Community Health Systems, Inc. (NYSE: CYH) (the “Company”) today
announced financial and operating results for the three months and year
ended December 31, 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 include
comparable information for hospitals acquired as a result of the HMA
acquisition for the months of February through December 2014 and 2013.
Net operating revenues for the three months ended December 31, 2014,
totaled $4.918 billion, a 54.1 percent increase compared with $3.191
billion for the same period in 2013. Income from continuing operations
attributable to Community Health Systems, Inc. common stockholders
increased to $129 million, or $1.12 per share (diluted), for the three
months ended December 31, 2014, compared with income from continuing
operations attributable to Community Health Systems, Inc. common
stockholders of $38 million, or $0.40 per share (diluted), for the same
period in 2013. The results for the three months ended December 31,
2014, include $0.01 per share (diluted) related to acquisition and
integration expenses from the acquisition of HMA; $0.15 per share
(diluted) of expenses related to government legal settlements and
related costs (other than HMA legal proceedings underlying the
contingent value rights, or “CVR,” agreement); and $0.09 per share
(diluted) of expenses related to the impairment of long-lived assets at
certain hospitals, with these expenses partially offset by $0.14 per
share (diluted) of income from fair value adjustments, net of legal
expenses, related to HMA legal proceedings underlying the CVR agreement.
Excluding these expenses, income from continuing operations was $1.23
per share (diluted). Net income attributable to Community Health
Systems, Inc. common stockholders was $0.87 per share (diluted) for the
three months ended December 31, 2014, compared with net income of $0.30
per share (diluted) for the same period in 2013. Discontinued operations
for the three months ended December 31, 2014, consisted of $0.01 per
share (diluted) of losses from operations of entities sold or held for
sale, and $0.24 per share (diluted) of expenses related to the
impairment of long-lived assets held for sale for a total after-tax loss
of approximately $29 million, or $0.25 per share (diluted).
Weighted-average shares outstanding (diluted) were 115 million for the
three months ended December 31, 2014, and 95 million for the three
months ended December 31, 2013.
Adjusted EBITDA for the three months ended December 31, 2014, was $785
million compared with $459 million for the same period in 2013,
representing a 71.0 percent increase.
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 total adjusted admissions compared with the
same period in 2013. On a same-store basis, admissions decreased 0.2
percent while adjusted admissions increased 2.7 percent compared with
the same period in 2013. On a same-store basis, net operating revenues
increased 4.7 percent compared with the same period in 2013.
Net operating revenues for the year ended December 31, 2014, totaled
$18.639 billion, a 45.4 percent increase compared with $12.819 billion
for the same period in 2013. Income from continuing operations
attributable to Community Health Systems, Inc. common stockholders
decreased to $149 million, or $1.32 per share (diluted), for the year
ended December 31, 2014, compared with income from continuing operations
attributable to Community Health Systems, Inc. common stockholders of
$166 million, or $1.77 per share (diluted), for the same period in 2013.
The results for the year ended December 31, 2014, include $0.38 per
share (diluted) related to acquisition and integration expenses from the
acquisition of HMA; $0.57 per share (diluted) of expenses related to
government legal settlements and related costs (other than HMA legal
proceedings underlying the CVR agreement); $0.40 per share (diluted) of
expenses related to the loss from early extinguishment of debt; $0.22
per share (diluted) of expenses related to the impairment of long-lived
assets; and $0.42 per share (diluted) of expenses related to
accelerating amortization on software to be abandoned, with these
expenses partially offset by $0.03 per share (diluted) of income from
fair value adjustments, net of legal expenses, related to HMA legal
proceedings underlying the CVR agreement. Excluding these expenses,
income from continuing operations was $3.29 per share (diluted). Net
income attributable to Community Health Systems, Inc. common
stockholders was $0.82 per share (diluted) for the year ended December
31, 2014, compared with net income of $1.51 per share (diluted) for the
same period in 2013. Discontinued operations for the year ended December
31, 2014, consisted of 0.07 per share (diluted) of losses from
operations of entities sold or held for sale and approximately $0.44 per
share (diluted) of expenses related to the impairment of long-lived
assets held for sale, for a total after-tax loss of approximately $57
million, or $0.51 per share (diluted). Weighted-average shares
outstanding (diluted) were 113 million for the year ended December
31, 2014, and 94 million for the year ended December 31, 2013.
Adjusted EBITDA for the year ended December 31, 2014, was $2.777 billion
compared with $1.860 billion for the same period in 2013, representing a
49.3 percent increase.
The consolidated operating results for the year ended December 31, 2014,
reflect a 43.7 percent increase in total admissions and a 47.3 percent
increase in total adjusted admissions compared with the same period in
2013. On a same-store basis, admissions decreased 4.2 percent while
adjusted admissions decreased 0.9 percent compared with the same period
in 2013. On a same-store basis, net operating revenues increased 1.2
percent compared with the same period in 2013.
Adjusted EBITDA is EBITDA adjusted to exclude discontinued operations,
loss from early extinguishment of debt, impairment of long-lived assets,
net income attributable to noncontrolling interests, acquisition and
integration expenses from the acquisition of HMA, expenses related to
government legal settlements and related costs (other than HMA legal
proceedings underlying the CVR agreement), and income from fair value
adjustments, net of legal expenses, related to the HMA legal proceedings
underlying the CVR agreement. Adjusted EBITDA as set forth herein is
calculated in the same manner for the applicable 2014 and 2013 periods
as ADJUSTED EBITDA in the Company’s preliminary release issued on
January 20, 2015. For information regarding why the Company believes
Adjusted EBITDA presents useful information to investors, and for a
reconciliation of Adjusted EBITDA to net cash provided by operating
activities, see footnote (f) to the Financial Highlights, Financial
Statements and Selected Operating Data below.
Commenting on the results, Wayne T. Smith, chairman and chief executive
officer of Community Health Systems, Inc., said, “We are pleased with
our overall operating performance, capping off an exceptional year for
the Company following the acquisition of HMA at the beginning of 2014.
Since that time, we have worked hard to assimilate these additional
hospitals, and we have made considerable progress in achieving our
targeted operating synergies. We are pleased with the incremental
improvement in operating revenues across our hospital network. We are
also encouraged by more favorable volume trends, partly driven by a more
severe flu season during the fourth quarter, and we will continue to
focus on initiatives to improve our overall admissions.
“Overall, we delivered a solid performance for 2014, reflecting
consistent execution of our proven operating strategy in our expanded
hospital network. Community Health Systems has continued to demonstrate
success in a dynamic and challenging healthcare environment. The
Affordable Care Act has been a watershed event for healthcare providers
with greater access to essential health services, and we expect to
realize additional benefits from proposed policy initiatives to cover
the uninsured in more of our hospital markets. We continue to execute on
the fundamental aspects of our business strategy, recruiting qualified
physicians, managing our costs, investing in technology, and, above all,
focusing on the safety and quality of care in our hospitals. As we look
ahead to 2015, we will pursue this same strategy to deliver value to
both our shareholders and the communities we serve,” Smith concluded.
Included on pages 15, 16, 17 and 18 of this press release are tables
setting forth the Company’s 2015 annual earnings guidance. The 2015
guidance is based on the Company’s historical operating performance,
current trends and other assumptions that the Company believes are
reasonable at this time.
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 communities across the country. Through
its subsidiaries, the Company currently owns, leases or operates 205
affiliated hospitals in 29 states with an aggregate of approximately
31,000 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 Friday,
February 20, 2015, at 10:00 a.m. Central, 11:00 a.m. Eastern, to review
financial and operating results for the three months and year ended
December 31, 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 March 20, 2015. 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.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
|
Financial Highlights (a)(b)(c)(d)(e)
|
(In millions, except per share amounts)
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Year Ended
|
|
|
December 31,
|
|
|
December 31,
|
|
|
2014
|
|
2013
|
|
|
2014
|
|
2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net operating revenues
|
|
$
|
4,918
|
|
|
$
|
3,191
|
|
|
|
$
|
18,639
|
|
|
$
|
12,819
|
|
Adjusted EBITDA (f)
|
|
|
785
|
|
|
|
459
|
|
|
|
|
2,777
|
|
|
|
1,860
|
|
Income from continuing operations (g), (h), (k)
|
|
|
165
|
|
|
|
62
|
|
|
|
|
260
|
|
|
|
242
|
|
Net income attributable to Community Health Systems, Inc.
stockholders
|
|
|
100
|
|
|
|
28
|
|
|
|
|
92
|
|
|
|
141
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings (loss) per share attributable to Community
Health Systems, Inc. common stockholders (n):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations (g), (h), (k)
|
|
$
|
1.13
|
|
|
$
|
0.41
|
|
|
|
$
|
1.33
|
|
|
$
|
1.80
|
|
Discontinued operations
|
|
|
(0.26
|
)
|
|
|
(0.10
|
)
|
|
|
|
(0.51
|
)
|
|
|
(0.27
|
)
|
Net income
|
|
$
|
0.88
|
|
|
$
|
0.30
|
|
|
|
$
|
0.82
|
|
|
$
|
1.52
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings (loss) per share attributable to Community
Health Systems, Inc. common stockholders (n):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations (g), (h), (k), (l)
|
|
$
|
1.12
|
|
|
$
|
0.40
|
|
|
|
$
|
1.32
|
|
|
$
|
1.77
|
|
Discontinued operations
|
|
|
(0.25
|
)
|
|
|
(0.10
|
)
|
|
|
|
(0.51
|
)
|
|
|
(0.27
|
)
|
Net income (l)
|
|
$
|
0.87
|
|
|
$
|
0.30
|
|
|
|
$
|
0.82
|
|
|
$
|
1.51
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average number of shares outstanding (i):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
114
|
|
|
|
93
|
|
|
|
|
112
|
|
|
|
93
|
|
Diluted
|
|
|
115
|
|
|
|
95
|
|
|
|
|
113
|
|
|
|
94
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
$
|
976
|
|
|
$
|
648
|
|
|
|
$
|
1,615
|
|
|
$
|
1,089
|
|
____
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For footnotes, see pages 12, 13 and 14.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 December 31,
|
|
|
2014
|
|
2013
|
|
|
Amount
|
|
% of Net
Operating
Revenues
|
|
Amount
|
|
% of Net
Operating
Revenues
|
Operating revenues (net of contractual allowances and discounts)
|
|
$
|
5,641
|
|
|
|
|
|
$
|
3,691
|
|
|
|
|
Provision for bad debts
|
|
|
723
|
|
|
|
|
|
|
500
|
|
|
|
|
Net operating revenues
|
|
|
4,918
|
|
|
100.0
|
|
%
|
|
|
3,191
|
|
|
100.0
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and benefits
|
|
|
2,221
|
|
|
45.2
|
|
%
|
|
|
1,517
|
|
|
47.5
|
|
%
|
Supplies
|
|
|
764
|
|
|
15.5
|
|
%
|
|
|
508
|
|
|
15.9
|
|
%
|
Other operating expenses
|
|
|
1,073
|
|
|
21.9
|
|
%
|
|
|
706
|
|
|
22.1
|
|
%
|
Government settlement and related costs (o)
|
|
|
24
|
|
|
0.5
|
|
%
|
|
|
4
|
|
|
0.1
|
|
%
|
Electronic health records incentive reimbursement (g)
|
|
|
(47
|
)
|
|
(1.0
|
)
|
%
|
|
|
(54
|
)
|
|
(1.7
|
)
|
%
|
Rent
|
|
|
115
|
|
|
2.3
|
|
%
|
|
|
70
|
|
|
2.2
|
|
%
|
Depreciation and amortization
|
|
|
291
|
|
|
5.9
|
|
%
|
|
|
197
|
|
|
6.2
|
|
%
|
Total operating costs and expenses
|
|
|
4,441
|
|
|
90.3
|
|
%
|
|
|
2,948
|
|
|
92.3
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations (g), (h)
|
|
|
477
|
|
|
9.7
|
|
%
|
|
|
243
|
|
|
7.7
|
|
%
|
Interest expense, net
|
|
|
244
|
|
|
5.0
|
|
%
|
|
|
149
|
|
|
4.7
|
|
%
|
Equity in earnings of unconsolidated affiliates
|
|
|
(14
|
)
|
|
(0.3
|
)
|
%
|
|
|
(6
|
)
|
|
(0.2
|
)
|
%
|
Impairment of long-lived assets (k)
|
|
|
17
|
|
|
0.3
|
|
%
|
|
|
12
|
|
|
0.4
|
|
%
|
Income from continuing operations before income taxes
|
|
|
230
|
|
|
4.7
|
|
%
|
|
|
88
|
|
|
2.8
|
|
%
|
Provision for income taxes
|
|
|
65
|
|
|
1.4
|
|
%
|
|
|
26
|
|
|
0.7
|
|
%
|
Income from continuing operations (g), (h), (k)
|
|
|
165
|
|
|
3.3
|
|
%
|
|
|
62
|
|
|
2.1
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued operations, net of taxes:
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations of entities sold or held for sale
|
|
|
(2
|
)
|
|
-
|
|
|
|
|
(5
|
)
|
|
(0.2
|
)
|
%
|
Impairment of hospitals held for sale
|
|
|
(27
|
)
|
|
(0.6
|
)
|
%
|
|
|
(5
|
)
|
|
(0.2
|
)
|
%
|
Loss from discontinued operations, net of taxes
|
|
|
(29
|
)
|
|
(0.6
|
)
|
%
|
|
|
(10
|
)
|
|
(0.4
|
)
|
%
|
Net income
|
|
|
136
|
|
|
2.7
|
|
%
|
|
|
52
|
|
|
1.7
|
|
%
|
Less: Net income attributable to noncontrolling interests
|
|
|
36
|
|
|
0.7
|
|
%
|
|
|
24
|
|
|
0.8
|
|
%
|
Net income attributable to Community Health Systems, Inc.
stockholders
|
|
$
|
100
|
|
|
2.0
|
|
%
|
|
$
|
28
|
|
|
0.9
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings (loss) per share attributable to Community
Health Systems, Inc. common stockholders (n):
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations (g), (h), (k)
|
|
$
|
1.13
|
|
|
|
|
|
$
|
0.41
|
|
|
|
|
Discontinued operations
|
|
|
(0.26
|
)
|
|
|
|
|
|
(0.10
|
)
|
|
|
|
Net income
|
|
$
|
0.88
|
|
|
|
|
|
$
|
0.30
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings (loss) per share attributable to Community
Health Systems, Inc. common stockholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations (g), (h), (k), (l)
|
|
$
|
1.12
|
|
|
|
|
|
$
|
0.40
|
|
|
|
|
Discontinued operations
|
|
|
(0.25
|
)
|
|
|
|
|
|
(0.10
|
)
|
|
|
|
Net income (l)
|
|
$
|
0.87
|
|
|
|
|
|
$
|
0.30
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average number of shares outstanding (i):
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
114
|
|
|
|
|
|
|
93
|
|
|
|
|
Diluted
|
|
|
115
|
|
|
|
|
|
|
95
|
|
|
|
|
____
|
|
|
|
|
|
|
|
|
|
|
|
|
For footnotes, see pages 12, 13 and 14.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
|
Condensed Consolidated Statements of Income (a)(b)(c)(d)(e)
|
(In millions, except per share amounts)
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
2014
|
|
2013
|
|
|
Amount
|
|
% of Net
Operating
Revenues
|
|
Amount
|
|
% of Net
Operating
Revenues
|
Operating revenues (net of contractual allowances and discounts)
|
|
$
|
21,561
|
|
|
|
|
|
$
|
14,853
|
|
|
|
|
Provision for bad debts
|
|
|
2,922
|
|
|
|
|
|
|
2,034
|
|
|
|
|
Net operating revenues
|
|
|
18,639
|
|
|
100.0
|
|
%
|
|
|
12,819
|
|
|
100.0
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and benefits
|
|
|
8,618
|
|
|
46.2
|
|
%
|
|
|
6,107
|
|
|
47.6
|
|
%
|
Supplies
|
|
|
2,862
|
|
|
15.4
|
|
%
|
|
|
1,975
|
|
|
15.4
|
|
%
|
Other operating expenses
|
|
|
4,322
|
|
|
23.3
|
|
%
|
|
|
2,818
|
|
|
22.0
|
|
%
|
Government settlement and related costs (o)
|
|
|
101
|
|
|
0.5
|
|
%
|
|
|
102
|
|
|
0.8
|
|
%
|
Electronic health records incentive reimbursement (g)
|
|
|
(259
|
)
|
|
(1.4
|
)
|
%
|
|
|
(162
|
)
|
|
(1.3
|
)
|
%
|
Rent
|
|
|
434
|
|
|
2.3
|
|
%
|
|
|
279
|
|
|
2.2
|
|
%
|
Depreciation and amortization
|
|
|
1,106
|
|
|
5.9
|
|
%
|
|
|
771
|
|
|
6.0
|
|
%
|
Amortization of software to be abandoned (k)
|
|
|
75
|
|
|
0.4
|
|
%
|
|
|
-
|
|
|
-
|
|
|
Total operating costs and expenses
|
|
|
17,259
|
|
|
92.6
|
|
%
|
|
|
11,890
|
|
|
92.7
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations (g), (h), (k)
|
|
|
1,380
|
|
|
7.4
|
|
%
|
|
|
929
|
|
|
7.3
|
|
%
|
Interest expense, net
|
|
|
972
|
|
|
5.3
|
|
%
|
|
|
613
|
|
|
4.8
|
|
%
|
Loss from early extinguishment of debt
|
|
|
73
|
|
|
0.4
|
|
%
|
|
|
1
|
|
|
-
|
|
|
Equity in earnings of unconsolidated affiliates
|
|
|
(48
|
)
|
|
(0.3
|
)
|
%
|
|
|
(43
|
)
|
|
(0.3
|
)
|
%
|
Impairment of long-lived assets (k)
|
|
|
41
|
|
|
0.2
|
|
%
|
|
|
12
|
|
|
0.1
|
|
%
|
Income from continuing operations before income taxes
|
|
|
342
|
|
|
1.8
|
|
%
|
|
|
346
|
|
|
2.7
|
|
%
|
Provision for income taxes
|
|
|
82
|
|
|
0.4
|
|
%
|
|
|
104
|
|
|
0.8
|
|
%
|
Income from continuing operations (g), (h), (k)
|
|
|
260
|
|
|
1.4
|
|
%
|
|
|
242
|
|
|
1.9
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued operations, net of taxes:
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations of entities sold or held for sale
|
|
|
(7
|
)
|
|
-
|
|
|
|
|
(21
|
)
|
|
(0.2
|
)
|
%
|
Impairment of hospitals held for sale
|
|
|
(50
|
)
|
|
(0.3
|
)
|
%
|
|
|
(4
|
)
|
|
-
|
|
|
Loss from discontinued operations, net of taxes
|
|
|
(57
|
)
|
|
(0.3
|
)
|
%
|
|
|
(25
|
)
|
|
(0.2
|
)
|
%
|
Net income
|
|
|
203
|
|
|
1.1
|
|
%
|
|
|
217
|
|
|
1.7
|
|
%
|
Less: Net income attributable to noncontrolling interests
|
|
|
111
|
|
|
0.6
|
|
%
|
|
|
76
|
|
|
0.6
|
|
%
|
Net income attributable to Community Health Systems, Inc.
stockholders
|
|
$
|
92
|
|
|
0.5
|
|
%
|
|
$
|
141
|
|
|
1.1
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic (loss) earnings per share attributable to Community
Health Systems, Inc. common stockholders (n):
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations (g), (h), (k)
|
|
$
|
1.33
|
|
|
|
|
|
$
|
1.80
|
|
|
|
|
Discontinued operations
|
|
|
(0.51
|
)
|
|
|
|
|
|
(0.27
|
)
|
|
|
|
Net income
|
|
$
|
0.82
|
|
|
|
|
|
$
|
1.52
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted (loss) earnings per share attributable to Community
Health Systems, Inc. common stockholders (n):
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations (g), (h), (k), (l)
|
|
$
|
1.32
|
|
|
|
|
|
$
|
1.77
|
|
|
|
|
Discontinued operations
|
|
|
(0.51
|
)
|
|
|
|
|
|
(0.27
|
)
|
|
|
|
Net income (l)
|
|
$
|
0.82
|
|
|
|
|
|
$
|
1.51
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average number of shares outstanding (i):
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
112
|
|
|
|
|
|
|
93
|
|
|
|
|
Diluted
|
|
|
113
|
|
|
|
|
|
|
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
|
|
|
Year Ended
|
|
|
December 31,
|
|
|
December 31,
|
|
|
2014
|
|
2013
|
|
|
2014
|
|
2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
136
|
|
|
$
|
52
|
|
|
|
$
|
203
|
|
|
$
|
217
|
Other comprehensive income (loss), net of income taxes:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change in fair value of interest rate swaps, net of tax
|
|
|
(7
|
)
|
|
|
13
|
|
|
|
|
13
|
|
|
|
60
|
Net change in fair value of available-for-sale securities, net of tax
|
|
|
2
|
|
|
|
(1
|
)
|
|
|
|
-
|
|
|
|
2
|
Amortization and recognition of unrecognized pension cost
components, net of tax
|
|
|
(10
|
)
|
|
|
13
|
|
|
|
|
(9
|
)
|
|
|
16
|
Other comprehensive income (loss)
|
|
|
(15
|
)
|
|
|
25
|
|
|
|
|
4
|
|
|
|
78
|
Comprehensive income
|
|
|
121
|
|
|
|
77
|
|
|
|
|
207
|
|
|
|
295
|
Less: Comprehensive income attributable to noncontrolling interests
|
|
|
36
|
|
|
|
24
|
|
|
|
|
111
|
|
|
|
76
|
Comprehensive income attributable to Community Health Systems,
Inc. stockholders
|
|
$
|
85
|
|
|
$
|
53
|
|
|
|
$
|
96
|
|
|
$
|
219
|
____
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 December 31,
|
|
|
|
Consolidated
|
|
Same-Store (1)
|
|
|
|
2014
|
|
2013
|
|
% Change
|
|
2014
|
|
2013
|
|
% Change
|
|
Number of hospitals (at end of period)
|
|
|
197
|
|
|
|
129
|
|
|
|
|
|
193
|
|
|
|
193
|
|
|
|
|
Licensed beds (at end of period)
|
|
|
30,137
|
|
|
|
19,632
|
|
|
|
|
|
29,154
|
|
|
|
29,499
|
|
|
|
|
Beds in service (at end of period)
|
|
|
27,000
|
|
|
|
16,850
|
|
|
|
|
|
26,242
|
|
|
|
26,743
|
|
|
|
|
Admissions
|
|
|
238,740
|
|
|
|
152,641
|
|
|
56.4
|
%
|
|
|
229,657
|
|
|
|
230,070
|
|
|
-0.2
|
%
|
|
Adjusted admissions
|
|
|
511,988
|
|
|
|
323,658
|
|
|
58.2
|
%
|
|
|
493,906
|
|
|
|
480,841
|
|
|
2.7
|
%
|
|
Patient days
|
|
|
1,046,254
|
|
|
|
676,168
|
|
|
|
|
|
1,004,207
|
|
|
|
1,016,927
|
|
|
|
|
Average length of stay (days)
|
|
|
4.4
|
|
|
|
4.4
|
|
|
|
|
|
4.4
|
|
|
|
4.4
|
|
|
|
|
Occupancy rate (average beds in service)
|
|
|
42.4
|
%
|
|
|
43.6
|
%
|
|
|
|
|
41.8
|
%
|
|
|
41.3
|
%
|
|
|
|
Net operating revenues
|
|
$
|
4,918
|
|
|
$
|
3,191
|
|
|
54.1
|
%
|
|
$
|
4,795
|
|
|
$
|
4,580
|
|
|
4.7
|
%
|
|
Net inpatient revenues as a % of net patient revenues before
provision for bad debts
|
|
|
43.6
|
%
|
|
|
42.2
|
%
|
|
|
|
|
43.6
|
%
|
|
|
44.1
|
%
|
|
|
|
Net outpatient revenues as a % of net patient revenues before
provision for bad debts
|
|
|
56.4
|
%
|
|
|
57.8
|
%
|
|
|
|
|
56.4
|
%
|
|
|
55.9
|
%
|
|
|
|
Income from operations (g), (h), (k)
|
|
$
|
477
|
|
|
$
|
243
|
|
|
96.3
|
%
|
|
|
|
|
|
|
|
Income from operations as a % of net operating revenues
|
|
|
9.7
|
%
|
|
|
7.7
|
%
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
$
|
291
|
|
|
$
|
197
|
|
|
|
|
|
|
|
|
|
|
Equity in earnings of unconsolidated affiliates
|
|
$
|
(14
|
)
|
|
$
|
(6
|
)
|
|
|
|
|
|
|
|
|
|
Liquidity Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA (f)
|
|
$
|
785
|
|
|
$
|
459
|
|
|
71.0
|
%
|
|
|
|
|
|
|
|
Adjusted EBITDA as a % of net operating revenues
|
|
|
16.0
|
%
|
|
|
14.4
|
%
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
$
|
976
|
|
|
$
|
648
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities a % of net operating
revenues
|
|
|
19.8
|
%
|
|
|
20.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Same-store operating results and statistical data include
comparable information for hospitals acquired in the HMA
acquisition for the months of October through December 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 Year Ended December 31,
|
|
|
|
Consolidated
|
|
Same-Store (1)
|
|
|
|
2014
|
|
2013
|
|
% Change
|
|
2014
|
|
2013
|
|
% Change
|
|
Number of hospitals (at end of period)
|
|
|
197
|
|
|
|
129
|
|
|
|
|
|
193
|
|
|
|
193
|
|
|
|
|
Licensed beds (at end of period)
|
|
|
30,137
|
|
|
|
19,632
|
|
|
|
|
|
29,154
|
|
|
|
29,499
|
|
|
|
|
Beds in service (at end of period)
|
|
|
27,000
|
|
|
|
16,850
|
|
|
|
|
|
26,242
|
|
|
|
26,743
|
|
|
|
|
Admissions
|
|
|
924,951
|
|
|
|
643,497
|
|
|
43.7
|
%
|
|
|
892,536
|
|
|
|
931,511
|
|
|
-4.2
|
%
|
|
Adjusted admissions
|
|
|
1,970,610
|
|
|
|
1,337,683
|
|
|
47.3
|
%
|
|
|
1,908,074
|
|
|
|
1,926,045
|
|
|
-0.9
|
%
|
|
Patient days
|
|
|
4,091,183
|
|
|
|
2,845,281
|
|
|
|
|
|
3,941,245
|
|
|
|
4,107,903
|
|
|
|
|
Average length of stay (days)
|
|
|
4.4
|
|
|
|
4.4
|
|
|
|
|
|
4.4
|
|
|
|
4.4
|
|
|
|
|
Occupancy rate (average beds in service)
|
|
|
43.8
|
%
|
|
|
46.4
|
%
|
|
|
|
|
43.2
|
%
|
|
|
43.6
|
%
|
|
|
|
Net operating revenues
|
|
$
|
18,639
|
|
|
$
|
12,819
|
|
|
45.4
|
%
|
|
$
|
18,138
|
|
|
$
|
17,929
|
|
|
1.2
|
%
|
|
Net inpatient revenues as a % of net patient revenues before
provision for bad debts
|
|
|
43.9
|
%
|
|
|
44.0
|
%
|
|
|
|
|
43.8
|
%
|
|
|
45.4
|
%
|
|
|
|
Net outpatient revenues as a % of net patient revenues before
provision for bad debts
|
|
|
56.1
|
%
|
|
|
56.0
|
%
|
|
|
|
|
56.2
|
%
|
|
|
54.6
|
%
|
|
|
|
Income from operations (g), (h), (k)
|
|
$
|
1,380
|
|
|
$
|
929
|
|
|
48.5
|
%
|
|
|
|
|
|
|
|
Income from operations as a % of net operating revenues
|
|
|
7.4
|
%
|
|
|
7.3
|
%
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
$
|
1,181
|
|
|
$
|
771
|
|
|
|
|
|
|
|
|
|
|
Equity in earnings of unconsolidated affiliates
|
|
$
|
(48
|
)
|
|
$
|
(43
|
)
|
|
|
|
|
|
|
|
|
|
Liquidity Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA (f)
|
|
$
|
2,777
|
|
|
$
|
1,860
|
|
|
49.3
|
%
|
|
|
|
|
|
|
|
Adjusted EBITDA as a % of net operating revenues
|
|
|
14.9
|
%
|
|
|
14.5
|
%
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
$
|
1,615
|
|
|
$
|
1,089
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities a % of net operating
revenues
|
|
|
8.7
|
%
|
|
|
8.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Same-store operating results and statistical data include
comparable information for hospitals acquired in the HMA
acquisition for the months of February through December 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)
|
|
|
|
December 31, 2014
|
|
December 31, 2013
|
ASSETS
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
509
|
|
|
$
|
373
|
|
Patient accounts receivable, net of allowance for doubtful
accounts of $3,504 and $2,438 at December 31, 2014 and 2013,
respectively
|
|
|
3,409
|
|
|
|
2,323
|
|
Supplies
|
|
|
557
|
|
|
|
371
|
|
Prepaid income taxes
|
|
|
30
|
|
|
|
107
|
|
Deferred income taxes
|
|
|
341
|
|
|
|
101
|
|
Prepaid expenses and taxes
|
|
|
192
|
|
|
|
127
|
|
Other current assets (including assets of hospitals held for sale
of $38 and $40 at December 31, 2014 and 2013, respectively)
|
|
|
528
|
|
|
|
345
|
|
Total current assets
|
|
|
5,566
|
|
|
|
3,747
|
|
Property and equipment:
|
|
|
|
|
|
|
Land and improvements
|
|
|
946
|
|
|
|
623
|
|
Buildings and improvements
|
|
|
8,791
|
|
|
|
6,225
|
|
Equipment and fixtures
|
|
|
4,527
|
|
|
|
3,614
|
|
Property and equipment, gross
|
|
|
14,264
|
|
|
|
10,462
|
|
Less accumulated depreciation and amortization
|
|
|
(4,095
|
)
|
|
|
(3,411
|
)
|
Property and equipment, net
|
|
|
10,169
|
|
|
|
7,051
|
|
Goodwill
|
|
|
8,951
|
|
|
|
4,424
|
|
Other assets, net of accumulated amortization of $827 and $535
at December 31, 2014 and 2013, respectively (including assets of
hospitals held for sale of $90 and $94 at December 31, 2014 and
2013, respectively)
|
|
|
2,735
|
|
|
|
1,895
|
|
Total assets
|
|
$
|
27,421
|
|
|
$
|
17,117
|
|
|
|
|
|
|
|
|
LIABILITIES AND EQUITY
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
Current maturities of long-term debt
|
|
|
235
|
|
|
|
167
|
|
Accounts payable
|
|
$
|
1,293
|
|
|
$
|
949
|
|
Deferred income taxes
|
|
|
23
|
|
|
|
3
|
|
Accrued liabilities:
|
|
|
|
|
|
|
Employee compensation
|
|
|
955
|
|
|
|
690
|
|
Interest
|
|
|
227
|
|
|
|
112
|
|
Other (including liabilities of hospitals held for sale of $10 and
$24 at December 31, 2014 and 2013, respectively)
|
|
|
856
|
|
|
|
537
|
|
Total current liabilities
|
|
|
3,589
|
|
|
|
2,458
|
|
Long-term debt
|
|
|
16,681
|
|
|
|
9,286
|
|
Deferred income taxes
|
|
|
845
|
|
|
|
906
|
|
Other long-term liabilities
|
|
|
1,692
|
|
|
|
977
|
|
Total liabilities
|
|
|
22,807
|
|
|
|
13,627
|
|
Redeemable noncontrolling interests in equity of consolidated
subsidiaries
|
|
|
531
|
|
|
|
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; 117,701,087 shares issued and 116,725,538 shares
outstanding at December 31, 2014, and 95,987,032 shares issued and
95,011,483 shares outstanding at December 31, 2013
|
|
|
1
|
|
|
|
1
|
|
Additional paid-in capital
|
|
|
2,095
|
|
|
|
1,256
|
|
Treasury stock, at cost, 975,549 shares at December 31, 2014 and 2013
|
|
|
(7
|
)
|
|
|
(7
|
)
|
Accumulated other comprehensive loss
|
|
|
(63
|
)
|
|
|
(67
|
)
|
Retained earnings
|
|
|
1,977
|
|
|
|
1,885
|
|
Total Community Health Systems, Inc. stockholders’ equity
|
|
|
4,003
|
|
|
|
3,068
|
|
Noncontrolling interests in equity of consolidated subsidiaries
|
|
|
80
|
|
|
|
64
|
|
Total equity
|
|
|
4,083
|
|
|
|
3,132
|
|
Total liabilities and equity
|
|
$
|
27,421
|
|
|
$
|
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)
|
|
|
|
Year Ended
|
|
|
December 31,
|
|
|
2014
|
|
2013
|
|
|
|
|
|
|
|
Cash flows from operating activities
|
|
|
|
|
|
|
Net income
|
|
$
|
203
|
|
|
$
|
217
|
|
Adjustments to reconcile net income to net cash provided by
operating activities:
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
1,187
|
|
|
|
783
|
|
Deferred income taxes
|
|
|
107
|
|
|
|
69
|
|
Government settlement and related costs (o)
|
|
|
101
|
|
|
|
102
|
|
Stock-based compensation expense
|
|
|
54
|
|
|
|
38
|
|
Impairment of hospitals sold or held for sale
|
|
|
50
|
|
|
|
5
|
|
Impairment of long-lived assets
|
|
|
41
|
|
|
|
12
|
|
Loss from early extinguishment of debt
|
|
|
73
|
|
|
|
1
|
|
Excess tax benefit relating to stock-based compensation
|
|
|
-
|
|
|
|
(7
|
)
|
Other non-cash expenses, net
|
|
|
13
|
|
|
|
61
|
|
Changes in operating assets and liabilities, net of effects of
acquisitions and divestitures:
|
|
|
|
|
|
|
Patient accounts receivable
|
|
|
(306
|
)
|
|
|
(285
|
)
|
Supplies, prepaid expenses and other current assets
|
|
|
28
|
|
|
|
(8
|
)
|
Accounts payable, accrued liabilities and income taxes
|
|
|
147
|
|
|
|
76
|
|
Other
|
|
|
(83
|
)
|
|
|
25
|
|
Net cash provided by operating activities (m)
|
|
|
1,615
|
|
|
|
1,089
|
|
|
|
|
|
|
|
|
Cash flows from investing activities
|
|
|
|
|
|
|
Acquisitions of facilities and other related equipment
|
|
|
(3,091
|
)
|
|
|
(44
|
)
|
Purchases of property and equipment
|
|
|
(853
|
)
|
|
|
(614
|
)
|
Proceeds from disposition of hospitals and certain ancillary
operations
|
|
|
88
|
|
|
|
-
|
|
Proceeds from sale of property and equipment
|
|
|
50
|
|
|
|
7
|
|
Purchases of available-for-sale securities
|
|
|
(263
|
)
|
|
|
-
|
|
Proceeds from sales of available-for-sale securities
|
|
|
229
|
|
|
|
-
|
|
Increase in other investments
|
|
|
(511
|
)
|
|
|
(340
|
)
|
Net cash used in investing activities
|
|
|
(4,351
|
)
|
|
|
(991
|
)
|
|
|
|
|
|
|
|
Cash flows from financing activities
|
|
|
|
|
|
|
Proceeds from exercise of stock options
|
|
|
65
|
|
|
|
110
|
|
Repurchase of restricted stock shares for payroll tax withholding
requirements
|
|
|
(11
|
)
|
|
|
(15
|
)
|
Stock buy-back
|
|
|
(9
|
)
|
|
|
(27
|
)
|
Deferred financing costs and other debt-related costs
|
|
|
(276
|
)
|
|
|
(13
|
)
|
Excess tax benefit relating to stock-based compensation
|
|
|
-
|
|
|
|
7
|
|
Proceeds from noncontrolling investors in joint ventures
|
|
|
10
|
|
|
|
-
|
|
Redemption of noncontrolling investments in joint ventures
|
|
|
(158
|
)
|
|
|
(9
|
)
|
Distributions to noncontrolling investors in joint ventures
|
|
|
(104
|
)
|
|
|
(76
|
)
|
Borrowings under credit agreements
|
|
|
9,131
|
|
|
|
1,194
|
|
Issuance of long-term debt
|
|
|
4,000
|
|
|
|
-
|
|
Proceeds from receivables facility
|
|
|
204
|
|
|
|
338
|
|
Repayments of long-term indebtedness
|
|
|
(9,980
|
)
|
|
|
(1,622
|
)
|
Net cash provided by (used in) financing activities
|
|
|
2,872
|
|
|
|
(113
|
)
|
|
|
|
|
|
|
|
Net change in cash and cash equivalents
|
|
|
136
|
|
|
|
(15
|
)
|
Cash and cash equivalents at beginning of period
|
|
|
373
|
|
|
|
388
|
|
Cash and cash equivalents at end of period
|
|
$
|
509
|
|
|
$
|
373
|
|
____
|
|
|
|
|
|
|
|
|
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 months and year ended December 31, 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
$21 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 $29 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 $265 million at December 31,
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
|
|
|
December 31,
|
|
|
2014
|
Legal and other related costs incurred to date
|
|
$
|
21
|
|
Settlements
|
|
|
3
|
|
Estimated liability for probable contingencies
|
|
|
29
|
|
Estimated liability for unresolved contingencies at fair value
|
|
|
265
|
|
Costs incurred plus estimated liability for CVR-related matters
|
|
|
318
|
|
Less:
|
|
|
|
CHS deductible of $18 million
|
|
|
(18
|
)
|
CHS co-insurance at 10%
|
|
|
(30
|
)
|
Current estimate of reductions to amounts owed to CVR holders
|
|
$
|
270
|
|
|
|
|
|
CVRs outstanding
|
|
|
265
|
|
|
|
|
|
(c)
|
The effective date of the HMA acquisition was January 27, 2014.
|
|
|
(d)
|
Included in discontinued operations for the three months and year
ended December 31, 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 sold its ownership
interest in one of these hospitals, Carolina Pines Regional Medical
Center, effective January 1, 2015). Management is actively marketing
several other smaller hospitals included as held for sale. The
estimated after-tax loss for the sold or held for sale hospitals,
including an impairment charge on certain long-lived assets held for
sale, is approximately $29 million and $57 million for the three
months and year ended December 31, 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
|
|
|
Year Ended
|
|
|
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
|
|
|
2014
|
|
2013
|
|
|
2014
|
|
2013
|
|
|
|
|
Income from continuing operations attributable to Community Health
Systems, Inc. common stockholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations, net of taxes
|
|
$
|
165
|
|
|
$
|
62
|
|
|
|
$
|
260
|
|
|
$
|
242
|
|
|
|
|
|
Less: Income from continuing operations attributable to
noncontrolling interests
|
|
|
36
|
|
|
|
24
|
|
|
|
|
111
|
|
|
|
76
|
|
|
|
|
|
Income from continuing operations attributable to Community Health
Systems, Inc. common stockholders — basic and diluted
|
|
$
|
129
|
|
|
$
|
38
|
|
|
|
$
|
149
|
|
|
$
|
166
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from discontinued operations attributable to Community Health
Systems, Inc. common stockholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from discontinued operations, net of taxes
|
|
$
|
(29
|
)
|
|
$
|
(10
|
)
|
|
|
$
|
(57
|
)
|
|
$
|
(25
|
)
|
|
|
|
|
Less: Loss from discontinued operations attributable to
noncontrolling interests
|
|
|
-
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
Loss from discontinued operations attributable to Community Health
Systems, Inc. common stockholders — basic and diluted
|
|
$
|
(29
|
)
|
|
$
|
(10
|
)
|
|
|
$
|
(57
|
)
|
|
$
|
(25
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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, net income attributable to
noncontrolling interests, acquisition and integration expenses from
the acquisition of HMA, expenses related to government legal
settlements and related costs (other than HMA legal proceedings
underlying the CVR agreement), and income from fair value
adjustments, net of legal expenses, related to the HMA legal
proceedings underlying the CVR agreement. 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 also presented Adjusted EBITDA in this
release 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
|
|
|
|
Year Ended
|
|
|
December 31,
|
|
|
|
December 31,
|
|
|
2014
|
|
2013
|
|
|
|
2014
|
|
2013
|
Adjusted EBITDA
|
|
$
|
785
|
|
|
$
|
459
|
|
|
|
|
$
|
2,777
|
|
|
$
|
1,860
|
|
Interest expense, net
|
|
|
(244
|
)
|
|
|
(149
|
)
|
|
|
|
|
(972
|
)
|
|
|
(613
|
)
|
Provision for income taxes
|
|
|
(65
|
)
|
|
|
(26
|
)
|
|
|
|
|
(82
|
)
|
|
|
(104
|
)
|
Income (loss) from operations of entities held for sale, net of taxes
|
|
|
(2
|
)
|
|
|
(5
|
)
|
|
|
|
|
(7
|
)
|
|
|
(21
|
)
|
Other non-cash expenses, net
|
|
|
137
|
|
|
|
94
|
|
|
|
|
|
209
|
|
|
|
173
|
|
Changes in operating assets and liabilities, net of effects of
acquisitions and divestitures
|
|
|
365
|
|
|
|
275
|
|
|
|
|
|
(310
|
)
|
|
|
(206
|
)
|
Net cash provided by operating activities
|
|
$
|
976
|
|
|
$
|
648
|
|
|
|
|
$
|
1,615
|
|
|
$
|
1,089
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As previously announced, the rural floor budget neutrality
adjustment related to the former HMA hospitals was recognized as an
adjustment to the allocation of the HMA purchase price. The net cash
received of approximately $37 million is included in net cash
provided by operating activities for the three months and year ended
December 31, 2014.
|
|
|
(g)
|
Included in income from operations and income from continuing
operations for the three months and year ended December 31, 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 months and year ended
December 31, 2014, were approximately $37 million, including
depreciation and amortization of approximately $28 million, and
approximately $188 million, including depreciation and amortization
of approximately $96 million, respectively. Total costs and expenses
related to the implementation of electronic health records for the
three months and year ended December 31, 2013, were approximately
$25 million, including depreciation and amortization of
approximately $17 million, and approximately $100 million, including
depreciation and amortization of approximately $63 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 $5 million and $11 million for the three months ended
December 31, 2014 and 2013, respectively, and $59 million and $21
million for the year ended December 31, 2014 and 2013, respectively.
These acquisition costs include expenses related to the acquisition
of HMA of $3 million and $9 million for the three months ended
December 31, 2014 and 2013, respectively, and $46 million and $14
million for the year ended December 31, 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
|
|
|
Year Ended
|
|
|
December 31,
|
|
|
December 31,
|
|
|
2014
|
|
2013
|
|
|
2014
|
|
2013
|
Weighted-average number of shares outstanding - basic
|
|
114
|
|
93
|
|
|
112
|
|
93
|
Add effect of dilutive securities:
|
|
|
|
|
|
|
|
|
|
Stock awards and options
|
|
1
|
|
2
|
|
|
1
|
|
1
|
Weighted-average number of shares outstanding - diluted
|
|
115
|
|
95
|
|
|
113
|
|
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 December 2014 and 2013.
|
|
|
(k)
|
Included in income from continuing operations for the year ended
December 31, 2014, is an impairment charge of approximately $24
million for internal-use software, and an acceleration of
amortization for the year ended December 31, 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. In addition, an impairment of $17 million was
recorded during the three months and year ended December 31, 2014
on certain long-lived assets at two of our smaller hospitals due
to a reduction in volumes in recent years resulting in a decline
in projections of future cash flows and estimated fair values, and
one hospital because of our decision to cease operating as an
acute care hospital.
|
|
(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 (total per
share amounts may not add due to rounding):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Year Ended
|
|
|
|
|
|
|
|
December 31,
|
|
December 31,
|
|
|
|
|
|
|
|
2014
|
|
2013
|
|
2014
|
|
2013
|
|
|
|
|
|
|
|
(per share - diluted)
|
|
(per share - diluted)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations, as reported (1)
|
|
$
|
1.12
|
|
|
$
|
0.40
|
|
$
|
1.32
|
|
|
$
|
1.77
|
|
|
|
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from early extinguishment of debt
|
|
|
-
|
|
|
|
-
|
|
|
0.40
|
|
|
|
0.01
|
|
|
|
|
|
Amortization of software to be abandoned (2)
|
|
|
-
|
|
|
|
-
|
|
|
0.42
|
|
|
|
-
|
|
|
|
|
|
Impairment of long-lived assets
|
|
|
0.09
|
|
|
|
0.07
|
|
|
0.22
|
|
|
|
0.07
|
|
|
|
|
|
Expenses related to the acquisition and integration of HMA
|
|
|
0.01
|
|
|
|
0.05
|
|
|
0.38
|
|
|
|
0.09
|
|
|
|
|
|
Government settlement and related costs
|
|
|
0.15
|
|
|
|
0.02
|
|
|
0.57
|
|
|
|
0.67
|
|
|
|
|
|
Income from fair value adjustments, net of legal expenses, related
to cases covered by the CVR
|
|
|
(0.14
|
)
|
|
|
-
|
|
|
(0.03
|
)
|
|
|
-
|
|
|
|
|
|
Income from continuing operations, excluding adjustments (1), (2)
|
|
$
|
1.23
|
|
|
$
|
0.55
|
|
$
|
3.29
|
|
|
$
|
2.62
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Year Ended
|
|
|
|
|
|
|
|
December 31,
|
|
December 31,
|
|
|
|
|
|
|
|
2014
|
|
2013
|
|
2014
|
|
2013
|
|
|
|
|
|
|
|
(per share - diluted)
|
|
(per share - diluted)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income, as reported (1)
|
|
$
|
0.87
|
|
|
$
|
0.30
|
|
$
|
0.82
|
|
|
$
|
1.51
|
|
|
|
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from early extinguishment of debt
|
|
|
-
|
|
|
|
-
|
|
|
0.40
|
|
|
|
0.01
|
|
|
|
|
|
Amortization of software to be abandoned (2)
|
|
|
-
|
|
|
|
-
|
|
|
0.42
|
|
|
|
-
|
|
|
|
|
|
Impairment of long-lived assets
|
|
|
0.09
|
|
|
|
0.07
|
|
|
0.22
|
|
|
|
0.07
|
|
|
|
|
|
Expenses related to the acquisition and integration of HMA
|
|
|
0.01
|
|
|
|
0.05
|
|
|
0.38
|
|
|
|
0.09
|
|
|
|
|
|
Government settlement and related costs
|
|
|
0.15
|
|
|
|
0.02
|
|
|
0.57
|
|
|
|
0.67
|
|
|
|
|
|
Income from fair value adjustments, net of legal expenses, related
to cases covered by the CVR
|
|
|
(0.14
|
)
|
|
|
-
|
|
|
(0.03
|
)
|
|
|
-
|
|
|
|
|
|
Net income, excluding adjustments (1), (2)
|
|
$
|
0.97
|
|
|
$
|
0.44
|
|
$
|
2.79
|
|
|
$
|
2.35
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Included in income from continuing operations, as reported and
income from continuing operations, as adjusted is approximately
$0.08 per share (diluted) related to the reversal of a tax
liability which will not recur in 2015.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2)
|
Included in the adjustment for accelerated amortization of
software to be abandoned is approximately $0.09 per share
(diluted) of amortization that will not be a recurring benefit in
2015 due to the acquisition of replacement software.
|
|
|
|
|
|
|
(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 $1.822 billion for the year ended December 31, 2014.
|
|
|
(n)
|
Total per share amounts may not add due to rounding.
|
|
|
(o)
|
The $0.15 per share and $0.57 per share of “Government settlement
and related costs” for the three months and year ended December 31,
2014, respectively, includes the reserve in the amount of $75
million (and legal fees incurred of $26 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.
|
|
|
Regulation FD Disclosure
The following tables set forth selected information concerning the
Company’s projected consolidated operating results for the year ending
December 31, 2015. These projections are based on the Company’s
historical operating performance, current trends and other assumptions
that the Company believes are reasonable at this time. The 2015 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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2015 Projection Range
|
Net operating revenues less provision for bad debts (in millions)
|
|
|
|
$
|
19,600
|
|
|
to
|
|
$
|
20,600
|
|
Adjusted EBITDA (in millions)
|
|
|
|
$
|
3,000
|
|
|
to
|
|
$
|
3,200
|
|
Income from continuing operations per share - diluted
|
|
|
|
$
|
3.40
|
|
|
to
|
|
$
|
4.05
|
|
Same-store hospital annual adjusted admissions growth
|
|
|
|
|
0.0
|
%
|
|
to
|
|
|
2.0
|
%
|
Weighted-average diluted shares, in millions
|
|
|
|
|
115
|
|
|
to
|
|
|
116
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following assumptions were used in developing the 2015 guidance
provided above:
-
The Company’s projection excludes the following:
-
Payments related to the CVRs issued in connection with the HMA
acquisition, and changes in the valuation of liabilities
underlying the CVR;
-
Future losses on the early extinguishment of debt;
-
Impairment of long-lived assets;
-
Resolution of government investigations or other significant legal
settlements; and
-
Other significant gains or losses that neither relate to the
ordinary course of business nor reflect the Company’s underlying
business performance.
-
Excluded from these projections is one hospital required to be
divested as part of receiving regulatory approval from the Federal
Trade Commission for the HMA acquisition, which is expected to close
in the first quarter of 2015. The Company has classified several other
small hospitals as held for sale, and the operating results of these
hospitals have been moved to discontinued operations, and have also
been excluded from these projections.
-
The 2015 projections include the acquisition of MetroHealth Hospital
in Grand Rapids, Michigan, which is currently targeted to close during
the middle of 2015, and assume the completion of one additional
targeted hospital acquisition during 2015.
Other assumptions used in the above guidance:
-
Benefits to Adjusted EBITDA from Healthcare Reform in 2015 of an
additional $100 million to $175 million of net operating revenues
before government deductions.
-
Achievement of additional acquisition synergies related to the HMA
acquisition of approximately $125 million to $150 million during 2015.
-
Health Information Technology (HITECH) electronic health records
incentive reimbursement of approximately 0.7% to 0.8% of net operating
revenues for the year ended December 31, 2015, with operating expenses
related to achieving meaningful use of 0.25% to 0.35% of net operating
revenues.
-
Continuation and approval of the California hospital provider fee
program for 2015.
-
For comparison purposes, 2014 earnings per share of $3.29, included a
benefit from the reversal of a tax liability of approximately $0.08
per share (diluted) and the benefit of reduced amortization from the
abandonment of software of $0.09 per share (diluted) which the Company
does not anticipate recurring in 2015.
-
Settlement of certain claims related to the BP oil spill, for which
the Company now expects to recognize up to approximately $28 million
in the second half of 2015.
-
Same-store hospital annual adjusted admissions growth, of 0.0% to 2.0%
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 6.2% for 2015. Additionally,
this is a fixed cost and the percentages may change 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 5.2%; 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 2015.
-
Expressed as a percentage of net operating revenues, equity in
earnings of unconsolidated affiliates of approximately 0.2% to 0.3%
for 2015.
-
Expressed as a percentage of net operating revenues, net income
attributable to noncontrolling interests of approximately 0.6% to 0.7%
for 2015.
-
Expressed as a percentage of income from continuing operations before
income taxes, provision for income tax of approximately 31.5% to 33%
for 2015.
-
Capital expenditures are projected as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2015
|
|
|
|
|
|
|
|
|
Guidance
|
|
|
|
|
Total
|
|
|
|
$1,050
|
|
|
|
to
|
|
|
|
$1,250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
Net cash provided by operating activities, excluding cash flows
related to the CVR and settlement of legal contingencies, is projected
as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2015
|
|
|
|
|
|
|
|
|
Guidance
|
|
|
|
|
Total
|
|
|
|
$1,650
|
|
|
|
to
|
|
|
|
$1,850
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash provided by operating activities in 2015 will be negatively
impacted by approximately $300 million, primarily from a reduction in
tax refunds, and the timing of payroll payments, compared to the
adjusted cash flows from operations of $1.822 billion in 2014.
-
Weighted average shares outstanding are projected to be approximately
115 million to 116 million for the year ended 2015 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, 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
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, the extent of remediation costs and additional
operating or other expenses that we may continue to incur, and the
impact of future cyber-attacks or security breaches; and
-
the other risk factors set forth in our other public filings with the
Securities and Exchange Commission.
The consolidated operating results for the three months and year ended
December 31, 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 2015 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 2015