Community Health Systems, Inc. (NYSE: CYH) (the “Company”) today
announced financial and operating results for the three and nine months
ended September 30, 2014.
Financial and statistical data reported in this earnings release
includes Health Management Associates, Inc.’s (“HMA”) operating results
from January 27, 2014, the date the Company completed its acquisition of
HMA. Prior period consolidated results and statistical data reflect only
the Company and its subsidiaries for the period prior to the HMA
acquisition. Same-store operating results and statistical data includes
comparable information for hospitals acquired as a result of the HMA
acquisition for the months of February through September 2014 and 2013.
Net operating revenues for the three months ended September 30, 2014,
totaled $4.795 billion, a 51.1 percent increase compared with $3.174
billion for the same period in 2013. Income from continuing operations
attributable to Community Health Systems, Inc. common stockholders
increased to $61 million, or $0.53 per share (diluted), for the three
months ended September 30, 2014, compared with income from continuing
operations attributable to Community Health Systems, Inc. common
stockholders of $10 million, or $0.11 per share (diluted), for the same
period in 2013. The Company has reached an agreement in principle with
the Department of Justice to resolve its investigation into whether the
Company’s three New Mexico hospitals improperly submitted claims for
federal funds through the state’s Medicaid programs. Based on the
Company’s negotiations, a reserve of $75 million has been recorded to
settle the government’s claims. The Company also incurred approximately
$2 million in legal fees during the three months ended September 30,
2014, in negotiating this settlement. The results for the three months
ended September 30, 2014, include $0.02 per share (diluted) of expenses
related to acquisition and integration expenses from the acquisition of
HMA; $0.04 per share (diluted) of legal expenses related to HMA legal
proceedings underlying the contingent value rights (“CVR”) agreement;
and $0.41 per share (diluted) of expenses related to the settlement of
claims at the Company’s New Mexico hospitals. Excluding these expenses,
income from continuing operations was $1.00 per share (diluted). Net
income attributable to Community Health Systems, Inc. common
stockholders was $0.54 per share (diluted) for the three months ended
September 30, 2014, compared with net income of $0.04 per share
(diluted) for the same period in 2013. Discontinued operations for the
three months ended September 30, 2014, consisted of income of $0.01 per
share (diluted). Weighted-average shares outstanding (diluted) were 114
million for the three months ended September 30, 2014, and 94 million
for the three months ended September 30, 2013.
Adjusted EBITDA for the three months ended September 30, 2014, was $663
million compared with $382 million for the same period in 2013,
representing a 73.6 percent increase. Excluding acquisition and
integration expenses from the acquisition of HMA, legal expenses related
to the HMA legal proceedings underlying the CVR agreement, and expenses
related to the settlement of claims at the Company’s New Mexico
hospitals, ADJUSTED EBITDA was $751 million for the three months ended
September 30, 2014. Adjusted EBITDA is EBITDA adjusted to exclude
discontinued operations, loss from early extinguishment of debt,
impairment of long-lived assets and net income attributable to
noncontrolling interests. The Company uses Adjusted EBITDA as a measure
of liquidity. A reconciliation of Adjusted EBITDA to net cash provided
by operating activities is included in the attached footnotes.
The consolidated operating results for the three months ended September
30, 2014, reflect a 49.0 percent increase in total admissions, and a
53.2 percent increase in total adjusted admissions compared with the
same period in 2013. On a same-store basis, admissions decreased 3.9
percent while adjusted admissions were flat compared with the same
period in 2013. On a same-store basis, net operating revenues increased
2.8 percent compared with the same period in 2013.
Net operating revenues for the nine months ended September 30, 2014,
totaled $13.759 billion, a 42.9 percent increase compared with $9.628
billion for the same period in 2013. Income from continuing operations
attributable to Community Health Systems, Inc. common stockholders
decreased to $18 million, or $0.16 per share (diluted), for the nine
months ended September 30, 2014, compared with income from continuing
operations attributable to Community Health Systems, Inc. common
stockholders of $128 million, or $1.37 per share (diluted), for the same
period in 2013. The results for the nine months ended September 30,
2014, include $0.38 per share (diluted) of expenses related to
acquisition and integration expenses from the acquisition of HMA; $0.12
per share (diluted) of legal expenses related to HMA legal proceedings
underlying the CVR agreement; $0.42 per share (diluted) of expenses
related to settlement of claims at the Company’s New Mexico hospitals;
$0.40 per share (diluted) of expenses related to the loss from early
extinguishment of debt; $0.14 per share (diluted) of expenses related to
the impairment of software costs taken out of service; and $0.42 per
share (diluted) of expenses related to accelerating amortization on
software to be abandoned. Excluding these expenses, income from
continuing operations was $2.04 per share (diluted). Net loss
attributable to Community Health Systems, Inc. common stockholders was
$(0.07) per share (diluted) for the nine months ended September 30,
2014, compared with net income of $1.21 per share (diluted) for the same
period in 2013. Discontinued operations for the nine months ended
September 30, 2014, consisted of $(0.03) per share (diluted) of losses
from operations of entities held for sale and approximately $(0.21) per
share (diluted) of expenses related to the impairment of long-lived
assets held for sale, for a total after-tax loss of approximately $26
million, or $(0.24) per share (diluted). Weighted-average shares
outstanding (diluted) were 112 million for the nine months ended
September 30, 2014, and 94 million for the nine months ended September
30, 2013.
Adjusted EBITDA for the nine months ended September 30, 2014, was $1.826
billion compared with $1.297 billion for the same period in 2013,
representing a 40.8 percent increase. Excluding acquisition and
integration expenses from the acquisition of HMA, legal expenses related
to the HMA legal proceedings underlying the CVR agreement, and expenses
related to the settlement of claims at the Company’s New Mexico
hospitals, ADJUSTED EBITDA was $1.992 billion for the nine months ended
September 30, 2014.
The consolidated operating results for the nine months ended September
30, 2014, reflect a 40.2 percent increase in total admissions and a 44.4
percent increase in total adjusted admissions compared with the same
period in 2013. On a same-store basis, admissions decreased 5.5 percent
while adjusted admissions decreased 2.1 percent compared with the same
period in 2013. On a same-store basis, net operating revenues decreased
0.2 percent compared with the same period in 2013.
Commenting on the results, Wayne T. Smith, chairman and chief executive
officer of Community Health Systems, Inc., said, “We are pleased with
our financial and operating performance for the third quarter of 2014.
These results reflect consistent execution of our strategy with
measurable progress since the completion of the HMA acquisition. We have
realized incremental benefits of the Affordable Care Act with a decline
in uninsured admissions and a favorable shift in payor mix in the third
quarter, and we expect this trend to continue.
“We have made substantial progress during the year with respect to the
HMA hospitals as we continue to identify and realize additional
operating synergies. We are confident in our ability to achieve our
expected synergy targets for 2014, and we will look for further
opportunities to improve our operating efficiencies in these acquired
facilities. Overall, we are pleased with the key trends that drive our
business, especially our recent physician recruitment efforts, which we
believe will further enhance the performance of our hospitals and
support the communities we serve.”
Included on pages 15, 16, 17 and 18 of this press release are tables
setting forth the Company’s updated 2014 annual earnings guidance. The
2014 guidance is based on the Company’s historical operating
performance, current trends and other assumptions that the Company
believes are reasonable at this time, including with respect to the HMA
acquisition.
Community Health Systems, Inc. is one of the largest publicly-traded
hospital companies in the United States and a leading operator of
general acute-care hospitals in non-urban and mid-size markets
throughout the country. Through its subsidiaries, the Company currently
owns, leases or operates 207 hospitals in 29 states with an aggregate of
approximately 31,100 licensed beds. The Company’s headquarters are
located in Franklin, Tennessee, a suburb south of Nashville. Shares in
Community Health Systems, Inc. are traded on the New York Stock Exchange
under the symbol “CYH.” More information about the Company can be found
on its website at www.chs.net.
Community Health Systems, Inc. will hold a conference call on Tuesday,
November 4, 2014, at 10:00 a.m. Central, 11:00 a.m. Eastern, to review
financial and operating results for the third quarter ended September
30, 2014. Investors will have the opportunity to listen to a live
internet broadcast of the conference call by clicking on the Investor
Relations link of the Company’s website at www.chs.net.
To listen to the live call, please go to the website at least fifteen
minutes early to register, download and install any necessary audio
software. For those who cannot listen to the live broadcast, a replay
will be available shortly after the call and will continue to be
available through December 4, 2014. Copies of the Company’s Current
Report on Form 8-K (including this press release) and conference call
slide show will be available on the Company’s website at www.chs.net.
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|
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
|
Financial Highlights (a)(b)(c)(d)(e)
|
(In millions, except per share amounts)
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Three Months Ended
|
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|
Nine Months Ended
|
|
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|
September 30,
|
|
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|
September 30,
|
|
|
|
2014
|
|
|
2013
|
|
|
|
2014
|
|
|
2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net operating revenues
|
|
|
$
|
4,795
|
|
|
$
|
3,174
|
|
|
|
|
$
|
13,759
|
|
|
|
$
|
9,628
|
|
Adjusted EBITDA (f)
|
|
|
|
663
|
|
|
|
382
|
|
|
|
|
|
1,826
|
|
|
|
|
1,297
|
|
Income from continuing operations (g), (h), (k)
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|
|
93
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|
|
|
28
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|
|
|
|
|
93
|
|
|
|
|
180
|
|
Net income (loss) attributable to Community Health Systems, Inc.
stockholders
|
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|
|
62
|
|
|
|
4
|
|
|
|
|
|
(8
|
)
|
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|
113
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings (loss) per share attributable to Community
Health Systems, Inc. common stockholders (n):
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|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations (g), (h), (k)
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|
|
$
|
0.54
|
|
|
$
|
0.11
|
|
|
|
|
$
|
0.16
|
|
|
|
$
|
1.39
|
|
Discontinued operations
|
|
|
|
0.01
|
|
|
|
(0.07
|
)
|
|
|
|
|
(0.24
|
)
|
|
|
|
(0.17
|
)
|
Net income (loss)
|
|
|
$
|
0.54
|
|
|
$
|
0.04
|
|
|
|
|
$
|
(0.08
|
)
|
|
|
$
|
1.22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings (loss) per share attributable to Community
Health Systems, Inc. common stockholders (n):
|
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|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations (g), (h), (k), (l)
|
|
|
$
|
0.53
|
|
|
$
|
0.11
|
|
|
|
|
$
|
0.16
|
|
|
|
$
|
1.37
|
|
Discontinued operations
|
|
|
|
0.01
|
|
|
|
(0.07
|
)
|
|
|
|
|
(0.24
|
)
|
|
|
|
(0.17
|
)
|
Net income (loss) (l)
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|
$
|
0.54
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|
|
$
|
0.04
|
|
|
|
|
$
|
(0.07
|
)
|
|
|
$
|
1.21
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|
|
|
|
|
|
|
|
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|
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Weighted-average number of shares outstanding (i):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
113
|
|
|
|
93
|
|
|
|
|
|
111
|
|
|
|
|
92
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|
Diluted
|
|
|
|
114
|
|
|
|
94
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|
|
|
|
|
112
|
|
|
|
|
94
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
$
|
126
|
|
|
$
|
132
|
|
|
|
|
$
|
639
|
|
|
|
$
|
441
|
|
|
_____ For footnotes, see pages 12, 13 and 14.
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COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
|
Condensed Consolidated Statements of Income (a)(b)(c)(d)(e)
|
(In millions, except per share amounts)
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
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|
2014
|
|
|
|
2013
|
|
|
|
Amount
|
|
|
% of Net
Operating
Revenues
|
|
|
|
Amount
|
|
|
% of Net
Operating
Revenues
|
Operating revenues (net of contractual allowances and discounts)
|
|
|
$5,563
|
|
|
|
|
|
|
$3,710
|
|
|
|
Provision for bad debts
|
|
|
768
|
|
|
|
|
|
|
536
|
|
|
|
Net operating revenues
|
|
|
4,795
|
|
|
100.0%
|
|
|
|
3,174
|
|
|
100.0%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and benefits
|
|
|
2,191
|
|
|
45.7%
|
|
|
|
1,514
|
|
|
47.7%
|
Supplies
|
|
|
733
|
|
|
15.3%
|
|
|
|
482
|
|
|
15.2%
|
Other operating expenses
|
|
|
1,121
|
|
|
23.4%
|
|
|
|
705
|
|
|
22.1%
|
Government settlement and related costs (o)
|
|
|
77
|
|
|
1.6%
|
|
|
|
98
|
|
|
3.1%
|
Electronic health records incentive reimbursement (g)
|
|
|
(88)
|
|
|
(1.8)%
|
|
|
|
(65)
|
|
|
(2.0)%
|
Rent
|
|
|
110
|
|
|
2.3%
|
|
|
|
70
|
|
|
2.2%
|
Depreciation and amortization
|
|
|
280
|
|
|
5.8%
|
|
|
|
193
|
|
|
6.1%
|
Total operating costs and expenses
|
|
|
4,424
|
|
|
92.3%
|
|
|
|
2,997
|
|
|
94.4%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations (g), (h)
|
|
|
371
|
|
|
7.7%
|
|
|
|
177
|
|
|
5.6%
|
Interest expense, net
|
|
|
250
|
|
|
5.2%
|
|
|
|
154
|
|
|
4.9%
|
Equity in earnings of unconsolidated affiliates
|
|
|
(12)
|
|
|
(0.3)%
|
|
|
|
(12)
|
|
|
(0.4)%
|
Income from continuing operations before income taxes
|
|
|
133
|
|
|
2.8%
|
|
|
|
35
|
|
|
1.1%
|
Provision for income taxes
|
|
|
40
|
|
|
0.8%
|
|
|
|
7
|
|
|
0.2%
|
Income from continuing operations (g), (h)
|
|
|
93
|
|
|
2.0%
|
|
|
|
28
|
|
|
0.9%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued operations, net of taxes:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations of entities held for sale
|
|
|
1
|
|
|
-
|
|
|
|
(6)
|
|
|
(0.2)%
|
Income (loss) from discontinued operations, net of taxes
|
|
|
1
|
|
|
-
|
|
|
|
(6)
|
|
|
(0.2)%
|
Net income
|
|
|
94
|
|
|
2.0%
|
|
|
|
22
|
|
|
0.7%
|
Less: Net income attributable to noncontrolling interests
|
|
|
32
|
|
|
0.7%
|
|
|
|
18
|
|
|
0.6%
|
Net income attributable to Community Health Systems, Inc.
stockholders
|
|
|
$62
|
|
|
1.3%
|
|
|
|
$4
|
|
|
0.1%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings (loss) per share attributable to Community
Health Systems, Inc. common stockholders (n):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations (g), (h)
|
|
|
$0.54
|
|
|
|
|
|
|
$0.11
|
|
|
|
Discontinued operations
|
|
|
0.01
|
|
|
|
|
|
|
(0.07)
|
|
|
|
Net income
|
|
|
$0.54
|
|
|
|
|
|
|
$0.04
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings (loss) per share attributable to Community
Health Systems, Inc. common stockholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations (g), (h), (l)
|
|
|
$0.53
|
|
|
|
|
|
|
$0.11
|
|
|
|
Discontinued operations
|
|
|
0.01
|
|
|
|
|
|
|
(0.07)
|
|
|
|
Net income (l)
|
|
|
$0.54
|
|
|
|
|
|
|
$0.04
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average number of shares outstanding (i):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
113
|
|
|
|
|
|
|
93
|
|
|
|
Diluted
|
|
|
114
|
|
|
|
|
|
|
94
|
|
|
|
|
_____ For footnotes, see pages 12, 13 and 14.
|
|
|
|
|
|
|
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
|
Condensed Consolidated Statements of (Loss) Income (a)(b)(c)(d)(e)
|
(In millions, except per share amounts)
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30,
|
|
|
|
2014
|
|
|
|
2013
|
|
|
|
Amount
|
|
|
% of Net
Operating
Revenues
|
|
|
|
Amount
|
|
|
% of Net
Operating
Revenues
|
Operating revenues (net of contractual allowances and discounts)
|
|
|
$
|
15,984
|
|
|
|
|
|
|
|
$
|
11,161
|
|
|
|
|
Provision for bad debts
|
|
|
|
2,225
|
|
|
|
|
|
|
|
|
1,533
|
|
|
|
|
Net operating revenues
|
|
|
|
13,759
|
|
|
|
100.0
|
%
|
|
|
|
|
9,628
|
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and benefits
|
|
|
|
6,417
|
|
|
|
46.6
|
%
|
|
|
|
|
4,591
|
|
|
|
47.7
|
%
|
Supplies
|
|
|
|
2,104
|
|
|
|
15.3
|
%
|
|
|
|
|
1,468
|
|
|
|
15.2
|
%
|
Other operating expenses
|
|
|
|
3,262
|
|
|
|
23.7
|
%
|
|
|
|
|
2,110
|
|
|
|
21.9
|
%
|
Government settlement and related costs (o)
|
|
|
|
77
|
|
|
|
0.6
|
%
|
|
|
|
|
98
|
|
|
|
1.0
|
%
|
Electronic health records incentive reimbursement (g)
|
|
|
|
(212
|
)
|
|
|
(1.5
|
)%
|
|
|
|
|
(108
|
)
|
|
|
(1.1
|
)%
|
Rent
|
|
|
|
320
|
|
|
|
2.3
|
%
|
|
|
|
|
208
|
|
|
|
2.2
|
%
|
Depreciation and amortization
|
|
|
|
817
|
|
|
|
6.0
|
%
|
|
|
|
|
574
|
|
|
|
6.0
|
%
|
Amortization of software to be abandoned (k)
|
|
|
|
75
|
|
|
|
0.5
|
%
|
|
|
|
|
-
|
|
|
|
-
|
|
Total operating costs and expenses
|
|
|
|
12,860
|
|
|
|
93.5
|
%
|
|
|
|
|
8,941
|
|
|
|
92.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations (g), (h), (k)
|
|
|
|
899
|
|
|
|
6.5
|
%
|
|
|
|
|
687
|
|
|
|
7.1
|
%
|
Interest expense, net
|
|
|
|
728
|
|
|
|
5.3
|
%
|
|
|
|
|
464
|
|
|
|
4.8
|
%
|
Loss from early extinguishment of debt
|
|
|
|
73
|
|
|
|
0.5
|
%
|
|
|
|
|
1
|
|
|
|
-
|
|
Equity in earnings of unconsolidated affiliates
|
|
|
|
(35
|
)
|
|
|
(0.3
|
)%
|
|
|
|
|
(36
|
)
|
|
|
(0.4
|
)%
|
Impairment of long-lived assets (k)
|
|
|
|
24
|
|
|
|
0.2
|
%
|
|
|
|
|
-
|
|
|
|
-
|
|
Income from continuing operations before income taxes
|
|
|
|
109
|
|
|
|
0.8
|
%
|
|
|
|
|
258
|
|
|
|
2.7
|
%
|
Provision for income taxes
|
|
|
|
16
|
|
|
|
0.1
|
%
|
|
|
|
|
78
|
|
|
|
0.8
|
%
|
Income from continuing operations (g), (h), (k)
|
|
|
|
93
|
|
|
|
0.7
|
%
|
|
|
|
|
180
|
|
|
|
1.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued operations, net of taxes:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations of entities held for sale
|
|
|
|
(4
|
)
|
|
|
-
|
|
|
|
|
|
(15
|
)
|
|
|
(0.2
|
)%
|
Impairment of hospitals held for sale
|
|
|
|
(22
|
)
|
|
|
(0.2
|
)%
|
|
|
|
|
-
|
|
|
|
-
|
|
Loss from discontinued operations, net of taxes
|
|
|
|
(26
|
)
|
|
|
(0.2
|
)%
|
|
|
|
|
(15
|
)
|
|
|
(0.2
|
)%
|
Net income
|
|
|
|
67
|
|
|
|
0.5
|
%
|
|
|
|
|
165
|
|
|
|
1.7
|
%
|
Less: Net income attributable to noncontrolling interests
|
|
|
|
75
|
|
|
|
0.5
|
%
|
|
|
|
|
52
|
|
|
|
0.5
|
%
|
Net (loss) income attributable to Community Health Systems, Inc.
stockholders
|
|
|
$
|
(8
|
)
|
|
|
-
|
|
|
|
|
$
|
113
|
|
|
|
1.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic (loss) earnings per share attributable to Community
Health Systems, Inc. common stockholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations (g), (h), (k)
|
|
|
$
|
0.16
|
|
|
|
|
|
|
|
$
|
1.39
|
|
|
|
|
Discontinued operations
|
|
|
|
(0.24
|
)
|
|
|
|
|
|
|
|
(0.17
|
)
|
|
|
|
Net income (loss)
|
|
|
$
|
(0.08
|
)
|
|
|
|
|
|
|
$
|
1.22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted (loss) earnings per share attributable to Community
Health Systems, Inc. common stockholders (n):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations (g), (h), (k), (l)
|
|
|
$
|
0.16
|
|
|
|
|
|
|
|
$
|
1.37
|
|
|
|
|
Discontinued operations
|
|
|
|
(0.24
|
)
|
|
|
|
|
|
|
|
(0.17
|
)
|
|
|
|
Net income (loss) (l)
|
|
|
$
|
(0.07
|
)
|
|
|
|
|
|
|
$
|
1.21
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average number of shares outstanding (i):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
111
|
|
|
|
|
|
|
|
|
92
|
|
|
|
|
Diluted
|
|
|
|
112
|
|
|
|
|
|
|
|
|
94
|
|
|
|
|
_____ For footnotes, see pages 12, 13 and 14.
|
|
|
|
|
|
|
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
|
Condensed Consolidated Statements of Comprehensive Income (c)
|
(In millions)
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
2014
|
|
2013
|
|
|
2014
|
|
2013
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
$
|
94
|
|
$
|
22
|
|
|
$
|
67
|
|
$
|
165
|
Other comprehensive income, net of income taxes:
|
|
|
|
|
|
|
|
|
|
|
Net change in fair value of interest rate swaps, net of tax
|
|
|
|
11
|
|
|
10
|
|
|
|
20
|
|
|
47
|
Net change in fair value of available-for-sale securities, net of tax
|
|
|
|
(5)
|
|
|
1
|
|
|
|
(2)
|
|
|
3
|
Amortization and recognition of unrecognized pension cost
components, net of tax
|
|
|
|
1
|
|
|
1
|
|
|
|
1
|
|
|
2
|
Other comprehensive income
|
|
|
|
7
|
|
|
12
|
|
|
|
19
|
|
|
52
|
Comprehensive income
|
|
|
|
101
|
|
|
34
|
|
|
|
86
|
|
|
217
|
Less: Comprehensive income attributable to noncontrolling interests
|
|
|
|
32
|
|
|
18
|
|
|
|
75
|
|
|
52
|
Comprehensive income attributable to Community Health Systems,
Inc. stockholders
|
|
|
$
|
69
|
|
$
|
16
|
|
|
$
|
11
|
|
$
|
165
|
|
_____ For footnotes, see pages 12, 13 and 14.
|
|
|
|
|
|
|
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
|
Selected Operating Data (a)(d)(j)
|
(Dollars in millions)
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended September 30,
|
|
|
|
Consolidated
|
|
|
|
Same-Store (1)
|
|
|
|
2014
|
|
|
2013
|
|
|
% Change
|
|
|
|
2014
|
|
|
2013
|
|
|
% Change
|
Number of hospitals (at end of period)
|
|
|
|
196
|
|
|
|
|
129
|
|
|
|
|
|
|
|
|
194
|
|
|
|
|
194
|
|
|
|
|
Licensed beds (at end of period)
|
|
|
|
30,062
|
|
|
|
|
19,648
|
|
|
|
|
|
|
|
|
29,383
|
|
|
|
|
29,731
|
|
|
|
|
Beds in service (at end of period)
|
|
|
|
26,871
|
|
|
|
|
16,900
|
|
|
|
|
|
|
|
|
26,238
|
|
|
|
|
27,009
|
|
|
|
|
Admissions
|
|
|
|
236,258
|
|
|
|
|
158,516
|
|
|
|
49.0
|
%
|
|
|
|
|
228,396
|
|
|
|
|
237,731
|
|
|
|
-3.9
|
%
|
Adjusted admissions
|
|
|
|
514,148
|
|
|
|
|
335,582
|
|
|
|
53.2
|
%
|
|
|
|
|
498,576
|
|
|
|
|
498,520
|
|
|
|
0.0
|
%
|
Patient days
|
|
|
|
1,026,759
|
|
|
|
|
683,677
|
|
|
|
|
|
|
|
|
990,935
|
|
|
|
|
1,024,148
|
|
|
|
|
Average length of stay (days)
|
|
|
|
4.3
|
|
|
|
|
4.3
|
|
|
|
|
|
|
|
|
4.3
|
|
|
|
|
4.3
|
|
|
|
|
Occupancy rate (average beds in service)
|
|
|
|
41.9
|
%
|
|
|
|
44.1
|
%
|
|
|
|
|
|
|
|
41.4
|
%
|
|
|
|
41.2
|
%
|
|
|
|
Net operating revenues
|
|
|
$
|
4,795
|
|
|
|
$
|
3,174
|
|
|
|
51.1
|
%
|
|
|
|
$
|
4,676
|
|
|
|
$
|
4,548
|
|
|
|
2.8
|
%
|
Net inpatient revenues as a % of operating revenues before
provision for bad debts
|
|
|
|
44.2
|
%
|
|
|
|
43.9
|
%
|
|
|
|
|
|
|
|
44.2
|
%
|
|
|
|
45.1
|
%
|
|
|
|
Net outpatient revenues as a % of operating revenues before
provision for bad debts
|
|
|
|
55.8
|
%
|
|
|
|
56.1
|
%
|
|
|
|
|
|
|
|
55.8
|
%
|
|
|
|
54.9
|
%
|
|
|
|
Income from operations (g), (h)
|
|
|
$
|
371
|
|
|
|
$
|
177
|
|
|
|
109.6
|
%
|
|
|
|
|
|
|
|
|
|
|
Income from operations as a % of net operating revenues
|
|
|
|
7.7
|
%
|
|
|
|
5.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
$
|
280
|
|
|
|
$
|
193
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in earnings of unconsolidated affiliates
|
|
|
$
|
(12
|
)
|
|
|
$
|
(12
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liquidity Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA (f)
|
|
|
$
|
663
|
|
|
|
$
|
382
|
|
|
|
73.6
|
%
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA as a % of net operating revenues
|
|
|
|
13.8
|
%
|
|
|
|
12.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
$
|
126
|
|
|
|
$
|
132
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities a % of net operating
revenues
|
|
|
|
2.6
|
%
|
|
|
|
4.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Same-store operating results and statistical data include
comparable information for hospitals acquired in the HMA
acquisition for the months of July through September 2014 and 2013.
|
|
_____ For footnotes, see pages 12, 13 and 14.
|
|
|
|
|
|
|
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
|
Selected Operating Data (a)(d)(j)
|
(Dollars in millions)
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Nine Months Ended September 30,
|
|
|
|
Consolidated
|
|
|
|
Same-Store (1)
|
|
|
|
2014
|
|
|
2013
|
|
|
% Change
|
|
|
|
2014
|
|
|
2013
|
|
|
% Change
|
Number of hospitals (at end of period)
|
|
|
|
196
|
|
|
|
|
129
|
|
|
|
|
|
|
|
|
194
|
|
|
|
|
194
|
|
|
|
|
Licensed beds (at end of period)
|
|
|
|
30,062
|
|
|
|
|
19,648
|
|
|
|
|
|
|
|
|
29,383
|
|
|
|
|
29,731
|
|
|
|
|
Beds in service (at end of period)
|
|
|
|
26,871
|
|
|
|
|
16,900
|
|
|
|
|
|
|
|
|
26,238
|
|
|
|
|
27,009
|
|
|
|
|
Admissions
|
|
|
|
688,407
|
|
|
|
|
490,856
|
|
|
|
40.2
|
%
|
|
|
|
|
665,075
|
|
|
|
|
703,871
|
|
|
|
-5.5
|
%
|
Adjusted admissions
|
|
|
|
1,463,507
|
|
|
|
|
1,013,635
|
|
|
|
44.4
|
%
|
|
|
|
|
1,419,025
|
|
|
|
|
1,449,127
|
|
|
|
-2.1
|
%
|
Patient days
|
|
|
|
3,054,410
|
|
|
|
|
2,169,113
|
|
|
|
|
|
|
|
|
2,946,519
|
|
|
|
|
3,101,378
|
|
|
|
|
Average length of stay (days)
|
|
|
|
4.4
|
|
|
|
|
4.4
|
|
|
|
|
|
|
|
|
4.4
|
|
|
|
|
4.4
|
|
|
|
|
Occupancy rate (average beds in service)
|
|
|
|
44.1
|
%
|
|
|
|
47.3
|
%
|
|
|
|
|
|
|
|
43.5
|
%
|
|
|
|
44.3
|
%
|
|
|
|
Net operating revenues
|
|
|
$
|
13,759
|
|
|
|
$
|
9,628
|
|
|
|
42.9
|
%
|
|
|
|
$
|
13,381
|
|
|
|
$
|
13,408
|
|
|
|
-0.2
|
%
|
Net inpatient revenues as a % of operating revenues before
provision for bad debts
|
|
|
|
43.9
|
%
|
|
|
|
44.6
|
%
|
|
|
|
|
|
|
|
43.9
|
%
|
|
|
|
46.0
|
%
|
|
|
|
Net outpatient revenues as a % of operating revenues before
provision for bad debts
|
|
|
|
56.1
|
%
|
|
|
|
55.4
|
%
|
|
|
|
|
|
|
|
56.1
|
%
|
|
|
|
54.0
|
%
|
|
|
|
Income from operations (g), (h), (k)
|
|
|
$
|
899
|
|
|
|
$
|
687
|
|
|
|
30.9
|
%
|
|
|
|
|
|
|
|
|
|
|
Income from operations as a % of net operating revenues
|
|
|
|
6.5
|
%
|
|
|
|
7.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
$
|
892
|
|
|
|
$
|
574
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in earnings of unconsolidated affiliates
|
|
|
$
|
(35
|
)
|
|
|
$
|
(36
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liquidity Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA (f)
|
|
|
$
|
1,826
|
|
|
|
$
|
1,297
|
|
|
|
40.8
|
%
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA as a % of net operating revenues
|
|
|
|
13.3
|
%
|
|
|
|
13.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
$
|
639
|
|
|
|
$
|
441
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities a % of net operating
revenues
|
|
|
|
4.6
|
%
|
|
|
|
4.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Same-store operating results and statistical data include
comparable information for hospitals acquired in the HMA
acquisition for the months of February through September 2014 and
2013.
|
|
_____ For footnotes, see pages 12, 13 and 14.
|
|
|
|
|
|
|
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
|
Condensed Consolidated Balance Sheets (b)
|
(In millions, except share data)
|
(Unaudited)
|
|
|
|
|
September 30, 2014
|
|
|
December 31, 2013
|
ASSETS
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
$
|
221
|
|
|
|
$
|
373
|
|
Patient accounts receivable, net of allowance for doubtful
accounts of $3,517 and $2,438 at September 30, 2014 and December
31, 2013, respectively
|
|
|
|
3,266
|
|
|
|
|
2,323
|
|
Supplies
|
|
|
|
553
|
|
|
|
|
371
|
|
Prepaid income taxes
|
|
|
|
123
|
|
|
|
|
107
|
|
Deferred income taxes
|
|
|
|
318
|
|
|
|
|
101
|
|
Prepaid expenses and taxes
|
|
|
|
213
|
|
|
|
|
127
|
|
Other current assets (including assets of hospitals held for sale
of $84 and $40 at September 30, 2014 and December 31, 2013,
respectively)
|
|
|
|
678
|
|
|
|
|
345
|
|
Total current assets
|
|
|
|
5,372
|
|
|
|
|
3,747
|
|
Property and equipment
|
|
|
|
14,221
|
|
|
|
|
10,462
|
|
Less accumulated depreciation and amortization
|
|
|
|
(3,923
|
)
|
|
|
|
(3,411
|
)
|
Property and equipment, net
|
|
|
|
10,298
|
|
|
|
|
7,051
|
|
Goodwill
|
|
|
|
8,936
|
|
|
|
|
4,424
|
|
Other assets, net (including assets of hospitals held for sale
of $174 and $94 at September 30, 2014 and December 31, 2013,
respectively)
|
|
|
|
2,618
|
|
|
|
|
1,895
|
|
Total assets
|
|
|
$
|
27,224
|
|
|
|
$
|
17,117
|
|
|
|
|
|
|
|
|
LIABILITIES AND EQUITY
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
Current maturities of long-term debt
|
|
|
$
|
219
|
|
|
|
$
|
167
|
|
Accounts payable
|
|
|
|
1,060
|
|
|
|
|
949
|
|
Deferred income taxes
|
|
|
|
-
|
|
|
|
|
3
|
|
Accrued interest
|
|
|
|
164
|
|
|
|
|
112
|
|
Accrued liabilities (including liabilities of hospitals held for
sale of $34 and $24 at September 30, 2014 and December 31, 2013,
respectively)
|
|
|
|
1,737
|
|
|
|
|
1,227
|
|
Total current liabilities
|
|
|
|
3,180
|
|
|
|
|
2,458
|
|
Long-term debt
|
|
|
|
16,793
|
|
|
|
|
9,286
|
|
Deferred income taxes
|
|
|
|
877
|
|
|
|
|
906
|
|
Other long-term liabilities
|
|
|
|
1,709
|
|
|
|
|
977
|
|
Total liabilities
|
|
|
|
22,559
|
|
|
|
|
13,627
|
|
Redeemable noncontrolling interests in equity of consolidated
subsidiaries
|
|
|
|
695
|
|
|
|
|
358
|
|
EQUITY
|
|
|
|
|
|
|
Community Health Systems, Inc. stockholders’ equity Preferred
stock, $.01 par value per share, 100,000,000 shares authorized;
none issued
|
|
|
|
-
|
|
|
|
|
-
|
|
Common stock, $.01 par value per share, 300,000,000 shares
authorized; 117,257,526 shares issued and 116,281,977 shares
outstanding at September 30, 2014, and 95,987,032 shares issued
and 95,011,483 shares outstanding at December 31, 2013
|
|
|
|
1
|
|
|
|
|
1
|
|
Additional paid-in capital
|
|
|
|
2,059
|
|
|
|
|
1,256
|
|
Treasury stock, at cost, 975,549 shares at September 30, 2014 and
December 31, 2013
|
|
|
|
(7
|
)
|
|
|
|
(7
|
)
|
Accumulated other comprehensive loss
|
|
|
|
(48
|
)
|
|
|
|
(67
|
)
|
Retained earnings
|
|
|
|
1,877
|
|
|
|
|
1,885
|
|
Total Community Health Systems, Inc. stockholders’ equity
|
|
|
|
3,882
|
|
|
|
|
3,068
|
|
Noncontrolling interests in equity of consolidated subsidiaries
|
|
|
|
88
|
|
|
|
|
64
|
|
Total equity
|
|
|
|
3,970
|
|
|
|
|
3,132
|
|
Total liabilities and equity
|
|
|
$
|
27,224
|
|
|
|
$
|
17,117
|
|
|
_____ For footnotes, see pages 12, 13 and 14.
|
|
|
|
|
|
|
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
|
Condensed Consolidated Statements of Cash Flows (b)
|
(In millions)
|
(Unaudited)
|
|
|
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
|
|
2014
|
|
|
2013
|
|
|
|
|
|
|
|
Cash flows from operating activities
|
|
|
|
|
|
|
Net income
|
|
|
$
|
67
|
|
|
|
$
|
165
|
|
Adjustments to reconcile net income to net cash provided by
operating activities:
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
|
897
|
|
|
|
|
583
|
|
Government settlement and related costs (o)
|
|
|
|
77
|
|
|
|
|
98
|
|
Stock-based compensation expense
|
|
|
|
36
|
|
|
|
|
29
|
|
Impairment of long-lived assets and hospitals held for sale
|
|
|
|
46
|
|
|
|
|
-
|
|
Loss from early extinguishment of debt
|
|
|
|
73
|
|
|
|
|
1
|
|
Excess tax benefit relating to stock-based compensation
|
|
|
|
(4
|
)
|
|
|
|
(7
|
)
|
Other non-cash expenses, net
|
|
|
|
34
|
|
|
|
|
48
|
|
Changes in operating assets and liabilities, net of effects of
acquisitions and divestitures:
|
|
|
|
|
|
|
Patient accounts receivable
|
|
|
|
(299
|
)
|
|
|
|
(231
|
)
|
Supplies, prepaid expenses and other current assets
|
|
|
|
(39
|
)
|
|
|
|
(60
|
)
|
Accounts payable, accrued liabilities and income taxes
|
|
|
|
(189
|
)
|
|
|
|
(206
|
)
|
Other
|
|
|
|
(60
|
)
|
|
|
|
21
|
|
Net cash provided by operating activities (m)
|
|
|
|
639
|
|
|
|
|
441
|
|
|
|
|
|
|
|
|
Cash flows from investing activities
|
|
|
|
|
|
|
Acquisitions of facilities and other related equipment
|
|
|
|
(3,041
|
)
|
|
|
|
(34
|
)
|
Purchases of property and equipment
|
|
|
|
(560
|
)
|
|
|
|
(421
|
)
|
Proceeds from disposition of certain ancillary operations
|
|
|
|
12
|
|
|
|
|
-
|
|
Proceeds from sale of property and equipment
|
|
|
|
40
|
|
|
|
|
4
|
|
Purchases of available-for-sale securities
|
|
|
|
(198
|
)
|
|
|
|
-
|
|
Proceeds from sales of available-for-sale securities
|
|
|
|
191
|
|
|
|
|
-
|
|
Increase in other investments
|
|
|
|
(387
|
)
|
|
|
|
(234
|
)
|
Net cash used in investing activities
|
|
|
|
(3,943
|
)
|
|
|
|
(685
|
)
|
|
|
|
|
|
|
|
Cash flows from financing activities
|
|
|
|
|
|
|
Proceeds from exercise of stock options
|
|
|
|
42
|
|
|
|
|
109
|
|
Repurchase of restricted stock shares for payroll tax withholding
requirements
|
|
|
|
(11
|
)
|
|
|
|
(15
|
)
|
Stock buy-back
|
|
|
|
-
|
|
|
|
|
(27
|
)
|
Deferred financing costs and other debt-related costs
|
|
|
|
(272
|
)
|
|
|
|
(13
|
)
|
Excess tax benefit relating to stock-based compensation
|
|
|
|
4
|
|
|
|
|
7
|
|
Proceeds from noncontrolling investors in joint ventures
|
|
|
|
10
|
|
|
|
|
-
|
|
Redemption of noncontrolling investments in joint ventures
|
|
|
|
(8
|
)
|
|
|
|
(6
|
)
|
Distributions to noncontrolling investors in joint ventures
|
|
|
|
(74
|
)
|
|
|
|
(60
|
)
|
Borrowings under credit agreements
|
|
|
|
8,348
|
|
|
|
|
814
|
|
Issuance of long-term debt
|
|
|
|
4,000
|
|
|
|
|
-
|
|
Proceeds from receivables facility
|
|
|
|
204
|
|
|
|
|
320
|
|
Repayments of long-term indebtedness
|
|
|
|
(9,091
|
)
|
|
|
|
(1,129
|
)
|
Net cash provided by financing activities
|
|
|
|
3,152
|
|
|
|
|
-
|
|
|
|
|
|
|
|
|
Net change in cash and cash equivalents
|
|
|
|
(152
|
)
|
|
|
|
(244
|
)
|
Cash and cash equivalents at beginning of period
|
|
|
|
373
|
|
|
|
|
388
|
|
Cash and cash equivalents at end of period
|
|
|
$
|
221
|
|
|
|
$
|
144
|
|
|
_____ For footnotes, see pages 12, 13 and 14.
|
|
|
|
|
|
|
Footnotes to Financial Highlights, Financial Statements and Selected
Operating Data
(a) Continuing operating results exclude discontinued operations for the
three and nine months ended September 30, 2014 and 2013. Both financial
and statistical results exclude entities in discontinued operations for
all periods presented.
(b) The contingent value right (“CVR”) entitles the holder to receive a
cash payment up to $1.00 per CVR (subject to downward adjustment but not
below zero), subject to the final resolution of certain existing legal
matters pertaining to HMA, as defined in the CVR agreement. Since the
HMA acquisition date of January 27, 2014, approximately $19 million in
costs have been incurred related to certain HMA legal matters, which
exceeds the deductible of $18 million under the CVR agreement. An
estimated liability of $42 million has been recorded for certain claims
which HMA had previously recognized as probable. In addition, CHS
previously recorded an estimated fair value of the remaining underlying
claims that will be covered by the CVR of $284 million as part of the
acquisition accounting for HMA, which was adjusted to its estimated fair
value of $291 million at September 30, 2014.
The following table presents the impact of the recorded amounts as
described above as applied to the CVR and the $18 million deductible and
10% co-insurance amounts (in millions):
|
|
|
As of
|
|
|
|
September 30,
|
|
|
|
2014
|
Legal and other related costs incurred to date
|
|
|
$
|
19
|
|
Settlements
|
|
|
|
3
|
|
Estimated liability for probable contingencies
|
|
|
|
42
|
|
Estimated liability for unresolved contingencies at fair value
|
|
|
|
291
|
|
Costs incurred plus estimated liability for CVR-related matters
|
|
|
|
355
|
|
Less:
|
|
|
|
CHS deductible of $18 million
|
|
|
|
(18
|
)
|
CHS co-insurance at 10%
|
|
|
|
(34
|
)
|
Current estimate of reductions to amounts owed to CVR holders
|
|
|
$
|
303
|
|
|
|
|
|
CVRs outstanding
|
|
|
|
265
|
|
|
|
|
|
|
|
(c) The effective date of the HMA acquisition was January 27, 2014.
(d) Included in discontinued operations for the three and nine months
ended September 30, 2014, are two hospitals required by the Federal
Trade Commission to be divested as part of its approval of the HMA
acquisition (as previously announced, the Company entered into a
definitive agreement to sell its ownership interest in one of these
hospitals, Carolina Pines Regional Medical Center, in October 2014).
Management is actively marketing several other smaller hospitals
included as held for sale. The results of operations on the held for
sale hospitals, including an impairment charge on certain long-lived
assets held for sale, is approximately $1 million and loss of $26
million for the three and nine months ended September 30, 2014,
respectively.
(e) The following table provides information needed to calculate income
per share, which is adjusted for income attributable to noncontrolling
interests (in millions):
|
|
|
Three Months Ended
|
|
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
|
|
September 30,
|
|
|
|
2014
|
|
|
2013
|
|
|
|
2014
|
|
|
2013
|
Income from continuing operations attributable to Community Health
Systems, Inc. common stockholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations, net of taxes
|
|
|
$
|
93
|
|
|
$
|
28
|
|
|
|
|
$
|
93
|
|
|
|
$
|
180
|
|
Less: Income from continuing operations attributable to
noncontrolling interests
|
|
|
|
32
|
|
|
|
18
|
|
|
|
|
|
75
|
|
|
|
|
52
|
|
Income from continuing operations attributable to Community Health
Systems, Inc. common stockholders — basic and diluted
|
|
|
$
|
61
|
|
|
$
|
10
|
|
|
|
|
$
|
18
|
|
|
|
$
|
128
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from discontinued operations attributable to
Community Health Systems, Inc. common stockholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from discontinued operations, net of taxes
|
|
|
$
|
1
|
|
|
$
|
(6
|
)
|
|
|
|
$
|
(26
|
)
|
|
|
$
|
(15
|
)
|
Less: Loss from discontinued operations attributable to
noncontrolling interests
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
-
|
|
|
|
|
-
|
|
Income (loss) from discontinued operations attributable to
Community Health Systems, Inc. common stockholders — basic and
diluted
|
|
|
$
|
1
|
|
|
$
|
(6
|
)
|
|
|
|
$
|
(26
|
)
|
|
|
$
|
(15
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(f) EBITDA consists of net income attributable to Community Health
Systems, Inc. before interest, income taxes, and depreciation and
amortization. Adjusted EBITDA is EBITDA adjusted to exclude discontinued
operations, loss from early extinguishment of debt, impairment of
long-lived assets and net income attributable to noncontrolling
interests. The Company has from time to time sold noncontrolling
interests in certain of its subsidiaries or acquired subsidiaries with
existing noncontrolling interest ownership positions. The Company
believes that it is useful to present Adjusted EBITDA because it
excludes the portion of EBITDA attributable to these third-party
interests and clarifies for investors the Company’s portion of EBITDA
generated by continuing operations. The Company uses Adjusted EBITDA as
a measure of liquidity. The Company has included this measure because it
believes it provides investors with additional information about the
Company’s ability to incur and service debt and make capital
expenditures. Adjusted EBITDA is the basis for a key component in the
determination of the Company’s compliance with some of the covenants
under the Company’s senior secured credit facility, as well as to
determine the interest rate and commitment fee payable under the senior
secured credit facility.
Adjusted EBITDA is not a measurement of financial performance or
liquidity under U.S. GAAP. It should not be considered in isolation or
as a substitute for net income, operating income, cash flows from
operating, investing or financing activities or any other measure
calculated in accordance with U.S. GAAP. The items excluded from
Adjusted EBITDA are significant components in understanding and
evaluating financial performance and liquidity. This calculation of
Adjusted EBITDA may not be comparable to similarly titled measures
reported by other companies.
The following table reconciles Adjusted EBITDA, as defined, to net cash
provided by operating activities as derived directly from the condensed
consolidated financial statements (in millions):
|
|
|
Three Months Ended
|
|
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
|
|
September 30,
|
|
|
|
2014
|
|
|
2013
|
|
|
|
2014
|
|
|
2013
|
Adjusted EBITDA
|
|
|
$
|
663
|
|
|
|
$
|
382
|
|
|
|
|
$
|
1,826
|
|
|
|
$
|
1,297
|
|
Interest expense, net
|
|
|
|
(250
|
)
|
|
|
|
(154
|
)
|
|
|
|
|
(728
|
)
|
|
|
|
(464
|
)
|
Provision for income taxes
|
|
|
|
(40
|
)
|
|
|
|
(7
|
)
|
|
|
|
|
(16
|
)
|
|
|
|
(78
|
)
|
Income (loss) from operations of entities held for sale, net of taxes
|
|
|
|
1
|
|
|
|
|
(6
|
)
|
|
|
|
|
(4
|
)
|
|
|
|
(15
|
)
|
Other non-cash expenses, net
|
|
|
|
105
|
|
|
|
|
131
|
|
|
|
|
|
148
|
|
|
|
|
178
|
|
Changes in operating assets and liabilities, net of effects of
acquisitions and divestitures
|
|
|
|
(353
|
)
|
|
|
|
(214
|
)
|
|
|
|
|
(587
|
)
|
|
|
|
(477
|
)
|
Net cash provided by operating activities
|
|
|
$
|
126
|
|
|
|
$
|
132
|
|
|
|
|
$
|
639
|
|
|
|
$
|
441
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(g) Included in income from operations and income from continuing
operations for the three and nine months ended September 30, 2014, is
the electronic health records incentive reimbursement, which represents
reimbursement from Medicare and Medicaid related to certain of the
Company’s hospitals and for certain employed physicians. Total costs and
expenses related to the implementation of electronic health records for
the three and nine months ended September 30, 2014, were approximately
$50 million, including depreciation and amortization of approximately
$27 million, and approximately $151 million, including depreciation and
amortization of approximately $69 million, respectively. Total costs and
expenses related to the implementation of electronic health records for
the three and nine months ended September 30, 2013, were approximately
$27 million, including depreciation and amortization of approximately
$17 million, and approximately $73 million, including depreciation and
amortization of approximately $45 million, respectively.
(h) Included in non-same-store income from operations and income from
continuing operations are pre-tax charges related to acquisition costs
of $7 million and $5 million for the three months ended September 30,
2014 and 2013, respectively, and $54 million and $10 million for the
nine months ended September 30, 2014 and 2013, respectively. These
acquisition costs include expenses related to the acquisition of HMA of
$5 million and $4 million for the three months ended September 30, 2014
and 2013, respectively, and $44 million and $5 million for the nine
months ended September 30, 2014 and 2013, respectively.
(i) The following table sets forth components reconciling the basic
weighted-average number of shares to the diluted weighted-average number
of shares (in millions):
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
2014
|
|
2013
|
|
|
2014
|
|
2013
|
Weighted-average number of shares outstanding - basic
|
|
|
113
|
|
93
|
|
|
111
|
|
92
|
Add effect of dilutive securities:
|
|
|
|
|
|
|
|
|
|
|
Stock awards and options
|
|
|
1
|
|
1
|
|
|
1
|
|
2
|
Weighted-average number of shares outstanding - diluted
|
|
|
114
|
|
94
|
|
|
112
|
|
94
|
|
|
|
|
|
|
|
|
|
|
|
(j) Same-store operating results and statistical data includes
comparable information for hospitals acquired in the HMA acquisition for
the months of February through September 2014 and 2013.
(k) Included in income from continuing operations for the nine months
ended September 30, 2014, is an impairment charge of approximately $24
million for internal-use software, and an acceleration of amortization
for the nine months ended September 30, 2014, of approximately $75
million, to adjust for its shortened remaining life which ended on July
1, 2014. In connection with the HMA acquisition, the Company further
analyzed its intangible assets related to internal-use software used in
certain of its hospitals for patient and clinical systems, including
software required to meet criteria for meaningful use attestation and
ICD-10 compliance. This analysis resulted in management reassessing its
usage of certain software products and rationalizing that, with the
addition of the HMA hospitals in the first quarter of 2014, those
software applications were going to be discontinued and replaced with
new applications that better integrate meaningful use and ICD-10
compliance, are more cost effective and can be implemented at a greater
efficiency of scale over future implementations.
(l) The following supplemental tables reconcile income from continuing
operations and net income attributable to Community Health Systems, Inc.
common stockholders, as reported, on a per share (diluted) basis, with
the adjustments described herein:
|
|
|
Three Months Ended
|
|
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
|
|
September 30,
|
|
|
|
2014
|
|
|
2013
|
|
|
|
2014
|
|
|
2013
|
|
|
|
(per share - diluted)
|
|
|
|
(per share - diluted)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations, as reported
|
|
|
$
|
0.53
|
|
|
$
|
0.11
|
|
|
|
$
|
0.16
|
|
|
|
$
|
1.37
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from early extinguishment of debt
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
0.40
|
|
|
|
|
0.01
|
Amortization of software to be abandoned
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
0.42
|
|
|
|
|
-
|
Impairment of long-lived assets
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
0.14
|
|
|
|
|
-
|
Expenses related to the acquisition and integration of HMA
|
|
|
|
0.02
|
|
|
|
0.03
|
|
|
|
|
0.38
|
|
|
|
|
0.04
|
Government settlement and related costs
|
|
|
|
0.41
|
|
|
|
0.65
|
|
|
|
|
0.42
|
|
|
|
|
0.65
|
Legal expenses related to cases covered by the CVR
|
|
|
|
0.04
|
|
|
|
-
|
|
|
|
|
0.12
|
|
|
|
|
-
|
Income from continuing operations, excluding adjustments
|
|
|
$
|
1.00
|
|
|
$
|
0.79
|
|
|
|
$
|
2.04
|
|
|
|
$
|
2.07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
|
|
September 30,
|
|
|
|
2014
|
|
|
2013
|
|
|
|
2014
|
|
|
2013
|
|
|
|
(per share - diluted)
|
|
|
|
(per share - diluted)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss), as reported
|
|
|
$
|
0.54
|
|
|
$
|
0.04
|
|
|
|
$
|
(0.07
|
)
|
|
|
$
|
1.21
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from early extinguishment of debt
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
0.40
|
|
|
|
|
0.01
|
Amortization of software to be abandoned
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
0.42
|
|
|
|
|
-
|
Impairment of long-lived assets
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
0.14
|
|
|
|
|
-
|
Expenses related to the acquisition and integration of HMA
|
|
|
|
0.02
|
|
|
|
0.03
|
|
|
|
|
0.38
|
|
|
|
|
0.04
|
Government settlement and related costs
|
|
|
|
0.41
|
|
|
|
0.65
|
|
|
|
|
0.42
|
|
|
|
|
0.65
|
Legal expenses related to cases covered by the CVR
|
|
|
|
0.04
|
|
|
|
-
|
|
|
|
|
0.12
|
|
|
|
|
-
|
Net income, excluding adjustments
|
|
|
$
|
1.01
|
|
|
$
|
0.72
|
|
|
|
$
|
1.81
|
|
|
|
$
|
1.91
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(m) Cash flows from operations includes HMA integration costs, CVR
related payments, HMA investment banking fees and other acquired
acquisition related liabilities and the payments of government
settlements. Excluding these items, which are not anticipated to be part
of ongoing operations, cash flows from operations would have been $833
million for the nine months ended September 30, 2014.
(n) Total per share amounts may not add due to rounding.
(o) The $0.41 per share and $0.42 per share of “Government settlement
and related costs” for the three and nine months ended 2014,
respectively, reflects the reserve in the amount of $75 million (and
legal fees incurred of $2 million) with respect to the qui tam lawsuit
that has been pending since 2008 in New Mexico. The lawsuit alleges that
three of the Company’s New Mexico hospitals caused the State of New
Mexico to improperly apply for and receive funds under the state’s
Medicaid program. The case was set for trial and the agreement in
principle to resolve the case was reached to avoid the uncertainty of
trial. The reserve does not include the legal fees of the relator’s
counsel.
Regulation FD Disclosure
The following tables set forth selected information concerning the
Company’s projected consolidated operating results for the year ending
December 31, 2014. These projections update selected preliminary
guidance provided on July 31, 2014, and are based on the Company’s
historical operating performance, current trends and other assumptions
that the Company believes are reasonable at this time. The 2014 guidance
should be considered in conjunction with the assumptions included
herein. See pages 17 and 18 for a list of factors that could affect the
future results of the Company or the healthcare industry generally.
The following is provided as guidance to analysts and investors:
|
|
|
|
2014 Projection Range
|
Net operating revenues less provision for bad debts (in millions)
|
|
|
|
$
|
18,700
|
|
|
to
|
|
$
|
19,100
|
|
Adjusted EBITDA (in millions)
|
|
|
|
$
|
2,825
|
|
|
to
|
|
$
|
2,900
|
|
Income from continuing operations per share - diluted
|
|
|
|
$
|
3.05
|
|
|
to
|
|
$
|
3.30
|
|
Same-store hospital annual adjusted admissions growth
|
|
|
|
|
(2.5
|
)%
|
|
to
|
|
|
0.0
|
%
|
Weighted-average diluted shares, in millions, for the full year
|
|
|
|
|
113
|
|
|
to
|
|
|
114
|
|
Weighted-average diluted shares, in millions, for the 4th quarter
|
|
|
|
|
114
|
|
|
to
|
|
|
115
|
|
|
|
|
|
|
|
|
|
|
The following assumptions were used in developing the 2014 guidance
provided above:
-
The Company’s projection excludes the following:
-
Payments related to the CVRs issued in connection with the HMA
acquisition;
-
Future losses on the early extinguishment of debt;
-
Impairment of long-lived assets;
-
Resolution of government investigations or other significant legal
settlements;
-
Transaction costs and other expenses incurred in connection with
the acquisition of HMA;
-
Gains or losses from conforming accounting adjustments between the
Company and HMA; and
-
Other significant gains or losses that neither relate to the
ordinary course of our business nor reflect our underlying
business performance.
-
The 2014 projections include the results of operations from the HMA
acquisition effective January 27, 2014.
-
Excluded from these projections are two hospitals required to be
divested as part of receiving regulatory approval from the Federal
Trade Commission for the HMA acquisition. In October, the Company
entered into a definitive agreement to sell its ownership interest in
one of these hospitals, Carolina Pines Regional Medical Center.
Several other small hospitals which the Company has classified as held
for sale and moved the operating results to discontinued operations
have also been excluded from these projections.
-
The 2014 projections include the acquisitions of Sharon Regional
Health System in Sharon, Pennsylvania, and Munroe Regional Medical
Center in Ocala, Florida, completed on April 1, 2014, Natchez Regional
Medical Center in Natchez, Mississippi, completed on October 1, 2014,
and assumes the completion of one additional targeted hospital
acquisition in the fourth quarter of 2014, a reduction from previous
guidance of one to three additional acquisitions. The acquisition of
MetroHealth Hospital in Grand Rapids, Michigan is currently targeted
to close in 2015.
Other assumptions used in the above guidance:
-
Benefits to Adjusted EBITDA from Healthcare Reform in 2014 of 0.5% to
0.8% of net operating revenues.
-
Achievement of acquisition synergies related to the HMA acquisition of
approximately $125 million during the first year of operations.
-
Health Information Technology (HITECH) electronic health records
incentive reimbursement of approximately 1.3% to 1.4% of net operating
revenues for the year ended December 31, 2014, with operating expenses
related to achieving meaningful use of 0.4% to 0.5% of net operating
revenues and depreciation and amortization of related assets of 0.4%
to 0.5% of net operating revenues.
-
Continuation and approval of the California hospital provider fee
program for 2014, for which the Company expects to recognize $25
million in the fourth quarter of 2014.
-
The Company expects to recognize and receive net cash proceeds of $36
million in the fourth quarter of 2014, as a result of the Budget
Neutrality Act settlement approval received on October 29, 2014.
-
Settlement of certain claims related to the BP oil spill, for which
the Company expects to recognize up to approximately $14 million in
the fourth quarter of 2014.
-
Same-store hospital annual adjusted admissions growth, of (2.5)% to
0.0% for the entire year, which does not take into account service
closures and weather-related or other unusual events.
-
Expressed as a percentage of net operating revenues, depreciation and
amortization of approximately 6.0% to 6.3% for 2014, an increase over
2013 primarily relating to the investments being made in information
systems technology and the acquisition of HMA; however, the adjustment
to fair market value of the acquired HMA assets remains subject to
finalization, therefore depreciation and amortization may vary
accordingly. Additionally, this is a fixed cost and the percentages
may vary as revenue varies. Such amounts exclude the possible impact
of any future hospital fixed asset impairments and acceleration of
amortization of software to be abandoned.
-
Interest expense, expressed as a percentage of net operating revenues,
of approximately 5.1% to 5.3%; however, interest expense is a fixed
cost and percentages may vary as revenue varies. Total fixed rate
debt, including swaps, is expected to average approximately 60% to 70%
of total debt during 2014.
-
Expressed as a percentage of net operating revenues, equity in
earnings of unconsolidated affiliates of approximately 0.2% to 0.3%
for 2014.
-
Expressed as a percentage of net operating revenues, net income
attributable to noncontrolling interests of approximately 0.6% to 0.8%
for 2014.
-
Expressed as a percentage of income from continuing operations before
income taxes, provision for income tax of approximately 30.0% to 32.0%
for 2014.
-
Capital expenditures are projected as follows (in millions):
|
|
|
|
2014
|
|
|
|
|
Guidance
|
Total
|
|
|
|
$975
|
|
|
to
|
|
|
$1,050
|
|
|
|
|
|
|
|
|
|
|
|
-
Net cash provided by operating activities, excluding acquisition and
integration related cash flow items, cash flows related to the CVR,
and settlement of legal contingencies is projected as follows (in
millions):
|
|
|
|
2014
|
|
|
|
|
Guidance
|
Total
|
|
|
|
$1,600
|
|
|
to
|
|
|
$1,800
|
|
|
|
|
|
|
|
|
|
|
|
-
Weighted average shares outstanding are projected to be approximately
113 million to 114 million for the year ended 2014 and approximately
114 million to 115 million for the fourth quarter of 2014 and have
been adjusted to include the estimated dilutive impact from
“in-the-money” stock options and restricted shares.
This press release contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended,
Section 21E of the Securities Exchange Act of 1934, as amended, and the
Private Securities Litigation Reform Act of 1995 that involve risk and
uncertainties. All statements in this press release other than
statements of historical fact, including statements regarding
projections, expected operating results, and other events that depend
upon or refer to future events or conditions or that include words such
as “expects,” “anticipates,” “intends,” “plans,” “believes,”
“estimates,” “thinks,” and similar expressions, are forward-looking
statements. Although the Company believes that these forward-looking
statements are based on reasonable assumptions, these assumptions are
inherently subject to significant economic and competitive uncertainties
and contingencies, which are difficult or impossible to predict
accurately and may be beyond the control of the Company. Accordingly,
the Company cannot give any assurance that its expectations will in fact
occur and cautions that actual results may differ materially from those
in the forward-looking statements. A number of factors could affect the
future results of the Company or the healthcare industry generally and
could cause the Company’s expected results to differ materially from
those expressed in this press release.
These factors include, among other things:
-
general economic and business conditions, both nationally and in the
regions in which we operate;
-
implementation and effect of adopted and potential federal and state
healthcare reform legislation and other federal, state or local laws
or regulations affecting the healthcare industry;
-
the extent to which states support increases, decreases or changes in
Medicaid programs, implement healthcare exchanges or alter the
provision of healthcare to state residents through regulation or
otherwise;
-
risks associated with our substantial indebtedness, leverage, and debt
service obligations;
-
demographic changes;
-
changes in, or the failure to comply with, governmental regulations;
-
potential adverse impact of known and unknown government
investigations, audits, and Federal and State False Claims Act
litigation and other legal proceedings;
-
our ability, where appropriate, to enter into and maintain managed
care provider arrangements and the terms of these arrangements;
-
changes in, or the failure to comply with, managed care provider
contracts, which could result in, among other things, disputes and
changes in reimbursements, both prospectively and retroactively;
-
changes in inpatient or outpatient Medicare and Medicaid payment
levels;
-
the effects related to the continued implementation of the
sequestration spending reductions and the potential for future deficit
reduction legislation;
-
increases in the amount and risk of collectability of patient accounts
receivable;
-
the efforts of insurers, healthcare providers and others to contain
healthcare costs;
-
our ongoing ability to demonstrate meaningful use of certified
electronic health record technology and recognize income for the
related Medicare or Medicaid incentive payments;
-
increases in wages as a result of inflation or competition for highly
technical positions and rising supply costs due to market pressure
from pharmaceutical companies and new product releases;
-
liabilities and other claims asserted against us, including
self-insured malpractice claims;
-
competition;
-
our ability to attract and retain, at reasonable employment costs,
qualified personnel, key management, physicians, nurses and other
healthcare workers;
-
trends toward treatment of patients in less acute or specialty
healthcare settings, including ambulatory surgery centers or specialty
hospitals;
-
changes in medical or other technology;
-
changes in U.S. generally accepted accounting principles;
-
the availability and terms of capital to fund additional acquisitions
or replacement facilities or other capital expenditures;
-
our ability to successfully make acquisitions or complete divestitures;
-
our ability to successfully integrate any acquired hospitals,
including those of HMA, or to recognize expected synergies from
acquisitions;
-
the impact of the acquisition of HMA on third-party relationships;
-
the impact of seasonal severe weather conditions;
-
our ability to obtain adequate levels of general and professional
liability insurance;
-
timeliness of reimbursement payments received under government
programs;
-
effects related to outbreaks of infectious diseases, including Ebola;
-
the impact of the external, criminal cyber-attack suffered by us in
the second quarter of 2014, including potential reputational damage,
the outcome of our investigation and any potential governmental
inquiries, the outcome of litigation filed against us in connection
with this cyber-attack, and the extent of remediation costs and
additional operating or other expenses that we may continue to incur;
and
-
the other risk factors set forth in our annual report on Form 10-K for
the year ended December 31, 2013 and our other public filings with the
Securities and Exchange Commission.
The consolidated operating results for the three and nine months ended
September 30, 2014, are not necessarily indicative of the results that
may be experienced for any such future period. The Company cautions that
the projections for calendar year 2014 set forth in this press release
are given as of the date hereof based on currently available
information. The Company undertakes no obligation to revise or update
any forward-looking statements, or to make any other forward-looking
statements, whether as a result of new information, future events or
otherwise.
Copyright Business Wire 2014