-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GhM1AiQs5zrXE3aZHTfDXjijLwBB82NhQvLUmxPT9ZYjXjFt1UIh3JQkUIJnFrBo dScGj/SrIFU+TjrHJhL+Rg== /in/edgar/work/0000950144-00-013573/0000950144-00-013573.txt : 20001114 0000950144-00-013573.hdr.sgml : 20001114 ACCESSION NUMBER: 0000950144-00-013573 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20001113 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LIFEPOINT HOSPITALS INC CENTRAL INDEX KEY: 0001074772 STANDARD INDUSTRIAL CLASSIFICATION: [6324 ] IRS NUMBER: 522165845 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-29818 FILM NUMBER: 762200 BUSINESS ADDRESS: STREET 1: 103 POWELL COURT STREET 2: SUITE 200 CITY: BRENTWOOD STATE: TN ZIP: 37027 BUSINESS PHONE: 6153728500 MAIL ADDRESS: STREET 1: 4525 HARDING RD CITY: NASHVILLE STATE: TN ZIP: 37205 FORMER COMPANY: FORMER CONFORMED NAME: LIFEPOINT HOSPITALS LLC DATE OF NAME CHANGE: 19981207 10-Q 1 g65276ae10-q.txt LIFEPOINT HOSPITALS, INC. 1 ============================================================================== UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 -------------- FORM 10-Q -------------- [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2000 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________ to ________ Commission file number 0-29818 ------------------------------ LifePoint Hospitals, Inc. (Exact name of registrant as specified in its charter) Delaware 52-2165845 (State or other jurisdiction (IRS Employer of incorporation or organization) Identification No.) 103 Powell Court 37027 Brentwood, Tennessee (Zip Code) (Address of principal executive offices) (615) 372-8500 (Registrant's telephone number, including area code) Not Applicable (Former name, former address and former fiscal year, if changed since last report) ----------------------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months, (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. YES [X] NO [ ] Commission file number 333-84755 -------------------------------- LifePoint Hospitals Holdings, Inc. (Exact name of registrant as specified in its charter) Delaware 52-2167869 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 103 Powell Court Brentwood, Tennessee 37027 (Address of principal executive offices) (Zip Code) (615) 372-8500 (Registrant's telephone number, including area code) Not Applicable (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. YES [X] NO [ ] As of October 31, 2000, the number of outstanding shares of Common Stock of LifePoint Hospitals, Inc. was 32,253,336, and all of the shares of Common Stock of LifePoint Hospitals Holdings, Inc. were owned by LifePoint Hospitals, Inc. ================================================================================ 2 Part I: Financial Information Item 1: Financial Statements LIFEPOINT HOSPITALS, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME UNAUDITED (Dollars in millions, except per share amounts)
THREE MONTHS NINE MONTHS ENDED ENDED SEPTEMBER 30, SEPTEMBER 30, --------------------- -------------------- 2000 1999 2000 1999 ------- ------- ------- ------- Revenues ............................................... $ 145.3 $ 125.4 $ 414.6 $ 387.8 Salaries and benefits .................................. 58.1 52.2 168.2 165.1 Supplies ............................................... 17.1 15.7 50.1 47.7 Other operating expenses ............................... 30.6 28.8 88.8 87.4 Provision for doubtful accounts ........................ 12.5 10.7 31.4 30.1 Depreciation and amortization .......................... 8.5 7.9 25.3 23.3 Interest expense ....................................... 8.3 6.7 22.9 17.4 Management fees ........................................ -- -- -- 3.2 Gain on previously impaired assets ..................... (1.4) -- (1.4) -- ESOP expense ........................................... 2.0 1.2 4.4 1.7 ------- ------- ------- ------- 135.7 123.2 389.7 375.9 ------- ------- ------- ------- Income before minority interests and income taxes .......................................... 9.6 2.2 24.9 11.9 Minority interests in earnings of consolidated entities. 0.5 0.4 1.8 1.4 ------- ------- ------- ------- Income before income taxes ............................. 9.1 1.8 23.1 10.5 Provision for income taxes ............................. 4.3 0.7 10.6 4.4 ------- ------- ------- ------- Net income .......................................... $ 4.8 $ 1.1 $ 12.5 $ 6.1 ======= ======= ======= ======= Earnings per share: Basic ............................................... $ 0.15 $ 0.03 $ 0.40 $ 0.20 ======= ======= ======= ======= Diluted ............................................. $ 0.14 $ 0.03 $ 0.38 $ 0.20 ======= ======= ======= ======= Shares used in earnings per share calculations (000s): Basic ............................................... 31,706 30,951 31,400 30,349 Dilutive securities - stock options ............. 1,624 63 1,231 194 ------- ------- ------- ------- Diluted ............................................. 33,330 31,014 32,631 30,543 ======= ======= ======= =======
See accompanying notes. 1 3 LIFEPOINT HOSPITALS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS UNAUDITED (Dollars in millions, except per share amounts)
SEPTEMBER 30, DECEMBER 31, 2000 1999 -------- -------- ASSETS --------------------- Current assets: Cash and cash equivalents ........................................ $ 20.3 $ 12.5 Accounts receivable, less allowance for doubtful accounts of $50.6 at September 30, 2000 and $50.3 at December 31, 1999 ............ 46.7 46.7 Inventories ...................................................... 13.8 14.3 Deferred taxes and other current assets .......................... 35.4 25.9 ------- ------- 116.2 99.4 Property and equipment, at cost: Land ............................................................. 8.8 7.9 Buildings ........................................................ 243.1 204.1 Equipment ........................................................ 254.6 260.6 Construction in progress (estimated cost to complete and equip after September 30, 2000 - $11.3) ............................... 3.2 20.2 ------- ------- 509.7 492.8 Accumulated depreciation ............................................ (190.1) (198.4) ------- ------- 319.6 294.4 Intangible assets, net of accumulated amortization of $10.6 at September 30, 2000 and $7.5 at December 31, 1999 ................. 54.6 26.4 Other ............................................................... 0.8 0.2 ------- ------- $ 491.2 $ 420.4 ======= ======= LIABILITIES AND EQUITY ------------------------ Current liabilities: Accounts payable ................................................. $ 14.1 $ 26.5 Accrued salaries ................................................. 14.0 14.7 Other current liabilities ........................................ 21.4 12.9 Current maturities of long-term debt ............................. 10.2 3.1 ------- ------- 59.7 57.2 Long-term debt ...................................................... 281.1 257.1 Deferred taxes ...................................................... 25.0 12.5 Professional liability risks and other liabilities .................. 7.8 3.4 Minority interests in equity of consolidated entities ............... 4.1 4.5 Stockholders' equity: Preferred stock, $0.01 par value; 10,000,000 shares authorized; no shares issued ................................................ -- -- Common stock, $0.01 par value; 90,000,000 shares authorized; 32,142,444 shares issued and outstanding at September 30, 2000 and 31,184,160 at December 31, 1999 ............................. 0.3 0.3 Capital in excess of par value ................................... 147.8 137.9 Unearned ESOP compensation ....................................... (26.5) (28.9) Notes receivable for shares sold to employees .................... (7.2) (10.2) Accumulated deficit .............................................. (0.9) (13.4) ------- ------- 113.5 85.7 ------- ------- $ 491.2 $ 420.4 ======= =======
See accompanying notes. 2 4 LIFEPOINT HOSPITALS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS UNAUDITED (Dollars in millions)
NINE MONTHS ENDED SEPTEMBER 30, -------------------- 2000 1999 ------- ------- Cash flows from operating activities: Net income ......................................... $ 12.5 $ 6.1 Adjustments to reconcile net income to net cash provided by operating activities: ESOP expense ................................... 4.4 1.7 Provision for doubtful accounts ................ 31.4 30.1 Depreciation and amortization .................. 25.3 23.3 Amortization of deferred loan costs ............ 1.2 0.5 Deferred income taxes (benefit) ................ 13.3 (7.4) Reserve for professional liability risk ........ 3.8 2.5 Gain on previously impaired assets ............. (1.4) -- Increase (decrease) in cash from operating assets and liabilities, net of effects from acquisitions and divestitures: Accounts receivable ......................... (27.0) (25.8) Inventories and other current assets ........ (1.8) (1.7) Accounts payable and accrued expenses ....... (3.5) 11.8 Income taxes payable ........................ (2.8) 10.3 Other .......................................... 0.3 (1.2) ------- ------- Net cash provided by operating activities.... 55.7 50.2 Cash flows from investing activities: Purchase of property and equipment, net ............ (23.3) (40.5) Purchase of facilities ............................. (83.3) -- Proceeds from sale of facilities ................... 24.4 -- Other .............................................. (0.4) 0.3 ------- ------- Net cash used in investing activities ....... (82.6) (40.2) Cash flows from financing activities: Increase (decrease) in long-term debt, net ......... 30.4 (0.4) Increase in intercompany balances with HCA, net .... -- 23.1 Proceeds from issuance of common stock ............. 4.3 -- ------- ------- Net cash provided by financing activities.... 34.7 22.7 Change in cash and cash equivalents .................... 7.8 32.7 Cash and cash equivalents at beginning of period ....... 12.5 -- ------- ------- Cash and cash equivalents at end of period ............. $ 20.3 $ 32.7 ======= ======= Interest payments ...................................... $ 17.7 $ 10.3 Income tax payments .................................... $ -- $ 6.1 Supplemental financing non-cash activities: Assumption of debt from HCA ........................ $ -- $ 260.0 Elimination of intercompany amounts payable to HCA.. $ -- $ 219.8
See accompanying notes. 3 5 LIFEPOINT HOSPITALS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) NOTE 1 - BASIS OF PRESENTATION On May 11, 1999, HCA - The Healthcare Company ("HCA"), formerly Columbia/HCA Healthcare Corporation, completed the spin-off of its operations comprising the America Group to its shareholders by distributing all outstanding shares of LifePoint Hospitals, Inc. (the "Distribution"). LifePoint Hospitals, Inc., together with its subsidiaries, as appropriate, is hereinafter referred to as the "Company" or "LifePoint". As a result of the Distribution, the Company became an independent, publicly-traded company. Owners of HCA Common Stock received one share of the Company's Common Stock for every 19 shares of HCA Common Stock held which resulted in approximately 29.9 million shares of the Company's Common Stock outstanding immediately after the Distribution. At September 30, 2000, the Company was comprised of 21 general, acute care hospitals and related health care entities. The entities are located in non-urban areas in the states of Alabama, Florida, Kansas, Kentucky, Louisiana, Tennessee, Utah and Wyoming. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the three months and nine months ended September 30, 2000 are not necessarily indicative of the results that may be expected for the year ending December 31, 2000. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 1999. Certain estimates, assumptions and allocations were made in preparing the unaudited condensed consolidated financial statements included herein. Therefore such financial statements may not necessarily be indicative of the results of operations, financial position or cash flows that would have existed had the Company been a separate, independent company throughout all of the periods presented. Certain prior year amounts have been reclassified to conform to the current year presentation. NOTE 2 - RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities", which was required to be adopted in years beginning after June 15, 1999. In June 1999, SFAS No. 137 was issued, deferring the effective date of SFAS No. 133 for one year. Management does not anticipate that the adoption of the new statement will have a material effect on the financial condition or results of operations of the Company. NOTE 3 - ACQUISITIONS AND DIVESTITURES Acquisitions Effective July 1, 2000, the Company acquired Lander Valley Medical Center in Lander, Wyoming for approximately $33.0 million; and, effective June 16, 2000, the Company acquired Putnam Community Medical Center in Palatka, Florida for approximately $50.3 million. These acquisitions were accounted for using the purchase method of accounting. The allocations of the purchase prices were 4 6 determined based on currently available information and are subject to further refinement pending the final working capital settlements. Divestitures In September 2000, the Company signed a definitive agreement to sell Springhill Medical Center in Springhill, Louisiana for approximately $5.0 million to $6.0 million. The transaction is scheduled to close during the fourth quarter of 2000, subject to customary conditions. Effective September 1, 2000, the Company sold Barrow Medical Center in Winder, Georgia for approximately $2.2 million. Effective August 1, 2000, the Company sold Riverview Medical Center in Gonzales, Louisiana for approximately $20.8 million. The proceeds from the transaction and the Company's available cash were used to pay down existing borrowings under the Company's revolving credit facility. Effective April 1, 2000, the Company sold Halstead Hospital in Halstead, Kansas and effective February 1, 2000, the Company sold Trinity Hospital in Erin, Tennessee. Halstead Hospital, Trinity Hospital, and Barrow Medical Center were the three hospitals previously held for sale by the Company. The Company recorded an impairment of long-lived assets related to the hospitals held for sale in 1998 and an additional impairment in 1999. During the three months ended September 30, 2000, the Company recorded a $1.4 million pre-tax gain related to the favorable settlement on the sale of a facility that was previously held for sale. The gain is recorded in the accompanying condensed consolidated statement of income as gain on previously impaired assets. The operating results of the acquisitions and divestitures have been consolidated in the accompanying condensed consolidated statements of income for the periods subsequent to acquisition and for the periods prior to sale. The following unaudited pro forma results of operations give effect to the operations of the hospitals acquired and sold during the nine months ended September 30, 2000 as if the respective transactions had occurred at the beginning of the period presented (in millions, except per share data):
Nine Months Ended September 30, --------------------- 2000 1999 ------ ------ Revenues $424.4 $392.0 Net income $ 13.0 $ 9.0 Earnings per share: Basic $ 0.41 $ 0.30 Diluted $ 0.40 $ 0.29
The pro forma results of operations do not purport to represent what the Company's results of operations would have been had such transactions in fact occurred at the beginning of the periods presented or to project the Company's results of operations in any future period. 5 7 NOTE 4 - CONTINGENCIES HCA Investigations, Litigation and Indemnification Rights Based upon its review of public filings and statements made by HCA, LifePoint's management understands that HCA is the subject of several federal investigations into certain of its business practices, as well as governmental investigations by various states. Any discussion contained in this report regarding such matters is based solely upon such public filings and statements. Management of LifePoint understands that HCA is cooperating in these investigations and that HCA understands, through written notice and other means, that it is a target in these investigations. Given the breadth of the ongoing investigations, HCA expects subpoenas and investigative and prosecutorial activity to occur in these and other jurisdictions in the future. HCA is the subject of a formal order of investigation by the Securities and Exchange Commission (the "Commission"). HCA understands that the Commission's investigation includes the anti-fraud, periodic reporting and internal accounting control provisions of the federal securities laws. According to published reports, on July 2, 1999, a federal jury in Tampa, Florida found two HCA employees guilty of conspiracy and making false statements on Medicare and TRICARE cost reports for the years 1992 and 1993 and on a Medicaid cost report for 1993. Both were found not guilty of obstructing a federal auditor. One other employee was acquitted on all counts for which he had been charged and the jury was unable to reach a verdict with respect to another employee. This employee and the government executed an agreement to defer prosecution for 18 months after which charges will be dismissed. The two convicted employees were sentenced in December 1999 and both have appealed to the 11th Circuit. HCA is a defendant in several qui tam actions, or actions under a state statute brought by private parties on behalf of the United States of America, which have been unsealed and served on HCA. The actions allege, in general, that HCA and certain subsidiaries and/or affiliated partnerships violated the False Claims Act by submitting improper claims to the government for reimbursement. The lawsuits seek three times the amount of damages caused to the United States by submission of any Medicare or Medicaid false claims presented by the defendants to the federal government, civil penalties of not less than $5,000 nor more than $10,000 for each such Medicare or Medicaid claim, attorneys' fees and costs. The government has intervened in six qui tam actions against HCA. HCA is aware of additional qui tam actions that remain under seal and believes that there may be other sealed qui tam cases of which it is unaware. HCA is a defendant in a number of other suits, which allege, in general, improper and fraudulent billing, overcharging, coding and physician referrals, as well as other violations of law. Certain of the suits have been conditionally certified as class actions. Several derivative actions have been filed in state court by certain purported stockholders of HCA against certain of its current and former officers and directors alleging breach of fiduciary duty, and failure to take reasonable steps to ensure that HCA did not engage in illegal practices thereby exposing it to significant damages. On May 18, 2000, HCA announced that it had reached an understanding with the Civil Division of the Department of Justice to recommend an agreement to settle, subject to certain conditions, the civil claims actions against HCA relating to diagnosis related group coding, outpatient laboratory billing and home health issues. The understanding with the Department of Justice would require HCA to pay $745 million in compensation to the government, with interest accruing immediately at a fixed rate of 6.5% per annum, and would reduce HCA's existing letter of credit agreement with the government from $1 billion to $250 million at the time of the payment of the settlement. The settlement is subject to approval by additional officials of the Department of Justice, other federal agencies as well as state officials; execution of a corporate integrity agreement; execution of definitive settlement documents; execution of agreements to resolve all criminal investigations pending against HCA and court approval. We are unable to predict the effect or outcome of any of the ongoing investigations or qui tam and other actions, or whether any additional investigations or litigation will be commenced. In connection with the Distribution, the Company entered into a Distribution Agreement with HCA. The terms of the 6 8 Distribution Agreement provide that HCA will indemnify the Company in respect of any losses which it may incur as a result of the proceedings described above, all of which the Company believes relate to periods prior to the Distribution. HCA has also agreed to indemnify the Company in respect of any losses, which it may incur as a result of proceedings which may be commenced by government authorities or by private parties in the future that arise from acts, practices or omissions engaged in prior to the date of the Distribution and relate to the proceedings described above. HCA has further agreed that, in the event that any hospital owned by the Company as of the date of the Distribution is permanently excluded from participation in the Medicare and Medicaid programs as a result of the proceedings described above, then HCA will make cash payments to the Company based on an amount (if positive) equal to five times the excluded hospital's 1998 income from continuing operations before depreciation and amortization, interest expense, management fees, impairment of long-lived assets, minority interests and income taxes, as set forth on a schedule to the Distribution Agreement, less the net proceeds of the sale or other disposition of the excluded hospital. The Company has agreed with HCA that, in connection with the pending governmental investigations, the Company will negotiate one or more compliance agreements with the Office of the Inspector General ("OIG") setting forth the Company's agreement to comply with applicable laws and regulations. HCA is expected to enter into its own compliance agreement with the OIG that will become effective when its settlement is final. If any of such indemnified matters were successfully asserted against the Company, or any of its facilities, and HCA failed to meet its indemnification obligations, then such losses could have a material adverse effect on the business, financial position, results of operations or prospects of the Company. HCA has not indemnified the Company for losses relating to any acts, practices and omissions engaged in by the Company after the Distribution, regardless of whether the Company is indemnified for similar acts, practices and omissions occurring prior to the date of the Distribution. Management of LifePoint believes that the ongoing governmental investigations and related media coverage may have had a negative effect on HCA's results of operations (which include the Company for the periods prior to the date of the Distribution which are presented herein). The extent to which the Company may or may not continue to be affected by the ongoing investigations of HCA, the initiation of additional investigations, if any, and the related media coverage cannot be predicted. It is possible that these matters could have a material adverse effect on the Company's business, financial condition, results of operations or prospects in future periods. General Liability Claims The Company is subject to claims and suits arising in the ordinary course of business. In certain of these actions claimants may ask for punitive damages against the Company, which are usually not covered by insurance. It is management's opinion that the ultimate resolution of pending claims and legal proceedings will not have a material adverse effect on the Company's results of operations or financial position. Physician Commitments The Company has committed to provide certain financial assistance pursuant to recruiting agreements with various physicians practicing in the communities it serves. In consideration for a physician relocating to one of its communities and agreeing to engage in private practice for the benefit of the respective community, the Company may loan certain amounts of money to a physician, normally over a period of one year, to assist in establishing his or her practice. The Company has committed to advance amounts of approximately $11.9 million at September 30, 2000. The actual amount of such commitments to be subsequently advanced to physicians often depends upon the financial results of a physician's private practice during the guaranteed period. Generally, amounts advanced under the recruiting agreements may be forgiven pro rata over a period of 48 months contingent upon the physician continuing to practice in the respective community. It is management's opinion that amounts actually advanced and not repaid will not have a material adverse effect on the Company's results of operations or financial position. 7 9 Risks Associated with Liabilities of Acquired Businesses The Company has acquired and plans to continue to acquire businesses with prior operating histories. Acquired companies may have unknown or contingent liabilities, including liabilities for failure to comply with health care laws and regulations, such as billing and reimbursement, fraud and abuse and similar anti-referral laws. The Company has from time to time identified certain past practices of acquired companies that do not conform to its standards. Although the Company institutes policies designed to conform such practices to its standards following completion of acquisitions, there can be no assurance that the Company will not become liable for past activities that may later be asserted to be improper by private plaintiffs or government agencies. Although the Company generally seeks to obtain indemnification from prospective sellers covering such matters, there can be no assurance that any such matter will be covered by indemnification, or if covered, that such indemnification will be adequate to cover potential losses and fines. NOTE 5 - LONG-TERM DEBT In June 2000, the Company borrowed the remaining $35 million of its $60 million term loan facility and $30 million under its $65 million revolving credit facility. The Company utilized this additional debt to fund acquisitions. In August 2000, the Company paid down the revolving credit facility using the Company's available cash and proceeds from the sale of Riverview Medical Center (see Note 3). At September 30, 2000, no amounts were outstanding under the revolving credit facility. Senior Subordinated Notes The Company's senior subordinated notes (the "Notes") are guaranteed jointly and severally on a full and unconditional basis by all of the Company's operating subsidiaries ("Subsidiary Guarantors"). The Company is a holding company with no operations apart from its ownership of the Subsidiary Guarantors. The aggregate assets, liabilities, equity and earnings of the Subsidiary Guarantors are substantially equivalent to the total assets, liabilities, equity and earnings of the Company and its subsidiaries on a consolidated basis. Separate financial statements and other disclosures of the wholly owned Subsidiary Guarantors are not presented because management believes that such separate financial statements and disclosures would not provide additional material information to investors. As of May 11, 1999, two of the Subsidiary Guarantors were not wholly owned and the guarantees of such non-wholly owned entities were limited. During the fourth quarter of 1999, the Company acquired ownership of the remaining interest in one such Subsidiary Guarantor, and the limitations on the guarantee of such Subsidiary Guarantor, as well as the limitations on the guarantee of the remaining non-wholly owned Subsidiary Guarantor, were eliminated. Therefore, at September 30, 2000, only one of the Company's subsidiaries, Dodge City Healthcare Group, L.P., was not wholly owned, although all assets, liabilities, equity and earnings of this entity fully and unconditionally, jointly and severally guarantee the Notes. The Company owns approximately 70% of the partnership interests in this mostly owned Subsidiary Guarantor. Presented below is summarized condensed unaudited consolidating financial information for the Company and its subsidiaries as of and for the nine months ended September 30, 2000 segregating the parent company, the issuer of the Notes (LifePoint Hospitals Holdings, Inc.), the combined wholly owned Subsidiary Guarantors, the mostly owned Subsidiary Guarantor and eliminations. 8 10 LIFEPOINT HOSPITALS, INC. CONDENSED CONSOLIDATING STATEMENT OF INCOME FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 (DOLLARS IN MILLIONS)
WHOLLY MOSTLY OWNED OWNED ISSUER OF SUBSIDIARY SUBSIDIARY CONSOLIDATED PARENT NOTES GUARANTORS GUARANTOR ELIMINATIONS TOTAL ------ ----- ---------- ---------- ------------ ------------ Revenues .......................... $ -- $ -- $390.5 $ 24.1 $ -- $414.6 Salaries and benefits ............. -- -- 160.4 7.8 -- 168.2 Supplies .......................... -- -- 47.0 3.1 -- 50.1 Other operating expenses .......... -- -- 85.3 3.5 -- 88.8 Provision for doubtful accounts ... -- -- 29.5 1.9 -- 31.4 Depreciation and amortization ..... -- -- 24.0 1.3 -- 25.3 Interest expense .................. -- 22.9 (0.3) 0.3 -- 22.9 Management fees ................... -- -- (0.5) 0.5 -- -- Gain on previously impaired assets. -- -- (1.4) -- -- (1.4) ESOP expense ...................... -- -- 4.2 0.2 -- 4.4 Equity in earnings of affiliates... (12.5) (28.4) -- -- 40.9 -- ------ ------ ------ ------ ------ ------ (12.5) (5.5) 348.2 18.6 40.9 389.7 ------ ------ ------ ------ ------ ------ Income before minority interests and income taxes ................ 12.5 5.5 42.3 5.5 (40.9) 24.9 Minority interests in earnings of consolidated entities ........... -- 1.8 -- -- -- 1.8 ------ ------ ------ ------ ------ ------ Income before income taxes ........ 12.5 3.7 42.3 5.5 (40.9) 23.1 Provision for income taxes ........ -- (8.8) 19.4 -- -- 10.6 ------ ------ ------ ------ ------ ------ Net income ................... $ 12.5 $ 12.5 $ 22.9 $ 5.5 $(40.9) $ 12.5 ====== ====== ====== ====== ====== ======
9 11 LIFEPOINT HOSPITALS, INC. CONDENSED CONSOLIDATING BALANCE SHEET SEPTEMBER 30, 2000 (DOLLARS IN MILLIONS)
WHOLLY MOSTLY OWNED OWNED ISSUER OF SUBSIDIARY SUBSIDIARY CONSOLIDATED PARENT NOTES GUARANTORS GUARANTOR ELIMINATIONS TOTAL ------ ------ ---------- --------- ------------ ------------ ASSETS ------------------ Current assets: Cash and cash equivalents .................... $ -- $ -- $ 20.3 $ -- $ -- $ 20.3 Accounts receivable, net ..................... -- -- 41.0 5.7 -- 46.7 Inventories .................................. -- -- 12.7 1.1 -- 13.8 Deferred taxes and other current assets ...... -- -- 35.3 0.1 -- 35.4 ------ ------ ------ ------ ------- ------ -- -- 109.3 6.9 -- 116.2 Property and equipment, at cost: Land ......................................... -- -- 8.5 0.3 -- 8.8 Buildings .................................... -- -- 233.2 9.9 -- 243.1 Equipment .................................... -- -- 244.2 10.4 -- 254.6 Construction in progress ..................... -- -- 3.2 -- -- 3.2 ------ ------ ------ ------ ------- ------ -- -- 489.1 20.6 -- 509.7 Accumulated depreciation ......................... -- -- (177.9) (12.2) -- (190.1) ------ ------ ------ ------ ------- ------ -- -- 311.2 8.4 -- 319.6 Net investment in and advances to subsidiaries ... 113.5 402.7 -- -- (516.2) -- Intangible assets, net ........................... -- 9.4 34.9 10.3 -- 54.6 Other ............................................ -- -- 0.8 -- -- 0.8 ------ ------ ------ ------ ------- ------ $113.5 $412.1 $456.2 $ 25.6 $(516.2) $491.2 ====== ====== ====== ====== ======= ====== LIABILITIES AND EQUITY ------------------------ Current liabilities: Accounts payable ............................. $ -- $ -- $ 13.7 $ 0.4 $ -- $ 14.1 Accrued salaries ............................. -- -- 14.0 -- -- 14.0 Other current liabilities .................... -- 6.8 14.2 0.4 -- 21.4 Current maturities of long-term debt ......... -- 10.0 0.2 -- -- 10.2 ------ ------ ------ ------ ------- ------ -- 16.8 42.1 0.8 -- 59.7 Intercompany balances to affiliates .............. -- (3.4) (7.2) 10.6 -- -- Long-term debt ................................... -- 281.1 -- -- -- 281.1 Deferred income taxes ............................ -- -- 25.0 -- -- 25.0 Professional liability risks and other liabilities -- -- 7.8 -- -- 7.8 Minority interests in equity of consolidated entities ..................................... -- 4.1 -- -- -- 4.1 Stockholders' equity ............................. 113.5 113.5 388.5 14.2 (516.2) 113.5 ------ ------ ------ ------ ------- ------ $113.5 $412.1 $456.2 $ 25.6 $(516.2) $491.2 ====== ====== ====== ====== ======= ======
10 12 LIFEPOINT HOSPITALS, INC. CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 (DOLLARS IN MILLIONS)
WHOLLY MOSTLY OWNED OWNED ISSUER OF SUBSIDIARY SUBSIDIARY CONSOLIDATED PARENT NOTES GUARANTORS GUARANTOR ELIMINATIONS TOTAL ------ ------ ---------- --------- ------------ ------------ Cash flows from operating activities: Net income .......................................... $ 12.5 $ 12.5 $ 22.9 $ 5.5 $ (40.9) $ 12.5 Adjustments to reconcile net income to net cash provided by operating activities: ESOP expense ..................................... -- -- 4.2 0.2 -- 4.4 Equity in earnings of affiliates ................. (12.5) (28.4) -- -- 40.9 -- Provision for doubtful accounts .................. -- -- 29.5 1.9 -- 31.4 Depreciation and amortization .................... -- -- 24.0 1.3 -- 25.3 Amortization of deferred loan costs .............. -- 1.2 -- -- -- 1.2 Deferred income taxes ............................ -- -- 13.3 -- -- 13.3 Reserve for professional liability risk .......... -- -- 3.8 -- -- 3.8 Gain on previously impaired assets ............... -- -- (1.4) -- -- (1.4) Increase (decrease) in cash from operating assets and liabilities, net of effects from acquisitions and divestitures: Accounts receivable ............................ -- -- (24.7) (2.3) -- (27.0) Inventories and other current assets ........... -- -- (1.9) 0.1 -- (1.8) Accounts payable and accrued expenses .......... -- 4.2 (7.6) (0.1) -- (3.5) Income taxes payable ........................... -- -- (2.8) -- -- (2.8) Other ............................................ -- (1.2) 1.5 -- -- 0.3 ------- ------- ------- ------ ------- ------- Net cash provided by (used in) operating activities .................................... -- (11.7) 60.8 6.6 -- 55.7 Cash flows from investing activities: Purchase of property and equipment, net ............. -- -- (23.1) (0.2) -- (23.3) Purchase of facilities .............................. -- -- (83.3) -- -- (83.3) Proceeds from sale of facilities .................... -- -- 24.4 -- -- 24.4 Other ............................................... -- -- (0.4) -- -- (0.4) ------- ------- ------- ------ ------- ------- Net cash used in investing activities .......... -- -- (82.4) (0.2) -- (82.6) Cash flows from financing activities: Increase in long-term debt, net ..................... -- 31.1 -- -- -- 31.1 Distributions ....................................... -- -- 6.7 (6.7) -- -- Proceeds from issuance of common stock .............. -- -- 4.3 -- -- 4.3 Increase (decrease) in intercompany balances with affiliates, net .............................. -- (19.4) 18.4 0.3 -- (0.7) ------- ------- ------- ------ ------- ------- Net cash provided by (used in) financing activities .......................... -- 11.7 29.4 (6.4) -- 34.7 Change in cash and cash equivalents .................... -- -- 7.8 -- -- 7.8 Cash and cash equivalents at beginning of period ....... -- -- 12.5 -- -- 12.5 ------- ------- ------- ------ ------- ------- Cash and cash equivalents at end of period ............. -- -- $ 20.3 -- -- $ 20.3 ======= ======= ======= ====== ======= =======
11 13 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This discussion should be read in conjunction with the unaudited Condensed Consolidated Financial Statements included herein. Overview On May 11, 1999, HCA completed the Distribution. A description of the Distribution is included in Note 1 of the Notes to the Condensed Consolidated Financial Statements included elsewhere in this report. Forward-Looking Statements This "Management's Discussion and Analysis of Financial Condition and Results of Operations" contains disclosures which are forward-looking statements. Forward-looking statements include all statements that do not relate solely to historical or current facts and can be identified by the use of words such as "may", "believe", "will", "expect", "project", "estimate", "anticipate", "plan" or "continue". These forward-looking statements are based on the current plans and expectations of the Company and are subject to a number of uncertainties and risks that could significantly affect current plans and expectations and the Company's future financial condition and results. These factors include, but are not limited to, (i) the Company's limited operating history; (ii) the Company's substantial leverage; (iii) the concentration of the Company's revenue in Kentucky and Tennessee; (iv) the Company's holding company structure; (v) the highly competitive nature of the health care business, including the competition to recruit general and specialized physicians; (vi) the efforts of insurers, health care providers and others to contain health care costs; (vii) possible changes in the Medicare and various Medicaid programs that may further limit reimbursements to health care providers and insurers; (viii) changes in federal, state or local regulation affecting the health care industry; (ix) the possible enactment of federal or state health care reform; (x) the ability to attract and retain qualified management and personnel, including physicians, both general practitioners and specialists, consistent with Company expectations and targets; (xi) uncertainty surrounding Congressional efforts to amend The Balanced Budget Act of 1997, including uncertainties following the national election held on November 7, 2000; (xii) the ability to enter into, renegotiate and renew payor arrangements on acceptable terms; (xiii) the availability and terms of capital to fund the Company's business strategy; (xiv) implementation of the Company's business strategy and development plans; (xv) the Company's continuing efforts to monitor, maintain and comply with applicable laws, regulations, policies and procedures including those required by the voluntary corporate integrity agreement that the Company expects to enter into with the government; (xvi) the ability to increase patient volumes and control the costs of providing services and supply costs; (xvii) successful development or license, performance and use of management information systems, including software for efficient claims processing; (xviii) liabilities and other claims asserted against the Company, including without limitation, liabilities for which the Company may be indemnified by HCA; (xix) limitations placed on the Company by the tax ruling received in connection with the Distribution, which limitations could restrict the Company's ability to raise capital and implement its acquisition plans, among other things; (xx) fluctuations in the market value of the Company's Common Stock; (xxi) changes in accounting practices; (xxii) changes in general economic conditions; and (xxiii) other risk factors. As a consequence, current plans, anticipated actions and future financial condition and results may differ from those expressed in any forward-looking statements made by or on behalf of the Company. You are cautioned not to unduly rely on such forward-looking statements when evaluating the information presented in this "Management's Discussion and Analysis of Financial Condition and Results of Operations". Results of Operations Revenue/Volume Trends The Company's revenues continue to be affected by an increasing proportion of revenue being derived from fixed payment, higher discount sources, including Medicare, Medicaid and managed care plans. In addition, insurance companies, government programs (other than Medicare) and employers purchasing health care services for their employees are also negotiating discounted amounts that they will pay health care providers rather than paying standard prices. The Company expects patient volumes from Medicare and Medicaid to continue to increase because of the general aging of the population and the expansion of state Medicaid programs. The Company generally receives lower payments per patient under managed care plans than under traditional indemnity insurance plans. With an increasing proportion of services being reimbursed based upon prospective payment amounts regardless of the cost incurred, revenues, earnings and cash flows are being reduced. Admissions related to Medicare, Medicaid and managed care plan patients were 90.3% of total admissions for the nine months ended September 30, 2000 compared to 89.3% for the same period last year. 12 14 The Company's revenues also continue to be adversely affected by the trend toward certain services being performed more frequently on an outpatient basis. Generally, the payments received for an outpatient procedure are less than payments received for a similar procedure performed in an inpatient setting. Growth in outpatient services is expected to continue in the health care industry as procedures performed on an inpatient basis are converted to outpatient procedures through continuing advances in pharmaceutical and medical technologies. The redirection of certain procedures to an outpatient basis is also influenced by pressures from payers to perform certain procedures as outpatient care rather than inpatient care. Reductions in Medicare and Medicaid reimbursement, the increasing percentage of the patient volume related to patients participating in managed care plans and continuing trends toward more services being performed on an outpatient basis are expected to present ongoing challenges. The challenges presented by these trends are magnified by the Company's inability to control these trends and the associated risks. To maintain and improve its operating margins in future periods, the Company must, among other things, increase patient volumes while controlling the costs of providing services. If the Company is not able to achieve these improvements and the trend toward declining reimbursements and payments continues, results of operations and cash flow will deteriorate. Management's strategy in response to these challenges includes delivering a broad range of quality health care services to patients through a focus on physician recruitment, investing capital in the Company's existing facilities and a continued focus on cost control. Since the formation of the Company, 175 physicians have been recruited, of which approximately 55% are specialists. Adding new physicians will help increase patient volumes, and thereby, increase revenues. Continuing to add specialists will allow the Company to grow by offering new services. In addition, the Company plans to invest capital in its existing facilities in order to expand services and to maintain efficiencies resulting from changes in technology. Impact of Acquisitions and Divestitures Acquisitions Effective July 1, 2000, the Company acquired Lander Valley Medical Center in Lander, Wyoming for approximately $33.0 million; and, effective June 16, 2000, the Company acquired Putnam Community Medical Center in Palatka, Florida for approximately $50.3 million. These acquisitions were accounted for using the purchase method of accounting. The allocations of the purchase prices were determined based on currently available information and are subject to further refinement pending the final working capital settlements. Divestitures In September 2000, the Company signed a definitive agreement to sell Springhill Medical Center in Springhill, Louisiana for approximately $5.0 million to $6.0 million. The transaction is scheduled to close during the fourth quarter of 2000, subject to customary conditions. Effective September 1, 2000, the Company sold Barrow Medical Center in Winder, Georgia for approximately $2.2 million. Effective August 1, 2000, the Company sold Riverview Medical Center in Gonzales, Louisiana for approximately $20.8 million. The proceeds from the transaction and the Company's available cash were used to pay down existing borrowings under the Company's revolving credit facility. Effective April 1, 2000, the Company sold Halstead Hospital in Halstead, Kansas and effective February 1, 2000, the Company sold Trinity Hospital in Erin, Tennessee. Halstead Hospital, Trinity Hospital, and Barrow Medical Center were the three hospitals previously held for sale by the Company. The Company recorded an impairment of long-lived assets related to the hospitals held for sale in 1998 and an additional impairment in 1999. 13 15 During the three months ended September 30, 2000, the Company recorded a $1.4 million pre-tax gain related to the favorable settlement on the sale of a facility that was previously held for sale. The gain is recorded in the accompanying condensed consolidated statement of income as gain on previously impaired assets. The operating results of the acquisitions and divestitures have been consolidated in the accompanying condensed consolidated statements of income for the periods subsequent to acquisition and for the periods prior to sale. Due to the relatively small number of hospitals owned by the Company, each hospital acquisition can materially affect the Company's overall operating margin. Upon the acquisition of a hospital, the Company typically takes a number of steps to lower operating costs. The impact of such actions may be offset by other cost increases to expand services, strengthen medical staff and improve market position. The benefits of these investments and of other activities to improve operating margins generally do not occur immediately. Consequently, the financial performance of a newly acquired hospital may adversely affect overall operating margins in the short term. As the Company acquires additional hospitals, this effect should be mitigated by the expanded financial base of existing hospitals and the allocation of corporate overhead among a larger number of hospitals. 14 16 Operating Results Summary The following is a summary of results of operations for the three months and nine months ended September 30, 2000 and 1999 (dollars in millions):
THREE MONTHS ENDED SEPTEMBER 30, ---------------------------------- 2000 1999 ---------------- ---------------- % OF % OF AMOUNT REVENUES AMOUNT REVENUES ------ -------- ------ -------- Revenues ............................. $145.3 100.0% $125.4 100.0% Salaries & benefits .................. 58.1 40.1 52.2 41.7 Supplies ............................. 17.1 11.8 15.7 12.5 Other operating expenses ............. 30.6 20.9 28.8 23.0 Provision for doubtful accounts ...... 12.5 8.6 10.7 8.5 Depreciation & amortization .......... 8.5 5.9 7.9 6.4 Interest expense ..................... 8.3 5.7 6.7 5.3 Gain on previously impaired assets ... (1.4) (1.0) -- -- ESOP expense ......................... 2.0 1.4 1.2 0.9 ------ ------ ------ ------ 135.7 93.4 123.2 98.3 ------ ------ ------ ------ Income before minority interests and income taxes .................... 9.6 6.6 2.2 1.7 Minority interests in earnings of consolidated entities ............... 0.5 0.3 0.4 0.3 ------ ------ ------ ------ Income before income taxes ........... 9.1 6.3 1.8 1.4 Provision for income taxes ........... 4.3 3.0 0.7 0.6 ------ ------ ------ ------ Net income ........................... $ 4.8 3.3% $ 1.1 0.8% ====== ====== ====== ====== % changes from prior year: Revenues............................ 15.7% Income before income taxes.......... 405.1 Net income.......................... 356.9 Admissions (a)...................... 11.3 Equivalent admissions (b)........... 10.9 Revenues per equivalent admission .. 4.4 Same hospital % changes from prior year (c): Revenues ........................... 9.6 Admissions (a) ..................... 3.8 Equivalent admissions (b)........... 7.8 Revenues per equivalent admission .. 1.6
15 17
NINE MONTHS ENDED SEPTEMBER 30, ---------------------------------- 2000 1999 ---------------- ---------------- % OF % OF AMOUNT REVENUES AMOUNT REVENUES ------ -------- ------ -------- Revenues ............................. $414.6 100.0% $387.8 100.0% Salaries & benefits .................. 168.2 40.6 165.1 42.6 Supplies ............................. 50.1 12.1 47.7 12.3 Other operating expenses ............. 88.8 21.3 87.4 22.5 Provision for doubtful accounts ...... 31.4 7.6 30.1 7.8 Depreciation & amortization .......... 25.3 6.1 23.3 6.0 Interest expense ..................... 22.9 5.5 17.4 4.5 Management fees allocated from HCA ... -- -- 3.2 0.8 Gain on previously impaired assets ... (1.4) (0.3) -- -- ESOP expense ......................... 4.4 1.1 1.7 0.4 ------ ------ ------ ------ 389.7 94.0 375.9 96.9 ------ ------ ------ ------ Income before minority interests and income taxes .................... 24.9 6.0 11.9 3.1 Minority interests in earnings of consolidated entities ............... 1.8 0.4 1.4 0.4 ------ ------ ------ ------ Income before income taxes ........... 23.1 5.6 10.5 2.7 Provision for income taxes ........... 10.6 2.6 4.4 1.1 ------ ------ ------ ------ Net income ........................... $ 12.5 3.0% $ 6.1 1.6% ====== ====== ====== ====== % changes from prior year: Revenues............................ 6.9% Income before income taxes.......... 120.6 Net income.......................... 105.4 Admissions (a)...................... 2.0 Equivalent admissions (b)........... 4.9 Revenues per equivalent admission... 1.9 Same hospital % changes from prior year (c): Revenues ........................... 8.2 Admissions (a) ..................... 2.7 Equivalent admissions (b) .......... 6.6 Revenues per equivalent admission .. 1.6
(a) Represents the total number of patients admitted (in the facility for a period in excess of 23 hours) to the Company's hospitals and is used by management and certain investors as a general measure of inpatient volume. (b) Equivalent admissions are used by management and certain investors as a general measure of combined inpatient and outpatient volume. Equivalent admissions are computed by multiplying admissions (inpatient volume) by the sum of gross inpatient revenue and gross outpatient revenue and then dividing the resulting amount by gross inpatient revenue. The equivalent admissions computation "equates" outpatient revenue to the volume measure (admissions) used to measure inpatient volume resulting in a general measure of combined inpatient and outpatient volume. (c) Same hospital information excludes the operations of hospitals which were either acquired or divested during the current and prior periods. 16 18 For the Three Months Ended September 30, 2000 and 1999 Revenues increased 15.7% to $145.3 million for the three months ended September 30, 2000 compared to $125.4 million for the three months ended September 30, 1999. This increase is primarily attributable to a 9.6% increase in same hospital revenue and the acquisition of two hospitals during fiscal 2000. The increase in revenues was partially offset by the sale of four hospitals during fiscal 2000. The 9.6% increase in same hospital revenues was primarily a result of a 3.8% increase in same hospital inpatient admissions and a 7.8% increase in same hospital equivalent admissions (adjusted to reflect combined inpatient and outpatient volume). Revenues per equivalent admission increased 4.4% primarily due to the acquisition of two hospitals in fiscal 2000 which have higher net revenues per equivalent admission compared to the Company average. The higher net revenues per equivalent admission at one of the acquired hospitals is primarily the result of a low number of outpatient procedures performed at that hospital as revenues earned on outpatient services are generally lower than inpatient services. In addition, the higher net revenues per equivalent admission at the other acquired hospital is primarily as a result of a lower percentage of net revenues from managed care plans as compared to the Company average. The increase in revenues per equivalent admission was partially offset by an increase in outpatient revenues for the three months ended September 30, 2000 compared to the same period last year. Net outpatient revenues as a percentage of net patient revenues were 49.5% for the three months ended September 30, 2000 compared to 48.9% for the same period last year. The Company recorded favorable cost report adjustments of $1.3 million for the three months ended September 30, 2000 compared to $0.3 million for the three months ended September 30, 1999. Salaries and benefits decreased as a percentage of revenues to 40.1% for the three months ended September 30, 2000 from 41.7% for the three months ended September 30, 1999 as a result of improvements in labor productivity and an increase in revenues per equivalent admission, as discussed above. Man-hours per equivalent admission decreased 4.2% over the same period last year. Supply costs decreased as a percentage of revenues to 11.8% for the three months ended September 30, 2000 from 12.5% for the three months ended September 30, 1999 as a result of a 1.2% decrease in the cost of supplies per equivalent admission which is primarily related to the Company's acquisitions in fiscal 2000. The supply costs as a percentage of revenues at the acquired facilities were lower than the Company average. Other operating expenses decreased as a percentage of revenues to 20.9% for the three months ended September 30, 2000 from 23.0% for the three months ended September 30, 1999. Other operating expenses consist primarily of contract services, physician recruitment, professional fees, repairs and maintenance, rents and leases, utilities, insurance, marketing and non-income taxes. The decrease was primarily the result of a decrease in professional fees and contract services as a percentage of revenues. Provision for doubtful accounts increased as a percentage of revenues to 8.6% for the three months ended September 30, 2000 from 8.5% for the three months ended September 30, 1999 primarily due to the effect of one of the Company's acquisitions in fiscal 2000. The provision for doubtful accounts as a percentage of revenues at this hospital is significantly higher than the Company average. Depreciation and amortization expense increased to $8.5 million for the three months ended September 30, 2000 from $7.9 million for the three months ended September 30, 1999 primarily due to the opening of a replacement facility in Bartow, Florida in December 1999 and the acquisition of two hospitals in fiscal 2000. This increase was partially offset by a decrease in depreciation and amortization expense related to the sale of four hospitals in fiscal 2000. 17 19 Interest expense increased to $8.3 million for the three months ended September 30, 2000 from $6.7 million for the three months ended September 30, 1999. This increase is primarily due to the increased borrowings to finance acquisitions and an increase in interest rates. During the three months ended September 30, 2000, the Company recorded a $1.4 million pre-tax gain related to the favorable settlement on the sale of a facility that was previously held for sale. The gain is recorded in the accompanying condensed consolidated statement of income as gain on previously impaired assets. ESOP expense increased to $2.0 million for the three months ended September 30, 2000 from $1.2 million for the three months ended September 30, 1999, primarily as a result of a higher average fair market value of the Company's Common Stock for the three months ended September 30, 2000 compared to the same period last year. ESOP expense is recognized based on the average fair market value of the shares committed to be released during the period. Minority interests in earnings of consolidated entities increased slightly to $0.5 million for the three months ended September 30, 2000 from $0.4 million for the three months ended September 30, 1999. Income before income taxes increased to $9.1 million for the three months ended September 30, 2000 compared to $1.8 million for the three months ended September 30, 1999 primarily as a result of increases in revenues and decreases in certain expenses as described above. The provision for income taxes for the three months ended September 30, 2000 was $4.3 million compared to $0.7 million for the three months ended September 30, 1999. These provisions reflect effective income tax rates of 47.5% for 2000 compared to 42.0% for 1999. The increase in the effective rate is due to the increase in the nondeductible portion of ESOP expense. Net income increased to $4.8 million for the three months ended September 30, 2000 compared to $1.1 million for the three months ended September 30, 1999. For the Nine Months Ended September 30, 2000 and 1999 Revenues increased 6.9% to $414.6 million for the nine months ended September 30, 2000 compared to $387.8 million for the nine months ended September 30, 1999. This increase is primarily attributable to an 8.2% increase in same hospital revenue and the acquisition of two hospitals during fiscal 2000. The increase in revenues was partially offset by the sale of four hospitals during fiscal 2000. The 8.2% increase in same hospital revenues was primarily a result of a 2.7% increase in same hospital inpatient admissions and a 6.6% increase in same hospital equivalent admissions (adjusted to reflect combined inpatient and outpatient volume). Revenues per equivalent admission increased 1.9% primarily due to the acquisition of two hospitals in fiscal 2000 which have a higher net revenues per equivalent admission compared to the Company average. The higher net revenues per equivalent admission at one of the acquired hospitals is primarily the result of a low number of outpatient procedures performed at that hospital as revenues from outpatient services are generally lower than inpatient services. In addition, the higher net revenues per equivalent admission at the other acquired hospital is primarily as a result of a lower percentage of net revenues from managed care plans as compared to the Company average. The increase in revenues per equivalent admission was partially offset by an increase in outpatient revenues for the nine months ended September 30, 2000 compared to the same period last year. Net outpatient revenues as a percentage of net patient revenues were 48.9% for the nine months ended September 30, 2000 compared to 47.0% for the same period last year. The Company recorded favorable cost report adjustments of $2.8 million for the nine months ended September 30, 2000 compared to $0.7 million for the nine months ended September 30, 1999. 18 20 Salaries and benefits decreased as a percentage of revenues to 40.6% for the nine months ended September 30, 2000 from 42.6% for the nine months ended September 30, 1999 as a result of improvements in labor productivity and an increase in revenues per equivalent admission, as discussed above. Man-hours per equivalent admission decreased 4.9% over the same period last year. Supply costs decreased as a percentage of revenues to 12.1% for the nine months ended September 30, 2000 from 12.3% for the nine months ended September 30, 1999. The decrease was related to the Company's acquisitions in fiscal 2000. The supply costs as a percentage of revenues at the acquired facilities were lower than the Company average. Other operating expenses decreased as a percentage of revenues to 21.3% for the nine months ended September 30, 2000 from 22.5% for the nine months ended September 30, 1999. Other operating expenses consist primarily of contract services, physician recruitment, professional fees, repairs and maintenance, rents and leases, utilities, insurance, marketing and non-income taxes. The decrease was primarily the result of a decrease in contract services as a percentage of revenues. Provision for doubtful accounts decreased as a percentage of revenues to 7.6% for the nine months ended September 30, 2000 from 7.8% for the nine months ended September 30, 1999 primarily due to increased collections of the Company's accounts receivable. Depreciation and amortization expense increased to $25.3 million for the nine months ended September 30, 2000 from $23.3 million for the nine months ended September 30, 1999 primarily due to the opening of a replacement facility in Bartow, Florida in December 1999 and the acquisition of two hospitals in fiscal 2000. This increase was partially offset by a decrease in depreciation and amortization expense related to the sale of four hospitals in fiscal 2000. Interest expense increased to $22.9 million for the nine months ended September 30, 2000 from $17.4 million for the nine months ended September 30, 1999. This increase is primarily due to the interest expense incurred on the debt obligations assumed from HCA as a result of the Distribution. The increase is also due to the increased borrowings to finance acquisitions and an increase in interest rates. For the nine months ended September 30, 1999, interest expense was a combination of interest incurred on the net intercompany balance with HCA and approximately four and a half months of interest expense on debt obligations assumed from HCA. Management fees incurred during 1999 represent fees allocated by HCA prior to the Distribution. This amount represented allocations, using revenues as the allocation basis, of the corporate, general and administrative expenses of HCA. During the nine months ended September 30, 2000, the Company recorded a $1.4 million pre-tax gain related to the favorable settlement on the sale of a facility that was previously held for sale. The gain is recorded in the accompanying condensed consolidated statement of income as gain on previously impaired assets. ESOP expense increased to $4.4 million for the nine months ended September 30, 2000 from $1.7 million for the nine months ended September 30, 1999. The ESOP was established in June 1999; therefore, only four months of expense for the ESOP is reflected in the nine months ended September 30, 1999. The increase in ESOP expense is also due to a higher average fair market value of the Company's Common Stock for the nine months ended September 30, 2000 compared to the same period last year. ESOP expense is recognized based on the average fair market value of the shares committed to be released during the period. Minority interests in earnings of consolidated entities increased slightly to $1.8 million for the nine months ended September 30, 2000 from $1.4 million for the three months ended September 30, 1999. 19 21 Income before income taxes increased to $23.1 million for the nine months ended September 30, 2000 compared to $10.5 million for the nine months ended September 30, 1999 primarily as a result of increases in revenues and decreases in certain expenses as described above. The provision for income taxes for the nine months ended September 30, 2000 was $10.6 million compared to $4.4 million for the nine months ended September 30, 1999. These provisions reflect effective income tax rates of 46.0% for 2000 and 42.0% for 1999. The increase in the effective rate is due to the increase in the nondeductible portion of ESOP expense. Net income increased to $12.5 million for the nine months ended September 30, 2000 compared to $6.1 million for the nine months ended September 30, 1999. 20 22 Pro Forma Operating Results Summary The following is a summary of pro forma results for the three and nine months ended September 30, 2000 and 1999 (dollars in millions, except per share amounts). The pro forma results reflect the results of the Company's operations as if the Distribution and the divestitures of the three facilities the Company's management previously identified as held for sale had occurred at the beginning of 1999.
PRO FORMA COMPARISONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, ---------------------------------- 2000 1999 ---------------- ---------------- % OF % OF AMOUNT REVENUES AMOUNT REVENUES ------ -------- ------ -------- Revenues ............................ $142.0 100.0% $116.0 100.0% Salaries & benefits ................. 56.9 40.1 47.7 41.2 Supplies ............................ 16.9 11.9 14.3 12.3 Other operating expenses ............ 29.8 21.0 26.0 22.3 Provision for doubtful accounts ..... 11.7 8.2 9.2 8.0 Depreciation & amortization ......... 8.3 5.8 7.1 6.1 Interest expense .................... 8.3 5.9 6.7 5.8 ESOP expense ........................ 2.0 1.4 1.2 1.0 ------ ------ ------ ------ 133.9 94.3 112.2 96.7 Income before minority interests and income taxes .................. 8.1 5.7 3.8 3.3 Minority interests in earnings of consolidated entities ............. 0.5 0.3 0.4 0.3 ------ ------ ------ ------ Income before income taxes .......... 7.6 5.4 3.4 3.0 Provision for income taxes .......... 3.7 2.6 1.4 1.3 ------ ------ ------ ------ Net income .......................... $ 3.9 2.8% $ 2.0 1.7% ====== ====== ====== ====== Earnings per share: Basic ............................. $ 0.12 $ 0.07 Diluted ........................... $ 0.12 $ 0.07 % changes from prior year: Revenues........................... 22.4% Income before income taxes......... 118.6 Net income......................... 95.5 Admissions ........................ 18.3 Equivalent admissions ............. 17.4 Revenues per equivalent admission.. 4.3
21 23
PRO FORMA COMPARISONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, ---------------------------------- 2000 1999 ---------------- ---------------- % OF % OF AMOUNT REVENUES AMOUNT REVENUES ------ -------- ------ -------- Revenues ............................ $400.2 100.0% $354.3 100.0% Salaries & benefits ................. 161.3 40.3 147.6 41.7 Supplies ............................ 48.5 12.1 43.1 12.2 Other operating expenses ............ 84.8 21.1 80.1 22.5 Provision for doubtful accounts ..... 28.6 7.2 25.8 7.3 Depreciation & amortization ......... 24.1 6.1 20.7 5.8 Interest expense .................... 22.9 5.7 20.0 5.7 ESOP expense ........................ 4.4 1.1 2.7 0.8 ------ ------ ------ ------ 374.6 93.6 340.0 96.0 Income before minority interests and income taxes ................... 25.6 6.4 14.3 4.0 Minority interests in earnings of consolidated entities .............. 1.7 0.4 1.4 0.3 ------ ------ ------ ------ Income before income taxes .......... 23.9 6.0 12.9 3.7 Provision for income taxes .......... 11.0 2.8 5.4 1.6 ------ ------ ------ ------ Net income .......................... $ 12.9 3.2% $ 7.5 2.1% ====== ====== ====== ====== Earnings per share: Basic ............................. $ 0.41 $ 0.25 Diluted ........................... $ 0.40 $ 0.25 % changes from prior year: Revenues........................... 13.0% Income before income taxes......... 84.6 Net income......................... 71.9 Admissions ........................ 7.9 Equivalent admissions ............. 10.2 Revenues per equivalent admission . 2.5
For the three months and nine months ended September 30, 2000 and the three months ended September 30, 1999, the only pro forma adjustment is to eliminate the historical results of operations for the three facilities which the Company's management previously identified as held for sale. One of the three facilities was sold effective February 1, 2000, one was sold effective April 1, 2000 and the last was sold effective September 1, 2000. See Note 3 of the Notes to the Condensed Consolidated Financial Statements. For the nine months ended September 30, 1999, the pro forma results reflect the following adjustments at the beginning of the period: (1) To eliminate the results of operations for the three facilities which the Company's management previously identified as held for sale. (2) To adjust historical retirement plan expense recorded as a component of salaries and wages and record the Company's estimated Employee Stock Ownership Plan expense. (3) To adjust for the estimated general and administrative costs that would have been incurred if the Company had managed comparable general and administrative functions and to eliminate the management fee allocated from HCA. 22 24 (4) To adjust interest expense for the elimination of all intercompany amounts payable by the Company to HCA and the assumption of certain indebtedness from HCA. (5) To adjust the income tax provision for the estimated impact of the pro forma adjustments. Pro Forma Comparisons of the Three Months Ended September 30, 2000 and 1999 The following discussion compares the results of the three months ended September 30, 2000 to the results of the three months ended September 30, 1999, in each case giving effect to the adjustments set forth above. On a pro forma basis, revenues increased 22.4% to $142.0 million for the three months ended September 30, 2000 compared to $116.0 million for the three months ended September 30, 1999. Of the 22.4% increase, 15.3% was due to the two acquisitions during fiscal 2000. The remaining increase is primarily a result of increases in the volume of patients treated at the Company's facilities. Inpatient admissions increased 18.3%, equivalent admissions (adjusted to reflect combined inpatient and outpatient volume) increased 17.4% and revenues per equivalent admission increased 4.3% for the three months ended September 30, 2000 compared to the three months ended September 30, 1999. The increase in revenues was partially offset by the sale of one hospital during the three months ended September 30, 2000. The increase in revenues per equivalent admission of 4.3% was primarily due to the acquisition of two hospitals in fiscal 2000 which have higher net revenues per equivalent admission compared to the Company average. The higher net revenues per equivalent admission at one of the acquired hospitals is primarily the result of a low number of outpatient procedures performed at that hospital as revenues earned on outpatient services are generally lower than inpatient services. In addition, the higher net revenues per equivalent admission at the other acquired hospital is primarily as a result of a lower percentage of net revenues from managed care plans as compared to the Company average. On a pro forma basis, salaries and benefits decreased as a percentage of revenues to 40.1% for the three months ended September 30, 2000 from 41.2% for the three months ended September 30, 1999 as a result of improvements in labor productivity and an increase in revenues per equivalent admission, as discussed above. Man-hours per equivalent admission decreased 2.9% over the same period in the prior year. On a pro forma basis, supply costs decreased as a percentage of revenues to 11.9% for the three months ended September 30, 2000 from 12.3% for the three months ended September 30, 1999. The decrease was related to the Company's acquisitions in fiscal 2000. The supply costs as a percentage of revenues at the acquired facilities were lower than the Company average. On a pro forma basis, other operating expenses decreased as a percentage of revenues to 21.0% for the three months ended September 30, 2000 from 22.3% for the three months ended September 30, 1999. Other operating expenses consist primarily of contract services, physician recruitment, professional fees, repairs and maintenance, rents and leases, utilities, insurance, marketing and non-income taxes. The decrease was primarily due to a decrease in professional fees and contract services as a percentage of revenues. On a pro forma basis, provision for doubtful accounts increased slightly as a percentage of revenues to 8.2% for the three months ended September 30, 2000 from 8.0% for the three months ended September 30, 1999 primarily due to the effect of one of the Company's acquisitions in fiscal 2000. The provision for doubtful accounts as a percentage of revenues at this hospital is significantly higher than the Company average. On a pro forma basis, depreciation and amortization expense increased to $8.3 million for the three months ended September 30, 2000 from $7.1 million for the three months ended September 30, 1999 primarily due to the opening of a replacement facility in Bartow, Florida in December 1999 and the acquisition of two hospitals in fiscal 2000. 23 25 On a pro forma basis, interest expense increased to $8.3 million for the three months ended September 30, 2000 from $6.7 million for the three months ended September 30, 1999 primarily due to increased borrowings to finance acquisitions and an increase in interest rates. On a pro forma basis, ESOP expense increased to $2.0 million for the three months ended September 30, 2000 from $1.2 million for the three months ended September 30, 1999 primarily as a result of a higher average fair market value of the Company's Common Stock for the three months ended September 30, 2000 compared to the same period last year. ESOP expense is recognized based on the average fair market value of the shares committed to be released during the period. On a pro forma basis, minority interests in earnings of consolidated entities increased slightly to $0.5 million for the three months ended September 30, 2000 from $0.4 million for the three months ended September 30, 1999. On a pro forma basis, income before income taxes increased to $7.6 million for the three months ended September 30, 2000 compared to $3.4 million for the three months ended September 30, 1999 primarily as a result of increases in revenues and decreases in certain expenses as described above. On a pro forma basis, the provision for income taxes for the three months ended September 30, 2000 was $3.7 million compared to $1.4 million for the three months ended September 30, 1999. These provisions reflect effective income tax rates of 48.1% for 2000 and 42.0% for 1999. The increase in the effective rate is due to the increase in the nondeductible portion of ESOP expense. On a pro forma basis, net income increased to $3.9 million for the three months ended September 30, 2000 compared to $2.0 million for the three months ended September 30, 1999. Pro Forma Comparisons of the Nine Months Ended September 30, 2000 and 1999 The following discussion compares the results of the nine months ended September 30, 2000 to the results of the nine months ended September 30, 1999, in each case giving effect to the adjustments set forth above. On a pro forma basis, revenues increased 13.0% to $400.2 million for the nine months ended September 30, 2000 compared to $354.3 million for the nine months ended September 30, 1999. Of the 13.0% increase, 5.7% was due to the two acquisitions during fiscal 2000. The remaining increase is primarily a result of increases in the volume of patients treated at the Company's facilities. Inpatient admissions increased 7.9%, equivalent admissions (adjusted to reflect combined inpatient and outpatient volume) increased 10.2% and revenues per equivalent admission increased 2.5% for the nine months ended September 30, 2000 compared to the nine months ended September 30, 1999. The increase in revenues was partially offset by the sale of one hospital in fiscal 2000. The increase in revenues per equivalent admission of 2.5% was primarily due to the acquisition of two hospitals in fiscal 2000 which have higher net revenues per equivalent admission compared to the Company average. The higher net revenues per equivalent admission at one of the acquired hospitals is primarily the result of a low number of outpatient procedures performed at that hospital as revenues from outpatient services are generally lower than inpatient services. In addition, the higher net revenues per equivalent admission at the other acquired hospital is primarily as a result of a lower percentage of net revenues from managed care plans as compared to the Company average. On a pro forma basis, salaries and benefits decreased as a percentage of revenues to 40.3% for the nine months ended September 30, 2000 from 41.7% for the nine months ended September 30, 1999 as a result of improvements in labor productivity and an increase in revenues per equivalent admission, as discussed above. Man-hours per equivalent admission decreased 4.1% over the same period in the prior year. 24 26 On a pro forma basis, supply costs decreased as a percentage of revenues to 12.1% for the nine months ended September 30, 2000 from 12.2% for the nine months ended September 30, 1999. The decrease was related to the Company's acquisitions in fiscal 2000. The supply costs as a percentage of revenues at the acquired facilities were lower than the Company average. On a pro forma basis, other operating expenses decreased as a percentage of revenues to 21.1% for the nine months ended September 30, 2000 from 22.5% for the nine months ended September 30, 1999. Other operating expenses consist primarily of contract services, physician recruitment, professional fees, repairs and maintenance, rents and leases, utilities, insurance, marketing and non-income taxes. The decrease was primarily due to a decrease in contract services as a percentage of revenues. On a pro forma basis, provision for doubtful accounts, as a percentage of revenues, decreased to 7.2% for the nine months ended September 30, 2000 from 7.3% for the nine months ended September 30, 1999 primarily due to an improvement in the Company's accounts receivable days outstanding. On a pro forma basis, depreciation and amortization expense increased to $24.1 million for the nine months ended September 30, 2000 from $20.7 million for the nine months ended September 30, 1999 primarily due to the opening of a replacement facility in Bartow, Florida in December 1999 and the acquisition of two hospitals in fiscal 2000. On a pro forma basis, interest expense increased to $22.9 million for the nine months ended September 30, 2000 from $20.0 million for the nine months ended September 30, 1999. The increase was primarily due to the increased borrowings to finance acquisitions and higher actual interest rates at September 30, 2000 compared to the interest rate assumptions used for the nine months ended September 30, 1999 pro forma calculation of interest expense. On a pro forma basis, ESOP expense increased to $4.4 million for the nine months ended September 30, 2000 from $2.7 million for the nine months ended September 30, 1999 primarily as a result of a higher average fair market value of the Company's Common Stock for the nine months ended September 30, 2000 compared to the average fair market value assumptions used for the nine months ended September 30, 1999 pro forma calculation of ESOP expense. ESOP expense is recognized based on the average fair market value of the shares committed to be released during the period. On a pro forma basis, minority interests in earnings of consolidated entities increased slightly to $1.7 million for the nine months ended September 30, 2000 from $1.4 million for the nine months ended September 30, 1999. On a pro forma basis, income before income taxes increased to $23.9 million for the nine months ended September 30, 2000 compared to $12.9 million for the nine months ended September 30, 1999 primarily as a result of increases in revenues and decreases in certain expenses as described above. On a pro forma basis, the provision for income taxes for the nine months ended September 30, 2000 was $11.0 million compared to $5.4 million for the nine months ended September 30, 1999. These provisions reflect effective income tax rates of 46.0% for 2000 and 42.0% for 1999. The increase in the effective rate is due to the increase in the nondeductible portion of ESOP expense. On a pro forma basis, net income increased to $12.9 million for the nine months ended September 30, 2000 compared to $7.5 million for the nine months ended September 30, 1999. Liquidity and Capital Resources Prior to the Distribution, the Company relied upon HCA for liquidity and sources of capital to supplement any needs not met by operations. As an independent, publicly-traded company, the Company has relied upon its bank credit facilities and other traditional funding sources to supplement needs not met by operations. At September 30, 2000, the Company had working capital of $56.5 million 25 27 compared to $42.2 million at December 31, 1999. The increase in working capital was primarily due to (i) a decrease in accounts payable of $12.4 million which was primarily due to payments made to HCA and payments on trade accounts payable, (ii) an increase in income tax receivable of $7.4 million which was largely a result of the sale, in fiscal 2000, of the three facilities the Company previously identified as held for sale and (iii) an increase in cash of $7.8 million. The increase in working capital was partially offset by an increase in current maturities of long-term debt of $7.1 million and an increase in accrued interest of $4.2 million on the Company's Notes which will be paid in the fourth quarter of 2000. Cash provided by operating activities was $55.7 million for the nine months ended September 30, 2000 compared to $50.2 million for the nine months ended September 30, 1999. This increase was primarily due to a higher net income and increases in working capital, as discussed above. Cash used in investing activities was $82.6 million for the nine months ended September 30, 2000 compared to $40.2 million for the nine months ended September 30, 1999 primarily due to the two acquisitions during fiscal 2000. The increase was partially offset by proceeds of $24.4 million from the sale of facilities and by decreased capital expenditures of $23.3 million during the nine months ended September 30, 2000 compared to $40.5 million for the nine months ended September 30, 1999 (which included the construction of a replacement facility). At September 30, 2000, there were projects under construction which had an estimated additional cost to complete and equip of approximately $11.3 million. These projects are scheduled for completion over the next twelve months. Management believes that its capital expenditure program is adequate to expand, improve and equip the Company's existing health care facilities. The Company expects to make total capital expenditures in 2000 of approximately $35 to $40 million, excluding acquisitions. Cash provided by financing activities was $34.7 million for the nine months ended September 30, 2000 compared to $22.7 million for the nine months ended September 30, 1999. The increase was primarily due to an increase in long-term debt as a result of acquisitions. In June 2000, the Company borrowed the remaining $35 million from its $60 million term loan facility and $30 million under its $65 million revolving credit facility. The Company utilized this additional debt to fund acquisitions. Effective August 1, 2000, the Company sold Riverview Medical Center in Gonzales, Louisiana for approximately $20.8 million. The proceeds from the transaction and the Company's available cash were used to pay off the $30 million outstanding balance under the Company's revolving credit facility. No amounts were outstanding under the Company's revolving credit facility at September 30, 2000. Management does not consider the sale of any assets to be necessary to repay the Company's indebtedness or to provide working capital. However, for other reasons, certain of the Company's hospitals may be sold in the future from time to time. Although the Company's indebtedness is much more significant than was the case for its predecessor entities, management expects that operations and amounts available under the Company's credit agreement will provide sufficient liquidity for the next twelve months. The Company intends to acquire additional hospitals in the future. There can be no assurance that the Company will not require additional debt or equity financing for any particular acquisition. Also, the Company continually reviews its capital needs and financing opportunities and may seek additional debt or equity financing for its acquisition program or other needs. In order to ensure the tax-free treatment of the Distribution, however, the Company is limited in the amount of stock it may issue. The Company does not expect to pay dividends on its Common Stock in the foreseeable future. 26 28 Contingencies HCA Investigations, Litigation and Indemnification Rights Based upon its review of public filings and statements made by HCA, LifePoint's management understands that HCA is the subject of several federal investigations into certain of its business practices, as well as governmental investigations by various states. Any discussion contained in this report regarding such matters is based solely upon such public filings and statements. Management of LifePoint understands that HCA is cooperating in these investigations and that HCA understands, through written notice and other means, that it is a target in these investigations. Given the breadth of the ongoing investigations, HCA expects subpoenas and investigative and prosecutorial activity to occur in these and other jurisdictions in the future. HCA is the subject of a formal order of investigation by the Securities and Exchange Commission (the "Commission"). HCA understands that the Commission's investigation includes the anti-fraud, periodic reporting and internal accounting control provisions of the federal securities laws. According to published reports, on July 2, 1999, a federal jury in Tampa, Florida found two HCA employees guilty of conspiracy and making false statements on Medicare and TRICARE cost reports for the years 1992 and 1993 and on a Medicaid cost report for 1993. Both were found not guilty of obstructing a federal auditor. One other employee was acquitted on all counts for which he had been charged and the jury was unable to reach a verdict with respect to another employee. This employee and the government executed an agreement to defer prosecution for 18 months after which charges will be dismissed. The two convicted employees were sentenced in December 1999 and both have appealed to the 11th Circuit. HCA is a defendant in several qui tam actions, or actions under a state statute brought by private parties on behalf of the United States of America, which have been unsealed and served on HCA. The actions allege, in general, that HCA and certain subsidiaries and/or affiliated partnerships violated the False Claims Act by submitting improper claims to the government for reimbursement. The lawsuits seek three times the amount of damages caused to the United States by submission of any Medicare or Medicaid false claims presented by the defendants to the federal government, civil penalties of not less than $5,000 nor more than $10,000 for each such Medicare or Medicaid claim, attorneys' fees and costs. The government has intervened in six qui tam actions against HCA. HCA is aware of additional qui tam actions that remain under seal and believes that there may be other sealed qui tam cases of which it is unaware. HCA is a defendant in a number of other suits, which allege, in general, improper and fraudulent billing, overcharging, coding and physician referrals, as well as other violations of law. Certain of the suits have been conditionally certified as class actions. Several derivative actions have been filed in state court by certain purported stockholders of HCA against certain of its current and former officers and directors alleging breach of fiduciary duty, and failure to take reasonable steps to ensure that HCA did not engage in illegal practices thereby exposing it to significant damages. On May 18, 2000, HCA announced that it had reached an understanding with the Civil Division of the Department of Justice to recommend an agreement to settle, subject to certain conditions, the civil claims actions against HCA relating to diagnosis related group coding, outpatient laboratory billing and home health issues. The understanding with the Department of Justice would require HCA to pay $745 million in compensation to the government, with interest accruing immediately at a fixed rate of 6.5% per annum, and would reduce HCA's existing letter of credit agreement with the government from $1 billion to $250 million at the time of the payment of the settlement. The settlement is subject to approval by additional officials of the Department of Justice, other federal agencies as well as state officials; execution of a corporate integrity agreement; execution of definitive settlement documents; execution of agreements to resolve all criminal investigations pending against HCA and court approval. We are unable to predict the effect or outcome of any of the ongoing investigations or qui tam and other actions, or whether any additional investigations or litigation will be commenced. In connection with the Distribution, 27 29 the Company entered into a Distribution Agreement with HCA. The terms of the Distribution Agreement provide that HCA will indemnify the Company in respect of any losses which it may incur as a result of the proceedings described above, all of which the Company believes relate to periods prior to the Distribution. HCA has also agreed to indemnify the Company in respect of any losses, which it may incur as a result of proceedings which may be commenced by government authorities or by private parties in the future that arise from acts, practices or omissions engaged in prior to the date of the Distribution and relate to the proceedings described above. HCA has further agreed that, in the event that any hospital owned by the Company as of the date of the Distribution is permanently excluded from participation in the Medicare and Medicaid programs as a result of the proceedings described above, then HCA will make cash payments to the Company based on an amount (if positive) equal to five times the excluded hospital's 1998 income from continuing operations before depreciation and amortization, interest expense, management fees, impairment of long-lived assets, minority interests and income taxes, as set forth on a schedule to the Distribution Agreement, less the net proceeds of the sale or other disposition of the excluded hospital. The Company has agreed with HCA that, in connection with the pending governmental investigations, the Company will negotiate one or more compliance agreements with the OIG setting forth the Company's agreement to comply with applicable laws and regulations. HCA is expected to enter into its own compliance agreement with the OIG that will become effective when its settlement is final. If any of such indemnified matters were successfully asserted against the Company, or any of its facilities, and HCA failed to meet its indemnification obligations, then such losses could have a material adverse effect on the business, financial position, results of operations or prospects of the Company. HCA has not indemnified the Company for losses relating to any acts, practices and omissions engaged in by the Company after the Distribution, regardless of whether the Company is indemnified for similar acts, practices and omissions occurring prior to the date of the Distribution. Management of LifePoint believes that the ongoing governmental investigations and related media coverage may have had a negative effect on HCA's results of operations (which include the Company for the periods prior to the date of the Distribution which are presented herein). The extent to which the Company may or may not continue to be affected by the ongoing investigations of HCA, the initiation of additional investigations, if any, and the related media coverage cannot be predicted. It is possible that these matters could have a material adverse effect on the Company's business, financial condition, results of operations or prospects in future periods. Risks Associated with Liabilities of Acquired Businesses The Company has acquired and plans to continue to acquire businesses with prior operating histories. Acquired companies may have unknown or contingent liabilities, including liabilities for failure to comply with health care laws and regulations, such as billing and reimbursement, fraud and abuse and similar anti-referral laws. The Company has from time to time identified certain past practices of acquired companies that do not conform to its standards. Although the Company institutes policies designed to conform such practices to its standards following completion of acquisitions, there can be no assurance that the Company will not become liable for past activities that may later be asserted to be improper by private plaintiffs or government agencies. Although the Company generally seeks to obtain indemnification from prospective sellers covering such matters, there can be no assurance that any such matter will be covered by indemnification, or if covered, that such indemnification will be adequate to cover potential losses and fines. Recently Issued Accounting Pronouncements In June 1998, the Financial Accounting Standards Board issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities", which was required to be adopted in years beginning after June 15, 1999. In June 1999, SFAS No. 137 was issued, deferring the effective date of SFAS No. 133 for one year. Management does not anticipate that the adoption of the new statement will have a material effect on the financial condition or results of operations of the Company. 28 30 Inflation The health care industry is labor intensive. Wages and other expenses increase during periods of inflation and when shortages in marketplaces occur. In addition, suppliers pass along rising costs to the Company in the form of higher prices. The Company's ability to pass on these increased costs is limited because of increasing regulatory and competitive pressures. In the event the Company experiences inflationary pressures, there can be no assurance that the Company's results of operations will not be materially effected. Health Care Reform In recent years, an increasing number of legislative proposals have been introduced or proposed to Congress and in some state legislatures. While the Company is unable to predict which, if any, proposals for health care reform will be adopted, there can be no assurance that proposals which are adverse to the business of the Company will not be adopted. 29 31 OPERATING DATA
ACTUAL PRO FORMA(h) ---------------- ----------------- 2000 1999(g) 2000 1999(g) ------ ------- ------ ------ Number of hospitals in operation at March 31.......................... 22 23 20 20 June 30............................ 22 23 21 20 September 30....................... 21 23 21 20 December 31........................ 23 20 Licensed hospitals beds at (a): March 31.......................... 2,129 2,169 1,896 1,896 June 30............................ 2,083 2,169 2,027 1,896 September 30....................... 2,026 2,169 2,026 1,896 December 31........................ 2,169 1,896 Weighted average licensed beds (b): Quarter: First.............................. 2,143 2,169 1,896 1,896 Second............................. 1,999 2,169 1,943 1,896 Third.............................. 2,098 2,169 2,061 1,896 Fourth............................. 2,169 1,896 Year................................... 2,169 1,896 Average daily census (c): Quarter: First.............................. 801 863 758 785 Second............................. 676 714 668 646 Third.............................. 731 668 726 615 Fourth............................. 713 664 Year................................... 739 677 Admissions (d): Quarter: First.............................. 17,195 17,936 16,441 16,454 Second............................. 15,281 15,294 15,057 14,070 Third.............................. 16,721 15,018 16,559 13,998 Fourth............................. 15,833 14,870 Year................................... 64,081 59,392 Equivalent Admissions (e): Quarter: First.............................. 30,521 30,545 29,018 28,005 Second............................. 28,780 27,574 28,025 25,412 Third.............................. 30,779 27,762 30,229 25,743 Fourth............................. 28,440 26,558 Year................................... 114,321 105,718 Average length of stay (days) (f): Quarter: First.............................. 4.2 4.3 4.2 4.3 Second............................. 4.0 4.2 4.0 4.2 Third.............................. 4.0 4.1 4.0 4.0 Fourth............................. 4.1 4.1 Year................................... 4.2 4.2
30 32 OPERATING DATA (CONTINUED) - ------------------------ (a) Licensed beds are those beds for which a facility has been granted approval to operate from the applicable state licensing agency. (b) Represents the average number of licensed beds, weighted based on periods owned. (c) Represents the average number of patients in the Company's hospital beds each day. (d) Represents the total number of patients admitted (in the facility for a period in excess of 23 hours) to the Company's hospitals and is used by management and certain investors as a general measure of inpatient volume. (e) Equivalent admissions is used by management and certain investors as a general measure of combined inpatient and outpatient volume. Equivalent admissions is computed by multiplying admissions (inpatient volume) by the sum of gross inpatient revenue and gross outpatient revenue and then dividing the resulting amount by gross inpatient revenue. The equivalent admissions computation "equates" outpatient revenue to the volume measure (admissions) used to measure inpatient volume resulting in a general measure of combined inpatient and outpatient volume. (f) Represents the average number of days admitted patients stay in the Company's hospitals. Average length of stay has declined due to the continuing pressures from managed care and other payers to restrict admissions and reduce the number of days that are covered by the payers for certain procedures, and by technological and pharmaceutical improvements. (g) 1999 operating data has been restated due to a correction in admissions. (h) Pro forma information excludes the three facilities the Company's management previously identified as held for sale. 31 33 Item 3: Quantitative and Qualitative Disclosures about Market Risk During the nine months ended September 30, 2000, there were no material changes in the quantitative and qualitative disclosures about market risks presented in the Company's Annual Report on Form 10-K for the year ended December 31, 1999. Part II. Other Information Item 6: Exhibits and Reports on Form 8-K (a) List of Exhibits:
EXHIBIT NUMBER DESCRIPTION - -------------- ----------- 3.1 Certificate of Incorporation of LifePoint Hospitals, Inc. Incorporated by reference from the LifePoint Hospitals, Inc. Quarterly Report on Form 10-Q for the quarter ended March 31, 1999. 3.2 Bylaws of LifePoint Hospitals, Inc. Incorporated by reference from the LifePoint Hospitals, Inc. Quarterly Report on Form 10-Q for the quarter ended March 31, 1999. 3.3 Certificate of Incorporation of LifePoint Hospitals Holdings, Inc. Incorporated by reference from the LifePoint Hospitals Holdings, Inc. Annual Report on Form 10-K for the year ended December 31, 1999. 3.4 Bylaws of LifePoint Hospitals Holdings, Inc. Incorporated by reference from the LifePoint Hospitals Holdings, Inc. Annual Report on Form 10-K for the year ended December 31, 1999. 10.1 Second Amendment to Credit Agreement dated as of May 23, 2000 among LifePoint Hospitals Holdings, Inc., as Borrower, the several lenders which are parties to the Credit Agreement, Fleet National Bank as arranger and administrative agent, ScotiaBanc, Inc. as documentation agent and co-arranger, Deutsche Bank Securities Inc. as syndication agent and co-arranger, and SunTrust Bank, Nashville, N.A. as co-agent. 27.1 Financial Data Schedule for LifePoint Hospitals, Inc. (for SEC use only). 27.2 Financial Data Schedule for LifePoint Hospitals Holdings, Inc. (for SEC use only).
(b) Reports on Form 8-K filed during the quarter ended September 30, 2000: None. 32 34 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. LifePoint Hospitals, Inc. Date: November 13, 2000 /s/ Kenneth C. Donahey ------------------------------------- Kenneth C. Donahey Senior Vice President & Chief Financial Officer LifePoint Hospitals Holdings, Inc. Date: November 13, 2000 /s/ Kenneth C. Donahey ------------------------------------- Kenneth C. Donahey Senior Vice President & Chief Financial Officer 33 35 EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION - -------------- ----------- 3.1 Certificate of Incorporation of LifePoint Hospitals, Inc. Incorporated by reference from the LifePoint Hospitals, Inc. Quarterly Report on Form 10-Q for the quarter ended March 31, 1999. 3.2 Bylaws of LifePoint Hospitals, Inc. Incorporated by reference from the LifePoint Hospitals, Inc. Quarterly Report on Form 10-Q for the quarter ended March 31, 1999. 3.3 Certificate of Incorporation of LifePoint Hospitals Holdings, Inc. Incorporated by reference from the LifePoint Hospitals Holdings, Inc. Annual Report on Form 10-K for the year ended December 31, 1999. 3.4 Bylaws of LifePoint Hospitals Holdings, Inc. Incorporated by reference from the LifePoint Hospitals Holdings, Inc. Annual Report on Form 10-K for the year ended December 31, 1999. 10.1 Second Amendment to Credit Agreement dated as of May 23, 2000 among LifePoint Hospitals Holdings, Inc., as Borrower, the several lenders which are parties to the Credit Agreement, Fleet National Bank as arranger and administrative agent, ScotiaBanc, Inc. as documentation agent and co-arranger, Deutsche Bank Securities Inc. as syndication agent and co-arranger, and SunTrust Bank, Nashville, N.A. as co-agent. 27.1 Financial Data Schedule for LifePoint Hospitals, Inc. (for SEC use only). 27.2 Financial Data Schedule for LifePoint Hospitals Holdings, Inc. (for SEC use only).
34 EX-10.1 2 g65276aex10-1.txt SECOND AMENDMENT TO CREDIT AGREEMENT 1 EXHIBIT 10.1 SECOND AMENDMENT TO CREDIT AGREEMENT THIS SECOND AMENDMENT TO CREDIT AGREEMENT (this "Amendment") is dated as of May 23, 2000 by and among LIFEPOINT HOSPITALS HOLDINGS, INC. (the "Borrower"); the financial institutions which are now, or in accordance with SECTION 11.6 of the Credit Agreement (hereinafter described) hereafter, parties to the Credit Agreement hereto by execution of the signature pages to the Credit Agreement or otherwise (collectively, the "Lenders" and each individually, a "Lender"); FLEET NATIONAL BANK, as administrative agent ("Administrative Agent"), for the Lenders (in such capacity as Administrative Agent, together with its successors and assigns in such capacity, the "Agent"); SCOTIABANC, INC., as documentation agent (in such capacity, together with its successors and assigns in such capacity, the "Documentation Agent"); DEUTSCHE BANK SECURITIES INC., as syndication agent (in such capacity, together with its successors and assigns in such capacity, the "Syndication Agent"); SUNTRUST BANK, NASHVILLE, N.A., as co-agent (in such capacity, together with its successors and assigns in suck capacity, the "Co-Agent"); FLEET NATIONAL BANK, as arranger (in such capacity, together with its successors and assigns in such capacity, the "Arranger"); and DEUTSCHE BANK SECURITIES INC. and SCOTIABANC, INC., as co-arrangers (in such capacity, together with their successors and assigns in such capacity, the "Co-Arrangers"). RECITALS A. The Borrower, the Lenders, the Agent, the Syndication Agent, the Documentation Agent, the Co-Agent, the Arranger and the Co-Arranger are parties to a Credit Agreement dated as of May 11, 1999, as amended on December 31, 1999 (the "Credit Agreement"). Capitalized terms used herein without definition have the meanings assigned to demean in the Credit Agreement. B. The Borrower has requested the Lenders' consent to a proposed Acquisition and a proposed Asset Sale. If the proposed Asset Sale is consummated prior to the proposed Acquisition, the Borrower has informed the Agent that it would deliver a Notice of Reinvestment concerning the proceeds of the Asset Sale indicating, that the Borrower would invest such proceeds in the proposed Acquisition. Because the proposed Acquisition may occur prior to the proposed Asset Sale, however, the Borrower has requested that the Lenders waive the mandatory prepayment required under Section 2.9(b) of the Credit Agreement if the proposed Asset Sale is consummated within eight months of the proposed Acquisition. In addition, the Borrower has requested an increase in the basket in fiscal year 2000 for Permitted Acquisitions which do not require the prior written approval of the Required Lenders. The Borrower has also requested a change in permitted Investments. C. The Lenders signing below arc willing to consent to such requests on the terms and conditions hereinafter set forth. NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows: 2 I. AMENDMENTS TO CREDIT AGREEMENT. Subject to the satisfaction of each of the conditions set forth herein, the Credit Agreement is hereby amended as follows: A. DEFINITIONS. ARTICLE I of the Credit Agreement is amended by amending subsection (i) of the definition of "Permitted Acquisition" to read as follows: "(i) LifePoint shall have obtained the prior written approval of the Required Lenders, if (A) such Acquisition involves a Total Purchase Price equal to or greater than (x) $45,000,000 plus the net proceeds received by the Borrower from the Riverview Sale (as defined below) if such Acquisition is consummated in fiscal year 2000, or (y) a Total Purchase Price equal to or greater than $32,500,000 if such Acquisition is consummated in any fiscal year other than local year 2000, or (B) the aggregate Total Purchase Price for Acquisitions for which such prior written approval is not required exceeds (x) $45,000,000 plus the net proceeds received by the Borrower from the Riverview Sale for fiscal year 2000, or (y) $40,000,000 for Acquisitions consummated in any f seal year other than fiscal year 2000." B. PERMITTED INVESTMENTS. SECTION 7.8(F) is hereby amended by providing that the aggregate amount at any time outstanding which LifePoint and its Subsidiaries may invest in Investments made after May 11, 1999 in joint ventures, partnerships and other equity investments (including any additional investments in joint ventures or partnerships in which they had invested prior to May 11, 1999) is increased from $1,000,000 to $2,000,000. II. CONSENT TO PUTNAM ACQUISITION. The Borrower has requested that the Lenders consent to the acquisition by a newly formed Subsidiary of substantially all of the assets of Putnam Community Medical Center, a 141-bed general acute care hospital located in Palatka, Florida, for a Total Purchase Price not exceeding $60,000,000, pursuant to an Asset Purchase Agreement relating thereto in substantially the form delivered to the Agent by the Borrower (the "Putnam Acquisition"). The Lenders hereby consent to the Putnam Acquisition on such terms and conditions, provided the Putnam Acquisitions also meets all of the requirements set forth in the Credit Agreement for a Permitted Acquisition and provided such new Subsidiary complies with all of the provisions of the Credit Agreement and other Loan Documents applicable to it, including without limitation Section 7.8(j) of the Credit Agreement. III. CONSENT TO RIVERVIEW SALE. The Borrower has requested that the Lenders consent to the sale by Riverview Medical Center, LLC, one of the Subsidiary Guarantors, of substantially all of the assets relating to the healthcare facility commonly known as Riverview Medical Center located in Gonzales, Louisiana to Our Lady of the Lake Hospital, Inc. for a total sale price of no less thank $15,000,000, pursuant to an Asset Purchase Agreement relating thereto in substantially the form delivered to the Agent by the Borrower (the "Riverview Sale"). The Lenders hereby consent to the Riverview Sale on such terms and conditions. In the event the Riverview Sale is consummated within eight months following the consummation of the Putnam Acquisition, the Lenders signing below also consent to the waiver of the mandatory prepayment required under Section 2.9(b) of the Credit Agreement with respect to net proceeds of the Riverview Sale. 2 3 IV. REFERENCES IN SECURITY DOCUMENTS; CONFIRMATION OF SECURITY. All references to the "Credit Agreement" in all Security Documents, and in any other Loan Documents shall, from and after the date hereof, refer to the Credit Agreement, as amended by this Amendment, and all obligations of the Borrower under the Credit Agreement shall be secured by and be entitled to the benefits of said Security Documents and such other Loan Documents. All Security Documents heretofore executed by the Borrower and its Affiliates, and each of them, shall remain in full force and effect and, by the Borrower's signature hereto and each such Subsidiary's consent hereto, such Security Documents arc hereby ratified and affirmed. V. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE BORROWER. The Borrower hereby represents and warrants to, and covenants and agrees with, the Lenders that: A. The execution and delivery of this Amendment has been duly authorized by all requisite company action on the part of the Borrower. B. The representations and warranties of any Loan Party contained in the Credit Agreement and the other Loan Documents are true and correct in all material respects on and as of the date of this Amendment as though made at and as of such date. Since the Closing Date, no event or circumstance has occurred or existed which could reasonably be expected to have Material Adverse Effect. As of the date hereof and after giving effect to this Amendment, no Default has occurred and is continuing. C. Neither the Borrower nor any Affiliate of the Borrower is required to obtain any consent, approval or authorization from, or to file any declaration or statement with, any governmental instrumentality or other agency or any other person or entity in connection with or as a condition to the execution, delivery or performance of this Amendment. D. This Amendment constitutes the legal, valid and binding obligation of the Borrower and its Affiliates enforceable against them, jointly and severally, in accordance with their respective terms, subject to bankruptcy, insolvency, reorganization, moratorium and similar laws affecting the rights and remedies of creditors generally or the application of principles of equity, whether in any action at law or proceeding in equity, and subject to the availability of the remedy of specific performance of any other equitable remedy or relief to enforce any right thereunder. E. The Borrower will satisfy all conditions set forth in SECTION VI. VI. CONDITIONS. The willingness of the Agent and Lenders to amend the Credit Agreement and grant the foregoing consent, is subject to the following, conditions precedent and subsequent: A. Borrower shall have executed and delivered to the Agent (or shall have caused to be executed and delivered to the Agent by the appropriate persons) the following: 1. On or before the date hereof: 3 4 (a) This Amendment; and (b) True and complete copies of any required stockholders' and/or directors' consents and/or resolutions, authorizing the execution and delivery of this Amendment, certified by the Secretary of the Borrower. 2. Such other supporting documents and certificates as the Agent or its counsel may reasonably request within the time period(s) reasonably designated by the Agent or its counsel B. All legal matters incident to the transactions hereby contemplated shall be reasonably satisfactory to the Agent's counsel. VI. MISCELLANEOUS. A. As provided in the Credit Agreement, the Borrower agrees to reimburse the Agent upon demand for all reasonable fees and disbursements of counsel to the Agent incurred in connection with the preparation of this Amendment. B. This Amendment shall be governed by and construed in accordance with the laws of the State of New York. C. This Amendment may be executed by the parties hereto in several counterparts hereof and by the different parties hereto on separate counterparts hereof, all of which counterparts shall together constitute one and the same agreement. Delivery of an executed signature page of this Amendment by facsimile transmission shall be effective as an in-hand delivery of an original executed counterpart hereof: [The next pages are the signature pages.] 4 5 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed as a sealed instrument by their duly authorized representatives, all as of the day and year first above written. LIFEPOINT HOSPITALS HOLDINGS, INC. By: ---------------------------------------- Name: Title: FLEET NATIONAL BANK as Administrative Agent, Arranger, Co-Arranger and a Lender By: ---------------------------------------- Name: Title: DEUTSCHE BANK SECURITIES, INC. as Syndication Agent and Co-Arranger By: ---------------------------------------- Name: Title: DEUTSCHE BANK, A.G., NEW YORK AND/OR CAYMAN ISLANDS BRANCH, as a Lender By: ---------------------------------------- Name: Title: SCOTIABANC, INC. By: ---------------------------------------- Name: Title: 5 6 SUNTRUST BANK, NASHVILLE, N.A. as Co-Agent and a Lender By: ---------------------------------------- Name: Title: BANK OF AMERICA, N.A., as a Lender By: ---------------------------------------- Name: Title: THE CHASE MANHATTAN BANK, as a Lender By: ---------------------------------------- Name: Title: AMSOUTH BANK, successor in interest by merger to FIRST AMERICAN NATIONAL BANK, as a Lender By: ---------------------------------------- Name: Title: MONUMENT CAPITAL, LTD., as a Lender By: Alliance Capital Management, L.P. as Investment Manager By: Alliance Capital Management Corporation, as General Partner By: ---------------------------------------- Name: Title: 6 7 OAK MOUNTAIN LIMITED, as a Lender By: Alliance Capital Management, L.P. as Investment Manager By: Alliance Capital Management Corporation, as General Partner By: ---------------------------------------- Name: Title: JOHN NUVEEN & CO., as a Lender By: ---------------------------------------- Name: Title: NORSE CBO, LTD., as a Lender By: ---------------------------------------- Name: Title: MAGNETITE ASSET INVESTORS, LLC., as a Lender By: ---------------------------------------- Name: Title: CARLYLE HIGH YIELD PARTNERS II, LTD., as a Lender By: ---------------------------------------- Name: Title: 7 8 FIRST DOMINION FUNDING III, as a Lender By: ---------------------------------------- Name: Title: ARES III CLO, LTD., as a Lender By: ---------------------------------------- Name: Title: VAN KAMPEN, as a Lender By: ---------------------------------------- Name: Title: UNION BANK OF CALIFORNIA, N.A., as a Lender By: ---------------------------------------- Name: Title: 8 9 CONSENT AND CONFIRMATION OF SECURITY OF PARENT The undersigned, LIFEPOINT HOSPITALS, INC., which owns all of the issued and outstanding equity interests in the Borrower, hereby joins in the execution of the foregoing Second Amendment to Credit Agreement dated as of May 23, 2000 (the "Amendment") to which this Consent is attached (1) to confirm its consent to all of the transactions contemplated by the Amendment, and (2) to confirm and ratify its Guarantee Agreement and Security Agreement entered into as required under such Credit Agreement and dated as of May 11, 1999 in favor of the Agent and the Lenders which remains in full force and effect. LIFEPOINT HOSPITALS, INC. By: ---------------------------------------- Name: Title: 9 10 CONSENT AND CONFIRMATION OF SECURITY OF SUBSIDIARIES Each of the undersigned Subsidiaries of the Borrower hereby joins in the execution of the foregoing Second Amendment to Credit Agreement dated as of May 23, 2000 (the "Amendment") to which this Subsidiary Confirmation of Security is attached (1) to confirm its consent, to the extent required, to all of the transactions contemplated by the Amendment, and (2) to confirm and ratify its Guaranty and Security Agreement entered into as required under such Credit Agreement and dated as of May 11, 1999 with the Agent, on behalf of the Lenders, which remain in full force and effect with respect to an of the Borrower Obligations and Grantor Obligations (as defined therein). AMERICA GROUP OFFICES, LLC. AMERICA MANAGEMENT COMPANIES, LLC. AMG-CROCKET, LLC AMG-HILCREST, LLC AMG-HILLSIDE, LLC AMG-LIVINGSTON, LLC AMG-LOGAN, LLC AMG-SOUTHERN TENNESSEE, LLC AMG-TRINITY, LLC ASHLEY VALLEY MEDICAL CENTER, LLC ASHLEY VALLEY PHYSICIAN PRACTICE, LLC BARROW MEDICAL CENTER, LLC BARTOW HEALTHCARE PARTNER, INC. BARTOW HEALTHCARE SYSTEM, LTD BARTOW MEMORIAL LIMITED PARTNER, LLC BURBON COMMUNITY HOSPITAL, LLC BUFFALO TRACE RADIATION ONCOLOGY ASSOCIATES, LLC CASTLEVIEW HOSPITAL, LLC CASTLEVIEW MEDICAL, LLC CASTLEVIEW PHYSICIAN PRACTICE, LLC COMMUNITY HOSPITAL OF ANDALUSIA, INC. COMMUNITY MEDICAL, LLC CROCKETT HOSPITAL, LLC DODGE CITY HEALTHCARE GROUP, LP DODGE CITY HEALTHCARE PARTNER, INC. GEORGETOWN COMMUNITY HOSPITAL, LLC GEORGETOWN REHABILITATION, LLC HALSTEAD HOSPITAL, LLC HCK LOGAN MEMORIAL, LLC HDP ANDALUSIA, LLC HDP GEORGETOWN, LLC HILLSIDE HOSPITAL, LLC HST PHYSICIAN PRACTICE, LLC HTI GEORGETOWN, LLC HTI PINELAKE, LLC INTEGRATED PHYSICIAN SERVICES, LLC 10 11 KANSAS HEALTHCARE MANAGEMENT COMPANY, INC. KANSAS HEALTHCARE MANAGEMENT SERVICES, LLC KENTUCKY HOSPITAL, LLC KENTUCKY MEDSERV, LLC KENTUCKY MSO, LLC KENTUCKY PHYSICIANS SERVICES, INC. LAKE CUMBERLAND HEALTH CARE, INC. LAKE CUMBERLAND REGIONAL HOSPITAL, LLC LAKE CUMBERLAND REGIONAL PHYSICIAN HOSPITAL ORGANIZATION, LLC LHSC, LLC LIFEPOINT CORPORATE SERVICES, GENERAL PARTNERSHIP LIFEPOINT CSGP, LLC LIFEPOINT CSLP, LLC LIFEPOINT FINANCE GP, LLC LIFEPOINT FINANCE LP, LLC LIFEPOINT FINANCE, LIMITED PARTNERSHIP LIFEPOINT HOLDINGS 2, LLC LIFEPOINT HOLDINGS 3, INC. LIFEPOINT OF GAGP, LLC LIFEPOINT OF GEORGIA, LIMITED PARTNERSHIP LIFEPOINT OF KENTUCKY, LLC LIFEPOINT MEDICAL GROUP-HILLSIDE, INC. LIFEPOINT RC, INC. LIVINGSTON REGIONAL HOSPITAL, LLC LOGAN MEDICAL, LLC LOGAN MEMORIAL HOSPITAL, LLC MEADOWVIEW PHYSICIAN PRACTICE, LLC MEADOWVIEW REGIONAL MEDICAL CENTER, LLC MEADOWVIEW RIGHTS, LLC 11 EX-27.1 3 g65276aex27-1.txt FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE STATEMENTS OF INCOME AND BALANCE SHEETS OF LIFEPOINT HOSPITALS, INC., FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 9-MOS DEC-31-2000 JAN-01-2000 SEP-30-2000 20,300 0 97,300 50,600 13,800 116,200 509,700 190,100 491,200 59,700 281,100 0 0 300 113,200 491,200 0 414,600 0 218,300 88,800 31,400 22,900 23,100 10,600 12,500 0 0 0 12,500 0.40 0.38
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