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Team Health Holdings, Inc., Announces Fourth Quarter and Fiscal 2009 Financial Results

Wednesday, February 10, 2010 General News J E 4
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KNOXVILLE, Tenn., Feb. 9 Team Health Holdings, Inc. ("TeamHealth") (NYSE: TMH), one of the largest suppliers of outsourced healthcare professional staffing and administrative services to hospitals and other healthcare providers in the United States, today announced results for its fourth quarter and full fiscal year 2009.

"The fourth quarter of 2009 proved to be a landmark quarter for TeamHealth, and we are pleased to again report consistent improvement in our operating and financial performance for the fourth quarter and full year 2009," said TeamHealth President and Chief Executive Officer Greg Roth. "We are also very pleased to have successfully completed our initial public offering in December, which provides our organization with greater financial flexibility as we pursue our multiple growth initiatives in our market place, as evidenced by the completion of three acquisitions during the quarter," added Roth.

Initial Public Offering

In December 2009, the Company completed its IPO of 13,300,000 shares. Including the subsequent exercise of the underwriters' over-allotment option of 1,995,000 shares, a total of 15,295,000 shares were sold. Total outstanding common shares were 62,401,000 as of December 31, 2009, and total outstanding common shares after exercise of the over-allotment option were 64,396,000.

The Company's net proceeds of approximately $168.5 million from the offering are being used for the pro rata redemption of approximately $157.5 million aggregate amount of its outstanding 11.25% Senior Subordinated Notes due 2013. TeamHealth completed the initial $136.9 million redemption on January 25, 2010, and the additional $20.6 million redemption using the over-allotment option proceeds is scheduled to be completed on February 12, 2010.

Fiscal 2009 Fourth Quarter Results

Net revenue less provision for uncollectibles ("revenue less provision") in the fourth quarter of 2009 increased 5.2% to $348.8 million from $331.5 million in the fourth quarter of 2008. Net revenue less provision from same contracts and acquisitions contributed 6.1% and 1.1%, respectively, of the 5.2% growth between quarters. New contracts, net of terminations, excluding contracting changes within the military division, contributed 0.7% of growth. New contracts, net of terminations within the military division, unfavorably impacted quarter over quarter net revenue growth by 2.7%.

Same contract revenue less provision for the fourth quarter of 2009 increased 6.8% to $317.3 million from $297.0 million in the same period a year ago. During the fourth quarter of 2009, growth in same contract revenue less provision was positively impacted by an increase in fee for service visits and procedures of 9.7%, which contributed approximately 6.7% of same contract revenue growth between quarters, while increases in estimated collections per visit contributed approximately 1.3% of same contract growth. Declines in contract and other revenue, primarily associated with the locum tenens and military divisions, constrained same contract revenue growth by 1.2%. Acquisitions contributed $3.5 million of growth between periods while new sales, net of contracts that terminated in the period, contributed a decline in revenue of $6.5 million between periods. Excluding the impact of contracting changes within the military division, net new contract revenue increased by $2.3 million.

Reported net loss was $14.5 million in the fourth quarter of 2009, or $0.28 pro forma diluted net loss per share, compared to a net loss of $5.4 million, or $0.11 pro forma diluted net loss per share in the same quarter of 2008. Included in the fourth quarter 2009 results were one-time fees associated with the IPO of approximately $37.4 million and transaction and other costs of $2.2 million. Included in the fourth quarter 2008 results were an impairment charge of $9.1 million, $0.6 million in transaction costs and a $1.6 million gain on the extinguishment of debt. Financial results for the fourth quarter of 2008 also reflected an unfavorable adjustment to prior year professional liability reserves of $5.4 million associated with a revaluation of the discounted carrying value of the prior year professional liability reserves due to the decline in the interest rate environment during the fourth quarter of 2008. In the fourth quarter of 2009, no adjustments to professional liability reserves associated with prior years were recorded.

Adjusted EBITDA for the fourth quarter of 2009 was $31.5 million, an increase of 34.8% from $23.4 million in the same quarter of 2008 (excluding the effect of the professional liability loss reserve adjustment in 2008).

Fiscal 2009 Full Year Results

Revenue less provision for the year ended December 31, 2009, increased 6.9% to $1.42 billion from $1.33 billion in fiscal 2008. Revenue less provision from same contracts contributed 5.2% of growth between fiscal years while acquisitions contributed 0.9%. New contracts, net of terminations, excluding contracting changes within the military division, contributed 1.6% of growth. New contracts, net of terminations within the military division, unfavorably impacted net revenue growth by 0.8%.

Same contract revenue less provision for the year ended December 31, 2009, increased 6.1% to $1.21 billion from $1.14 billion in fiscal 2008. Same contract revenue growth during the year benefited from a 5.9% increase in fee for service visits and procedures which contributed approximately 4.1% of year-over-year growth, while increases in estimated collections per visit contributed an additional 1.8% of growth in same contract revenue between years. Acquisitions and new sales, net of contracts that terminated in the period, contributed $11.6 million and $10.7 million of growth between periods, respectively. Excluding the impact of contracting changes within the military division, net new contract revenue increased by $21.4 million.

Reported net earnings were $40.7 million, or $0.82 pro forma diluted net earnings per share, for the year ended December 31, 2009, compared to $44.7 million, or $0.91 pro forma diluted net earnings per share, in fiscal 2008. Financial results for the years ended December 31, 2009 and 2008 reflected reductions of professional liability reserves related to prior years of $18.8 million and $34.9 million, respectively.

Adjusted EBITDA (excluding the effects of professional liability loss reserve adjustments) for the year ended December 31, 2009, was $149.7 million, an increase of 21.8% from $122.9 million in fiscal 2008.

As of December 31, 2009, the Company had cash and cash equivalents of approximately $170.3 million and a revolving credit facility of $125.0 million (without giving effect to $7.7 million of undrawn letters of credit). Included in the cash and cash equivalents were proceeds of the IPO that have since been applied to debt reduction. Excluding the IPO proceeds, cash was approximately $23.7 million. During the year ended December 31, 2009, the Company made scheduled debt payments of $4.3 million. As a result, the Company's total outstanding debt as of December 31, 2009, was $611.0 million and there were no amounts outstanding under the revolving credit facility. After giving effect to the redemptions of the 11.25% Senior Subordinated Notes in January and February of 2010 in the aggregate amount of $157.5 million, total outstanding debt will be $453.5 million.

Cash flow provided by operations for the year ended December 31, 2009, increased to $82.8 million compared to $62.0 million for fiscal 2008. Included within operating cash flow in 2009 was approximately $32.7 million of cash costs associated with the IPO. Excluding after tax costs associated with the IPO, 2009 operating cash flows would have been $103.1 million. Contributing to the increase in operating cash flow between years were improvements in profitability, lower levels of accounts receivable funding, and reductions in interest payments during fiscal 2009 compared to fiscal 2008.

"Our focus on reducing our cost structure and enhancing our revenue cycle process not only aligned our operations with current market conditions, but has also generated increased cash flow that has provided greater financial flexibility in making further investments in the growth and efficiency of our business. Our organization is in a stronger strategic position, and we are excited about the opportunities to accelerate our gains in profitable market share and to drive increasing value for our shareholders." concluded Roth.

Lynn Massingale, M.D., Executive Chairman of TeamHealth, added, "The financial benefits from our IPO, combined with the consistency of our financial performance, will continue to enable us to recruit and retain high quality physicians and other clinicians who do an outstanding job of caring for the patients of our hospital clients. Additionally, our financial performance allows us to continue to invest in resources that support our clinicians and drive value for our hospital clients."

Conference Call

As previously announced, TeamHealth will hold a conference call tomorrow, February 10, to discuss its fiscal fourth quarter and full-year 2009 results at 10:00 a.m. (Eastern Standard Time). The conference call can be accessed live over the phone by dialing 1-877-941-8418, or for international callers, 1-480-629-9809. A replay will be available one hour after the call and can be accessed by dialing 1-800-406-7325, or for international callers, 1-303-590-3030. The passcode for the live call and the replay is 4203264. The replay will be available until February 17, 2010.

Interested investors and other parties may also listen to a simultaneous webcast of the conference call by logging onto the Investor Relations section of the Company's website at www.teamhealth.com. The on-line replay will remain available for a limited time beginning immediately following the call in the Investor Relations section of the Company's website at www.teamhealth.com.

To learn more about TeamHealth, please visit the company's Web site at www.teamhealth.com. TeamHealth uses its Web site as a channel of distribution for material Company information. Financial and other material information regarding TeamHealth is routinely posted on the Company's Web site and is readily accessible.

About TeamHealth

TeamHealth (Knoxville, Tenn.) (NYSE: TMH) was founded in 1979 and has become one of the largest suppliers of outsourced healthcare professional staffing and administrative services to hospitals and other healthcare providers in the United States. Through its seven principal service lines located in 13 regional sites, TeamHealth's more than 5,900 affiliated healthcare professionals provide emergency medicine, hospital medicine, anesthesia, teleradiology, and pediatric staffing and management services to more than 530 civilian and military hospitals, clinics, and physician groups in 48 states. For more information about TeamHealth, visit www.teamhealth.com.

Forward Looking Statements

Statements and information contained herein that are not historical facts and that reflect the current view of Team Health Holdings, Inc. (the "Company") about future events and financial performance are hereby identified as "forward looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Some of these statements can be identified by terms and phrases such as "anticipate," "believe," "intend," "estimate," "expect," "continue," "could," "should," "may," "plan," "project," "predict" and similar expressions. The Company cautions 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 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." Factors that could cause our actual results to differ materially from those expressed or implied in such forward-looking statements include but are not limited to current or future government regulation of the healthcare industry, exposure to professional liability lawsuits and governmental agency investigations, the adequacy of insurance coverage and insurance reserves, as well as those factors detailed from time to time in the Company's filings with the Securities and Exchange Commission. The Company's "forward looking statements" speak only as of the date hereof and the Company disclaims any intent or obligation to update "forward looking statements" herein to reflect changed assumptions, the occurrence of unanticipated events, or changes to future operating results over time.

Non-GAAP Financial Measures Reconciliation

This release includes a table that sets forth a reconciliation of net earnings (loss) to Adjusted EBITDA. Adjusted EBITDA under the indenture governing the 11.25% Senior Subordinated Notes is defined as net earnings (loss) before interest expense, taxes, depreciation and amortization, as further adjusted to exclude unusual items, non-cash items and the other adjustments shown in the table below. We believe that the disclosure of the calculation of Adjusted EBITDA provides information that is useful to an investor's understanding of our liquidity and financial flexibility. Adjusted EBITDA is not a measurement of financial performance or liquidity under generally accepted accounting principles. It should not be considered in isolation or as a substitute for net income, operating income, cash flows from operating, investing or financing activities, or any other measure calculated in accordance with generally accepted accounting principles.

Since Adjusted EBITDA is not a measure determined in accordance with GAAP and is susceptible to varying calculations, Adjusted EBITDA, as presented, may not be comparable to other similarly titled measures of other companies.

The following table sets forth a reconciliation of net earnings (loss) to Adjusted EBITDA. Adjusted EBITDA under the indenture governing the senior subordinated notes is defined as net earnings (loss) before interest expense, taxes, depreciation and amortization, as further adjusted to exclude unusual items, non-cash items and the other adjustments shown in the table below. We believe that the disclosure of the calculation of Adjusted EBITDA provides information that is useful to an investor's understanding of our financial flexibility under our indenture covenants. Adjusted EBITDA is not a measurement of financial performance or liquidity under generally accepted accounting principles. It should not be considered in isolation or as a substitute for net income, operating income, cash flows from operating, investing or financing activities, or any other measure calculated in accordance with generally accepted accounting principles.

The components of net revenue less provision for uncollectibles includes revenue from contracts that have been in effect for prior periods (same contracts) and from new and acquired contracts during the periods, as set forth in the table below:

The following table reflects the visits and procedures included within fee for service revenues described in the table above:

The components of net revenue less provision for uncollectibles includes revenue from contracts that have been in effect for prior periods (same contracts) and from new and acquired contracts during the periods, as set forth in the table below:

The following table reflects the visits and procedures included within fee for service revenues described in the table above:

-- Net Revenue less provision for uncollectibles increased 5.2% to $348.8 million over the same period in the prior year. -- Reported net loss of $14.5 million or $0.28 pro forma diluted net loss per share. Net Earnings were $9.6 million, or $0.19 pro forma diluted net earnings per share, after excluding costs associated with our IPO and acquisition related charges totaling $39.6 million on a pretax basis ($24.1 million after-tax) -- Adjusted EBITDA (excluding the effects of professional liability loss reserve adjustments) increased 34.8% to $31.5 million over the same period in the prior year.

SOURCE Team Health Holdings, Inc.
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