Community Health Systems, Inc. (NYSE: CYH) (the “Company”) today
announced financial and operating results for the three and nine
months ended September 30, 2017.
The following highlights the financial and operating results for
the three months ended September 30, 2017, that are further
discussed below:
- Net operating revenues totaled
$3.666 billion.
- Net loss attributable to Community
Health Systems, Inc. common stockholders was $(110) million, or
$(0.98) per share (diluted), compared with net loss of $(79)
million, or $(0.71) per share (diluted) for the same period in
2016.
- Adjusted EBITDA was $331
million.
- Loss from continuing operations
attributable to Community Health Systems, Inc. common stockholders
was $(0.96) per share (diluted).
- Adjusted for certain items discussed
below, loss from continuing operations attributable to Community
Health Systems, Inc. common stockholders was $(0.77) per share
(diluted).
- Cash flow from operations was $114
million, compared with $178 million for the same period in 2016,
representing a 36.0 percent decrease.
- On a same-store basis, both
admissions and adjusted admissions decreased 2.3 percent, compared
with the same period in 2016.
- As further discussed below,
Hurricanes Harvey in Texas and Irma in Florida and Georgia
significantly impacted the results of operations for the three
months ended September 30, 2017, resulting in a loss of net
operating revenues together with incremental expenses currently
estimated at approximately $40 million in the aggregate. This
amount does not include any insurance recoveries that the Company
may receive.
Financial and statistical data for 2017 and 2016 include the
following in operating results through the effective date of each
respective transaction:
- 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. Same-store operating results and
statistical data exclude information for the hospitals divested in
the spin-off of QHC in the comparable period in 2016.
- On April 29, 2016, the Company sold its
unconsolidated minority equity interests in Valley Health System,
LLC and Summerlin Hospital Medical Center, LLC, both joint ventures
with Universal Health Systems, Inc. comprising a total of five
hospitals in Las Vegas, Nevada.
- On December 31, 2016, the Company sold
an 80 percent majority ownership interest in its home care division
to a subsidiary of Almost Family, Inc. Same-store operating results
exclude the home care division in the comparable period in
2016.
- As part of its ongoing portfolio
rationalization efforts, the Company sold 11 hospitals effective
May 1, 2017, sold nine hospitals effective June 30, 2017 and July
1, 2017, and sold two hospitals effective September 1, 2017.
Same-store operating results exclude the results of these hospitals
divested in 2017 and the comparable period in 2016.
- Additionally, six hospitals were sold
effective October 1, 2017, and two hospitals were sold effective
November 1, 2017. Actual and same-store operating results include
the results of these eight hospitals in 2017 and the comparable
periods in 2016.
Net operating revenues for the three months ended September 30,
2017, totaled $3.666 billion, a 16.3 percent decrease, compared
with $4.380 billion for the same period in 2016. Loss from
continuing operations attributable to Community Health Systems,
Inc. common stockholders was $(108) million, or $(0.96) per share
(diluted), for the three months ended September 30, 2017, compared
with $(77) million, or $(0.69) per share (diluted), for the same
period in 2016. During the three months ended September 30, 2017,
the Company recorded a non-cash expense totaling $33 million
related to impairment charges to reduce the value of long-lived
assets at hospitals that the Company has identified for sale. The
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 September 30, 2017,
included a loss of $(0.19) per share (diluted) related to
impairment and (gain) loss on sale of businesses, loss of $(0.02)
per share (diluted) from early extinguishment of debt, loss of
$(0.01) per share (diluted) related to government and other legal
settlements and related costs, and loss of $(0.01) per share
(diluted) related to employee termination benefits and other
restructuring charges. These expenses were partially offset by
income of $0.04 per share (diluted) related to fair value
adjustments on the CVR agreement liability accounted for at fair
value related to the HMA legal proceedings, and related legal
expenses. Excluding these items, loss from continuing operations
was $(0.77) per share (diluted).
Net loss attributable to Community Health Systems, Inc. common
stockholders was $(110) million, or $(0.98) per share (diluted) for
the three months ended September 30, 2017, compared with $(79)
million, or $(0.71) per share (diluted) for the same period in
2016. Discontinued operations for the three months ended September
30, 2017, consisted of $(0.01) per share (diluted) of losses from
operations of entities sold or held for sale and $(0.01) per share
(diluted) for impairment of hospitals sold or held for sale, for a
total after-tax loss of approximately $(2) million.
Weighted-average shares outstanding (diluted) were 112 million for
the three months ended September 30, 2017, and 111 million for the
three months ended September 30, 2016. Adjusted EBITDA for the
three months ended September 30, 2017, was $331 million compared
with $465 million for the same period in 2016, representing a 28.8
percent decrease.
The consolidated operating results for the three months ended
September 30, 2017, reflect a 14.8 percent decrease in total
admissions, and a 15.5 percent decrease in total adjusted
admissions, compared with the same period in 2016. On a same-store
basis, both admissions and adjusted admissions decreased 2.3
percent during the three months ended September 30, 2017, compared
with the same period in 2016. On a same-store basis, net operating
revenues decreased 1.5 percent during the three months ended
September 30, 2017, compared with the same period in 2016.
Net operating revenues for the nine months ended September 30,
2017, totaled $12.295 billion, a 12.0 percent decrease, compared
with $13.969 billion for the same period in 2016. Loss from
continuing operations attributable to Community Health Systems,
Inc. common stockholders was $(436) million, or $(3.91) per share
(diluted), for the nine months ended September 30, 2017, compared
with $(1.495) billion, or $(13.50) per share (diluted), for the
same period in 2016. During the nine months ended September 30,
2017, the Company recorded a non-cash expense totaling $363 million
related to impairment charges to reduce the value of long-lived
assets, primarily allocated goodwill, at hospitals that the Company
has identified for sale. The 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 nine months ended September 30, 2017,
included a loss of $(2.87) per share (diluted) related to
impairment and (gain) loss on sale of businesses, loss of $(0.20)
per share (diluted) from early extinguishment of debt, loss of
$(0.03) per share (diluted) related to employee termination
benefits and other restructuring charges, and loss of $(0.05) per
share (diluted) related to expense from fair value adjustments on
the CVR agreement liability accounted for at fair value related to
the HMA legal proceedings, and related legal expenses. These
expenses were partially offset by income of $0.19 per share
(diluted) related to government and other legal settlements, net of
related legal expenses, primarily as a result of the previously
announced settlement of the shareholder derivative action in
January 2017. Excluding these items, loss from continuing
operations was $(0.95) per share (diluted).
Net loss attributable to Community Health Systems, Inc. common
stockholders was $(446) million, or $(3.99) per share (diluted) for
the nine months ended September 30, 2017, compared with $(1.500)
billion, or $(13.55) per share (diluted) for the same period in
2016. Discontinued operations for the nine months ended September
30, 2017, consisted of $(0.03) per share (diluted) of losses from
operations of entities sold or held for sale and $(0.05) per share
(diluted) for impairment of hospitals sold or held for sale, for a
total after-tax loss of approximately $(10) million.
Weighted-average shares outstanding (diluted) were 112 million for
the nine months ended September 30, 2017, and 111 million for the
nine months ended September 30, 2016. Adjusted EBITDA for the nine
months ended September 30, 2017, was $1.294 billion compared with
$1.661 billion for the same period in 2016, representing a 22.1
percent decrease.
The consolidated operating results for the nine months ended
September 30, 2017, reflect a 12.3 percent decrease in total
admissions, and a 13.0 percent decrease in total adjusted
admissions, compared with the same period in 2016. On a same-store
basis, both admissions and adjusted admissions decreased 1.9
percent during the nine months ended September 30, 2017, compared
with the same period in 2016. On a same-store basis, net operating
revenues decreased 0.3 percent during the nine months ended
September 30, 2017, compared with the same period in 2016.
Impact of Hurricanes Harvey and Irma on Operating
Results
During August and September 2017, the Company’s facilities in
Victoria, Texas, experienced an interruption in business and
incurred additional costs as a direct result of the landfall of
Hurricane Harvey. Also during September 2017, due to the broad
regional impact of Hurricane Irma, many of the Company’s hospital
operations in the state of Florida and at one of its hospitals in
the state of Georgia experienced a disruption, with the most
significant impact on hospital operations in Key West and Punta
Gorda, Florida. The Company currently estimates that these
hurricanes resulted in a loss of net operating revenues together
with incremental expenses directly related to hurricane response
efforts of approximately $40 million in the aggregate during the
three months ended September 30, 2017. The impact on net operating
revenues is the direct result of the evacuations and population
disruption prior to the hurricanes, as well as during the aftermath
and recovery efforts in the communities affected by the hurricanes.
This estimated impact is prior to any insurance recoveries which
the Company may receive.
Due to the timing of these extreme weather events, the above
estimate of the associated impact of these hurricanes may be
updated in the future as the Company continues its clean-up and
remediation efforts and accumulates information necessary to assess
the fourth quarter impact of these hurricanes and provide
loss-related data to the Company’s insurance carriers for property
losses and business interruption coverage. Because of the required
accounting for such insurance recoveries as gain contingencies, the
timing and amount of such insurance proceeds will not be recognized
until future periods when any such gains are realized. Future
property losses or impairment charges on its long-lived assets may
be recorded based on a final assessment of damage and estimated
impact on future cash flows for the affected hospitals.
The Company completed its divestiture of six hospitals on
October 1, 2017, and two hospitals on November 1, 2017, bringing
its total completed divestitures during 2017 to the previously
announced 30 hospitals that had been subject to definitive
agreements. In addition to the previously announced divestiture of
30 hospitals, the Company continues to receive interest from
acquirers for certain of its hospitals. The Company is pursuing
these interests for sale transactions involving hospitals with a
combined total of at least $2.0 billion in annual net operating
revenues and combined mid-single digit Adjusted EBITDA margins.
Adjusted EBITDA, a non-GAAP financial measure, is EBITDA
adjusted to add back net income attributable to noncontrolling
interests and to exclude the effect of discontinued operations,
loss from early extinguishment of debt, impairment and (gain) loss
on sale of businesses, gain on sale of investments in
unconsolidated affiliates, expense incurred related to the spin-off
of QHC, expense incurred related to the sale of a majority
ownership interest in the Company’s home care division, expense
(income) related to government and other legal settlements and
related costs, expenses related to employee termination benefits
and other restructuring charges, and (income) expense from fair
value adjustments on the CVR agreement liability accounted for at
fair value related to the HMA legal proceedings, 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 income attributable to
Community Health Systems, Inc. stockholders, 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,
“Numerous factors affected our operating and financial results in
the third quarter, including lower volumes, divestiture activity
and extreme weather events. Hurricanes Harvey and Irma directly
impacted operations at a significant number of our hospitals,
forcing evacuations at some facilities and requiring others to take
extraordinary measures to remain operational during these storms.
We are proud of the incredible effort and compassionate response of
our hospital teams who worked to keep patients safe, helped enable
first responders in their rescue missions, and provided immediate
relief in the aftermath of the hurricanes. Our company and
hospitals continue to provide recovery support for their
communities and for those employees who suffered personal losses as
a result of the storms. In times like these, we are reminded of the
courage and resilience of our caregivers and how important all
hospitals are to the communities they serve.”
Smith added, “Looking forward, we remain focused on strategic
initiatives that we believe will yield positive results in the
future. We’ve made substantial progress in our portfolio
rationalization initiative with 30 hospital divestitures now
complete. Our goal is to emerge from this process with a
sustainable group of hospitals that are positioned for long-term
success and growth.”
Included on pages 18, 19, 20 and 21 of this press release are
tables setting forth the Company’s 2017 annual earnings guidance.
The updated 2017 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 divestitures that the Company has completed in 2017.
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. The Company, through its subsidiaries, owns, leases or
operates 127 affiliated hospitals in 20 states with an aggregate of
approximately 21,000 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
Thursday, November 2, 2017, at 10:00 a.m. Central, 11:00 a.m.
Eastern, to review financial and operating results for the third
quarter ended September 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.chs.net. To listen to the live call,
please go to the website at least fifteen minutes early to
register, download and install any necessary audio software. For
those who cannot listen to the live broadcast, a replay will be
available shortly after the call and will continue to be available
through December 2, 2017. 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.
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIESFinancial
Highlights (a)(b)(c)(d)(In millions, except per share
amounts)(Unaudited)
Three Months Ended Nine Months
Ended September 30, September 30, 2017
2016 2017 2016
Net operating revenues $ 3,666 $ 4,380 $ 12,295 $ 13,969
Loss from continuing operations (f), (i), (j), (k) (88 ) (54 ) (380
) (1,422 ) Net loss attributable to Community Health Systems, Inc.
stockholders (110 ) (79 ) (446 ) (1,500 ) Adjusted EBITDA (e) 331
465 1,294 1,661 Net cash provided by operating activities 114 178
617 810 Basic loss per share attributable to Community
Health Systems, Inc. common stockholders: Continuing operations
(f), (i), (j), (k) $ (0.96 ) $ (0.69 ) $ (3.91 ) $ (13.50 )
Discontinued operations (0.02 ) (0.02 ) (0.08
) (0.05 ) Net loss $ (0.98 ) $ (0.71 ) $ (3.99 ) $ (13.55 )
Diluted loss per share attributable to Community Health
Systems, Inc. common stockholders: Continuing operations (f), (h),
(i), (j), (k) $ (0.96 ) $ (0.69 ) $ (3.91 ) $ (13.50 ) Discontinued
operations (0.02 ) (0.02 ) (0.08 )
(0.05 ) Net loss (h) $ (0.98 ) $ (0.71 ) $ (3.99 ) $ (13.55 )
Weighted-average number of shares outstanding (g): Basic 112
111 112 111 Diluted 112 111 112 111
For footnotes, see pages 13, 14, 15, 16 and 17.
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIESCondensed
Consolidated Statements of Loss (a)(b)(c)(d)(In millions,
except per share amounts)(Unaudited)
Three Months
Ended September 30, 2017 2016
Amount
% of Net
Operating
Revenues
Amount
% of Net
Operating
Revenues
Operating revenues (net of contractual allowances and discounts) $
4,333 $ 5,084 Provision for bad debts 667
704 Net operating revenues
3,666 100.0 % 4,380 100.0
% Operating costs and expenses: Salaries and benefits 1,724
47.0 % 2,067 47.2 % Supplies 610 16.6 % 723 16.5 % Other operating
expenses 911 24.9 % 1,026 23.4 % Government and other legal
settlements and related costs (j) 1 - % 10 0.2 % Electronic health
records incentive reimbursement (2 ) - % (5 ) (0.1 ) % Rent 93 2.5
% 109 2.5 % Depreciation and amortization 206 5.6 % 265 6.1 %
Impairment and (gain) loss on sale of businesses, net (i) 33
0.9 % 39 0.9 % Total operating
costs and expenses 3,576 97.5 % 4,234
96.7 % Income from operations (f), (i), (j) 90
2.5 % 146 3.3 % Interest expense, net 238 6.5 % 233 5.3 % Loss from
early extinguishment of debt 4 0.1 % - - % Equity in earnings of
unconsolidated affiliates (5 ) (0.1 ) % (4 ) (0.1 ) %
Loss from continuing operations before income taxes (147 )
(4.0 ) % (83 ) (1.9 ) % Benefit from income taxes (59 ) (1.6
) % (29 ) (0.7 ) % Loss from continuing operations (f), (i),
(j) (88 ) (2.4 ) % (54 ) (1.2 ) % Discontinued
operations, net of taxes: Loss from operations of entities sold or
held for sale (1 ) - % (2 ) - % Impairment of hospitals sold or
held for sale (1 ) - % - - %
Loss from discontinued operations, net of taxes (2 ) (0.1 )
% (2 ) - % Net loss (90 ) (2.5 ) % (56 ) (1.2 ) %
Less: Net income attributable to noncontrolling interests 20
0.5 % 23 0.6 % Net loss
attributable to Community Health Systems, Inc. stockholders $ (110
) (3.0 ) % $ (79 ) (1.8 ) % Basic loss per share
attributable to Community Health Systems, Inc. common stockholders:
Continuing operations (f), (i), (j) $ (0.96 ) $ (0.69 )
Discontinued operations (0.02 ) (0.02 ) Net loss $
(0.98 ) $ (0.71 ) Diluted loss per share attributable to
Community Health Systems, Inc. common stockholders: Continuing
operations (f), (h), (i), (j) $ (0.96 ) $ (0.69 ) Discontinued
operations (0.02 ) (0.02 ) Net loss (h) $ (0.98 ) $
(0.71 ) Weighted-average number of shares outstanding (g):
Basic 112 111 Diluted 112
111
For footnotes, see pages 13, 14, 15, 16 and 17.
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIESCondensed
Consolidated Statements of Loss (a)(b)(c)(d)(In millions,
except per share amounts)(Unaudited)
Nine Months
Ended September 30, 2017 2016
Amount
% of Net
Operating
Revenues
Amount
% of Net
Operating
Revenues
Operating revenues (net of contractual allowances and discounts) $
14,323 $ 16,128 Provision for bad debts 2,028
2,159 Net operating revenues
12,295 100.0 % 13,969 100.0
% Operating costs and expenses: Salaries and benefits
5,704 46.4 % 6,537 46.8 % Supplies 2,056 16.7 % 2,281 16.3 % Other
operating expenses 2,984 24.3 % 3,256 23.4 % Government and other
legal settlements and related costs (j) (32 ) (0.3 ) % 10 0.1 %
Electronic health records incentive reimbursement (25 ) (0.2 ) %
(54 ) (0.4 ) % Rent 306 2.5 % 340 2.4 % Depreciation and
amortization 665 5.4 % 839 6.0 % Impairment and (gain) loss on sale
of businesses, net (i) 363 3.0 % 1,695
12.1 % Total operating costs and expenses
12,021 97.8 % 14,904 106.7 %
Income (loss) from operations (f), (i), (j) 274 2.2 % (935 )
(6.7 ) % Interest expense, net 706 5.7 % 730 5.2 % Loss from early
extinguishment of debt 35 0.3 % 30 0.3 % Gain on sale of
investments in unconsolidated affiliates (k) - - % (94 ) (0.7 ) %
Equity in earnings of unconsolidated affiliates (13 ) (0.1 )
% (38 ) (0.3 ) % Loss from continuing operations
before income taxes (454 ) (3.7 ) % (1,563 ) (11.2 ) % Benefit from
income taxes (74 ) (0.6 ) % (141 ) (1.0 ) % Loss from
continuing operations (f), (i), (j), (k) (380 ) (3.1 ) %
(1,422 ) (10.2 ) % Discontinued operations, net of
taxes: Loss from operations of entities sold or held for sale (4 )
- % (4 ) - % Impairment of hospitals sold or held for sale
(6 ) - % (1 ) - % Loss from discontinued
operations, net of taxes (10 ) (0.1 ) % (5 ) -
% Net loss (390 ) (3.2 ) % (1,427 ) (10.2 ) % Less: Net income
attributable to noncontrolling interests 56 0.4
% 73 0.5 % Net loss attributable to
Community Health Systems, Inc. stockholders $ (446 ) (3.6 ) % $
(1,500 ) (10.7 ) % Basic loss per share attributable to
Community Health Systems, Inc. common stockholders: Continuing
operations (f), (i), (j), (k) $ (3.91 ) $ (13.50 ) Discontinued
operations (0.08 ) (0.05 ) Net loss $ (3.99 ) $
(13.55 ) Diluted loss per share attributable to Community
Health Systems, Inc. common stockholders: Continuing operations
(f), (h), (i), (j), (k) $ (3.91 ) $ (13.50 ) Discontinued
operations (0.08 ) (0.05 ) Net loss (h) $ (3.99 ) $
(13.55 ) Weighted-average number of shares outstanding (g):
Basic 112 111 Diluted 112
111
For footnotes, see pages 13, 14, 15, 16 and 17.
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIESCondensed
Consolidated Statements of Comprehensive Loss(In
millions)(Unaudited)
Three Months Ended
Nine Months Ended September 30,
September 30, 2017 2016
2017 2016
Net loss $ (90 ) $ (56 ) $ (390 ) $ (1,427 ) Other comprehensive
income (loss), net of income taxes: Net change in fair value of
interest rate swaps, net of tax 5 10 8 (11 ) Net change in fair
value of available-for-sale securities, net of tax 2 (7 ) 7 (8 )
Amortization and recognition of unrecognized pension
costcomponents, net of tax 1 - 2 3 Other comprehensive income
(loss) 8 3 17 (16
) Comprehensive loss (82 ) (53 ) (373 ) (1,443 ) Less:
Comprehensive income attributable to noncontrolling interests
20 23 56 73
Comprehensive loss attributable to Community HealthSystems, Inc.
stockholders $ (102 ) $ (76 ) $ (429 ) $ (1,516 )
For footnotes, see pages 13, 14, 15, 16 and 17.
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIESSelected
Operating Data (a)(c)(Dollars in millions)(Unaudited)
Three Months Ended September 30, Consolidated
Same-Store 2017 2016
% Change 2017
2016 % Change Number of hospitals (at
end of period) 133 155 133 133 Licensed beds (at end of period)
22,012 26,246 22,012 22,176 Beds in service (at end of period)
19,616 23,231 19,616 19,839 Admissions 171,994 201,957 -14.8 %
171,241 175,285 -2.3 % Adjusted admissions 376,597 445,817 -15.5 %
374,808 383,816 -2.3 % Patient days 756,186 898,177 753,086 772,419
Average length of stay (days) 4.4 4.4 4.4 4.4 Occupancy rate
(average beds in service) 41.8 % 41.9 % 41.8 % 43.0 % Net operating
revenues $ 3,666 $ 4,380 -16.3 % $ 3,653 $ 3,709 -1.5 % Net
inpatient revenues as a % of net patient revenues before provision
for bad debts 43.0 % 42.6 % 43.0 % 43.2 % Net outpatient revenues
as a % of net patient revenues before provision for bad debts 57.0
% 57.4 % 57.0 % 56.8 % Income from operations (f), (i), (j) $ 90 $
146 -38.4 % Income from operations as a % of net operating revenues
2.5 % 3.3 % Depreciation and amortization $ 206 $ 265 Equity in
earnings of unconsolidated affiliates $ (5 ) $ (4 ) Net loss
attributable to Community Health Systems, Inc. stockholders $ (110
) $ (79 ) -39.2 % Net loss attributable to Community Health
Systems, Inc. stockholders as a % of net operating revenues -3.0 %
-1.8 % Adjusted EBITDA (e) $ 331 $ 465 -28.8 % Adjusted EBITDA as a
% of net operating revenues 9.0 % 10.6 % Net cash provided by
operating activities $ 114 $ 178 -36.0 %
For footnotes, see pages 13, 14, 15, 16 and 17.
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIESSelected
Operating Data (a)(c)(Dollars in millions)(Unaudited)
Nine Months Ended September 30, Consolidated
Same-Store 2017
2016 % Change
2017 2016
% Change Number of hospitals (at
end of period) 133 155 133 133 Licensed beds (at end of period)
22,012 26,246 22,012 22,176 Beds in service (at end of period)
19,616 23,231 19,616 19,839 Admissions 573,671 653,916 -12.3 %
528,204 538,431 -1.9 % Adjusted admissions 1,241,327 1,427,298
-13.0 % 1,137,791 1,159,920 -1.9 % Patient days 2,569,587 2,921,895
2,356,909 2,397,323 Average length of stay (days) 4.5 4.5 4.5 4.5
Occupancy rate (average beds in service) 43.5 % 43.3 % 43.8 % 44.2
% Net operating revenues $ 12,295 $ 13,969 -12.0 % $ 11,152 $
11,188 -0.3 % Net inpatient revenues as a % of net patient revenues
before provision for bad debts 43.4 % 43.1 % 43.7 % 43.6 % Net
outpatient revenues as a % of net patient revenues before provision
for bad debts 56.6 % 56.9 % 56.3 % 56.4 % Income (loss) from
operations (f), (i), (j) $ 274 $ (935 ) 129.3 % Income (loss) from
operations as a % of net operating revenues 2.2 % -6.7 %
Depreciation and amortization $ 665 $ 839 Equity in earnings of
unconsolidated affiliates $ (13 ) $ (38 ) Net loss attributable to
Community Health Systems, Inc. stockholders $ (446 ) $ (1,500 )
70.3 % Net loss attributable to Community Health Systems, Inc.
stockholders as a % of net operating revenues -3.6 % -10.7 %
Adjusted EBITDA (e) $ 1,294 $ 1,661 -22.1 % Adjusted EBITDA as a %
of net operating revenues 10.5 % 11.9 % Net cash provided by
operating activities $ 617 $ 810 -23.8 %
For footnotes, see pages 13, 14, 15, 16 and 17.
COMMUNITY HEALTH SYSTEMS, INC. AND
SUBSIDIARIESCondensed Consolidated Balance Sheets (b)(In
millions, except share data)(Unaudited)
September 30,
2017 December 31, 2016 ASSETS
Current assets Cash and cash equivalents $ 590 $ 238 Patient
accounts receivable, net of allowance for doubtful accounts of
$3,538 and $3,773 at September 30, 2017 and December 31, 2016,
respectively 2,888 3,176 Supplies 445 480 Prepaid income taxes 22
17 Prepaid expenses and taxes 207 187 Other current assets
526 568 Total current assets 4,678
4,666 Property and equipment, gross 11,552
12,422 Less accumulated depreciation and amortization (4,221
) (4,273 ) Property and equipment, net 7,331
8,149 Goodwill 6,148 6,521
Other assets, net 1,578 2,608
Total assets $ 19,735 $ 21,944
LIABILITIES
AND EQUITY Current liabilities Current maturities of long-term
debt $ 40 $ 455 Accounts payable 850 995 Accrued interest 238 207
Accrued liabilities 1,149 1,230 Total
current liabilities 2,277 2,887
Long-term debt 13,901 14,789 Deferred
income taxes 319 411 Other long-term
liabilities 1,399 1,575 Total
liabilities 17,896 19,662 Redeemable
noncontrolling interests in equity of consolidated subsidiaries
530 554 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;
114,658,341 shares issued and outstanding at September 30, 2017,
and 113,876,580 shares issued and outstanding at December 31, 2016
1 1 Additional paid-in capital 2,002 1,975 Accumulated other
comprehensive loss (45 ) (62 ) Accumulated deficit (745 )
(299 ) Total Community Health Systems, Inc. stockholders’
equity 1,213 1,615 Noncontrolling interests in equity of
consolidated subsidiaries 96 113 Total
equity 1,309 1,728 Total liabilities
and equity $ 19,735 $ 21,944
For footnotes, see pages 13, 14, 15, 16 and 17.
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIESCondensed
Consolidated Statements of Cash Flows (b)(In
millions)(Unaudited)
Nine Months Ended September
30, 2017 2016 Cash
flows from operating activities Net loss $ (390 ) $ (1,427 )
Adjustments to reconcile net loss to net cash provided by operating
activities: Depreciation and amortization 665 839 Government and
other legal settlements and related costs (j) 8 10 Stock-based
compensation expense 20 36 Impairment of hospitals sold or held for
sale 6 1 Impairment and (gain) loss on sale of businesses, net (i)
363 1,695 Loss from early extinguishment of debt 35 30 Gain on sale
of investments in unconsolidated affiliates (k) - (94 ) Other
non-cash expenses, net 24 19 Changes in operating assets and
liabilities, net of effects of acquisitions and divestitures:
Patient accounts receivable 229 (40 ) Supplies, prepaid expenses
and other current assets (37 ) 64 Accounts payable, accrued
liabilities and income taxes (215 ) (256 ) Other (91 )
(67 ) Net cash provided by operating activities 617
810 Cash flows from investing
activities Acquisitions of facilities and other related equipment
(4 ) (122 ) Purchases of property and equipment (428 ) (561 )
Proceeds from disposition of hospitals and other ancillary
operations 1,666 12 Proceeds from sale of property and equipment 4
10 Purchases of available-for-sale securities (85 ) (395 ) Proceeds
from sales of available-for-sale securities 133 386 Proceeds from
sale of investments in unconsolidated affiliates - 403 Distribution
from Quorum Health Corporation - 1,219 Increase in other
investments (95 ) (201 ) Net cash provided by
investing activities 1,191 751
Cash flows from financing activities Repurchase of restricted stock
shares for payroll tax withholding requirements (5 ) (5 ) Deferred
financing costs and other debt-related costs (66 ) (22 ) Proceeds
from noncontrolling investors in joint ventures 5 - Redemption of
noncontrolling investments in joint ventures (5 ) (19 )
Distributions to noncontrolling investors in joint ventures (79 )
(69 ) Borrowings under credit agreements 839 3,929 Issuance of
long-term debt 3,100 - Proceeds from receivables facility 26 66
Repayments of long-term indebtedness (5,271 ) (5,492
) Net cash used in financing activities (1,456 )
(1,612 ) Net change in cash and cash equivalents 352 (51 )
Cash and cash equivalents at beginning of period 238
184 Cash and cash equivalents at end of period $ 590
$ 133
For footnotes, see pages 13, 14, 15, 16 and 17.
Footnotes to Financial Highlights, Financial
Statements and Selected Operating Data
(a) Continuing operating results exclude discontinued
operations for the three and nine months ended September 30, 2017
and 2016. 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 sold during the period and the hospitals divested in the
spin-off of QHC in the comparable period in 2016. (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 Health Management Associates, Inc.
(“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 $33 million in costs have been incurred and
approximately $30 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, after consideration of
amounts paid and current estimates of valuation inputs, has been
adjusted to its estimated fair value of $256 million at September
30, 2017. 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. For the CVR
valuation at September 30, 2017, the change in fair value from the
previous quarter was primarily the result of an increase in the
discount rate applied to the estimated settlement amount.
The following table presents the impact of the recorded amounts as
described above as applied to the CVR and the $18 million
deductible and 10% co-insurance amounts (in millions):
As
of September 30, 2017 Legal and other related
costs incurred to date $ 33 Settlements 30 Estimated liability for
probable contingencies - Estimated liability for unresolved
contingencies at fair value 256
Costs incurred plus certain estimated
liabilities for CVR-related matters
319 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
$ 272 CVRs outstanding 265 (c)
Included in discontinued operations for the three and nine
months ended September 30, 2017 and 2016, are three smaller
hospitals, two of which are being actively marketed for sale and
one hospital that sold effective May 1, 2017. The after-tax loss
for the sold or held for sale hospitals, was approximately $2
million for both of the three-month periods ended September 30,
2017 and 2016, and approximately $10 million and $5 million for the
nine months ended September 30, 2017 and 2016, respectively.
Footnotes to Financial Highlights, Financial
Statements and Selected Operating Data (Continued)
(d) The following table provides information needed to
calculate loss per share, which is adjusted for income attributable
to noncontrolling interests (in millions):
Three Months Ended Nine Months Ended
September 30, September 30, 2017 2016
2017 2016
Loss from continuing operations
attributable to Community Health Systems, Inc. common
stockholders:
Loss from continuing operations, net of taxes $ (88 ) $ (54 ) $
(380 ) $ (1,422 )
Less: Income from continuing operations
attributable to noncontrolling interests, net of taxes
20 23 56 73
Loss from continuing operations
attributable to Community Health Systems, Inc. common stockholders
— basic and diluted
$ (108 ) $ (77 ) $ (436 ) $ (1,495 )
Loss from discontinued operations
attributable to Community Health Systems, Inc. common
stockholders:
Loss from discontinued operations, net of taxes $ (2 ) $ (2 ) $ (10
) $ (5 )
Less: Loss from discontinued operations
attributable to noncontrolling interests, net of taxes
- - - -
Loss from discontinued operations
attributable to Community Health Systems, Inc. common stockholders
— basic and diluted
$ (2 ) $ (2 ) $ (10 ) $ (5 ) (e) EBITDA is a non-GAAP
financial measure which consists of net loss 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 add back net income
attributable to noncontrolling interests and to exclude the effect
of discontinued operations, loss from early extinguishment of debt,
impairment and (gain) loss on sale of businesses, gain on sale of
investments in unconsolidated affiliates, expense incurred related
to the spin-off of QHC, expense incurred related to the sale of a
majority ownership interest in the Company’s home care division,
expense (income) related to government and other legal settlements
and related costs, expense related to employee termination benefits
and other restructuring charges, and (income) expense from fair
value adjustments on the CVR agreement liability accounted for at
fair value related to the HMA legal proceedings, and related legal
expenses. During the three months ended June 30, 2017, the Company
incurred a significant amount of and included an adjustment for
employee termination benefits and other restructuring charges in
Adjusted EBITDA. The Company has included this adjustment (and
intends to continue including this adjustment on a prospective
basis) based on its belief that such expense, which may differ
significantly between periods in a manner not correlated with the
Company’s ongoing operational performance, is consistent with
management’s intended use of Adjusted EBITDA to assess the
Company’s results of operations and compare operating results
between periods. 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 adds back 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 reports Adjusted EBITDA as a measure of
financial performance. Adjusted EBITDA is a key measure used by
management to assess the operating performance of the Company’s
hospital operations and to make decisions on the allocation of
resources. Adjusted EBITDA is also used to evaluate the performance
of the Company’s executive management team and is one of the
primary targets used to determine short-term cash incentive
compensation. In addition, management utilizes Adjusted EBITDA in
assessing the Company’s consolidated results of operations and
operational performance and in comparing the Company’s results of
operations between periods. The Company believes it is useful to
provide investors and other users of the Company’s financial
statements this performance measure to align with how management
assesses the Company’s results of operations. Adjusted EBITDA also
is comparable to a similar metric called Consolidated EBITDA, 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 (including the Company’s ability to service debt and incur
capital expenditures), and is used to determine the interest rate
and commitment fee payable under the senior secured credit facility
(although Adjusted EBITDA does not include all of the adjustments
described in the senior secured credit facility). Adjusted
EBITDA is not a measurement of financial performance under U.S.
GAAP. It should not be considered in isolation or as a substitute
for net income, operating income, or any other performance measure
calculated in accordance with U.S. GAAP. The items excluded from
Adjusted EBITDA are significant components in understanding and
evaluating 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, this calculation of
Adjusted EBITDA may not be comparable to similarly titled measures
reported by other companies.
Footnotes to Financial Highlights, Financial
Statements and Selected Operating Data (Continued)
The following table reflects the reconciliation of Adjusted EBITDA,
as defined, to net loss attributable to Community Health Systems,
Inc. stockholders as derived directly from the condensed
consolidated financial statements (in millions):
Three Months Ended Nine Months
Ended September 30, September 30, 2017
2016 2017 2016
Net loss attributable to Community Health
Systems, Inc. stockholders
$ (110 ) $ (79 ) $ (446 ) $ (1,500 ) Adjustments: Benefit from
income taxes (59 ) (29 ) (74 ) (141 ) Depreciation and amortization
206 265 665 839 Net income attributable to noncontrolling interests
20 23 56 73 Loss from discontinued operations 2 2 10 5 Interest
expense, net 238 233 706 730 Loss from early extinguishment of debt
4 - 35 30 Impairment and (gain) loss on sale of businesses, net 33
39 363 1,695 Gain on sale of investments in unconsolidated
affiliates - - - (94 )
Expense (income) from government and other
legal settlements and related costs
1 10 (32 ) 10
(Income) expense from fair value
adjustments and legal expenses related to cases covered by the
CVR
(6 ) - 6 1 Expense related to the sale of a majority interest in
home care division - 1 1 1 Expense related to the spin-off of QHC -
- - 12
Expense related to employee termination
benefits and other restructuring charges
2 - 4 -
Adjusted EBITDA $ 331 $ 465 $ 1,294 $ 1,661
(f) Included in non-same-store income (loss)
from operations and loss from continuing operations are pre-tax
charges related to acquisition costs of less than $1 million and $1
million for the three months ended September 30, 2017 and 2016, and
$1 million and $4 million for the nine months ended September 30,
2017 and 2016, 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 Nine Months Ended September 30,
September 30, 2017 2016 2017
2016
Weighted-average number of shares
outstanding - basic
112 111 112 111
Add effect of dilutive securities: Stock
awards and options
- - - -
Weighted-average number of shares
outstanding - diluted
112 111 112 111
The Company generated a loss from continuing operations
attributable to Community Health Systems, Inc. common stockholders
for the three and nine months ended September 30, 2017 and 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 months ended September
30, 2017 and 2016, the effect of restricted stock awards on the
diluted shares calculation would have been an increase of 148,768
shares and 445,732 shares, respectively. If the Company had
generated income from continuing operations during the nine months
ended September 30, 2017 and 2016, the effect of restricted stock
awards on the diluted shares calculation would have been an
increase of 147,618 shares and 225,334 shares, respectively.
Footnotes to Financial Highlights, Financial
Statements and Selected Operating Data (Continued)
(h) The following supplemental tables reconcile loss from
continuing operations and net loss 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 Nine Months Ended
September 30, September 30, 2017
2016 2017 2016
Loss from continuing operations, as reported $ (0.96 ) $ (0.69 ) $
(3.91 ) $ (13.50 ) Adjustments: Loss from early extinguishment of
debt 0.02 - 0.20 0.18 Impairment and (gain) loss on sale of
businesses, net 0.19 0.28 2.87 13.72
Expense (income) from government and other
legal settlements and related costs
0.01 0.06 (0.19 ) 0.06
(Income) expense from fair value
adjustments and legal expenses related to cases covered by the
CVR
(0.04 ) - 0.05 - Gain on sale of investments in unconsolidated
affiliates - - - (0.54 ) Expense related to the spin-off of QHC - -
- 0.08
Expense related to employee termination
benefits and other restructuring charges
0.01 - 0.03 -
(Loss) income from continuing operations,
excluding adjustments
$ (0.77 ) $ (0.35 ) $ (0.95 ) $ -
Three Months
Ended Nine Months Ended September 30,
September 30, 2017 2016
2017 2016 Net loss, as reported
$ (0.98 ) $ (0.71 ) $ (3.99 ) $ (13.55 ) Adjustments: Loss from
early extinguishment of debt 0.02 - 0.20 0.18 Impairment and (gain)
loss on sale of businesses, net 0.19 0.28 2.87 13.72
Expense (income) from government and other
legal settlements and related costs
0.01 0.06 (0.19 ) 0.06
(Income) expense from fair value
adjustments and legal expenses related to cases covered by the
CVR
(0.04 ) - 0.05 - Gain on sale of investments in unconsolidated
affiliates - - - (0.54 ) Expense related to the spin-off of QHC - -
- 0.08
Expense related to employee termination
benefits and other restructuring charges
0.01 - 0.03 - Impairment of long-lived assets in discontinued
operations 0.01 - 0.05
0.01 Net loss, excluding adjustments $ (0.79 ) $
(0.37 ) $ (0.98 ) $ (0.03 )
Footnotes to Financial Highlights, Financial
Statements and Selected Operating Data (Continued)
(i) Both income from operations and loss from continuing
operations for the three and nine months ended September 30, 2017,
included non-cash expense of approximately $33 million and $363
million, respectively, related to impairment charges to reduce the
value of long-lived assets, primarily allocated goodwill, at
hospitals that the Company has identified for sale or sold. Both
income from operations and loss from continuing operations for the
three months ended September 30, 2016, included an impairment
charge of approximately $39 million, primarily related to the
allocation of hospital reporting unit goodwill to four hospitals
classified as held for sale in September 2016 upon the execution of
a definitive agreement to sell such hospitals as announced by us on
September 29, 2016, as well as the updated measurement of the
estimated impairment charge recorded during the three months ended
June 30, 2016. Both loss from operations and loss from continuing
operations for the nine months ended September 30, 2016, included
an impairment charge of approximately $1.695 billion, of which
$1.395 billion was a charge related to the write-down of a portion
of the goodwill for the Company’s hospital operation reporting
unit, and $283 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 was marketing for sale that had experienced declining
operating results or had a decline in their estimated fair value
since the Company’s previous impairment review. Also, included in
loss from operations and loss from continuing operations for the
nine months ended September 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.
(j) The $(0.01) per share (diluted) of expense for
“Government and other legal settlements and related costs” for the
three months ended September 30, 2017, is the settlement in
principle of several lawsuits during the three months ended
September 30, 2017, and related legal expenses. The $0.19 per share
(diluted) of income for “Government and other legal settlements and
related costs” for the nine months ended September 30, 2017, is
primarily the impact of the shareholder derivative action settled
during the nine months ended September 30, 2017, net of related
legal expenses. The $0.06 per share (diluted) of expense for
“Government and other legal settlements and related costs” for the
three and nine months ended September 30, 2016, is the net impact
of several lawsuits settled in principle during the three and nine
months ended September 30, 2016, 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 $94 million gain on sale of investments in
unconsolidated affiliates during the nine months ended September
30, 2016.
Regulation FD Disclosure
Set forth below is selected information concerning the Company’s
projected consolidated operating results for the year ending
December 31, 2017. These projections update selected guidance
issued on August 1, 2017, 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 2017 guidance
should be considered in conjunction with the assumptions included
herein. See pages 20 and 21 for a list of factors that could affect
the future results of the Company or the healthcare industry
generally.
The following is provided as guidance to analysts and
investors:
2017 Projection Range Net operating
revenues less provision for bad debts (in millions) $ 15,800 to $
15,900 Adjusted EBITDA (in millions) $ 1,675 to $ 1,725 Loss from
continuing operations per share - diluted $ (1.30) to $ (1.20)
Same-store hospital annual adjusted admissions decline (2.0) % to
(1.5) % Weighted-average diluted shares, in millions 112.0 to 112.5
The following assumptions were used in developing the 2017
guidance provided above:
- The divestiture of 30 hospitals
included in continuing operations, all of which divestitures were
completed in 2017 on or before November 1, 2017. These hospitals
generated approximately $3.4 billion of net operating revenues in
2016 with mid-single digit Adjusted EBITDA margins. These
divestitures generated approximately $1.95 billion in gross
proceeds, including working capital.
- The Company’s projections also exclude
the following:
- Gains associated with the settlement of
the shareholder derivative action in January 2017;
- 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;
- Employee termination benefits and
restructuring costs;
- Resolution of government investigations
or other significant legal settlements;
- Costs incurred in connection with
divestitures;
- Insurance recoveries that may be
received for property losses and business interruption coverage
related to Hurricanes Harvey and Irma; and
- Other significant gains or losses that
neither relate to the ordinary course of business nor reflect the
Company’s underlying business performance.
- The Company has two small hospitals
which remain held for sale for which the operating results have
been classified in discontinued operations and have been excluded
from the Company’s guidance.
Other assumptions used in the above guidance:
• Health Information Technology (HITECH) electronic health
records incentive reimbursement of approximately $25 million to $30
million for the year ending December 31, 2017.
• Same-store hospital annual adjusted admissions decline of
(2.0)% to (1.5)% for 2017, 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 5.5% to 5.6% for
2017. 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 additional
hospitals which may be classified as held for sale.
• Interest expense, expressed as a percentage of net operating
revenues, of approximately 5.8% to 5.9%; however, interest expense
may vary as revenue varies. Interest expense has been adjusted to
reflect the Company’s refinancing transactions in March 2017 and
May 2017 and the repayment of debt with proceeds from the
divestitures completed during 2017. Projected interest expense does
not consider any future refinancing transactions. Total fixed rate
debt, including swaps, is expected to average approximately 75% to
85% of total debt during 2017.
• Expressed as a percentage of net operating revenues, net
income attributable to noncontrolling interests of approximately
0.5% to 0.6% for 2017.
• Expressed as a percentage of loss from continuing operations
before income taxes, benefit from income taxes of approximately
25.0% to 27.0% for 2017, which includes the impact of adopting ASU
2016-09 on the tax provision for the vesting of equity-based
compensation.
A reconciliation of the Company’s projected 2017 Adjusted
EBITDA, a forward-looking non-GAAP financial measure, to the
Company’s projected net loss attributable to Community Health
Systems, Inc. stockholders, the most directly comparable GAAP
financial measure, is shown below:
Year Ending December 31, 2017
Low High
Net loss attributable to Community Health
Systems, Inc. stockholders (1)
$ (146 ) $ (134 ) Adjustments: Depreciation and amortization 870
880 Interest expense, net 925 935 Benefit from income taxes (54 )
(44 ) Net income attributable to noncontrolling interests 80
88 Adjusted EBITDA (1) $ 1,675 $ 1,725
(1) The Company does not include in this
reconciliation the impact of certain items not included in the
Company’s forecast set forth above that would be included in a
reconciliation of historical net loss attributable to Community
Health Systems, Inc. stockholders to Adjusted EBITDA such as, but
not limited to, losses from early extinguishment of debt,
impairment and (gain) loss on sale of businesses, and expense
(income) related to government and other legal settlements and
related costs, in light of the fact that such items are not
determinable and/or the inherent difficulty in quantifying such
projected amounts on a forward-looking basis.
- Capital expenditures are projected as
follows (in millions):
2017 Guidance Total $575
to $725
- Net cash provided by operating
activities, excluding cash flows related to the CVR and settlement
of legal contingencies, is projected as follows (in millions):
2017 Guidance Total $900
to $1,000
- Diluted weighted-average shares
outstanding are projected to be between approximately 112.0 million
to 112.5 million for 2017.
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;
• the impact of the potential repeal of or significant changes
to the Affordable Care Act, its implementation or its
interpretation, as well as changes in other federal, state or local
laws or regulations affecting our business;
• 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 future and long-term viability of health insurance
exchanges, which may be affected by whether a sufficient number of
payors participate as well as the impact of the 2016 federal
elections on the Affordable Care Act;
• risks associated with our substantial indebtedness, leverage
and debt service obligations, including our ability to refinance
such indebtedness on acceptable terms or 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 affected 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, 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 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, to the extent such
payments have not expired;
• 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 any additional
acquisitions or replacement facilities or other capital
expenditures;
• our ability to successfully make acquisitions or complete
divestitures, including the disposition of hospitals and
non-hospital businesses pursuant to our portfolio rationalization
and deleveraging strategy, our ability to complete any such
acquisitions or divestitures on desired terms or at all (including
to realize the anticipated amount of proceeds from contemplated
dispositions), 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;
• the impact that changes in our relationships with joint
venture or syndication partners could have on effectively operating
our hospitals or ancillary services or in advancing strategic
opportunities;
• 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, including
the timing and amount of insurance recoveries in relation to severe
weather events such as Hurricanes Harvey and Irma;
• 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;
• any failure to comply with the terms of the Corporate
Integrity Agreement;
• the concentration of our revenue in a small number of
states;
• our ability to realize anticipated cost savings and other
benefits from our current strategic and operational cost savings
initiatives; 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 nine months
ended September 30, 2017, are not necessarily indicative of the
results that may be experienced for any future periods. The Company
cautions that the projections for calendar year 2017 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.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20171101006708/en/
Investor:For Community Health Systems, Inc.Thomas J. Aaron,
615-465-7000Executive Vice Presidentand Chief Financial Officer
Community Health Systems (NYSE:CYH)
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