21st Century Oncology Holdings Inc. Reports First and Second Quarter 2016 Financial Results

FORT MYERS, Fla., Sept. 20, 2016 (GLOBE NEWSWIRE) — 21st Century Oncology Holdings, Inc. (“21C” or the “Company”), the leading global provider of integrated cancer care (ICC) services, announced today its financial results for the first and second quarters of 2016.

First Quarter 2016

Total revenues for the first quarter of 2016 were $270.3 million, a decline of 1.9% as compared to total revenues of $275.6 million for the same period in the prior year. Net patient service revenue in our ICC line of business declined $2.9 million, or 3.2%, as compared to the same period in the prior year predominantly due to the conversion of our Jacksonville medical oncology group to a professional services agreement (PSA) with the University of Florida, whereby the Company will invoice for chemotherapy administration only, eliminating the drug portion. In addition, our international net patient service revenue declined $3.3 million, or 12.3%, as compared to the same period in the prior year due to the devaluation in the Argentine Peso. Constant currency international revenue growth was approximately 33.3%, or $7.2 million, quarter over quarter. 

Net income for the first quarter of 2016 was $2.6 million as compared to a net loss of $14.4 million for the same period in the prior year. The improvement in net income resulted primarily from a $12.6 million gain on the contribution of a radiation facility to a health system joint venture and changes in fair value measurements of $4.7 million.   

Adjusted EBITDA in the first quarter of 2016 was $39.0 million, or 14.4% of total revenues, as compared to $42.3 million, or 15.3% of total revenues, in the first quarter of 2015. The contributors to the adjusted EBITDA decline were a $5.3 million reduction in revenue offset by a $6.3 million decrease in salaries and benefits. In addition, a net increase in medical supply expense of $1.2 million occurred in the first quarter of 2016 as compared to the first quarter of 2015.  This increase was the result of the expansion of medical oncology in SFRO locations, offset to some degree by a reduction in medical supply cost as a result of converting the Jacksonville medical oncology group to a PSA. Further contributors to the adjusted EBITDA reduction were an increase in other operating and general and administrative costs of $3.5 million offset by a reduction in cash distributions to non-controlling interests of $0.8 million. 

Total radiation oncology treatment plans increased 0.2% in the first quarter of 2016 as compared to the same period in the prior year, and same market radiation oncology treatment plans increased 0.7% for the first quarter of 2016 as compared to the same period in the prior year. 

Total radiation oncology treatments per day during the first quarter of 2016 declined 3.0% as compared to the same period in 2015 due to the closing of our Bronx-Lebanon and Riverhead centers as well as the transition of our Greenville, North Carolina radiation center to an unconsolidated health system joint venture. Same market radiation oncology treatments per day for the first quarter of 2016 declined 1.5% as compared to the same period in 2015. As previously disclosed, the Company has experienced a decrease in treatments per case for breast and some newly diagnosed lung cancers as a result of advances in hypo-fractionated external beam radiotherapy and stereotactic radiosurgery.

Net patient service revenue per radiation oncology treatment increased 1.8% in the first quarter of 2016 as compared to the same period in the prior year and same market net patient service revenue per radiation oncology treatment increased 0.2% in the first quarter of 2016 as compared to the same period in the prior year.  While this change is insignificant, on a same market basis, there are a number of factors affecting this rate, comparatively.  The simulation code bundling that was implemented in July 2015 reduced our rate by 1.6% for the first quarter of 2016 as compared to the same period in the prior year.  In addition, the net effect of the 2016 Final Rule on the Physician Fee Schedule reduced our rate by 1.4% for the first quarter of 2016 as compared to the same period in the prior year.  A further rate reduction of 0.4% occurred in the first quarter of 2016 as compared to the same period in the prior year as a result of not achieving the meaningful use criteria for electronic health records.  Offsetting these reductions in revenue was a 1.0% increase in our rate for the first quarter of 2016 as compared to the same period in 2015 as a result of the SFRO facilities being added to the existing 21C commercial insurance fee schedules.  Finally, our rate in the first quarter of 2015 as compared to the first quarter of 2016 was negatively affected 2.6% by uncertainties driven by the newly issued IMRT G codes.

The number of open cases in our international line of business in the first quarter of 2016 increased 10.5% as compared to the same period in the prior year.  Due to devaluation in the Argentine Peso, revenue per radiation oncology case declined 20.6% for the first quarter of 2016 as compared to the same period in the prior year.  In constant currency, our international revenue per open case increased by approximately 12.7%.

Second Quarter 2016 Results

Total revenues for the second quarter of 2016 were $258.4 million, a decline of 7.1% as compared to total revenues of $278.2 million for the same period in the prior year. Net patient service revenue in our domestic freestanding line of business declined $12.9 million, or 8.1%, as compared to the same period in the prior year.  This decline was driven by a 4.7% decline in total radiation oncology treatments per day and a 3.5% decline in net patient service revenue per radiation oncology treatment for the second quarter of 2016 as compared to the same period in the prior year. Net patient service revenue in our ICC line of business declined $5.1 million, or 5.8%, as compared to the same period in the prior year predominantly due to the conversion of our Jacksonville medical oncology group to a professional services agreement (PSA) with the University of Florida. Our international net patient service revenue declined $1.4 million, or 4.7%, as compared to the same period in the prior year due to the devaluation in the Argentine Peso. Constant currency international revenue growth was approximately 37%, or $10.0 million, quarter over quarter.  In addition, our net patient service revenue professional services declined $0.6 million in the second quarter 2016 as compared to the same period in the prior year. 

Net loss for the second quarter of 2016 was $17.1 million as compared to a net loss of $64.2 million for the same period in the prior year. The improvement in net loss resulted primarily from a $9.7 million reduction in salaries and benefits, a $7.7 million reduction in general and administrative expenses and changes in fair value measurements of $14.7 million for the second quarter 2016 as compared to the same period in 2015.  In addition, the second quarter of 2015 included a $37.4 million expense associated with the early extinguishment of debt. These amounts were offset by a $19.8 million decline in total revenues in the second quarter of 2016 as compared to the second quarter of 2015, a $1.8 million impairment loss in the second quarter of 2016 and a $1.4 million gain on insurance recoveries in the second quarter of 2015. 

Adjusted EBITDA in the second quarter of 2016 was $33.4 million, or 12.9% of total revenues, as compared to $46.2 million, or 16.6% of total revenues, in the second quarter of 2015. The contributors to the adjusted EBITDA decline were a $19.8 million reduction in revenue offset by a $9.7 million decrease in salaries and benefits, and an increase of $2.7 million in other operating expenses. 

Total radiation oncology treatment plans decreased 4.8% in the second quarter of 2016 as compared to the same period in the prior year, and same market radiation oncology treatment plans decreased 3.2% for the second quarter of 2016 as compared to the same period in the prior year. 

Total radiation oncology treatments per day during the second quarter of 2016 declined 4.7% as compared to the same period in 2015 due to the closing of our Bronx-Lebanon and Riverhead centers as well as the conversion of our Greenville, North Carolina radiation center to an unconsolidated health system joint venture in January 2016.  Same market radiation oncology treatments per day for the second quarter of 2016 declined 3.1% as compared to the same period in 2015.

Net patient service revenue per radiation oncology treatment decreased 3.5% in the second quarter of 2016 as compared to the same period in the prior year and same market net patient service revenue per radiation oncology treatment decreased 3.6% in the second quarter of 2016 as compared to the same period in the prior year. The simulation code bundling that was implemented in July 2015 reduced our rate by 1.4% for the second quarter of 2016 as compared to the same period in the prior year. In addition, the net effect of the 2016 Final Rule on the Physician Fee Schedule reduced our rate by 1.4% for the second quarter of 2016 as compared to the same period in the prior year. A rate reduction of 0.4% occurred in the second quarter of 2016 as compared to the same period in the prior year as a result of not achieving the meaningful use criteria for electronic health records.  Our rate in the second quarter of 2015 as compared to the second quarter of 2016 was negatively affected 2.6% by uncertainties driven by the newly issued IMRT G codes. Offsetting these rate reductions was a 1.7% increase in our rate for the second quarter of 2016 as compared to the same period in 2015 as a result of the SFRO facilities being added to the existing 21C commercial insurance fee schedules. 

The number of open cases in our international line of business in the second quarter of 2016 increased 7.8% as compared to the same period in the prior year. Due to devaluation in the Argentine Peso, revenue per radiation oncology case declined 11.6% for the second quarter of 2016 as compared to the same period in the prior year.  In constant currency, our international revenue per open case increased by approximately 17.0%.

Management Transition and Success with First Capital Event

On September 9, 2016, 21st Century Oncology announced that the Company has appointed William R. Spalding as President and Chief Executive Officer of the Company, effective as of such date and that Dr. Daniel E. Dosoretz will continue to serve as a member of the Company’s board of directors and senior physician.

The Company also announced, on September 9, 2016 that Canada Pension Plan Investment Board (CPPIB), a professional investment management organization, has purchased an additional $25 million of preferred stock in the company. 

Bill Spalding, President and Chief Executive Officer, commented, “Dr. Dosoretz led the development of a remarkable organization that today has unparalleled size, scale and relevance in the delivery of academic-quality, integrated cancer care.  Our integrated business model is a distinct advantage, and positions the Company to succeed in the current health care environment.  The Company’s unwavering commitment to providing patients with high-quality, efficient care remains unchanged.”

Mr. Spalding continued, “I’m grateful to CPPIB for their continued commitment to 21st Century Oncology.”

Earnings Conference Call

The Company will host a conference call on Thursday, September 29, 2016 at 2:00 p.m. Eastern Time, during which management will discuss the financial results of the first and second quarters of 2016.  The conference call and replay of the conference call may be accessed as follows:

Dial-in numbers: 877-407-9039 (Domestic); 201-689-8470 (International)

Replay Dial-in Numbers (Available until October 13, 2016): 877-870-5176 (Domestic); 858-384-5517 (International); Replay Pin Number: 13645618

A live webcast and webcast replay of the call will also be available from the Events section of the corporate website at www.21co.com

About 21st Century Oncology Holdings, Inc.

21st Century Oncology Holdings, Inc. is the largest global provider of integrated cancer care services. The Company offers a comprehensive range of cancer treatment services, focused on delivering academic quality, cost-effective patient care in personal and convenient settings. As of June 30, 2016, the Company operated 183 treatment centers, including 147 centers located in 17 U.S. states and 36 centers located in seven countries in Latin America.

Forward-Looking Statements
This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Act of 1934, as amended. Statements preceded by, followed by or that otherwise include the words “believes”, “expects”, “anticipates”, “intends”, “projects”, “estimates”, “plans”, “may increase”, “forecast” and similar expressions or future or conditional verbs such as “will”, “should”, “would”, “may” and “could” are generally forward-looking in nature and not historical facts. Forward-looking statements are based on management’s current expectations or beliefs about the Company’s future plans, expectations and objectives. These forward-looking statements are not historical facts and are subject to risks and uncertainties that could cause the actual results to differ materially from those projected in these forward-looking statements including, but not limited to reductions in Medicare reimbursement, healthcare reform, state and federal investigations, claims and litigation matters, decreases in payments by managed care organizations and other commercial payers, liquidity, leverage ratios and compliance with other debt covenants  and other risk factors that may be described from time to time in the Company’s filings with the Securities and Exchange Commission. Readers of this release are cautioned not to place undue reliance on forward-looking statements contained herein, which speak only as of the date stated, or if no date is stated, as of the date of this press release. The Company undertakes no obligation to publicly update or revise the forward-looking statements contained herein to reflect changed events or circumstances after the date of this release, unless required by law.

           
 21ST CENTURY ONCOLOGY HOLDINGS, INC.   
 CONDENSED CONSOLIDATED BALANCE SHEETS   
 (in thousands, except share amounts)   
       
     March 31,     December 31,   
    2016    2015   
     (unaudited)     (a)   
 ASSETS   
Current assets:           
Cash and cash equivalents    $   72,403     $   65,211    
Restricted cash        196         195    
Marketable securities        1,041         1,078    
Accounts receivable, net        146,436         122,355    
Prepaid expenses        8,077         7,822    
Inventories        3,440         3,918    
Income tax receivable        4,174         4,966    
Other        15,843         15,732    
Total current assets        251,610         221,277    
           
Equity investments in joint ventures        14,874         1,214    
Property and equipment, net        242,005         238,585    
Real estate subject to finance obligation        12,768         12,631    
Goodwill        492,896         498,680    
Intangible assets, net        66,671         70,115    
Embedded derivative & other financial instrument features of Series A convertible redeemable preferred stock        21,407         17,883    
Other assets        41,394         41,588    
Deferred income taxes        1,850         1,888    
Total assets    $ 1,145,475     $ 1,103,861    
           
 LIABILITIES AND DEFICIT   
           
Current liabilities:           
Accounts payable    $   73,617     $   59,888    
Accrued expenses        84,625         111,653    
Income taxes payable        1,923         2,501    
Current portion of long-term debt      1,094,066       1,023,877    
Current portion of finance obligation        276         283    
Other current liabilities        14,602         14,265    
Total current liabilities      1,269,109       1,212,467    
Long-term debt, less current portion        34,007         49,233    
Finance obligation, less current portion        13,567         13,318    
Embedded derivative & other financial instrument features of Series A convertible redeemable preferred stock        21,110         19,911    
Other long-term liabilities        69,878         70,928    
Deferred income taxes        4,477         3,887    
Total liabilities      1,412,148       1,369,744    
           
Series A convertible redeemable preferred stock, $0.001 par value, $1,000 stated value, 3,500,000 authorized, 385,000 issued and outstanding at March 31, 2016 and December 31, 2015        409,332         389,514    
Noncontrolling interests – redeemable        19,955         19,233    
           
Commitments and Contingencies           
           
Equity:           
Common stock, $0.01 par value, 1,000,000 shares authorized 1,059 shares issued and outstanding at March 31, 2016 and December 31, 2015        –          –     
Additional paid-in capital        559,967         579,920    
Retained deficit       (1,225,473 )     (1,226,298 )  
Accumulated other comprehensive loss, net of tax        (57,498 )       (54,574 )  
Total 21st Century Oncology Holdings, Inc. shareholder’s deficit        (723,004 )       (700,952 )  
Noncontrolling interests – nonredeemable        27,044         26,322    
Total deficit        (695,960 )       (674,630 )  
Total liabilities and deficit    $  1,145,475     $  1,103,861    
           
(a)  Derived from audited financial statements           
           

 

21ST CENTURY ONCOLOGY HOLDINGS, INC.  
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS  
(in thousands)  
(unaudited)  
     
  Three Months Ended  
  March 31,  
  2016    2015   
                 
Revenues:        
Net patient service revenue $   250,784     $   254,255    
Management fees     14,631         15,870    
Other revenue     4,883         5,508    
Total revenues     270,298         275,633    
         
Expenses:        
Salaries and benefits     140,098         146,959    
Medical supplies     27,510         26,291    
Facility rent expenses     17,342         16,821    
Other operating expenses     16,104         14,948    
General and administrative expenses     29,373         28,974    
Depreciation and amortization     21,120         22,132    
Provision for doubtful accounts     4,696         4,313    
Interest expense, net     24,619         25,687    
Other gains and losses     (12,629 )       (384 )  
Fair value measurements     (2,534 )       2,153    
Loss on foreign currency transactions     71         238    
Total expenses     265,770         288,132    
         
Income (loss) before income taxes and equity interest in net income of joint ventures     4,528         (12,499 )  
Income tax expense     2,259         1,933    
         
Net income (loss) before equity interest in net income of joint ventures     2,269         (14,432 )  
Equity interest in net income of joint ventures, net of tax     352         24    
Net income (loss)     2,621         (14,408 )  
         
Net  income attributable to noncontrolling interests- redeemable and non-redeemable     (1,796 )       (2,259 )  
         
Net income (loss) attributable to 21st Century Oncology Holdings, Inc. shareholder     825         (16,667 )  
         
Other comprehensive loss, net of tax:        
Unrealized loss on foreign currency translation     (3,173 )       (2,193 )  
Other comprehensive loss     (3,173 )       (2,193 )  
         
Comprehensive loss     (552 )       (16,601 )  
Comprehensive income attributable to noncontrolling interests- redeemable and non-redeemable     (1,547 )       (1,952 )  
Comprehensive loss attributable to 21st Century        
Oncology Holdings, Inc. shareholder $   (2,099 )   $   (18,553 )  
         

 

                   
21ST CENTURY ONCOLOGY HOLDINGS, INC.  
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS  
(in thousands)  
(unaudited)  
               
            Three Months Ended  
            March 31,  
              2016       2015    
Cash flows from operating activities                  
Net income (loss)   $   2,621     $   (14,408 )  
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:          
  Depreciation and amortization       21,120         22,132    
  Deferred rent expense       97         165    
  Deferred income taxes       415         (437 )  
  Stock-based compensation       –          1    
  Provision for doubtful accounts       4,696         4,313    
  Gain on the sale/disposal of property and equipment       –          (384 )  
  Gain on the contribution of a radiation facility to a joint venture       (12,629 )       –     
  Loss on foreign currency transactions       25         141    
  Fair value adjustment of earn-out liabilities       1         460    
  Fair value adjustment of embedded derivatives and other financial instruments       (2,535 )       1,693    
  Amortization of debt discount       475         446    
  Amortization of loan costs       1,034         1,455    
  Paid in kind interest on notes payable       393         –     
  Equity interest in net income of joint ventures, net of tax       (352 )       (24 )  
  Distribution received from unconsolidated joint ventures       –          53    
  Changes in operating assets and liabilities:          
        Accounts receivable and other current assets       (33,244 )       (22,445 )  
        Prepaid expenses and other assets       958         623    
        Inventories        547         183    
        Accounts payable        5,511         4,106    
        Accrued deferred compensation       366         393    
        Income taxes payable       52         1,048    
        Accrued expenses / other liabilities       (26,239 )       23,105    
                   
Net cash (used in) provided by operating activities       (36,688 )       22,619    
                   
Cash flows from investing activities          
Purchase of property and equipment       (12,259 )       (12,199 )  
Acquisition of medical practices       (129 )       (25,965 )  
Change in restricted cash associated with medical practice acquisitions       (1 )       (815 )  
Proceeds from the sale of equity interest in a joint venture       6,170         –     
Purchase of joint venture interests       (502 )       –     
Proceeds from the sale of property and equipment       29         1,103    
Loans to employees       (35 )       (117 )  
Purchase of company owned life insurance policies       (394 )       (321 )  
Change in other assets and other liabilities       194         (62 )  
                   
Net cash used in investing activities       (6,927 )       (38,376 )  
                   
Cash flows from financing activities          
Proceeds from issuance of debt       60,033         2,863    
Principal repayments of debt       (8,789 )       (9,901 )  
Repayments of finance obligation       (52 )       (84 )  
Proceeds from issuance of noncontrolling interest       –          743    
Proceeds from noncontrolling interest holders – redeemable and non-redeemable       –          3,230    
Purchase of noncontrolling interest – non-redeemable       –          (1,233 )  
Cash distributions to noncontrolling interest holders – redeemable and non-redeemable       (214 )       (964 )  
Payments for contingent considerations       (149 )       –     
                   
Net cash provided by (used in) financing activities       50,829         (5,346 )  
                   
Effect of exchange rate changes on cash and cash equivalents     (22 )       (6 )  
                   
Net increase (decrease) in cash and cash equivalents       7,192         (21,109 )  
Cash and cash equivalents, beginning of period       65,211         99,082    
                   
Cash and cash equivalents, end of period   $   72,403     $   77,973    
                   

               
 21ST CENTURY ONCOLOGY HOLDINGS, INC.       
 Supplemental Financial Information (Unaudited)       
 Reconciliation of Total Revenue and Adjusted EBITDA to Net Loss Attributable       
 to 21st Century Oncology Holdings, Inc. Shareholder       
           
   Three Months Ended         
   March 31,         
    2016       2015          
(in thousands):                      
Total revenues $   270,298     $   275,633          
               
               
Net income (loss) attributable to 21st Century Oncology Holdings, Inc. shareholder $   825     $   (16,667 )        
Income tax expense     2,259         1,933          
Interest expense, net     24,619         25,687          
Depreciation and amortization     21,120         22,132          
Gain on the contribution of a radiation facility to a joint venture     (12,629 )       –          
Fair value adjustment of earn-out liabilities      1         460          
Fair value adjustment of embedded derivatives and other financial instruments     (2,535 )       1,693          
Net income attributable to noncontrolling interests, net of cash distributions     1,582         1,295          
Other expenses (a)     1,703         1,937          
Non-cash expenses (b)     840         1,011          
Sale-lease back adjustments (c)     (289 )       (449 )        
Acquisition-related costs (d)     632         1,310          
Litigation matters (e)     866         1,941          
               
Adjusted EBITDA (1) $   38,994     $   42,283          
               
Adjusted EBITDA as a percentage of total revenues   14.4 %     15.3 %        
               
(1) Adjusted EBITDA, as defined in our Credit Agreement, dated as of April 30, 2015, is calculated as income (loss) before interest expense (net of interest income), income taxes, depreciation and amortization, net income attributable to noncontrolling interests, net of cash distributions, gain on the sale of an interest in a joint venture, loss on sale leaseback transaction, early extinguishment of debt, fair value adjustment of earn-out liability, fair value adjustment of embedded derivative, impairment loss, foreign currency derivative contract loss (gain), management fees accrued to our sponsor, non-cash expenses including costs relating to stock compensation, amortization of straight-line rent and amortization of capital expenditures relating to repairs and maintenance, non-cash equipment rent, sale-lease back adjustments, acquisition-related costs, other expenses including loss on sale of assets, severance payments related to termination of employee staff reductions, tail premiums on termed physicians, franchise taxes, costs relating to consulting services on Medicare reimbursement, litigation settlements with physicians, costs associated with tradename and rebranding initiatives, expenses associated with idle/closed radiation therapy treatment facilities.      
               
(a) Other expenses include management fees accrued to our sponsor, Vestar Capital Partners, loss on sale of assets, severance payments related to termination of employee staff reductions, tail premiums paid on terminated physicians, franchise taxes and costs relating to consulting services on Medicare reimbursement. Expenses related to the costs associated
with the Company’s tradename and rebranding initiatives and expenses associated with idle/closed radiation therapy facilities, costs associated with the CMS Medicare freeze and costs associated with the restatement process.
     
               
(b) Non-cash expenses including costs relating to stock compensation, amortization of straight-line rent, amortization of capital expenditures relating to warranty arrangements amortized to repairs and maintenance and non-cash equipment rent.      
               
(c) Sale-lease back adjustments relates to the adjustment of benefit derived from the classification of operating leases as finance obligations reflecting a reclassification of interest expense and depreciation and amortization expense as rent expense.      
               
(d) Acquisition related costs associated with ASC 805, “Business Combinations,” including professional fees, corporate development, integration and due diligence costs relating to the acquisition of medical practices.      
               
(e) Litigation matters relate to loss contingency reserves related to the Medicare investigative matters and costs associated with the termination of physicians.      
               
We believe the Adjusted EBITDA provides useful information about our financial performance to investors, lenders, financial analysts and rating agencies as 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 company’s leverage capacity and its ability to meet its debt service requirements.  Adjusted EBITDA eliminates the uneven effect of non-cash depreciation of tangibles assets and amortization of intangible assets, much of which results from acquisitions accounted for under the purchase method of accounting.  Adjusted EBITDA is also used by us to measure individual performance for incentive compensation purposes and as an analytical indicator for purposes of allocating resources to our operating business and assessing their performance, both internally and relative to our peers, as well as to evaluate the performance of our operating management teams, and for purposes in the calculation of debt covenants and related disclosures.      
               
Adjusted EBITDA is not intended as a substitute for net income (loss) attributable to 21st Century Oncology Holdings, Inc. shareholder, operating cash flows or other cash flow data determined in accordance with accounting principles generally accepted in the United States. Due to varying methods of calculation, Adjusted EBITDA as presented may not be comparable to similarly titled measures of other companies.      

               
  21ST CENTURY ONCOLOGY HOLDINGS, INC.
  KEY OPERATING STATISTICS
  (unaudited)
               
     Three Months Ended       
     March 31,     %   
Operating Metrics   2016       2015     Change  
  Number of operating days     64         63       1.6 %  
               
  Domestic            
  Radiation oncology treatment plans (total) (1)     9,369         9,352       0.2 %  
               
  Radiation oncology treatments per day (total)     3,276         3,378       -3.0 %  
               
  Net patient service revenue per radiation oncology treatment (total)  $   752     $   739       1.8 %  
               
               
  Radiation oncology treatment plans (same market) (1,2)     9,236         9,169       0.7 %  
               
  Radiation oncology treatments per day (same market) (2)     3,258         3,308       -1.5 %  
               
  Net patient service revenue per radiation oncology treatment (same market) (2) $   747     $   745       0.2 %  
               
  International            
  Total number of open cases     4,974         4,501       10.5 %  
               
  Revenue per radiation oncology case $   4,766     $   6,003       -20.6 %  
               
               
     Three Months Ended       
     March 31,     %   
Revenue Details   2016       2015     Change  
  Net patient service revenue per Consolidated Statements of Operations and Comprehensive Loss $   250,784     $   254,255        
  Less net patient service revenue ICC      (86,619 )       (89,469 )      
  Less net patient service revenue professional services     (1,969 )       (1,944 )      
  Plus net patient service revenue unconsolidated MSAs (3)     19,255         21,504        
  Less international net patient service revenue     (23,708 )       (27,020 )      
               
  Domestic freestanding net patient service revenue $    157,743     $    157,326       0.3 %  
               
               
     March 31,       
Center Details   2016       2015        
  Radiation therapy centers – freestanding (domestic)     135         133        
  Radiation therapy centers – freestanding (international)     36         36        
  Radiation therapy centers – professional / other      12         11        
               
  Total radiation therapy centers     183         180        
               
  (1) Total radiation oncology treatment plans represent the number of prescriptions issued by the physicians to start the treatment process. 
             
  (2) Same market is defined as markets that have been open in excess of 12 months.   
    This includes in-market acquisitions and conversion of existing professional only relationships to freestanding. 
               
  (3) Medical services agreement            
               

 

           
 21ST CENTURY ONCOLOGY HOLDINGS, INC.   
 CONDENSED CONSOLIDATED BALANCE SHEETS   
 (in thousands, except share amounts)   
       
     June 30,     December 31,   
      2016       2015    
     (unaudited)     (a)   
 ASSETS   
Current assets:           
Cash and cash equivalents    $   52,206     $   65,211    
Restricted cash        307         195    
Marketable securities        1,080         1,078    
Accounts receivable, net        128,715         122,355    
Prepaid expenses        8,029         7,822    
Inventories        3,418         3,918    
Income tax receivable        5,285         4,966    
Other        15,298         15,732    
Total current assets        214,338         221,277    
           
Equity investments in joint ventures        15,328         1,214    
Property and equipment, net        230,748         238,585    
Real estate subject to finance obligation        13,997         12,631    
Goodwill        492,143         498,680    
Intangible assets, net        61,937         70,115    
Embedded derivative & other financial instrument features of Series A convertible redeemable preferred stock        33,284         17,883    
Other assets        40,946         41,588    
Deferred income taxes        2,119         1,888    
Total assets    $ 1,104,840     $   1,103,861    
           
 LIABILITIES AND DEFICIT   
           
Current liabilities:           
Accounts payable    $   67,398     $   59,888    
Accrued expenses        68,488         111,653    
Income taxes payable        2,680         2,501    
Current portion of long-term debt      1,102,452         1,023,877    
Current portion of finance obligation        269         283    
Other current liabilities        11,430         14,265    
Total current liabilities      1,252,717         1,212,467    
Long-term debt, less current portion        24,899         49,233    
Finance obligation, less current portion        14,903         13,318    
Embedded derivative & other financial instrument features of Series A convertible redeemable preferred stock        22,212         19,911    
Other long-term liabilities        70,971         70,928    
Deferred income taxes        4,953         3,887    
Total liabilities      1,390,655         1,369,744    
           
Series A convertible redeemable preferred stock, $0.001 par value, $1,000 stated value, 3,500,000 authorized, 385,000 issued and outstanding at June 30, 2016 and December 31, 2015        429,966         389,514    
Noncontrolling interests – redeemable        19,825         19,233    
           
Commitments and Contingencies           
           
Equity:           
Common stock, $0.01 par value, 1,000,000 shares authorized 1,059 shares issued and outstanding at June 30, 2016 and December 31, 2015        –          –     
Additional paid-in capital        539,093         579,920    
Retained deficit      (1,243,855 )      (1,226,298 )  
Accumulated other comprehensive loss, net of tax        (57,809 )       (54,574 )  
Total 21st Century Oncology Holdings, Inc. shareholder’s deficit        (762,571 )       (700,952 )  
Noncontrolling interests – nonredeemable        26,965         26,322    
Total deficit        (735,606 )       (674,630 )  
Total liabilities and deficit    $ 1,104,840     $  1,103,861    
           
(a)  Derived from audited financial statements           
           

 21ST CENTURY ONCOLOGY HOLDINGS, INC. 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS 
 (in thousands) 
 (unaudited) 
       
   Three Months Ended     Six Months Ended 
   June 30,     June 30, 
    2016         2015       2016         2015  
                                   
Revenues:                  
Net patient service revenue $   238,685       $   257,854     $   489,469       $   512,109  
Management fees     14,643           15,211         29,274           31,081  
Other revenue     5,055           5,148         9,938           10,656  
Total revenues     258,383           278,213         528,681           553,846  
                   
Expenses:                  
Salaries and benefits     137,653           147,397         277,751           294,356  
Medical supplies     24,494           24,774         52,004           51,065  
Facility rent expenses     17,522           17,017         34,864           33,838  
Other operating expenses     15,567           16,095         31,671           31,043  
General and administrative expenses     36,353           44,061         65,726           73,035  
Depreciation and amortization     20,973           22,204         42,093           44,336  
Provision for doubtful accounts     3,964           3,753         8,660           8,066  
Interest expense, net     25,583           24,378         50,202           50,065  
Other gains and losses     (551 )         (1,283 )       (13,180 )         (1,667 )
Impairment loss     1,825           –         1,825           –  
Early extinguishment of debt     –           37,390         –           37,390  
Fair value measurements     (10,255 )         4,452         (12,789 )         6,605  
Loss (gain) on foreign currency transactions     234           (34 )       305           204  
Total expenses     273,362           340,204         539,132           628,336  
                   
Loss before income taxes and equity interest in net income of joint ventures     (14,979 )         (61,991 )       (10,451 )         (74,490 )
Income tax expense     2,542           2,414         4,801           4,347  
                   
Net loss before equity interest in net income of joint ventures     (17,521 )         (64,405 )       (15,252 )         (78,837 )
Equity interest in net income of joint ventures, net of tax     455           188         807           212  
Net loss     (17,066 )         (64,217 )       (14,445 )         (78,625 )
                   
Net income attributable to noncontrolling interests- redeemable and non-redeemable     (1,316 )         (1,821 )       (3,112 )         (4,080 )
                   
Net loss attributable to 21st Century Oncology Holdings, Inc. shareholder     (18,382 )         (66,038 )       (17,557 )         (82,705 )
                   
Other comprehensive loss, net of tax:                  
Unrealized loss on foreign currency translation     (823 )         (1,806 )       (3,996 )         (3,999 )
Other comprehensive loss     (823 )         (1,806 )       (3,996 )         (3,999 )
                   
Comprehensive loss     (17,889 )         (66,023 )       (18,441 )         (82,624 )
Comprehensive income attributable to noncontrolling interests- redeemable and non-redeemable     (804 )         (1,580 )       (2,351 )         (3,532 )
Comprehensive loss attributable to 21st Century Oncology Holdings, Inc. shareholder $   (18,693 )     $   (67,603 )   $   (20,792 )     $   (86,156 )
                   

 

21ST CENTURY ONCOLOGY HOLDINGS, INC.  
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS  
(in thousands)  
(unaudited)  
               
            Six Months Ended  
            June 30,  
              2016       2015    
Cash flows from operating activities                  
Net loss     $   (14,445 )   $   (78,625 )  
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:          
  Depreciation and amortization       42,093         44,336    
  Deferred rent expense       144         379    
  Deferred income taxes       1,061         (809 )  
  Stock-based compensation       –          5    
  Provision for doubtful accounts       8,660         8,066    
  Gain on the sale/disposal of property and equipment       (34 )       (303 )  
  Gain on the contribution of a radiation facility to a joint venture       (12,629 )       –     
  Impairment loss       1,825         –     
  Early extinguishment of debt       –          37,390    
  Debt modification costs       197         –     
  Loss on foreign currency transactions       227         38    
  Fair value adjustment of earn-out liabilities       1         (530 )  
  Fair value adjustment of embedded derivatives and other financial instruments       (12,790 )       7,135    
  Amortization of debt discount       947         746    
  Amortization of loan costs       2,095         2,630    
  Paid in kind interest on notes payable       795         –     
  Equity interest in net income of joint ventures, net of tax       (807 )       (212 )  
  Distribution received from unconsolidated joint ventures       –          106    
  Changes in operating assets and liabilities:          
        Accounts receivable and other current assets       (25,282 )       (34,636 )  
        Prepaid expenses and other assets       1,228         (1,003 )  
        Inventories        468         124    
        Accounts payable        10,864         3,556    
        Accrued deferred compensation       799         686    
        Income taxes payable       (1,030 )       346    
        Accrued expenses / other liabilities       (39,844 )       23,533    
                   
Net cash (used in) provided by operating activities       (35,457 )       12,958    
                   
Cash flows from investing activities          
Purchase of property and equipment       (20,195 )       (25,753 )  
Acquisition of medical practices       (129 )       (29,258 )  
Change in restricted cash associated with medical practice acquisitions       (112 )       4,040    
Proceeds from the sale of equity interest in a joint venture       6,170         –     
Purchase of joint venture interests       (502 )       –     
Proceeds from the sale of property and equipment       123         1,122    
(Loans to) repayments from employees       (191 )       160    
Purchase of company owned life insurance policies       (656 )       (670 )  
Change in other assets and other liabilities       113         (156 )  
                   
Net cash used in investing activities       (15,379 )       (50,515 )  
                   
Cash flows from financing activities          
Proceeds from issuance of debt       60,789         970,618    
Principal repayments of debt       (19,264 )       (911,717 )  
Repayments of finance obligation       (108 )       (136 )  
Proceeds from issuance of noncontrolling interest       –          743    
Proceeds from noncontrolling interest holders – redeemable and non-redeemable       –          3,230    
Purchase of noncontrolling interest – non-redeemable       –          (1,233 )  
Cash distributions to noncontrolling interest holders – redeemable and non-redeemable       (1,407 )       (2,022 )  
Payments for contingent considerations       (149 )       (8,537 )  
Payment of call premium on long-term debt       –          (24,877 )  
Payment of debt modification costs       (197 )       –     
Payments of loan costs       (1,811 )       (25,626 )  
                   
Net cash provided by financing activities       37,853         443    
                   
Effect of exchange rate changes on cash and cash equivalents     (22 )       (10 )  
                   
Net decrease in cash and cash equivalents       (13,005 )       (37,124 )  
Cash and cash equivalents, beginning of period       65,211         99,082    
                   
Cash and cash equivalents, end of period   $   52,206     $   61,958    
                   

 

21ST CENTURY ONCOLOGY HOLDINGS, INC.
 Supplemental Financial Information (Unaudited)
 Reconciliation of Total Revenue and Adjusted EBITDA to Net Loss Attributable 
 to 21st Century Oncology Holdings, Inc. Shareholder
       
   Three Months Ended    Six Months Ended
   June 30,    June 30,
    2016     2015       2016     2015  
 (in thousands):                          
 Total revenues $   258,383   $   278,213     $   528,681   $   553,846  
           
           
Net income (loss) attributable to 21st Century          
Oncology Holdings, Inc. shareholder $   (18,382 ) $   (66,038 )   $   (17,557 ) $   (82,705 )
Income tax expense     2,542       2,414         4,801       4,347  
Interest expense, net     25,583       24,378         50,202       50,065  
Depreciation and amortization     20,973       22,204         42,093       44,336  
Gain on the contribution of a radiation facility to a joint venture     –       –         (12,629 )     –  
Gain on BP settlement     (517 )     –         (517 )     –  
Impairment loss     1,825       –         1,825       –  
Early extinguishment of debt     –       37,390         –       37,390  
Fair value adjustment of earn-out liabilities     –       (990 )       1       (530 )
Fair value adjustment of embedded derivatives          
and other financial instruments     (10,255 )     5,442         (12,790 )     7,135  
Net income attributable to noncontrolling interests,          
net of cash distributions     123       763         1,705       2,058  
Other expenses (a)     2,232       2,008         3,735       3,945  
Non-cash expenses (b)     793       1,338         1,633       2,349  
Sale-lease back adjustments (c)     (292 )     (315 )       (582 )     (764 )
Acquisition-related costs (d)     358       1,069         990       2,379  
Litigation matters (e)     386       16,578         1,252       18,519  
Expenses associated with debt/waiver amendments and                          
restatement of previously issued financial statements (f)     7,981       –       8,181       –  
                           
 Adjusted EBITDA (1) $   33,350   $   46,241     $   72,343   $   88,524  
                           
Adjusted EBITDA as a percentage of                          
total revenues   12.9 %   16.6 %     13.7 %   16.0 %
                           
(1) Adjusted EBITDA, as defined in our Credit Agreement, dated as of April 30, 2015, is calculated as income (loss) before interest expense (net of interest income), income taxes, depreciation and amortization, net income attributable to noncontrolling interests, net of cash distributions, gain on the sale of an interest in a joint venture, loss on sale leaseback transaction, early extinguishment of debt, fair value adjustment of earn-out liability, fair value adjustment of embedded derivative, impairment loss, foreign currency derivative contract loss (gain), management fees accrued to our sponsor, non-cash expenses including costs relating to stock compensation, amortization of straight-line rent and amortization of capital expenditures relating to repairs and maintenance, non-cash equipment rent, sale-lease back adjustments, acquisition-related costs, other expenses including loss on sale of assets, severance payments related to termination of employee staff reductions, tail premiums on termed physicians, franchise taxes, costs relating to consulting services on Medicare reimbursement, litigation settlements with physicians, costs associated with tradename and rebranding initiatives, expenses associated with idle/closed radiation therapy treatment facilities.
 
(a) Other expenses include management fees accrued to our sponsor, Vestar Capital Partners, loss on sale of assets, severance payments related to termination of employee staff reductions, tail premiums paid on terminated physicians, franchise taxes and costs relating to consulting services on Medicare reimbursement. Expenses related to the costs associated with the Company’s tradename and rebranding initiatives and expenses associated with idle/closed radiation therapy facilities, costs associated with the CMS Medicare freeze and costs associated with the restatement process.
 
(b) Non-cash expenses including costs relating to stock compensation, amortization of straight-line rent, amortization of capital expenditures relating to warranty arrangements amortized to repairs and maintenance and non-cash equipment rent.
           
(c) Sale-lease back adjustments relates to the adjustment of benefit derived from the classification of operating leases as finance obligations reflecting a reclassification of interest expense and depreciation and amortization expense as rent expense.
           
(d) Acquisition related costs associated with ASC 805, “Business Combinations,” including professional fees, corporate development, integration and due diligence costs relating to the acquisition of medical practices.
       
(e) Litigation matters relate to loss contingency reserves related to the Medicare investigative matters and costs associated with the termination of physicians.
           
(f) Expenses associated with debt/waiver amendments and accounting, legal and consulting fees associated with the restatement of previously issued financial statements.
           
We believe the Adjusted EBITDA provides useful information about our financial performance to investors, lenders, financial analysts and rating agencies as 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 company’s leverage capacity and its ability to meet its debt service requirements.  Adjusted EBITDA eliminates the uneven effect of non-cash depreciation of tangibles assets and amortization of intangible assets, much of which results from acquisitions accounted for under the purchase method of accounting.  Adjusted EBITDA is also used by us to measure individual performance for incentive compensation purposes and as an analytical indicator for purposes of allocating resources to our operating business and assessing their performance, both internally and relative to our peers, as well as to evaluate the performance of our operating management teams, and for purposes in the calculation of debt covenants and related disclosures.
           
Adjusted EBITDA is not intended as a substitute for net income (loss) attributable to 21st Century Oncology Holdings, Inc. shareholder, operating cash flows or other cash flow data determined in accordance with accounting principles generally accepted in the United States. Due to varying methods of calculation, Adjusted EBITDA as presented may not be comparable to similarly titled measures of other companies.

                           
  21ST CENTURY ONCOLOGY HOLDINGS, INC.  
  KEY OPERATING STATISTICS  
  (unaudited)  
                           
     Three Months Ended         Six Months Ended       
     June 30,     %     June 30,     %   
Operating Metrics   2016       2015     Change     2016       2015     Change  
  Number of operating days     64         64       0.0 %       128         127       0.8 %  
                           
  Domestic                        
  Radiation oncology treatment plans (total) (1)     8,854         9,297       -4.8 %       18,223         18,649       -2.3 %  
                           
  Radiation oncology treatments per day (total)     3,140         3,296       -4.7 %       3,208         3,337       -3.9 %  
                           
  Net patient service revenue per radiation oncology  $   731     $   758       -3.5 %   $   742     $   749       -0.9 %  
  treatment (total)                        
                           
                           
  Radiation oncology treatment plans (same market) (1,2)     8,829         9,122       -3.2 %       18,065         18,291       -1.2 %  
                           
  Radiation oncology treatments per day (same market) (2)     3,140         3,242       -3.1 %       3,199         3,275       -2.3 %  
                           
  Net patient service revenue per radiation oncology                         
  treatment (same market) (2) $   729     $   757       -3.6 %   $   738     $   747       -1.1 %  
                           
  International                        
  Total number of open cases     4,987         4,626       7.8 %       9,961         9,127       9.1 %  
                           
  Revenue per radiation oncology case $   5,521     $   6,248       -11.6 %   $   5,144     $   6,127       -16.0 %  
                           
                           
                           
     Three Months Ended         Six Months Ended       
     June 30,     %     June 30,     %   
Revenue Details   2016       2015     Change     2016       2015     Change  
  Net patient service revenue per Consolidated Statements                        
    of Operations and Comprehensive Loss $   238,685     $   257,854         $   489,469     $   512,109        
  Less net patient service revenue ICC      (81,842 )       (86,893 )           (168,461 )       (176,362 )      
  Less net patient service revenue professional services     (1,863 )       (2,416 )           (3,832 )       (4,360 )      
  Plus net patient service revenue unconsolidated MSAs (3)     19,551         20,294             38,806         41,798        
  Less international net patient service revenue     (27,534 )       (28,905 )           (51,242 )       (55,925 )      
                           
  Domestic freestanding net patient service revenue $    146,997     $    159,934       -8.1 %   $    304,741     $    317,259       -3.9 %  
                           
                           
                           
     June 30,                   
Center Details   2016       2015                    
  Radiation therapy centers – freestanding (domestic)     135         136                    
  Radiation therapy centers – freestanding (international)     36         35                    
  Radiation therapy centers – professional / other      12         12                    
                           
  Total radiation therapy centers     183         183                    
                           
  (1) Total radiation oncology treatment plans represent the number of prescriptions issued by the physicians to start the treatment process.   
                           
  (2) Same market is defined as markets that have been open in excess of 12 months.   
  This includes in-market acquisitions and conversion of existing professional only relationships to freestanding.   
                           
  (3) Medical services agreement                        
                           
                           

 Additional Supplemental Financial Information

 
21ST CENTURY ONCOLOGY HOLDINGS, INC.
 Supplemental Financial Information (Unaudited)
 Reconciliation of Restated Total Pro-forma Revenue and Pro-forma Adjusted EBITDA to Prior Reported
 
       
   Three Months Ended
         Three Months Ended
 
  September 30,
        September 30,
 
   2015          2015  
  Prior Reported
  Adjustments
  Restated
 
(in thousands):                  
Total revenues $   257,985   $   4,272   $   262,257  
Pro-forma full period effect of acquisitions     169       –       169  
Total pro-forma revenues $   258,154   $   4,272   $   262,426  
       
       
Net income (loss) attributable to 21st Century      
Oncology Holdings, Inc. shareholder $   (56,904 ) $   (872 ) $   (57,776 )
Income tax expense     1,152       1,699       2,851  
Interest expense, net     23,724       47       23,771  
Depreciation and amortization     22,479       (40 )     22,439  
Gain on BP settlement     (5,796 )     –       (5,796 )
Fair value adjustment of earn-out liabilities     (3,723 )     3,735       12  
Fair value adjustment of embedded derivatives      
and other financial instruments     2,363       (576 )     1,787  
Net income attributable to noncontrolling interests,      
net of cash distributions     408       72       480  
Other expenses (b)     2,200       –       2,200  
Non-cash expenses (c)     782       162       944  
Sale-lease back adjustments (d)     4       –       4  
Acquisition-related costs (e)     1,128       –       1,128  
Litigation matters (f)     39,256       –       39,256  
Pro-Forma full period effect of acquisition EBITDA (a)     117       –       117  
                   
Pro-Forma Adjusted EBITDA (1)  $   27,190   $   4,227   $   31,417  
                   
Pro-Forma Adjusted EBITDA as a percentage of                  
total pro-forma revenues   10.5 %   1.4 %   12.0 %
                   
(1) Pro-Forma Adjusted EBITDA, as defined in our Credit Agreement, dated as of April 30, 2015, is calculated as income (loss) before interest expense (net of interest income), income taxes, depreciation and amortization, net income attributable to noncontrolling interests, net of cash distributions, gain on the sale of an interest in a joint venture, loss on sale leaseback transaction, early extinguishment of debt, fair value adjustment of earn-out liability, fair value adjustment of embedded derivative, impairment loss, foreign currency derivative contract loss (gain), management fees accrued to our sponsor, non-cash expenses including costs relating to stock compensation, amortization of straight-line rent and amortization of capital expenditures relating to repairs and maintenance, non-cash equipment rent, sale-lease back adjustments, acquisition-related costs, other expenses including loss on sale of assets, severance payments related to termination of employee staff reductions, tail premiums on termed physicians, franchise taxes, costs relating to consulting services on Medicare reimbursement, litigation settlements with physicians, costs associated with tradename and rebranding initiatives, expenses associated with idle/closed radiation therapy treatment facilities.
 
(a) Pro-forma amounts related to adjustments to total revenues and Pro-forma Adjusted EBITDA to reflect the full period effect of our acquisitions and Value Added Services contracts completed during 2015.  The adjustments reflect the impact to our total revenues and Pro-forma Adjusted EBITDA as if the acquisitions and Value Added Services contracts had occurred at the beginning of the year.
       
(b) Other expenses include management fees accrued to our sponsor, Vestar Capital Partners, loss on sale of assets, severance payments related to termination of employee staff reductions, tail premiums paid on terminated physicians, franchise taxes and costs relating to consulting services on Medicare reimbursement. Expenses related to the costs associated with the Company’s tradename and rebranding initiatives and expenses associated with idle/closed radiation therapy facilities, costs associated with the CMS Medicare freeze and costs associated with the restatement process.
 
(c) Non-cash expenses including costs relating to stock compensation, amortization of straight-line rent, amortization of capital expenditures relating to warranty arrangements amortized to repairs and maintenance and non-cash equipment rent.
       
(d) Sale-lease back adjustments relates to the adjustment of benefit derived from the classification of operating leases as finance obligations reflecting a reclassification of interest expense and depreciation and amortization expense as rent expense.
 
(e) Acquisition related costs associated with ASC 805, “Business Combinations,” including professional fees, corporate development, integration and due diligence costs relating to the acquisition of medical practices.
       
(f) Litigation matters relate to loss contingency reserves related to the Medicare investigative matters and costs associated with the termination of physicians.
       
We believe the Pro-Forma Adjusted EBITDA provides useful information about our financial performance to investors, lenders, financial analysts and rating agencies as 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 company’s leverage capacity and its ability to meet its debt service requirements.  Pro-Forma Adjusted EBITDA eliminates the uneven effect of non-cash depreciation of tangibles assets and amortization of intangible assets, much of which results from acquisitions accounted for under the purchase method of accounting.  Pro-Forma Adjusted EBITDA is also used by us to measure individual performance for incentive compensation purposes and as an analytical indicator for purposes of allocating resources to our operating business and assessing their performance, both internally and relative to our peers, as well as to evaluate the performance of our operating management teams, and for purposes in the calculation of debt covenants and related disclosures.
 
Pro-Forma Adjusted EBITDA is not intended as a substitute for net income (loss) attributable to 21st Century Oncology Holdings, Inc. shareholder, operating cash flows or other cash flow data determined in accordance with accounting principles generally accepted in the United States. Due to varying methods of calculation, Pro-Forma Adjusted EBITDA as presented may not be comparable to similarly titled measures of other companies.

21ST CENTURY ONCOLOGY HOLDINGS, INC.
 Supplemental Financial Information (Unaudited)
 Reconciliation of Restated Total Revenue and Adjusted EBITDA to Prior Reported
 
                   
   Three Months Ended
         Three Months Ended
 
  June 30,
        June 30,
 
   2015          2015  
  Prior Reported
  Adjustments
  Restated
 
(in thousands):                  
Total revenues $   285,209   $   (6,996 ) $   278,213  
       
       
Net income (loss) attributable to 21st Century      
Oncology Holdings, Inc. shareholder $   (64,538 ) $   (1,500 ) $   (66,038 )
Income tax expense     3,088       (674 )     2,414  
Interest expense, net     24,326       52       24,378  
Depreciation and amortization     22,242       (38 )     22,204  
Early extinguishment of debt     37,390       –       37,390  
Fair value adjustment of earn-out liabilities     2,745       (3,735 )     (990 )
Fair value adjustment of embedded derivatives      
and other financial instruments     5,217       225       5,442  
Net income attributable to noncontrolling interests,      
net of cash distributions     1,018       (255 )     763  
Other expenses (a)     1,034       974       2,008  
Non-cash expenses (b)      1,243       95       1,338  
Sale-lease back adjustments (c)     (315 )     –       (315 )
Acquisition-related costs (d)     1,070       (1 )     1,069  
Litigation matters (e)     16,579       (1 )     16,578  
                   
Adjusted EBITDA (1) $   51,099   $   (4,858 ) $   46,241  
                   
Adjusted EBITDA as a percentage of                  
total revenues   17.9 %   -1.3 %   16.6 %
                   
(1) Adjusted EBITDA, as defined in our Credit Agreement, dated as of April 30, 2015, is calculated as income (loss) before interest expense (net of interest income), income taxes, depreciation and amortization, net income attributable to noncontrolling interests, net of cash distributions, gain on the sale of an interest in a joint venture, loss on sale leaseback transaction, early extinguishment of debt, fair value adjustment of earn-out liability, fair value adjustment of embedded derivative, impairment loss, foreign currency derivative contract loss (gain), management fees accrued to our sponsor, non-cash expenses including costs relating to stock compensation, amortization of straight-line rent and amortization of capital expenditures relating to repairs and maintenance, non-cash equipment rent, sale-lease back adjustments, acquisition-related costs, other expenses including loss on sale of assets, severance payments related to termination of employee staff reductions, tail premiums on termed physicians, franchise taxes, costs relating to consulting services on Medicare reimbursement, litigation settlements with physicians, costs associated with tradename and rebranding initiatives, expenses associated with idle/closed radiation therapy treatment facilities.
 
(a) Other expenses include management fees accrued to our sponsor, Vestar Capital Partners, loss on sale of assets, severance payments related to termination of employee staff reductions, tail premiums paid on terminated physicians, franchise taxes and costs relating to consulting services on Medicare reimbursement. Expenses related to the costs associated with the Company’s tradename and rebranding initiatives and expenses associated with idle/closed radiation therapy facilities, costs associated with the CMS Medicare freeze and costs associated with the restatement process.
 
(b) Non-cash expenses including costs relating to stock compensation, amortization of straight-line rent, amortization of capital expenditures relating to warranty arrangements amortized to repairs and maintenance and non-cash equipment rent.
       
(c) Sale-lease back adjustments relates to the adjustment of benefit derived from the classification of operating leases as finance obligations reflecting a reclassification of interest expense and depreciation and amortization expense as rent expense.
       
(d) Acquisition related costs associated with ASC 805, “Business Combinations,” including professional fees, corporate development, integration and due diligence costs relating to the acquisition of medical practices.
       
(e) Litigation matters relate to loss contingency reserves related to the Medicare investigative matters and costs associated with the termination of physicians.
       
We believe the Adjusted EBITDA provides useful information about our financial performance to investors, lenders, financial analysts and rating agencies as 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 company’s leverage capacity and its ability to meet its debt service requirements.  Adjusted EBITDA eliminates the uneven effect of non-cash depreciation of tangibles assets and amortization of intangible assets, much of which results from acquisitions accounted for under the purchase method of accounting.  Adjusted EBITDA is also used by us to measure individual performance for incentive compensation purposes and as an analytical indicator for purposes of allocating resources to our operating business and assessing their performance, both internally and relative to our peers, as well as to evaluate the performance of our operating management teams, and for purposes in the calculation of debt covenants and related disclosures.
 
Adjusted EBITDA is not intended as a substitute for net income (loss) attributable to 21st Century Oncology Holdings, Inc. shareholder, operating cash flows or other cash flow data determined in accordance with accounting principles generally accepted in the United States. Due to varying methods of calculation, Adjusted EBITDA as presented may not be comparable to similarly titled measures of other companies.

21ST CENTURY ONCOLOGY HOLDINGS, INC.
 Supplemental Financial Information (Unaudited)
 Reconciliation of Restated Total Revenue and Adjusted EBITDA to Prior Reported
 
       
   Three Months Ended
         Three Months Ended
 
  March 31,
        March 31,
 
   2015          2015  
  Prior Reported
  Adjustments
  Restated
 
(in thousands):                  
Total revenues $   278,483   $   (2,850 ) $   275,633  
       
       
Net income (loss) attributable to 21st Century      
Oncology Holdings, Inc. shareholder $   (15,242 ) $   (1,425 ) $   (16,667 )
Income tax expense     2,690       (757 )     1,933  
Interest expense, net     25,687       –       25,687  
Depreciation and amortization     22,569       (437 )     22,132  
Fair value adjustment of earn-out liabilities     460       –       460  
Fair value adjustment of embedded derivatives      
and other financial instruments     1,342       351       1,693  
Net income attributable to noncontrolling interests,                  
net of cash distributions     1,344       (49 )     1,295  
Other expenses (a)     967       970       1,937  
Non-cash expenses (b)     1,065       (54 )     1,011  
Sale-lease back adjustments (c)     (449 )     –       (449 )
Acquisition-related costs (d)     1,310       –       1,310  
Litigation matters (e)     1,941       –       1,941  
                   
Adjusted EBITDA (1) $   43,684   $   (1,401 ) $   42,283  
                   
Adjusted EBITDA as a percentage of                  
total revenues   15.7 %   -0.3 %   15.3 %
                   
(1) Adjusted EBITDA, as defined in our Credit Agreement, dated as of April 30, 2015, is calculated as income (loss) before interest expense (net of interest income), income taxes, depreciation and amortization, net income attributable to noncontrolling interests, net of cash distributions, gain on the sale of an interest in a joint venture, loss on sale leaseback transaction, early extinguishment of debt, fair value adjustment of earn-out liability, fair value adjustment of embedded derivative, impairment loss, foreign currency derivative contract loss (gain), management fees accrued to our sponsor, non-cash expenses including costs relating to stock compensation, amortization of straight-line rent and amortization of capital expenditures relating to repairs and maintenance, non-cash equipment rent, sale-lease back adjustments, acquisition-related costs, other expenses including loss on sale of assets, severance payments related to termination of employee staff reductions, tail premiums on termed physicians, franchise taxes, costs relating to consulting services on Medicare reimbursement, litigation settlements with physicians, costs associated with tradename and rebranding initiatives, expenses associated with idle/closed radiation therapy treatment facilities.
 
(a) Other expenses include management fees accrued to our sponsor, Vestar Capital Partners, loss on sale of assets, severance payments related to termination of employee staff reductions, tail premiums paid on terminated physicians, franchise taxes and costs relating to consulting services on Medicare reimbursement. Expenses related to the costs associated with the Company’s tradename and rebranding initiatives and expenses associated with idle/closed radiation therapy facilities, costs associated with the CMS Medicare freeze and costs associated with the restatement process.
 
(b) Non-cash expenses including costs relating to stock compensation, amortization of straight-line rent, amortization of capital expenditures relating to warranty arrangements amortized to repairs and maintenance and non-cash equipment rent.
       
(c) Sale-lease back adjustments relates to the adjustment of benefit derived from the classification of operating leases as finance obligations reflecting a reclassification of interest expense and depreciation and amortization expense as rent expense.
       
(d) Acquisition related costs associated with ASC 805, “Business Combinations,” including professional fees, corporate development, integration and due diligence costs relating to the acquisition of medical practices.
       
(e) Litigation matters relate to loss contingency reserves related to the Medicare investigative matters and costs associated with the termination of physicians.
       
We believe the Adjusted EBITDA provides useful information about our financial performance to investors, lenders, financial analysts and rating agencies as 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 company’s leverage capacity and its ability to meet its debt service requirements.  Adjusted EBITDA eliminates the uneven effect of non-cash depreciation of tangibles assets and amortization of intangible assets, much of which results from acquisitions accounted for under the purchase method of accounting.  Adjusted EBITDA is also used by us to measure individual performance for incentive compensation purposes and as an analytical indicator for purposes of allocating resources to our operating business and assessing their performance, both internally and relative to our peers, as well as to evaluate the performance of our operating management teams, and for purposes in the calculation of debt covenants and related disclosures.
 
Adjusted EBITDA is not intended as a substitute for net income (loss) attributable to 21st Century Oncology Holdings, Inc. shareholder, operating cash flows or other cash flow data determined in accordance with accounting principles generally accepted in the United States. Due to varying methods of calculation, Adjusted EBITDA as presented may not be comparable to similarly titled measures of other companies.

21ST CENTURY ONCOLOGY HOLDINGS, INC.
 Supplemental Financial Information (Unaudited)
 Reconciliation of Restated Total Revenue and Adjusted EBITDA to Prior Reported
 
       
   Three Months Ended
         Three Months Ended
 
  December 31,
        December 31,
 
   2014          2014  
  Prior Reported
  Adjustments
  Restated
 
(in thousands):                  
Total revenues $   269,261   $   (2,674 ) $   266,587  
       
       
Net income (loss) attributable to 21st Century      
Oncology Holdings, Inc. shareholder $   (24,168 ) $   (4,173 ) $   (28,341 )
Income tax expense     946       (868 )     78  
Interest expense, net     25,620       –       25,620  
Depreciation and amortization     21,429       (32 )     21,397  
Fair value adjustment of earn-out liabilities     1,015       –       1,015  
Fair value adjustment of embedded derivatives                  
and other financial instruments     837       –       837  
Net income attributable to noncontrolling interests,                  
net of cash distributions     (109 )     (1,364 )     (1,473 )
Other expenses (a)     4,035       1       4,036  
Non-cash expenses (b)     1,085       63       1,148  
Sale-lease back adjustments (c)     (441 )     –       (441 )
Acquisition-related costs (d)     2,261       –       2,261  
Litigation matters (e)     2,108       –       2,108  
Expenses associated with note-holder negotiations and                  
management of liquidity (f)     2,482       –       2,482  
 Adjusted EBITDA (1) $   37,100   $   (6,373 ) $   30,727  
                   
Adjusted EBITDA as a percentage of                  
total revenues   13.8 %   -2.3 %   11.5 %
                   
(1) Adjusted EBITDA, as defined in our Credit Agreement, dated as of April 30, 2015, is calculated as income (loss) before interest expense (net of interest income), income taxes, depreciation and amortization, net income attributable to noncontrolling interests, net of cash distributions, gain on the sale of an interest in a joint venture, loss on sale leaseback transaction, early extinguishment of debt, fair value adjustment of earn-out liability, fair value adjustment of embedded derivative, impairment loss, foreign currency derivative contract loss (gain), management fees accrued to our sponsor, non-cash expenses including costs relating to stock compensation, amortization of straight-line rent and amortization of capital expenditures relating to repairs and maintenance, non-cash equipment rent, sale-lease back adjustments, acquisition-related costs, other expenses including loss on sale of assets, severance payments related to termination of employee staff reductions, tail premiums on termed physicians, franchise taxes, costs relating to consulting services on Medicare reimbursement, litigation settlements with physicians, costs associated with tradename and rebranding initiatives, expenses associated with idle/closed radiation therapy treatment facilities.
 
(a) Other expenses include management fees accrued to our sponsor, Vestar Capital Partners, loss on sale of assets, severance payments related to termination of employee staff reductions, tail premiums paid on terminated physicians, franchise taxes and costs relating to consulting services on Medicare reimbursement. Expenses related to the costs associated with the Company’s tradename and rebranding initiatives and expenses associated with idle/closed radiation therapy facilities, costs associated with the CMS Medicare freeze and costs associated with the restatement process.
       
(b) Non-cash expenses including costs relating to stock compensation, amortization of straight-line rent, amortization of capital expenditures relating to warranty arrangements amortized to repairs and maintenance and non-cash equipment rent.
       
(c) Sale-lease back adjustments relates to the adjustment of benefit derived from the classification of operating leases as finance obligations reflecting a reclassification of interest expense and depreciation and amortization expense as rent expense.
       
(d) Acquisition related costs associated with ASC 805, “Business Combinations,” including professional fees, corporate development, integration and due diligence costs relating to the acquisition of medical practices.
       
(e) Litigation matters relate to loss contingency reserves related to the Medicare investigative matters and costs associated with the termination of physicians.
       
(f) Expenses associated with negotiating with note-holders, recapitalization support agreement and legal and consulting fees associated with management of liquidity.
       
We believe the Adjusted EBITDA provides useful information about our financial performance to investors, lenders, financial analysts and rating agencies as 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 company’s leverage capacity and its ability to meet its debt service requirements.  Adjusted EBITDA eliminates the uneven effect of non-cash depreciation of tangibles assets and amortization of intangible assets, much of which results from acquisitions accounted for under the purchase method of accounting.  Adjusted EBITDA is also used by us to measure individual performance for incentive compensation purposes and as an analytical indicator for purposes of allocating resources to our operating business and assessing their performance, both internally and relative to our peers, as well as to evaluate the performance of our operating management teams, and for purposes in the calculation of debt covenants and related disclosures.
 
Adjusted EBITDA is not intended as a substitute for net income (loss) attributable to 21st Century Oncology Holdings, Inc. shareholder, operating cash flows or other cash flow data determined in accordance with accounting principles generally accepted in the United States. Due to varying methods of calculation, Adjusted EBITDA as presented may not be comparable to similarly titled measures of other companies.

21ST CENTURY ONCOLOGY HOLDINGS, INC.
 Supplemental Financial Information (Unaudited)
 Reconciliation of Restated Total Revenue and Adjusted EBITDA to Prior Reported
 
       
   Three Months Ended
         Three Months Ended
 
  September 30,
        September 30,
 
   2014          2014  
  Prior Reported
  Adjustments
  Restated
 
(in thousands):                  
Total revenues $   257,618   $   (1,599 ) $   256,019  
       
       
Net income (loss) attributable to 21st Century      
Oncology Holdings, Inc. shareholder $   (87,377 ) $   (506 ) $   (87,883 )
Income tax expense     1,173       (645 )     528  
Interest expense, net     30,233       –       30,233  
Depreciation and amortization     22,388       (30 )     22,358  
Impairment loss     47,526       –       47,526  
Early extinguishment of debt     8,558        –       8,558  
Equity initial public offering expenses     742       (742 )     –  
Fair value adjustment of earn-out liabilities     209       –       209  
Net income attributable to noncontrolling interests,      
net of cash distributions     (365 )     (21 )     (386 )
Other expenses (a)     4,090       –       4,090  
Non-cash expenses (b)     1,120       –        1,120  
Sale-lease back adjustments (c)     (331 )     –       (331 )
Acquisition-related costs (d)     1,371       (120 )     1,251  
Litigation matters (e)     1,097       –       1,097  
Expenses associated with note-holder negotiations and                  
management of liquidity (f)     9,258       121       9,379  
Adjusted EBITDA (1) $   39,692   $   (1,943 ) $   37,749  
                   
 Adjusted EBITDA as a percentage of                   
  total revenues   15.4 %   -0.7 %   14.7 %
                   
(1) Adjusted EBITDA, as defined in our Credit Agreement, dated as of April 30, 2015, is calculated as income (loss) before interest expense (net of interest income), income taxes, depreciation and amortization, net income attributable to noncontrolling interests, net of cash distributions, gain on the sale of an interest in a joint venture, loss on sale leaseback transaction, early extinguishment of debt, fair value adjustment of earn-out liability, fair value adjustment of embedded derivative, impairment loss, foreign currency derivative contract loss (gain), management fees accrued to our sponsor, non-cash expenses including costs relating to stock compensation, amortization of straight-line rent and amortization of capital expenditures relating to repairs and maintenance, non-cash equipment rent, sale-lease back adjustments, acquisition-related costs, other expenses including loss on sale of assets, severance payments related to termination of employee staff reductions, tail premiums on termed physicians, franchise taxes, costs relating to consulting services on Medicare reimbursement, litigation settlements with physicians, costs associated with tradename and rebranding initiatives, expenses associated with idle/closed radiation therapy treatment facilities.
       
(a) Other expenses include management fees accrued to our sponsor, Vestar Capital Partners, loss on sale of assets, severance payments related to termination of employee staff reductions, tail premiums paid on terminated physicians, franchise taxes and costs relating to consulting services on Medicare reimbursement. Expenses related to the costs associated with the Company’s tradename and rebranding initiatives and expenses associated with idle/closed radiation therapy facilities, costs associated with the CMS Medicare freeze and costs associated with the restatement process.
       
(b) Non-cash expenses including costs relating to stock compensation, amortization of straight-line rent, amortization of capital expenditures relating to warranty arrangements amortized to repairs and maintenance and non-cash equipment rent.
       
(c) Sale-lease back adjustments relates to the adjustment of benefit derived from the classification of operating leases as finance obligations reflecting a reclassification of interest expense and depreciation and amortization expense as rent expense.
       
(d) Acquisition related costs associated with ASC 805, “Business Combinations,” including professional fees, corporate development, integration and due diligence costs relating to the acquisition of medical practices.
       
(e) Litigation matters relate to loss contingency reserves related to the Medicare investigative matters and costs associated with the termination of physicians.
       
(f) Expenses associated with negotiating with note-holders, recapitalization support agreement and legal and consulting fees associated with management of liquidity.
       
We believe the Adjusted EBITDA provides useful information about our financial performance to investors, lenders, financial analysts and rating agencies as 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 company’s leverage capacity and its ability to meet its debt service requirements.  Adjusted EBITDA eliminates the uneven effect of non-cash depreciation of tangibles assets and amortization of intangible assets, much of which results from acquisitions accounted for under the purchase method of accounting.  Adjusted EBITDA is also used by us to measure individual performance for incentive compensation purposes and as an analytical indicator for purposes of allocating resources to our operating business and assessing their performance, both internally and relative to our peers, as well as to evaluate the performance of our operating management teams, and for purposes in the calculation of debt covenants and related disclosures.
 
Adjusted EBITDA is not intended as a substitute for net income (loss) attributable to 21st Century Oncology Holdings, Inc. shareholder, operating cash flows or other cash flow data determined in accordance with accounting principles generally accepted in the United States. Due to varying methods of calculation, Adjusted EBITDA as presented may not be comparable to similarly titled measures of other companies.

 

21ST CENTURY ONCOLOGY HOLDINGS, INC.
 Supplemental Financial Information (Unaudited)
 Reconciliation of Restated Total Revenue and Adjusted EBITDA to Prior Reported
 
                   
   Three Months Ended
         Three Months Ended
 
  June 30,
        June 30,
 
   2014          2014  
  Prior Reported
  Adjustments
  Restated
 
(in thousands):                  
Total revenues $   265,898   $   (2,660 ) $   263,238  
       
       
Net income (loss) attributable to 21st Century      
Oncology Holdings, Inc. shareholder $   (207,524 ) $   (2,714 ) $   (210,238 )
Income tax expense     934       (839 )     95  
Interest expense, net     29,899       –       29,899  
Depreciation and amortization     22,162       (28 )     22,134  
Impairment loss     182,000       –       182,000  
Equity initial public offering expenses     4,163       742       4,905  
Fair value adjustment of earn-out liabilities     204       –       204  
Net income attributable to noncontrolling interests,                  
net of cash distributions     2,014       (45 )     1,969  
Other expenses (a)     3,659       (1 )     3,658  
Non-cash expenses (b)     1,248       (1 )     1,247  
Sale-lease back adjustments (c)     (329 )     1       (328 )
Acquisition-related costs (d)     4,213       –       4,213  
Litigation matters (e)     2,568       –       2,568  
Adjusted EBITDA $   45,211   $   (2,885 ) $   42,326  
                   
Adjusted EBITDA as a percentage of                  
total revenues   17.0 %   -0.9 %   16.1 %
                   
(1) Adjusted EBITDA, as defined in our Credit Agreement, dated as of April 30, 2015, is calculated as income (loss) before interest expense (net of interest income), income taxes, depreciation and amortization, net income attributable to noncontrolling interests, net of cash distributions, gain on the sale of an interest in a joint venture, loss on sale leaseback transaction, early extinguishment of debt, fair value adjustment of earn-out liability, fair value adjustment of embedded derivative, impairment loss, foreign currency derivative contract loss (gain), management fees accrued to our sponsor, non-cash expenses including costs relating to stock compensation, amortization of straight-line rent and amortization of capital expenditures relating to repairs and maintenance, non-cash equipment rent, sale-lease back adjustments, acquisition-related costs, other expenses including loss on sale of assets, severance payments related to termination of employee staff reductions, tail premiums on termed physicians, franchise taxes, costs relating to consulting services on Medicare reimbursement, litigation settlements with physicians, costs associated with tradename and rebranding initiatives, expenses associated with idle/closed radiation therapy treatment facilities.
 
(a) Other expenses include management fees accrued to our sponsor, Vestar Capital Partners, loss on sale of assets, severance payments related to termination of employee staff reductions, tail premiums paid on terminated physicians, franchise taxes and costs relating to consulting services on Medicare reimbursement. Expenses related to the costs associated with the Company’s tradename and rebranding initiatives and expenses associated with idle/closed radiation therapy facilities, costs associated with the CMS Medicare freeze and costs associated with the restatement process.
       
(b) Non-cash expenses including costs relating to stock compensation, amortization of straight-line rent, amortization of capital expenditures relating to warranty arrangements amortized to repairs and maintenance and non-cash equipment rent.
       
(c) Sale-lease back adjustments relates to the adjustment of benefit derived from the classification of operating leases as finance obligations reflecting a reclassification of interest expense and depreciation and amortization expense as rent expense.
       
(d) Acquisition related costs associated with ASC 805, “Business Combinations,” including professional fees, corporate development, integration and due diligence costs relating to the acquisition of medical practices.
       
(e) Litigation matters relate to loss contingency reserves related to the Medicare investigative matters and costs associated with the termination of physicians.
       
We believe the Adjusted EBITDA provides useful information about our financial performance to investors, lenders, financial analysts and rating agencies as 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 company’s leverage capacity and its ability to meet its debt service requirements.  Adjusted EBITDA eliminates the uneven effect of non-cash depreciation of tangibles assets and amortization of intangible assets, much of which results from acquisitions accounted for under the purchase method of accounting.  Adjusted EBITDA is also used by us to measure individual performance for incentive compensation purposes and as an analytical indicator for purposes of allocating resources to our operating business and assessing their performance, both internally and relative to our peers, as well as to evaluate the performance of our operating management teams, and for purposes in the calculation of debt covenants and related disclosures.
 
Adjusted EBITDA is not intended as a substitute for net income (loss) attributable to 21st Century Oncology Holdings, Inc. shareholder, operating cash flows or other cash flow data determined in accordance with accounting principles generally accepted in the United States. Due to varying methods of calculation, Adjusted EBITDA as presented may not be comparable to similarly titled measures of other companies.

21ST CENTURY ONCOLOGY HOLDINGS, INC.
 Supplemental Financial Information (Unaudited)
 Reconciliation of Restated Total Pro-forma Revenue and Pro-forma Adjusted EBITDA to Prior Reported
 
       
   Three Months Ended
         Three Months Ended
 
  March 31,
        March 31,
 
   2014          2014  
  Prior Reported
  Adjustments
  Restated
 
(in thousands):                  
Total revenues $   233,397   $   (1,059 ) $   232,338  
Pro-forma full period effect of acquisitions     8,819       –       8,819  
Total pro-forma revenues $   242,216   $   (1,059 ) $   241,157  
       
       
Net income (loss) attributable to 21st Century      
Oncology Holdings, Inc. shareholder $   (30,181 ) $   (648 ) $   (30,829 )
Income tax expense     2,106       (488 )     1,618  
Interest expense, net     27,527       –       27,527  
Depreciation and amortization     20,722       (28 )     20,694  
Loss on sale leaseback transaction     135       –       135  
Fair value adjustment of earn-out liabilities     199       –       199  
Gain on foreign currency derivative contracts     (4 )     –       (4 )
Net income attributable to noncontrolling interests,      
net of cash distributions     891       (5 )     886  
Other expenses (b)     3,541       (1 )     3,540  
Non-cash expenses (c)     723       –       723  
Sale-lease back adjustments (d)      (303 )     –       (303 )
Acquisition-related costs (e)     4,491       –       4,491  
Litigation matters (f)     757       –       757  
Pro-Forma full period effect of acquisition EBITDA (a)     742       –       742  
                   
Pro-Forma Adjusted EBITDA (1) $   31,346   $   (1,170 ) $   30,176  
                   
Pro-Forma Adjusted EBITDA as a percentage of                  
total pro-forma revenues   12.9 %   -0.4 %   12.5 %
                   
(1) Pro-Forma Adjusted EBITDA, as defined in our Credit Agreement, dated as of April 30, 2015, is calculated as income (loss) before interest expense (net of interest income), income taxes, depreciation and amortization, net income attributable to noncontrolling interests, net of cash distributions, gain on the sale of an interest in a joint venture, loss on sale leaseback transaction, early extinguishment of debt, fair value adjustment of earn-out liability, fair value adjustment of embedded derivative, impairment loss, foreign currency derivative contract loss (gain), management fees accrued to our sponsor, non-cash expenses including costs relating to stock compensation, amortization of straight-line rent and amortization of capital expenditures relating to repairs and maintenance, non-cash equipment rent, sale-lease back adjustments, acquisition-related costs, other expenses including loss on sale of assets, severance payments related to termination of employee staff reductions, tail premiums on termed physicians, franchise taxes, costs relating to consulting services on Medicare reimbursement, litigation settlements with physicians, costs associated with tradename and rebranding initiatives, expenses associated with idle/closed radiation therapy treatment facilities.
 
(a) Pro-forma amounts related to adjustments to total revenues and Pro-forma Adjusted EBITDA to reflect the full period effect of our acquisitions and Value Added Services contracts completed during 2014.  The adjustments reflect the impact to our total revenues and Pro-forma Adjusted EBITDA as if the acquisitions and Value Added Services contracts had occurred at the beginning of the year.
 
(b) Other expenses include management fees accrued to our sponsor, Vestar Capital Partners, loss on sale of assets, severance payments related to termination of employee staff reductions, tail premiums paid on terminated physicians, franchise taxes and costs relating to consulting services on Medicare reimbursement. Expenses related to the costs associated with the Company’s tradename and rebranding initiatives and expenses associated with idle/closed radiation therapy facilities, costs associated with the CMS Medicare freeze and costs associated with the restatement process.
 
(c) Non-cash expenses including costs relating to stock compensation, amortization of straight-line rent, amortization of capital expenditures relating to warranty arrangements amortized to repairs and maintenance and non-cash equipment rent.
       
(d) Sale-lease back adjustments relates to the adjustment of benefit derived from the classification of operating leases as finance obligations reflecting a reclassification of interest expense and depreciation and amortization expense as rent expense.
       
(e) Acquisition related costs associated with ASC 805, “Business Combinations,” including professional fees, corporate development, integration and due diligence costs relating to the acquisition of medical practices.
       
(f) Litigation matters relate to loss contingency reserves related to the Medicare investigative matters and costs associated with the termination of physicians.
       
We believe the Pro-Forma Adjusted EBITDA provides useful information about our financial performance to investors, lenders, financial analysts and rating agencies as 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 company’s leverage capacity and its ability to meet its debt service requirements.  Pro-Forma Adjusted EBITDA eliminates the uneven effect of non-cash depreciation of tangibles assets and amortization of intangible assets, much of which results from acquisitions accounted for under the purchase method of accounting.  Pro-Forma Adjusted EBITDA is also used by us to measure individual performance for incentive compensation purposes and as an analytical indicator for purposes of allocating resources to our operating business and assessing their performance, both internally and relative to our peers, as well as to evaluate the performance of our operating management teams, and for purposes in the calculation of debt covenants and related disclosures.
 
Pro-Forma Adjusted EBITDA is not intended as a substitute for net income (loss) attributable to 21st Century Oncology Holdings, Inc. shareholder, operating cash flows or other cash flow data determined in accordance with accounting principles generally accepted in the United States. Due to varying methods of calculation, Pro-Forma Adjusted EBITDA as presented may not be comparable to similarly titled measures of other companies.
 

Additional Supplemental Key Operating Statistics 

                 
                 
  21ST CENTURY ONCOLOGY HOLDINGS, INC.  
  KEY OPERATING STATISTICS  
  (unaudited)  
                 
     Three Months Ended         
     September 30,     %     
Operating Metrics   2015       2014     Change    
  Number of operating days     64         64       0.0 %    
                 
  Domestic              
  Radiation oncology treatment plans (total) (1)     8,832         8,479       4.2 %    
                 
  Radiation oncology treatments per day (total)     3,124         3,135       -0.3 %    
                 
  Net patient service revenue per radiation oncology  $   754     $   768       -1.8 %    
  treatment (total)              
                 
                 
  Radiation oncology treatment plans (same market) (1,2)     8,442         8,479       -0.4 %    
                 
  Radiation oncology treatments per day (same market) (2)     2,983         3,126       -4.6 %    
                 
  Net patient service revenue per radiation oncology               
  treatment (same market) (2) $   757     $   760       -0.3 %    
                 
  International              
  Total number of open cases     4,907         4,480       9.5 %    
                 
  Revenue per radiation oncology case $   6,421     $   5,306       21.0 %    
                 
                 
                 
     Three Months Ended         
     September 30,     %     
Revenue Details   2015       2014     Change    
  Net patient service revenue per Consolidated Statements              
  of Operations and Comprehensive Loss $   243,768     $   236,581          
  Less net patient service revenue ICC      (79,292 )       (79,278 )        
  Less net patient service revenue professional services     (1,820 )       (1,950 )        
  Plus net patient service revenue unconsolidated MSAs (3)     19,653         22,551          
  Less international net patient service revenue     (31,508 )       (23,770 )        
                 
  Domestic freestanding net patient service revenue $    150,801     $    154,134       -2.2 %    
                 
                 
                 
     September 30,         
Center Details   2015       2014          
  Radiation therapy centers – freestanding (domestic)     134         132          
  Radiation therapy centers – freestanding (international)     36         35          
  Radiation therapy centers – professional / other      12         11          
                         
  Total radiation therapy centers     182         178          
                         
  (1) Total radiation oncology treatment plans represent the number of prescriptions issued by the physicians to start the treatment process.     
                 
  (2) Same market is defined as markets that have been open in excess of 12 months.     
  This includes in-market acquisitions and conversion of existing professional only relationships to freestanding.
                 
  (3) Medical services agreement              
                 

 

                 
  21ST CENTURY ONCOLOGY HOLDINGS, INC.  
  KEY OPERATING STATISTICS  
  (unaudited)  
                 
     Three Months Ended         
     June 30,     %     
Operating Metrics   2015       2014     Change    
  Number of operating days     64         64       0.0 %    
                 
  Domestic              
  Radiation oncology treatment plans (total) (1)     9,297         8,742       6.3 %    
                 
  Radiation oncology treatments per day (total)     3,296         3,175       3.8 %    
                 
  Net patient service revenue per radiation oncology  $   758     $   780       -2.8 %    
  treatment (total)              
                 
                 
  Radiation oncology treatment plans (same market) (1,2)     8,913         8,734       2.0 %    
                 
  Radiation oncology treatments per day (same market) (2)     3,153         3,168       -0.5 %    
                 
  Net patient service revenue per radiation oncology               
  treatment (same market) (2) $   768     $   769       -0.2 %    
                 
  International              
  Total number of open cases     4,626         4,600       0.6 %    
                 
  Revenue per radiation oncology case $   6,248     $   4,707       32.7 %    
                 
                 
                 
     Three Months Ended         
     June 30,     %     
Revenue Details   2015       2014     Change    
  Net patient service revenue per Consolidated Statements              
  of Operations and Comprehensive Loss $   257,854     $   243,149          
  Less net patient service revenue ICC      (86,893 )       (83,022 )        
  Less net patient service revenue professional services     (2,416 )       (2,193 )        
  Plus net patient service revenue unconsolidated MSAs (3)     20,294         22,145          
  Less international net patient service revenue     (28,905 )       (21,653 )        
                 
  Domestic freestanding net patient service revenue $    159,934     $    158,426       1.0 %    
                 
                 
                 
     June 30,         
Center Details   2015       2014          
  Radiation therapy centers – freestanding (domestic)     136         133          
  Radiation therapy centers – freestanding (international)     35         35          
  Radiation therapy centers – professional / other      12         12          
                 
  Total radiation therapy centers     183         180          
                 
  (1) Total radiation oncology treatment plans represent the number of prescriptions issued by the physicians to start the treatment process.     
                 
  (2) Same market is defined as markets that have been open in excess of 12 months.     
  This includes in-market acquisitions and conversion of existing professional only relationships to freestanding.
                 
  (3) Medical services agreement              
                 

 

                 
  21ST CENTURY ONCOLOGY HOLDINGS, INC.  
  KEY OPERATING STATISTICS  
  (unaudited)  
                 
     Three Months Ended         
     March 31,     %     
Operating Metrics   2015       2014     Change    
  Number of operating days     63         63       0.0 %    
                 
  Domestic              
  Radiation oncology treatment plans (total) (1)     9,352         8,261       13.2 %    
                 
  Radiation oncology treatments per day (total)     3,378         3,017       12.0 %    
                 
  Net patient service revenue per radiation oncology  $   739     $   753       -1.8 %    
  treatment (total)              
                 
                 
  Radiation oncology treatment plans (same market) (1,2)     8,113         7,914       2.5 %    
                 
  Radiation oncology treatments per day (same market) (2)     2,893         2,869       0.8 %    
                 
  Net patient service revenue per radiation oncology               
  treatment (same market) (2) $   744     $   758       -1.9 %    
                 
  International              
  Total number of open cases     4,501         4,281       5.1 %    
                 
  Revenue per radiation oncology case $   6,003     $   4,595       30.6 %    
                 
                 
                 
     Three Months Ended         
     March 31,     %     
Revenue Details   2015       2014     Change    
  Net patient service revenue per Consolidated Statements              
  of Operations and Comprehensive Loss $   254,255     $   212,796          
  Less net patient service revenue ICC      (89,469 )       (69,712 )        
  Less net patient service revenue professional services     (1,944 )       (1,917 )        
  Plus net patient service revenue unconsolidated MSAs (3)     21,504         21,639          
  Less international net patient service revenue     (27,020 )       (19,672 )        
                 
  Domestic freestanding net patient service revenue $    157,326     $    143,134       9.9 %    
                 
                 
                 
     March 31,         
Center Details   2015       2014          
  Radiation therapy centers – freestanding (domestic)     136         138          
  Radiation therapy centers – freestanding (international)     35         35          
  Radiation therapy centers – professional / other      11         12          
                 
  Total radiation therapy centers     182         185          
                 
  (1) Total radiation oncology treatment plans represent the number of prescriptions issued by the physicians to start the treatment process.     
                 
  (2) Same market is defined as markets that have been open in excess of 12 months.     
  This includes in-market acquisitions and conversion of existing professional only relationships to freestanding.
                 
  (3) Medical services agreement              
                 

CONTACT: 21st Century Oncology Contact:
LeAnne M. Stewart		
Chief Financial Officer	
239-931-7281			
leanne.stewart@21co.com	

Investor Contact:
The Ruth Group
Nick Laudico			
646-536-7030			
nlaudico@theruthgroup.com	

Brandon Vazquez		
646-536-7032
bvazquez@theruthgroup.com