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VHS > SEC Filings for VHS > Form 8-K on 20-Aug-2013All Recent SEC Filings




Results of Operations and Financial Condition, Financial Statements a

Item 2.02 Results of Operations and Financial Condition.

On August 19, 2013, Vanguard Health Systems, Inc. (the "Company") issued a press release announcing its operating results for its fourth fiscal quarter and year ended June 30, 2013. For information regarding the operating results, the Company hereby incorporates by reference herein the information set forth in its press release, dated August 19, 2013, a copy of which is attached hereto as Exhibit 99.1 (the "Earnings Release").

The Earnings Release contains a non-GAAP financial measure, Adjusted EBITDA. For purposes of Regulation G, a non-GAAP financial measure is a numerical measure of a registrant's historical or future financial performance, financial position or cash flows that excludes amounts, or is subject to adjustments that have the effect of excluding amounts, that are included in the most directly comparable measure calculated and presented in accordance with GAAP in the statement of operations, balance sheet or statement of cash flows of the registrant; or includes amounts, or is subject to adjustments that have the effect of including amounts, that are excluded from the most directly comparable measure so calculated and presented. In this regard, GAAP refers to generally accepted accounting principles in the United States. Pursuant to the requirements of Regulation G, the Company has provided a reconciliation in the Earnings Release of Adjusted EBITDA to the most directly comparable GAAP financial measure to Adjusted EBITDA, which is net income (loss) attributable to Vanguard Health Systems, Inc. stockholders.

The Company defines Adjusted EBITDA as income (loss) before interest expense (net of interest income), income taxes, depreciation and amortization, non-controlling interests, gain or loss on the disposal of assets, equity method income or loss, stock compensation, monitoring fees and expenses, realized gains or losses on investments, acquisition related expenses, debt extinguishment costs, impairment and restructuring charges, pension expense (credits) and discontinued operations, net of taxes. Monitoring fees and expenses represent fees and reimbursed expenses paid to affiliates of The Blackstone Group and Metalmark Subadvisor LLC for advisory and oversight services. It is reasonable to expect these reconciling items to occur in future periods, but for many of them the amounts recognized can vary significantly from period to period, do not relate directly to the ongoing operations of the Company's health care facilities and complicate period to period comparisons of the Company's results of operations. Adjusted EBITDA should not be considered as a substitute for net income (loss) attributable to Vanguard Health Systems, Inc. stockholders, operating cash flows or other cash flow statement data determined in accordance with GAAP. Additionally, Adjusted EBITDA is not intended to be a measure of free cash flow available for management's discretionary use, since it does not consider

certain cash requirements such as interest payments, tax payments and other debt service requirements. Because Adjusted EBITDA is not a GAAP measure and is susceptible to varying calculations, Adjusted EBITDA, as presented by the Company, may not be comparable to similarly titled measures of other companies.

Management believes that Adjusted EBITDA provides useful information as a measurement of the Company's financial performance to investors, lenders, financial analysts and rating agencies on the same basis as that viewed by management. These groups have historically used EBITDA-related measures in the health care industry, along with other measures, to estimate the value of a company, to make informed investment decisions, to evaluate a company's operating performance compared to that of other companies in the health care industry and 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 tangible assets and amortization of intangible assets, much of which results from acquisitions accounted for under the purchase method of accounting. Adjusted EBITDA also eliminates the effects of changes in interest rates, which management believes relate to general trends in global capital markets, but are not necessarily indicative of a company's operating performance.

A limitation of Adjusted EBITDA, however, is that it does not reflect the periodic cost of certain capitalized assets that the Company uses to generate its revenues. The Company evaluates these costs through other financial measures such as capital expenditures. Adjusted EBITDA also excludes net interest expense, which is a significant expense because of the Company's substantial indebtedness. Many of the items excluded from Adjusted EBITDA result from decisions outside the control of management and may differ significantly from company to company due to differing long-term decisions regarding capital structure, capital investment strategies, the tax jurisdictions in which the companies operate and unique circumstances of acquired entities. Adjusted EBITDA is also used by the Company's management to measure individual performance for incentive compensation purposes and as an analytical indicator for purposes of allocating resources to the Company's operating businesses and assessing their performance, both internally and relative to the Company's peers, as well as to evaluate the performance of the Company's health care facilities.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits. The Exhibits filed as part of this Form 8-K are listed in the Exhibit Index that is located at the end of this Form 8-K.

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