Community Health Systems, Inc. (NYSE: CYH) (the “Company”) today
announced preliminary financial and operating results for the three
months and year ended December 31, 2014. These results are based on
information available to management as of the date of this press release
and are subject to revision upon finalization of the Company’s quarterly
accounting and financial reporting procedures and completion of the
annual audit.
The Company anticipates net operating revenues for the three months
ended December 31, 2014, will be approximately $4.9 billion, compared
with $3.2 billion for the same period in 2013. Excluding acquisition and
integration expenses from the acquisition of Hospital Management
Associates, Inc. (“HMA”), legal expenses related to the HMA legal
proceedings underlying the CVR agreement, and expenses related to other
government legal settlements, ADJUSTED EBITDA is expected to be
approximately $785 million for the three months ended December 31, 2014,
an increase of 71% over ADJUSTED EBITDA of $459 million for the three
months ended December 31, 2013, adjusted for expenses related to the HMA
acquisition and government settlement and related expenses. Excluding
these same adjustments, ADJUSTED EBITDA for the three months ended
September 30, 2014 was $751 million.
The Company anticipates net operating revenues for the year ended
December 31, 2014, will be approximately $18.6 billion, compared with
$12.8 billion for the same period in 2013. 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 other government legal settlements, ADJUSTED EBITDA is
expected to be approximately $2.777 billion for the year ended December
31, 2014, an increase of 49% over ADJUSTED EBITDA of $1.860 billion for
the year ended December 31, 2013, adjusted for expenses related to the
HMA acquisition and government settlement and related expenses.
Excluding the per share impact in 2014 and 2013 of the adjustments
above, as well as the per share impact of early extinguishment of debt,
and the impairment and accelerated amortization of certain long-lived
assets, consistent with prior periods, the Company anticipates income
from continuing operations per share (diluted) to be $1.23 and $3.29 per
share (diluted) for the three months and year ended December 31, 2014,
respectively, compared to $0.55 and $2.62 per share (diluted) for the
three months and year ended December 31, 2013, respectively.
The following summarizes additional preliminary supplemental operating
data related to anticipated results:
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The consolidated operating results for the three months ended December
31, 2014, reflect a 56.4 percent increase in total admissions and a
58.2 percent increase in adjusted admissions compared with the same
period in 2013. For the three months ended December 31, 2014, on a
same-store basis, which includes the effect of comparable information
for the hospitals acquired in the HMA acquisition, admissions
decreased 0.2 percent while adjusted admissions increased 2.7 percent
compared with the same period in 2013, which includes a benefit from
flu and respiratory volume in the fourth quarter. For the year ended
December 31, 2014, same-store admissions decreased 4.2 percent while
adjusted admissions decreased 0.9 percent compared with the same
period in 2013.
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The Company had previously anticipated accounting for the $36 million
from the rural floor budget neutrality adjustment related to the
former HMA hospitals as revenue in the period the government finalized
the settlement, as the amount had not been recognized by HMA in its
2013 audited financial statements. On October 29, 2014, the Company
finalized the settlement with the Centers for Medicare and Medicaid
Services related to these claims and the net cash proceeds of
approximately $37 million were received by the Company during the
three months ended December 31, 2014. Given the unusual and contingent
nature of this transaction, which was finalized during the measurement
period used for allocation of the purchase price to the acquired
assets of HMA, the Company consulted with its independent accountants
and the staff of the Office of the Chief Accountant of the Securities
and Exchange Commission. The Company concluded that the settlement
should be recognized as an adjustment to the allocation of the
purchase price versus recognition as revenue since the settlement was
executed during the purchase accounting measurement period.
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The Company had previously expected to recognize approximately $14
million for certain claims related to the BP oil spill in the fourth
quarter of 2014. These claims were not received in 2014 and therefore
recognition will be delayed until such claims are realized, which is
now expected to occur in 2015.
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During the quarter ended December 31, 2014, the Company recognized the
recently approved California Medicaid supplemental program revenue of
$35 million and additional provider taxes associated with this program
of $9 million.
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HITECH incentive reimbursement is expected to be $47 million for the
three months ended December 31, 2014, with $9 million of total costs
and expenses related to the implementation of electronic health
records for the same period, compared to $88 million of HITECH
incentive reimbursement for the three months ended September 30, 2014,
with $23 million of related costs and expenses. The impact on ADJUSTED
EBITDA is approximately $10 million less than previously expected for
the three months ended December 31, 2014. For the full year of 2014,
HITECH incentive reimbursement is expected to be $259 million.
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Same-store net operating revenue per adjusted admission is expected to
increase approximately 0.4 percent for the quarter ended December 31,
2014 compared to the same period in 2013, and expected to increase
approximately 3.5 percent for the quarter ended December 31, 2014
compared to the quarter ended September 30, 2014.
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Net cash provided by operating activities, excluding HMA acquisition
and integration related cash flow items, cash flows related to the CVR
agreement and settlement of legal contingencies and other related
expenses, is expected to be at least $1.725 billion for the year ended
December 31, 2014. Net cash provided by operating activities was $1.1
billion for the same period in 2013. Total cash and cash equivalents
at December 31, 2014 is expected to be approximately $510 million
compared to $221 million at September 30, 2014 and $373 million at
December 31, 2013.
The Company anticipates reporting its complete financial results for the
three months and year ended December 31, 2014, on February 19, 2015,
followed by a live earnings call on February 20, 2015.
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. ADJUSTED EBITDA
is Adjusted EBITDA further adjusted to exclude 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 government settlements for the relevant 2014 and 2013
periods. The Company uses Adjusted EBITDA as a measure of liquidity. The
Company also believes that Adjusted EBITDA provides investors with
additional information about the Company’s ability to incur and service
debt and make capital expenditures. The Company has included ADJUSTED
EBITDA in this release because it believes that including this measure
provides investors with an additional tool for evaluating and
understanding the Company’s operating performance and comparing such
performance between relevant periods. Adjusted EBITDA and ADJUSTED
EBITDA are not measurements of financial performance or liquidity under
U.S. GAAP. They 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 and ADJUSTED
EBITDA are significant components in understanding and evaluating
financial performance and liquidity. This calculation of Adjusted EBITDA
and ADJUSTED EBITDA may not be comparable to similarly titled measures
reported by other companies. A reconciliation of Adjusted EBITDA to net
cash provided by operating activities will be provided in connection
with the Company’s release setting forth its complete financial results
as noted above.
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 206 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.
Forward-Looking Statements
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, and changes to, 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 such
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 public filings with the
Securities and Exchange Commission.
The Company cautions that the preliminary results for the three months
and year ended December 31, 2014 set forth in this press release are
given as of the date hereof based on information currently available to
management and are subject to revision upon finalization of the
Company’s quarterly accounting and financial reporting procedures and
completion of the annual audit. 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.
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