| Vanguard Reports Second Quarter Results NASHVILLE, Tenn.—February 11, 2003 -- Vanguard Health Systems, Inc. (the “Company” or “Vanguard”) today announced results for the second quarter ended December 31, 2002. “We continue to realize same hospital volume and revenue growth as we implement our in-market strategic initiatives and business development activities,” commented Charles N. Martin, Jr., Chairman and Chief Executive Officer. “We are excited about furthering our leadership role in the markets we serve as we recruit new physicians, expand services and invest in medical technologies.” For the quarter ended December 31, 2002, net revenues were $267.3 million, an increase of $44.2 million or 19.8% from the prior year period. Acute services revenues and health plan premium revenues increased $36.4 million and $7.8 million, respectively, from the prior year period. EBITDA increased to $22.0 million for the quarter ended December 31, 2002 compared to $17.1 million for the prior year period. Net income for the quarter ended December 31, 2002 was $2.6 million, consistent with the prior year period. Income before income taxes increased by $1.8 million or 69.2% to $4.4 million for the quarter ended December 31, 2002, from $2.6 million for the prior year period. Income tax expense increased to $1.8 million for the quarter ended December 31, 2002, an effective tax rate of 41%, compared to an effective tax rate of 0.4% for the prior year period. The Company expects its future effective tax rate to approximate 40%, the full statutory rate. The consolidated operating results for the quarter ended December 31, 2002, reflect an 18.2% increase in discharges and a 15.4% increase in patient days compared to the prior year period. On a same hospital basis, discharges increased by 3.0% while patient days decreased by 1.3% due to shorter length of patient stays during the quarter ended December 31, 2002. For the six months ended December 31, 2002, net revenues were $535.2 million, an increase of $104.8 million or 24.3% from the prior year period. Acute services revenues and health plan premium revenues increased $83.4 million and $21.4 million, respectively, from the prior year period. EBITDA increased to $42.1 million for the six months ended December 31, 2002 compared to $32.4 million for the prior year period. Net income increased to $5.0 million for the six months ended December 31, 2002, compared to a net loss of $1.6 million for the prior year period. During the six months ended December 31, 2001, the Company incurred debt extinguishment costs of $6.6 million related primarily to the refinancing of its credit facility debt and the termination of an interest rate collar agreement. Income before income taxes increased by $10.0 million to $8.4 million for the six months ended December 31, 2002, compared to a loss of $1.6 million for the prior year period. Income tax expense increased to $3.5 million for the six months ended December 31, 2002, an effective tax rate of 41%. The Company expects its future effective tax rate to approximate 40%, the full statutory rate. The consolidated operating results for the six months ended December 31, 2002, reflect a 21.2% increase in discharges and a 20.6% increase in patient days compared to the prior year period. On a same hospital basis, discharges increased by 1.5% while patient days decreased by 0.5% due to shorter length of patient stays during the six months ended December 31, 2002. On January 3, 2003, the Company purchased the five acute care hospitals aggregating 1,537 beds and related health care businesses of Baptist Health System in San Antonio, Texas. The purchase price was $295.0 million, payable $247.0 million in cash and $48.0 million in the convertible subordinated debt, convertible preferred stock and common stock securities of the Company or its subsidiaries. In addition, the Company assumed certain of the seller’s current liabilities as of the closing date related to the assets purchased. The Company funded the cash portion of the purchase price with proceeds from an expanded credit facility, from private sales of its common stock to existing shareholders and with available cash. “We are pleased to partner with Baptist Health System to provide the San Antonio market with the highest quality health care in a faith-based environment,” stated Mr. Martin. “We are ready for the challenge of integrating the operations of our largest acquisition to date with the Vanguard mission for the benefit of both the Company and SanAntonio and the surrounding communities of South Texas.” The Company will host a conference call for investors at 11:00 am EST today. All interested investors are invited to access a live audio broadcast of the call, via webcast. The live webcast can be accessed at the Company’s Web site at www.vanguardhealth.com or at www.firstcallevents.com/service/ajwz372505604gf12.html. If you are unable to participate during the live webcast, the call will be available on a replay basis on the Company’s Web site www.vanguardhealth.com beginning this afternoon and throughout the next 30 days. To access the replay, click on 2nd Quarter Webcast. At January 31, 2003, Vanguard Health Systems, Inc. owned and operated 15 acute care hospitals and complementary facilities and services in Chicago, Illinois; Phoenix, Arizona; Orange County, California and San Antonio, Texas. The Company’s strategy is to develop locally branded, comprehensive health care delivery networks in urban markets. Vanguard will pursue acquisitions where there are opportunities to partner with leading delivery systems in new urban markets. Upon acquiring a facility or network of facilities, Vanguard implements strategic and operational improvement initiatives including expanding services, strengthening relationships with physicians and managed care organizations, recruiting new physicians and upgrading information systems and other capital equipment. These strategies improve quality and network coverage in a cost effective and accessible manner for the communities we serve. This press release contains forward-looking statements within the meaning of the federal securities laws, which are intended to be covered by the safe harbors created thereby. These forward-looking statements include all statements that are not historical statements of fact and those statements regarding the Company’s intent, belief or expectations. Do not rely on any forward-looking statements as such statements are subject to numerous factors, risks and uncertainties that could cause the Company’s actual outcomes, results, performance or achievements to be materially different from those projected. These factors, risks and uncertainties include, among others, the Company’s high degree of leverage; the Company’s ability to incur substantially more debt; operating and financial restrictions in the Company’s debt agreements; the Company’s ability to successfully implement its business strategies; the Company’s ability to successfully integrate its recent and any future acquisitions; the highly competitive nature of the health care business; governmental regulation of the industry including Medicare and Medicaid reimbursement levels; changes in Federal, state or local regulation affecting the health care industry; the possible enactment of Federal or state health care reform; the ability to attract and retain qualified management and personnel, including physicians and nurses; claims and legal actions relating to professional liabilities or other matters; changes in accounting practices; changes in general economic conditions; the ability to enter into managed care provider and other payer arrangements on acceptable terms; the efforts of insurers, managed care payers, employers and others to contain health care costs; the availability and terms of capital to fund the expansion of the Company’s business; the timeliness of reimbursement payments received under government programs; the potential adverse impact of known and unknown government investigations; and those factors, risks and uncertainties detailed in the Company’s filings from time to time with the Securities and Exchange Commission, including, among others, the Company’s annual reports on Form 10-K and its quarterly reports on Form 10-Q. Although the Company believes that the assumptions underlying the forward-looking statements contained in this press release are reasonable, any of these assumptions could prove to be inaccurate, and, therefore, there can be no assurance that the forward-looking statements included in this press release will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, you should not regard the inclusion of such information as a representation by the Company that its objectives and plans anticipated by the forward-looking statements will occur or be achieved, or if any of them do, what impact they will have on the Company’s results of operations and financial condition. The Company undertakes no obligation to publicly release any revisions to any forward-looking statements contained herein to reflect events and circumstances occurring after the date hereof or to reflect the occurrence of unanticipated events. |
