Exhibit 99.1
ADEPTUS HEALTH INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
The following unaudited pro forma condensed consolidated financial information is based upon the historical financial statements of Adeptus Health Inc. (the “Company”), including certain pro forma adjustments, and has been prepared to illustrate the pro forma effect of the Company’s contribution of its 27 freestanding emergency rooms in North Texas, the hospital in Carrollton, Texas, and the related business associated with these facilities to the joint venture (the “Joint Venture”) in exchange for a minority equity interest of 49% in the Joint Venture.
The unaudited pro forma condensed consolidated statements of operations for the three months ended March 31, 2016 and the fiscal year ended December 31, 2015 are presented as if the contribution had occurred as of January 1, 2015. The unaudited pro forma condensed consolidated balance sheet as of March 31, 2016 is presented as if the contribution had occurred as of March 31, 2016. The Company’s approximately 49% interest in the Joint Venture will be accounted for in the future using the equity method of accounting, with the Company’s preferred return and proportionate share of Joint Venture earnings reflected in the consolidated statements of operations.
The unaudited pro forma condensed consolidated financial information has been prepared based upon available information and management estimates; actual amounts may differ from these estimated amounts. The unaudited pro forma condensed consolidated financial information is not necessarily indicative of the financial position or results of operations that might have occurred had the contribution occurred as of the dates stated above. The pro forma adjustments are described in the notes.
The unaudited pro forma condensed consolidated financial information should be read in conjunction with the related notes and with the historical consolidated financial statements of the Company and the related notes included in previous filings with the Securities and Exchange Commission.
ADEPTUS HEALTH INC.
Unaudited Pro Forma Condensed Consolidated Statement of Operations
For the Three Months Ended March 31, 2016
(In thousands, except per share data)
| | Previously
Reported | | Pro Forma
Adjustments(1) | | Pro Forma
Statement of
Operations | |
| | | | | | | |
Statement of Operations Data: | | | | | | | |
Revenue | | | | | | | |
Patient service revenue | | $ | 133,288 | | $ | (52,347 | ) | $ | 80,941 | |
Provision for bad debt | | (27,053 | ) | 11,554 | | (15,499 | ) |
Net patient service revenue | | 106,235 | | (40,793 | ) | 65,442 | |
Management and contract services revenue | | 6,534 | | 9,868 | | 16,402 | |
Total net operating revenue | | 112,769 | | (30,925 | ) | 81,844 | |
Equity in earnings of unconsolidated joint venture | | 2,501 | | 7,383 | | 9,884 | |
Operating expenses: | | | | | | | |
Salaries, wages and benefits | | 66,815 | | (10,544 | ) | 56,271 | |
General and administrative | | 16,264 | | (1,113 | ) | 15,151 | |
Other operating expenses | | 15,013 | | (9,305 | ) | 5,708 | |
Depreciation and amortization | | 4,371 | | (1,710 | ) | 2,661 | |
Total operating expenses | | 102,463 | | (22,672 | ) | 79,791 | |
Income from operations | | 12,807 | | (870 | ) | 11,937 | |
Other income: | | | | | | | |
Interest expense | | (1,826 | ) | 110 | | (1,716 | ) |
Total other expense | | (1,826 | ) | 110 | | (1,716 | ) |
Income before provision for income taxes | | 10,981 | | (760 | ) | 10,221 | |
Provision for income taxes | | 3,118 | | (216 | ) | 2,902 | |
Net income | | 7,863 | | (544 | ) | 7,319 | |
Less: Net income attributable to non-controlling interest | | 3,330 | | (230 | ) | 3,100 | |
Net income attributable to Adeptus Health Inc. | | $ | 4,533 | | (314 | ) | 4,219 | |
Net loss per share of Class A common stock: | | | | | | | |
Basic | | $ | 0.32 | | | | $ | 0.29 | |
Diluted | | $ | 0.32 | | | | $ | 0.29 | |
Weighted average shares of Class A common stock: | | | | | | | |
Basic | | 14,373,699 | | | | 14,373,699 | |
Diluted | | 14,373,699 | | | | 14,373,699 | |
| | | | | | | | | | |
ADEPTUS HEALTH INC.
Unaudited Pro Forma Condensed Consolidated Statement of Operations
For the Year Ended December 31, 2015
(In thousands, except per share data)
| | Previously
Reported | | Pro Forma
Adjustments(1) | | Pro Forma
Statement of
Operations | |
| | | | | | | |
Statement of Operations Data: | | | | | | | |
Revenue | | | | | | | |
Patient service revenue | | $ | 420,612 | | $ | (127,454 | ) | $ | 293,158 | |
Provision for bad debt | | (70,119 | ) | 22,710 | | (47,409 | ) |
Net patient service revenue | | 350,493 | | (104,744 | ) | 245,749 | |
Management and contract services revenue | | 14,194 | | 33,722 | | 47,916 | |
Total net operating revenue | | 364,687 | | (71,022 | ) | 293,665 | |
Equity in earnings of unconsolidated joint venture | | 8,927 | | 949 | | 9,876 | |
Operating expenses: | | | | | | | |
Salaries, wages and benefits | | 218,114 | | (32,430 | ) | 185,684 | |
General and administrative | | 51,083 | | (2,923 | ) | 48,160 | |
Other operating expenses | | 51,374 | | (25,366 | ) | 26,008 | |
Depreciation and amortization | | 17,875 | | (6,605 | ) | 11,270 | |
Total operating expenses | | 338,446 | | (67,324 | ) | 271,122 | |
Income from operations | | 35,168 | | (2,749 | ) | 32,419 | |
Other income: | | | | | | | |
Gain on contribution to joint venture | | 24,250 | | — | | 24,250 | |
Interest expense | | (12,759 | ) | 440 | | (12,319 | ) |
Realized (loss) on derivative | | (92 | ) | — | | (92 | ) |
Loss on extinguishment of debt | | (5,011 | ) | — | | (5,011 | ) |
Total other income | | 6,388 | | 440 | | 6,828 | |
Income before provision for income taxes | | 41,556 | | (2,309 | ) | 39,247 | |
Provision for income taxes | | 8,733 | | (350 | ) | 8,383 | |
Net income | | 32,823 | | (1,959 | ) | 30,864 | |
Less: Net income attributable to non-controlling interest | | 19,606 | | (1,170 | ) | 18,436 | |
Net income attributable to Adeptus Health Inc. | | $ | 13,217 | | (789 | ) | 12,428 | |
Net income per share of Class A common stock: | | | | | | | |
Basic | | $ | 1.09 | | | | $ | 1.03 | |
Diluted | | $ | 1.09 | | | | $ | 1.03 | |
Weighted average shares of Class A common stock: | | | | | | | |
Basic | | 12,103,383 | | | | 12,103,383 | |
Diluted | | 12,103,383 | | | | 12,103,383 | |
| | | | | | | | | | |
ADEPTUS HEALTH INC.
Unaudited Pro Forma Condensed Consolidated Balance Sheet
March 31, 2016
(In thousands)
| | Previously
Reported | | Business and
Assets
Contributed to
Joint
Venture(2) | | Pro Forma
Balance Sheet | |
| | | | | | | |
Assets: | | | | | | | |
Current assets | | | | | | | |
Cash | | $ | 3,656 | | $ | — | | $ | 3,656 | |
Accounts receivable, less allowance for doubtful accounts | | 77,397 | | — | | 77,397 | |
Other receivables and current assets | | 38,640 | | — | | 38,640 | |
Medical supplies inventory | | 5,673 | | — | | 5,673 | |
Total current assets | | 125,366 | | — | | 125,366 | |
Property and equipment, net | | 68,303 | | (33,159 | ) | 35,144 | |
Investment in unconsolidated joint ventures | | 45,605 | | 143,926 | | 189,531 | |
Deposits | | 1,010 | | (230 | ) | 780 | |
Deferred tax assets | | 204,491 | | — | | 204,491 | |
Intangibles, net | | 17,790 | | — | | 17,790 | |
Goodwill | | 61,009 | | — | | 61,009 | |
Other long-term assets | | 2,767 | | — | | 2,767 | |
Total assets | | $ | 526,341 | | $ | 110,537 | | $ | 636,878 | |
Liabilities and shareholders’ equity: | | | | | | | |
Current liabilities | | | | | | | |
Accounts payable and accrued expenses | | $ | 28,494 | | $ | — | | $ | 28,494 | |
Accrued compensation | | 20,137 | | — | | 20,137 | |
Current maturities of long-term debt | | 6,910 | | — | | 6,910 | |
Current maturities of capital lease obligations | | 107 | | (107 | ) | — | |
Deferred rent | | 944 | | (292 | ) | 652 | |
Total current liabilities | | 56,592 | | (399 | ) | 56,193 | |
Long-term debt, less current maturities | | 112,141 | | — | | 112,141 | |
Payable to related parties pursuant to tax receivable agreement | | 191,302 | | — | | 191,302 | |
Capital lease obligations, less current maturities | | 3,925 | | (3,925 | ) | — | |
Deferred rent | | 4,207 | | (2,139 | ) | 2,068 | |
Total liabilities | | 368,167 | | (6,464 | ) | 361,704 | |
Total shareholders’ equity | | 158,174 | | 117,000 | | 275,174 | |
Total liabilities and shareholders’ equity | | $ | 526,341 | | $ | 110,537 | | $ | 636,878 | |
ADEPTUS HEALTH INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
NOTE 1. BASIS OF PRESENTATION
The accompanying unaudited pro forma condensed consolidated financial statements give effect to the pro forma adjustments necessary to reflect the Company’s contribution of its 27 freestanding emergency rooms in North Texas, the hospital in Carrollton, Texas, and the related business associated with these facilities (the “Facilities”) to the joint venture with Texas Health Resources (the “Joint Venture”) in exchange for a minority equity interest of 49% in the Joint Venture as if it occurred as of January 1, 2015 in the pro forma condensed consolidated statements of operations for the three months ended March 31, 2016 and the fiscal year ended December 31, 2015 and as of March 31, 2016 in the pro forma condensed consolidated balance sheet.
NOTE 2. PRO FORMA ADJUSTMENTS
The unaudited pro forma condensed consolidated statements of operations and balance sheet reflect the effect of the following pro forma adjustments:
(1) Reduction of revenue and expenses are the result of the contribution of the Facilities into the Joint Venture. The Company will also receive management and contract services revenue for services performed on behalf of the Joint Venture. This activity is recurring and has been adjusted within the pro forma condensed consolidated statements of operations. The Company’s approximately 49% interest in the Joint Venture will be accounted for in the future using the equity method of accounting, with the Company’s preferred return and proportionate share of Joint Venture earnings reflected in the consolidated statements of operations.
(2) The elimination of assets and liabilities associated with the Facilities included in the Company’s historical condensed consolidated financial statements. The increase in investment in unconsolidated joint ventures of $143.9 million represents the Company’s estimated gain on contribution of the Facilities of $117.0 million and the book value of the net assets contributed of approximately $26.9 million. The net increase to total equity of $117.0 million approximates the estimated gain on the contribution.
