UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): February 1, 2012 (February 1, 2012)
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VANGUARD HEALTH SYSTEMS, INC.
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(Exact name of registrant as specified in its charter)
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DELAWARE
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001-35204
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62-1698183
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(State or other jurisdiction
of incorporation)
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(Commission
File Number)
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(IRS Employer
Identification No.)
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20 Burton Hills Boulevard, Suite 100, Nashville, Tennessee 37215
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(Address of principal executive offices, including zip code)
Registrants telephone number, including area code: (615) 665-6000
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the
registrant under any of the following provisions (
see
General Instruction A.2. below):
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
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The information contained in this Form 8-K (including the Exhibits attached
hereto) shall be deemed furnished and not be deemed filed for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the Exchange Act), or otherwise subject to the liabilities of that
section. The information contained in this Form 8-K and the Exhibits attached hereto may only be incorporated by reference in another filing under the Exchange Act or under the Securities Act of 1933, as amended, if such subsequent filing
specifically references and incorporates the information in this Form 8-K or the Exhibits attached hereto.
Item 2.02
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Results of Operations and Financial Condition.
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On February 1, 2012, Vanguard Health Systems, Inc. (the Company) issued a press release announcing its operating results for its second fiscal quarter and six months ended
December 31, 2011. For information regarding the operating results, the Company hereby incorporates by reference herein the information set forth in its press release dated February 1, 2012, a copy of which is attached hereto as Exhibit
99.1 (the Earnings Release).
The Earnings Release contains a non-GAAP financial measure, Adjusted
EBITDA. For purposes of Regulation G, a non-GAAP financial measure is a numerical measure of a registrants historical or future financial performance, financial position or cash flows that excludes amounts, or is subject to adjustments that
have the effect of excluding amounts, that are included in the most directly comparable measure calculated and presented in accordance with GAAP in the statement of operations, balance sheet or statement of cash flows of the registrant; or includes
amounts, or is subject to adjustments that have the effect of including amounts, that are excluded from the most directly comparable measure so calculated and presented. In this regard, GAAP refers to generally accepted accounting principles in the
United States. Pursuant to the requirements of Regulation G, the Company has provided a reconciliation in the Earnings Release of Adjusted EBITDA to the most directly comparable GAAP financial measure to Adjusted EBITDA, which is net income (loss)
attributable to Vanguard Health Systems, Inc. stockholders.
The Company defines Adjusted EBITDA as income (loss) before
interest expense (net of interest income), income taxes, depreciation and amortization, non-controlling interests, gain or loss on the disposal of assets, equity method income, stock compensation, monitoring fees and expenses, realized gains or
losses on investments, acquisition related expenses, debt extinguishment costs, impairment and restructuring charges, pension expense (credits) and discontinued operations, net of taxes. Monitoring fees and expenses represent fees and reimbursed
expenses paid to affiliates of The Blackstone Group and Metalmark Subadvisor LLC for advisory and oversight services. It is reasonable to expect these reconciling items to occur in future periods, but for many of them the amounts recognized can vary
significantly from period to period, do not relate directly to the ongoing operations of the Companys healthcare facilities and complicate period to period comparisons of the Companys results of operations. Adjusted EBITDA should not be
considered as a
substitute for net income (loss) attributable to Vanguard Health Systems, Inc. stockholders, operating cash flows or other cash flow statement data determined in accordance with GAAP.
Additionally, Adjusted EBITDA is not intended to be a measure of free cash flow available for managements discretionary use, since it does not consider certain cash requirements such as interest payments, tax payments and other debt service
requirements. Because Adjusted EBITDA is not a GAAP measure and is susceptible to varying calculations, Adjusted EBITDA, as presented by the Company, may not be comparable to similarly titled measures of other companies.
Further, as additional supplementary financial disclosures covered by Regulation G, the Company is hereby providing
(1) an EBITDA-related, non-GAAP financial measure, the Adjusted EBITDA Margin, for certain completed accounting periods and (2) a calculation of certain of the financial covenants under the Companys senior secured credit agreement as
of, or for the twelve months ended, December 31, 2011 as well as presenting the reconciliations required by Regulation G (collectively, the Supplementary Financial Information). The Supplementary Financial Information is attached
hereto as Exhibits 99.2 and 99.3 and is incorporated by reference herein.
Adjusted EBITDA is a measure used
by management to evaluate the Companys operating performance. Management believes that Adjusted EBITDA and the Supplementary Financial Information provide useful information about the Companys financial performance on the same basis as
that viewed by management to investors, lenders, financial analysts and rating agencies. These groups have historically used EBITDA-related measures in the healthcare industry, along with other measures, to estimate the value of a company, to make
informed investment decisions, to evaluate a companys operating performance compared to that of other companies in the healthcare industry and to evaluate a companys leverage capacity and its ability to meet its debt service. Adjusted
EBITDA eliminates the uneven effect of non-cash depreciation of tangible assets and amortization of intangible assets, much of which results from acquisitions accounted for under the purchase method of accounting. Adjusted EBITDA also eliminates the
effects of changes in interest rates, which management believes relate to general trends in global capital markets, but are not necessarily indicative of a companys operating performance.
A limitation of Adjusted EBITDA, however, is that it does not reflect the periodic cost of certain capitalized assets
that the Company uses to generate its revenues. The Company evaluates these costs through other financial measures such as capital expenditures. Adjusted EBITDA also excludes net interest expense, which is a significant expense because of the
Companys substantial indebtedness. Many of the items excluded from Adjusted EBITDA result from decisions outside the control of management and may differ significantly from company to company due to differing long-term decisions regarding
capital structure, capital investment strategies, the tax jurisdictions in which the companies operate and unique circumstances of acquired entities. Adjusted EBITDA is also used by the Companys management to measure
individual performance for incentive compensation purposes and as an analytical indicator for purposes of allocating resources to the Companys operating businesses and assessing their
performance, both internally and relative to the Companys peers, as well as to evaluate the performance of the Companys healthcare facilities and their regional and local management teams.
Item 9.01
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Financial Statements and Exhibits.
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(d)
Exhibits
. The exhibits filed as part of this Form 8-K are listed in the Exhibit Index that is located at the end of this Form 8-K.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned hereunto duly authorized.
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DATE: February 1, 2012
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VANGUARD HEALTH SYSTEMS, INC.
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(Registrant)
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BY
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/s/ James H. Spalding
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James H. Spalding
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Executive Vice President, General Counsel
& Secretary
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VANGUARD HEALTH SYSTEMS, INC.
EXHIBIT INDEX
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Exhibit No.
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Description
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99.1
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Press Release of Vanguard Health Systems, Inc. dated February 1, 2012, announcing operating results for the second fiscal quarter and six months ended December 31,
2011
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99.2
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Adjusted EBITDA Margin
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99.3
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Calculation of Certain Financial Covenants under Senior Secured Credit Agreement
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