Net Operating Revenues Increase 18.2% in
the Second Quarter Over Prior Year Period
Surgical Care Affiliates, Inc. (NASDAQ:SCAI) (“SCA” or the
“Company”), a leading provider of surgical services, today
announced results for the second quarter and six-months ended June
30, 2016.
For the three-months ended June 30, 2016, SCA’s
net operating revenue was $299.9 million, an increase of 18.2% over
the prior year second quarter. For the second quarter of 2016, net
income attributable to SCA grew 25.1% to $5.7 million and adjusted
EBITDA less NCI grew 10.9% to $47.7 million.
The Company reiterates the 2016 adjusted EBITDA
less NCI growth guidance range of 13% to 16% provided in January
2016.
“We are pleased with our clinical, strategic and
financial performance. Patient care is our first priority, and our
success is driven by our outstanding physicians and teammates, who
continue to achieve strong clinical quality and patient
satisfaction results,” said Andrew Hayek, Chairman and Chief
Executive Officer. “From a strategic standpoint, we continue to
partner with health plans, medical groups and health systems, and
our development pipeline remains strong. We are grateful to our
physicians and teammates across the country who are dedicated to
outstanding patient care and to building our SCA community.”
Transactions Update
During the second quarter of 2016, the Company
acquired nine new facilities, four of which are consolidated, two
of which are nonconsolidated and three of which are managed-only
facilities. One of the nine facilities acquired was absorbed into
an existing facility and ceased operations at its old
location. In addition, the Company exited one managed-only
facility. Since the end of the second quarter, the Company has
added two new facilities, one of which is consolidated and one of
which is nonconsolidated. SCA’s total facility count as of
August 2, 2016 is 203.
Strategy Update
SCA continues to partner with health plans,
medical groups and health systems to improve surgical
delivery. SCA’s health plan relationships are designed to
optimize surgical services, improving both the quality of care and
the patient experience, while reducing the total cost of care.
In the second quarter of 2016, SCA entered into three
additional strategic partnerships with health plans, which
represents another significant step forward in the execution of the
Company’s health plan strategy. SCA now has several health plan
partnerships that include value-based incentive payments and are
similar in many respects to the health plan partnerships the
Company announced last year and earlier this year.
SCA’s health system relationships continue to
present opportunities to co-invest in surgical networks. In the
second quarter, the Company was pleased to add its first facility
in the greater Chicago area in partnership with Advocate Health
Care. The DuPage Medical Group is also a partner in this
center.
Second Quarter 2016 Results
GAAP net operating revenues, which excludes
revenues from facilities in which SCA owns a noncontrolling
interest, increased 18.2% in the second quarter of 2016 to $299.9
million from $253.7 million in the prior year period. This increase
was driven both organically, mainly through higher acuity case mix
and increased volumes, and inorganically through additions of new
facilities. On a same site basis, GAAP net patient revenue for the
second quarter of 2016 increased 3.3% compared to the prior year
period.
Systemwide net operating revenues, which
includes revenues from all facilities in which SCA has an ownership
interest and management fee revenues from managed-only facilities,
increased 17.3% in the second quarter of 2016 as compared to the
prior year period. This increase was driven both organically,
mainly through higher acuity case mix and increased volumes, and
inorganically through additions of new facilities. On a same site
basis, systemwide net patient revenue for the second quarter of
2016 increased 8.1% compared to the prior year period. Same site
systemwide case volume increased 4.1% compared to the prior year
period. Management believes systemwide growth metrics are the most
important to understand the true financial performance of the
Company because they include all facilities in the Company’s
portfolio.
Net income attributable to SCA, which includes
certain non-cash and non-recurring expenses, was $5.7 million for
the second quarter of 2016, up 25.1% from $4.6 million in the
second quarter of 2015.
Adjusted EBITDA less NCI, which adds back
certain non-cash and non-recurring expenses, increased 10.9% for
the second quarter of 2016 to $47.7 million from $43.0 million in
the same period of the prior year.
Adjusted net income, which adjusts for items
that are non-cash or non-recurring in nature, was $19.1 million for
the second quarter of 2016, compared to $19.9 million for the same
period of the prior year.
SCA’s net cash provided by operating activities
was $77.4 million for the second quarter of 2016, slightly down
from $78.1 million or 0.9% from the second quarter of 2015.
For the first six months of 2016, net cash provided by operating
activities was $138.9 million, up 19.0% from the prior year period.
Adjusted operating cash flow less distributions to noncontrolling
interests was $41.4 million for the second quarter, up 5.2% from
$39.4 million in the second quarter of 2015. For the first
six months of 2016, adjusted operating cash flow less distributions
to noncontrolling interests was $62.7 million, up 27.6% from the
same period of the prior year.
Full Year 2016 Guidance
For 2016, the Company reiterates the guidance it
initially provided in January 2016. The Company continues to expect
adjusted EBITDA less NCI growth in 2016 to be in the range of 13%
to 16%.
Conference Call Information
SCA will hold a webcast conference call to
discuss this release today at 8:00 a.m. Eastern Time. The live
webcast of the conference call will be available by accessing
http://investor.scasurgery.com. Following the call, an
archived replay of the webcast will be available on the Company’s
website for 30 days.
Forward-Looking Statements
This press release contains forward-looking
statements within the meaning of Section 27A of the Securities Act
of 1933, as amended, and Section 21E of the Securities Exchange Act
of 1934, as amended. These statements, which have been included in
reliance on the “safe harbor” provisions of the Private Securities
Litigation Reform Act of 1995, involve risks and uncertainties and
assumptions relating to our operations, financial condition,
business, prospects, growth strategy and liquidity, which may cause
our actual results to differ materially from those projected by
such forward-looking statements, and the Company cannot give
assurances that such statements will prove to be correct. Investors
are hereby cautioned that these statements may be affected by
important factors, including, but not limited to, the following
risks: our dependence on payments from third-party payers,
including governmental healthcare programs, commercial payers and
workers’ compensation programs; our inability or the inability of
our healthcare system partners to negotiate favorable contracts or
renew existing contracts with commercial health plans on favorable
terms; significant changes in our payer mix or case mix resulting
from fluctuations in the types of cases performed at our
facilities; the fact that the Medicare and Medicaid programs
provide a significant portion of our revenues and are each
particularly susceptible to legislative and regulatory change; the
implementation by states of reduced fee schedules and reimbursement
rates for workers’ compensation programs; our inability to maintain
good relationships with our current health system partners or our
inability to enter into relationships with new health system
partners; our dependence on physician utilization of our
facilities, which could decrease if we fail to maintain good
relationships with these physicians; our dependence on the quality
of care provided by the physicians who provide medical services at
our facilities; the potential reduction in the number of surgical
procedures because of physician treatment methodologies and
governmental or commercial health insurance controls; our inability
to attract new physician investors and to acquire and develop
additional surgical facilities on favorable terms; shortages of, or
quality control issues with, surgery-related products, equipment
and medical supplies that could result in a disruption of our
operations; the competition for staffing, shortages of qualified
personnel or other factors that drive up labor costs; the intense
competition we face for patients, physician use of our facilities,
strategic relationships and commercial health plan contracts; the
fact that our facilities are subject to significant malpractice and
related legal claims, and we could be required to pay significant
damages in connection with those claims; the adverse effect of
current and future economic conditions on volume and case mix; the
regulatory, economic and other conditions in certain states in
which many of our facilities are concentrated; material changes in
Internal Revenue Service revenue rulings, case law or the
interpretation of such rulings; the fact that certain of our
partnership and operating agreements contain provisions giving
rights to our partners and other members that may be adverse to our
interests, as well as termination dates that will require us to
amend and possibly renegotiate such agreements; the fact that
we may have a special legal responsibility to the holders of
ownership interests in the entities through which we own our
facilities, which may conflict with, and prevent us from acting
solely in, our own best interest; the difficulty in operating and
integrating newly acquired or developed facilities; the growth of
patient receivables or the deterioration in the ability to collect
on those accounts; the loss of the service of our senior
management; our reliance on a significant stockholder of ours for
guidance and expertise in financial matters; our substantial
indebtedness, and our ability to incur additional indebtedness in
the future; our inability to generate sufficient cash in order to
meet our debt service obligations; restrictions on our current and
future operations because of the terms of our senior secured credit
facilities and the indenture governing our senior notes; market
risks related to interest rate changes; significant loans that we
have made to the partnerships and limited liability companies that
own and operate certain of our facilities; our liability for
certain debt and other obligations of the partnerships and limited
liability companies that own and operate certain of our facilities;
recognition of impairment on our long-lived assets or equity method
investments; our inability to manage and secure our information
systems effectively, which could disrupt our operations; our
inability to fully realize the value of our net operating loss
carry-forwards; adverse impact of weather and other environmental
factors beyond our control on our facilities; our inability to
predict the long-term impact on us of the Patient Protection and
Affordable Care Act, as amended by the Health Care and Education
Affordability Reconciliation Act of 2010, which represents a
significant change to the healthcare industry; our failure to
comply with numerous federal and state laws and regulations
relating to our facilities, which could lead to the incurrence of
significant penalties by us or require us to make significant
changes to our operations; our obligations to purchase some or all
of the ownership interests of our physician partners or renegotiate
some of our partnership and operating agreements because of changes
to laws or regulations governing physician ownership of our
facilities; our failure to comply with a federal criminal law
referred to as the Anti-Kickback Statute or the physician
self-referral laws; restrictions by federal law on our ability to
expand surgical capacity of our surgical hospitals; our being
subject to federal and state audits and investigations, including
actions for false and improper claims; our failure to comply with
Medicare’s conditions for coverage and conditions of participation,
which could result in loss of program payment or other government
sanctions; ensuring our continued compliance with laws governing
the privacy and security of health information including the
Health Insurance Portability and Accountability Act of 1996 or
HIPAA, which could require us to expend significant resources and
capital; our failure to effectively and timely implement electronic
health records systems; our failure to successfully transition to
the ICD-10 coding system; efforts to regulate the construction,
relocation, acquisition, change of ownership, change of control or
expansion of healthcare facilities, which could prevent us from
acquiring additional facilities, renovating our existing facilities
or expanding the breadth of services we offer; our being subject to
enforcement action from antitrust authorities; our being subject to
constantly evolving healthcare laws and regulations; and the fact
that our significant stockholder continues to have significant
influence over us and key decisions about our business that could
limit other stockholders’ ability to influence the outcome of
matters submitted to stockholders for a vote.
The forward-looking statements made in this
press release are made only as of the date hereof. Except as
required by law, we undertake no obligation to update any
forward-looking statement, whether as a result of new information
or otherwise. More information about potential factors that could
affect our business and financial results is included in our
filings with the Securities and Exchange Commission, including in
our most recent annual report on Form 10-K and subsequently filed
quarterly reports on Form 10-Q.
Use of Non-GAAP Financial Measures
In addition to the results prepared in
accordance with generally accepted accounting principles in the
United States (“GAAP”) provided throughout this press release, SCA
has presented the following non-GAAP financial measures, which
management uses to gauge operating performance: adjusted EBITDA
less noncontrolling interests (“NCI”), adjusted net income
(including adjusted net income per diluted share), and adjusted
operating cash flow less distributions to NCI. SCA has also
presented adjusted net debt leverage, a non-GAAP financial measure,
which management uses to evaluate SCA’s operating performance and
financial condition, including SCA’s ability to incur incremental
indebtedness. These non-GAAP financial measures exclude various
items detailed in the accompanying “Reconciliation of Non-GAAP
Financial Measures” at the end of this press release
These non-GAAP financial measures are not
intended to replace financial performance measures determined in
accordance with GAAP. Rather, they are presented as supplemental
measures of the Company’s performance that management finds useful
in assessing the Company’s operating performance between periods
and that we believe are useful for investors to analyze our
operating performance on the same basis as used by our management.
You should be aware that there is no certainty that we will not
incur expenses in the future that are similar to those excluded in
the calculation of adjusted EBITDA less NCI, adjusted net income
(including adjusted net income per diluted share), and adjusted
operating cash flow less distributions to NCI. Other companies in
our industry may calculate adjusted EBITDA less NCI, adjusted net
income (including adjusted net income per diluted share), and
adjusted operating cash flow less distributions to NCI and adjusted
net debt leverage differently than we do, limiting their usefulness
as comparative measures. Because of these limitations, none of
adjusted EBITDA less NCI, adjusted net income (including adjusted
net income per diluted share), adjusted operating cash flow less
distributions to NCI, or adjusted net debt leverage should be
considered the primary measure of the operating performance of our
business. We strongly encourage you to review the Company’s GAAP
financial statements and not to rely on any single financial
measure to evaluate our business.
In addition, this press release includes SCA’s
projected adjusted EBITDA less NCI for the year ending December 31,
2016. The Company has not reconciled its adjusted EBITDA less NCI
guidance for 2016 to the most directly comparable GAAP financial
measure, net income, because this cannot be done without
unreasonable efforts due to the inherent difficulty of forecasting
the timing or amount of various reconciling items that would impact
net income. These items vary from period to period and cannot be
reliably predicted or estimated. We expect the variability of these
items, including in particular depreciation and amortization, loss
(gain) on sale of investments, and asset impairments, to have a
potentially unpredictable, and potentially significant, impact on
our future GAAP financial results.
As of June 30, 2016, 67 of SCA’s 201 facilities
were nonconsolidated. SCA accounts for these facilities using the
equity method. For consolidated subsidiaries, the Company’s
financial statements reflect 100% of the revenues and expenses for
these subsidiaries, after elimination of intercompany transactions
and accounts. For nonconsolidated affiliates, our consolidated
statements of operations reflect our earnings from such facilities
in two line items:
- Equity in net income of nonconsolidated affiliates, which
represents SCA’s combined share of the net income of each equity
method facility that is based on such equity method facility’s net
income and the percentage of such equity method facility’s
outstanding equity interests owned by us; and
- Management fee revenues, which represents the Company’s
combined income from management fees that are earned from managing
the day-to-day operations of the facilities that are not
consolidated for financial reporting purposes.
As a result of this accounting treatment in
SCA’s reported results, management supplementally focuses on
non-GAAP systemwide metrics to analyze the results of
operations. These systemwide metrics include systemwide net
operating revenues growth, same site systemwide net patient
revenues growth, systemwide net patient revenues per case growth,
same site systemwide net patient revenues per case growth and same
site systemwide case volume (day adjusted). Systemwide metrics
treat SCA’s nonconsolidated facilities as if they were consolidated
and they do not represent actual GAAP operating results of the
Company. The Company includes management fee revenue from
managed-only facilities in systemwide net operating revenues growth
and same site systemwide net operating revenues growth, but not
patient or other revenues from managed-only facilities (in which
SCA holds no ownership interest). The Company does not include
revenues from managed-only facilities in systemwide net patient
revenues per case growth or same site systemwide net patient
revenues per case growth. While net patient revenues earned at the
nonconsolidated facilities are not recorded in our consolidated
financial statements, management believes systemwide growth metrics
are important to understand the Company’s financial performance
because the metrics are used to interpret the sources of our growth
and provide a growth metric incorporating the net patient revenues
earned by all affiliated facilities, regardless of the accounting
treatment.
About Surgical Care Affiliates
SCA (NASDAQ:SCAI), a leader in the outpatient
surgery industry, strategically partners with health plans, medical
groups and health systems across the country to develop and
optimize surgical facilities. As of June 30, 2016, SCA
operated 201 surgical facilities, including ambulatory surgery
centers and surgical hospitals, in partnership with approximately
3,000 physicians. For more information on SCA, visit
www.scasurgery.com.
Surgical Care
Affiliates, Inc. |
Unaudited
Selected Financial and Operating Data |
(In millions,
except per share data) |
|
|
THREE-MONTHS ENDED |
|
|
SIX-MONTHS ENDED |
|
|
JUNE 30, |
|
|
JUNE 30, |
|
|
2016 |
|
|
2015 |
|
|
2016 |
|
|
2015 |
|
Statement of
Operations Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net operating revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net patient revenues |
$ |
280.5 |
|
|
$ |
233.9 |
|
|
$ |
539.6 |
|
|
$ |
450.5 |
|
Management fee revenues |
|
14.2 |
|
|
|
14.4 |
|
|
|
28.2 |
|
|
|
28.5 |
|
Other revenues |
|
5.2 |
|
|
|
5.4 |
|
|
|
11.7 |
|
|
|
8.8 |
|
Total net operating revenues |
|
299.9 |
|
|
|
253.7 |
|
|
|
579.6 |
|
|
|
487.8 |
|
Equity in net income of nonconsolidated
affiliates |
|
11.1 |
|
|
|
11.6 |
|
|
|
22.9 |
|
|
|
23.7 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and benefits |
|
100.9 |
|
|
|
84.9 |
|
|
|
199.9 |
|
|
|
168.3 |
|
Supplies |
|
70.1 |
|
|
|
51.8 |
|
|
|
136.3 |
|
|
|
101.3 |
|
Other operating expenses |
|
46.6 |
|
|
|
38.1 |
|
|
|
91.5 |
|
|
|
74.8 |
|
Depreciation and amortization |
|
20.4 |
|
|
|
15.9 |
|
|
|
42.6 |
|
|
|
31.1 |
|
Occupancy costs |
|
11.0 |
|
|
|
9.2 |
|
|
|
21.6 |
|
|
|
17.4 |
|
Provision for doubtful
accounts |
|
6.7 |
|
|
|
4.5 |
|
|
|
10.6 |
|
|
|
8.7 |
|
Loss (gain) on disposal of
assets |
|
0.2 |
|
|
|
— |
|
|
|
1.1 |
|
|
|
0.2 |
|
Total operating expenses |
|
255.9 |
|
|
|
204.4 |
|
|
|
503.6 |
|
|
|
401.8 |
|
Operating income |
|
55.1 |
|
|
|
60.9 |
|
|
|
98.8 |
|
|
|
109.7 |
|
Interest expense |
|
12.8 |
|
|
|
10.7 |
|
|
|
25.6 |
|
|
|
19.5 |
|
HealthSouth option expense |
|
— |
|
|
|
1.9 |
|
|
|
— |
|
|
|
11.7 |
|
Debt modification expense |
|
— |
|
|
|
0.2 |
|
|
|
— |
|
|
|
5.0 |
|
Loss on extinguishment of debt |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
0.5 |
|
Interest income |
|
(4.3 |
) |
|
|
— |
|
|
|
(8.7 |
) |
|
|
(0.1 |
) |
Gain (loss) on sale of
investments |
|
(5.8 |
) |
|
|
0.3 |
|
|
|
(10.0 |
) |
|
|
(1.6 |
) |
Income from continuing operations before income
tax expense |
|
52.4 |
|
|
|
47.9 |
|
|
|
91.9 |
|
|
|
74.5 |
|
Provision for income tax
expense |
|
4.3 |
|
|
|
4.3 |
|
|
|
6.2 |
|
|
|
8.1 |
|
Income from continuing operations |
|
48.1 |
|
|
|
43.7 |
|
|
|
85.7 |
|
|
|
66.4 |
|
Loss from discontinued operations, net of income
tax expense |
|
— |
|
|
|
(0.2 |
) |
|
|
— |
|
|
|
(1.6 |
) |
Net income |
|
48.1 |
|
|
|
43.5 |
|
|
|
85.7 |
|
|
|
64.8 |
|
Less: Net income attributable to noncontrolling
interests |
|
(42.4 |
) |
|
|
(39.0 |
) |
|
|
(77.6 |
) |
|
|
(69.4 |
) |
Net income (loss) attributable to Surgical Care
Affiliates |
$ |
5.7 |
|
|
$ |
4.6 |
|
|
$ |
8.1 |
|
|
$ |
(4.6 |
) |
Net income (loss) per dilutive share attributable
to SCA |
$ |
.14 |
|
|
$ |
.11 |
|
|
$ |
.20 |
|
|
$ |
(.12 |
) |
Surgical Care
Affiliates, Inc. |
Unaudited
Selected Financial and Operating Data, continued |
(In millions,
except number of shares in thousands, per share data and facility
count) |
|
|
|
June 30, |
|
|
December 31, |
|
|
|
2016 |
|
|
2015 |
|
Balance Sheet Data (at period
end): |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
37.8 |
|
|
$ |
79.3 |
|
Total current assets |
|
|
283.0 |
|
|
|
314.9 |
|
Total assets |
|
|
2,179.6 |
|
|
|
2,001.6 |
|
|
|
|
|
|
|
|
|
|
Current portion of long-term debt |
|
|
36.7 |
|
|
|
32.5 |
|
Total current liabilities |
|
|
273.2 |
|
|
|
258.1 |
|
Long-term debt, net of current portion |
|
|
867.7 |
|
|
|
851.8 |
|
Total liabilities |
|
|
1,223.4 |
|
|
|
1,185.9 |
|
|
|
|
|
|
|
|
|
|
Total Surgical Care Affiliates’ equity |
|
|
405.6 |
|
|
|
382.3 |
|
Noncontrolling interests — non-redeemable |
|
|
533.8 |
|
|
|
411.5 |
|
Total equity |
|
|
939.4 |
|
|
|
793.7 |
|
|
|
|
|
|
|
|
|
|
Facilities (at period end): |
|
|
|
|
|
|
|
|
Consolidated facilities |
|
|
114 |
|
|
|
104 |
|
Equity method facilities |
|
|
67 |
|
|
|
68 |
|
Managed-only facilities |
|
|
20 |
|
|
|
21 |
|
Total facilities |
|
201 |
|
|
|
193 |
|
|
|
THREE-MONTHS ENDED |
|
|
SIX-MONTHS ENDED |
|
|
|
JUNE 30, |
|
|
JUNE 30, |
|
|
|
2016 |
|
|
2015 |
|
|
2016 |
|
|
2015 |
|
Net income
(loss) per share |
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per diluted share attributable
to SCA |
|
$ |
.14 |
|
|
$ |
.11 |
|
|
$ |
.20 |
|
|
$ |
(.12 |
) |
Number of shares outstanding used to compute
adjusted net income (loss) per diluted share |
|
|
41,045 |
|
|
|
40,797 |
|
|
|
40,930 |
|
|
|
39,073 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flow
data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating activities |
|
$ |
77.4 |
|
|
$ |
78.1 |
|
|
$ |
138.9 |
|
|
$ |
116.7 |
|
Investing activities |
|
|
(33.3 |
) |
|
|
(56.0 |
) |
|
|
(97.9 |
) |
|
|
(76.7 |
) |
Capital expenditures |
|
|
(13.8 |
) |
|
|
(11.0 |
) |
|
|
(41.3 |
) |
|
|
(19.0 |
) |
Investments in new
businesses |
|
|
(23.3 |
) |
|
|
(58.1 |
) |
|
|
(75.2 |
) |
|
|
(85.0 |
) |
Financing activities |
|
|
(52.4 |
) |
|
|
(38.2 |
) |
|
|
(82.5 |
) |
|
|
29.1 |
|
Distributions to
noncontrolling interests |
|
|
(36.5 |
) |
|
|
(39.1 |
) |
|
|
(76.6 |
) |
|
|
(73.7 |
) |
Surgical Care
Affiliates, Inc. |
Supplemental
Information |
(Unaudited; in
millions, except cases, days, growth rates and per share
data) |
|
|
|
THREE-MONTHS ENDED |
|
|
SIX-MONTHS ENDED |
|
|
|
JUNE 30, |
|
|
JUNE 30, |
|
|
|
2016 |
|
|
2015 |
|
|
2016 |
|
|
2015 |
|
Consolidated
and Equity Method Facility Data: |
|
|
|
|
|
|
|
|
|
|
|
Net Operating
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
facilities |
|
$ |
299.9 |
|
|
$ |
253.7 |
|
|
$ |
579.6 |
|
|
$ |
487.8 |
|
Equity method
facilities |
|
|
211.4 |
|
|
|
182.2 |
|
|
|
415.1 |
|
|
|
343.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Patient
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
facilities |
|
|
280.5 |
|
|
|
233.9 |
|
|
|
539.6 |
|
|
|
450.5 |
|
Equity method
facilities |
|
|
209.2 |
|
|
|
180.6 |
|
|
|
409.9 |
|
|
|
340.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Case Volume: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
facilities |
|
|
145,325 |
|
|
|
126,826 |
|
|
|
276,758 |
|
|
|
239,608 |
|
Equity method
facilities |
|
|
83,281 |
|
|
|
75,990 |
|
|
|
165,786 |
|
|
|
141,328 |
|
Systemwide case
volume(1) |
|
|
228,606 |
|
|
|
202,816 |
|
|
|
442,544 |
|
|
|
380,936 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of work days in
the period |
|
64 |
|
|
64 |
|
|
128 |
|
|
127 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated net
operating revenues growth |
|
|
18.2 |
% |
|
|
21.5 |
% |
|
|
18.8 |
% |
|
|
21.5 |
% |
Consolidated net
patient revenues per case growth |
|
|
4.7 |
% |
|
|
6.3 |
% |
|
|
3.7 |
% |
|
|
7.5 |
% |
Systemwide net
operating revenues growth(2) |
|
|
17.3 |
% |
|
|
18.2 |
% |
|
|
19.7 |
% |
|
|
17.2 |
% |
Systemwide net patient
revenues per case growth(2) |
|
|
4.8 |
% |
|
|
3.3 |
% |
|
|
3.4 |
% |
|
|
4.7 |
% |
Same site consolidated
net patient revenues growth(3) |
|
|
3.3 |
% |
|
|
8.6 |
% |
|
|
4.3 |
% |
|
|
9.5 |
% |
Same site consolidated
net patient revenues per case growth(3) |
|
|
1.2 |
% |
|
|
6.3 |
% |
|
|
0.1 |
% |
|
|
7.7 |
% |
Same site systemwide
net patient revenues growth(2)(3) |
|
|
8.1 |
% |
|
|
7.1 |
% |
|
|
9.0 |
% |
|
|
7.7 |
% |
Same site systemwide
net patient revenues per case growth(2)(3) |
|
|
3.8 |
% |
|
|
3.7 |
% |
|
|
2.8 |
% |
|
|
5.1 |
% |
Same site consolidated
case volume growth (day adjusted)(1)(3) |
|
|
2.1 |
% |
|
|
2.1 |
% |
|
|
3.3 |
% |
|
|
1.7 |
% |
Same site systemwide
case volume growth (day adjusted)(1)(2)(3) |
|
|
4.1 |
% |
|
|
3.3 |
% |
|
|
5.3 |
% |
|
|
2.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Financial
Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA-NCI(4)(5) |
|
$ |
47.7 |
|
|
$ |
43.0 |
|
|
$ |
89.2 |
|
|
$ |
78.9 |
|
Adjusted net
income(4)(5) |
|
$ |
19.1 |
|
|
$ |
19.9 |
|
|
$ |
30.3 |
|
|
$ |
35.0 |
|
Adjusted net income per
diluted share(4) |
|
$ |
.47 |
|
|
$ |
.49 |
|
|
$ |
.74 |
|
|
$ |
.89 |
|
Surgical Care
Affiliates, Inc. |
Reconciliation
of Non-GAAP Financial Measures |
(Unaudited; in
millions, except number of shares in thousands) |
|
|
|
THREE-MONTHS ENDED |
|
|
SIX-MONTHS ENDED |
|
|
TWELVE-MONTHS ENDED |
|
|
|
JUNE 30, |
|
|
JUNE 30, |
|
|
JUNE 30, |
|
|
|
2016 |
|
|
2015 |
|
|
2016 |
|
|
2015 |
|
|
2016 |
|
|
2015 |
|
Adjusted
EBITDA-NCI: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
48.1 |
|
|
$ |
43.5 |
|
|
$ |
85.7 |
|
|
$ |
64.8 |
|
|
$ |
294.5 |
|
|
$ |
164.3 |
|
(Minus): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to
noncontrolling interests |
|
|
(42.4 |
) |
|
|
(39.0 |
) |
|
|
(77.6 |
) |
|
|
(69.4 |
) |
|
|
(166.5 |
) |
|
|
(143.2 |
) |
Net income (loss) attributable to
SCA |
|
|
5.7 |
|
|
|
4.6 |
|
|
|
8.1 |
|
|
|
(4.6 |
) |
|
|
128.0 |
|
|
|
21.1 |
|
Plus (minus): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
12.8 |
|
|
|
10.7 |
|
|
|
25.6 |
|
|
|
19.5 |
|
|
|
47.9 |
|
|
|
35.8 |
|
Provision for income tax
expense |
|
|
4.3 |
|
|
|
4.3 |
|
|
|
6.2 |
|
|
|
8.1 |
|
|
|
(86.6 |
) |
|
|
14.4 |
|
Depreciation and amortization |
|
|
20.4 |
|
|
|
15.9 |
|
|
|
42.6 |
|
|
|
31.1 |
|
|
|
77.7 |
|
|
|
59.4 |
|
Loss from discontinued operations,
net |
|
|
— |
|
|
|
0.2 |
|
|
|
— |
|
|
|
1.6 |
|
|
|
(0.8 |
) |
|
|
8.4 |
|
Equity method amortization expense
(6) |
|
|
0.4 |
|
|
|
0.2 |
|
|
|
0.9 |
|
|
|
0.4 |
|
|
|
1.8 |
|
|
|
12.0 |
|
(Gain) loss on sale of
investments |
|
|
(5.8 |
) |
|
|
0.3 |
|
|
|
(10.0 |
) |
|
|
(1.6 |
) |
|
|
(12.4 |
) |
|
|
(13.5 |
) |
HealthSouth option expense |
|
|
— |
|
|
|
1.9 |
|
|
|
— |
|
|
|
11.7 |
|
|
|
— |
|
|
|
11.7 |
|
Debt modification expense |
|
|
— |
|
|
|
0.2 |
|
|
|
— |
|
|
|
5.0 |
|
|
|
— |
|
|
|
5.0 |
|
Loss on extinguishment of debt |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
0.5 |
|
|
|
— |
|
|
|
0.5 |
|
Asset impairments |
|
|
5.8 |
|
|
|
2.7 |
|
|
|
7.7 |
|
|
|
2.7 |
|
|
|
14.9 |
|
|
|
3.1 |
|
Loss (gain) on disposal of
assets |
|
|
0.2 |
|
|
|
— |
|
|
|
1.1 |
|
|
|
0.2 |
|
|
|
2.8 |
|
|
|
— |
|
Stock compensation expense |
|
|
3.4 |
|
|
|
2.0 |
|
|
|
6.0 |
|
|
|
3.7 |
|
|
|
10.6 |
|
|
|
6.2 |
|
Other |
|
|
0.5 |
|
|
|
0.2 |
|
|
|
1.0 |
|
|
|
0.5 |
|
|
|
1.7 |
|
|
|
0.6 |
|
Adjusted EBITDA-NCI |
|
$ |
47.7 |
|
|
$ |
43.0 |
|
|
$ |
89.2 |
|
|
$ |
78.9 |
|
|
$ |
185.6 |
|
|
$ |
164.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Net
Income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to
SCA |
|
$ |
5.7 |
|
|
$ |
4.6 |
|
|
$ |
8.1 |
|
|
$ |
(4.6 |
) |
|
|
|
|
|
|
|
|
Plus (minus) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for income tax
expense |
|
|
4.3 |
|
|
|
4.3 |
|
|
|
6.2 |
|
|
|
8.1 |
|
|
|
|
|
|
|
|
|
HealthSouth option expense |
|
|
— |
|
|
|
1.9 |
|
|
|
— |
|
|
|
11.7 |
|
|
|
|
|
|
|
|
|
Debt modification expense |
|
|
— |
|
|
|
0.2 |
|
|
|
— |
|
|
|
5.0 |
|
|
|
|
|
|
|
|
|
Loss on extinguishment of debt |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
0.5 |
|
|
|
|
|
|
|
|
|
Asset impairments |
|
|
5.8 |
|
|
|
2.7 |
|
|
|
7.7 |
|
|
|
2.7 |
|
|
|
|
|
|
|
|
|
Amortization expense |
|
|
4.6 |
|
|
|
3.5 |
|
|
|
9.3 |
|
|
|
6.7 |
|
|
|
|
|
|
|
|
|
Loss from discontinued operations,
net |
|
|
— |
|
|
|
0.2 |
|
|
|
— |
|
|
|
1.6 |
|
|
|
|
|
|
|
|
|
(Gain) loss on sale of
investments |
|
|
(5.8 |
) |
|
|
0.3 |
|
|
|
(10.0 |
) |
|
|
(1.6 |
) |
|
|
|
|
|
|
|
|
Loss (gain) on disposal of
assets |
|
|
0.2 |
|
|
|
— |
|
|
|
1.1 |
|
|
|
0.2 |
|
|
|
|
|
|
|
|
|
Equity method amortization expense
(6) |
|
|
0.4 |
|
|
|
0.2 |
|
|
|
0.9 |
|
|
|
0.4 |
|
|
|
|
|
|
|
|
|
Stock compensation expense |
|
|
3.4 |
|
|
|
2.0 |
|
|
|
6.0 |
|
|
|
3.7 |
|
|
|
|
|
|
|
|
|
Other |
|
|
0.5 |
|
|
|
0.2 |
|
|
|
1.0 |
|
|
|
0.5 |
|
|
|
|
|
|
|
|
|
Adjusted Net Income |
|
$ |
19.1 |
|
|
$ |
19.9 |
|
|
$ |
30.3 |
|
|
$ |
35.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of shares
outstanding used to compute Adjusted net income per diluted
share |
|
|
41,045 |
|
|
|
40,797 |
|
|
|
40,930 |
|
|
|
39,073 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Operating cash flow less distributions to
NCI: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash
provided by operating activities |
|
$ |
77.4 |
|
|
$ |
78.1 |
|
|
$ |
138.9 |
|
|
$ |
116.7 |
|
|
|
|
|
|
|
|
|
Plus |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt modification costs |
|
|
— |
|
|
|
0.2 |
|
|
|
— |
|
|
|
5.6 |
|
|
|
|
|
|
|
|
|
Other |
|
|
0.5 |
|
|
|
0.2 |
|
|
|
0.5 |
|
|
|
0.5 |
|
|
|
|
|
|
|
|
|
Adjusted
Operating cash flow |
|
|
77.9 |
|
|
|
78.4 |
|
|
|
139.4 |
|
|
|
122.9 |
|
|
|
|
|
|
|
|
|
Distributions to
noncontrolling interests of consolidated affiliates |
|
|
(36.5 |
) |
|
|
(39.1 |
) |
|
|
(76.6 |
) |
|
|
(73.7 |
) |
|
|
|
|
|
|
|
|
Adjusted
Operating cash flow less distributions to NCI |
|
$ |
41.4 |
|
|
$ |
39.4 |
|
|
$ |
62.7 |
|
|
$ |
49.2 |
|
|
|
|
|
|
|
|
|
Surgical Care
Affiliates, Inc. |
Reconciliation of
Non-GAAP Financial Measures |
(Unaudited; in
millions, except ratios) |
|
|
|
TWELVE-MONTHS ENDED |
|
|
|
JUNE 30, |
|
|
|
2016 |
|
|
2015 |
|
Adjusted Net Debt Leverage(7): |
|
|
|
|
|
|
|
|
Total
indebtedness less cash and cash equivalents |
|
|
|
|
|
|
|
|
Total
indebtedness |
|
$ |
904.4 |
|
|
$ |
801.7 |
|
(Minus) |
|
|
|
|
|
|
|
|
Cash and cash
equivalents |
|
|
(37.8 |
) |
|
|
(77.8 |
) |
Total
indebtedness less cash and cash equivalents |
|
$ |
866.5 |
|
|
$ |
723.9 |
|
|
|
|
|
|
|
|
|
|
Assumed
Adjusted EBITDA-NCI |
|
|
|
|
|
|
|
|
Adjusted
EBITDA-NCI |
|
$ |
185.6 |
|
|
$ |
164.9 |
|
(Plus) |
|
|
|
|
|
|
|
|
Post Fiscal
Period-End Estimated EBITDA-NCI of Acquisitions(8) |
|
|
15.8 |
|
|
|
13.3 |
|
Assumed
Adjusted EBITDA-NCI |
|
$ |
201.4 |
|
|
$ |
178.2 |
|
|
|
|
|
|
|
|
|
|
Adjusted Net
Debt Leverage |
|
|
4.3 |
x |
|
|
4.1 |
x |
Note: Totals above may
not sum due to rounding.
(1) The number of cases performed at SCA’s consolidated and
equity method facilities (does not include managed-only facilities)
is a key metric utilized to regularly evaluate performance.(2) The
revenues and expenses of equity method facilities are not directly
included in SCA’s consolidated GAAP results; only the net income
earned from such facilities is reported on a net basis in the line
item “Equity in net income of nonconsolidated affiliates.” Because
of this, management supplementally focuses on non-GAAP systemwide
results, which measure results from all our facilities, including
revenues from our consolidated facilities and the Company’s equity
method facilities (without adjustment based on our percentage of
ownership). SCA includes management fee revenue from managed-only
facilities in systemwide net operating revenues growth, but not
patient or other revenues from managed-only facilities (in which
SCA holds no ownership interest).(3) Same site refers to facilities
that were operational in both the current and prior period, as
applicable. SCA does not include revenues from managed-only
facilities in systemwide net patient revenues per case growth or
same site systemwide net patient revenues per case growth.(4)
Represents adjusted EBITDA-NCI and adjusted net income (including
adjusted net income per diluted share) as computed and used by
management. Adjusted EBITDA-NCI means net income before provisions
for income tax expense, interest expense, depreciation and
amortization, net income (loss) from discontinued operations,
equity method amortization expense, gain (loss) on sale of
investments, loss on extinguishment of debt, debt modification
expense, HealthSouth option expense, asset impairments, gain (loss)
on disposal of assets and stock compensation expense less net
income attributable to noncontrolling interests. Adjusted net
income means net income (loss) attributable to SCA before
provisions for income tax, loss on extinguishment of debt, debt
modification expense, HealthSouth option expense, asset
impairments, amortization expense, net income (loss) from
discontinued operations, gain (loss) on sale of investments, gain
(loss) on disposal of assets, equity method amortization expense
and stock compensation expense. SCA presents adjusted EBITDA-NCI
and adjusted net income (including adjusted net income per diluted
share) because management believes they are useful for investors to
analyze SCA’s operating performance on the same basis as that used
by management. Management believes adjusted EBITDA-NCI can be
useful to facilitate comparisons of operating performance between
periods because it excludes the effect of depreciation and
amortization, which represents a non-cash charge to earnings,
income tax, interest expense and other expenses or income not
related to the normal, recurring operations of our business.
Management believes adjusted net income (including adjusted net
income per diluted share) can be useful to facilitate comparisons
of SCA’s operating performance between periods because it excludes
the effect of certain non-cash and other charges to earnings whose
fluctuations from period-to-period do not necessarily correspond to
the normal, recurring operations of our business. Adjusted
EBITDA-NCI and adjusted net income (including adjusted net income
per diluted share) are each considered a “non-GAAP financial
measure” under SEC rules and should not be considered a substitute
for net income (loss) or net operating income (or net loss per
share) as determined in accordance with GAAP. In addition adjusted
EBITDA-NCI and adjusted net income (including adjusted net income
per diluted share) have limitations as analytical tools, including
the following:
- Adjusted EBITDA-NCI and adjusted net income (including adjusted
net income per diluted share) do not reflect our historical capital
expenditures, or future requirements for capital expenditures, or
contractual commitments;
- Adjusted EBITDA-NCI and adjusted net income (including adjusted
net income per diluted share) do not reflect changes in, or cash
requirements for, the Company’s working capital needs;
- Adjusted EBITDA-NCI does not reflect the significant interest
expense or the cash requirements necessary to service interest or
principal payments under the Company’s credit agreement and
indenture;
- Adjusted EBITDA-NCI and adjusted net income (including adjusted
net income per diluted share) do not reflect our historical
impairments recognized;
- Adjusted EBITDA-NCI and adjusted net income (including adjusted
net income per diluted share) do not reflect SCA’s historical
amortization expenses; and
- Adjusted EBITDA-NCI does not reflect income tax expense or the
cash requirements to pay taxes.
In addition, you should be aware that there is
no certainty that SCA will not incur expenses in the future that
are similar to those excluded in the calculation of adjusted
EBITDA-NCI or adjusted net income (including adjusted net income
per diluted share). Other companies in SCA’s industry may calculate
adjusted EBITDA-NCI or adjusted net income (including adjusted net
income per diluted share) differently than SCA does, limiting their
usefulness as comparative measures.Because of these limitations,
neither adjusted EBITDA-NCI nor adjusted net income (including
adjusted net income per diluted share) should be considered the
primary measure of the operating performance of SCA’s business. The
Company strongly encourages you to review the GAAP financial
statements and not to rely on any single financial measure to
evaluate our business.
(5) Adjusted EBITDA-NCI for the second quarter
of 2016 was $47,660 compared to $42,971 in the second quarter of
2015, a 10.9% increase period over period. Adjusted net
income for the second quarter of 2016 was $19,128 compared to
$19,942 in the second quarter of 2015, a 4.1% decrease period over
period.(6) For the three-months ended June 30, 2016 and June 30,
2015, we recorded $0.4 million and $0.2 million, respectively, of
amortization expense for definite-lived intangible assets
attributable to equity method investments. These expenses are
included in Equity in net income of nonconsolidated
affiliates in our consolidated financial statements.(7)
Adjusted net debt leverage is defined as total debt, less cash and
cash equivalents, divided by assumed adjusted EBITDA-NCI for the
trailing twelve months then ended. Included within assumed adjusted
EBITDA-NCI is the EBITDA-NCI for acquisitions for the entire
twelve-month period following the date of acquisition (which
calculation includes an estimate of EBITDA-NCI for an acquisition
for the remaining portion of such twelve-month period that follows
the end of the fiscal period in which the acquisition
occurred). SCA calculates assumed adjusted EBITDA-NCI for the
sole purpose of presenting adjusted net debt leverage. (8)
Represents an estimate of the EBITDA-NCI for acquisitions for the
remaining portion of the applicable twelve-month period that
follows the end of the fiscal period in which such acquisitions
occurred.
Contacts:
Tom De Weerdt
Executive Vice President & CFO
Surgical Care Affiliates
(847) 267-3502
tom.deweerdt@scasurgery.com
Leslie Wachsman
Vice President, Finance & IR
Surgical Care Affiliates
(847) 267-9823
leslie.wachsman@scasurgery.com
ASC ACQUISITION LLC (NASDAQ:SCAI)
Historical Stock Chart
From Jun 2024 to Jul 2024
ASC ACQUISITION LLC (NASDAQ:SCAI)
Historical Stock Chart
From Jul 2023 to Jul 2024