EXHIBIT 99.1
UNAUDITED PRO FORMA COMBINED CONDENSED
CONSOLIDATED FINANCIAL INFORMATION
The following unaudited pro forma combined condensed consolidated
financial statements have been prepared to give effect to the proposed
transaction using the purchase method of accounting and are based upon the
assumptions and adjustments described in the notes to the unaudited pro forma
combined condensed consolidated financial statements included in this Current
Report on Form 8-K. These unaudited pro forma combined condensed consolidated
financial statements were prepared as if the proposed transaction had been
completed on January 1, 2003 for statements of operations purposes and on
December 31, 2004 for balance sheet purposes.
The unaudited pro forma combined condensed consolidated financial
statements are presented for illustrative purposes only and are not necessarily
indicative of the financial position or results of operations that would have
actually been reported had the proposed transaction occurred on the dates
indicated, nor are they necessarily indicative of the future financial position
or results of operations of the combined company. The final purchase price
depends on the actual number of shares of New LifePoint common stock issued, the
actual amount of cash exchanged, the actual amount of debt assumed and actual
direct merger costs incurred. The final purchase price will be determined after
completion of the proposed transaction. Please refer to Note 1 to the Unaudited
Pro Forma Combined Condensed Consolidated Financial Information beginning on
page 5 for a detailed description of the final purchase price. The unaudited pro
forma combined condensed consolidated financial statements include adjustments,
which are based upon preliminary estimates, to reflect the allocation of
purchase price to the fair values of acquired assets and assumed liabilities of
Province. The final allocation of the purchase price will be determined after
the completion of the proposed transaction and will be based upon the fair
values of actual net tangible and intangible assets acquired and liabilities
assumed. The preliminary purchase price allocation for Province is subject to
revision as more detailed analysis is completed and additional information
related to the fair values of Province's assets and liabilities becomes
available. Any change in the fair value of the net assets of Province will
change the amount of the purchase price allocable to goodwill. Additionally,
changes in Province's working capital, including the results of operations from
December 31, 2004 through the date the proposed transaction is completed, will
change the amount of goodwill recorded. Due to these varying assumptions, final
purchase accounting adjustments may differ materially from the pro forma
adjustments presented herein.
These unaudited pro forma combined condensed consolidated financial
statements are based upon, and should be read in conjunction with, the
historical consolidated financial statements of LifePoint and Province and
related notes contained in the reports and other information LifePoint and
Province have filed with the United States Securities and Exchange Commission.
1
UNAUDITED PRO FORMA COMBINED CONDENSED CONSOLIDATED
BALANCE SHEET
DECEMBER 31, 2004
(IN MILLIONS)
PRO FORMA
AS REPORTED AS ADJUSTED ---------------------------
LIFEPOINT PROVINCE ADJUSTMENTS COMBINED
----------- ----------- ------------- -----------
ASSETS
Current assets:
Cash and cash equivalents..................................... $ 18.6 $ 9.8 $ (689.1) (a) $ 61.7
722.4 (b)
Accounts receivable, net...................................... 112.0 117.2 (15.0) (e) 214.2
Inventories................................................... 25.3 21.8 - 47.1
Assets held for sale/of discontinued operations............... 33.0 1.4 - 34.4
Income taxes receivable....................................... 7.5 10.0 2.0 (f) 19.5
Deferred income taxes and other current assets................ 31.4 23.9 (0.2) (a) 60.8
5.7 (f)
---------- ---------- --------- ----------
227.8 184.1 25.8 437.7
Property and equipment, net........................................ 501.1 578.6 126.4 (a) 1,206.1
Deferred loan costs, net........................................... 4.9 11.7 (11.7) (a) 33.7
29.5 (b)
(0.7) (c)
Intangible assets, net............................................. 3.3 0.9 - 4.2
Other.............................................................. 5.8 19.1 (16.4) (a) 8.5
Goodwill........................................................... 144.4 388.7 692.9 (a) 1,226.0
--------- --------- --------- ----------
$ 887.3 $ 1,183.1 $ 845.8 $ 2,916.2
========= ========= ========= ==========
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable................................................ $ 29.5 32.2 $ - $ 61.7
Accrued salaries................................................ 31.2 32.7 - 63.9
Liabilities held for sale/of discontinued operations............ 0.3 0.4 - 0.7
Other current liabilities....................................... 18.2 26.1 (3.7) (b) 40.6
Current maturities of long-term debt............................ - 76.0 (76.0) (b) -
---------- ---------- --------- ---------
79.2 167.4 (79.7) 166.9
Revolving credit facility.......................................... - 55.0 (55.0) (b) -
Convertible notes.................................................. 221.0 172.5 (172.5) (b) 221.0
Senior subordinated notes - Province............................... - 200.0 (200.0) (b) -
Interest rate swap................................................. - (1.7) 1.7 (c) -
Senior subordinated notes - New LifePoint.......................... - - 200.0 (b) 200.0
Term loan B........................................................ - - 1,100.0 (b) 1,100.0
Deferred income taxes.............................................. 47.9 46.7 41.7 (a) 136.3
Professional and general liability claims and other liabilities.... 28.4 25.0 (1.7) (c) 51.7
Minority interests in equity of consolidated entities.............. 1.3 2.4 - 3.7
Stockholders' equity:
Preferred stock................................................. - - - -
Common stock.................................................... 0.4 0.5 (0.5) (a) 0.5
0.1 (a)
Capital in excess of par value.................................. 332.6 320.0 (320.0) (a) 908.5
575.9 (a)
Unearned ESOP compensation...................................... (12.9) - - (12.9)
Unearned compensation on non-vested stock....................... (4.5) - 4.5 (d) -
Retained earnings............................................... 222.8 195.7 (195.7) (a) 169.4
(40.9) (b)
(0.7) (c)
(4.5) (d)
(15.0) (e)
7.7 (f)
Accumulated other comprehensive loss............................ - (0.4) 0.4 (a) -
Treasury stock.................................................. (28.9) - - (28.9)
---------- ---------- --------- ---------
509.5 515.8 11.3 1,036.6
---------- ---------- --------- ---------
$ 887.3 $ 1,183.1 $ 845.8 $ 2,916.2
========== ========== ========= =========
The accompanying notes are an integral part of these unaudited pro forma
combined condensed consolidated financial statements.
2
UNAUDITED PRO FORMA COMBINED CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2004
(IN MILLIONS, EXCEPT PER SHARE DATA)
PRO FORMA
AS ADJUSTED AS ADJUSTED ------------------------
LIFEPOINT PROVINCE ADJUSTMENTS COMBINED
----------- ----------- ----------- ----------
Revenues $ 1,018.6 $ 947.9 $ - $ 1,966.5
Salaries and benefits 409.3 367.3 (9.3) (g) 763.9
(3.4) (h)
Supplies 131.6 123.3 (1.4) (g) 253.5
Other operating expenses 172.2 192.0 (7.4) (g) 357.7
0.9 (i)
Provision for doubtful accounts 89.3 107.2 - 196.5
Depreciation and amortization 49.3 49.9 11.4 (k) 110.6
Interest expense, net 13.1 33.0 14.4 (j) 60.5
Debt retirement costs 1.5 - (1.5) (l) -
ESOP expense 9.4 - 4.9 (h) 14.3
---------- --------- ------- ----------
875.7 872.7 8.6 1,757.0
---------- --------- ------- ----------
Income (loss) from continuing operations
before minority interests and income taxes 142.9 75.2 (8.6) 209.5
Minority interests in earnings of consolidated entities 1.0 0.7 - 1.7
---------- --------- ------- ----------
Income (loss) from continuing operations
before income taxes 141.9 74.5 (8.6) 207.8
Provision (benefit) for income taxes 55.6 26.5 (3.2) (m) 78.9
---------- --------- ------- ----------
Income (loss) from continuing operations $ 86.3 $ 48.0 $ (5.4) $ 128.9
========== ========= ======= ==========
Basic earnings per share:
Income from continuing operations $ 2.33 $ 0.96 (n) $ 2.49
========== ========= ==========
Shares used in per share calculation - basic 37.0 49.8 (n) 51.7
========== ========= ==========
Diluted earnings per share:
Income from continuing operations $ 2.18 $ 0.93 (n) $ 2.38
========== ========= ==========
Shares used in per share calculation - diluted 42.8 60.0 (n) 57.1
========== ========= ==========
The accompanying notes are an integral part of these unaudited pro forma
combined condensed consolidated financial statements.
3
UNAUDITED PRO FORMA COMBINED CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2003
(IN MILLIONS, EXCEPT PER SHARE DATA)
PRO FORMA
AS ADJUSTED AS ADJUSTED ------------------------
LIFEPOINT PROVINCE ADJUSTMENTS COMBINED
----------- ----------- ----------- ----------
Revenues $ 932.4 $ 890.5 $ - $ 1,822.9
Salaries and benefits 378.0 357.1 (9.3) (g) 722.8
(3.0) (h)
Supplies 121.2 116.8 (1.4) (g) 236.6
Other operating expenses 168.2 192.1 (6.1) (g) 355.1
0.9 (i)
Provision for doubtful accounts 80.5 92.8 - 173.3
Depreciation and amortization 46.3 44.8 11.4 (k) 102.5
Interest expense, net 13.8 34.6 12.9 (j) 61.3
Debt retirement costs - 0.5 (0.5) (l) -
ESOP expense 6.9 - 3.5 (h) 10.4
-------- -------- ------- ----------
814.9 838.7 8.4 1,662.0
-------- -------- ------- ----------
Income (loss) from continuing operations
before minority interests and income taxes 117.5 51.8 (8.4) 160.9
Minority interests in earnings of consolidated entities 0.7 0.3 - 1.0
-------- -------- ------- ----------
Income (loss) from continuing operations
before income taxes 116.8 51.5 (8.4) 159.9
Provision (benefit) for income taxes 46.2 18.0 (3.1) (m) 61.1
-------- -------- ------- ----------
Income (loss) from continuing operations $ 70.6 $ 33.5 $ (5.3) $ 98.8
======== ======== ======= ==========
Basic earnings per share:
Income from continuing operations $ 1.90 $ 0.69 (n) $ 1.90
======== ======== ==========
Shares used in per share calculation - basic 37.2 48.7 (n) 51.9
======== ======== ==========
Diluted earnings per share:
Income from continuing operations $ 1.81 $ 0.68 (n) $ 1.85
======== ======== ==========
Shares used in per share calculation - diluted 43.3 49.3 (n) 57.3
======== ======== ==========
The accompanying notes are an integral part of these unaudited pro forma
combined condensed consolidated financial statements.
4
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED CONSOLIDATED
FINANCIAL INFORMATION
1. BASIS OF PRO FORMA PRESENTATION
LifePoint announced on August 16, 2004 that it entered into a definitive
agreement to acquire Province for approximately $1.7 billion in cash, stock and
the assumption of debt. Under the terms of the merger agreement, the businesses
of LifePoint and Province will be combined under a newly formed company. Each
Province stockholder will receive a per share consideration comprised of $11.375
in cash and a number of shares of common stock of New LifePoint equal to an
exchange ratio of between 0.3447 and 0.2917, which shares will have a value of
$11.375 to the extent that the LifePoint average share price (defined below) is
between $33.00 and $39.00. The exchange ratio will be 0.3447 if the volume
weighted average (rounded to four decimal places) of the daily sale prices for a
share of LifePoint common stock for the 20 consecutive trading day period ending
at the close of business on the third trading day prior to the closing (the
"LifePoint average share price") is $33.00 or less, or 0.2917 if the LifePoint
average share price is $39.00 or more. If the LifePoint average share price is
between $33.00 and $39.00, then the exchange ratio will be equal to $11.375
divided by the LifePoint average share price. The LifePoint average share price
as of February 28, 2005 was $39.27. Based on this price, each Province
stockholder would have received a total per share consideration valued at
$22.83. New LifePoint will account for the proposed transaction using the
purchase method of accounting.
The per share consideration represents approximately a 68% premium for
Province shares based on $13.61, which was the closing price of a share of
Province common stock on August 13, 2004, the last trading day prior to the
announcement of the proposed transaction. Based on $39.27, the LifePoint average
share price as of February 28, 2005 and the number of shares of Province common
stock outstanding on such date, New LifePoint will issue approximately 14.7
million shares of its common stock to Province stockholders and will pay
approximately $572.0 million in cash. Each LifePoint stockholder will be deemed
to receive one share of New LifePoint common stock for each share of LifePoint
common stock.
2. PRELIMINARY PURCHASE PRICE
The estimated total purchase price of the proposed acquisition of Province
is as follows (in millions):
Fair value of LifePoint common stock to be issued $ 576.0
Cash 572.0
Assumption of Province debt obligations 503.5
Estimated severance and Province stock option costs 80.6
Estimated direct transaction costs 36.5
-----------
Total $ 1,768.6
===========
Under the purchase method of accounting, the total estimated purchase
price as shown in the table above will be allocated to Province's net tangible
and intangible assets based upon their estimated fair values as of the date of
completion of the proposed transaction. Any excess of the purchase price over
the estimated fair value of the net tangible and intangible assets will be
recorded as goodwill. The estimated fair value of New LifePoint common stock to
be issued is based on the $39.27 LifePoint average share price as of February
28, 2005, as described in Note 1. Due to the variable nature of the exchange
ratio to determine the per share consideration, the measurement date to
determine the fair value of New LifePoint common stock to be issued will be
determined in accordance with Emerging Issues Task Force Issue Number 99-12,
Determination of the Measurement Date for the Market Price of Acquirer
Securities Issued in a Purchase Business Combination , ("EITF No. 99-12"). As
stated in paragraph 7 in EITF No. 99-12, the measurement date is the earliest
date, from the date the terms of the acquisition are agreed to and announced to
the date of final application of the formula pursuant to the acquisition
agreement, on which subsequent applications of the formula do not result in a
change in the number of shares or the amount of other consideration.
Based upon the estimated purchase price and assumptions regarding valuations of
acquired assets and liabilities, the preliminary purchase price allocation,
which will change based upon the completion of an extensive valuation to be
5
performed by a third party valuation firm, is as follows (amounts in millions):
Net working capital $ 92.5
Property and equipment 705.0
Amortizable intangible assets 0.9
Other long-term assets 2.7
Goodwill 1,081.6
Interest rate swap 1.7
Deferred income tax liabilities (88.4)
Other long-term liabilities (27.4) (a)
-----------
Total $ 1,768.6
===========
- --------------
(a) Includes $(1.7) million in interest rate swap, which nets to $0 with above
$1.7 million.
The depreciation and amortization related to the fair value adjustments
are reflected as pro forma adjustments to the unaudited pro forma combined
condensed consolidated financial statements.
Goodwill represents the excess of the purchase price over the fair market
value of the net tangible and intangible assets acquired and liabilities
assumed. Goodwill will not be amortized and will be tested for impairment on an
annual basis and whenever events or circumstances occur indicating that the
goodwill may be impaired. The preliminary purchase price allocation for Province
is subject to revision as more detailed analysis is completed, including the
completion of a valuation to be performed by a third party valuation firm, and
additional information on the fair values of Province's assets and liabilities
becomes available. Any change in the fair value of the assets or liabilities of
Province will change the amount of the purchase price allocable to goodwill. The
final purchase price allocation may differ materially from the allocation
presented here.
3. PRO FORMA ADJUSTMENTS
Pro forma adjustments are necessary to reflect the estimated purchase
price, to adjust amounts related to Province's assets and liabilities to a
preliminary estimate of their fair values, to reflect financing transactions
associated with the proposed transaction, to reflect changes in depreciation and
amortization expense resulting from the estimated fair value adjustments to net
tangible assets, to reflect other transactions directly related to the proposed
transaction, and to reflect the income tax effects related to the pro forma
adjustments. There were no intercompany transactions between LifePoint and
Province. Certain pro forma adjustments were required to conform Province's
accounting policies and presentation to LifePoint's accounting policies and
presentation.
The pro forma combined provision (benefit) for income taxes does not
reflect the amounts that would have resulted had LifePoint and Province filed
consolidated income tax returns during the periods presented.
LifePoint has not identified any preacquisition contingencies where the
related asset, liability or impairment is probable and the amount of the asset,
liability or impairment can be reasonably estimated. Prior to the end of the
purchase price allocation period after completion of the proposed transaction,
if information becomes available which would indicate it is probable that such
events had occurred and the amount can be reasonably estimated, such items will
be included in the final purchase price allocation.
There are no material non-recurring adjustments in the unaudited pro forma
combined condensed consolidated statements of operations.
6
The accompanying unaudited pro forma combined condensed consolidated
financial statements have been prepared as if the proposed transaction was
completed on December 31, 2004 for balance sheet purposes and as of January 1,
2003 for statements of operations purposes, and reflect the following pro forma
adjustments:
(a) To record the proposed transaction (dollar amounts in millions, except per
share data):
- Issuance of New LifePoint common stock -- approximately 14.7 million
shares at $39.27 per share, the LifePoint average share price as of
February 28, 2005:
Common stock $ 0.1
Capital in excess of par value 575.9
--------
$ 576.0
========
The final fair value of New LifePoint common stock to be issued
cannot be Determined until the acquisition date, which is in
accordance with EITF No. 99-12 and further discussed in Note 2.
- Estimated cash payments for:
Cash per share merger consideration
of $11.375 per share of Province $572.0
Province stock option costs 54.0
Province severance costs 26.6
Direct transaction costs 36.5
------
$689.1
======
Direct transaction costs primarily include estimated investment
banker fees, attorney fees and accounting fees.
- Elimination of existing Province stockholders' equity:
Common stock $ 0.5
Capital in excess of par value 320.0
Retained earnings 195.7
Accumulated comprehensive loss (0.4)
--------
$ 515.8
========
- The difference between the preliminary estimate of the fair value
based upon management's expectations and The historical amount of
Province's property and equipment is as follows:
Historical Preliminary Estimated
Amount Fair Value Increase
---------- ----------- ---------
Land........................... $ 40.3 $ 52.6 $ 12.3
Buildings and improvements..... 374.3 488.4 114.1
Equipment...................... 141.5 141.5 -
Construction in progress....... 22.5 22.5 -
------ ------ ------
$578.6 $705.0 $126.4
====== ====== ======
The final fair value amounts assigned to Province's property and
equipment will be determined based upon a valuation to be performed
by a third party valuation firm.
7
- Elimination of Province's physician recruiting receivable balance to
conform Province's accounting treatment of these assets to
LifePoint's method of accounting, which is to immediately expense
these costs:
Current assets $ 0.2
Long-term assets 16.4
--------
$ 16.6
========
- To increase deferred income tax liabilities by $41.7 million to
reflect the impact of the pro forma purchase price adjustments
related to the increase in fair value of Province's property and
equipment and the elimination of Province's physician recruiting
receivable balance, as discussed above:
Increase in property and equipment $ 48.0
Eliminate physician receivables (6.3)
-------
$ 41.7
=======
- Eliminate Province's deferred loan costs as it is not a future
benefit to New LifePoint - $ 11.7
======
- Estimation of step-up of goodwill - $692.9
======
(b) To record the payments to be made from the proceeds of the new
indebtedness (in millions):
Sources:
Term Loan B $ 1,100.0
Senior subordinated notes 200.0
----------
Subtotal 1,300.0
Uses:
Revolving credit facility - Province 55.0
Province convertible notes 248.5
Province senior subordinated notes 200.0
Financing fees 29.5
Debt premium costs and interest rate swap retirement
costs 40.9
Interest payments 3.7
---------
Subtotal 577.6 (577.6)
--------- ----------
Remaining funds available for Province merger 722.4
Cash payment at $11.375 per share of Province 572.0
Province stock option costs 54.0
Province severance costs 26.6
Direct transaction costs 36.5
Cash balance 33.3 722.4
--------- ----------
$ 1,300.0 $ --
========= ==========
(c) To reflect the non-cash write-off of deferred loan costs and interest rate
swap associated with the refinancing of existing indebtedness of both
Province and LifePoint (in millions):
Deferred Interest Combined
Loan Costs Rate Swap Total
---------- --------- --------
Province (portion on interest rate swap line) $ -- $ 1.7 $ 1.7
Province (portion on professional liability risks and other liabilities line) -- (1.7) (1.7)
LifePoint (revolving credit facility) 0.7 -- 0.7
----- ----- -----
$ 0.7 $ -- $ 0.7
===== ===== =====
8
(d) To expense LifePoint's unearned compensation balance related to the
non-vested LifePoint stock awards that immediately vest as a result of the
proposed transaction.
(e) To adjust Province's allowance for doubtful accounts conforming Province's
accounting treatment of this critical accounting estimate to LifePoint's
accounting policy. This adjustment reflects the change from an aged days
approach to an estimated payor collection approach and will be a
non-recurring charge to New LifePoint's statement of operations after
completion of the proposed transaction.
(f) To adjust income taxes receivable and deferred income tax assets and
liabilities reflecting the impact of the pro forma adjustments related to
the write-off of LifePoint's deferred loan costs, the adjustment to
Province's allowance for doubtful accounts and the vesting of the
LifePoint non-vested stock awards.
(g) To adjust operating expenses in the years ended December 31, 2004 and 2003
for estimated net decreases in operating expenses. Approximately 86
positions will be eliminated at the Province corporate office for an
estimated annual savings of $18.0 million in salaries and benefits
expense. Additionally, approximately 63 new positions will be created at
the New LifePoint corporate office for an estimated annual cost of $8.7
million in salaries and benefits expense. In addition to salaries and
benefits, there are adjustments reflecting net decreases in supply
expenses and other operating expenses such as legal, accounting and
consulting fees. The projected decrease in supply expenses and other
operating expenses are based upon a preliminary analysis of savings from
the Company's group purchasing organization and elimination of duplicative
costs. New LifePoint may be unable to fully realize these estimated net
cost savings. The following is an estimate of the net cost savings
anticipated as a result of the proposed transaction (in millions):
Year Ended Year Ended
December 31, 2004 December 31, 2003
----------------- -----------------
Salaries and benefits $ (9.3) $ (9.3)
Supplies (1.4) (1.4)
Other operating expense (7.4) (6.1)
------- --------
$ (18.1) $ (16.8)
======= ========
(h) To reflect the elimination of Province's retirement expense and record
additional ESOP expense based upon an additional allocation to employees
assumed to be 145,000 shares per year. The pro forma ESOP expense is based
on the historical average closing market prices of LifePoint common stock
during the periods presented multiplied by the additional ESOP shares to
be allocated. Total shares assumed to be allocated are 425,000 shares.
Dollar amounts below in millions:
Year Ended Year Ended
December 31, 2004 December 31, 2003
----------------- -----------------
Eliminate Province's retirement expense $ (3.4) $ (3.0)
Record additional ESOP expense 4.9 3.5
------- ---------
Net expense adjustment $ 1.5 $ 0.5
======= =========
(i) To record expenses relating to Martin S. Rash's consulting agreement (in
millions):
Year Ended Year Ended
December 31, 2004 December 31, 2003
----------------- -----------------
$ 0.9 $ 0.9
===== =====
9
(j) To record pro forma interest expense based upon an assumed debt structure
as follows (in millions):
Year Ended Year Ended
December 31, 2004 December 31, 2003
----------------- -----------------
Term Loan B - LIBOR +175 bps $ 37.1 $ 37.1
($1.1 billion)
Senior subordinated notes - LIBOR
+ 225 bps ($200 million) 7.8 7.8
Revolver - ($300.0 million)
commitment fees 1.4 1.4
4.5% Convertible notes 9.9 9.9
Standby letters of credit 0.4 0.4
Interest on capital leases 1.6 1.4
Amortization of deferred loan costs 5.0 5.0
------------ ----------
Interest costs 63.2 63.0
Less: Capitalized interest (2.4) (1.5)
Interest income (0.3) (0.2)
------------ ----------
Interest expense, net $ 60.5 $ 61.3
------------ ----------
Less: Historical interest expense, net:
Province (33.0) (34.6)
LifePoint (13.1) (13.8)
------------ ----------
Net interest expense adjustment $ 14.4 $ 12.9
============ ==========
The interest expense calculation presented above uses the actual average
LIBOR rate during the year ended December 31, 2004, which is 1.6243% to
determine the interest rate applied to the borrowings under term loan B and
senior subordinated notes. If the LIBOR rate increases or decreases, the annual
effect on interest expense would be as follows (dollars in millions):
Increase/Decrease Effect on Interest Expense
- ----------------- --------------------------
0.25% $ 3.3
0.50% 6.5
0.75% 9.8
1.00% 13.0
(k) To adjust depreciation and amortization expense related to the purchase
price adjustments of Province's property and equipment.
(l) To eliminate debt retirement costs assuming a pro forma convertible debt
balance of $221.0 million at January 1, 2003.
(m) To record the income tax effects of the pro forma statement of operations
adjustments.
(n) Shares used to calculate unaudited pro forma income from continuing
operations per diluted share were computed by adding to LifePoint's
weighted average shares outstanding of approximately 14.7 million shares
of New LifePoint common stock assumed to be issued, which is based upon
the pro forma exchange ratio of 0.2917 of a share of New LifePoint common
stock for each outstanding share of Province common stock. This pro forma
exchange ratio is based on $39.27, the LifePoint average share price as of
February 28, 2005. The actual exchange ratio may be different and will be
based on the volume weighted average of the daily sale prices for a share
of LifePoint common stock for the 20 consecutive trading day period ending
at the close of business on the third trading day prior to the closing of
the proposed transaction. Please refer to Note 1 for further discussion of
the exchange ratio.
Diluted earnings per share is calculated using the "if-converted" method.
Interest expense related to convertible notes, net of taxes, is added to
income from continuing operations for the numerator of this calculation.
10
The interest expense, net of taxes, added to income from continuing
operations was $6.8 million and $6.9 million for the years ended December
31, 2004 and 2003, respectively.
4. LIFEPOINT PRO FORMA FINANCIAL STATEMENTS
The following unaudited pro forma condensed consolidated statement of
operations has been prepared to give effect to the operations of River Parishes
Hospital and Spring View Hospital as if LifePoint had acquired these hospitals
on January 1, 2003 for statements of operations purposes. LifePoint acquired
River Parishes Hospital effective July 1, 2004 and Spring View Hospital
effective October 1, 2003. The unaudited pro forma condensed consolidated
statement of operations are presented for illustrative purposes only and are not
necessarily indicative of the financial position or results of operations that
would have actually been reported had the acquisitions occurred on the dates
indicated, nor are they necessarily indicative of the future financial position
or results of operations.
11
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2004
(IN MILLIONS)
AS REPORTED PRO FORMA AS ADJUSTED
LIFEPOINT ACQUISITION (a) LIFEPOINT
----------- --------------- -----------
Revenues $ 996.9 $ 21.7 $ 1,018.6
Salaries and benefits 399.4 9.9 409.3
Supplies 129.1 2.5 131.6
Other operating expenses 166.8 5.4 172.2
Provision for doubtful accounts 86.2 3.1 89.3
Depreciation and amortization 48.1 1.2 49.3
Interest expense, net 12.6 0.5 13.1
Debt retirement costs 1.5 - 1.5
ESOP expense 9.4 - 9.4
--------- --------- ----------
853.1 22.6 875.7
--------- --------- ----------
Income (loss) before minority interests and income taxes 143.8 (0.9) 142.9
Minority interests in earnings of consolidated entities 1.0 - 1.0
--------- --------- ----------
Income (loss) before income taxes 142.8 (0.9) 141.9
Provision (benefit) for income taxes 56.0 (0.4) 55.6
--------- --------- ----------
Income (loss) from continuing operations $ 86.8 $ (0.5) $ 86.3
========= ========= ==========
(a) To give effect to the operations of River Parishes Hospital as if
LifePoint had acquired it on January 1, 2003. LifePoint acquired River
Parishes Hospital effective July 1, 2004.
12
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2003
(IN MILLIONS)
AS REPORTED PRO FORMA AS ADJUSTED
LIFEPOINT ACQUISITIONS (a) LIFEPOINT
----------- ----------------- ------------
Revenues $875.6 $ 56.8 $932.4
Salaries and benefits 352.3 25.7 378.0
Supplies 114.2 7.0 121.2
Other operating expenses 155.4 12.8 168.2
Provision for doubtful accounts 74.1 6.4 80.5
Depreciation and amortization 43.1 3.2 46.3
Interest expense, net 12.8 1.0 13.8
ESOP expense 6.9 - 6.9
------ ------ ------
758.8 56.1 814.9
------ ------ ------
Income before minority interests and income taxes 116.8 0.7 117.5
Minority interests in earnings of consolidated entities 0.7 - 0.7
------ ------ ------
Income before income taxes 116.1 0.7 116.8
Provision for income taxes 45.9 0.3 46.2
------ ------ ------
Income from continuing operations $ 70.2 $ 0.4 $ 70.6
====== ====== ======
(a) To give effect to the operations of River Parishes Hospital and Spring
View Hospital as if LifePoint had acquired these facilities on January 1,
2003. LifePoint acquired River Parishes Hospital effective July 1, 2004
and Spring View Hospital effective October 1, 2003.
13
5. PROVINCE PRO FORMA FINANCIAL STATEMENTS
The following unaudited pro forma condensed consolidated statement of
operations has been prepared to conform the presentation of Province's
historical statement of operations to LifePoint's statement of operations
presentation and to give effect to the operations of Las Cruces Medical Center
as if Province had acquired this hospital on January 1, 2003. Province acquired
Las Cruces Medical Center effective June 1, 2004. The unaudited pro forma
condensed consolidated statement of operations is presented for illustrative
purposes only and is not necessarily indicative of the results of operations
that would have actually been reported had the acquisition occurred on the date
indicated, nor is it necessarily indicative of the future results of operations.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2004
(IN MILLIONS)
PRO FORMA
AS REPORTED RECLASS LAS AS ADJUSTED
PROVINCE ENTRIES (a) CRUCES (b) PROVINCE
----------- ---------- ----------- -----------
Revenues $882.9 $ - $ 65.0 $947.9
Salaries and benefits 323.6 20.6 23.1 367.3
Purchased services 85.7 (85.7) - -
Supplies 114.2 - 9.1 123.3
Other operating expenses 109.0 65.8 17.2 192.0
Provision for doubtful accounts 95.0 - 12.2 107.2
Depreciation and amortization 46.9 - 3.0 49.9
Interest expense, net 29.6 - 3.4 33.0
------ ------ ------ ------
804.0 0.7 68.0 872.7
------ ------ ------ ------
Income (loss) from continuing operations
before minority interests and income taxes 78.9 (0.7) (3.0) 75.2
Minority interests in earnings of consolidated entities 0.7 - - 0.7
------ ------ ------ ------
Income (loss) from continuing operations
before income taxes 78.2 (0.7) (3.0) 74.5
Provision (benefit) for income taxes 28.1 (0.4) (1.2) 26.5
------ ------ ------ ------
Income (loss) from continuing operations $ 50.1 $ (0.3) $ (1.8) $ 48.0
====== ====== ====== ======
(a) To reclassify purchased services into salaries and benefits and other
operating expenses, reclassify $5.1 million of workers compensation
expense from other operating expenses into salaries and benefits, and
reclassify $0.7 million of management fees from discontinued operations
into salaries and benefits. All of these reclassifications are to conform
to LifePoint's statement of operations.
(b) To give effect to the pro forma operations of Las Cruces Medical Center as
if Province had acquired it on January 1, 2003. Province acquired Las
Cruces Medical Center effective June 1, 2004. The pro forma Las Cruces
statement of operations presented herein includes pro forma adjustments
for interest expense and interest income, income taxes, taxes other than
income taxes, indigent care subsidies, sole-community reimbursement,
rental expense and information system expenses.
14
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2003
(IN MILLIONS)
PRO FORMA
AS REPORTED RECLASS LAS AS ADJUSTED
PROVINCE ENTRIES (a) CRUCES (b) PROVINCE
----------- ------------ ------------- -----------
Revenues $ 746.2 $ - $ 144.3 $ 890.5
Salaries and benefits 282.8 19.6 54.7 357.1
Purchased services 68.9 (68.9) - -
Supplies 95.6 - 21.2 116.8
Other operating expenses 97.1 51.0 44.0 192.1
Provision for doubtful accounts 72.6 - 20.2 92.8
Depreciation and amortization 37.6 - 7.2 44.8
Interest expense, net 26.3 - 8.3 34.6
Debt retirement costs 0.5 - - 0.5
------- ------- ------- -------
681.4 1.7 155.6 838.7
------- ------- ------- -------
Income (loss) from continuing operations
before minority interests and income taxes 64.8 (1.7) (11.3) 51.8
Minority interests in earnings of consolidated entities 0.3 - - 0.3
------- ------- ------- -------
Income (loss) from continuing operations
before income taxes 64.5 (1.7) (11.3) 51.5
Provision (benefit) for income taxes 22.8 (0.6) (4.2) 18.0
------- ------- ------- -------
Income (loss) from continuing operations $ 41.7 $ (1.1) $ (7.1) $ 33.5
======= ======= ======= =======
(a) To reclassify purchased services into salaries and benefits and other
operating expenses, reclassify $7.1 million of workers compensation
expense from other operating expenses into salaries and benefits, and
reclassify $1.7 million of management fees from discontinued operations
into salaries and benefits. All of these reclassifications are to conform
to LifePoint's statement of operations.
(b) To give effect to the pro forma operations of Las Cruces Medical Center as
if Province had acquired it on January 1, 2003. Province acquired Las
Cruces Medical Center effective June 1, 2004. Province acquired Las Cruces
Medical Center effect June 1, 2004. The pro forma Las Cruces statement of
operations presented herein includes pro forma adjustments for interest
expense and interest income, income taxes, taxes other than income taxes,
indigent care subsidies, sole-community reimbursement, rental expense and
information system expenses.
15
6. PROVINCE UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET
The following unaudited condensed consolidated balance sheet has been
prepared to conform Province's balance sheet presentation to LifePoint's balance
sheet presentation.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET
DECEMBER 31, 2004
(IN MILLIONS)
AS REPORTED RECLASS AS ADJUSTED
PROVINCE ENTRIES PROVINCE
------------ --------- -----------
ASSETS
Current assets:
Cash and cash equivalents $ 9.8 $ - $ 9.8
Accounts receivable, net 137.1 (19.9)(a) 117.2
Inventories 21.8 - 21.8
Income taxes receivable 10.0 - 10.0
Deferred income taxes and other current assets 4.0 19.9 (a) 23.9
Assets of discontinued operations 1.4 - 1.4
-------- --------- --------
184.1 - 184.1
Property and equipment, net 578.6 - 578.6
Deferred loan costs, net 11.7 - 11.7
Intangible assets, net 0.9 - 0.9
Other 19.1 - 19.1
Goodwill 388.7 - 388.7
-------- --------- --------
$1,183.1 $ - $1,183.1
======== ========= ========
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable $ 32.2 $ - $ 32.2
Accrued salaries 32.7 - 32.7
Other current liabilities 25.9 0.2 (b) 26.1
Current maturities of long-term debt 76.2 (0.2)(b) 76.0
Liabilities of discontinued operations 0.4 - 0.4
-------- --------- --------
167.4 - 167.4
Revolving credit facility 55.0 - 55.0
Convertible notes 172.5 - 172.5
Senior subordinated notes 200.0 - 200.0
Interest rate swap (1.7) - (1.7)
Capital leases, less current portion 2.5 (2.5)(b) -
Deferred income taxes 46.7 - 46.7
Professional and general liability claims and other
liabilities 22.5 2.5 (b) 25.0
Minority interests in equity of consolidated entities 2.4 - 2.4
Stockholders' equity:
Preferred stock - - -
Common stock 0.5 - 0.5
Capital in excess of par value 320.0 - 320.0
Retained earnings 195.7 - 195.7
Accumulated other comprehensive loss (0.4) - (0.4)
-------- --------- --------
515.8 - 515.8
-------- --------- --------
$1,183.1 $ - $1,183.1
======== ========= ========
(a) To reclassify non-patient receivables into other current assets.
(b) To reclassify capital leases into other liabilities.
16