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Press release from PR Newswire

Team Health Holdings Inc. Announces Third Quarter 2012 Financial Results

Wednesday, October 31, 2012

Team Health Holdings Inc. Announces Third Quarter 2012 Financial Results16:01 EDT Wednesday, October 31, 2012KNOXVILLE, Tenn., Oct. 31, 2012 /PRNewswire/ -- Net revenue increased 21.6% to $539.2 million over the prior year third quarter Net earnings were $20.5 million; $30.4 million after adjustments Diluted net earnings per share of $0.30; Adjusted EPS of $0.44 Adjusted EBITDA increased 20.1% to $58.5 million Projected growth in net revenue for full year 2012 revised to an expected range of 17.0% to 18.0% from the prior 16.0% to 17.0% guidanceTeam Health Holdings Inc. ("TeamHealth") (NYSE: TMH), one of the largest providers of outsourced physician staffing solutions for hospitals in the United States, today announced results for its third quarter of 2012. "We are pleased with our third quarter results, as we delivered growth in revenue, Adjusted EBITDA, and Adjusted EPS. These results represent the strongest revenue growth we have delivered as a public company and showcase our balanced and broad based approach to meeting our revenue growth goals," said TeamHealth President and Chief Executive Officer, Greg Roth. "Over the quarter, all of our growth drivers delivered contributions to revenue, which include same contract, acquisitions and net contract growth. Acquisition growth was the largest component of consolidated revenue growth as the recent acquisitions that closed in the second half of 2011 and through the third quarter of 2012 continue to support revenue and earnings growth. Net new contract growth continued to perform well as we benefited from the new hospital relationships added through our sales and marketing process.  Finally, same contract revenue contributed steady growth, driven by increases in volume and increases in estimated collections per visit. Moving into the final quarter 2012, we remain confident about our prospects with a strong acquisition pipeline, opportunities for additional new contract wins and continued same contract revenue growth."As a result of our financial performance through the first nine months of 2012, including the contribution from our recent acquisitions, and our current expectations about operating trends and growth opportunities for the fourth quarter of 2012, we have increased our estimates for net revenue growth for fiscal year 2012 to range between $2.04 billion and $2.06 billion, reflecting a growth rate of between 17.0% and 18.0%, which is an increase from the prior guidance of 16.0% to 17.0% annual growth rate in net revenue.   Historically, our fiscal fourth quarter typically is a period of reduced operating margins due to a combination of softer volume and increases in seasonal costs.  Due to this seasonal trend as well as the potential for disruptions in hospital operations, patient visits, and surgical cases in areas impacted by Hurricane Sandy, we are projecting Adjusted EBITDA margin for the full year of 2012 to range around 10.4%.  "In addition, on October 11, 2012, we announced plans to seek a refinancing of certain components of our outstanding debt, which will extend our debt maturities and provide us with increased financial capacity and a solid capital structure to support our plans for future growth," concluded Mr. Roth.Lynn Massingale, M.D., Executive Chairman of TeamHealth, added, "In today's dynamic healthcare environment, TeamHealth remains a premier partner for strong physician groups and hospitals.  We continue to utilize our national infrastructure and strong physician leadership to drive operational improvements across our growing network of high quality affiliated providers, while making investments in patient safety, risk management, operational efficiency and customer satisfaction.  We remain fully committed to providing our affiliated clinicians the support required to deliver exceptional patient care while generating long-term shareholder value."2012 Third Quarter ResultsNet revenue increased 21.6% to $539.2 million from $443.6 million in the third quarter of 2011. Acquisitions contributed 14.3%, new contracts net of terminations contributed 4.4%, and same contracts contributed 2.9% of the increase in quarter-over-quarter growth in net revenue.Same contract revenue increased $12.9 million, or 3.1%, to $423.4 million from $410.4 million in the third quarter of 2011.  Same contract fee-for-service volume growth of 2.5% provided a 1.9% increase in same contract revenue growth while increases in estimated collections on fee-for-service visits of 2.5% provided a 1.8% increase in same contract revenue growth between quarters.  Contract and other revenue decreased same contract revenue growth between quarters by 0.6% due primarily to conversions to fee-for-service billing arrangements and reductions in contract revenue support as a result of increases in fee-for-service revenue within the emergency medicine division and contract revenue reductions in the military and locums divisions.  Acquisitions contributed $63.3 million of revenue growth and net new contract revenue increased by $19.4 million between quarters. Reported net earnings were $20.5 million, or $0.30 diluted net earnings per share, compared to net earnings of $15.3 million, or $0.23 diluted net earnings per share, in the third quarter of 2011.  The financial results for the third quarter of 2012 included $7.6 million ($4.8 million after-tax) of contingent purchase compensation expense and non-cash amortization expense of $8.1 million ($5.1 million after tax).  Excluding these items, net earnings for the third quarter of 2012 would have been $30.4 million and Adjusted EPS would have been $0.44 per share.  Financial results for the third quarter of 2011 included $2.7 million of contingent purchase compensation expense ($1.7 million after-tax), non-cash amortization expense of $4.4 million ($2.8 million after-tax) and a $5.3 million increase in prior year professional liability loss reserves ($3.2 million after tax).  Excluding these items, net earnings for the third quarter of 2011 would have been $22.9 million and Adjusted EPS would have been $0.34 per share.  See "Non-GAAP Financial Measures Reconciliations" and "Adjusted Earnings Per Share" below for the definition of Adjusted EPS and its reconciliation to net earnings and diluted earnings per share.Third quarter 2012 net earnings were impacted by transaction costs of $1.3 million compared to $1.5 million in 2011. Third quarter 2012 net earnings also reflected a realized gain of $2.5 million as a component of other income primarily associated with the sale of investments at the Company's insurance subsidiary during the quarter.Cash flow used in operations for the quarter was $7.1 million compared to cash provided from operations of $31.0 million in the same quarter in 2011.  Included in operating cash flows were contingent purchase payments of $15.9 million in 2012 and $4.8 million in 2011. Also included in operating cash flow in 2012 were $37.3 million in premium payments to a commercial insurance carrier in connection with a loss portfolio transfer by the Company's insurance subsidiary. The loss portfolio transfer premiums were funded by the sale of existing insurance investments during the quarter. Excluding the impact of contingent purchase and loss portfolio transfer premium payments, operating cash flows would have been $46.1 million in 2012 and $35.8 million in 2011.  The $10.3 million increase in operating cash flow (excluding the impact of contingent purchase and loss portfolio transfer premium payments) between quarters was principally the result of increased net earnings.  Adjusted EBITDA increased 20.1% to $58.5 million from $48.7 million in the third quarter of 2011, and Adjusted EBITDA margin was 10.8% compared to 11.0% for the same quarter in 2011. See "Non-GAAP Financial Measures Reconciliations" and "Adjusted EBITDA" below for the definitions of Adjusted EBITDA Margin and Adjusted EBITDA and its reconciliation to net earnings. As of September 30, 2012, the Company had cash and cash equivalents of approximately $7.1 million and $102.0 million of available borrowings under a revolving credit facility (without giving effect to $6.0 million of undrawn letters of credit). The Company's total outstanding debt was $510.5 million, including $123.0 million outstanding under its revolving credit facility.  The decrease in total debt in the third quarter of 2012 was $7.9 million, which reflected a $5.4 million decrease of outstanding revolver borrowings and $2.5 million of term debt payments.On October 11, 2012, the Company announced that it plans to amend and extend its existing credit facility. If approved, the proposed amendment would increase the Company's existing Term A Loan Facility and extend its maturity until 2017 as well as extend the maturity of the Revolving Credit Facility to 2017. The use of proceeds from the increased Term A Loan will be used to repay outstanding borrowings under the Revolving Credit Facility and other general corporate purposes.  The Company expects to pay an interest rate consistent with current market conditions on the Term A Loan Facility and Revolving Credit Facility. The Company will also pay a market based fee to new lenders and existing lenders that agree to extend and amend their term loans and revolving credit commitments.  The existing $250 million Term B Loan Facility is not subject to the proposed amendment and will remain in place with current terms and conditions. The amended credit facility is expected to close on or around November 1, 2012.2012 First Nine Months ResultsNet revenue in the nine months ended September 30, 2012 increased 18.8% to $1.52 billion from $1.28 billion for the same period of 2011.  Acquisitions contributed 11.0% of the growth, and new contracts, net of terminations, contributed 4.3% of the growth.  Same contract revenue contributed 3.5% of the growth in net revenue.  Same contract revenue for the nine months ended September 30, 2012 increased $44.7 million, or 4.0%, to $1.17 billion from $1.13 billion in the same period a year ago.  Fee-for-service volume growth provided a 2.0% increase in same contract revenue growth as the number of visits increased 2.5% from the same contract volume reported in the nine months ended September 30, 2011. Increases in estimated collections on fee-for-service visits of 2.8% provided a 2.0% increase in same contract revenue growth between periods.  Contract and other revenue was unchanged between periods. Acquisitions contributed $140.6 million of growth between periods.  Net new contract revenue increased by $55.6 million.Reported net earnings were $49.0 million in the nine months ended September 30, 2012, or $0.72 diluted net earnings per share, compared to net earnings of $52.2 million, or $0.79 diluted net earnings per share, in the same period of 2011.  The 2012 first nine months financial results included $26.1 million ($16.2 million after-tax) of contingent purchase compensation expense and non-cash amortization expense of $21.5 million ($13.6 million after-tax).  In addition, the financial results for the 2012 first nine months included an increase in prior year professional liability loss reserves of $5.2 million ($3.1 million after-tax).  Excluding these items, net earnings for the 2012 first nine months would have been $81.9 million and Adjusted EPS would have been $1.21 per share.  Financial results for the same period in 2011 included $7.8 million of contingent purchase compensation expense ($4.7 million after-tax), non-cash amortization expense of $11.6 million ($7.4 million after-tax), a loss on the refinancing of debt of $6.0 million ($3.7 million after-tax) and an increase in prior year professional liability loss reserves of $5.3 million ($3.2 million after-tax).  Excluding these adjustments, net earnings for the same period in 2011 would have been $71.2 million and Adjusted EPS would have been $1.07 per share.  See "Non-GAAP Financial Measures Reconciliations" and "Adjusted Earnings Per Share" below for the definition of Adjusted EPS and its reconciliation to net earnings and diluted earnings per share.Cash flow provided by operations for the nine months ended September 30, 2012 was $23.6 million compared to $55.1 million in 2011.  Included in operating cash flows were contingent purchase payments of $17.9 million in 2012 and $12.0 million in 2011. Also included in operating cash flows in 2012 were $37.3 million in premium payments related to the loss portfolio transfer. Excluding the impact of contingent purchase and the loss transfer payments, operating cash flows in 2012 would have been $78.8 million compared to $67.2 million in 2011, reflecting an increase of $11.6 million.Adjusted EBITDA for the nine months ended September 30, 2012 increased to $164.2 million from $144.7 million for the same nine months of 2011, and Adjusted EBITDA margin was 10.8% compared to 11.3% for the same period in 2011. See "Non-GAAP Financial Measures Reconciliation" and "Adjusted EBITDA" below for the definitions of Adjusted EBITDA Margin and Adjusted EBITDA and its reconciliation to net earnings. Conference CallAs previously announced, TeamHealth will hold a conference call tomorrow, November 1, to discuss its 2012 fiscal third quarter results at 8:30 a.m. (Eastern Time).  The conference call can be accessed live over the phone by dialing 1-877-941-8416, or for international callers, 1-480-629-9808. A replay will be available one hour after the call and can be accessed by dialing 1-877-870-5176, or for international callers, 1-858-384-5517. The passcode for the live call and the replay is 4570059. The replay will be available until November 8, 2012.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.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) is one of the largest providers of outsourced physician staffing solutions for hospitals in the United States.  Through its 17 regional locations and multiple service lines, TeamHealth's approximately 8,500 affiliated healthcare professionals provide emergency medicine, hospital medicine, anesthesia, urgent care, and pediatric staffing and management services to approximately 800 civilian and military hospitals, clinics, and physician groups in 47 states.  For more information about TeamHealth, visit www.teamhealth.com.Forward Looking StatementsStatements 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 under the caption "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's most recent annual report on Form 10-K and the most recent quarterly report on Form 10-Q filed 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 Reconciliations In this release we refer to Adjusted EBITDA, Adjusted EBITDA margin and Adjusted EPS which are financial measures that are calculated and presented on the basis of methodologies other than in accordance with generally accepted accounting principles in the United States of America ("GAAP").   Adjusted EBITDA is defined as net earnings before interest expense, taxes, depreciation and amortization, as further adjusted to exclude the non-cash items and the other adjustments shown in the table under "Adjusted EBITDA" below.   Adjusted EBITDA margin represents Adjusted EBITDA divided by net revenue.  Adjusted EPS is defined as diluted earnings per share excluding non-cash and other adjustments, including the impact of contingent purchase compensation expense and amortization expense relating to purchase accounting for historical acquisitions and the other adjustments shown in the table under "Adjusted Earnings Per Share".  For a reconciliation of each of Adjusted EBITDA and Adjusted EPS to the most directly comparable GAAP measure, we refer you to the tables under "Adjusted EBITDA" and "Adjusted Earnings Per Share," respectively. Team Health Holdings, Inc. Consolidated Balance Sheets December 31, 2011September 30, 2012(Unaudited)(In thousands)ASSETSCurrent assets:Cash and cash equivalents$9,855$7,071Accounts receivable, less allowance for uncollectibles of $265,293 and $342,833 in 2011 and 2012, respectively307,874370,299Prepaid expenses and other current assets24,02133,399Receivables under insured programs14,12927,177Income tax receivable1,438?Total current assets357,317437,946Investments of insurance subsidiary94,30066,325Property and equipment, net34,67446,449Other intangibles, net101,910134,294Goodwill232,215322,742Deferred income taxes36,18842,829Receivables under insured programs31,58154,024Other40,08243,799$928,267$1,148,408LIABILITIES AND SHAREHOLDERS' EQUITYCurrent liabilities:Accounts payable$22,356$20,987Accrued compensation and physician payable153,674163,502Other accrued liabilities109,649102,224Income tax payable?3,281Current maturities of long-term debt35,000133,938Deferred income taxes38,06847,938Total current liabilities358,747471,870Long-term debt, less current maturities385,000376,562Other non-current liabilities167,120208,786Shareholders' equity:Common stock, ($0.01 par value; 100,000 shares authorized, 65,589 and 67,145 shares issued and outstanding at December 31, 2011 and September 30, 2012, respectively)656671Additional paid-in capital541,216567,414Accumulated deficit(527,774)(478,779)Accumulated other comprehensive income3,3021,884Shareholders' equity17,40091,190$928,267$1,148,408 Team Health Holdings, Inc.Consolidated Statements of Comprehensive Earnings Three Months EndedSeptember 30,20112012(Unaudited)(In thousands, except per share data)Net revenue before provision for uncollectibles$811,927$984,843Provision for uncollectibles368,364445,621Net revenue443,563539,222Cost of services rendered (exclusive of depreciation and amortization shown separately below)Professional service expenses345,037418,243Professional liability costs19,63518,074General and administrative expenses (includes contingent purchase compensation expense of $2,730 and $7,558 in 2011 and 2012, respectively)40,21055,170Other expense (income)1,878(3,303)Depreciation2,8503,962Amortization4,3638,058Interest expense, net3,4104,151Transaction costs1,4581,287Earnings before income taxes24,72233,580Provision for income taxes9,47213,127Net earnings$15,250$20,453Net earnings per shareBasic0.230.31Diluted0.230.30Weighted average shares outstandingBasic65,30266,712Diluted66,79168,746Other comprehensive income, net of tax:Net change in fair value of investments, net of tax of $510 and $(781) for 2011 and 2012, respectively949(1,452)Total comprehensive earnings$16,199$19,001 Team Health Holdings, Inc.Consolidated Statements of Comprehensive Earnings Nine Months EndedSeptember 30,20112012(Unaudited)(In thousands, except per share data)Net revenue before provision for uncollectibles$2,295,043$2,755,486Provision for uncollectibles1,011,7501,231,303Net revenue1,283,2931,524,183Cost of services rendered (exclusive of depreciation and amortization shown separately below)Professional service expenses985,7701,182,648Professional liability costs49,51857,042General and administrative expenses (includes contingent purchase compensation expense of $7,800 and $26,143 in 2011 and 2012, respectively)121,871160,034Other expense (income)1,218(4,476)Depreciation9,16410,611Amortization11,63921,507Interest expense, net9,20011,682Transaction costs2,6533,792Loss on refinancing of debt6,022?Earnings before income taxes86,23881,343Provision for income taxes34,01832,350Net earnings$52,220$48,993Net earnings per shareBasic0.800.74Diluted0.790.72Weighted average shares outstandingBasic64,91266,037Diluted66,40467,943Other comprehensive income, net of tax:Net change in fair value of investments, net of tax of $823 and $(763) for 2011 and 2012, respectively1,529(1,418)Net change in fair value of swaps, net of tax of $359 for 2011562?Total comprehensive earnings$54,311$47,575 Team Health Holdings, Inc.Consolidated Statements of Cash FlowsThree Months EndedSeptember 30,20112012(Unaudited)(In thousands)Operating ActivitiesNet earnings$15,250$20,453Adjustments to reconcile net earnings:Depreciation2,8503,962Amortization4,3638,058Amortization of deferred financing costs211197Employee equity-based compensation expense1,3181,961Provision for uncollectibles368,364445,621Deferred income taxes1,6973,805Loss on sale or disposal of equipment2121Equity in joint venture income(711)(794)Changes in operating assets and liabilities, net of acquisitions:Accounts receivable(380,730)(463,243)Prepaids and other assets3,258425Income tax accounts(1,730)319Accounts payable8,586(210)Accrued compensation and physician payable3,44012,103Other accrued liabilities1,402(10,056)Contingent purchase liabilities(2,093)(7,817)Professional liability reserves5,264(21,874)Net cash provided by (used in) operating activities30,951(7,089)Investing ActivitiesPurchases of property and equipment(1,958)(6,100)Cash paid for acquisitions, net(125,503)(27,657)Purchases of investments by insurance subsidiary(21,324)(94,027)Proceeds from investments by insurance subsidiary18,993122,145Net cash used in investing activities(129,792)(5,639)Financing ActivitiesPayments on notes payable(2,500)(2,500)Proceeds from revolving credit facility114,500222,300Payments on revolving credit facility(55,000)(227,700)Payments of financing costs(24)?Proceeds from exercise of stock options1,97513,769 Tax benefit from exercise of stock options ?807Stock issuance costs?(453)Net cash provided by financing activities58,9516,223Net decrease in cash(39,890)(6,505)Cash and cash equivalents, beginning of period48,90413,576Cash and cash equivalents, end of period$9,014$7,071Interest paid$3,631$4,788Taxes paid$9,548$8,902 Team Health Holdings, Inc. Consolidated Statements of Cash Flows Nine Months EndedSeptember 30,20112012(Unaudited)(In thousands)Operating ActivitiesNet earnings$52,220$48,993Adjustments to reconcile net earnings:Depreciation9,16410,611Amortization11,63921,507Amortization of deferred financing costs1,114596Employee equity-based compensation expense2,7064,822Provision for uncollectibles1,011,7501,231,303Deferred income taxes7,8763,992Loss on refinancing of debt1,654?Loss (gain) on sale of equipment252(61)Equity in joint venture income(2,231)(2,201)Changes in operating assets and liabilities, net of acquisitions:Accounts receivable(1,055,228)(1,278,193)Prepaids and other assets(401)(5,951)Income tax accounts(64)(2,161)Accounts payable(3,328)(3,275)Accrued compensation and physician payable8,9208,853Contingent purchase compensation expense liability3,8738,773Other accrued liabilities(4,214)(15,114)Professional liability reserves9,442(8,890)Net cash provided by operating activities55,14423,604Investing ActivitiesPurchases of property and equipment(6,052)(15,695)Sale of property and equipment90171Cash paid for acquisitions, net(125,828)(146,529)Purchases of investments by insurance subsidiary(61,718)(138,913)Proceeds from investments by insurance subsidiary59,308164,707Other investing activities?(2,000)Net cash used in investing activities(134,200)(138,259)Financing ActivitiesPayments on notes payable(406,250)(7,500)Proceeds from notes payable400,000?Proceeds from revolving credit facility114,500683,600Payments on revolving credit facility(55,000)(585,600)Proceeds from the issuance of common stock under stock purchase plans8721,054Proceeds from exercise of stock options11,88520,635Tax benefit from exercise of stock options?807Stock issuance costs(491)(1,106)Payments of financing costs(7,783)(19)Net cash provided by financing activities57,733111,871Decrease in cash and cash equivalents(21,323)(2,784)Cash and cash equivalents, beginning of period30,3379,855Cash and cash equivalents, end of period$9,014$7,071Interest paid$10,634$12,842Taxes paid$25,910$30,552 Team Health Holdings, Inc.Adjusted EBITDAWe present Adjusted EBITDA as a supplemental measure of our performance. We define Adjusted EBITDA as net earnings before interest expense, taxes, depreciation and amortization, as further adjusted to exclude the non-cash items and the other adjustments shown in the table below. We present Adjusted EBITDA because we believe it assists investors and analysts in comparing our performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance. Adjusted EBITDA is not a measurement of financial performance or liquidity under generally accepted accounting principles. In evaluating our performance as measured by Adjusted EBITDA, management recognizes and considers the limitations of this measure. Adjusted EBITDA does not reflect certain cash expenses that we are obligated to make, and although depreciation and amortizations are non-cash charges, assets being depreciated and amortized will often have to be replaced in the future, and Adjusted EBITDA does not reflect any cash requirements for such replacements. In addition, other companies in our industry may calculate Adjusted EBITDA differently than we do or may not calculate it at all, limiting its usefulness as a comparative measure. Because of these limitations, Adjusted EBITDA 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 following table sets forth a reconciliation of net earnings to Adjusted EBITDA.  Three Months EndedSeptember 30,Nine Months EndedSeptember 30,2011201220112012(in thousands)Net earnings$15,250$20,453$52,220$48,993Interest expense, net3,4104,1519,20011,682Provision for income taxes9,47213,12734,01832,350Depreciation2,8503,9629,16410,611Amortization4,3638,05811,63921,507Other expense (income)(a)1,878(3,303)1,218(4,476)Contingent purchase compensation expense(b)2,7307,5587,80026,143Loss on refinancing of debt(c)??6,022?Transaction costs(d)1,4581,2872,6533,792Employee equity-based compensation expense(e)1,3181,9612,7064,822Insurance subsidiary interest income5884291,7531,541Professional liability loss reserve adjustments associated with prior years5,345?5,3455,165Severance and other charges27689302,062Adjusted EBITDA$48,664$58,451$144,668$164,192(a) Reflects gain or loss on sale of assets, realized gains on investments, and changes in fair value of investments associated with the Company's non-qualified retirement plan. (b) Reflects contingent purchase compensation expense associated with earnout arrangements on acquisition transactions.(c) Reflects the write-off of deferred financing costs of $1,654 from the previous term loan, as well as certain fees and expenses associated with the debt refinancing. (d) Reflects expenses associated with acquisition transaction fees. (e) Reflects costs related to options and restricted shares granted under the Team Health Holdings, Inc. 2009 Stock Incentive Plan.  Team Health Holdings, Inc.Adjusted Earnings Per Share(in thousands, except per share data)We present Adjusted earnings per share ("Adjusted EPS") as a supplemental measure of our performance.  We define Adjusted EPS as diluted earnings per share excluding non-cash and other adjustments, including the impact of contingent purchase compensation expense and amortization expense relating to purchase accounting for historical acquisitions. We present Adjusted EPS because we believe that it assists investors in understanding the impact of acquisition-related costs on our earnings per share and comparing our performance across operating periods on a consistent basis and provides additional insight into our core earnings performance.  Adjusted EPS is not a measurement of financial performance or liquidity under generally accepted accounting principles. In evaluating our performance as measured by Adjusted EPS, management recognizes and considers the limitations of this measure. Adjusted EPS does not reflect certain cash expenses that we are obligated to make, and although contingent purchase compensation expense and amortization expense are non-cash charges in the period reported, such charges reflect historical or future cash payments in conjunction with our acquisition transactions. In addition, other companies in our industry may calculate Adjusted EPS differently than we do or may not calculate it at all, limiting its usefulness as a comparative measure. Because of these limitations, Adjusted EPS should not be considered in isolation or as a substitute for net income, operating income, basic and diluted earnings per share, cash flows from operating, investing or financing activities, or any other measure calculated in accordance with generally accepted accounting principles. The following tables set forth a reconciliation of diluted earnings per share to Adjusted EPS (note that some totals may not add due to rounding). Three Months Ended September 30,20112012Diluted weighted average shares outstanding66,79168,746Net earnings and diluted net earnings per share, as reported$15,250$0.23$20,453$0.30Adjustments:Professional liability loss reserve adjustments associated with prior years, net of tax of $(2,101) for 20113,2440.05??Contingent purchase compensation expense, net of tax of $(1,073) and $(2,765) for 2011 and 2012, respectively1,6570.024,7930.07Amortization expense, net of tax of $(1,580) and $(2,916) for 2011 and 2012, respectively2,7830.045,1420.07Net earnings and diluted earnings per share, as adjusted$22,934$0.34$30,388$0.44 Nine Months Ended September 30,20112012Diluted weighted average shares outstanding66,40467,943Net earnings and diluted net earnings per share, as reported$52,2200.79$48,9930.72Adjustments:Professional liability loss reserve adjustments associated with prior years, net of tax of $(2,101)  and $(2,051) for 2011 and 2012, respectively3,2440.053,1140.05Loss on refinancing of debt, net of tax of $(2,367) for 20113,6550.06??Contingent purchase compensation expense, net of tax of $(3,066) and $(9,960) for 2011 and 2012, respectively4,7340.0716,1830.24Amortization expense, net of tax of $(4,283) and $(7,898) for 2011 and 2012, respectively7,3560.1113,6090.20Net earnings and diluted earnings per share, as adjusted$71,209$1.07$81,899$1.21 Team Health Holdings, Inc.Revenue AnalysisThe components of net revenue include revenue from contracts that have been in effect for prior periods (same contracts) and from net, new and acquired contracts during the periods, as set forth in the table below: Three Months EndedSeptember 30,20112012(in thousands)Same contracts:Fee-for-service revenue$302,444$317,744Contract and other revenue107,991105,613Total same contracts410,435423,357New contracts, net of terminations:Fee-for-service revenue18,98420,188Contract and other revenue10,81729,009Total new contracts, net of terminations29,80149,197Acquired contracts:Fee-for-service revenue2,64348,293Contract and other revenue68418,375Total acquired contracts3,32766,668Consolidated:Fee-for-service revenue324,071386,225Contract and other revenue119,492152,997Total net revenue$443,563$539,222The following table reflects the visits and procedures included within fee-for-service revenues described in the table above: Three Months EndedSeptember 30,20112012(in thousands)Fee-for-service visits and procedures:Same contract2,1422,196New and acquired contracts, net of terminations176425Total fee-for-service visits and procedures$2,318$2,621 Team Health Holdings, Inc. Revenue AnalysisThe components of net revenue include revenue from contracts that have been in effect for prior periods (same contracts) and from net, new and acquired contracts during the periods, as set forth in the table below: Nine Months EndedSeptember 30,20112012(in thousands)Same contracts:Fee-for-service revenue$835,298$880,018Contract and other revenue291,271291,235Total same contracts1,126,5691,171,253New contracts, net of terminations:Fee-for-service revenue91,760111,904Contract and other revenue58,43493,894Total new contracts, net of terminations150,194205,798Acquired contracts:Fee-for-service revenue5,846115,529Contract and other revenue68431,603Total acquired contracts6,530147,132Consolidated:Fee-for-service revenue932,9041,107,451Contract and other revenue350,389416,732Total net revenue$1,283,293$1,524,183The following table reflects the visits and procedures included within fee-for-service revenues described in the table above: Nine Months EndedSeptember 30,20112012(in thousands)Fee-for-service visits and procedures:Same contract$5,933$6,083New and acquired contracts, net of terminations8261,578Total fee-for-service visits and procedures$6,759$7,661 SOURCE Team Health Holdings Inc.For further information: INVESTOR, David Jones, Executive Vice President and Chief Financial Officer, +1-865-293-5299, MEDIA, Tracy Young, Vice President, Communications, 800-818-1498