UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

 

Form 10-Q

 

(Mark One)
x		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2011

or

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from         to

Commission file number: 000-51251

 

LifePoint Hospitals, Inc.

(Exact Name of Registrant as Specified in its Charter)

Delaware		20-1538254
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

103 Powell Court Brentwood, Tennessee		37027
(Address Of Principal Executive Offices)		(Zip Code)

(615) 372-8500

(Registrant’s Telephone Number, Including Area Code)

 

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act:

Large accelerated filer x		Accelerated filer o		Non-accelerated filer o		Smaller reporting company o
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

As of October 21, 2011, the number of outstanding shares of the registrant’s Common Stock was 48,154,516.

TABLE OF CONTENTS

LifePoint Hospitals, Inc.
  
TABLE OF CONTENTS

PART I — FINANCIAL INFORMATION
Item 1. Financial Statements			1
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			29
Item 3. Quantitative and Qualitative Disclosures About Market Risk			54
Item 4. Controls and Procedures			54
PART II — OTHER INFORMATION
Item 1. Legal Proceedings			55
Item 1A. Risk Factors			55
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			56
Item 6. Exhibits			58

TABLE OF CONTENTS

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements.

LIFEPOINT HOSPITALS, INC.
  
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Unaudited
(In millions, except per share amounts)

		Three Months Ended September 30,								Nine Months Ended September 30,
		2011				2010				2011				2010
Revenues		$	877.2			$	832.3			$	2,643.4			$	2,409.1
Salaries and benefits			337.8				324.8				1,011.2				935.1
Supplies			113.9				112.9				346.7				330.5
Other operating expenses			171.1				158.5				495.8				444.2
Provision for doubtful accounts			127.0				116.3				383.4				323.4
Depreciation and amortization			40.7				36.4				121.0				109.2
Interest expense, net			24.3				26.2				81.6				77.2
Debt extinguishment costs			—				2.4				—				2.4
			814.8				777.5				2,439.7				2,222.0
Income from continuing operations before income taxes			62.4				54.8				203.7				187.1
Provision for income taxes			22.8				15.6				76.5				65.5
Income from continuing operations			39.6				39.2				127.2				121.6
(Loss) income from discontinued operations, net of income taxes			(0.1	)			0.3				0.2				—
Net income			39.5				39.5				127.4				121.6
Less: Net income attributable to noncontrolling interests			(0.7	)			(0.7	)			(2.2	)			(2.3	)
Net income attributable to LifePoint Hospitals, Inc.		$	38.8			$	38.8			$	125.2			$	119.3
Basic earnings per share attributable to LifePoint Hospitals, Inc. stockholders:
Continuing operations		$	0.79			$	0.74			$	2.49			$	2.26
Discontinued operations			—				—				0.01				—
Net income		$	0.79			$	0.74			$	2.50			$	2.26
Diluted earnings per share attributable to LifePoint Hospitals, Inc. stockholders(a):
Continuing operations		$	0.77			$	0.72			$	2.43			$	2.21
Discontinued operations			—				—				0.01				—
Net income		$	0.77			$	0.73			$	2.44			$	2.21
Weighted average shares and dilutive securities outstanding:
Basic			49.3				52.0				50.2				52.8
Diluted			50.4				53.1				51.4				54.0
Amounts attributable to LifePoint Hospitals, Inc. stockholders:
Income from continuing operations, net of income taxes		$	38.9			$	38.5			$	125.0			$	119.3
(Loss) income from discontinued operations, net of income taxes			(0.1	)			0.3				0.2				—
Net income		$	38.8			$	38.8			$	125.2			$	119.3

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LIFEPOINT HOSPITALS, INC.
  
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in millions, except per share amounts)

		September 30, 2011				December 31, 2010(a)
		(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents		$	199.4			$	207.4
Accounts receivable, less allowances for doubtful accounts of $534.2 and $459.8 at September 30, 2011 and December 31, 2010, respectively			397.7				387.3
Inventories			83.9				84.6
Prepaid expenses			20.4				13.9
Income taxes receivable			—				5.5
Deferred tax assets			138.3				99.7
Other current assets			24.5				24.7
			864.2				823.1
Property and equipment:
Land			86.5				85.9
Buildings and improvements			1,561.0				1,532.9
Equipment			1,033.1				950.2
Construction in progress (estimated cost to complete and equip after September 30, 2011 is $102.6)			68.9				39.4
			2,749.5				2,608.4
Accumulated depreciation			(1,045.0	)			(939.8	)
			1,704.5				1,668.6
Deferred loan costs, net			23.2				27.2
Intangible assets, net			88.2				73.1
Other			43.7				20.2
Goodwill			1,574.5				1,550.7
Total assets		$	4,298.3			$	4,162.9
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable		$	82.8			$	89.0
Accrued salaries			95.8				101.4
Accrued interest			10.4				16.0
Income taxes payable			58.1				—
Other current liabilities			124.7				116.5
Current maturities of long-term debt			1.4				1.4
			373.2				324.3
Long-term debt			1,588.7				1,570.5
Deferred income tax liabilities			217.0				211.2
Reserves for self-insurance claims and other liabilities			142.1				131.8
Long-term income tax liability			15.3				18.5
Total liabilities			2,336.3				2,256.3
Redeemable noncontrolling interests			15.3				15.3
Equity:
LifePoint Hospitals, Inc. stockholders’ equity:
Preferred stock, $0.01 par value; 10,000,000 shares authorized; no shares issued			—				—
Common stock, $0.01 par value; 90,000,000 shares authorized; 63,080,246 and 61,450,098 shares issued at September 30, 2011 and December 31, 2010, respectively			0.6				0.6
Capital in excess of par value			1,347.3				1,289.4
Accumulated other comprehensive loss			—				(4.0	)
Retained earnings			1,029.2				904.0
Common stock in treasury, at cost, 13,981,039 and 9,991,316 shares at September 30, 2011 and December 31, 2010, respectively			(443.7	)			(302.5	)
Total LifePoint Hospitals, Inc. stockholders’ equity			1,933.4				1,887.5
Noncontrolling interests			13.3				3.8
Total equity			1,946.7				1,891.3
Total liabilities and equity		$	4,298.3			$	4,162.9

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LIFEPOINT HOSPITALS, INC.
  
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Unaudited
(In millions)

		Three Months Ended September 30,								Nine Months Ended September 30,
		2011				2010				2011				2010
Cash flows from operating activities:
Net income		$	39.5			$	39.5			$	127.4			$	121.6
Adjustments to reconcile net income to net cash provided by operating activities:
Loss (income) from discontinued operations			0.1				(0.3	)			(0.2	)			—
Stock-based compensation			6.4				5.7				17.7				16.8
Depreciation and amortization			40.7				36.4				121.0				109.2
Amortization of physician minimum revenue guarantees			5.0				4.4				14.3				12.4
Amortization of convertible debt discounts			6.1				5.7				18.0				16.7
Amortization of deferred loan costs			1.4				1.6				4.4				5.6
Debt extinguishment costs			—				2.4				—				2.4
Deferred income tax benefit			(15.3	)			(17.9	)			(34.7	)			(34.6	)
Reserves for self-insurance claims, net of payments			2.7				5.0				9.7				9.3
Increase (decrease) in cash from operating assets and liabilities, net of effects from acquisitions and divestitures:
Accounts receivable			(17.5	)			(1.8	)			(12.4	)			(28.2	)
Inventories and other current assets			(1.7	)			0.1				(5.5	)			(2.4	)
Accounts payable and accrued expenses			8.6				15.8				(2.6	)			(3.9	)
Income taxes payable/receivable			37.0				17.6				63.6				57.3
Other			(3.0	)			(0.6	)			(2.4	)			(0.5	)
Net cash provided by operating activities – continuing operations			110.0				113.6				318.3				281.7
Net cash (used in) provided by operating activities –  discontinued operations			—				(0.5	)			0.2				(1.2	)
Net cash provided by operating activities			110.0				113.1				318.5				280.5
Cash flows from investing activities:
Purchases of property and equipment			(49.3	)			(48.4	)			(153.8	)			(122.0	)
Acquisitions, net of cash acquired			(36.6	)			(142.2	)			(63.1	)			(184.9	)
Other			(0.3	)			—				(1.2	)			—
Net cash used in investing activities			(86.2	)			(190.6	)			(218.1	)			(306.9	)
Cash flows from financing activities:
Proceeds from borrowings			—				400.0				—				400.0
Payments on borrowings			(0.1	)			(255.2	)			(0.1	)			(255.2	)
Repurchases of common stock			(99.4	)			(46.9	)			(141.2	)			(97.4	)
Payment of debt financing costs			(0.3	)			(8.7	)			(0.4	)			(13.1	)
Proceeds from exercise of stock options			0.1				1.2				34.6				14.7
Proceeds from employee stock purchase plans			0.6				0.4				1.2				1.0
Distributions to noncontrolling interests			(0.8	)			(0.7	)			(1.4	)			(1.6	)
(Purchases of) proceeds from redeemable noncontrolling interests			—				(0.8	)			—				3.1
Capital lease payments and other			(0.3	)			(0.2	)			(1.1	)			(1.0	)
Net cash (used in) provided by financing activities			(100.2	)			89.1				(108.4	)			50.5
Change in cash and cash equivalents			(76.4	)			11.6				(8.0	)			24.1
Cash and cash equivalents at beginning of period			275.8				199.7				207.4				187.2
Cash and cash equivalents at end of period		$	199.4			$	211.3			$	199.4			$	211.3
Supplemental disclosure of cash flow information:
Interest payments		$	21.0			$	16.0			$	65.0			$	50.7
Capitalized interest		$	0.5			$	0.3			$	1.3			$	0.6
Income taxes paid, net		$	1.2			$	16.0			$	47.8			$	42.8

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LIFEPOINT HOSPITALS, INC.
  
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
For the Nine Months Ended September 30, 2011
Unaudited
(In millions)

		LifePoint Hospitals, Inc. Stockholders																								Noncontrolling Interests				Total
		Common Stock								Capital in Excess of Par Value				Accumulated Other Comprehensive Income (loss)				Retained Earnings				Treasury Stock
		Shares				Amount
Balance at December 31, 2010(a)			51.5			$	0.6			$	1,289.4			$	(4.0	)		$	904.0			$	(302.5	)		$	3.8			$	1,891.3
Comprehensive income:
Net income			—				—				—				—				125.2				—				2.2				127.4
Net change in fair value of interest rate swap, net of tax provision of $2.8			—				—				—				4.0				—				—				—				4.0
Total comprehensive income																															131.4
Exercise of stock options and tax effects of stock-based awards			1.2				—				38.8				—				—				—				—				38.8
Stock activity in connection with employee stock purchase plan			—				—				1.2				—				—				—				—				1.2
Stock-based compensation			0.4				—				17.7				—				—				—				—				17.7
Repurchases of common stock, at cost			(4.0	)			—				—				—				—				(141.2	)			—				(141.2	)
Noncash change in noncontrolling interests as a result of acquisition			—				—				—				—				—				—				8.9				8.9
Cash proceeds from (cash distributions to) noncontrolling interests			—				—				0.2				—				—				—				(1.6	)			(1.4	)
Balance at September 30, 2011			49.1			$	0.6			$	1,347.3			$	—			$	1,029.2			$	(443.7	)		$	13.3			$	1,946.7

TABLE OF CONTENTS

LIFEPOINT HOSPITALS, INC.
  
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2011
Unaudited

Note 1. Organization and Basis of Presentation

Organization

LifePoint Hospitals, Inc., a Delaware corporation, acting through its subsidiaries, operates general acute care hospitals in non-urban communities in the United States (“U.S.”). Unless the context otherwise indicates, LifePoint Hospitals, Inc. and its subsidiaries are referred to herein as the “Company.” At September 30, 2011, on a consolidated basis, the Company operated 52 hospital campuses in 17 states. Unless noted otherwise, discussions in these notes pertain to the Company’s continuing operations, which exclude the results of those facilities that have been previously disposed.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, all adjustments, consisting of normal recurring adjustments, and disclosures considered necessary for a fair presentation have been included. Operating results for the three and nine months ended September 30, 2011 are not necessarily indicative of the results that may be expected for the year ending December 31, 2011. For further information, refer to the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2010.

Certain prior year amounts have been reclassified to conform to the current year presentation for the Company’s January 1, 2011 adoption of Accounting Standards Update (“ASU”) 2010-24, “Health Care Entities (Topic 954) — Presentation of Insurance Claims and Related Insurance Recoveries” (“ASU 2010-24”), as further discussed in Note 2.

Note 2. New Accounting Standards

ASU 2010-24, “Health Care Entities (Topic 954) — Presentation of Insurance Claims and Related Insurance Recoveries”

Effective January 1, 2011 and retrospectively for all periods presented, the Company adopted the provisions of ASU 2010-24 which further clarifies that health care entities should not net insurance recoveries against the related claim liabilities. In connection with the Company’s adoption of ASU 2010-24, the Company recorded an increase to its “Other assets” and “Reserves for self-insurance claims and other liabilities” in the accompanying condensed consolidated balance sheet by $10.5 million as of December 31, 2010. The $10.5 million increase to both “Other assets” and “Reserves for self-insurance claims and other liabilities” as of December 31, 2010 represents the Company’s estimate of its recoveries for certain claims in excess of the Company’s self-insured retention levels for workers’ compensation claims and professional and general liability claims. The adoption of ASU 2010-24 had no impact on the Company’s results of operations or cash flows.

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LIFEPOINT HOSPITALS, INC.
  
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2011
Unaudited

Note 2. New Accounting Standards  – (continued)

The following is a summary of the line items impacted by the adoption of ASU 2010-24 in the Company’s December 31, 2010 accompanying condensed consolidated balance sheet (in millions):

		As Originally Reported				Adjustments for the Adoption of ASU 2010-24				As Currently Reported
Other		$	9.7			$	10.5			$	20.2
Total assets		$	4,152.4			$	10.5			$	4,162.9
Reserves for self-insurance claims and other liabilities		$	121.3			$	10.5			$	131.8
Total liabilities		$	2,245.8			$	10.5			$	2,256.3
Total liabilities and equity		$	4,152.4			$	10.5			$	4,162.9

ASU 2011-5, “Comprehensive Income (Topic 220) — Presentation of Comprehensive Income”

In June 2011, the Financial Accounting Standards Board (“FASB”) issued ASU 2011-5, “Comprehensive Income (Topic 220) — Presentation of Comprehensive Income” (“ASU 2011-5”). ASU 2011-5 eliminates the Company’s currently elected option to present components of other comprehensive income as part of the statement of changes in stockholders’ equity. Instead, ASU 2011-5 requires that all non-owner changes in stockholders’ equity be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements. ASU 2011-5 is required to be applied retrospectively and is effective for public companies for fiscal years beginning after December 15, 2011 and interim periods within those fiscal years. Early adoption is permitted. The Company anticipates applying the provisions of ASU 2011-5 for its interim period ending March 31, 2012. Through May 30, 2011, the Company’s only component of other comprehensive income related to its changes in the fair value of its interest rate swap derivative instrument. As further discussed in Note 6, effective May 30, 2011, the Company’s interest rate swap agreement matured. Accordingly, the adoption of ASU 2011-5 is not expected to impact the Company’s financial position, results of operations or cash flows prospectively, however, it will change the presentation of the Company’s other comprehensive income for all periods prior to May 30, 2011, which was the maturity date of the Company’s interest rate swap agreement.

ASU 2011-7, “Health Care Entities (Topic 954): Presentation and Disclosure of Patient Service Revenue, Provision for Bad Debts, and the Allowance for Doubtful Accounts for Certain Health Care Entities”

In July 2011, the FASB issued ASU 2011-7, “Health Care Entities (Topic 954): Presentation and Disclosure of Patient Service Revenue, Provision for Bad Debts, and the Allowance for Doubtful Accounts for Certain Health Care Entities” (“ASU 2011-7”). In accordance with ASU 2011-7, the Company will be required to present its provision for doubtful accounts related to patient service revenue as a deduction from revenue, similar to contractual discounts. Accordingly, the Company’s revenues will be required to be reported net of both contractual discounts as well as its provision for doubtful accounts related to patient service revenues. Additionally, ASU 2011-7 will require the Company to make certain additional disclosures designed to help users understand how contractual discounts and bad debts affect recorded revenue in both interim and annual financial statements. ASU 2011-7 is required to be applied retrospectively and is effective for public companies for fiscal years beginning after December 15, 2011 and interim periods within those fiscal years. Early adoption is permitted. The Company is considering the early adoption of the provisions of ASU 2011-7. The adoption of ASU 2011-7 is not expected to impact the Company’s financial position, results of operations or cash flows, however, it will change the presentation of the Company’s revenues on its statements of operations as well as requiring additional disclosures.

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LIFEPOINT HOSPITALS, INC.
  
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2011
Unaudited

Note 2. New Accounting Standards  – (continued)

ASU 2011-8, “Intangibles — Goodwill and Other (Topic 350)”

In September 2011, the FASB issued ASU 2011-8, “Intangibles — Goodwill and Other (Topic 350)” (“ASU 2011-8”). Previously, entities were required to test goodwill for impairment, on at least an annual basis, by first comparing the fair value of a reporting unit with its carrying amount, including goodwill. If the resulting fair value of a reporting unit was less than its carrying amount, then the second step of the test would be performed to measure the amount of the impairment loss, if any. ASU 2011-8 permits an entity to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test. If, after assessing the totality of events or circumstances, an entity determines it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then performing the two-step goodwill impairment test is unnecessary.

In accordance with ASU 2011-8, an entity has the option to bypass the qualitative assessment for any reporting unit in any period and proceed directly to performing the first step of the two-step goodwill impairment test. Additionally, ASU 2011-8 permits an entity to resume performing the qualitative assessment in any subsequent period. ASU 2011-8 is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. Early adoption is permitted. The adoption of ASU 2011-8 is not expected to impact the Company’s financial position, results of operations or cash flows.

Note 3. General and Administrative Costs

The majority of the Company’s expenses are “cost of revenue” items. Costs that could be classified as “general and administrative” by the Company would include its corporate overhead costs, which were $35.4 million and $31.2 million for the three months ended September 30, 2011 and 2010, respectively, and $99.1 million and $85.7 million for the nine months ended September 30, 2011 and 2010, respectively.

Note 4. Fair Value of Financial Instruments

In accordance with Accounting Standards Codification (“ASC”) 825-10, “Financial Instruments”, the fair value of the Company’s financial instruments are further described as follows.

Cash and Cash Equivalents, Accounts Receivable and Accounts Payable

The carrying amounts reported in the accompanying condensed consolidated balance sheets for cash and cash equivalents, accounts receivable and accounts payable approximate fair value because of the short-term maturity of these instruments.

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LIFEPOINT HOSPITALS, INC.
  
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2011
Unaudited

Note 4. Fair Value of Financial Instruments  – (continued)

Long-Term Debt

The Company’s term B loans (the “Term B Loans”) under its credit agreement, as amended, with Citicorp North America, Inc., as administrative agent, and a syndicate of lenders (the “Credit Agreement”), 6.625% unsecured senior notes due October 1, 2020 (the “6.625% Senior Notes”), 3½% convertible senior subordinated notes due May 15, 2014 (the “3½% Notes”) and 3¼% convertible senior subordinated debentures due August 15, 2025 (the “3¼% Debentures”) are the Company’s long-term debt instruments where the carrying amounts are different from their fair value. The carrying amount and fair value of these instruments as of September 30, 2011 and December 31, 2010 were as follows (in millions):

		Carrying Amount								Fair Value
		September 30, 2011				December 31, 2010				September 30, 2011				December 31, 2010
Term B Loans		$	443.7			$	443.7			$	430.4			$	445.4
6.625% Senior Notes		$	400.0			$	400.0			$	396.0			$	398.0
3½% Notes, excluding unamortized discount		$	575.0			$	575.0			$	584.3			$	579.3
3¼% Debentures, excluding unamortized discount		$	225.0			$	225.0			$	227.8			$	225.6

The fair values of the Company’s Term B Loans and 6.625% Senior Notes were estimated based on the average bid and ask price as determined using published rates. The fair values of the Company’s 3½% Notes and 3¼% Debentures were estimated based on the quoted market prices determined using the closing share price of the Company’s common stock.

Interest Rate Swap

Through May 30, 2011, the Company had an interest rate swap in effect with Citibank, N.A. (“Citibank”) that was designated as a cash flow hedge instrument. Effective May 30, 2011, the Company’s interest rate swap agreement matured. Through May 30, 2011, the fair value of the Company’s interest rate swap agreement was determined in accordance with ASC 815-10, “Derivatives and Hedging” (“ASC 815-10”), based on the amount at which it could be settled, which is referred to in ASC 815-10 as the exit price. The exit price was based upon observable market assumptions and appropriate valuation adjustments for credit risk. The Company categorized its interest rate swap as Level 2 in the fair value hierarchy, which ASC 820-10 “Fair Value Measurements and Disclosures” (“ASC 820-10”), defines as observable market-based inputs or unobservable inputs that are corroborated by market data.

Because the Company’s interest rate swap agreement matured on May 30, 2011, the fair value of the interest rate swap at September 30, 2011 was zero. The fair value of the Company’s interest rate swap at December 31, 2010 reflected a liability of $7.9 million and is included as a current liability under the caption “Other current liabilities” in the accompanying condensed consolidated balance sheet. The Company’s interest rate swap is further described in Note 6.

Note 5. Goodwill and Intangible Assets

Goodwill

The Company accounts for its acquisitions in accordance with ASC 805-10, “Business Combinations” using the acquisition method of accounting. Goodwill represents the excess of the cost of an acquired entity over the net amounts assigned to assets acquired and liabilities assumed. In accordance with ASC 350-10, “Intangibles — Goodwill and Other” goodwill and intangible assets with indefinite lives are reviewed by the Company at least annually for impairment. The Company’s business comprises a single operating reporting unit for impairment test purposes. For the purposes of these analyses, the Company’s estimates of fair value are based on a combination of the income approach, which estimates the fair value of the Company based on

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LIFEPOINT HOSPITALS, INC.
  
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2011
Unaudited

Note 5. Goodwill and Intangible Assets  – (continued)

its future discounted cash flows, and the market approach, which estimates the fair value of the Company based on comparable market prices. The Company performed its most recent annual impairment test as of October 1, 2010 and did not incur an impairment charge.

Intangible Assets

Summary of Intangible Assets

The following table provides information regarding the Company’s intangible assets, which are included in the accompanying condensed consolidated balance sheets at September 30, 2011 and December 31, 2010 (in millions):

		September 30, 2011				December 31, 2010
Amortized intangible assets:
Contract-based physician minimum revenue guarantees
Gross carrying amount		$	94.4			$	87.2
Accumulated amortization			(46.7	)			(37.9	)
Net total			47.7				49.3
Non-competition agreements
Gross carrying amount			31.2				29.3
Accumulated amortization			(14.0	)			(12.0	)
Net total			17.2				17.3
Total amortized intangible assets
Gross carrying amount			125.6				116.5
Accumulated amortization			(60.7	)			(49.9	)
Net total			64.9				66.6
Indefinite-lived intangible assets:
Certificates of need and certificates of need exemptions			23.3				6.5
Total intangible assets:
Gross carrying amount			148.9				123.0
Accumulated amortization			(60.7	)			(49.9	)
Net total		$	88.2			$	73.1

Contract-Based Physician Minimum Revenue Guarantees

The Company has committed to provide certain financial assistance pursuant to recruiting agreements, or “physician minimum revenue guarantees,” with various physicians practicing in the communities it serves. In consideration for a physician relocating to one of its communities and agreeing to engage in private practice for the benefit of the respective community, the Company may advance certain amounts of money to a physician to assist in establishing his or her practice.

The Company accounts for its physician minimum revenue guarantees in accordance with the provisions of ASC 460-10, “Guarantees” (“ASC 460-10”). In accordance with ASC 460-10, the Company records a contract-based intangible asset and a related guarantee liability for new physician minimum revenue guarantees. The contract-based intangible asset is amortized as a component of “Other operating expenses”, in the accompanying condensed consolidated statements of operations, over the period of the physician contract, which typically ranges from four to five years. As of September 30, 2011 and December 31, 2010, the Company’s liability for contract-based physician minimum revenue guarantees was $17.4 million and

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LIFEPOINT HOSPITALS, INC.
  
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2011
Unaudited

Note 5. Goodwill and Intangible Assets  – (continued)

$18.0 million, respectively. These amounts are included under the caption “Other current liabilities” in the Company’s accompanying condensed consolidated balance sheets.

Non-Competition Agreements

The Company has entered into non-competition agreements with certain physicians and other individuals which are amortized on a straight-line basis over the term of the agreements.

Certificates of Need and Certificates of Need Exemptions

The construction of new facilities, the acquisition or expansion of existing facilities and the addition of new services and certain equipment at the Company’s facilities may be subject to state laws that require prior approval by state regulatory agencies. These certificate of need laws generally require that a state agency determine the public need and give approval prior to the construction or acquisition of facilities or the addition of new services.

During the nine months ended September 30, 2011, through the Company’s joint venture arrangement with Duke University Health Systems (“Duke”), the Company completed an acquisition of cardiac catheterization laboratories located in North Carolina totaling $24.8 million. The Company has attributed $16.8 million of its total purchase price of this acquisition to certificates of need exemptions.

Note 6. Interest Rate Swap

Through May 30, 2011, the Company had an interest rate swap agreement in effect with Citibank as counterparty. Effective May 30, 2011, the Company’s interest rate swap agreement matured. Prior to its maturity, the interest rate swap agreement required the Company to make quarterly fixed rate payments to Citibank calculated on a notional amount as set forth in the table below at an annual fixed rate of 5.585% while Citibank was obligated to make quarterly floating payments to the Company based on the three-month London Interbank Offer Rate (“LIBOR”) on the same referenced notional amount.

The following table provides information regarding the notional amounts in effect for the indicated date ranges for the Company’s interest rate swap agreement:

Date Range		Notional Amount (In millions)
November 30, 2009 to November 30, 2010		$	450.0
November 30, 2010 to May 30, 2011			300.0

The Company entered into the interest rate swap agreement to mitigate the floating interest rate risk on a portion of its outstanding borrowings under its Credit Agreement. Through May 30, 2011, in accordance with ASC 815-10, the Company was required to recognize all derivative instruments as either assets or liabilities at fair value in its accompanying condensed consolidated balance sheet. In accordance with ASC 815-10, the Company designated its interest rate swap as a cash flow hedge. For derivative instruments that are designated and qualify as cash flow hedges, the effective portion of the gain or loss on the derivative is reported as a component of other comprehensive income (“OCI”) and reclassified into earnings in the same period or periods during which the hedged transactions affect earnings. Gains and losses on the derivative representing either hedge ineffectiveness or hedge components excluded from the assessment of effectiveness are recognized in current earnings. Through May 30, 2011, the Company assessed the effectiveness of its interest rate swap and determined the hedge to be effective. In connection with the Company’s quarterly assessment for the three months ended September 30, 2010, the Company determined the hedge to be partially ineffective because the notional amount of the interest rate swap in effect during the three months ended September 30, 2010 exceeded the Company’s outstanding variable rate borrowings under its Credit Agreement. The Company recognized an increase in interest expense of approximately $0.1 million related to the ineffective portion of

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LIFEPOINT HOSPITALS, INC.
  
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2011
Unaudited

Note 6. Interest Rate Swap  – (continued)

the Company’s cash flow hedge during the three and nine months ended September 30, 2010. During the three and nine months ended September 30, 2011, the Company reclassed $1.1 million in previously recognized ineffective losses to OCI in connection with the maturity of the Company’s interest rate swap agreement.

As of September 30, 2011 and December 31, 2010, the fair value and line item caption of the Company’s interest rate swap derivative instrument were as follows (in millions):

		Balance Sheet Location				September 30, 2011				December 31, 2010
Derivative designated as a hedging instrument under ASC 815-10:
Interest rate swap			Other current liabilities			$	—			$	7.9

The following table shows the effect of the Company’s interest rate swap derivative instrument qualifying and designated as a hedging instrument in cash flow hedges for the three and nine months ended September 30, 2011 and 2010 (in millions):

		Amount of gain (loss) recognized in OCI on Derivative (Effective Portion)																Location of gain (loss) recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing)				Amount of gain (loss) recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing)
		For the Three Months Ended September 30,								For the Nine Months Ended September 30,												For the Three Months Ended September 30,								For the Nine Months Ended September 30,
		2011				2010				2011				2010								2011				2010				2011				2010
Derivative in ASC 815-10 cash flow hedging relationships:
Interest rate swap		$	(1.1	)		$	4.8			$	6.8			$	14.6				Interest expense, net			$	1.1			$	(0.1	)		$	1.1			$	(0.1	)

Since the Company’s interest rate swap was not traded on a market exchange, the fair value was determined using a valuation model that involved a discounted cash flow analysis on the expected cash flows. This cash flow analysis reflected the contractual terms of the interest rate swap agreement, including the period to maturity, and used observable market-based inputs, including the three-month LIBOR forward interest rate curve. The fair value of the Company’s interest rate swap agreement was determined by netting the discounted future fixed cash payments and the discounted expected variable cash receipts. The variable cash receipts were based on the expectation of future interest rates based on the observable market three-month LIBOR forward interest rate curve and the notional amount being hedged. In addition, the Company incorporated credit valuation adjustments to appropriately reflect both its own and Citibank’s non-performance or credit risk in the fair value measurements. The interest rate swap agreement exposed the Company to credit risk in the event of non-performance by Citibank. The majority of the inputs used to value its interest rate swap agreement, including the three-month LIBOR forward interest rate curve and market perceptions of the Company’s credit risk used in the credit valuation adjustments, were observable inputs available to a market participant. As a result, the Company made the determination that the interest rate swap valuation was categorized as Level 2 in the fair value hierarchy, in accordance with ASC 820-10.

Note 7. Common Stock in Treasury and Repurchases of Common Stock

The Company’s Board of Directors has authorized the repurchase of outstanding shares of the Company’s common stock either in the open market or through privately negotiated transactions, subject to market conditions, regulatory constraints and other customary factors in accordance with repurchase plans adopted in 2009, 2010 and 2011. The 2009 plan provided for the repurchase of up to $100.0 million shares of common stock. The 2009 repurchase plan expired in February 2011. The 2010 plan provided for the repurchase of up to $150.0 million shares of common stock, and through September 30, 2011, the Company had repurchased

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LIFEPOINT HOSPITALS, INC.
  
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2011
Unaudited

Note 7. Common Stock in Treasury and Repurchases of Common Stock  – (continued)

all shares authorized for repurchase under this plan. The 2011 plan provides for the repurchase of up to $250.0 million shares of common stock, and, in connection with this repurchase plan, the Company entered into a trading plan in accordance with the SEC Rule 10b5-1 (the “10b5-1 Trading Plan”). The 10b5-1 Trading Plan became effective on September 16, 2011 and expires on November 2, 2011. The Company is not obligated to repurchase any specific number of shares under its repurchase plans. The Company has designated the shares repurchased in accordance with the repurchase plans as treasury stock.

The following tables summarize the Company’s share repurchases in accordance with the 2009, 2010 and 2011 repurchase plans for the three and nine months ended September 30, 2011 and 2010:

		Three Months Ended September 30, 2011
		2011												2010
		Amount (In millions)				Total Number of Shares Repurchased (In millions)				Weighted Average Price Paid per Share				Amount (In millions)				Total Number of Shares Repurchased (In millions)				Weighted Average Price Paid per Share
2009 Repurchase Plan		$	—				—				N/A			$	42.3				1.4			$	31.91
2010 Repurchase Plan			67.3				2.0			$	33.46				4.3				0.1			$	34.00
2011 Repurchase Plan			31.7				0.9			$	35.39				—				—				N/A
Total		$	99.0				2.9							$	46.6				1.5

		Nine Months Ended September 30, 2011
		2011												2010
		Amount (In millions)				Total Number of Shares Repurchased (In millions)				Weighted Average Price Paid per Share				Amount (In millions)				Total Number of Shares Repurchased (In millions)				Weighted Average Price Paid per Share
2009 Repurchase Plan		$	—				—				N/A			$	87.6				2.7			$	33.03
2010 Repurchase Plan			103.6				3.0			$	35.24				4.3				0.1			$	34.00
2011 Repurchase Plan			31.7				0.9			$	35.39				—				—				N/A
Total		$	135.3				3.9							$	91.9				2.8

The following table provides certain additional information about the repurchase plans:

		2011 Repurchase Plan												2010 Repurchase Plan												2009 Repurchase Plan
		Amount (In millions)				Total Number of Shares Repurchased (In millions)				Weighted Average Price Paid per Share				Amount (In millions)				Total Number of Shares Repurchased (In millions)				Weighted Average Price Paid per Share				Amount (In millions)				Total Number of Shares Repurchased (In millions)				Weighted Average Price Paid per Share
Amount authorized to repurchase		$	250.0				N/A				N/A			$	150.0				N/A				N/A			$	100.0				N/A				N/A
Less: Amount repurchased through September 30, 2011			31.7				0.9			$	35.39				150.0				4.3			$	35.14				100.0				3.0			$	33.21
Remaining amount authorized to repurchase as of September 30, 2011		$	218.3				N/A				N/A			$	—				N/A				N/A			$	—				N/A				N/A

Additionally, the Company redeems shares from employees for minimum statutory tax withholding purposes upon vesting of certain stock awards granted pursuant to its Amended and Restated 1998 Long-Term Incentive Plan (“LTIP”) and Amended and Restated Management Stock Purchase Plan (“MSPP”). The Company redeemed approximately 0.1 million shares of certain vested LTIP and MSPP shares during each of the nine month periods ended September 30, 2011 and 2010 for an aggregate purchase price of approximately $5.9 million and $5.5 million, respectively. There were a nominal number of shares redeemed for minimum

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LIFEPOINT HOSPITALS, INC.
  
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2011
Unaudited

Note 7. Common Stock in Treasury and Repurchases of Common Stock  – (continued)

statutory tax withholdings purposes during each of the three month periods ended September 30, 2011 and 2010. The Company has designated these shares as treasury stock.

Note 8. Stock-Based Compensation

Overview

The Company issues stock-based awards, including stock options and other stock-based awards (nonvested stock, restricted stock, restricted stock units, performance shares and deferred stock units) to certain officers, employees and non-employee directors in accordance with the Company’s various stockholder-approved stock-based compensation plans. The Company accounts for its stock-based awards in accordance with the provisions of ASC 718-10, “Compensation — Stock Compensation”, (“ASC 718-10”) and accordingly recognizes compensation expense over each of the stock-based award’s requisite service period based on the estimated grant date fair value.

Stock Options

The Company granted stock options to purchase 724,190 and 1,272,938 shares of the Company’s common stock to certain officers and employees in accordance with the LTIP during the nine months ended September 30, 2011 and 2010, respectively. Options to purchase shares granted to the Company’s officers and employees in accordance with the LTIP were granted with an exercise price equal to the fair market value of the Company’s common stock on the day prior to the grant date. The options granted during the nine months ended September 30, 2011 and 2010 become ratably exercisable beginning one year from the date of grant to three years after the date of grant and expire ten years from the date of grant.

The Company estimated the fair value of stock options granted using the Hull-White II (“HW-II”) lattice option valuation model and a single option award approach. The Company uses the HW-II because it considers characteristics of fair value option pricing, such as an option’s contractual term and the probability of exercise before the end of the contractual term. In addition, the complications surrounding the expected term of an option are material, as indicated in ASC 718-10. Given the Company’s relatively large pool of unexercised options, the Company believes a lattice model that specifically addresses this fact and models a full term of exercises is the most appropriate and reliable means of valuing its stock options. The Company is amortizing the fair value on a straight-line basis over the requisite service period of the awards, which is the vesting period of three years. The stock options vest 33.3% on each grant anniversary date over three years of continued employment.

The following table shows the weighted average assumptions the Company used to develop the fair value estimates under its HW-II option valuation model and the resulting estimates of weighted-average fair value per share of stock options granted during the nine months ended September 30, 2011 and 2010:

		Nine Months Ended September 30,
		2011				2010
Expected volatility			36.0	%			40.0	%
Risk free interest rate (range)			0.02% – 3.58	%			0.06% – 3.69	%
Expected dividends			—				—
Average expected term (years)			5.3				5.4
Fair value per share of stock options granted		$	11.77			$	10.95

The total intrinsic value of stock options exercised during the nine months ended September 30, 2011 and 2010 was $12.7 million and $4.4 million, respectively. The Company received $0.1 million and $1.2 million in cash from stock option exercises for the three months ended September 30, 2011 and 2010, respectively, and $34.6 million and $14.7 million during the nine months ended September 30, 2011 and 2010, respectively.

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LIFEPOINT HOSPITALS, INC.
  
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2011
Unaudited

Note 8. Stock-Based Compensation  – (continued)

The actual tax benefit realized for the tax deductions from stock option exercises totaled $1.6 million for the nine months ended September 30, 2011. There was a nominal amount of tax benefit realized for the tax deductions from stock options exercised during the three months ended September 30, 2011 and 2010 and the nine months ended September 30, 2010.

As of September 30, 2011, there was $12.8 million of total estimated unrecognized compensation cost related to stock option compensation arrangements. Total estimated unrecognized compensation cost will be adjusted for future changes in estimated forfeitures. The Company expects to recognize that cost over a weighted average period of 1.3 years.

Other Stock-Based Awards

The Company granted 489,294 and 506,773 shares of nonvested stock awards to certain officers, employees, and non-employee directors in accordance with the LTIP, MSPP and Outside Directors Stock and Incentive Compensation Plan during the nine months ended September 30, 2011 and 2010, respectively. The fair value of other stock-based awards is determined based on the closing price of the Company’s common stock on the day prior to the grant date. The nonvested stock awards granted during the nine months ended September 30, 2011 and 2010 have either cliff-vesting periods from the grant date of three years, cliff-vesting periods from the grant date of six months and one day or ratable vesting periods beginning one year from the date of grant to three years after the date of grant.

Of the nonvested stock awards granted during the nine months ended September 30, 2011 and 2010, 297,000 and 317,000, respectively, were performance-based. In addition to requiring continuing service of an employee, the vesting of these nonvested stock awards is contingent upon the satisfaction of certain financial goals, specifically related to the achievement of targeted annual revenues and earnings goals within a three-year period. In accordance with the LTIP, if these goals are achieved, the nonvested stock awards will cliff-vest three years after the grant date. The performance criteria for performance-based nonvested stock awards granted during 2010 have been certified as met by the Compensation Committee of the Company’s Board of Directors, however, these awards are still subject to continuing service requirements and the three year cliff-vesting provisions. For purposes of estimating compensation expense for the performance-based nonvested stock awards granted during 2011, the Company has assumed that the performance goals will be achieved. If the performance goals are not met for the performance-based awards granted during 2011, no compensation expense will be recognized, and any previously recognized compensation expense will be reversed.

Notwithstanding the specific grant vesting requirements, nonvested stock awards and performance-based awards granted under the LTIP become fully vested upon the death or disability of the participant. Additionally, in the event of termination without cause of a participant, the nonvested stock awards and performance-based awards otherwise subject to cliff-vesting become vested in a percentage equal to the number of full months of continuous employment following the date of grant through the date of termination divided by the total number of months in the vesting period, and in the case of performance-based awards, only in the event that the performance goals are attained.

The Company received $0.6 million and $0.4 million for the issuance of nonvested stock in accordance with the MSPP for the three months ended September 30, 2011 and 2010, respectively, and $1.2 million and $1.0 million during the nine months ended September 30, 2011 and 2010, respectively.

As of September 30, 2011, there was $18.9 million of total estimated unrecognized compensation cost related to other stock-based awards granted in accordance with the LTIP and MSPP. Total estimated unrecognized compensation cost will be adjusted for future changes in estimated forfeitures. The Company expects to recognize that cost over a weighted average period of 1.8 years.

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LIFEPOINT HOSPITALS, INC.
  
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2011
Unaudited

Note 8. Stock-Based Compensation  – (continued)

The following table summarizes the Company’s total stock-based compensation expense as well as the total recognized tax benefits related thereto for the three and nine months ended September 30, 2011 and 2010 (in millions):

		Three Months Ended September 30,								Nine Months Ended September 30,
		2011				2010				2011				2010
Other stock-based awards		$	4.1			$	3.5			$	10.8			$	10.4
Stock options			2.3				2.2				6.9				6.4
Total stock-based compensation expense		$	6.4			$	5.7			$	17.7			$	16.8
Tax benefit on stock-based compensation expense		$	2.4			$	2.3			$	7.1			$	6.7

The Company did not capitalize any stock-based compensation cost during the three or nine months ended September 30, 2011 or 2010. As of September 30, 2011, there was $31.7 million of total estimated unrecognized compensation cost related to all of the Company’s stock-based compensation arrangements. Total estimated unrecognized compensation cost may be adjusted for future changes in estimated forfeitures. The Company expects to recognize that cost over a weighted-average period of 1.6 years.

Note 9. Commitments and Contingencies

Legal Proceedings and General Liability Claims

The Company is, from time to time, subject to claims and suits arising in the ordinary course of business, including claims for damages for personal injuries, medical malpractice, breach of contracts, wrongful restriction of or interference with physicians’ staff privileges and employment related claims. In certain of these actions, plaintiffs request payment for damages, including punitive damages that may not be covered by insurance. The Company is currently not a party to any pending or threatened proceeding, which, in management’s opinion, would have a material adverse effect on the Company’s business, financial condition or results of operations.

In May 2009, the Company’s hospital in Andalusia, Alabama (Andalusia Regional Hospital) produced documents responsive to a request received from the U.S. Attorney’s Office for the Western District of New York regarding an investigation they are conducting with respect to the billing of kyphoplasty procedures. Kyphoplasty is a surgical spine procedure that returns a compromised vertebra (either from trauma or osteoporotic disease process) to its previous height, reducing or eliminating severe pain. It has been reported that other unaffiliated hospitals and hospital operators in multiple states have received similar requests for information. The Company believes that this investigation is related to the May 22, 2008 qui tam settlement between the same U.S. Attorney’s Office and the manufacturer and distributor of the product used in performing the kyphoplasty procedure.

Based on a review of the number of the kyphoplasty procedures performed at all of the Company’s other hospitals, as part of its effort to cooperate with the U.S. Attorney’s Office, by letter dated January 20, 2010 the Company’s management identified to the U.S. Attorney’s Office four additional facilities at which the number of inpatient kyphoplasty procedures approximated those performed at Andalusia Regional Hospital. The Company’s management has completed its review of the relevant medical records and is continuing to cooperate with the government’s investigation.

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LIFEPOINT HOSPITALS, INC.
  
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2011
Unaudited

Note 9. Commitments and Contingencies  – (continued)

Physician Commitments

The Company has committed to provide certain financial assistance pursuant to recruiting agreements with various physicians practicing in the communities it serves. In consideration for a physician’s relocating to one of its communities and agreeing to engage in private practice for the benefit of the respective community, the Company may advance certain amounts of money to a physician, normally over a period of one year, to assist in establishing the physician’s practice. The Company has committed to advance a maximum amount of approximately $28.8 million at September 30, 2011. The actual amount of such commitments to be subsequently advanced to physicians is estimated at $17.4 million and often depends upon the financial results of a physician’s private practice during the guarantee period. Generally, amounts advanced under the recruiting agreements may be forgiven pro rata over a period of 36 to 48 months contingent upon the physician continuing to practice in the respective community. Pursuant to the Company’s standard physician recruiting agreement, any breach or non-fulfillment by a physician under the physician recruiting agreement gives the Company the right to recover any payments made to the physician under the agreement.

Capital Expenditure Commitments

The Company is reconfiguring some of its facilities to accommodate patient services more effectively and to permit additional patient volume and a greater variety of services. The Company is also implementing various information system initiatives in its efforts to comply with the Health Information Technology for Economic and Clinical Health Act. The Company has incurred $68.9 million in uncompleted projects as of September 30, 2011, which is included as “Construction in progress” in the Company’s accompanying condensed consolidated balance sheet. At September 30, 2011, the Company had uncompleted projects with an estimated cost to complete and equip of approximately $102.6 million. Additionally, the Company is subject to annual capital expenditure commitments in connection with several of its facilities.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2011
Unaudited

Note 10. Earnings Per Share

The following table sets forth the computation of basic and diluted earnings per share for the three and nine months ended September 30, 2011 and 2010 (dollars and shares in millions, except per share amounts):

		Three Months Ended September 30,								Nine Months Ended September 30,
		2011				2010				2011				2010
Numerator for basic and diluted earnings per share attributable to LifePoint Hospitals, Inc.:
Income from continuing operations		$	39.6			$	39.2			$	127.2			$	121.6
Less: Net income attributable to noncontrolling interests			(0.7	)			(0.7	)			(2.2	)			(2.3	)
Income from continuing operations attributable to LifePoint Hospitals, Inc. stockholders			38.9				38.5				125.0				119.3
(Loss) income from discontinued operations, net of income taxes			(0.1	)			0.3				0.2				—
Net income attributable to LifePoint Hospitals, Inc.		$	38.8			$	38.8			$	125.2			$	119.3
Denominator:
Weighted average shares outstanding – basic			49.3				52.0				50.2				52.8
Effect of dilutive securities: stock options and other stock-based awards			1.1				1.1				1.2				1.2
Weighted average shares outstanding – diluted			50.4				53.1				51.4				54.0
Basic earnings per share attributable to LifePoint Hospitals, Inc. stockholders:
Continuing operations		$	0.79			$	0.74			$	2.49			$	2.26
Discontinued operations			—				—				0.01				—
Net income		$	0.79			$	0.74			$	2.50			$	2.26
Diluted earnings per share attributable to LifePoint Hospitals, Inc. stockholders(a):
Continuing operations		$	0.77			$	0.72			$	2.43			$	2.21
Discontinued operations			—				—				0.01				—
Net income		$	0.77			$	0.73			$	2.44			$	2.21

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2011
Unaudited

Note 10. Earnings Per Share  – (continued)

The Company’s 3½% Notes and 3¼% Debentures are included in the calculation of diluted earnings per share whether or not the contingent requirements have been met for conversion if the conversion price of $51.79 and $61.22, respectively, is less than the average market price of the Company’s common stock for the period. Upon conversion, the par value is settled in cash, and only the conversion premium is settled in shares of the Company’s common stock. The impact of the 3½% Notes and 3¼% Debentures has been excluded because the effects would have been anti-dilutive for the three and nine months ended September 30, 2011 and 2010.

11. Subsequent Events

Effective October 1, 2011, the Company, through its joint venture with Duke, acquired Person Memorial Hospital (“Person Memorial”), located in Roxboro, North Carolina for $22.7 million. The purchase price of Person Memorial is reflected as a deposit and is included in “Other assets” in the accompanying condensed consolidated balance sheet at September 30, 2011.

Subsequent to September 30, 2011 and through October 28, 2011, the Company has repurchased an additional 0.9 million shares of the Company’s common stock for an aggregate purchase price, including commissions, of approximately $33.5 million at an average purchase price of $35.43 per share in connection with the 2011 Repurchase Plan.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2011
Unaudited

Note 12. Guarantor and Non-Guarantor Supplementary Information

The Company’s 6.625% Senior Notes are jointly and severally guaranteed on an unsecured senior basis by substantially all of the Company’s existing subsidiaries that guarantee the Company’s Credit Agreement. The following presents the condensed consolidating financial information for the parent issuer, guarantor subsidiaries, non-guarantor subsidiaries, certain eliminations and the Company for the three and nine months ended September 30, 2011 and 2010 and as of September 30, 2011 and December 31, 2010:

LIFEPOINT HOSPITALS, INC.
  
Condensed Consolidating Statements of Operations
For the Three Months Ended September 30, 2011
(In millions)

		Parent Issuer				Guarantors				Non-Guarantors				Eliminations				Consolidated
Revenues		$	—			$	802.5			$	74.7			$	—			$	877.2
Salaries and benefits			6.4				307.9				23.5				—				337.8
Supplies			—				102.0				11.9				—				113.9
Other operating expenses			—				159.7				11.4				—				171.1
Provision for doubtful accounts			—				117.0				10.0				—				127.0
Equity in earnings of affiliates			(50.4	)			—				—				50.4				—
Depreciation and amortization			—				36.8				3.9				—				40.7
Interest expense, net			5.8				17.9				0.6				—				24.3
Management (income) fees			—				(2.3	)			2.3				—				—
			(38.2	)			739.0				63.6				50.4				814.8
Income from continuing operations before income taxes			38.2				63.5				11.1				(50.4	)			62.4
Provision for income taxes			(0.6	)			23.4				—				—				22.8
Income from continuing operations			38.8				40.1				11.1				(50.4	)			39.6
Income from discontinued operations, net of taxes:			—				(0.1	)			—				—				(0.1	)
Net income			38.8				40.0				11.1				(50.4	)			39.5
Less: Net income attributable to noncontrolling interests			—				—				(0.7	)			—				(0.7	)
Net income attributable to LifePoint Hospitals, Inc.		$	38.8			$	40.0			$	10.4			$	(50.4	)		$	38.8

TABLE OF CONTENTS

LIFEPOINT HOSPITALS, INC.
  
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2011
Unaudited

Note 12. Guarantor and Non-Guarantor Supplementary Information  – (continued)

LIFEPOINT HOSPITALS, INC.
  
Condensed Consolidating Statements of Operations
For the Three Months Ended September 30, 2010
(In millions)

		Parent Issuer				Guarantors				Non-Guarantors				Eliminations				Consolidated
Revenues		$	—			$	755.1			$	77.2			$	—			$	832.3
Salaries and benefits			5.7				295.4				23.7				—				324.8
Supplies			—				100.9				12.0				—				112.9
Other operating expenses			(0.2	)			145.2				13.5				—				158.5
Provision for doubtful accounts			—				105.3				11.0				—				116.3
Equity in earnings of affiliates			(53.8	)			—				—				53.8				—
Depreciation and amortization			—				32.8				3.6				—				36.4
Interest expense, net			9.2				16.9				0.1				—				26.2
Debt extinguishment costs			2.4				—				—				—				2.4
Management (income) fees			—				(2.2	)			2.2				—				—
			(36.7	)			694.3				66.1				53.8				777.5
Income from continuing operations before income taxes			36.7				60.8				11.1				(53.8	)			54.8
Provision for income taxes			(2.1	)			17.7				—				—				15.6
Income from continuing operations			38.8				43.1				11.1				(53.8	)			39.2
Income from discontinued operations, net of income taxes			—				0.3				—				—				0.3
Net income			38.8				43.4				11.1				(53.8	)			39.5
Less: Net income attributable to noncontrolling interests			—				(0.2	)			(0.5	)			—				(0.7	)
Net income attributable to LifePoint Hospitals, Inc.		$	38.8			$	43.2			$	10.6			$	(53.8	)		$	38.8

TABLE OF CONTENTS

LIFEPOINT HOSPITALS, INC.
  
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2011
Unaudited

Note 12. Guarantor and Non-Guarantor Supplementary Information  – (continued)

LIFEPOINT HOSPITALS, INC.
  
Condensed Consolidating Statements of Operations
For the Nine Months Ended September 30, 2011
(In millions)

		Parent Issuer				Guarantors				Non-Guarantors				Eliminations				Consolidated
Revenues		$	—			$	2,409.8			$	233.6			$	—			$	2,643.4
Salaries and benefits			17.7				921.5				72.0				—				1,011.2
Supplies			—				308.9				37.8				—				346.7
Other operating expenses			—				460.7				35.1				—				495.8
Provision for doubtful accounts			—				352.4				31.0				—				383.4
Equity in earnings of affiliates			(167.1	)			—				—				167.1				—
Depreciation and amortization			—				109.9				11.1				—				121.0
Interest expense, net			27.6				52.6				1.4				—				81.6
Management (income) fees			—				(7.1	)			7.1				—				—
			(121.8	)			2,198.9				195.5				167.1				2,439.7
Income from continuing operations before income taxes			121.8				210.9				38.1				(167.1	)			203.7
Provision for income taxes			(3.4	)			79.9				—				—				76.5
Income from continuing operations			125.2				131.0				38.1				(167.1	)			127.2
Income from discontinued operations, net of income taxes			—				0.2				—				—				0.2
Net income			125.2				131.2				38.1				(167.1	)			127.4
Less: Net income attributable to noncontrolling interests			—				(0.4	)			(1.8	)			—				(2.2	)
Net income attributable to LifePoint Hospitals, Inc.		$	125.2			$	130.8			$	36.3			$	(167.1	)		$	125.2

TABLE OF CONTENTS

LIFEPOINT HOSPITALS, INC.
  
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2011
Unaudited

Note 12. Guarantor and Non-Guarantor Supplementary Information  – (continued)

LIFEPOINT HOSPITALS, INC.
  
Condensed Consolidating Statements of Operations
For the Nine Months Ended September 30, 2010
(In millions)

		Parent Issuer				Guarantors				Non-Guarantors				Eliminations				Consolidated
Revenues		$	—			$	2,181.6			$	227.5			$	—			$	2,409.1
Salaries and benefits			16.8				847.6				70.7				—				935.1
Supplies			—				292.1				38.4				—				330.5
Other operating expenses			0.2				407.8				36.2				—				444.2
Provision for doubtful accounts			—				294.3				29.1				—				323.4
Equity in earnings of affiliates			(161.9	)			—				—				161.9				—
Depreciation and amortization			—				98.3				10.9				—				109.2
Interest expense, net			27.9				49.1				0.2				—				77.2
Debt extinguishment costs			2.4				—				—				—				2.4
Management (income) fees			—				(6.5	)			6.5				—				—
			(114.6	)			1,982.7				192.0				161.9				2,222.0
Income before income taxes			114.6				198.9				35.5				(161.9	)			187.1
Provision for income taxes			(4.7	)			70.2				—				—				65.5
Net income			119.3				128.7				35.5				(161.9	)			121.6
Less: Net income attributable to noncontrolling interests			—				(0.6	)			(1.7	)			—				(2.3	)
Net income attributable to LifePoint Hospitals, Inc.		$	119.3			$	128.1			$	33.8			$	(161.9	)		$	119.3

TABLE OF CONTENTS

LIFEPOINT HOSPITALS, INC.
  
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2011
Unaudited

Note 12. Guarantor and Non-Guarantor Supplementary Information  – (continued)

LIFEPOINT HOSPITALS, INC.
  
Condensed Consolidating Balance Sheets
September 30, 2011
(In millions)

		Parent Issuer				Guarantors				Non-Guarantors				Eliminations				Consolidated
ASSETS
Current assets:
Cash and cash equivalents		$	—			$	187.4			$	12.0			$	—			$	199.4
Accounts receivable, net			—				362.6				35.1				—				397.7
Inventories			—				75.2				8.7				—				83.9
Prepaid expenses			0.1				19.5				0.8				—				20.4
Deferred tax assets			138.3				—				—				—				138.3
Other current assets			—				24.5				—				—				24.5
			138.4				669.2				56.6				—				864.2
Property and equipment:
Land			—				74.0				12.5				—				86.5
Buildings and improvements			—				1,423.0				138.0				—				1,561.0
Equipment			—				958.8				74.3				—				1,033.1
Construction in progress			—				64.3				4.6				—				68.9
			—				2,520.1				229.4				—				2,749.5
Accumulated depreciation			—				(965.5	)			(79.5	)			—				(1,045.0	)
			—				1,554.6				149.9				—				1,704.5
Deferred loan costs, net			23.2				—				—				—				23.2
Intangible assets, net			—				50.0				38.2				—				88.2
Investments in subsidiaries			1,422.0				—				—				(1,422.0	)			—
Other			1.0				40.8				1.9				—				43.7
Goodwill			—				1,413.1				161.4				—				1,574.5
Total assets		$	1,584.6			$	3,727.7			$	408.0			$	(1,422.0	)		$	4,298.3
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable		$	—			$	76.0			$	6.8			$	—			$	82.8
Accrued salaries			—				89.3				6.5				—				95.8
Accrued interest			10.4				—				—				—				10.4
Income taxes payable			58.1				—				—				—				58.1
Other current liabilities			—				113.6				11.1				—				124.7
Current maturities of long-term debt			—				1.3				0.1				—				1.4
			68.5				280.2				24.5				—				373.2
Long-term debt			1,581.9				6.4				0.4				—				1,588.7
Intercompany			(2,231.5	)			2,265.5				(34.0	)			—				—
Deferred income tax liabilities			217.0				—				—				—				217.0
Reserves for self-insurance claims and other liabilities			—				118.9				23.2				—				142.1
Long-term income tax liability			15.3				—				—				—				15.3
Total liabilities			(348.8	)			2,671.0				14.1				—				2,336.3
Redeemable noncontrolling interests			—				—				15.3				—				15.3
Total LifePoint Hospitals, Inc. stockholders’ equity			1,933.4				1,055.1				366.9				(1,422.0	)			1,933.4
Noncontrolling interests			—				1.6				11.7				—				13.3
Total equity			1,933.4				1,056.7				378.6				(1,422.0	)			1,946.7
Total liabilities and equity		$	1,584.6			$	3,727.7			$	408.0			$	(1,422.0	)		$	4,298.3

TABLE OF CONTENTS

LIFEPOINT HOSPITALS, INC.
  
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2011
Unaudited

Note 12. Guarantor and Non-Guarantor Supplementary Information  – (continued)

LIFEPOINT HOSPITALS, INC.
  
Condensed Consolidating Balance Sheets
December 31, 2010
(In millions)

		Parent Issuer				Guarantors				Non-Guarantors				Eliminations				Consolidated
ASSETS
Current assets:
Cash and cash equivalents		$	—			$	197.1			$	10.3			$	—			$	207.4
Accounts receivable, net			—				358.4				28.9				—				387.3
Inventories			—				75.9				8.7				—				84.6
Prepaid expenses			—				13.6				0.3				—				13.9
Income taxes receivable			5.5				—				—				—				5.5
Deferred tax assets			99.7				—				—				—				99.7
Other current assets			—				24.5				0.2				—				24.7
			105.2				669.5				48.4				—				823.1
Property and equipment:
Land			—				73.5				12.4				—				85.9
Buildings and improvements			—				1,399.8				133.1				—				1,532.9
Equipment			—				883.7				66.5				—				950.2
Construction in progress			—				36.6				2.8				—				39.4
			—				2,393.6				214.8				—				2,608.4
Accumulated depreciation			—				(868.6	)			(71.2	)			—				(939.8	)
			—				1,525.0				143.6				—				1,668.6
Deferred loan costs, net			27.2				—				—				—				27.2
Intangible assets, net			—				50.5				22.6				—				73.1
Investments in subsidiaries			1,255.9				—				—				(1,255.9	)			—
Other			—				18.2				2.0				—				20.2
Goodwill			—				1,413.2				137.5				—				1,550.7
Total assets		$	1,388.3			$	3,676.4			$	354.1			$	(1,255.9	)		$	4,162.9
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable		$	—			$	83.0			$	6.0			$	—			$	89.0
Accrued salaries			—				96.0				5.4				—				101.4
Accrued interest			16.0				—				—				—				16.0
Other current liabilities			7.9				96.2				12.4				—				116.5
Current maturities of long-term debt			—				1.4				—				—				1.4
			23.9				276.6				23.8				—				324.3
Long-term debt			1,563.9				6.6				—				—				1,570.5
Intercompany			(2,316.7	)			2,361.2				(44.5	)			—				—
Deferred income tax liabilities			211.2				—				—				—				211.2
Reserves for self-insurance claims and other liabilities			—				107.0				24.8				—				131.8
Long-term income tax liability			18.5				—				—				—				18.5
Total liabilities			(499.2	)			2,751.4				4.1				—				2,256.3
Redeemable noncontrolling interests			—				—				15.3				—				15.3
Total LifePoint Hospitals, Inc. stockholders’ equity			1,887.5				923.7				332.2				(1,255.9	)			1,887.5
Noncontrolling interests			—				1.3				2.5				—				3.8
Total equity			1,887.5				925.0				334.7				(1,255.9	)			1,891.3
Total liabilities and equity		$	1,388.3			$	3,676.4			$	354.1			$	(1,255.9	)		$	4,162.9