Quorum Health Corporation (NYSE: QHC) (the “Company”) today
announced its operating and financial results for the three and six
months ended June 30, 2017.
Net operating revenues for the three months ended June 30, 2017
increased $0.4 million to $530.1 million, compared to $529.7
million for the same period in 2016. Net operating revenues for the
quarter were negatively impacted by a decrease of $18.2 million
from the four hospitals divested in December 2016 and in the first
half of 2017, and a decrease of $11.3 million resulting from the
Company’s inability to accrue in the 2017 period for the California
Hospital Quality Assurance Fee (“HQAF”) program revenues for the
2017 to 2019 program period pending approval by Centers for
Medicare & Medicaid Services (“CMS”). Excluding these amounts
in both periods, net operating revenues increased $29.9 million for
the three months ended June 30, 2017 compared to the same period in
2016, primarily due to favorable volume and rate variances and a
decrease in the provision for bad debts. Net loss attributable to
Quorum Health Corporation for the three months ended June 30, 2017
was $(30.6) million, or $(1.09) per share, compared to $(245.1)
million, or $(8.63) per share, for the same period in 2016. The net
loss for the three months ended June 30, 2017 was impacted by an
$8.6 million decrease, net of provider taxes, related to the
California HQAF program and $12.9 million of impairment charges
related to the ten hospitals identified for potential divestiture.
The Company’s 2016 results for the same period included $250.4
million of impairment charges. On a same-facility basis, as defined
in footnote (j), the Company’s operating results for the three
months ended June 30, 2017 reflect a 1.5% decrease in admissions
and a 0.2% decrease in adjusted admissions compared to the same
period in 2016. Excluding the four divested hospitals and ten
hospitals intended for divestiture, admissions and adjusted
admissions increased 1.5% and 2.6%, respectively, for these same
periods.
Adjusted EBITDA for the three months ended June 30, 2017 was
$34.4 million, compared to $29.2 million for the same period in
2016. Adjusted EBITDA was negatively impacted by the Company’s
inability to accrue for the California HQAF program in the 2017
period, as stated above. Adjusted EBITDA for the three months ended
June 30, 2016 included $8.6 million related to this program. The
divested hospitals negatively impacted EBITDA by $4.7 million and
$6.1 million for the three months ended June 30, 2017 and 2016,
respectively. As a result, Adjusted EBITDA, Adjusted for
Divestitures, was $39.1 million and $35.3 million for the three
months ended June 30, 2017 and 2016, respectively.
Net operating revenues for the six months ended June 30, 2017
decreased $21.5 million to $1,057.8 million, compared to $1,079.3
million for the same period in 2016. Net operating revenues
decreased $31.5 million related to the divested hospitals and
decreased $22.3 million due to the inability to accrue revenues
related to the California HQAF program, as discussed above.
Excluding these amounts, net operating revenues of the remaining
hospitals increased $32.3 million for the six months ended June 30,
2017 compared to the same period in 2016, primarily due to
favorable volume and rate variances and a decrease in the provision
for bad debts. Net loss attributable to Quorum Health Corporation
for the six months ended June 30, 2017 was $(58.2) million, or
$(2.08) per share, compared to $(250.1) million, or $(8.80) per
share, for the same period in 2016. The 2017 period included
impairment charges of $16.2 million related to hospitals held for
sale or identified for potential divestiture and a net gain of $5.2
million on the sale of hospitals. The 2016 period included $250.4
million of impairment charges mentioned above, $16.9 million in
revenues, net of provider taxes, related to the California HQAF
program and $4.9 million of transaction costs related to the
Spin-off. On a same-facility basis, the Company’s operating results
for the six months ended June 30, 2017 reflect a 1.8% decrease in
admissions and a 0.5% decrease in adjusted admissions compared to
the same period in 2016. Excluding divested hospitals and hospitals
intended for divestiture, admissions and adjusted admissions
increased 0.4% and 1.4%, respectively, for these same periods.
Adjusted EBITDA for the six months ended June 30, 2017 was $60.6
million, compared to $85.5 million for the same period in 2016.
Adjusted EBITDA was negatively impacted by the Company’s inability
to accrue for the California HQAF program in the 2017 period, as
stated above. Adjusted EBITDA for the six months ended June 30,
2016 included $16.9 million related to this program. The two
hospitals divested in December 2016, in addition to the two
hospitals divested in 2017, negatively impacted EBITDA by $6.7
million and $9.4 million for the six months ended June 30, 2017 and
2016, respectively. As a result, Adjusted EBITDA, Adjusted for
Divestitures, was $67.2 million and $94.9 million for the six
months ended June 30, 2017 and 2016, respectively. The Company had
combined proceeds from these four divestitures of $34.0 million, of
which $22.4 million was utilized to pay down the Company’s term
loan under its credit facility.
Commenting on the results, Thomas D. Miller, president and chief
executive officer of Quorum Health Corporation, said, “We believe
the second quarter results demonstrate our commitment to improve
operations. Our strategy to divest underperforming hospitals will
improve our financial position. Our plan is to complete additional
divestitures during the third quarter resulting in continued
reductions in debt levels. We believe our financial operations will
also benefit from improvements in billing and collections
processes, resulting from our focused efforts in this area. We have
dedicated our remaining core markets to quality and the expansion
of service capabilities to improve volume growth and enhance
profitability.”
Financial Outlook
The Company’s updated financial outlook for the year ending
December 31, 2017 is discussed below. These projections update
selected guidance issued on March 29, 2017 and are based on the
Company’s historical operating performance, current economic,
demographic and regulatory trends and other assumptions that the
Company believes are reasonable at this time. The 2017 guidance
should be considered in conjunction with the assumptions included
herein. See “Forward-Looking Statements” below for a list of
factors that could affect the future results of the Company or the
healthcare industry generally.
The Company expects net operating revenues for the year ending
December 31, 2017 to range from $2.050 billion to $2.100 billion.
The Company expects Adjusted EBITDA for the year ending December
31, 2017 to range from $150 million to $170 million and Adjusted
EBITDA, Adjusted for Potential Divestitures to range from $170
million to $190 million. The guidance gives effect to: (i)
divestitures and potential divestitures stated above, (ii) the
approval of the California Department of Health Care Services’ HQAF
Program by CMS, which we estimate to be approved in the fourth
quarter of 2017 at approximately $21 million, approximately $13
million less than 2016, (iii) the reduction of approximately $7
million in electronic health records incentives earned in 2017
compared to the 2016 amounts, (iv) the inclusion of approximately
$10 million to $13 million of non-cash stock-based compensation and
other non-cash benefits expense and approximately $25 million to
$26 million of non-cash insurance expense, and (v) no estimate for
the effects of any changes to the Affordable Care Act. Adjusted
EBITDA, Adjusted for Potential Divestitures includes the same
assumptions above, in addition to excluding the negative EBITDA of
the potential divestitures from the beginning of the year. A
reconciliation of the Company’s projected 2017 Adjusted EBITDA, and
Adjusted EBITDA, Adjusted for Potential Divestitures, each a
forward-looking non-GAAP financial measure, to net income (loss),
the most directly comparable U.S. GAAP financial measure, is
omitted from this press release because the Company is unable to
provide such reconciliation without unreasonable effort. 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, income tax
expense (benefit) and other adjustments that would be necessary to
prepare a forward-looking statement of net income (loss) in
accordance with U.S. GAAP. For the same reasons, the Company is
unable to address the probable significance of the unavailable
information.
About Quorum Health Corporation
The principal business of Quorum Health Corporation is to
provide hospital and outpatient healthcare services in its markets
across the United States. As of June 30, 2017, the Company owned or
leased 34 hospitals in rural and mid-sized markets located across
16 states and licensed for 3,168 beds. Through Quorum Health
Resources LLC, a wholly-owned subsidiary, the Company provides
hospital management advisory and healthcare consulting services.
Over 95% of the Company’s net operating revenues are attributable
to its hospital operations business.
The Company’s headquarters are located in Brentwood, Tennessee,
a suburb south of Nashville. Shares in Quorum Health Corporation
are traded on the NYSE under the symbol “QHC.” More information
about the Company can be found on its website at www.quorumhealth.com.
Quorum Health Corporation will hold a conference call on
Thursday, August 10, 2017, 10:00 a.m. Central time, 11:00 a.m.
Eastern, to review operating and financial results for the three
and six months ended June 30, 2017. 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.quorumhealth.com. To listen to the live call,
please go to the website at least 15 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 for
approximately 30 days. Copies of this press release and the
Company’s Current Report on Form 8-K (including this press release)
are available on the Company’s website at www.quorumhealth.com.
QUORUM HEALTH CORPORATION UNAUDITED CONDENSED
CONSOLIDATED AND COMBINED STATEMENTS OF INCOME (LOSS) (In
Thousands, Except Earnings per Share and Shares)
Three Months Ended June 30, 2017 2016
% of % of $ Amount
Revenues $ Amount Revenues
Operating revenues, net of contractual allowances and discounts (a)
$ 585,215 $ 598,163 Provision for bad debts 55,069
68,426 Net operating revenues
530,146 100.0 % 529,737 100.0 % Operating
costs and expenses: Salaries and benefits 265,309 50.0 % 264,886
50.0 % Supplies 64,112 12.1 % 64,136 12.1 % Other operating
expenses (a) 157,613 29.8 % 163,185 30.8 % Depreciation and
amortization 20,586 3.9 % 31,463 5.9 % Rent 12,152 2.3 % 12,545 2.4
% Electronic health records incentives earned (1,777 ) (0.3 )%
(4,247 ) (0.8 )% Legal, professional and settlement costs 3,934 0.7
% 5,447 1.0 % Impairment of long-lived assets and goodwill 12,900
2.4 % 250,400 47.3 % Loss (gain) on sale of hospitals, net (4,321 )
(0.8 )% — — % Transaction costs related to the Spin-off —
— % 1,177 0.2 % Total operating costs and
expenses 530,508 100.1 % 788,992 148.9
% Income (loss) from operations (362 ) (0.1 )% (259,255 ) (48.9 )%
Interest expense, net 30,458 5.7 % 29,276
5.6 % Income (loss) before income taxes (30,820 ) (5.8 )%
(288,531 ) (54.5 )% Provision for (benefit from) income taxes
(245 ) — % (44,565 ) (8.4 )% Net income
(loss) (b) (30,575 ) (5.8 )% (243,966 ) (46.1 )% Less: Net income
(loss) attributable to noncontrolling interests 55 —
% 1,095 0.2 % Net income (loss) attributable to
Quorum Health Corporation $ (30,630 ) (5.8 )% $ (245,061 )
(46.3 )% Earnings (loss) per share attributable to
Quorum Health Corporation stockholders: Basic and diluted (c) $
(1.09 ) $ (8.63 ) Weighted-average shares outstanding: Basic and
diluted (d) 28,145,215 28,412,720
For footnotes, see pages 8-10.
QUORUM HEALTH CORPORATION UNAUDITED
CONDENSED CONSOLIDATED AND COMBINED STATEMENTS OF INCOME (LOSS)
(In Thousands, Except Earnings per Share and Shares)
Six Months Ended June 30, 2017 2016
% of % of $ Amount
Revenues $ Amount Revenues
Operating revenues, net of contractual allowances and discounts (a)
$ 1,173,160 $ 1,212,647 Provision for bad debts 115,374
133,359 Net operating revenues
1,057,786 100.0 % 1,079,288 100.0 %
Operating costs and expenses: Salaries and benefits 529,911 50.1 %
521,748 48.3 % Supplies 127,934 12.1 % 127,797 11.8 % Other
operating expenses (a) 321,037 30.4 % 327,648 30.5 % Depreciation
and amortization 42,706 4.0 % 62,620 5.8 % Rent 24,254 2.3 % 25,094
2.3 % Electronic health records incentives earned (4,229 ) (0.4 )%
(8,455 ) (0.8 )% Legal, professional and settlement costs 4,469 0.4
% 5,688 0.5 % Impairment of long-lived assets and goodwill 16,200
1.5 % 250,400 23.2 % Loss (gain) on sale of hospitals, net (5,191 )
(0.5 )% — — % Transaction costs related to the Spin-off 31
— % 4,912 0.5 % Total operating costs and
expenses 1,057,122 99.9 % 1,317,452
122.1 % Income (loss) from operations 664 0.1 % (238,164 ) (22.1 )%
Interest expense, net 57,988 5.5 % 56,728
5.2 % Income (loss) before income taxes (57,324 ) (5.4 )%
(294,892 ) (27.3 )% Provision for (benefit from) income taxes
456 0.1 % (46,239 ) (4.3 )% Net income
(loss) (b) (57,780 ) (5.5 )% (248,653 ) (23.0 )% Less: Net income
(loss) attributable to noncontrolling interests 411 —
% 1,410 0.2 % Net income (loss) attributable to
Quorum Health Corporation $ (58,191 ) (5.5 )% $ (250,063 )
(23.2 )% Earnings (loss) per share attributable to
Quorum Health Corporation stockholders: Basic and diluted (c) $
(2.08 ) $ (8.80 ) Weighted-average shares outstanding: Basic and
diluted (d) 27,977,738 28,412,389
For footnotes, see pages 8-10.
QUORUM HEALTH CORPORATION UNAUDITED
CONSOLIDATED AND COMBINED SELECTED OPERATING DATA
Three Months Ended June 30, 2017
2016 Variance % Variance
Consolidated and combined: Number of
licensed beds at end of period (e) 3,168 3,579 (411 ) (11.5 )%
Admissions (f) 22,270 23,618 (1,348 ) (5.7 )% Adjusted admissions
(g) 55,634 58,942 (3,308 ) (5.6 )% Emergency room visits (h)
167,575 182,301 (14,726 ) (8.1 )% Medicare case mix index (i) 1.43
1.38 0.05 3.6 % Same-facility: (j) Number of licensed beds
at end of period (e) 3,168 3,168 — — % Admissions (f) 22,270 22,617
(347 ) (1.5 )% Adjusted admissions (g) 55,634 55,730 (96 ) (0.2 )%
Emergency room visits (h) 167,575 171,779 (4,204 ) (2.4 )% Medicare
case mix index (i) 1.41 1.39 0.02 1.4 %
Six Months
Ended June 30, 2017 2016 Variance %
Variance Consolidated and combined: Number of licensed
beds at end of period (e) 3,168 3,579 (411 ) (11.5 )% Admissions
(f) 45,926 48,610 (2,684 ) (5.5 )% Adjusted admissions (g) 112,501
118,746 (6,245 ) (5.3 )% Emergency room visits (h) 340,514 367,235
(26,721 ) (7.3 )% Medicare case mix index (i) 1.41 1.37 0.04 2.9 %
Same-facility: (j) Number of licensed beds at end of period
(e) 3,168 3,168 — — % Admissions (f) 45,708 46,550 (842 ) (1.8 )%
Adjusted admissions (g) 111,763 112,346 (583 ) (0.5 )% Emergency
room visits (h) 338,464 345,973 (7,509 ) (2.2 )% Medicare case mix
index (i) 1.40 1.38 0.02 1.4 %
For footnotes, see pages 8-10.
QUORUM HEALTH CORPORATION UNAUDITED
CONDENSED CONSOLIDATED AND COMBINED BALANCE SHEETS (In
Thousands, Except Par Value per Share and Shares)
June 30, December 31, 2017 2016
ASSETS Current assets: Cash and cash equivalents $ 22,405 $
25,455 Patient accounts receivable, net of allowance for doubtful
accounts of $340,197 and $360,796 at June 30, 2017 and December 31,
2016, respectively 409,217 380,685 Inventories 54,269 58,124
Prepaid expenses 27,641 23,028 Due from third-party payors 97,172
116,235 Current assets of hospitals held for sale 5,813 1,502 Other
current assets 48,329 57,942 Total current assets
664,846 662,971 Property and equipment, at cost
1,436,407 1,519,975 Less: Accumulated depreciation and amortization
(724,929 ) (786,075 ) Total property and equipment,
net 711,478 733,900 Goodwill 409,781 416,833
Intangible assets, net 77,694 84,982 Long-term assets of hospitals
held for sale 14,381 6,851 Other long-term assets 109,321
88,833 Total assets $ 1,987,501 $ 1,994,370
LIABILITIES
AND EQUITY Current liabilities: Current maturities of long-term
debt $ 1,649 $ 5,683 Accounts payable 170,862 169,684 Accrued
liabilities: Accrued salaries and benefits 94,381 98,803 Accrued
interest 10,142 19,915 Due to third-party payors 38,881 42,537
Current liabilities of hospitals held for sale 1,391 492 Other
current liabilities 47,163 53,268 Total current
liabilities 364,469 390,382 Long-term debt 1,284,721 1,241,142
Deferred income tax liabilities, net 31,729 31,474 Other long-term
liabilities 141,756 108,996 Total liabilities
1,822,675 1,771,994 Redeemable noncontrolling interests
5,614 6,807 Equity: Quorum Health Corporation
stockholders' equity: Preferred stock, $0.0001 par value per share,
100,000,000 shares authorized, none issued — — Common stock,
$0.0001 par value per share, 300,000,000 shares authorized;
30,297,524 shares issued and outstanding at June 30, 2017, and
29,482,050 shares issued and outstanding at December 31, 2016 3 3
Additional paid-in capital 541,774 537,911 Accumulated other
comprehensive income (loss) (2,518 ) (2,760 ) Accumulated deficit
(392,217 ) (334,026 ) Total Quorum Health Corporation
stockholders' equity 147,042 201,128 Nonredeemable noncontrolling
interests 12,170 14,441 Total equity 159,212
215,569 Total liabilities and equity $ 1,987,501 $ 1,994,370
For footnotes, see pages 8-10.
QUORUM HEALTH CORPORATION UNAUDITED
CONDENSED CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS
(In Thousands) Three Months Ended June 30,
Six Months Ended June 30, 2017 2016
2017 2016 Cash flows from operating
activities: Net income (loss) $ (30,575 ) $ (243,966 ) $ (57,780 )
$ (248,653 ) Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities: Depreciation and
amortization 20,586 31,463 42,706 62,620 Non-cash interest expense
700 729 1,430 729 Provision for (benefit from) deferred income
taxes (346 ) (47,451 ) 255 (47,451 ) Stock-based compensation
expense 2,531 1,897 5,328 1,897 Impairment of long-lived assets and
goodwill 12,900 250,400 16,200 250,400 Loss (gain) on sale of
hospitals, net (4,321 ) — (5,191 ) — Changes in reserves for
self-insurance claims, net of payments 7,042 8,901 11,254 16,891
Changes in reserves for legal, professional and settlement costs,
net of payments — 4,642 (3,651 ) 4,642 Other non-cash expense
(income), net 47 (33 ) 5 (587 ) Changes in operating assets and
liabilities, net of acquisitions and divestitures: Patient accounts
receivable, net (13,186 ) 4,911 (30,349 ) (7,211 ) Due from and due
to third-party payors, net 4,366 (6,538 ) 15,407 5,355 Inventories,
prepaid expenses and other current assets 8,942 5,103 (7,732 )
2,277 Accounts payable and accrued liabilities (36,773 ) 36,072
1,292 29,129 Long-term assets and liabilities, net 606
(9,334 ) 1,871 (8,845 ) Net cash provided by
(used in) operating activities (27,481 ) 36,796
(8,955 ) 61,193 Cash flows from investing
activities: Capital expenditures for property and equipment (15,925
) (20,367 ) (39,142 ) (33,207 ) Capital expenditures for software
(1,663 ) (1,278 ) (3,169 ) (3,804 ) Acquisitions, net of cash
acquired (1,887 ) — (1,887 ) — Proceeds from the sale of hospitals
15,874 — 20,156 — Other investing activities — 492
— 1,402 Net cash provided by (used in) investing
activities (3,601 ) (21,153 ) (24,042 )
(35,609 ) Cash flows from financing activities: Borrowings
(repayments) of revolving credit facilities, net (28,000 ) — 50,000
— Borrowings of long-term debt 72 1,255,500 72 1,255,520 Repayments
of long-term debt (4,738 ) (3,188 ) (11,847 ) (4,277 ) Increase
(decrease) in Due to Parent, net — 31,669 — 25,183 Payments of debt
issuance costs (2,891 ) (28,003 ) (2,938 ) (28,003 ) Cash paid to
Parent related to the Spin-off — (1,217,336 ) — (1,217,336 )
Cancellation of restricted stock awards for payroll tax
withholdings on vested shares (461 ) 27 (1,489 ) 27 Cash
distributions to noncontrolling investors (37 ) (163 ) (3,851 )
(2,647 ) Purchases of shares from noncontrolling investors —
— — (12 ) Net cash provided by (used in)
financing activities (36,055 ) 38,506 29,947
28,455 Net change in cash and cash equivalents
(67,137 ) 54,149 (3,050 ) 54,039 Cash and cash equivalents at
beginning of period 89,542 996 25,455
1,106 Cash and cash equivalents at end of period $ 22,405 $ 55,145
$ 22,405 $ 55,145
For footnotes, see pages 8-10.
FOOTNOTES TO UNAUDITED FINANCIAL
STATEMENTS AND SELECTED OPERATING DATA
(a) The California Department of Health Care Services
implemented the HQAF program, imposing a fee on certain general and
acute care California hospitals. Revenues generated from these fees
provide funding for the non-federal supplemental payments to
California hospitals that serve California’s Medicaid (“Medi-Cal”)
and uninsured patients. Under the most recent phase of the program,
covering the period January 2014 through December 2016, the Company
recognized $11.3 million of net operating revenues less $2.7
million of provider taxes for the three months ended June 30, 2016.
The Company recognized $22.3 million of net operating revenues less
$5.4 million of provider taxes for the six months ended June 30,
2016. There were no comparative amounts recorded in the 2017
periods, as discussed below. In November 2016, California
voters approved a state constitutional amendment measure that
extends indefinitely the statute that imposes fees on California
hospitals seeking federal matching funds. However, the current
program expired on December 31, 2016 and CMS has not approved a new
program. Consistent with the first four phases of the HQAF program,
the Company does not recognize any revenues under the new program
until CMS completes the approval process. HQAF funding levels are
based in part on Medi-Cal utilization. As a result, changes in
coverage of individuals under the Medi-Cal program could affect the
revenues and cash flows related to the Company’s California
hospitals under future phases of the HQAF program. Accordingly, the
Company is unable to predict the ultimate amount of revenues and
cash flows its California hospitals may receive from or the timing
of CMS’ approval of the extended HQAF program, including its impact
on the Company’s 2017 quarterly or full year net operating results.
The Company has included an estimated amount in its 2017
projections based on currently available and historical
information. (b) EBITDA is a non-GAAP financial measure that
consists of net income (loss) before interest, income taxes,
depreciation and amortization. Adjusted EBITDA, also a non-GAAP
financial measure, is EBITDA adjusted to add back the effect of
certain legal, professional and settlement costs, impairment of
long-lived assets and goodwill, net loss (gain) on sale of
hospitals and transaction costs related to the Spin-off. The
Company uses Adjusted EBITDA as a measure of financial performance.
Adjusted EBITDA is a key measure used by the Company’s management
to assess the operating performance of its hospital operations
business and to make decisions on the allocation of resources.
Additionally, management utilizes Adjusted EBITDA in assessing the
Company’s consolidated results of operations and in comparing the
Company’s results of operations between periods. Adjusted EBITDA,
Adjusted for Divestitures, also a non-GAAP financial measure, is
further retrospectively adjusted to exclude the effect of EBITDA of
hospitals divested in December 2016 and in 2017. The Company has
presented Adjusted EBITDA and Adjusted EBITDA, Adjusted for
Divestitures in this press release because it believes these
measures provide investors and other users of the Company’s
financial statements with additional information about how the
Company’s management assesses its results of operations.
Adjusted EBITDA and Adjusted EBITDA, Adjusted for Divestitures are
not measurements of financial performance under U.S. GAAP. These
calculations should not be considered in isolation or as a
substitute for net income, operating income or any other measure
calculated in accordance with U.S. GAAP. The items excluded from
Adjusted EBITDA and Adjusted EBITDA, Adjusted for Divestitures are
significant components in understanding and evaluating the
Company’s financial performance. The Company believes such
adjustments are appropriate, as the magnitude and frequency of such
items can vary significantly and are not related to the assessment
of normal operating performance. Additionally, the Company’s
calculation of Adjusted EBITDA and Adjusted EBITDA, Adjusted for
Divestitures may not be comparable to similarly titled measures
reported by other companies.
FOOTNOTES TO UNAUDITED FINANCIAL STATEMENTS AND SELECTED
OPERATING DATA (Continued)
The following table reconciles Adjusted
EBITDA and Adjusted EBITDA, Adjusted for Divestitures, each as
defined above, to net income (loss), the most directly comparable
U.S. GAAP financial measure, as derived directly from the Company’s
consolidated and combined financial statements for the respective
periods (in thousands):
Three Months Ended June 30, Six Months Ended June
30, 2017 2016 2017 2016 Net
income (loss) $ (30,575 ) $ (243,966 ) $ (57,780 ) $ (248,653 )
Interest expense, net 30,458 29,276 57,988 56,728 Provision for
(benefit from) income taxes (245 ) (44,565 ) 456 (46,239 )
Depreciation and amortization 20,586 31,463
42,706 62,620 EBITDA 20,224 (227,792 ) 43,370 (175,544 )
Legal, professional and settlement costs 3,934 5,447 4,469 5,688
Impairment of long-lived assets and goodwill 12,900 250,400 16,200
250,400 Loss (gain) on sale of hospitals, net (4,321 ) — (5,191 ) —
Transaction costs related to the Spin-off — 1,177 31 4,912
Post-spin headcount reductions 1,693 — 1,693
— Adjusted EBITDA 34,430 29,232 60,572 85,456 Negative
EBITDA of divested hospitals 4,716 6,060 6,652
9,427 Adjusted EBITDA, Adjusted for Divestitures $ 39,146 $
35,292 $ 67,224 $ 94,883
(c)
The following table reconciles net income
(loss) attributable to Quorum Health Corporation, as reported and
on a per share basis, with the adjustments described herein:
Three Months Ended June 30, Six Months Ended June
30, 2017 2016 2017 2016 (per
share - basic and diluted) Earnings (loss) per share
attributable to Quorum Health Corporation stockholders, as reported
$ (1.09 ) $ (8.63 ) $ (2.08 ) $ (8.80 ) Adjustments: Legal,
professional and settlement costs 0.14 0.16 0.16 0.17 Impairment of
long-lived assets and goodwill 0.45 7.46 0.58 7.43 Loss (gain) on
sale of hospitals, net (0.15 ) — 0.02 — Transaction costs related
to the Spin-off — 0.04 — 0.15 Post-spin headcount reductions 0.06 —
0.06 — Net operating losses of divested hospitals 0.17
0.15 0.24 0.28 Earnings (loss) per share
attributable to Quorum Health Corporation stockholders, excluding
adjustments $ (0.42 ) $ (0.82 ) $ (1.02 ) $ (0.77 )
FOOTNOTES TO UNAUDITED FINANCIAL
STATEMENTS AND SELECTED OPERATING DATA
(Continued)
(d) For comparative purposes, the Company used 28,412,054
shares as the number of weighted-average shares to calculate basic
and diluted earnings per share for periods prior to the Spin-off.
This number represents the number of shares issued on the Spin-off
date. Due to the net loss attributable to Quorum Health Corporation
in the three and six months ended June 30, 2017, no incremental
shares are included in diluted earnings per share for this period,
because the effect of the incremental shares would be
anti-dilutive. No incremental shares were considered for any
periods prior to the Spin-off. (e) Licensed beds are the
number of beds for which the appropriate state agency licenses a
hospital, regardless of whether the beds are actually available for
patient use. (f) Admissions represent the number of patients
admitted for inpatient services. (g) Adjusted admissions is
computed by multiplying admissions by gross patient revenues and
then dividing that number by gross inpatient revenues. (h)
Emergency room visits represent the number of patients registered
and treated in the Company’s emergency rooms. (i) Medicare
case mix index is a relative value assigned to a diagnosis-related
group of inpatients that is used in determining the allocation of
resources necessary to treat the patients in that group. Medicare
case mix index is calculated as the average case mix index for all
Medicare admissions during the period. (j) Same-facility
financial and operating data includes hospitals that are owned and
leased during all periods. Same-facility operating results have
been adjusted to exclude the operating results of Sandhills
Regional Medical Center, Barrow Regional Medical Center and
Cherokee Medical Center which were sold on December 1, 2016,
December 31, 2016 and March 31, 2017, respectively. Same-facility
operating results includes the operating results of Trinity
Hospital of Augusta, since this hospital was not sold until June
30, 2017.
Forward-Looking Statements
This press release contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as
amended, Section 21E of the Securities Exchange Act of 1934,
as amended, and the Private Securities Litigation Reform Act of
1995 that involve risk and uncertainties. All statements in this
press release other than statements of historical fact, including
statements regarding projections, expected operating results, and
other events that depend upon or refer to future events or
conditions or that include words such as “expects,” “anticipates,”
“intends,” “plans,” “believes,” “estimates,” “thinks,” and similar
expressions, are forward-looking statements. Although the Company
believes that these forward-looking statements are based on
reasonable assumptions, these assumptions are inherently subject to
significant economic and competitive uncertainties and
contingencies, which are difficult or impossible to predict
accurately and may be beyond the control of the Company.
Accordingly, the Company cannot give any assurance that its
expectations will in fact occur and cautions that actual results
may differ materially from those in the forward-looking statements.
A number of factors could affect the future results of the Company
or the healthcare industry generally and could cause the Company’s
expected results to differ materially from those expressed in this
press release.
These factors include, but are not limited to, the
following:
- general economic and business
conditions, both nationally and in the regions in which the Company
operates;
- risks associated with the Company’s
substantial indebtedness, leverage and debt service obligations,
including its ability to comply with its debt covenants, including
its senior credit facility, as amended;
- the ability to achieve operating and
financial targets and to control the costs of providing services if
patient volumes are lower than expected;
- the ability to achieve the anticipated
benefits of the Spin-off;
- the impact of significant changes to
the Affordable Care Act, its implementation or its interpretation,
efforts to repeal the Affordable Care Act, as well as changes in
other federal, state or local laws or regulations affecting the
healthcare industry;
- the success and long-term viability of
healthcare insurance exchanges, which may be impacted by whether a
sufficient number of payors participate, as well as the impact of
the 2016 federal elections on the Affordable Care Act;
- the extent to which states support or
implement changes to Medicaid programs, utilize healthcare
insurance exchanges or alter the provision of healthcare to state
residents through regulation or otherwise;
- the extent to which regulatory and
economic changes occur in Illinois, where a material portion of the
Company’s revenues are concentrated;
- demographic changes;
- the failure to comply with governmental
regulations;
- the impact of certain outsourcing
functions, and the ability of Community Health Systems, Inc., as
provider of the Company’s billing and collection services pursuant
to the transition services agreements, to timely and appropriately
bill and collect;
- the potential adverse impact of known
and unknown government investigations, internal investigations,
investor demands for investigation, audits, and federal and state
false claims act litigation and other legal proceedings, including
the shareholder litigation against the Company and certain of its
officers and threats of litigation, as well as the significant
costs and attention from management required to address such
matters;
- the ability, where appropriate, to
enter into, maintain and comply with 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 reimbursement rates paid by
federal or state healthcare programs, including Medicare and
Medicaid, or commercial payors, and the timeliness of reimbursement
payments;
- any potential impairments in the
carrying values of long-lived assets and goodwill or the shortening
of the useful lives of long-lived assets;
- 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 lower
collectability levels which may result from, among other things,
self-pay growth in states that have not expanded Medicaid and
difficulties in collecting payments for which patients are
responsible, including co-pays and deductibles;
- the efforts of healthcare insurers,
providers and others to contain healthcare costs, including the
trend toward treatment of patients in less acute or specialty
healthcare settings and the increased emphasis on value-based
purchasing;
- the Company’s ongoing ability to
demonstrate meaningful use of certified electronic health records
technology and recognize income for the related Medicare or
Medicaid incentive payments, to the extent such payments have not
expired;
- increases in wages as a result of
inflation or competition for highly technical positions and rising
medical supply and drug costs due to market pressure from
pharmaceutical companies and new product releases;
- liabilities and other claims asserted
against the Company, including self-insured malpractice
claims;
- competition;
- the ability to attract and retain, at
reasonable employment costs, qualified personnel, key management,
physicians, nurses and other healthcare workers;
- changes in medical or other
technology;
- changes in U.S. generally accepted
accounting principles, including the impact of adopting newly
issued accounting standards;
- the availability and terms of capital
to fund acquisitions, replacement facilities or other capital
expenditures;
- the ability to successfully make
acquisitions or complete divestitures and the timing thereof, the
ability to complete any such acquisitions or divestitures on
desired terms or at all, and the ability to realize the intended
benefits from any such acquisitions or divestitures;
- the impact of seasonal or severe
weather conditions or earthquakes;
- the ability to obtain adequate levels
of professional and general liability and workers’ compensation
liability insurance;
- the effects related to outbreaks of
infectious diseases;
- the impact of external, criminal
cyber-attacks or security breaches;
- the ability to manage effectively the
Company’s arrangements with third-party vendors for key
non-clinical business functions and services;
- the ability to maintain certain
accreditations at the Company’s existing facilities and any future
facilities the Company may acquire; and
- the other risk factors set forth in the
Company’s other public filings with the Securities and Exchange
Commission.
Although the Company believes that these forward-looking
statements are based upon reasonable assumptions, these assumptions
are inherently subject to significant regulatory, economic and
competitive uncertainties and contingencies, which are difficult or
impossible to predict accurately and may be beyond its control.
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.
Given these uncertainties, prospective investors are cautioned not
to place undue reliance on these forward-looking statements. These
forward-looking statements are made as of the date of this filing.
The Company undertakes no obligation to revise or update any
forward-looking statements, or to make any other forward-looking
statements, whether as a result of new information, future events
or otherwise.
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version on businesswire.com: http://www.businesswire.com/news/home/20170809006156/en/
Quorum Health CorporationMichael J. Culotta,
615-221-3502Executive Vice President and Chief Financial
Officer
Quorum Health (NYSE:QHC)
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