Envision Healthcare Reports Solid Results for 2018 Second Quarter
Aug. 06, 2018
NASHVILLE, Tenn.--(BUSINESS WIRE)--Aug 6, 2018--Envision Healthcare Corporation (“Envision”) (NYSE: EVHC) today reported solid financial results for the three months and six months ended June 30, 2018.
Highlights for the second quarter of 2018 include:Net revenue of $2.07 billion; Net loss attributable to common stockholders of $1.84 billion, or $15.21 per share; Adjusted net earnings of $113.1 million, or $0.92 per diluted share; and Adjusted EBITDA of $246.7 million.
Envision’s net loss for the second quarter of 2018 included a non-cash impairment charge of $1.98 billion that affected its Physician Services’ segment goodwill. The goodwill adjustment resulted from the establishment of fair value based on the definitive agreement for Envision to be acquired at a price of $46 per share, plus assumption or repayment of all outstanding debt, by global investment firm KKR. That agreement was entered into June 10, 2018, and the transaction is expected to be completed during the fourth quarter of 2018.
A reconciliation of all non-GAAP financial results to the comparable GAAP measure is provided on page six of this press release.
“We are encouraged by the progress our organization is making on a number of initiatives to improve operational efficiencies at Envision, and these efforts are reflected in our results for the second quarter of 2018,” said Christopher A. Holden, President and Chief Executive Officer of Envision. “Specific accomplishments include reduction of corporate overhead expense as a percent of revenue, and more effective engagement of our clinical resources, particularly premium compensation.
“Our organization remains committed to our Patients First Initiative, which was launched earlier this year, and builds on the leadership position we have established to move the overwhelming majority of our services to in-network status and by supporting the critical safety net services delivered to patients by our facility-based providers and health system partners across the country.”
Envision reports two operating segments: Physician Services, which includes facility-based and post-acute services, and Ambulatory Services.
Net revenues for Physician Services were $1.74 billion for the second quarter of 2018, an increase of 7.1% from the prior-year period. Revenue growth was driven by contributions of 4.7% from acquisitions, 1.2% from net new contracts and 1.2% from same contracts. Physician Services’ net revenue growth from new contracts consisted of 7.9% growth from contract additions, partially offset by contract terminations of 6.7%.
On a same-contract base, net revenues grew by 1.5% in the second quarter of 2018 when compared to the prior-year period. Same-contract patient encounters grew by 1.1%, while revenue per patient encounter increased by 0.4%.
Physician Services Adjusted EBITDA was $182.4 million for the second quarter of 2018, which compares with $193.3 million for the prior-year period. Physician Services results were impacted by higher-than-anticipated malpractice expense related to both settlement of prior-year claims as well as increased accruals for claims related to those same periods. Physician Services benefited from operational improvement efforts, including lower supply costs and other operating expenses for the second quarter of 2018, when compared with the prior-year period. Physician Services’ margin was 10.5%, which compares with 11.9% for the prior-year period.
Net revenues for the second quarter of 2018 were $328.0 million, a 3.0% increase from $318.5 million for the prior-year period.
Same-center revenue grew by 2.9%, which included volume growth of 1.5% and rate growth of 1.4%. Surgery centers deconsolidated and disposed in the 12 months ended June 30, 2018, contributed incremental revenues of $8.4 million for the second quarter of 2017.
Adjusted EBITDA for the second quarter of 2018 was $64.3 million, an increase of 6.1% from the prior-year period. Adjusted EBITDA margin was 19.6% in the 2018 second quarter, a 60-basis point improvement from the prior-year period.
Envision had cash and cash equivalents of $593.5 million and had no amounts outstanding under its asset-based lending facility at the end of the second quarter of 2018. At June 30, 2018, Envision had total debt outstanding of $4.72 billion. The Company’s ratio of total net debt at June 30, 2018, to trailing 12 months EBITDA, as defined under the Company’s credit agreement, was 4.5 times.
Envision’s cash flow from operations was impacted by tax payments made during the second quarter of 2018 primarily related to the divestiture of its Medical Transportation business. That transaction was completed earlier in 2018. Cash flow from operations less distributions to noncontrolling interests, and when excluding transaction costs and the divestiture-related tax payment, was $212.8 million.
During the second quarter of 2018, Envision invested $69.0 million in acquisitions, and maintenance capital expenditures were $33.5 million. During the quarter, Envision completed four acquisitions, including two physician group practice and two ambulatory services transactions. One of those acquisitions was completed at the end of the second quarter, and was funded early in the third quarter of 2018.
Acquisition of Envision by KKR
On June 10, 2018, Envision entered into a definitive agreement to be acquired by investment funds affiliated with the global investment firm KKR in an all-cash transaction.
On July 19, 2018, the Federal Trade Commission granted early termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act. Early termination of the waiting period satisfies one of the conditions of the closing of the sale of Envision. The closing remains subject to the satisfaction or waiver of customary conditions, including approval by Envision’s stockholders at its 2018 annual meeting of stockholders, which will be held on Tuesday, September 11, 2018, in Nashville, TN.
Envision expects the transaction to be completed during the fourth quarter of 2018.
About Envision Healthcare Corporation
Envision Healthcare Corporation is a leading provider of physician-led services and post-acute care, and ambulatory surgery services. At June 30, 2018, we delivered physician services, primarily in the areas of emergency department and hospitalist services, anesthesiology services, radiology/tele-radiology services, and children’s services to more than 1,800 clinical departments in healthcare facilities in 45 states and the District of Columbia. Post-acute care is delivered through an array of clinical professionals and integrated technologies which, when combined, contribute to efficient and effective population health management strategies. The Company owns and operates 261 surgery centers and one surgical hospital in 35 states and the District of Columbia, with medical specialties ranging from gastroenterology to ophthalmology and orthopedics. In total, the Company offers a differentiated suite of clinical solutions on a national scale, creating value for health systems, payors, providers and patients. For additional information, visit www.evhc.net.
Additional Information and Where to Find It
This communication relates to the proposed merger transaction involving Envision Healthcare Corporation (the “Company”). In connection with the proposed transaction, the Company has filed a preliminary proxy statement with the Securities and Exchange Commission (the “SEC”). The definitive proxy statement, when available, and other relevant documents will be sent or given to the stockholders of the Company and will contain important information about the proposed transaction and related matters. This communication is not a substitute for the proxy statement or any other document that the Company may file with the SEC or send to its stockholders in connection with the proposed transaction. BEFORE MAKING ANY VOTING DECISION, STOCKHOLDERS OF THE COMPANY ARE URGED TO READ ALL RELEVANT DOCUMENTS FILED WITH THE SEC, INCLUDING THE PROXY STATEMENT, WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION. Investors and security holders will be able to obtain the documents (when available) free of charge at the SEC’s website, www.sec.gov, and the Company’s website, www.evhc.net.
Participants in the Solicitation
The Company and its directors and executive officers may be deemed to be participants in the solicitation of proxies from the holders of Company common stock in respect of the proposed transaction. Information about the directors and executive officers of the Company is set forth in the preliminary proxy statement filed by the Company with the SEC on July 9, 2018 in connection with the proposed transaction and in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017 filed with the SEC on March 1, 2018, as amended by the Company’s Annual Report on Form 10-K/A filed with the SEC on April 30, 2018. Other information regarding the participants in the proxy solicitation and a description of their direct and indirect interests, by security holdings or otherwise, will be contained in the definitive proxy statement when it becomes available.
Certain statements and information in this communication may be deemed to be “forward-looking statements” within the meaning of the Federal Private Securities Litigation Reform Act of 1995. Forward-looking statements may include, but are not limited to, statements relating to the proposed transaction, the Company’s financial and operating objectives, plans and strategies, industry trends, and all statements (other than statements of historical fact) that address activities, events or developments that the Company intends, expects, projects, believes or anticipates will or may occur in the future. These statements are often characterized by terminology such as “believe,” “hope,” “may,” “anticipate,” “should,” “intend,” “plan,” “will,” “expect,” “estimate,” “project,” “positioned,” “strategy” and similar expressions, and are based on assumptions and assessments made by the Company’s management in light of their experience and their perception of historical trends, current conditions, expected future developments, and other factors they believe to be appropriate. Any forward-looking statements in this communication are made as of the date hereof, and the Company undertakes no duty to update or revise any such statements, whether as a result of new information, future events or otherwise. Forward-looking statements are not guarantees of future performance. Whether actual results will conform to expectations and predictions is subject to known and unknown risks and uncertainties, including: (i) risks and uncertainties discussed in the reports and other documents that the Company files with the SEC; (ii) general economic, market, or business conditions; (iii) the impact of legislative or regulatory changes, such as changes to the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010; (iv) changes in governmental reimbursement programs; (v) decreases in revenue and profit margin under fee-for-service contracts due to changes in volume, payor mix and reimbursement rates; (vi) the loss of existing contracts; (vii) risks related to the occurrence of any event, change or other circumstance that could give rise to the termination of the merger agreement; (viii) the failure to obtain Company stockholder approval of the transaction or required regulatory approvals or the failure to satisfy any of the other conditions to the completion of the transaction; (ix) the effect of the announcement of the transaction on the ability of the Company to retain and hire key personnel and maintain relationships with its customers, suppliers, partners and others with whom it does business, or on its operating results and businesses generally; (x) risks associated with the disruption of management’s attention from ongoing business operations due to the transaction; (xi) the ability to meet expectations regarding the timing and completion of the transaction; and (xii) other circumstances beyond the Company’s control.
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