[TEAM HEALTH LOGO]
FOR IMMEDIATE RELEASE Contact:
Team Health, Inc.
Knoxville, Tennessee
David Jones, CFO
(865) 693-1000
TEAM HEALTH ANNOUNCES SECOND QUARTER 2004 RESULTS
KNOXVILLE, TENN. - AUGUST 10, 2004 - Team Health, Inc. today announced results
for its second quarter ended June 30, 2004.
For the second quarter of 2004, net revenue less provision for uncollectibles
("revenue less provision") increased 2.3% to $256.0 million from $250.1 million
in the second quarter of 2003. Same contract revenue less provision increased
$5.1 million, or 2.2%, to $229.6 million in the second quarter of 2004 from
$224.6 million for the same period of 2003. The Company reported a net loss of
$55.9 million in the second quarter of 2004 versus net earnings of $7.7 million
in the second quarter of 2003. During the second quarter of 2004, the Company
recorded an estimated impairment loss of $65.8 million to reduce the carrying
value of the goodwill related to its military staffing business due to
contracting changes in the military's TRICARE program. The estimated goodwill
impairment charge is based upon the interim results of the TRICARE re-bidding
process along with projections of estimated results of the remaining business
subject to re-bidding. A final determination of the impairment loss will be
known at the end of the re-bidding process which is scheduled to be completed by
November 1, 2004.
Net revenue less provision for the six months ended June 30, 2004 increased 5.9%
to $517.4 million from $488.5 million in the prior year. For the first six
months of 2004, same contract revenue less
provision increased $23.7 million, or 5.6%, to $447.6 million in 2004 from
$423.9 million in the same period of 2003.
During the first quarter of 2004, the Company completed a financial
restructuring. As a result of a total of $16.0 million of refinancing costs and
compensatory bonus expense paid in conjunction with the refinancing, along with
the estimated impairment loss in the amount of $65.8 million, the Company
reported a net loss of $59.6 million in the six months ended June 30, 2004
compared to a net loss of $17.1 million in the six months ended June 30, 2003.
As of June 30, 2004, Team Health had cash of $55.0 million and $76.1 million of
available capacity under its revolving credit facility. During the second
quarter 2004, Team Health repaid $8.9 million of outstanding debt, including
$8.3 million of the 12% Senior Subordinated Notes redeemed in conjunction with
the March 2004 refinancing transactions. Total indebtedness as of June 30, 2004
is $429.4 million. Cash flow provided by operations (after interest, taxes and
changes in working capital) for the first six months ended June 30, 2004 was
$21.4 million compared to $11.7 million in 2003. The increase between periods
was principally due to an increase in cash collections on accounts receivable as
well as net cash retained under the Company's self-insured professional
liability program.
Lynn Massingale, M.D., President and CEO of Team Health said, "Our management
team is heavily engaged in the military's TRICARE contract re-bidding process
which commenced during the second quarter and is scheduled to be completed by
November 1, 2004. During this process, the majority of our revenue derived as a
subcontractor under the TRICARE program is being subjected to direct contract
re-bidding. Despite a very high level of satisfaction with the quality of our
civilian healthcare providers, the Department of Defense has subjected its
outsourced healthcare staffing contracts held by us and other companies to a
re-bidding process. The potential for disruption to the existing healthcare
services of military dependents is significant as physician and other providers
are subject to replacement on very short notice in many instances. Management is
focused on retaining its existing business as well as winning new staffing
contracts. In certain cases, the opportunity to submit bids has been limited to
restricted vendor lists or small business or minority qualified businesses.
Under these circumstances, the Company is not eligible to bid on such contracts.
Despite these challenges, through mid-July we have been able to retain existing
contracts and obtain new business equal to approximately 71% of our annual
revenue that has been re-bid and awarded to date. The contracts re-bid to date
represent approximately 63% of the
Company's military staffing revenues that are subject to re-bidding. The
remaining balance of the contracts will be re-bid over the balance of the year
and we are committed to making every effort to ensure that all opportunities to
retain and add new business during this period of transition are maximized.
"We anticipate that the changes to our military staffing business derived from
the TRICARE program will result in a decline in revenues and earnings associated
with military staffing. The total impact of the TRICARE changes still remains
unknown due to the volume of contracts still subject to re-bidding over the
balance of the year. However, based upon the known results of the re-bidding
process as well as an estimate of the future results of contracts yet to be
awarded, we have concluded that a portion of the goodwill related to the
military staffing business is impaired and we recorded an estimated goodwill
impairment loss during the second quarter.
"The military staffing operation is expected to remain profitable at the
conclusion of the re-bidding process although at levels below its current level
of profitability. We believe our proven ability to provide the military with
high quality healthcare professionals in a timely manner will ultimately be
rewarded in the form of future growth. The near term reduction expected in the
profitability of our military business is not expected to impact compliance with
our debt covenant provisions regarding maintenance of required financial ratios.
"As a whole, Team Health has achieved growth in revenue and profitability due to
pricing increases and control over our service costs.
"All our resources remain committed to the day to day operations of providing
ongoing value to our customers and physicians. Despite the challenges in the
current environment, an ongoing focus on serving our customers and managing the
details of the business will provide opportunities for the continued long term
financial growth of the Company."
ABOUT TEAM HEALTH
Founded in 1979, Team Health is headquartered in Knoxville, Tennessee. Team
Health is affiliated with over 7,000 healthcare professionals who provide
emergency medicine, radiology, anesthesia, hospitalist, urgent care and
pediatric staffing and management services to over 450 civilian and military
hospitals, surgical centers, imaging centers and clinics in 42 states. For more
information about Team Health, visit www.teamhealth.com.
As previously announced, Team Health will hold an investor conference call at
9:00 a.m. Eastern Time on August 11, 2004. All interested parties may listen to
the call by calling (877) 234-1830. A taped replay of the call will be available
after 12:00 p.m. Eastern Time Wednesday, August 11, 2004, through midnight on
August 18, 2004, by calling (800) 642-1687, access code 8948249.
Statements in this document that are not historical facts are hereby identified
as "forward looking statements" for purposes of the safe harbor provided by
Section 21E of the Securities Exchange Act of 1934 (the "Exchange Act") and
Section 27A of the Securities Act of 1933 (the "Securities Act"). Team Health,
Inc. (the "Company") cautions readers that such "forward looking statements",
including without limitation, those relating to the Company's future business
prospects, revenue, working capital, professional liability expense, liquidity,
capital needs, interest costs and income, wherever they occur in this document
or in other statements attributable to the Company, are necessarily estimates
reflecting the judgment of the Company's senior management and involve a number
of risks and uncertainties that could cause actual results to differ materially
from those suggested by the "forward looking statements." Moreover, the Company,
through its senior management, may from time to time make "forward looking
statements" about matters described herein or other matters concerning the
Company. The Company disclaims any intent or obligation to update "forward
looking statements" to reflect changed assumptions, the occurrence of
unanticipated events or changes to future operating results over time.
- tables attached -
TEAM HEALTH, INC.
FINANCIAL HIGHLIGHTS
(IN THOUSANDS)
(UNAUDITED)
THREE MONTHS ENDED
JUNE 30,
-----------------------
2004 2003
---------- ----------
(UNAUDITED)
(IN THOUSANDS)
Net revenue $ 388,730 $ 358,979
Provision for uncollectibles 132,736 108,848
---------- ----------
Net revenue less provision for uncollectibles 255,994 250,131
Cost of services rendered
Professional service expenses 191,237 187,001
Professional liability costs 13,617 14,535
---------- ----------
Gross profit 51,140 48,595
General and administrative expenses 24,124 24,460
Management fee and other expenses 457 128
Depreciation and amortization 3,459 5,598
Interest expense, net 7,008 6,178
Estimated impairment loss 65,819 -
---------- ----------
Earnings (loss) before income taxes (49,727) 12,231
Provision for income taxes 6,190 4,553
---------- ----------
Net earnings (loss) (55,917) 7,678
Dividends on preferred stock - 3,600
---------- ----------
Net earnings (loss) attributable to common stockholders $ (55,917) $ 4,078
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TEAM HEALTH, INC.
FINANCIAL HIGHLIGHTS
(IN THOUSANDS)
(UNAUDITED)
SIX MONTHS ENDED
JUNE 30,
2004 2003
---------- ----------
(UNAUDITED)
(IN THOUSANDS)
Net revenue $ 786,032 $ 709,118
Provision for uncollectibles 268,628 220,573
---------- ----------
Net revenue less provision for uncollectibles 517,404 488,545
Cost of services rendered
Professional service expenses 385,948 368,997
Professional liability costs 29,891 76,078
---------- ----------
Gross profit 101,565 43,470
General and administrative expenses 48,819 45,923
Management fee and other expenses 613 253
Depreciation and amortization 6,944 11,121
Interest expense, net 14,326 12,393
Refinancing costs 14,731 -
Estimated impairment loss 65,819 -
---------- ----------
Loss before income taxes (49,687) (26,220)
Provision (benefit) for income taxes 6,266 (9,089)
---------- ----------
Net loss (55,953) (17,131)
Dividends on preferred stock 3,602 7,161
---------- ----------
Net loss attributable to common stockholders $ (59,555) $ (24,292)
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TEAM HEALTH, INC.
SUPPLEMENTAL INFORMATION
(IN THOUSANDS)
(UNAUDITED)
JUNE 30, DECEMBER 31,
2004 2003
------------ ------------
Cash and cash equivalents $ 54,971 $ 100,964
Long-term debt, including current portion 429,375 299,415
Accounts receivable, net 152,002 167,957
Capital expenditures, year to date 2,557 8,972
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