 29.0% to $2.62 billion from $2.03 billion for the same period of 2014.  Acquisitions contributed 19.9%, net sales growth contributed 4.9% and same contract revenue contributed 4.2% 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 5.3% of overall net revenue growth between years.

Same contract revenue for the nine months ended September 30, 2015 increased $85.8 million, or 4.7%, to $1.90 billion from $1.82 billion in the same period a year ago.  Increases in same contract volume of 6.1% contributed 4.6% to growth while an increase in estimated collections on fee for service visits provided a 0.2% increase in same contract revenue growth between periods.  Contract and other revenue constrained same contract growth by 0.1% between periods.  Acquisitions contributed $403.7 million of growth between periods and net new contract revenue increased by $99.1 million.  The benefit from Medicaid parity revenue recognized in the nine months ended September 30, 2015 was $2.0 million, of which $0.2 million was same contract revenue compared to $27.7 million in 2014, of which $25.6 million was same contract revenue.  The decrease in Medicaid parity revenue constrained consolidated revenue growth by 1.3% and same contract revenue growth by 1.4% 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:

 

Nine Months Ended September 30,

2014

2015

% Increase

Contribution to Overall Revenue Growth

(in thousands)

Same contracts:

Fee for service revenue

$

1,383,476

$

1,469,940

6.2

%

4.3

%

Contract and other revenue

434,253

433,613

(0.1)

%

%

Total same contracts

1,817,729

1,903,553

4.7

%

4.2

%

New contracts, net of terminations:

Fee for service revenue

92,328

193,259

109.3

%

5.0

%

Contract and other revenue

78,120

76,325

(2.3)

%

(0.1)

%

Total new contracts, net of terminations

170,448

269,584

58.2

%

4.9

%

Acquired contracts:

Fee for service revenue

38,321

380,276

892.3

%

16.9

%

Contract and other revenue

2,463

64,207

2,506.9

%

3.0

%

Total acquired contracts

40,784

444,483

989.8

%

19.9

%

Consolidated:

Fee for service revenue

1,514,125

2,043,475

35.0

%

26.1

%

Contract and other revenue

514,836

574,145

11.5

%

2.9

%

Total net revenues

$

2,028,961

$

2,617,620

29.0

%

29.0

%

 

 

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

 

Nine Months Ended September 30,

2014

2015

% Increase

(in thousands)

Fee for service visits and procedures:

Same contract

8,050

8,541

6.1

%

New and acquired contracts, net of terminations

824

3,296

300.0

%

Total fee for service visits and procedures

8,874

11,837

33.4

%

 

 

Net earnings attributable to Team Health Holdings, Inc. were $92.4 million in the nine months ended September 30, 2015, or $1.26 diluted net earnings per share, compared to net earnings of $81.6 million, or $1.13 diluted net earnings per share, in the same period of 2014.  The 2015 financial results included $12.2 million ($10.7 million after-tax) of contingent purchase and other acquisition compensation expense, non-cash amortization expense of $62.1 million ($44.9 million after-tax) and $2.6 million in non-tax-deductible transaction costs related to the proposed IPC merger.  Excluding these items, net earnings for the nine months of 2015 would have been $150.7 million and Adjusted EPS would have been $2.05 per share.  Financial results for the same period in 2014 included $22.5 million of contingent purchase and other acquisition compensation expense ($15.7 million after-tax), non-cash amortization expense of $35.2 million ($23.9 million after-tax) and a $7.1 million increase in prior year professional liability loss reserves ($4.4 million after tax).  Excluding these adjustments, net earnings for the same period in 2014 would have been $125.6 million and Adjusted EPS would have been $1.75 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 sets 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

Nine Months Ended September 30,

2014

2015

(in thousands, except for share data)

Diluted weighted average shares outstanding

71,955

73,351

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

$

81,634

$

1.13

$

92,431

$

1.26

Adjustments:

Contingent purchase and other acquisition compensation expense, net of tax of $(6,744) and $(1,508) for 2014 and 2015, respectively

15,739

0.22

10,722

0.15

Amortization expense, net of tax of $(11,345) and $(17,145) for 2014 and 2015, respectively

23,858

0.33

44,940

0.61

IPC transaction costs, net of tax of $(0) for 2015

2,582

0.04

Professional liability loss reserve adjustments associated with prior years, net of tax of $(2,729) for 2014

4,359

0.06

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

$

125,590

$

1.75

$

150,675

$

2.05

 

 

Cash flow provided by operations for the nine months ended September 30, 2015 was $131.9 million compared to $106.7 million in 2014.  There were $12.2 million contingent purchase payments in 2015 and $21.9 million contingent purchase payments in 2014.  Excluding the impact of the 2015 and 2014 contingent purchase payments, operating cash flows increased $15.5 million to $144.2 million in 2015 compared to $128.7 million in 2014.  The increase in operating cash flow between periods was due primarily to increased profitability compared to the prior period.

Adjusted EBITDA increased 17.3% to $289.8 million from $247.1 million in the nine months ended September 30, 2014, and Adjusted EBITDA margin was 11.1% compared to 12.2% for the same period in 2014.  Excluding the impact of Medicaid parity in both years, Adjusted EBITDA margin would have been 11.0% in 2015 and 11.4% 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

Nine Months Ended September 30,

2014

2015

(in thousands)

Net earnings attributable to Team Health Holdings, Inc.

$

81,634

$

92,431

Interest expense, net

10,758

14,132

Provision for income taxes

56,542

65,178

Depreciation

15,315

17,423

Amortization

35,203

62,085

Other (income) expenses, net(a)

(3,457)

(182)

Contingent purchase and other acquisition compensation expense(b)

22,483

12,230

Transaction costs(c)

5,734

7,170

Equity based compensation expense(d)

12,693

13,197

Insurance subsidiaries interest income

1,501

1,558

Professional liability loss reserve adjustments associated with prior years

7,088

Severance and other charges

1,563

4,590

Adjusted EBITDA

$

247,057

$

289,812

     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, including costs associated with the IPC Healthcare, Inc. transaction of $2.6 million.

 

     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

September 30, 2015

(In thousands)

ASSETS

Current assets:

Cash and cash equivalents

$

20,094

$

18,194

Accounts receivable, less allowance for uncollectibles of $409,851 and $558,488 in 2014 and 2015, respectively

500,633

577,291

Prepaid expenses and other current assets

46,469

56,902

Receivables under insured programs

23,623

19,514

Income tax receivable

8,935

Total current assets

599,754

671,901

Insurance subsidiaries' and other investments

112,946

97,492

Property and equipment, net

62,117

74,939

Other intangibles, net

341,194

326,959

Goodwill

724,979

800,583

Deferred income taxes

21,113

39,694

Receivables under insured programs

50,625

72,959

Other

61,994

59,652

$

1,974,722

$

2,144,179

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:

Accounts payable

$

40,616

$

48,886

Accrued compensation and physician payable

283,033

283,288

Other accrued liabilities

153,137

127,331

Income tax payable

20,650

Current maturities of long-term debt

227,750

200,000

Deferred income taxes

38,272

31,511

Total current liabilities

742,808

711,666

Long-term debt, less current maturities

577,500

555,000

Other non-current liabilities

231,778

308,105

Shareholders' equity:

Common stock, ($0.01 par value; 100,000 shares authorized, 71,283 and 72,502 shares issued and outstanding at December 31, 2014 and September 30, 2015, respectively)

713

725

Additional paid-in capital

696,996

750,089

Accumulated deficit

(278,855)

(186,424)

Accumulated other comprehensive earnings

1,695

1,325

Team Health Holdings, Inc. shareholders' equity

420,549

565,715

Noncontrolling interests

2,087

3,693

Total shareholders' equity including noncontrolling interests

422,636

569,408

$

1,974,722

$

2,144,179

 

 

 

Team Health Holdings, Inc.

 

Consolidated Statements of Comprehensive Earnings

Three Months Ended September 30,

2014

2015

(In thousands, except per share data)

Net revenue before provision for uncollectibles

$

1,223,104

$

1,525,409

Provision for uncollectibles

510,863

626,228

Net revenue

712,241

899,181

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

Professional service expenses

546,346

707,871

Professional liability costs

29,564

27,474

General and administrative expenses (includes contingent purchase and other acquisition compensation expense of $3,086 and $(3,530) in 2014 and 2015, respectively)

61,643

67,066

Other (income) expenses, net

292

2,137

Depreciation

5,826

6,290

Amortization

12,991

20,633

Interest expense, net

3,921

5,572

Transaction costs

3,107

3,869

Earnings before income taxes

48,551

58,269

Provision for income taxes

20,895

22,837

     Net earnings

27,656

35,432

Net earnings (loss) attributable to noncontrolling interests

70

(10)

Net earnings attributable to Team Health Holdings, Inc.

$

27,586

$

35,442

Net earnings per share of Team Health Holdings, Inc.

Basic

$

0.39

$

0.49

Diluted

$

0.38

$

0.48

Weighted average shares outstanding

Basic

70,627

72,361

Diluted

72,331

73,687

Other comprehensive earnings (loss), net of tax:

Net change in fair value of investments, net of tax of $89 and $124 for 2014 and 2015, respectively

165

230

Comprehensive earnings

27,821

35,662

Comprehensive earnings (loss) attributable to noncontrolling interests

70

(10)

Comprehensive earnings attributable to Team Health Holdings, Inc.

$

27,751

$

35,672

Team Health Holdings, Inc.

 

Consolidated Statements of Comprehensive Earnings

Nine Months Ended September 30,

2014

2015

(In thousands, except per share data)

Net revenues before provision for uncollectibles

$

3,493,892

$

4,390,682

Provision for uncollectibles

1,464,931

1,773,062

Net revenues

2,028,961

2,617,620

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

Professional service expenses

1,557,696

2,058,876

Professional liability costs

73,482

81,371

General and administrative expenses (includes contingent purchase and other acquisition compensation expense of $22,483 and $12,230 in 2014 and 2015, respectively)

195,842

219,214

Other (income) expenses, net

(3,457)

(182)

Depreciation

15,315

17,423

Amortization

35,203

62,085

Interest expense, net

10,758

14,132

Transaction costs

5,734

7,170

Earnings before income taxes

138,388

157,531

Provision for income taxes

56,542

65,178

  Net earnings

81,846

92,353

Net earnings (loss) attributable to noncontrolling interests

212

(78)

Net earnings attributable to Team Health Holdings, Inc.

$

81,634

$

92,431

Net earnings per share of Team Health Holdings, Inc.

Basic

$

1.16

$

1.29

Diluted

$

1.13

$

1.26

Weighted average shares outstanding

Basic

70,209

71,900

Diluted

71,955

73,351

Other comprehensive earnings (loss), net of tax:

Net change in fair value of investments, net of tax of $663 and $(213) for 2014 and 2015, respectively

1,228

(370)

Comprehensive earnings

83,074

91,983

Comprehensive earnings (loss) attributable to noncontrolling interests

212

(78)

Comprehensive earnings attributable to Team Health Holdings, Inc.

$

82,862

$

92,061

 

 

Team Health Holdings, Inc.

 

Consolidated Statements of Cash Flow

Three Months Ended September 30,

2014

2015

(In thousands)

Operating Activities

Net earnings

$

27,656

$

35,432

Adjustments to reconcile net earnings:

Depreciation

5,826

6,290

Amortization

12,991

20,633

Amortization of deferred financing costs

252

1,415

Equity based compensation expense

3,345

3,985

Provision for uncollectibles

510,863

626,228

Deferred income taxes

(12,732)

(19,562)

Gain on sale of investments and other assets

(1,479)

Equity in joint venture income

(994)

(1,142)

Changes in operating assets and liabilities, net of acquisitions:

Accounts receivable

(529,823)

(602,487)

Prepaids and other assets

6,993

(24)

Income tax accounts

2,705

25,618

Accounts payable

6,685

3,069

Accrued compensation and physician payable

12,710

13,149

Contingent purchase liabilities

(17,623)

(6,885)

Other accrued liabilities

(1,062)

(856)

Professional liability reserves

4,294

10,391

Net cash provided by operating activities

32,086

113,775

Investing Activities

Purchases of property and equipment

(4,786)

(13,759)

Sale of property and equipment

225

Cash paid for acquisitions, net

(340,637)

(31,522)

Proceeds from the sale of investments

772

Net proceeds from disposition of assets held for sale

695

Purchases of investments at insurance subsidiaries

(37,039)

(22,952)

Proceeds from investments at insurance subsidiaries

36,031

28,235

Net cash used in investing activities

(346,431)

(38,306)

Financing Activities

Payments on long-term debt

(4,063)

(3,750)

Proceeds from revolving credit facility

288,600

249,000

Payments on revolving credit facility

(61,200)

(358,500)

Payments of financing costs

(1,146)

Contributions from noncontrolling interests

51

306

Proceeds from exercise of stock options

6,832

2,666

Tax benefit from exercise of stock options

5,513

1,700

Net cash provided by (used in) financing activities

234,587

(108,578)

Net decrease in cash and cash equivalents

(79,758)

(33,109)

Cash and cash equivalents, beginning of period

93,397

51,303

Cash and cash equivalents, end of period

$

13,639

$

18,194

Supplemental cash flow information:

Interest paid

$

4,369

$

4,239

Taxes paid

$

25,482

$

14,960

 

 

Team Health Holdings, Inc.

 

Consolidated Statements of Cash Flows

Nine Months Ended September 30,

2014

2015

(In thousands)

Operating Activities

Net earnings

$

81,846

$

92,353

Adjustments to reconcile net earnings:

Depreciation

15,315

17,423

Amortization

35,203

62,085

Amortization of deferred financing costs

758

2,142

Equity based compensation expense

12,693

13,197

Provision for uncollectibles

1,464,931

1,773,062

Deferred income taxes

(21,367)

(34,140)

Gain on sale of investments and other assets

(2,349)

(1,879)

Equity in joint venture income

(3,124)

(2,856)

Changes in operating assets and liabilities, net of acquisitions:

Accounts receivable

(1,515,378)

(1,846,532)

Prepaids and other assets

(1,467)

(9,774)

Income tax accounts

1,414

29,585

Accounts payable

7,831

8,624

Accrued compensation and physician payable

13,694

2,439

Contingent purchase liabilities

(1,283)

(13)

Other accrued liabilities

712

(3,034)

Professional liability reserves

17,287

29,261

Net cash provided by operating activities

106,716

131,943

Investing Activities

Purchases of property and equipment

(16,783)

(31,123)

Sale of property and equipment

2,776

225

Cash paid for acquisitions, net

(347,154)

(116,314)

Proceeds from the sale of investments

7,332

Net proceeds from disposition of assets held for sale

964

Purchases of investments at insurance subsidiaries

(68,527)

(67,887)

Proceeds from investments at insurance subsidiaries

61,314

79,422

Net cash used in investing activities

(368,374)

(127,381)

Financing Activities

Payments on long-term debt

(12,188)

(11,250)

Proceeds from revolving credit facility

316,100

950,500

Payments on revolving credit facility

(88,700)

(989,500)

Payments of financing costs

(1,146)

Contribution from noncontrolling interests

262

1,683

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

15,510

23,185

Tax benefit from exercise of stock options

11,347

15,475

Net cash provided by (used in) financing activities

242,966

(6,462)

Net decrease in cash and cash equivalents

(18,692)

(1,900)

Cash and cash equivalents, beginning of year

32,331

20,094

Cash and cash equivalents, end of year

$

13,639

$

18,194

Supplemental cash flow information:

Interest paid

$

11,708

$

13,619

Taxes paid

$

65,525

$

52,120

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 and the combined businesses of the Company and IPC.  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'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 are necessarily estimates reflecting the judgment of the Company's and IPC'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'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 hold a conference call tomorrow, November 4, 2015, at 8:30 a.m. (Eastern Time).  The conference call can be accessed live over the phone by dialing 1-877-407-0784, or for international callers, 1-201-689-8560.  A replay will be available two hours after the call and can be accessed by dialing 1-877-870-5176, or for international callers, 1-858-384-5517.  The passcode for the live call and the replay is 13621635. The replay will be available until November 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 

At TeamHealth (NYSE: TMH), our purpose is to perfect our physicians' ability to practice medicine, every day, in everything we do. Through our more than 14,000 affiliated physicians and advanced practice clinicians, TeamHealth offers outsourced emergency medicine, hospital medicine, anesthesia, urgent care, orthopaedic hospitalist, acute care surgery, obstetrics and gynecology hospitalist and medical call center solutions to approximately 1,000 civilian and military hospitals, clinics and physician groups nationwide. Our philosophy is as simple as our goal is singular: we believe better experiences for physicians lead to better outcomes -- for patients, hospital partners and physicians alike. Join our team; we value and empower clinicians. Partner with us; we deliver on our promises. Learn more at http://www.teamhealth.com.

The term "TeamHealth" as used throughout this release includes Team Health Holdings, Inc., its subsidiaries, affiliates, affiliated medical groups and providers, all of which are part of the TeamHealth organization. "Providers" are physicians, advanced practice clinicians and other healthcare providers who are employed by or contract with subsidiaries or affiliated entities of Team Health Holdings, Inc. All such providers exercise independent clinical judgment when providing patient care. Team Health Holdings, Inc. does not have any employees, does not contract with providers and does not practice medicine.

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SOURCE TeamHealth



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