[TEAM HEALTH LOGO]
FOR IMMEDIATE RELEASE Contact:
- --------------------- Team Health, Inc.
Knoxville, Tennessee
David Jones, CFO
(865) 693-1000
Team Health Announces Fiscal 2004 Results
-----------------------------------------
KNOXVILLE, Tenn. - February 8, 2005 - Team Health, Inc. today announced results
for its fiscal year and fourth quarter ended December 31, 2004.
Net revenue less provision for uncollectibles ("net revenue less
provision") for the fiscal year ended December 31, 2004 increased to $1,008.7
million from $999.7 million in the prior year. Same contract revenue less
provision for the year increased by 4.2% to $710.6 million from $682.2 million
in 2003. The Company realized a net loss of $49.2 million in 2004 compared to a
net loss of $2.8 million in 2003. The net loss of $49.2 million in 2004 includes
a previously reported goodwill impairment loss of $73.2 million and $16.0
million of refinancing related costs. The net loss in 2003 includes a loss
provision of $50.8 million relating to an actuarial determination of
professional liability losses in excess of insured limits for prior years.
Net revenue less provision in the fourth quarter of 2004 decreased 6.1% to
$240.2 million from $255.8 million in the corresponding period of 2003. The
decline in net revenue less provision between periods is primarily due to
contracting changes for outsourced healthcare staffing by the military under the
TRICARE program. Same contract revenue less provision for the quarter increased
by 3.3% to $186.3 million from $180.3 million in the same period a year ago. Net
earnings were $3.6 million in the fourth quarter of 2004 versus $4.9 million in
the fourth quarter of 2003.
As of December 31, 2004, the Company had cash and cash equivalents and
short term investments of approximately $82.6 million and a revolving credit
facility borrowing availability of $76.2 million. The Company's total
outstanding debt as of December 31, 2004 was $428.1 million. Cash flow provided
by operations (after interest, taxes and changes in working capital) for 2004
was $64.6 million compared to $101.7 million in 2003. The decline in operating
cash flow is due primarily to higher levels of interest and tax payments in
2004, as well as a use of operating cash flow associated with the refinancing
transaction.
Lynn Massingale, M.D., Chief Executive Officer of Team Health, said,
"During 2004, several significant developments occurred that not only impacted
our 2004 financial results, but will continue to impact our financial results
going forward into 2005.
"First, the military subjected its outsourced healthcare staffing providers
to virtually a total re-bidding of their contracts which was completed late in
2004. As the results of the re-bidding process became known, it became
increasingly apparent that our military staffing revenues and operating margins
in 2005 were going to be negatively impacted. As a result, we recorded a non
cash goodwill impairment loss of $73.2 million during the year. In the first
half of 2004, our military staffing business performed quite well. During the
fourth quarter of 2004, we experienced a decline in our military staffing
revenues of approximately $23.4 million compared to the fourth quarter of 2003.
Although management has achieved a high level of success with the re-bidding
process, revenues and profitability will decline in 2005. We are proud and
appreciative of the management and employees of our military healthcare staffing
business for their past successes and for their endurance during a very
disruptive and stressful re-bidding process throughout most of 2004. We believe
our military staffing business continues to be the premier provider of
outsourced healthcare staffing services to the military.
"Second, our core emergency department staffing business experienced growth
in net revenue and even stronger growth in operating profit, excluding the
effect of a $50.8 million professional liability loss charge in 2003, despite
relatively flat year over year fee-for-service volumes. Our ED staffing business
experienced an approximately 6% increase in net revenues. In addition,
professional liability costs declined $4.8 million, excluding the $50.8 million
charge in 2003. This reduction in cost is due to several factors, including the
termination of several high risk environment contracts, the lowering of
physician coverage limits in certain contracts, and a lower
frequency of reported claims. Under the leadership of our Chief Medical
Officer, Dr. Gar LaSalle and other physician executive leaders, we have
implemented a number of risk management loss prevention initiatives, including
improved physician screening and awareness training for high risk patients and
medical conditions. At least preliminarily, these initiatives, along with some
small level of tort reform in several states, would suggest that the rapid
escalation of professional liability costs experienced in recent years has eased
from a year ago.
"Third, during 2004 we engaged experienced healthcare billing consultants
to review our billing processes and to recommend and help implement certain
procedures and tools designed to improve the efficacy of our billings and
collection processes. This work was substantially completed by year end at a
cost in excess of $2.5 million in 2004. While it is too early to gauge the
impact of these efforts on our 2005 average collected rates per visit, such
efforts are expected to favorably impact our collections going forward.
"Lastly, early in 2004 we restructured our capital structure to
significantly lower our average cost of capital. Previous non tax deductible
preferred stock dividends were replaced with lower cost borrowings with tax
deductible interest. Our previous 12% senior subordinated bonds were refinanced
with 9% senior subordinated bonds. This new capital structure gave us greater
flexibility to take advantage of the strong cash flows historically generated by
our business to realize increased net earnings going forward.
"We believe we have a team in place capable of meeting both the challenges
and opportunities that confront our Company, in 2005 and beyond. In that regard,
we welcomed Greg Roth on board in the fourth quarter as our President and Chief
Operating Officer. Greg joins us with a long background in healthcare, including
clinical, operations and financial management experience in the hospital and
outpatient sectors."
As previously announced, Team Health will hold an investor conference call at
4:00 p.m., Eastern Time, on February 9, 2005. All interested parties may listen
to the call by calling (877) 234-1830. A taped replay of the call will be
available after 7:00 p.m., Eastern Time, February 9, 2005, through midnight
Eastern on February 16, 2005, by calling (800) 642-1687, access code 3292859.
About Team Health
- -----------------
Founded in 1979, Team Health is headquartered in Knoxville, Tennessee. Team
Health is affiliated with over 6,200 healthcare professionals who provide
emergency medicine, radiology, anesthesia, hospitalist, urgent care and
pediatric staffing and management services to over 400 civilian and military
hospitals, surgical centers, imaging centers and clinics in 42 states. For more
information about Team Health, visit www.teamhealth.com.
------------------
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)
Year anded December 31,
-----------------------
2004 2003
---- ----
(In thousands)
Net revenue $ 1,572,174 $ 1,479,013
Provision for uncollectibles 563,483 479,267
----------- -----------
Net revenue less provision for uncollectibles 1,008,691 999,746
Cost of services rendered
Professional service expenses 754,222 746,409
Professional liability costs 59,839 115,970
----------- -----------
Gross profit 194,630 137,367
General and administrative expenses 100,473 95,554
Management fee and other expenses 1,387 505
Impairment of intangibles 73,177 168
Depreciation and amortization 13,689 22,018
Interest expense, net 28,949 23,343
Refinancing costs 14,731 --
----------- -----------
Loss before income taxes (37,776) (4,221)
Provision (benefit) for income taxes 11,436 (1,410)
----------- -----------
Net loss (49,212) (2,811)
Dividends on preferred stock 3,602 14,440
----------- -----------
Net loss attributable to common stockholders $ (52,814) $ (17,251)
=========== ===========
Capital Expenditures $ 6,713 $ 8,972
- more -
Team Health, Inc.
Financial Highlights
(in thousands)
(unaudited)
For the three months ended
December 31,
--------------------------
2004 2003
---- ----
(In thousands)
Net revenue $ 393,396 $ 384,860
Provision for uncollectibles 153,154 129,018
---------- ---------
Net revenue less provision for uncollectibles 240,242 255,842
Cost of services rendered
Professional service expenses 181,946 188,844
Professional liability costs 15,027 22,745
---------- ---------
Gross profit 43,269 44,253
General and administrative expenses 25,765 26,500
Management fee and other expenses 613 127
Impairment of intangibles -- 168
Depreciation and amortization 3,367 5,419
Interest expense, net 7,274 4,875
---------- ---------
Earnings before income taxes 6,250 7,164
Provision for income taxes 2,615 2,221
---------- ---------
Net earnings 3,635 4,943
Dividends on preferred stock -- 3,640
---------- ---------
Net earnings attributable to common stockholders $ 3,635 $ 1,303
========== =========
Capital Expenditures $ 2,178 $ 1,860
- more -
Team Health, Inc.
Financial Highlights
(in thousands)
(unaudited)
December 31, December 31,
Balance Sheet Data 2004 2003
- ------------------ ---- ----
Cash and cash equivalents $ 17,931 $100,964
Short term investments 64,651 --
Accounts receivable, net 160,852 167,957
Long-term debt, including current portion 428,125 299,415
####