Community Health Systems, Inc. Announces Second Quarter 2016 Results with Net Operating Revenues of $4.590
Billion
Community Health Systems, Inc. (NYSE: CYH) (the “Company”) today announced financial and operating results for the three and six
months ended June 30, 2016.
On April 29, 2016, the Company completed the spin-off of Quorum Health Corporation (“QHC”), comprised of 38 affiliated hospitals
and related outpatient services in 16 states, together with Quorum Health Resources, LLC, a subsidiary providing management
advisory and consulting services to non-affiliated hospitals. Following the spin-off, QHC became an independent public company with
its common stock listed for trading under the symbol “QHC” on the New York Stock Exchange. Financial and statistical data reported
in this earnings release include QHC operating results through the spin-off date. Same-store operating results and statistical data
exclude information for the hospitals divested in the spin-off of QHC in both the 2016 periods and the comparable periods in
2015.
Net operating revenues for the three months ended June 30, 2016, totaled $4.590 billion, a 6.0 percent decrease compared with
$4.882 billion for the same period in 2015. Income from continuing operations attributable to Community Health Systems, Inc. common
stockholders decreased to a loss of $(1.431) billion, or $(12.90) per share (diluted), for the three months ended June 30, 2016,
compared with income from continuing operations of $117 million, or $1.01 per share (diluted), for the same period in 2015. During
the three months ended June 30, 2016, the Company recorded a non-cash impairment charge of $1.400 billion to reduce the value of
goodwill for the Company’s hospital reporting unit; a charge of $169 million to reduce the value of long-lived assets at certain
hospitals that the Company is currently marketing for sale; and a charge of $70 million to reduce the value of long-lived assets at
certain under-performing hospitals. The impairment charge recorded for goodwill is an estimated charge resulting from a
determination that the carrying value of the Company’s hospital operations reporting unit exceeded its fair value, primarily as the
result of the decline in the Company’s market capitalization and fair value of long-term debt during the three months ended June
30, 2016, as well as a decrease in the estimated future earnings of the Company compared to previous estimates. These impairment
charges do not have an impact on the calculation of the Company’s financial covenants under the Company’s Credit Facility. The
results for the three months ended June 30, 2016, included the loss of $(13.29) per share (diluted) related to impairment of
goodwill and long-lived assets, loss of $(0.18) per share (diluted) from early extinguishment of debt and loss of $(0.07) per share
(diluted) related to expenses from the spin-off of QHC, which were partially offset by income of $0.54 per share (diluted) related
to the gain on sale of investments in unconsolidated affiliates in connection with the Company’s sale of its minority equity
interests in five hospitals located in Las Vegas, Nevada, on April 29, 2016. Excluding these items, income from continuing
operations was $0.09 per share (diluted).
Net income attributable to Community Health Systems, Inc. common stockholders was a loss of $(12.91) per share (diluted) for the
three months ended June 30, 2016, compared with income of $0.95 per share (diluted) for the same period in 2015. Discontinued
operations for the three months ended June 30, 2016, consisted of $(0.01) per share (diluted) of losses from operations of entities
sold or held for sale for a total after-tax loss of approximately $(1) million or $(0.01) per share (diluted). Weighted-average
shares outstanding (diluted) were 111 million for the three months ended June 30, 2016, and 116 million for the three months ended
June 30, 2015.
Net cash provided by operating activities for the three months ended June 30, 2016, was $338 million compared with $565 million
for the same period in 2015, representing a 40.2 percent decrease. Adjusted EBITDA for the three months ended June 30, 2016, was
$563 million compared with $769 million for the same period in 2015, representing a 26.8 percent decrease.
The consolidated operating results for the three months ended June 30, 2016, reflect a 9.1 percent decrease in total admissions,
and an 8.5 percent decrease in total adjusted admissions, compared with the same period in 2015. On a same-store basis, admissions
decreased 2.1 percent and adjusted admissions decreased 0.6 percent during the three months ended June 30, 2016, compared with the
same period in 2015. On a same-store basis, net operating revenues increased 1.2 percent during the three months ended June 30,
2016, compared with the same period in 2015.
Net operating revenues for the six months ended June 30, 2016, totaled $9.589 billion, a 2.1 percent decrease compared with
$9.793 billion for the same period in 2015. Income from continuing operations attributable to Community Health Systems, Inc. common
stockholders decreased to a loss of $(1.418) billion, or $(12.82) per share (diluted), for the six months ended June 30, 2016,
compared with income from continuing operations of $209 million, or $1.80 per share (diluted), for the same period in 2015. The
results for the six months ended June 30, 2016, included the loss of $(13.45) per share (diluted) related to impairment of goodwill
and long-lived assets, loss of $(0.18) per share (diluted) from early extinguishment of debt and loss of $(0.09) per share
(diluted) related to expenses from the spin-off of QHC, which were partially offset by income of $0.54 per share (diluted) related
to the gain on sale of investments in unconsolidated affiliates, as noted above. Excluding these items, income from continuing
operations was $0.36 per share (diluted).
Net income attributable to Community Health Systems, Inc. common stockholders was a loss of $(12.85) per share (diluted) for the
six months ended June 30, 2016, compared with income of $1.64 per share (diluted) for the same period in 2015. Discontinued
operations for the six months ended June 30, 2016, consisted of $(0.02) per share (diluted) of losses from operations of entities
sold or held for sale and $(0.01) per share (diluted) of expenses related to the impairment of long-lived assets held for sale, for
a total after-tax loss of approximately $(3) million, or $(0.03) per share (diluted). Weighted-average shares outstanding (diluted)
were 111 million for the six months ended June 30, 2016, and 116 million for the six months ended June 30, 2015.
Net cash provided by operating activities for the six months ended June 30, 2016, was $632 million compared with $504 million
for the same period in 2015, representing a 25.4 percent increase. Adjusted EBITDA for the six months ended June 30, 2016, was
$1.196 billion compared with $1.483 billion for the same period in 2015, representing a 19.4 percent decrease.
The consolidated operating results for the six months ended June 30, 2016, reflect a 5.7 percent decrease in total admissions,
and a 3.9 percent decrease in total adjusted admissions, compared with the same period in 2015. On a same-store basis, admissions
decreased 2.1 percent while adjusted admissions increased 0.4 percent during the six months ended June 30, 2016, compared with the
same period in 2015. On a same-store basis, net operating revenues increased 1.8 percent during the six months ended June 30, 2016,
compared with the same period in 2015.
Adjusted EBITDA, a non-GAAP financial measure, is EBITDA adjusted to exclude discontinued operations, loss from early
extinguishment of debt, impairment of goodwill and long-lived assets, gain on sale of investments in unconsolidated affiliates, net
income attributable to noncontrolling interests, acquisition and integration expenses from the acquisition of Health Management
Associates, Inc. (“HMA”), expenses incurred related to the spin-off of QHC, expense (income) related to government legal
settlements and related costs, and expense (income) from fair value adjustments related to the HMA legal proceedings, accounted for
at fair value, underlying the CVR agreement, and related legal expenses. 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 (e) 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, “During
the second quarter, we completed the successful spin-off of Quorum Health Corporation. Additional divestiture activity is underway
as part of our portfolio rationalization strategy, which we believe will ultimately produce a higher performing, more sustainable
group of hospitals and outpatient services. We also revised our organization structure and promoted key leaders into new roles.
While our operating performance fell short of expectations this period, our management team and local operators are aggressively
pursuing key initiatives and growth opportunities in markets where we believe we have the greatest potential to generate better
operational and financial results.”
Included on pages 16, 17, 18 and 19 of this press release are tables setting forth the Company’s updated 2016 annual earnings
guidance. The 2016 guidance is based on the Company’s historical operating performance, current trends and other assumptions that
the Company believes are reasonable at this time, and reflects the impact of the spin-off of QHC and other planned divestitures
that the Company expects to occur in 2016.
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. After giving effect to the spin-off noted above, the
Company, through its subsidiaries, owns, leases or operates 159 affiliated hospitals in 22 states with an aggregate of nearly
27,000 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 Wednesday, August 3, 2016, at 10:00 a.m. Central, 11:00 a.m.
Eastern, to review financial and operating results for the second quarter ended June 30, 2016. 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 September 3, 2016. Copies of this press release and
conference call slide show, as well as the Company’s Current Report on Form 8-K (including this press release), 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) |
(In millions, except per share amounts) |
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Three Months Ended |
|
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Six Months Ended |
|
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|
|
June 30, |
|
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|
June 30, |
|
|
|
|
2016 |
|
|
2015 |
|
|
|
2016 |
|
|
2015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net operating revenues |
|
|
|
$ |
4,590 |
|
|
|
$ |
4,882 |
|
|
|
|
$ |
9,589 |
|
|
|
$ |
9,793 |
|
(Loss) income from continuing operations (f), (i), (k) |
|
|
|
|
(1,405 |
) |
|
|
|
140 |
|
|
|
|
|
(1,368 |
) |
|
|
|
252 |
|
Net (loss) income attributable to Community Health Systems, Inc. stockholders
|
|
|
|
|
(1,432 |
) |
|
|
|
111 |
|
|
|
|
|
(1,421 |
) |
|
|
|
189 |
|
Adjusted EBITDA (e) |
|
|
|
|
563 |
|
|
|
|
769 |
|
|
|
|
|
1,196 |
|
|
|
|
1,483 |
|
Net cash provided by operating activities |
|
|
|
|
338 |
|
|
|
|
565 |
|
|
|
|
|
632 |
|
|
|
|
504 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic (loss) earnings per share attributable to Community Health Systems, Inc. common
stockholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations (f), (i) |
|
|
|
$ |
(12.90 |
) |
|
|
$ |
1.02 |
|
|
|
|
$ |
(12.82 |
) |
|
|
$ |
1.82 |
|
Discontinued operations |
|
|
|
|
(0.01 |
) |
|
|
|
(0.06 |
) |
|
|
|
|
(0.03 |
) |
|
|
|
(0.17 |
) |
Net (loss) income |
|
|
|
$ |
(12.91 |
) |
|
|
$ |
0.96 |
|
|
|
|
$ |
(12.85 |
) |
|
|
$ |
1.65 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted (loss) earnings per share attributable to Community Health Systems, Inc. common
stockholders (l):
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations (f), (h), (i) |
|
|
|
$ |
(12.90 |
) |
|
|
$ |
1.01 |
|
|
|
|
$ |
(12.82 |
) |
|
|
$ |
1.80 |
|
Discontinued operations |
|
|
|
|
(0.01 |
) |
|
|
|
(0.06 |
) |
|
|
|
|
(0.03 |
) |
|
|
|
(0.17 |
) |
Net (loss) income (h) |
|
|
|
$ |
(12.91 |
) |
|
|
$ |
0.95 |
|
|
|
|
$ |
(12.85 |
) |
|
|
$ |
1.64 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average number of shares outstanding (g): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
|
|
111 |
|
|
|
|
115 |
|
|
|
|
|
111 |
|
|
|
|
115 |
|
Diluted |
|
|
|
|
111 |
|
|
|
|
116 |
|
|
|
|
|
111 |
|
|
|
|
116 |
|
|
_________
For footnotes, see pages 12, 13, 14 and 15.
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COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES |
Condensed Consolidated Statements of (Loss) Income
(a)(b)(c)(d) |
(In millions, except per share amounts) |
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
|
|
|
2016 |
|
|
2015 |
|
|
|
|
Amount |
|
|
% of Net
Operating
Revenues
|
|
|
Amount |
|
|
% of Net
Operating
Revenues
|
Operating revenues (net of contractual allowances and discounts) |
|
|
|
$ |
5,290 |
|
|
|
|
|
|
$ |
5,614 |
|
|
|
|
Provision for bad debts |
|
|
|
|
700 |
|
|
|
|
|
|
|
732 |
|
|
|
|
Net operating revenues |
|
|
|
|
4,590 |
|
|
|
100.0 |
% |
|
|
|
4,882 |
|
|
|
100.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and benefits |
|
|
|
|
2,154 |
|
|
|
46.9 |
% |
|
|
|
2,217 |
|
|
|
45.4 |
% |
Supplies |
|
|
|
|
759 |
|
|
|
16.6 |
% |
|
|
|
750 |
|
|
|
15.4 |
% |
Other operating expenses |
|
|
|
|
1,056 |
|
|
|
23.1 |
% |
|
|
|
1,125 |
|
|
|
23.0 |
% |
Government settlement and related costs (j) |
|
|
|
|
- |
|
|
|
- |
% |
|
|
|
(6 |
) |
|
|
(0.1 |
)% |
Electronic health records incentive reimbursement |
|
|
|
|
(31 |
) |
|
|
(0.7 |
)% |
|
|
|
(55 |
) |
|
|
(1.1 |
)% |
Rent |
|
|
|
|
112 |
|
|
|
2.4 |
% |
|
|
|
113 |
|
|
|
2.3 |
% |
Depreciation and amortization |
|
|
|
|
276 |
|
|
|
6.0 |
% |
|
|
|
291 |
|
|
|
6.0 |
% |
Impairment of goodwill and long-lived assets (i) |
|
|
|
|
1,639 |
|
|
|
35.7 |
% |
|
|
|
6 |
|
|
|
0.1 |
% |
Total operating costs and expenses |
|
|
|
|
5,965 |
|
|
|
130.0 |
% |
|
|
|
4,441 |
|
|
|
91.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from operations (f), (i) |
|
|
|
|
(1,375 |
) |
|
|
(30.0 |
)% |
|
|
|
441 |
|
|
|
9.0 |
% |
Interest expense, net |
|
|
|
|
246 |
|
|
|
5.4 |
% |
|
|
|
239 |
|
|
|
4.9 |
% |
Loss from early extinguishment of debt |
|
|
|
|
30 |
|
|
|
0.7 |
% |
|
|
|
9 |
|
|
|
0.2 |
% |
Gain on sale of investments in unconsolidated affiliates (k) |
|
|
|
|
(94 |
) |
|
|
(2.1 |
)% |
|
|
|
- |
|
|
|
- |
% |
Equity in earnings of unconsolidated affiliates |
|
|
|
|
(14 |
) |
|
|
(0.4 |
)% |
|
|
|
(21 |
) |
|
|
(0.4 |
)% |
(Loss) income from continuing operations before income taxes
|
|
|
|
|
(1,543 |
) |
|
|
(33.6 |
)% |
|
|
|
214 |
|
|
|
4.3 |
% |
(Benefit from) provision for income taxes |
|
|
|
|
(138 |
) |
|
|
(3.0 |
)% |
|
|
|
74 |
|
|
|
1.5 |
% |
(Loss) income from continuing operations (f), (i), (k) |
|
|
|
|
(1,405 |
) |
|
|
(30.6 |
)% |
|
|
|
140 |
|
|
|
2.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued operations, net of taxes: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations of entities sold or held for sale |
|
|
|
|
(1 |
) |
|
|
(0.0 |
)% |
|
|
|
(6 |
) |
|
|
(0.1 |
)% |
Loss from discontinued operations, net of taxes |
|
|
|
|
(1 |
) |
|
|
- |
% |
|
|
|
(6 |
) |
|
|
(0.1 |
)% |
Net (loss) income |
|
|
|
|
(1,406 |
) |
|
|
(30.6 |
)% |
|
|
|
134 |
|
|
|
2.7 |
% |
Less: Net income attributable to noncontrolling interests |
|
|
|
|
26 |
|
|
|
0.6 |
% |
|
|
|
23 |
|
|
|
0.4 |
% |
Net (loss) income attributable to Community Health Systems, Inc.
stockholders |
|
|
|
$ |
(1,432 |
) |
|
|
(31.2 |
)% |
|
|
$ |
111 |
|
|
|
2.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic (loss) earnings per share attributable to Community Health Systems, Inc. common
stockholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations (f), (i), (k) |
|
|
|
$ |
(12.90 |
) |
|
|
|
|
|
$ |
1.02 |
|
|
|
|
Discontinued operations |
|
|
|
|
(0.01 |
) |
|
|
|
|
|
|
(0.06 |
) |
|
|
|
Net (loss) income |
|
|
|
$ |
(12.91 |
) |
|
|
|
|
|
$ |
0.96 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted (loss) earnings per share attributable to Community Health Systems, Inc. common
stockholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations (f), (h), (i), (k) |
|
|
|
$ |
(12.90 |
) |
|
|
|
|
|
$ |
1.01 |
|
|
|
|
Discontinued operations |
|
|
|
|
(0.01 |
) |
|
|
|
|
|
|
(0.06 |
) |
|
|
|
Net (loss) income (h) |
|
|
|
$ |
(12.91 |
) |
|
|
|
|
|
$ |
0.95 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average number of shares outstanding (g): |
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
|
|
111 |
|
|
|
|
|
|
|
115 |
|
|
|
|
Diluted |
|
|
|
|
111 |
|
|
|
|
|
|
|
116 |
|
|
|
|
|
|
_________
For footnotes, see pages 12, 13, 14 and 15.
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|
|
|
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|
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES |
Condensed Consolidated Statements of (Loss) Income
(a)(b)(c)(d) |
(In millions, except per share amounts) |
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, |
|
|
|
|
2016 |
|
|
2015 |
|
|
|
|
Amount |
|
|
% of Net
Operating
Revenues
|
|
|
Amount |
|
|
% of Net
Operating
Revenues
|
Operating revenues (net of contractual allowances and discounts) |
|
|
|
$ |
11,044 |
|
|
|
|
|
|
$ |
11,260 |
|
|
|
|
Provision for bad debts |
|
|
|
|
1,455 |
|
|
|
|
|
|
|
1,467 |
|
|
|
|
Net operating revenues |
|
|
|
|
9,589 |
|
|
|
100.0 |
% |
|
|
|
9,793 |
|
|
|
100.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and benefits |
|
|
|
|
4,470 |
|
|
|
46.6 |
% |
|
|
|
4,474 |
|
|
|
45.7 |
% |
Supplies |
|
|
|
|
1,559 |
|
|
|
16.3 |
% |
|
|
|
1,512 |
|
|
|
15.4 |
% |
Other operating expenses |
|
|
|
|
2,229 |
|
|
|
23.2 |
% |
|
|
|
2,225 |
|
|
|
22.8 |
% |
Government settlement and related costs (j) |
|
|
|
|
1 |
|
|
|
0.0 |
% |
|
|
|
1 |
|
|
|
0.0 |
% |
Electronic health records incentive reimbursement |
|
|
|
|
(49 |
) |
|
|
(0.5 |
)% |
|
|
|
(81 |
) |
|
|
(0.8 |
)% |
Rent |
|
|
|
|
231 |
|
|
|
2.4 |
% |
|
|
|
229 |
|
|
|
2.3 |
% |
Depreciation and amortization |
|
|
|
|
574 |
|
|
|
6.0 |
% |
|
|
|
587 |
|
|
|
6.0 |
% |
Impairment of goodwill and long-lived assets (i) |
|
|
|
|
1,656 |
|
|
|
17.3 |
% |
|
|
|
6 |
|
|
|
0.1 |
% |
Total operating costs and expenses |
|
|
|
|
10,671 |
|
|
|
111.3 |
% |
|
|
|
8,953 |
|
|
|
91.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from operations (f), (i) |
|
|
|
|
(1,082 |
) |
|
|
(11.3 |
)% |
|
|
|
840 |
|
|
|
8.5 |
% |
Interest expense, net |
|
|
|
|
496 |
|
|
|
5.2 |
% |
|
|
|
481 |
|
|
|
4.8 |
% |
Loss from early extinguishment of debt |
|
|
|
|
30 |
|
|
|
0.3 |
% |
|
|
|
16 |
|
|
|
0.2 |
% |
Gain on sale of investments in unconsolidated affiliates (k) |
|
|
|
|
(94 |
) |
|
|
(1.0 |
)% |
|
|
|
- |
|
|
|
- |
% |
Equity in earnings of unconsolidated affiliates |
|
|
|
|
(34 |
) |
|
|
(0.4 |
)% |
|
|
|
(39 |
) |
|
|
(0.4 |
)% |
(Loss) income from continuing operations before income taxes
|
|
|
|
|
(1,480 |
) |
|
|
(15.4 |
)% |
|
|
|
382 |
|
|
|
3.9 |
% |
(Benefit from) provision for income taxes |
|
|
|
|
(112 |
) |
|
|
(1.1 |
)% |
|
|
|
130 |
|
|
|
1.3 |
% |
(Loss) income from continuing operations (f), (i), (k) |
|
|
|
|
(1,368 |
) |
|
|
(14.3 |
)% |
|
|
|
252 |
|
|
|
2.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued operations, net of taxes: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations of entities sold or held for sale |
|
|
|
|
(2 |
) |
|
|
(0.0 |
)% |
|
|
|
(17 |
) |
|
|
(0.2 |
)% |
Impairment of hospitals sold or held for sale |
|
|
|
|
(1 |
) |
|
|
(0.0 |
)% |
|
|
|
(2 |
) |
|
|
(0.0 |
)% |
Loss on sale, net |
|
|
|
|
- |
|
|
|
- |
% |
|
|
|
(1 |
) |
|
|
(0.0 |
)% |
Loss from discontinued operations, net of taxes |
|
|
|
|
(3 |
) |
|
|
(0.0 |
)% |
|
|
|
(20 |
) |
|
|
(0.2 |
)% |
Net (loss) income |
|
|
|
|
(1,371 |
) |
|
|
(14.3 |
)% |
|
|
|
232 |
|
|
|
2.4 |
% |
Less: Net income attributable to noncontrolling interests |
|
|
|
|
50 |
|
|
|
0.5 |
% |
|
|
|
43 |
|
|
|
0.5 |
% |
Net (loss) income attributable to Community Health Systems, Inc.
stockholders |
|
|
|
$ |
(1,421 |
) |
|
|
(14.8 |
)% |
|
|
$ |
189 |
|
|
|
1.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic (loss) earnings per share attributable to Community Health Systems, Inc. common
stockholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations (f), (i), (k) |
|
|
|
$ |
(12.82 |
) |
|
|
|
|
|
$ |
1.82 |
|
|
|
|
Discontinued operations |
|
|
|
|
(0.03 |
) |
|
|
|
|
|
|
(0.17 |
) |
|
|
|
Net (loss) income |
|
|
|
$ |
(12.85 |
) |
|
|
|
|
|
$ |
1.65 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted (loss) earnings per share attributable to Community Health Systems, Inc. common
stockholders (l):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations (f), (h), (i), (k) |
|
|
|
$ |
(12.82 |
) |
|
|
|
|
|
$ |
1.80 |
|
|
|
|
Discontinued operations |
|
|
|
|
(0.03 |
) |
|
|
|
|
|
|
(0.17 |
) |
|
|
|
Net (loss) income (h) |
|
|
|
$ |
(12.85 |
) |
|
|
|
|
|
$ |
1.64 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average number of shares outstanding (g): |
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
|
|
111 |
|
|
|
|
|
|
|
115 |
|
|
|
|
Diluted |
|
|
|
|
111 |
|
|
|
|
|
|
|
116 |
|
|
|
|
|
|
_________
For footnotes, see pages 12, 13, 14 and 15.
|
|
|
|
|
|
|
|
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES |
Condensed Consolidated Statements of Comprehensive
(Loss) Income |
(In millions) |
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
Six Months Ended |
|
|
|
|
June 30, |
|
|
|
June 30, |
|
|
|
|
2016 |
|
|
2015 |
|
|
|
2016 |
|
|
2015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income |
|
|
|
$ |
(1,406 |
) |
|
|
$ |
134 |
|
|
|
|
$ |
(1,371 |
) |
|
|
$ |
232 |
|
Other comprehensive (loss) income, net of income taxes: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change in fair value of interest rate swaps, net of tax |
|
|
|
|
(2 |
) |
|
|
|
8 |
|
|
|
|
|
(21 |
) |
|
|
|
(1 |
) |
Net change in fair value of available-for-sale securities, net of tax |
|
|
|
|
(3 |
) |
|
|
|
(2 |
) |
|
|
|
|
(1 |
) |
|
|
|
(1 |
) |
Amortization and recognition of unrecognized pension cost components, net of tax
|
|
|
|
|
2 |
|
|
|
|
- |
|
|
|
|
|
3 |
|
|
|
|
1 |
|
Other comprehensive (loss) income |
|
|
|
|
(3 |
) |
|
|
|
6 |
|
|
|
|
|
(19 |
) |
|
|
|
(1 |
) |
Comprehensive (loss) income |
|
|
|
|
(1,409 |
) |
|
|
|
140 |
|
|
|
|
|
(1,390 |
) |
|
|
|
231 |
|
Less: Comprehensive income attributable to noncontrolling interests |
|
|
|
|
26 |
|
|
|
|
23 |
|
|
|
|
|
50 |
|
|
|
|
43 |
|
Comprehensive (loss) income attributable to Community Health Systems, Inc. stockholders
|
|
|
|
$ |
(1,435 |
) |
|
|
$ |
117 |
|
|
|
|
$ |
(1,440 |
) |
|
|
$ |
188 |
|
|
_________
For footnotes, see pages 12, 13, 14 and 15.
|
|
|
|
|
|
|
|
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES |
Selected Operating Data (a)(c) |
(Dollars in millions) |
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
|
|
|
Consolidated |
|
|
Same-Store |
|
|
|
|
2016 |
|
|
2015 |
|
|
% Change |
|
|
2016 |
|
|
2015 |
|
|
% Change |
Number of hospitals (at end of period) |
|
|
|
|
156 |
|
|
|
|
196 |
|
|
|
|
|
|
|
153 |
|
|
|
|
153 |
|
|
|
|
Licensed beds (at end of period) |
|
|
|
|
26,366 |
|
|
|
|
29,964 |
|
|
|
|
|
|
|
26,065 |
|
|
|
|
26,177 |
|
|
|
|
Beds in service (at end of period) |
|
|
|
|
23,371 |
|
|
|
|
26,206 |
|
|
|
|
|
|
|
23,206 |
|
|
|
|
23,112 |
|
|
|
|
Admissions |
|
|
|
|
212,259 |
|
|
|
|
233,517 |
|
|
|
-9.1 |
% |
|
|
|
202,702 |
|
|
|
|
207,091 |
|
|
|
-2.1 |
% |
Adjusted admissions |
|
|
|
|
468,087 |
|
|
|
|
511,456 |
|
|
|
-8.5 |
% |
|
|
|
444,270 |
|
|
|
|
446,912 |
|
|
|
-0.6 |
% |
Patient days |
|
|
|
|
947,492 |
|
|
|
|
1,033,244 |
|
|
|
|
|
|
|
909,067 |
|
|
|
|
928,935 |
|
|
|
|
Average length of stay (days) |
|
|
|
|
4.5 |
|
|
|
|
4.4 |
|
|
|
|
|
|
|
4.5 |
|
|
|
|
4.5 |
|
|
|
|
Occupancy rate (average beds in service) |
|
|
|
|
42.5 |
% |
|
|
|
43.0 |
% |
|
|
|
|
|
|
42.8 |
% |
|
|
|
43.8 |
% |
|
|
|
Net operating revenues |
|
|
|
$ |
4,590 |
|
|
|
$ |
4,882 |
|
|
|
-6.0 |
% |
|
|
$ |
4,339 |
|
|
|
$ |
4,286 |
|
|
|
1.2 |
% |
Net inpatient revenues as a % of net patient revenues before provision for bad debts
|
|
|
|
|
42.8 |
% |
|
|
|
42.4 |
% |
|
|
|
|
|
|
43.0 |
% |
|
|
|
42.4 |
% |
|
|
|
Net outpatient revenues as a % of net patient revenues before provision for bad debts
|
|
|
|
|
57.2 |
% |
|
|
|
57.6 |
% |
|
|
|
|
|
|
57.0 |
% |
|
|
|
57.6 |
% |
|
|
|
(Loss) income from operations (f), (i) |
|
|
|
$ |
(1,375 |
) |
|
|
$ |
441 |
|
|
|
-411.8 |
% |
|
|
|
|
|
|
|
|
|
(Loss) income from operations as a % of net operating revenues
|
|
|
|
|
-30.0 |
% |
|
|
|
9.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
|
$ |
276 |
|
|
|
$ |
291 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in earnings of unconsolidated affiliates |
|
|
|
$ |
(14 |
) |
|
|
$ |
(21 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Liquidity Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA (e) |
|
|
|
$ |
563 |
|
|
|
$ |
769 |
|
|
|
-26.8 |
% |
|
|
|
|
|
|
|
|
|
Adjusted EBITDA as a % of net operating revenues
|
|
|
|
|
12.3 |
% |
|
|
|
15.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities |
|
|
|
$ |
338 |
|
|
|
$ |
565 |
|
|
|
-40.2 |
% |
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities as a % of net operating revenues
|
|
|
|
|
7.4 |
% |
|
|
|
11.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
_________
For footnotes, see pages 12, 13, 14 and 15.
|
|
|
|
|
|
|
|
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES |
Selected Operating Data (a)(c) |
(Dollars in millions) |
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, |
|
|
|
|
Consolidated |
|
|
Same-Store |
|
|
|
|
2016 |
|
|
2015 |
|
|
% Change |
|
|
2016 |
|
|
2015 |
|
|
% Change |
Number of hospitals (at end of period) |
|
|
|
|
156 |
|
|
|
|
196 |
|
|
|
|
|
|
|
153 |
|
|
|
|
153 |
|
|
|
|
Licensed beds (at end of period) |
|
|
|
|
26,366 |
|
|
|
|
29,964 |
|
|
|
|
|
|
|
26,065 |
|
|
|
|
26,177 |
|
|
|
|
Beds in service (at end of period) |
|
|
|
|
23,371 |
|
|
|
|
26,206 |
|
|
|
|
|
|
|
23,206 |
|
|
|
|
23,112 |
|
|
|
|
Admissions |
|
|
|
|
451,959 |
|
|
|
|
479,532 |
|
|
|
-5.7 |
% |
|
|
|
416,539 |
|
|
|
|
425,319 |
|
|
|
-2.1 |
% |
Adjusted admissions |
|
|
|
|
981,406 |
|
|
|
|
1,021,309 |
|
|
|
-3.9 |
% |
|
|
|
896,539 |
|
|
|
|
892,982 |
|
|
|
0.4 |
% |
Patient days |
|
|
|
|
2,023,718 |
|
|
|
|
2,160,321 |
|
|
|
|
|
|
|
1,881,309 |
|
|
|
|
1,942,759 |
|
|
|
|
Average length of stay (days) |
|
|
|
|
4.5 |
|
|
|
|
4.5 |
|
|
|
|
|
|
|
4.5 |
|
|
|
|
4.6 |
|
|
|
|
Occupancy rate (average beds in service) |
|
|
|
|
43.8 |
% |
|
|
|
45.0 |
% |
|
|
|
|
|
|
44.4 |
% |
|
|
|
45.9 |
% |
|
|
|
Net operating revenues |
|
|
|
$ |
9,589 |
|
|
|
$ |
9,793 |
|
|
|
-2.1 |
% |
|
|
$ |
8,763 |
|
|
|
$ |
8,607 |
|
|
|
1.8 |
% |
Net inpatient revenues as a % of net patient revenues before provision for bad debts
|
|
|
|
|
43.4 |
% |
|
|
|
43.3 |
% |
|
|
|
|
|
|
43.4 |
% |
|
|
|
43.3 |
% |
|
|
|
Net outpatient revenues as a % of net patient revenues before provision for bad debts
|
|
|
|
|
56.6 |
% |
|
|
|
56.7 |
% |
|
|
|
|
|
|
56.6 |
% |
|
|
|
56.7 |
% |
|
|
|
(Loss) income from operations (f), (i) |
|
|
|
$ |
(1,082 |
) |
|
|
$ |
840 |
|
|
|
-228.8 |
% |
|
|
|
|
|
|
|
|
|
(Loss) income from operations as a % of net operating revenues
|
|
|
|
|
-11.3 |
% |
|
|
|
8.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
|
$ |
574 |
|
|
|
$ |
587 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in earnings of unconsolidated affiliates |
|
|
|
$ |
(34 |
) |
|
|
$ |
(39 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Liquidity Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA (e) |
|
|
|
$ |
1,196 |
|
|
|
$ |
1,483 |
|
|
|
-19.4 |
% |
|
|
|
|
|
|
|
|
|
Adjusted EBITDA as a % of net operating revenues
|
|
|
|
|
12.5 |
% |
|
|
|
15.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities |
|
|
|
$ |
632 |
|
|
|
$ |
504 |
|
|
|
25.4 |
% |
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities as a % of net operating revenues
|
|
|
|
|
6.6 |
% |
|
|
|
5.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
_________
For footnotes, see pages 12, 13, 14 and 15.
|
|
|
|
|
|
|
|
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
|
Condensed Consolidated Balance Sheets (b) |
(In millions, except share data) |
(Unaudited) |
|
|
|
|
|
|
|
|
June 30, 2016 |
|
|
December 31, 2015 |
ASSETS |
|
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
|
Cash and cash equivalents |
|
|
|
$ |
461 |
|
|
|
$ |
184 |
|
Patient accounts receivable, net of allowance for doubtful accounts of $3,732 and $4,110 at June 30,
2016 and December 31, 2015, respectively
|
|
|
|
|
3,179 |
|
|
|
|
3,611 |
|
Supplies |
|
|
|
|
527 |
|
|
|
|
580 |
|
Prepaid income taxes |
|
|
|
|
33 |
|
|
|
|
27 |
|
Prepaid expenses and taxes |
|
|
|
|
217 |
|
|
|
|
197 |
|
Other current assets (including assets of hospitals held for sale of $5 and $17 at June 30, 2016 and
December 31, 2015, respectively)
|
|
|
|
|
425 |
|
|
|
|
567 |
|
Total current assets |
|
|
|
|
4,842 |
|
|
|
|
5,166 |
|
Property and equipment |
|
|
|
|
13,364 |
|
|
|
|
14,906 |
|
Less accumulated depreciation and amortization |
|
|
|
|
(4,409 |
) |
|
|
|
(4,794 |
) |
Property and equipment, net |
|
|
|
|
8,955 |
|
|
|
|
10,112 |
|
Goodwill |
|
|
|
|
6,926 |
|
|
|
|
8,965 |
|
Other assets, net (including assets of hospitals held for sale of $26 and $41 at June 30, 2016
and December 31, 2015, respectively)
|
|
|
|
|
1,709 |
|
|
|
|
2,352 |
|
Total assets |
|
|
|
$ |
22,432 |
|
|
|
$ |
26,595 |
|
|
|
|
|
|
|
|
|
LIABILITIES AND EQUITY |
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
Current maturities of long-term debt |
|
|
|
$ |
253 |
|
|
|
$ |
229 |
|
Accounts payable |
|
|
|
|
979 |
|
|
|
|
1,258 |
|
Accrued interest |
|
|
|
|
208 |
|
|
|
|
227 |
|
Accrued liabilities (including liabilities of hospitals held for sale of $3 and $6 at June 30, 2016
and December 31, 2015, respectively)
|
|
|
|
|
1,288 |
|
|
|
|
1,358 |
|
Total current liabilities |
|
|
|
|
2,728 |
|
|
|
|
3,072 |
|
Long-term debt |
|
|
|
|
15,110 |
|
|
|
|
16,556 |
|
Deferred income taxes |
|
|
|
|
388 |
|
|
|
|
593 |
|
Other long-term liabilities |
|
|
|
|
1,658 |
|
|
|
|
1,698 |
|
Total liabilities |
|
|
|
|
19,884 |
|
|
|
|
21,919 |
|
Redeemable noncontrolling interests in equity of consolidated
subsidiaries |
|
|
|
|
546 |
|
|
|
|
571 |
|
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; 113,643,956 shares issued and
outstanding at June 30, 2016, and 113,732,933 shares issued and 112,757,384 shares outstanding at December 31, 2015
|
|
|
|
|
1 |
|
|
|
|
1 |
|
Additional paid-in capital |
|
|
|
|
1,965 |
|
|
|
|
1,963 |
|
Treasury stock, at cost, no shares at June 30, 2016 and 975,549 shares at December
31, 2015 |
|
|
|
|
- |
|
|
|
|
(7 |
) |
Accumulated other comprehensive loss |
|
|
|
|
(90 |
) |
|
|
|
(73 |
) |
Retained earnings |
|
|
|
|
19 |
|
|
|
|
2,135 |
|
Total Community Health Systems, Inc. stockholders’ equity |
|
|
|
|
1,895 |
|
|
|
|
4,019 |
|
Noncontrolling interests in equity of consolidated subsidiaries |
|
|
|
|
107 |
|
|
|
|
86 |
|
Total equity |
|
|
|
|
2,002 |
|
|
|
|
4,105 |
|
Total liabilities and equity |
|
|
|
$ |
22,432 |
|
|
|
$ |
26,595 |
|
|
|
|
|
_________
For footnotes, see pages 12, 13, 14 and 15.
|
|
|
|
|
|
|
|
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
|
Condensed Consolidated Statements of Cash Flows
(b) |
(In millions) |
(Unaudited) |
|
|
|
|
|
Six Months Ended June 30, |
|
|
|
|
2016 |
|
|
2015 |
|
|
|
|
|
|
|
|
Cash flows from operating activities |
|
|
|
|
|
|
|
Net (loss) income |
|
|
|
$ |
(1,371 |
) |
|
|
$ |
232 |
|
Adjustments to reconcile net (loss) income to net cash provided by operating
activities: |
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
|
|
574 |
|
|
|
|
588 |
|
Government settlement and related costs (j) |
|
|
|
|
1 |
|
|
|
|
1 |
|
Stock-based compensation expense |
|
|
|
|
26 |
|
|
|
|
30 |
|
Loss on sale, net |
|
|
|
|
- |
|
|
|
|
1 |
|
Impairment of hospitals sold or held for sale |
|
|
|
|
1 |
|
|
|
|
2 |
|
Impairment of goodwill and long-lived assets (i) |
|
|
|
|
1,656 |
|
|
|
|
6 |
|
Loss from early extinguishment of debt |
|
|
|
|
30 |
|
|
|
|
16 |
|
Gain on sale of investments in unconsolidated affiliates |
|
|
|
|
(94 |
) |
|
|
|
- |
|
Other non-cash expenses, net |
|
|
|
|
22 |
|
|
|
|
(1 |
) |
Changes in operating assets and liabilities, net of effects of acquisitions and
divestitures: |
|
|
|
|
|
|
|
Patient accounts receivable |
|
|
|
|
(40 |
) |
|
|
|
(88 |
) |
Supplies, prepaid expenses and other current assets |
|
|
|
|
31 |
|
|
|
|
(30 |
) |
Accounts payable, accrued liabilities and income taxes |
|
|
|
|
(212 |
) |
|
|
|
(238 |
) |
Other |
|
|
|
|
8 |
|
|
|
|
(15 |
) |
Net cash provided by operating activities |
|
|
|
|
632 |
|
|
|
|
504 |
|
|
|
|
|
|
|
|
|
Cash flows from investing activities |
|
|
|
|
|
|
|
Acquisitions of facilities and other related equipment |
|
|
|
|
(114 |
) |
|
|
|
(27 |
) |
Purchases of property and equipment |
|
|
|
|
(407 |
) |
|
|
|
(474 |
) |
Proceeds from disposition of hospitals and other ancillary operations |
|
|
|
|
12 |
|
|
|
|
62 |
|
Proceeds from sale of property and equipment |
|
|
|
|
7 |
|
|
|
|
11 |
|
Purchases of available-for-sale securities |
|
|
|
|
(63 |
) |
|
|
|
(90 |
) |
Proceeds from sales of available-for-sale securities |
|
|
|
|
233 |
|
|
|
|
86 |
|
Proceeds from sale of investments in unconsolidated affiliates |
|
|
|
|
403 |
|
|
|
|
- |
|
Distribution from Quorum Health Corporation |
|
|
|
|
1,219 |
|
|
|
|
- |
|
Increase in other investments |
|
|
|
|
(113 |
) |
|
|
|
(80 |
) |
Net cash provided by (used in) investing activities |
|
|
|
|
1,177 |
|
|
|
|
(512 |
) |
|
|
|
|
|
|
|
|
Cash flows from financing activities |
|
|
|
|
|
|
|
Proceeds from exercise of stock options |
|
|
|
|
- |
|
|
|
|
22 |
|
Repurchase of restricted stock shares for payroll tax withholding requirements |
|
|
|
|
(5 |
) |
|
|
|
(20 |
) |
Deferred financing costs and other debt-related costs |
|
|
|
|
(22 |
) |
|
|
|
(30 |
) |
Redemption of noncontrolling investments in joint ventures |
|
|
|
|
(16 |
) |
|
|
|
(14 |
) |
Distributions to noncontrolling investors in joint ventures |
|
|
|
|
(47 |
) |
|
|
|
(48 |
) |
Borrowings under credit agreements |
|
|
|
|
2,806 |
|
|
|
|
2,385 |
|
Proceeds from receivables facility |
|
|
|
|
31 |
|
|
|
|
91 |
|
Repayments of long-term indebtedness |
|
|
|
|
(4,279 |
) |
|
|
|
(2,522 |
) |
Net cash used in financing activities |
|
|
|
|
(1,532 |
) |
|
|
|
(136 |
) |
|
|
|
|
|
|
|
|
Net change in cash and cash equivalents |
|
|
|
|
277 |
|
|
|
|
(144 |
) |
Cash and cash equivalents at beginning of period |
|
|
|
|
184 |
|
|
|
|
509 |
|
Cash and cash equivalents at end of period |
|
|
|
$ |
461 |
|
|
|
$ |
365 |
|
|
_________
For footnotes, see pages 12, 13, 14 and 15.
|
|
|
|
|
|
|
Footnotes to Financial Highlights, Financial Statements and Selected Operating Data
(a) Continuing operating results exclude discontinued operations for the three and six months ended June 30, 2016 and 2015. Both
financial and statistical results exclude entities in discontinued operations for all periods presented. Same-store operating
results and statistical data exclude information for the hospitals divested in the spin-off of QHC in both the 2016 periods and the
comparable periods in 2015.
(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 legal matters pertaining to HMA, as defined in the CVR
agreement. If the aggregate amount of applicable losses under the CVR agreement exceeds a deductible of $18 million, then the
amount payable in respect of each CVR shall be reduced (but not below zero) by an amount equal to the quotient obtained by
dividing: (a) the product of (i) all losses in excess of the deductible and (ii) 90%; by (b) the number of CVRs outstanding on the
date on which final resolution of the existing litigation occurs. Since the HMA acquisition date of January 27, 2014, approximately
$31 million in costs have been incurred and approximately $29 million of settlements have been paid related to certain HMA legal
matters, which collectively exceed the deductible of $18 million under the CVR agreement. The Company 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 has been adjusted to its estimated fair value of $260 million at June 30, 2016. In addition, although
future legal fees (which are expensed as incurred) associated with the HMA legal matters have not been accrued or included in the
table below, such legal fees are taken into account in determining the total amount of reductions applied to the amounts owed to
CVR holders.
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 |
|
|
|
|
|
June 30, |
|
|
|
|
|
2016 |
Legal and other related costs incurred to date |
|
|
|
|
$ |
31 |
|
Settlements |
|
|
|
|
|
29 |
|
Estimated liability for probable contingencies |
|
|
|
|
|
- |
|
Estimated liability for unresolved contingencies at fair value |
|
|
|
|
|
260 |
|
Costs incurred plus certain estimated liabilities for CVR-related matters
|
|
|
|
|
|
320 |
|
Allocated to: |
|
|
|
|
|
CHS deductible of $18 million |
|
|
|
|
|
(18 |
) |
CHS co-insurance at 10% |
|
|
|
|
|
(29 |
) |
Recorded amounts that reduce CVR value after giving effect to deductible and co-insurance
|
|
|
|
|
$ |
273 |
|
|
|
|
|
|
|
CVRs outstanding |
|
|
|
|
|
265 |
|
|
(c) Included in discontinued operations for the three and six months ended June 30, 2016, are three smaller hospitals that are
being actively marketed for sale. Included in discontinued operations for the three and six months ended June 30, 2015, were
several hospitals held for sale at December 31, 2014, some of which were sold during the year ended December 31, 2015. The
after-tax loss for the sold or held for sale hospitals, including an impairment charge on certain long-lived assets sold or held
for sale, was approximately $1 million and $6 million for the three months ended June 30, 2016 and 2015, respectively, and
approximately $3 million and $20 million for the six months ended June 30, 2016 and 2015, respectively.
(d) The following table provides information needed to calculate (loss) income per share, which is adjusted for income
attributable to noncontrolling interests (in millions):
|
|
|
|
Three Months Ended |
|
|
|
Six Months Ended |
|
|
|
|
June 30, |
|
|
|
June 30, |
|
|
|
|
2016 |
|
|
2015 |
|
|
|
2016 |
|
|
2015 |
(Loss) income from continuing operations attributable to Community Health Systems, Inc. common
stockholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from continuing operations, net of taxes |
|
|
|
$ |
(1,405 |
) |
|
|
$ |
140 |
|
|
|
|
$ |
(1,368 |
) |
|
|
$ |
252 |
|
Less: Income from continuing operations attributable to noncontrolling interests
|
|
|
|
|
26 |
|
|
|
|
23 |
|
|
|
|
|
50 |
|
|
|
|
43 |
|
(Loss) income from continuing operations attributable to Community Health Systems, Inc. common
stockholders — basic and diluted
|
|
|
|
$ |
(1,431 |
) |
|
|
$ |
117 |
|
|
|
|
$ |
(1,418 |
) |
|
|
$ |
209 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from discontinued operations attributable to Community Health Systems, Inc. common
stockholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from discontinued operations, net of taxes |
|
|
|
$ |
(1 |
) |
|
|
$ |
(6 |
) |
|
|
|
$ |
(3 |
) |
|
|
$ |
(20 |
) |
Less: Loss from discontinued operations attributable to noncontrolling interests
|
|
|
|
|
- |
|
|
|
|
- |
|
|
|
|
|
- |
|
|
|
|
- |
|
Loss from discontinued operations attributable to Community Health Systems, Inc. common stockholders
— basic and diluted
|
|
|
|
$ |
(1 |
) |
|
|
$ |
(6 |
) |
|
|
|
$ |
(3 |
) |
|
|
$ |
(20 |
) |
|
(e) EBITDA is a non-GAAP financial measure which consists of net (loss) income attributable to Community Health Systems, Inc.
before interest, income taxes, and depreciation and amortization. Adjusted EBITDA, also a non-GAAP financial measure, is EBITDA
adjusted to exclude discontinued operations, loss from early extinguishment of debt, impairment of goodwill and long-lived assets,
gain on sale of investments in unconsolidated affiliates, net income attributable to noncontrolling interests, acquisition and
integration expenses from the acquisition of HMA, expenses incurred related to the spin-off of QHC, expense (income) related to
government legal settlements and related costs, and expense (income) from fair value adjustments related to the HMA legal
proceedings, accounted for at fair value, underlying the CVR agreement, and related legal expenses. 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 also aligns with a similar metric as defined in the Company’s senior secured credit
facility, which is a key component in the determination of the Company’s compliance with some of the covenants under the Company’s
senior secured credit facility, and is used 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 reflects the calculation of Adjusted EBITDA, as defined, from (loss) income from continuing operations
before income taxes and reconciles Adjusted EBITDA to net cash provided by operating activities as derived directly from the
condensed consolidated financial statements (in millions):
|
|
|
|
Three Months Ended |
|
|
|
Six Months Ended |
|
|
|
|
June 30, |
|
|
|
June 30, |
|
|
|
|
2016 |
|
|
2015 |
|
|
|
2016 |
|
|
2015 |
(Loss) income from continuing operations before income taxes |
|
|
|
$(1,543 |
) |
|
|
$214 |
|
|
|
|
$(1,480 |
) |
|
|
$382 |
|
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
|
276 |
|
|
|
291 |
|
|
|
|
574 |
|
|
|
587 |
|
Interest expense, net |
|
|
|
246 |
|
|
|
239 |
|
|
|
|
496 |
|
|
|
481 |
|
Loss from early extinguishment of debt |
|
|
|
30 |
|
|
|
9 |
|
|
|
|
30 |
|
|
|
16 |
|
Impairment of goodwill and long-lived assets |
|
|
|
1,639 |
|
|
|
6 |
|
|
|
|
1,656 |
|
|
|
6 |
|
Gain on sale of investments in unconsolidated affiliates |
|
|
|
(94 |
) |
|
|
- |
|
|
|
|
(94 |
) |
|
|
- |
|
Expenses related to the acquisition and integration of HMA |
|
|
|
- |
|
|
|
- |
|
|
|
|
- |
|
|
|
1 |
|
(Income) expense from government settlement and related costs |
|
|
|
- |
|
|
|
(6 |
) |
|
|
|
1 |
|
|
|
1 |
|
(Income) expense from fair value adjustments and legal expenses related to cases covered by the
CVR
|
|
|
|
(1 |
) |
|
|
16 |
|
|
|
|
- |
|
|
|
9 |
|
Expenses related to the spin-off of QHC |
|
|
|
10 |
|
|
|
- |
|
|
|
|
13 |
|
|
|
- |
|
Adjusted EBITDA |
|
|
|
$563 |
|
|
|
$769 |
|
|
|
|
$1,196 |
|
|
|
$1,483 |
|
Adjusted EBITDA |
|
|
|
$563 |
|
|
|
$769 |
|
|
|
|
$1,196 |
|
|
|
$1,483 |
|
Interest expense, net |
|
|
|
(246 |
) |
|
|
(239 |
) |
|
|
|
(496 |
) |
|
|
(481 |
) |
Benefit from (provision for) income taxes |
|
|
|
138 |
|
|
|
(74 |
) |
|
|
|
112 |
|
|
|
(130 |
) |
Loss from operations of entities sold or held for sale, net of taxes
|
|
|
|
(1 |
) |
|
|
(6 |
) |
|
|
|
(2 |
) |
|
|
(17 |
) |
Other non-cash expenses, net |
|
|
|
20 |
|
|
|
6 |
|
|
|
|
49 |
|
|
|
26 |
|
Changes in operating assets and liabilities, net of effects of acquisitions and divestitures
|
|
|
|
(136 |
) |
|
|
109 |
|
|
|
|
(227 |
) |
|
|
(377 |
) |
Net cash provided by operating activities |
|
|
|
$338 |
|
|
|
$565 |
|
|
|
|
$632 |
|
|
|
$504 |
|
|
(f) Included in non-same-store (loss) income from operations and (loss) income from continuing operations are pre-tax charges
related to acquisition costs of $1 million and $2 million for the three months ended June 30, 2016 and 2015, respectively, and $3
million and $5 million for the six months ended June 30, 2016 and 2015, respectively.
(g) 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 |
|
|
Six Months Ended |
|
|
|
|
June 30, |
|
|
June 30, |
|
|
|
|
2016 |
|
2015 |
|
|
2016 |
|
2015 |
Weighted-average number of shares outstanding - basic
|
|
|
|
111 |
|
115 |
|
|
111 |
|
115 |
Add effect of dilutive securities: |
|
|
|
|
|
|
|
|
|
|
|
Stock awards and options |
|
|
|
- |
|
1 |
|
|
- |
|
1 |
Weighted-average number of shares outstanding - diluted
|
|
|
|
111 |
|
116 |
|
|
111 |
|
116 |
|
The Company generated a loss from continuing operations attributable to Community Health Systems, Inc. common stockholders for
the three and six months ended June 30, 2016, so the effect of dilutive securities is not considered because their effect would be
antidilutive. If the Company had generated income from continuing operations during the three and six months ended June 30, 2016,
the effect of restricted stock awards, employee stock options, and other equity-based awards on the diluted shares calculation
would have been an increase in shares of 168,764 shares and 115,135 shares, respectively.
(h) The following supplemental tables reconcile (loss) 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 |
|
|
Six Months Ended |
|
|
|
|
June 30, |
|
|
June 30, |
|
|
|
|
2016 |
|
|
2015 |
|
|
2016 |
|
|
2015 |
|
|
|
|
(per share - diluted) |
|
|
(per share - diluted) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from continuing operations, as reported |
|
|
|
$ |
(12.90 |
) |
|
|
$ |
1.01 |
|
|
|
$ |
(12.82 |
) |
|
|
$ |
1.80 |
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from early extinguishment of debt |
|
|
|
|
0.18 |
|
|
|
|
0.05 |
|
|
|
|
0.18 |
|
|
|
|
0.09 |
Impairment of goodwill and long-lived assets |
|
|
|
|
13.29 |
|
|
|
|
0.04 |
|
|
|
|
13.45 |
|
|
|
|
0.04 |
(Income) expense from government settlement and related costs
|
|
|
|
|
- |
|
|
|
|
(0.03 |
) |
|
|
|
- |
|
|
|
|
0.01 |
(Income) expense from fair value adjustments and legal expenses related to cases covered by the
CVR
|
|
|
|
|
- |
|
|
|
|
0.08 |
|
|
|
|
- |
|
|
|
|
0.05 |
Gain on sale of investments in unconsolidated affiliates |
|
|
|
|
(0.54 |
) |
|
|
|
- |
|
|
|
|
(0.54 |
) |
|
|
|
- |
Expenses related to the spin-off of QHC |
|
|
|
|
0.07 |
|
|
|
|
- |
|
|
|
|
0.09 |
|
|
|
|
- |
Income from continuing operations, excluding adjustments |
|
|
|
$ |
0.09 |
|
|
|
$ |
1.14 |
|
|
|
$ |
0.36 |
|
|
|
$ |
1.99 |
|
|
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
|
June 30, |
|
|
June 30, |
|
|
|
|
2016 |
|
|
2015 |
|
|
2016 |
|
|
2015 |
|
|
|
|
(per share - diluted) |
|
|
(per share - diluted) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income, as reported |
|
|
|
$ |
(12.91 |
) |
|
|
$ |
0.95 |
|
|
|
$ |
(12.85 |
) |
|
|
$ |
1.64 |
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from early extinguishment of debt |
|
|
|
|
0.18 |
|
|
|
|
0.05 |
|
|
|
|
0.18 |
|
|
|
|
0.09 |
Impairment of goodwill and long-lived assets |
|
|
|
|
13.29 |
|
|
|
|
0.04 |
|
|
|
|
13.45 |
|
|
|
|
0.04 |
(Income) expense from government settlement and related costs
|
|
|
|
|
- |
|
|
|
|
(0.03 |
) |
|
|
|
- |
|
|
|
|
0.01 |
(Income) expense from fair value adjustments and legal expenses related to cases covered by the
CVR
|
|
|
|
|
- |
|
|
|
|
0.08 |
|
|
|
|
- |
|
|
|
|
0.05 |
Gain on sale of investments in unconsolidated affiliates |
|
|
|
|
(0.54 |
) |
|
|
|
- |
|
|
|
|
(0.54 |
) |
|
|
|
- |
Expenses related to the spin-off of QHC |
|
|
|
|
0.07 |
|
|
|
|
- |
|
|
|
|
0.09 |
|
|
|
|
- |
Net income, excluding adjustments |
|
|
|
$ |
0.08 |
|
|
|
$ |
1.08 |
|
|
|
$ |
0.33 |
|
|
|
$ |
1.82 |
|
(i) Both loss from operations and loss from continuing operations for the three and six months ended June 30, 2016, included an
impairment charge of approximately $1.639 billion, of which $1.400 billion was a charge related to the write-down of a portion of
the goodwill for the Company’s hospital operation reporting unit, and $239 million was a charge related to the adjustment of the
fair value of long-lived assets at certain of the Company’s underperforming hospitals and some of the hospitals that the Company is
currently marketing for sale that have experienced declining operating results or have had a decline in their estimated fair value
since the Company’s last impairment review. Of this $239 million impairment charge, $169 million related to the reduction in value
of long-lived assets at such hospitals that the Company is currently marketing for sale, and $70 million related to the reduction
in value of long-lived assets at such under-performing hospitals. The impairment charge recorded for goodwill is an estimated
charge resulting from a determination that the carrying value of the Company’s hospital operations reporting unit exceeded its fair
value, primarily as the result of the decline in the Company’s market capitalization and fair value of long-term debt during the
three months ended June 30, 2016, as well as a decrease in the estimated future earnings of the Company compared to previous
estimates. As allowed by generally accepted accounting principles, this amount represents an estimate of the implied goodwill in
step two of the goodwill evaluation process until that process can be finalized, which the Company expects to complete during the
third quarter of 2016. Any increases or decreases in the fair value and resulting implied value of goodwill will be recorded when
the evaluation is complete. Also, included in loss from operations and loss from continuing operations for the six months ended
June 30, 2016, was an impairment charge of approximately $17 million incurred during the three months ended March 31, 2016, related
to the write-down of a portion of the goodwill allocated to the divestitures of Lehigh Regional Medical Center and Bartow Regional
Medical Center, as well as the impairment of certain long-lived assets at one of the Company’s smaller hospitals where the decision
was made during the quarter ended March 31, 2016, to permanently close the hospital. These impairment charges do not have an impact
on the calculation of the Company’s financial covenants under the Company’s Credit Facility. Both income from operations and income
from continuing operations for the three and six months ended June 30, 2015, include an impairment charge of approximately $6
million related to the allocated reporting unit goodwill for one hospital where a definitive agreement to sell the hospital was
entered into during the quarter ended June 30, 2015.
(j) The $0.03 per share (diluted) of income for “Government settlement and related costs” for the three months ended June 30,
2015, related primarily to favorable outcomes for several qui tam matters previously accrued and settled in principle, net of
related legal expenses. The $0.01 per share (diluted) of expense for “Government settlement and related costs” for the six months
ended June 30, 2015, is the net impact of several qui tam lawsuits settled in principle during the three months ended June 30,
2015, and related legal expenses.
(k) On April 29, 2016, the Company sold its unconsolidated minority equity interests in Valley Health System, LLC, a joint
venture with Universal Health Systems, Inc. (“UHS”) representing four hospitals in Las Vegas, Nevada, in which the Company owned a
27.5% interest, and in Summerlin Hospital Medical Center, LLC, a joint venture with UHS representing one hospital in Las Vegas,
Nevada, in which the Company owned a 26.1% interest. The Company received $403 million in cash in return for the sale of its equity
interests and recognized a gain on sale of investments in unconsolidated affiliates during the three and six months ended June 30,
2016.
(l) Total per share amounts may not add due to rounding.
Regulation FD Disclosure
Set forth below is selected information concerning the Company’s projected consolidated operating results for the year ending
December 31, 2016. These projections update selected guidance issued on May 2, 2016, 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 2016
guidance should be considered in conjunction with the assumptions included herein. See pages 18 and 19 for a list of factors that
could affect the future results of the Company or the healthcare industry generally.
A reconciliation of the Company’s projected 2016 Adjusted EBITDA, a forward-looking non-GAAP financial measure, to the most
directly comparable GAAP financial measure is omitted from this release because the Company is unable to provide such
reconciliation without unreasonable effort (the Company’s presentation of projected net cash provided by operating activities later
in this Regulation FD Disclosure section is not projected using the same factors as the Adjusted EBITDA guidance, as there are
different assumptions made in connection with the determination of such projected net cash provided by operating activities
amount). This inability results from the inherent difficulty in forecasting generally and in quantifying certain projected amounts
that are necessary for such reconciliation. In particular, sufficient information is not available to calculate certain adjustments
required for such reconciliation without unreasonable effort, including interest expense, net; provision for (benefit from) income
taxes; other non-cash expenses, net; other changes in operating assets and liabilities and other adjustments that would be
necessary to prepare a forward-looking statement of cash flows prepared in accordance with GAAP. For the same reasons, the Company
is unable to address the probable significance of the unavailable information.
The following is provided as guidance to analysts and investors:
|
|
|
|
2016 Projection Range |
Net operating revenues less provision for bad debts (in millions) |
|
|
|
$ |
17,700 |
|
|
|
to |
|
|
$ |
18,300 |
|
Adjusted EBITDA (in millions) |
|
|
|
$ |
2,400 |
|
|
|
to |
|
|
$ |
2,550 |
|
Income from continuing operations per share - diluted |
|
|
|
$ |
1.40 |
|
|
|
to |
|
|
$ |
1.90 |
|
Same-store hospital annual adjusted admissions growth |
|
|
|
|
0.5 |
% |
|
|
to |
|
|
|
1.2 |
% |
Weighted-average diluted shares, in millions |
|
|
|
|
111.5 |
|
|
|
to |
|
|
|
112.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following assumptions were used in developing the 2016 guidance provided above:
- The guidance excludes the financial results of the following:
- Quorum Health Resources, LLC and the 38 hospitals associated with the spin-off of QHC from the
spin-off date of April 29, 2016 through December 31, 2016;
- Our investment in a joint venture representing five hospitals in Las Vegas, Nevada that was
divested in the second quarter of 2016;
- Three small hospitals which remain held-for-sale for which the operating results have been
classified in discontinued operations;
- 12 hospitals that are being actively marketed for sale that we assume will be divested by the end
of 2016; and
- An investment in non-hospital operations that is being actively marketed for sale that we assume
will be divested by the end of 2016.
The Company may also consider additional hospitals for disposition for which the operating results have not been excluded from
this guidance.
- The Company’s projections also exclude the following:
- Payments related to the CVRs issued in connection with the HMA acquisition, and changes in the
valuation of liabilities underlying the CVR;
- Losses from the early extinguishment of debt;
- Impairment of goodwill and long-lived assets;
- Resolution of government investigations or other significant legal settlements;
- Costs incurred in connection with the spin-off of QHC; and
- Other significant gains or losses that neither relate to the ordinary course of business nor
reflect the Company’s underlying business performance.
Other assumptions used in the above guidance:
- The 2016 projections include the results from the date of acquisition of an 80% interest in two
hospitals in La Porte, Indiana and Knox, Indiana, which were acquired effective March 1, 2016, and an 80% interest in one
hospital in Fayetteville, Arkansas, which was acquired effective April 1, 2016.
- Health Information Technology (HITECH) electronic health records incentive reimbursement of
approximately $60 million to $70 million for the year ended December 31, 2016.
- Same-store hospital annual adjusted admissions growth of 0.5% to 1.2% for 2016, 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
6.1% to 6.2% for 2016. 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 5.3% to 5.4%;
however, interest expense is a fixed cost and percentages may vary as revenue varies. Interest expense has been adjusted to
reflect the repayment of debt with proceeds from the QHC spin-off as well as the anticipated divestitures, based on the expected
timing of those divestitures. Total fixed rate debt, including swaps, is expected to average approximately 65% to 75% of total
debt during 2016.
- Expressed as a percentage of net operating revenues, equity in earnings of unconsolidated affiliates
of approximately 0.1% to 0.2% for 2016.
- Expressed as a percentage of net operating revenues, net income attributable to noncontrolling
interests of approximately 0.5% to 0.6% for 2016.
- Expressed as a percentage of income from continuing operations before income taxes, provision for
income tax of approximately 30.0% to 32.0% for 2016.
- Capital expenditures are projected as follows (in millions):
|
|
|
|
|
2016 |
|
|
|
|
|
Guidance |
Total |
|
|
|
|
$725 |
|
|
to |
|
|
$875 |
|
- Net cash provided by operating activities, excluding costs incurred in connection with the spin-off
of QHC, cash flows related to the CVR and settlement of legal contingencies, is projected as follows (in millions):
|
|
|
|
|
2016 |
|
|
|
|
|
Guidance |
Total |
|
|
|
|
$1,300 |
|
|
to |
|
|
$1,400 |
|
- Weighted-average shares outstanding are projected to be between approximately 111.5 million to 112.5
million for the year ended 2016.
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
health insurance exchanges or alter the provision of healthcare to state residents through regulation or otherwise;
- the success and long-term viability of health insurance exchanges, which may be impacted by whether a
sufficient number of payors participate;
- risks associated with our substantial indebtedness, leverage and debt service obligations, including
our ability to incur additional indebtedness;
- 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 provider arrangements with payors and the
terms of these arrangements, which may be further impacted by the increasing consolidation of health insurers and managed care
companies;
- changes in, or the failure to comply with, contract terms with payors and changes in reimbursement
rates paid by federal or state healthcare programs or commercial payors;
- any potential additional impairments in the carrying value of goodwill (or change in the estimated
goodwill impairment charge incurred during the three months ended June 30, 2016, pending the completion of our goodwill
evaluation process), other intangible assets, or other long-lived assets, or changes in the useful lives of other intangible
assets;
- 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, including the
impact of the implementation of ICD-10 and decreases in collectability which may result from, among other things, self-pay growth
in states that have not expanded Medicaid and difficulties in recovering payments for which patients are responsible, including
co-pays and deductibles;
- the efforts of insurers, healthcare providers and others to contain healthcare costs, including the
trend toward value-based purchasing;
- 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 and drug 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, including the intended
disposition of certain hospitals and other investments as referenced herein, our ability to complete any such acquisitions or
divestitures on desired terms or at all, the timing of the completion of any such acquisitions or divestitures, and our ability
to realize the intended benefits from any such acquisitions or divestitures;
- our ability to successfully integrate any acquired hospitals, including those of HMA, or to recognize
expected synergies from acquisitions;
- 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;
- 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 potential future cyber-attacks or security breaches;
- the effects of the spin-off of QHC that was completed on April 29, 2016 on our business, including
our ability to achieve the anticipated benefits of the spin-off; 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 and six months ended June 30, 2016, are not necessarily indicative of the
results that may be experienced for any future periods. The Company cautions that the projections for calendar year 2016 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.
![](http://cts.businesswire.com/ct/CT?id=bwnews&sty=20160802006847r1&sid=mstr1&distro=nx&lang=en)
Community Health Systems, Inc.
W. Larry Cash, 615-465-7000
President of Financial Services and Chief Financial Officer
View source version on businesswire.com: http://www.businesswire.com/news/home/20160802006847/en/