NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
Business. Community Health Systems, Inc. is a holding company and operates no business in its own name. On a
consolidated basis, Community Health Systems, Inc. and its subsidiaries (collectively the Company) own, lease and operate general acute care hospitals in communities across the country. As of December 31, 2019, the Company owned or
leased 102 hospitals, included in continuing operations, including two stand-alone rehabilitation or psychiatric hospitals, licensed for 16,240 beds in 18 states. Throughout these notes to the consolidated financial statements, Community Health
Systems, Inc. (the Parent) and its consolidated subsidiaries are referred to on a collective basis as the Company. This drafting style is not meant to indicate that the publicly-traded Parent or any particular subsidiary of
the Parent owns or operates any asset, business, or property. The hospitals, operations and businesses described in this filing are owned and operated, and management services provided, by distinct and indirect subsidiaries of Community Health
Systems, Inc.
As of December 31, 2019, Florida, Texas and Indiana represent the only areas of significant geographic concentration.
Net operating revenues generated by the Companys hospitals in Florida, as a percentage of consolidated operating revenues, were 14.3% in both 2019 and 2018 and 14.0% in 2017. Net operating revenues generated by the Companys hospitals in
Texas, as a percentage of consolidated operating revenues, were 12.2% in 2019, 11.7% in 2018 and 10.9% in 2017. Net operating revenues generated by the Companys hospitals in Indiana, as a percentage of consolidated operating revenues, were
13.7% in 2019, 12.5% in 2018 and 11.6% in 2017.
Use of Estimates. The preparation of financial statements
in conformity with U.S. generally accepted accounting principles (GAAP) requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements. Actual results could differ from
these estimates under different assumptions or conditions.
Principles of Consolidation. The consolidated
financial statements include the accounts of the Parent, its subsidiaries, all of which are controlled by the Parent through majority voting control, and variable interest entities for which the Company is the primary beneficiary. All intercompany
accounts, profits and transactions have been eliminated. Noncontrolling interests in less-than-wholly-owned consolidated subsidiaries of the Parent are presented as a component of total equity to distinguish between the interests of the Parent and
the interests of the noncontrolling owners. Revenues, expenses and income from continuing operations from these subsidiaries are included in the consolidated amounts as presented on the consolidated statements of loss, along with a net income
measure that separately presents the amounts attributable to the controlling interests and the amounts attributable to the noncontrolling interests for each of the periods presented. Noncontrolling interests that are redeemable or may become
redeemable at a fixed or determinable price at the option of the holder or upon the occurrence of an event outside of the control of the Company are presented in mezzanine equity on the consolidated balance sheets.
Cost of Revenue. Substantially all of the Companys operating costs and expenses are cost of
revenue items. Operating costs that could be classified as general and administrative by the Company would include the Companys corporate office costs at its Franklin, Tennessee office which were collectively $184 million,
$181 million and $189 million for the years ended December 31, 2019, 2018 and 2017, respectively. Included in these corporate office costs is stock-based compensation of $10 million, $13 million and $24 million for the
years ended December 31, 2019, 2018 and 2017, respectively.
Cash Equivalents. The Company considers
highly liquid investments with original maturities of three months or less to be cash equivalents.
Supplies. Supplies, principally medical supplies, are stated at the lower of cost
(first-in, first-out basis) or market.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Marketable Securities. Prior to adoption of Accounting
Standards Update (ASU) 2016-01 on January 1, 2018, the Companys marketable securities were classified as trading or
available-for-sale. Trading securities were reported at fair value with unrealized gains and losses included in earnings. Available-for-sale securities were carried at fair value as determined by quoted market prices, with unrealized gains and losses reported as a separate component of stockholders (deficit) equity. After
adoption of ASU 2016-01 on January 1, 2018, the Companys marketable securities consist of debt securities that are classified as trading or available-for-sale and equity securities. Equity securities are reported at fair value with changes in fair value included in earnings.
Available-for-sale debt securities are carried at fair value as determined by quoted market prices, with unrealized gains and losses reported as a separate component of
stockholders (deficit) equity. Trading securities are reported at fair value with unrealized gains and losses included in earnings. Other comprehensive loss, net of tax, included an unrealized gain of $4 million and $8 million during
the years ended December 31, 2019 and 2017, respectively, and an unrealized loss of $2 million during the year ended December 31, 2018, related to these
available-for-sale debt securities.
Property and
Equipment. Property and equipment are recorded at cost. Depreciation is recognized using the straight-line method over the estimated useful lives of the land and improvements (3 to 20 years), buildings and improvements (5
to 40 years) and equipment and fixtures (3 to 18 years). Costs capitalized as construction in progress were $219 million at both December 31, 2019 and 2018. Expenditures for renovations and other significant improvements are capitalized;
however, maintenance and repairs which do not improve or extend the useful lives of the respective assets are charged to operations as incurred. Interest capitalized related to construction in progress was $20 million, $15 million and
$11 million for the years ended December 31, 2019, 2018 and 2017, respectively. Purchases of property and equipment and internal-use software accrued in accounts payable and not yet paid were
$93 million and $115 million at December 31, 2019 and 2018, respectively.
The Company also leases certain facilities and
equipment under finance leases (see Note 9). Such assets are amortized on a straight-line basis over the lesser of the term of the lease or the remaining useful lives of the applicable assets. During the year ended December 31, 2019, the
Company had non-cash investing activity of $6 million related to certain facility and equipment additions that were financed through finance leases and other debt.
Goodwill. Goodwill represents the excess of the fair value of the consideration conveyed in the acquisition over
the fair value of net assets acquired. Goodwill arising from business combinations is not amortized. Goodwill is required to be evaluated for impairment at the same time every year and when an event occurs or circumstances change such that it is
more likely than not that impairment may exist. The Company performs its annual testing of impairment for goodwill in the fourth quarter of each year. As further discussed in Note 4, the Company recorded an impairment charge of $1.419 billion
during the year ended December 31, 2017. There was no goodwill impairment charge during the years ended December 31, 2019 and 2018 as a result of the Companys annual impairment evaluation.
Other Assets. Other assets consist of the insurance recovery receivable from excess insurance carriers related
to the Companys self-insured malpractice general liability and workers compensation insurance liability; costs to recruit physicians to the Companys markets, which are deferred and expensed over the term of the respective physician
recruitment contract, generally three years, and included in amortization expense; equity method investments; and capitalized internal-use software costs, which are expensed over the expected useful life,
which is generally three years for routine software and eight to ten years for major software projects, and included in amortization expense. Included in the increase in other investments in the consolidated statement of cash flows for the year
ended December 31, 2019, was cash paid of approximately $28 million to increase investments in certain equity method investments.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Revenue Recognition. On January 1, 2018, the Company
adopted the new revenue recognition accounting standard issued by the Financial Accounting Standards Board (FASB) and codified in the FASB Accounting Standards Codification (ASC) as topic 606 (ASC 606). The
revenue recognition standard in ASC 606 outlines a single comprehensive model for recognizing revenue as performance obligations, defined in a contract with a customer as goods or services transferred to the customer in exchange for consideration,
are satisfied. The standard also requires expanded disclosures regarding the Companys revenue recognition policies and significant judgments employed in the determination of revenue.
The Company applied the modified retrospective approach to all contracts when adopting ASC 606. As a result, upon the Companys adoption
of ASC 606 the majority of what was previously classified as the provision for bad debts in the statement of operations is now reflected as implicit price concessions (as defined in ASC 606) and therefore was included as a reduction to net operating
revenues in 2019 and 2018. For changes in credit issues not assessed at the date of service, the Company prospectively recognizes those amounts in other operating expenses on the statement of operations. For periods prior to the adoption of ASC 606,
the provision for bad debts has been presented consistent with the previous revenue recognition standards that required such provision to be presented separately as a component of net operating revenues. Additionally, upon adoption of ASC 606 the
allowance for doubtful accounts of approximately $3.9 billion as of January 1, 2018 was reclassified as a component of net patient accounts receivable. Other than these changes in presentation on the consolidated statement of operations
and consolidated balance sheet, the adoption of ASC 606 did not have a material impact on the consolidated results of operations for the years ended December 31, 2019 and 2018, and the Company does not expect it to have a material impact on its
consolidated results of operations on a prospective basis.
As part of the adoption of ASC 606, the Company elected two of the available
practical expedients provided for in the standard. First, the Company does not adjust the transaction price for any financing components as those were deemed to be insignificant. Additionally, the Company expenses all incremental customer contract
acquisition costs as incurred because such costs are not material and would be amortized over a period less than one year.
Net Operating Revenues
Net operating revenues are recorded at the transaction price estimated by the Company to reflect the total consideration due from
patients and third-party payors in exchange for providing goods and services in patient care. These services are considered to be a single performance obligation and have a duration of less than one year. Revenues are recorded as these goods and
services are provided. The transaction price, which involves significant estimates, is determined based on the Companys standard charges for the goods and services provided, with a reduction recorded for price concessions related to third
party contractual arrangements as well as patient discounts and other patient price concessions. During the years ended December 31, 2019 and 2018, the impact of changes to the inputs used to determine the transaction price was considered
immaterial to the current period.
States utilize supplemental reimbursement programs for the purpose of providing reimbursement to
providers that is not specifically tied to an individuals care, some of which offsets a portion of the cost of providing care to Medicaid and indigent patients. These programs are designed with input from the Centers for Medicare &
Medicaid Services and are funded with a combination of state and federal resources, including, in certain instances, fees or taxes levied on the providers. Under these supplemental programs, the Company recognizes revenue and related expenses in the
period in which amounts are estimable and collection is reasonably assured. Reimbursement under these programs is reflected in net operating revenues and fees, taxes or other program-related costs are reflected in other operating expenses.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The Companys net operating revenues during the years ended December 31, 2019 and
2018 have been presented in the following table based on an allocation of the estimated transaction price with the patient between the primary patient classification of insurance coverage (in millions):
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2019
|
|
|
2018
|
|
Medicare
|
|
$
|
3,331
|
|
|
$
|
3,730
|
|
Medicaid
|
|
|
1,736
|
|
|
|
1,876
|
|
Managed Care and other third-party payors
|
|
|
8,014
|
|
|
|
8,349
|
|
Self-pay
|
|
|
129
|
|
|
|
200
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
13,210
|
|
|
$
|
14,155
|
|
|
|
|
|
|
|
|
|
|
Operating revenues, net of contractual allowances and discounts (but before the provision for bad debts) by
payor have been presented in the following table for the year ended December 31, 2017, as follows, consistent with the presentation prior to the adoption of ASC 606 on January 1, 2018 (in millions):
|
|
|
|
|
|
|
Year Ended
December 31, 2017
|
|
Medicare
|
|
$
|
4,188
|
|
Medicaid
|
|
|
1,900
|
|
Managed Care and other third-party payors
|
|
|
9,991
|
|
Self-pay
|
|
|
2,319
|
|
|
|
|
|
|
Total
|
|
$
|
18,398
|
|
|
|
|
|
|
Patient Accounts Receivable
Patient accounts receivable are recorded at net realizable value based on certain assumptions determined by each payor. For third-party payors
including Medicare, Medicaid, and Managed Care, the net realizable value is based on the estimated contractual reimbursement percentage, which is based on current contract prices or historical paid claims data by payor. For self-pay accounts receivable, which includes patients who are uninsured and the patient responsibility portion for patients with insurance, the net realizable value is determined using estimates of historical
collection experience without regard to aging category. These estimates are adjusted for estimated conversions of patient responsibility portions, expected recoveries and any anticipated changes in trends.
Patient accounts receivable can be impacted by the effectiveness of the Companys collection efforts. Additionally, significant changes
in payor mix, business office operations, economic conditions or trends in federal and state governmental healthcare coverage could affect the net realizable value of accounts receivable. The Company also continually reviews the net realizable value
of accounts receivable by monitoring historical cash collections as a percentage of trailing net operating revenues, as well as by analyzing current period net revenue and admissions by payor classification, aged accounts receivable by payor, days
revenue outstanding, the composition of self-pay receivables between pure self-pay patients and the patient responsibility portion of third-party insured receivables and
the impact of recent acquisitions and dispositions.
Final settlements for some payors and programs are subject to adjustment based on
administrative review and audit by third parties. As a result of these final settlements, the Company has recorded amounts due to third-party payors of $83 million and $144 million as of December 31, 2019 and December 31,
2018, respectively, and these amounts are included in accrued liabilities-other in the accompanying consolidated balance sheets. Amounts due
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COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
from third-party payors were $137 million and $155 million as of December 31, 2019 and December 31, 2018, respectively, and are included in other current assets in
the accompanying consolidated balance sheets. Substantially all Medicare and Medicaid cost reports are final settled through 2016.
Charity Care
In the ordinary course of business, the Company renders services to patients who are financially unable to pay for hospital care. The
Companys policy is to not pursue collections for such amounts; therefore, the related charges for those patients who are financially unable to pay and that otherwise do not qualify for reimbursement from a governmental program are not reported
in net operating revenues, and are thus classified as charity care. The Company determines amounts that qualify for charity care primarily based on the patients household income relative to the federal poverty level guidelines, as established
by the federal government.
These charity care services are estimated to be $540 million, $491 million and
$482 million for the years ended December 31, 2019, 2018 and 2017, respectively, representing the value (at the Companys standard charges) of these charity care services that are excluded from net operating revenues. The estimated
cost incurred by the Company to provide these charity care services to patients who are unable to pay was approximately $66 million, $62 million and $62 million for the years ended December 31, 2019, 2018 and 2017, respectively.
The estimated cost of these charity care services was determined using a ratio of cost to gross charges and applying that ratio to the gross charges associated with providing care to charity patients for the period.
During 2017 and culminating with the financial close process at December 31, 2017, the Company developed new accounting methodologies and
processes to implement ASU 2014-09, the accounting standard for revenue recognition that was adopted by the Company effective January 1, 2018. By implementing new data extraction techniques and updated
hindsight information on historical collection data, the Company was able to better estimate the net amount after contractual allowances owed by the third-party payor and what will be owed by the patient based on historical experience. Such updated
information included portfolio-level data related to historical collection amounts on an individual hospital and patient level that previously had not been readily available. Using this information the Company created a new accounting process by
which it can estimate contractual allowances on a per patient basis. In addition to this new accounting methodology, the Company also revised its methods of estimating contractual allowances to (1) expand the hindsight period over which the
Company analyzes payors historical paid claims data to estimate contractual allowances, (2) expand the basis for payor denied claims to refine the hindsight reserve for such denials, and (3) adjust the contractual allowances for
certain categories of commercial payors using more precise historical experience based on recent patterns of account reimbursement. Additionally, the Company evaluated the estimated collection of those amounts due from the patient as part of the
Companys estimate of the allowance for doubtful accounts. This analysis also included an evaluation of patient accounts receivable retained after the divestiture of 30 hospitals throughout 2017, and certain other revenues. Based on these new
accounting processes and methodologies, the Company recorded a change in estimate during the three months ended December 31, 2017 to increase contractual allowances by approximately $197 million, and to record additional provision for bad
debts and increase the allowance for doubtful accounts by $394 million. The total impact of the change in estimate recorded during the three months ended December 31, 2017 was a decrease to net operating revenues of $591 million.
Electronic Health Records Incentive Reimbursement. The federal government has implemented a number of
regulations and programs designed to promote the use of electronic health records (EHR) technology and, pursuant to the Health Information Technology for Economic and Clinical Health Act (HITECH), established requirements for
a Medicare and Medicaid incentive payments program for eligible hospitals and professionals that adopt and meaningfully use certified EHR technology. The Company utilizes a gain contingency model to recognize EHR incentive payments. Recognition
occurs when the eligible hospitals adopt or demonstrate
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
meaningful use of certified EHR technology for the applicable payment period and have available the Medicare cost report information for the relevant full cost report year used to determine the
final incentive payment.
Medicaid EHR incentive payments are calculated based on prior period Medicare cost report information available
at the time when eligible hospitals adopt, implement, upgrade or demonstrate meaningful use of certified EHR technology. Since the information for the relevant full Medicare cost report year is available at the time of attestation, the incentive
income from resolving the gain contingency is recognized when eligible hospitals adopt, implement, upgrade or demonstrate meaningful use of certified EHR technology.
Medicare EHR incentive payments are calculated based on the Medicare cost report information for the full cost report year that began during
the federal fiscal year in which meaningful use is demonstrated. Since the necessary information is only available at the end of the relevant full Medicare cost report year and after the cost report is settled, the incentive income from resolving
the gain contingency is recognized when eligible hospitals demonstrate meaningful use of certified EHR technology and the information for the applicable full Medicare cost report year to determine the final incentive payment is available.
In some instances, the Company may receive estimated Medicare EHR incentive payments prior to when the Medicare cost report information used
to determine the final incentive payment is available. In these instances, recognition of the gain for EHR incentive payments is deferred until all recognition criteria described above are met.
Eligibility for annual Medicare incentive payments is dependent on providers successfully attesting to the meaningful use of EHR technology.
Medicaid incentive payments are available to providers in the first payment year that they adopt, implement or upgrade certified EHR technology; however, providers must demonstrate meaningful use of such technology in any subsequent payment years to
qualify for additional incentive payments. Medicaid EHR incentive payments are fully funded by the federal government and administered by the states; however, the states are not required to offer EHR incentive payments to providers.
The Company recognized approximately $1 million, $4 million and $28 million for the years ended December 31, 2019, 2018
and 2017, respectively, of incentive reimbursement for HITECH incentives from Medicare and Medicaid related to certain of the Companys hospitals and for certain of the Companys employed physicians that have demonstrated meaningful use of
certified EHR technology or have completed attestations to their adoption or implementation of certified EHR technology. These incentive reimbursements are presented as a reduction of operating costs and expenses on the consolidated statements of
loss. The Company received cash related to the incentive reimbursement for HITECH incentives of approximately less than $1 million, $4 million and $41 million for the years ended December 31, 2019, 2018 and 2017, respectively.
The Company recorded no deferred revenue in connection with the receipt of these cash payments at December 31, 2019, 2018 or 2017.
Leases. On January 1, 2019, the Company adopted the cumulative accounting standard updates initially issued
by the FASB in February 2016 that amend the accounting for leases and are codified as Accounting Standards Codification Topic 842 (ASC 842). These changes to the lease accounting model require operating leases be recorded on the balance
sheet through recognition of a liability for the discounted present value of future fixed lease payments and a corresponding right-of-use (ROU) asset. The
Companys accounting for finance leases remained substantially unchanged from its prior accounting for capital leases. The ROU asset recorded at commencement of the lease represents the right to use the underlying asset over the lease term in
exchange for the lease payments. Leases with an initial term of 12 months or less that do not have an option to purchase the underlying asset that is deemed reasonably certain to be exercised are not recorded on the balance sheet; rather, rent
expense for these leases is recognized on a straight-line basis over the lease term, or when incurred if a month-to-month lease. When readily determinable, the Company
uses the interest rate implicit in a
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COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
lease to determine the present value of future lease payments. For leases where the implicit rate is not readily determinable, the Companys incremental borrowing rate is utilized. The
Company calculates its incremental borrowing rate on a quarterly basis using a third-party financial model that estimates the rate of interest the Company would have to pay to borrow an amount equal to the total lease payments on a collateralized
basis over a term similar to the lease. The Companys lease agreements do not contain any material residual value guarantees or material restrictive covenants.
The Company elected the amended transition requirements allowed for by the FASB in ASU 2018-11, which
provide entities relief by allowing them not to recast prior comparative periods from the adoption of ASC 842. As a result, the prior year comparative financial statements have not been restated to reflect the adoption of ASC 842. Additionally, the
Company elected the package of practical expedients available in ASC 842 upon adoption whereby an entity need not reassess expired contracts for lease identification or classification as a finance or operating lease, or for the reassessment of
initial direct costs. The Company has not elected the practical expedient to use hindsight to determine the lease term for its leases at transition. Certain of the Companys lease agreements have lease and
non-lease components, which for the majority of leases the Company accounts for separately when the actual lease and non-lease components are determinable. For equipment
leases with immaterial non-lease components incorporated into the fixed rent payment, the Company accounts for the lease and non-lease components as a single lease
component in determining the lease payment. Additionally, for certain individually insignificant equipment leases such as copiers, the Company applies a portfolio approach to effectively record the operating lease liability and ROU asset.
The adoption of ASC 842 had a material impact on the Companys consolidated balance sheet through the recording of the operating lease
liabilities and related ROU assets for leases in effect at January 1, 2019, but the adoption did not have a material impact on the Companys consolidated statement of loss or consolidated statement of cash flows for the year ended
December 31, 2019. The Company recorded approximately $673 million of operating lease liabilities and ROU assets on January 1, 2019 upon adoption of ASC 842, with no impact on accumulated deficit.
Physician Income Guarantees. The Company enters into physician recruiting agreements under which it supplements
physician income to a minimum amount over a period of time, typically one year, while the physicians establish themselves in the community. As part of the agreements, the physicians are committed to practice in the community for a period of time,
typically three years, which extends beyond their income guarantee period. The Company records an asset and liability for the estimated fair value of minimum revenue guarantees on new agreements. Adjustments to the ultimate value of the guarantee
paid to physicians are recognized in the period that the change in estimate is identified. The Company amortizes an asset over the life of the agreement. As of December 31, 2019 and 2018, the unamortized portion of these physician income
guarantees was $20 million and $24 million, respectively, and is recorded in other assets in the consolidated balance sheet.
Concentrations of Credit Risk. The Company grants unsecured credit to its patients, most of whom reside in the
service area of the Companys facilities and are insured under third-party payor agreements. Because of the economic diversity of the Companys facilities and non-governmental third-party payors,
Medicare represents the only significant concentration of credit risk from payors. Accounts receivable, net of contractual allowances, from Medicare was $268 million and $283 million at December 31, 2019 and 2018, respectively,
representing 5% of consolidated net accounts receivable at both December 31, 2019 and 2018.
Accounting for the Impairment or
Disposal of Long-Lived Assets. During the year ended December 31, 2019, the Company recorded a total combined impairment charge and loss on disposal of approximately $138 million, of which (i) approximately
$92 million was recorded to reduce the carrying value of closed hospitals and certain
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COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
hospitals that have been sold or deemed held for sale based on the difference between the carrying value of the hospital disposal groups compared to estimated fair value less costs to sell and
(ii) approximately $46 million was recorded primarily to adjust the carrying value of other long-lived assets at several underperforming hospitals or where the Company is in discussions with potential buyers for divestiture at a sales
price that indicates a fair value below carrying value. Included in the carrying value of the hospital disposal groups at December 31, 2019 is a net allocation of approximately $167 million of goodwill allocated from the hospital
operations reporting unit goodwill based on a calculation of the disposal groups relative fair value compared to the total reporting unit. The Company will continue to evaluate the potential for further impairment of the long-lived assets of
underperforming hospitals as well as evaluate offers for potential sales. Based on such analysis, additional impairment charges may be recorded in the future.
During the year ended December 31, 2018, the Company recorded a total combined impairment charge and loss on disposal of approximately
$668 million, of which (i) approximately $423 million was recorded to reduce the carrying value of certain hospitals that have been sold or deemed held for sale based on the difference between the carrying value of the hospital
disposal groups compared to estimated fair value less costs to sell, (ii) approximately $29 million was recorded to write-off the value of a promissory note received as consideration for the sale of
three hospitals in 2017 where the buyer entered into bankruptcy proceedings, and (iii) approximately $216 million was recorded primarily to adjust the carrying value of other long-lived assets at several underperforming hospitals that have
ceased operations or where the Company was in discussions with potential buyers for divestiture at a sales price that indicated a fair value below carrying value. Included in the carrying value of the hospital disposal groups at December 31,
2018 is a net allocation of approximately $186 million of goodwill allocated from the hospital operations reporting unit goodwill based on a calculation of the disposal groups relative fair value compared to the total reporting unit.
Income Taxes. The Company accounts for income taxes under the asset and liability method, in which deferred
income tax assets and liabilities are recognized for the tax consequences of temporary differences by applying enacted statutory tax rates applicable to future years to differences between the financial statement carrying amounts and the
tax bases of existing assets and liabilities. The effect on deferred taxes of a change in tax rates is recognized in the consolidated statement of loss during the period in which the tax rate change becomes law.
Comprehensive Loss. Comprehensive loss is the change in equity of a business enterprise during a period from
transactions and other events and circumstances from non-owner sources.
Segment
Reporting. A public company is required to report annual and interim financial and descriptive information about its reportable operating segments. Operating segments, as defined, are components of an enterprise about
which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. Aggregation of similar operating segments into a single
reportable operating segment is permitted if the businesses have similar economic characteristics and meet the criteria established by U.S. GAAP. The Company operates a single operating segment represented by hospital operations (which includes the
Companys acute care hospitals and related healthcare entities that provide inpatient and outpatient healthcare services).
Derivative Instruments and Hedging Activities. The Company records derivative instruments on the consolidated
balance sheet as either an asset or liability measured at its fair value. Changes in a derivatives fair value are recorded each period in earnings or other comprehensive income (OCI), depending on whether the derivative is
designated and is effective as a hedged transaction, and on the type of hedge transaction. Changes in the fair value of derivative instruments recorded to OCI are reclassified to earnings in the period affected by the underlying hedged item. Any
portion of the fair value of a derivative instrument determined to be ineffective
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COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
under the standard is recognized in current earnings. The Company has entered into several interest rate swap agreements and had one such agreement outstanding as of December 31, 2019. See
Note 7 for further discussion about the swap transactions.
New Accounting Pronouncements. In August 2018,
the FASB issued ASU 2018-15 to provide guidance on the accounting for implementation costs incurred in a cloud computing arrangement that is accounted for as a service contract. This ASU requires entities to
account for such costs consistent with the guidance on capitalizing costs associated with developing or obtaining internal-use software. The ASU is effective for all entities for fiscal years beginning after
December 15, 2019, and interim periods within those fiscal years, with early adoption permitted. The Company adopted this ASU on January 1, 2020, and does not expect the adoption of this ASU will have a material impact on its consolidated
financial position and results of operations.
In June 2016, the FASB issued ASU 2016-13, which
introduced a new model for recognizing credit losses on financial instruments based on an estimate of the current expected credit losses. The new current expected credit losses (CECL) model generally calls for the immediate
recognition of all expected credit losses and applies to financial instruments and other assets, including accounts receivable and other financial assets measured at amortized cost, debt securities and other financial assets. This guidance replaces
the current incurred loss model for measuring expected credit losses, requires expected losses on available-for-sale debt securities to be recognized through an
allowance for credit losses rather than as reductions in the amortized cost of the securities, and provides for additional disclosure requirements. This ASU is effective for fiscal years beginning after December 15, 2019, and interim
periods within those fiscal years, with early adoption permitted. The Company adopted this ASU on January 1, 2020, and does not expect the adoption of this ASU will have a material impact on its consolidated financial position and results of
operations.
2. ACCOUNTING FOR STOCK-BASED COMPENSATION
Stock-based compensation awards have been granted under the Community Health Systems, Inc. Amended and Restated 2000 Stock Option and Award
Plan, amended and restated as of March 20, 2013 (the 2000 Plan), and the Community Health Systems, Inc. Amended and Restated 2009 Stock Option and Award Plan, which was amended and restated as of March 14, 2018 and approved by
the Companys stockholders at the annual meeting of stockholders held on May 15, 2018 (the 2009 Plan).
The 2000
Plan allowed for the grant of incentive stock options intended to qualify under Section 422 of the Internal Revenue Code (the IRC), as well as stock options which did not so qualify, stock appreciation rights, restricted stock,
restricted stock units, performance-based shares or units and other share awards. Prior to being amended in 2009, the 2000 Plan also allowed for the grant of phantom stock. Persons eligible to receive grants under the 2000 Plan included the
Companys directors, officers, employees and consultants. All options granted under the 2000 Plan were nonqualified stock options for tax purposes. Generally, vesting of these granted options occurred in one-third increments on each of the first three anniversaries of the award date. Options granted prior to 2005 had a 10-year contractual term, options granted in 2005 through
2007 had an eight-year contractual term and options granted since 2008 had a 10-year contractual term. Pursuant to the amendment and restatement of the 2000 Plan dated March 20, 2013, no further grants
will be awarded under the 2000 Plan.
The 2009 Plan provides for the grant of incentive stock options intended to qualify under
Section 422 of the IRC and for the grant of stock options which do not so qualify, stock appreciation rights, restricted stock, restricted stock units, performance-based shares or units and other share awards. Persons eligible to receive grants
under the 2009 Plan include the Companys directors, officers, employees and consultants. To date, all options granted under the 2009 Plan have been nonqualified stock options for tax purposes. Generally, vesting of these granted
options occurs in one-third increments on each of the first three anniversaries of the award date.
107
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Options granted in 2011 or later have a 10-year contractual term. As of December 31, 2019, 5,308,206 shares of unissued common stock were reserved for
future grants under the 2009 Plan.
The exercise price of all options granted under the 2000 Plan and the 2009 Plan has been equal to the
fair value of the Companys common stock on the option grant date.
The following table reflects the impact of total compensation
expense related to stock-based equity plans on the reported operating results for the respective periods (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2019
|
|
|
2018
|
|
|
2017
|
|
Effect on loss before income taxes
|
|
$
|
(10)
|
|
|
$
|
(13)
|
|
|
$
|
(24)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect on net loss
|
|
$
|
(8)
|
|
|
$
|
(10)
|
|
|
$
|
(16)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2019, $13 million of unrecognized stock-based compensation expense related to
outstanding unvested stock options, restricted stock and restricted stock units (the terms of which are summarized below) was expected to be recognized over a weighted-average period of 22 months. Of that amount, $1 million related to
outstanding unvested stock options was expected to be recognized over a weighted-average period of 26 months and $12 million related to outstanding unvested restricted stock and restricted stock units was expected to be recognized over a
weighted-average period of 21 months. There were no modifications to awards during the years ended December 31, 2019, 2018 and 2017.
The fair value of stock options was estimated using the Black Scholes option pricing model with the following assumptions and weighted-average
fair values during the years ended December 31, 2019, 2018 and 2017:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2019
|
|
|
2018
|
|
|
2017
|
|
Expected volatility
|
|
|
68.4
|
%
|
|
|
N/A
|
%
|
|
|
N/A
|
%
|
Expected dividends
|
|
|
-
|
|
|
|
N/A
|
|
|
|
N/A
|
|
Expected term
|
|
|
5.6 years
|
|
|
|
N/A
|
|
|
|
N/A
|
|
Risk-free interest rate
|
|
|
2.6
|
%
|
|
|
N/A
|
%
|
|
|
N/A
|
%
|
In determining the expected term, the Company examined concentrations of option holdings and historical
patterns of option exercises and forfeitures, as well as forward-looking factors, in an effort to determine if there were any discernable employee populations. From this analysis, the Company identified two primary employee populations, one
consisting of certain senior executives and the other consisting of substantially all other recipients.
The expected volatility rate was
estimated based on historical volatility. In determining expected volatility, the Company also reviewed the market-based implied volatility of actively traded options of its common stock and determined that historical volatility utilized to estimate
the expected volatility rate did not differ significantly from the implied volatility.
The expected term computation is based on
historical exercise and cancellation patterns and forward-looking factors, where present, for each population identified. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of the grant. The pre-vesting forfeiture rate is based on historical rates and forward-looking factors for each population identified. The Company adjusts the estimated forfeiture rate to its actual experience.
108
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Options outstanding and exercisable under the 2000 Plan and the 2009 Plan as of
December 31, 2019, and changes during each of the years in the three-year period prior to December 31, 2019, were as follows (in millions, except share and per share data):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
|
Weighted-
Average
Exercise Price
|
|
|
Weighted-
Average
Remaining
Contractual Term
|
|
|
Aggregate
Intrinsic Value
as of
December 31,
2019
|
|
Outstanding at December 31, 2016
|
|
|
1,185,320
|
|
|
$
|
28.12
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Forfeited and cancelled
|
|
|
(69,653
|
)
|
|
|
33.52
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2017
|
|
|
1,115,667
|
|
|
|
31.56
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Forfeited and cancelled
|
|
|
(490,729
|
)
|
|
|
32.01
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2018
|
|
|
624,938
|
|
|
|
31.21
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
658,500
|
|
|
|
4.95
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Forfeited and cancelled
|
|
|
(173,304
|
)
|
|
|
23.04
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2019
|
|
|
1,110,134
|
|
|
$
|
16.90
|
|
|
|
5.6 years
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at December 31, 2019
|
|
|
486,134
|
|
|
$
|
32.26
|
|
|
|
1.0 years
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The weighted-average grant date fair value of stock options granted during the year ended December 31,
2019 was $3.05. No stock options were granted during the years ended December 31, 2018 and 2017. The aggregate intrinsic value (calculated as the number of
in-the-money stock options multiplied by the difference between the Companys closing stock price on the last trading day of the reporting period ($2.90) and the
exercise price of the respective stock options) in the table above represents the amount that would have been received by the option holders had all option holders exercised their options on December 31, 2019. This amount changes based on the
market value of the Companys common stock. There were no options exercised during the years ended December 31, 2019, 2018 and 2017. The aggregate intrinsic value of options vested and expected to vest approximates that of the outstanding
options.
The Company has also awarded restricted stock under the 2009 Plan to employees of certain subsidiaries. With respect to
time-based vesting restricted stock that has been awarded under the 2009 Plan, the restrictions on these shares have generally lapsed in one-third increments on each of the first three anniversaries of the
award date. In addition, certain of the restricted stock awards granted to the Companys senior executives have contained performance objectives required to be met in addition to any time-based vesting requirements. If the applicable
performance objectives are not attained, these awards will be forfeited in their entirety. For such performance-based awards granted prior to March 1, 2017, performance objectives were measured over a
one-year period, and, provided the target performance objective was attained, restrictions lapsed in one-third increments on each of the first three anniversaries of the
award date. For performance-based awards granted on or after March 1, 2017, the performance objectives have been measured cumulatively over a three-year period. With respect to performance-based awards granted on or after March 1, 2017, if
the applicable target performance objective is met at the end of the three-year period, then the portion of the restricted stock award subject to such performance objective will vest in full on the third anniversary of the award date. Additionally,
for these awards, based on the level of achievement for the applicable performance objective within the parameters specified in the award
109
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
agreement, the number of shares to be issued in connection with the vesting of the award may be adjusted to decrease or increase the number of shares specified in the original award.
Notwithstanding the above-mentioned performance objectives and vesting requirements, the restrictions with respect to restricted stock granted under the 2009 Plan may lapse earlier in the event of death, disability or termination of employment by
the Company for any reason other than for cause of the holder of the restricted stock, or change in control of the Company. Restricted stock awards subject to performance objectives that have not yet been satisfied are not considered outstanding for
purposes of determining earnings per share until the performance objectives have been satisfied.
Restricted stock outstanding under the
2009 Plan as of December 31, 2019, and changes during each of the years in the three-year period prior to December 31, 2019, were as follows:
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
|
Weighted-
Average Grant
Date Fair Value
|
|
Unvested at December 31, 2016
|
|
|
2,969,285
|
|
|
$
|
29.39
|
|
Granted
|
|
|
1,502,000
|
|
|
|
9.10
|
|
Vested
|
|
|
(1,586,855
|
)
|
|
|
33.91
|
|
Forfeited
|
|
|
(240,511
|
)
|
|
|
18.20
|
|
|
|
|
|
|
|
|
|
|
Unvested at December 31, 2017
|
|
|
2,643,919
|
|
|
|
16.17
|
|
Granted
|
|
|
1,987,000
|
|
|
|
4.54
|
|
Vested
|
|
|
(1,154,670
|
)
|
|
|
23.22
|
|
Forfeited
|
|
|
(167,342
|
)
|
|
|
10.29
|
|
|
|
|
|
|
|
|
|
|
Unvested at December 31, 2018
|
|
|
3,308,907
|
|
|
|
7.00
|
|
Granted
|
|
|
1,989,000
|
|
|
|
4.94
|
|
Vested
|
|
|
(1,160,667
|
)
|
|
|
8.89
|
|
Forfeited
|
|
|
(279,838
|
)
|
|
|
5.60
|
|
|
|
|
|
|
|
|
|
|
Unvested at December 31, 2019
|
|
|
3,857,402
|
|
|
|
5.47
|
|
|
|
|
|
|
|
|
|
|
Restricted stock units (RSUs) have been granted to the Companys outside directors under the
2009 Plan. Each of the Companys then serving outside directors received grants under the 2009 Plan of 18,498 RSUs, 37,118 RSUs and 34,068 RSUs on March 1, 2017, 2018 and 2019, respectively. Each of the 2017, 2018 and 2019 grants had a
grant date fair value of approximately $170,000. Vesting of these RSUs occurs in one-third increments on each of the first three anniversaries of the award date or upon the directors earlier cessation of
service on the board, other than for cause.
110
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
RSUs outstanding under the 2009 Plan as of December 31, 2019, and changes during each of
the years in the three-year period prior to December 31, 2019, were as follows:
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
|
Weighted-
Average Grant
Date Fair Value
|
|
Unvested at December 31, 2016
|
|
|
120,386
|
|
|
$
|
22.06
|
|
Granted
|
|
|
110,988
|
|
|
|
9.19
|
|
Vested
|
|
|
(59,296
|
)
|
|
|
24.90
|
|
Forfeited
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Unvested at December 31, 2017
|
|
|
172,078
|
|
|
|
12.78
|
|
Granted
|
|
|
296,944
|
|
|
|
4.58
|
|
Vested
|
|
|
(71,116
|
)
|
|
|
15.51
|
|
Forfeited
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Unvested at December 31, 2018
|
|
|
397,906
|
|
|
|
6.17
|
|
Granted
|
|
|
306,612
|
|
|
|
4.99
|
|
Vested
|
|
|
(162,942
|
)
|
|
|
7.42
|
|
Forfeited
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Unvested at December 31, 2019
|
|
|
541,576
|
|
|
|
5.13
|
|
|
|
|
|
|
|
|
|
|
3. ACQUISITIONS AND DIVESTITURES
Acquisitions
The Company accounts
for all transactions that represent business combinations using the acquisition method of accounting, where the identifiable assets acquired, the liabilities assumed and any noncontrolling interest in the acquired entity are recognized and measured
at their fair values on the date the Company obtains control in the acquiree. Such fair values that are not finalized for reporting periods following the acquisition date are estimated and recorded as provisional amounts. Adjustments to these
provisional amounts during the measurement period (defined as the date through which all information required to identify and measure the consideration transferred, the assets acquired, the liabilities assumed and any noncontrolling interests has
been obtained, limited to one year from the acquisition date) are recorded when identified. Goodwill is determined as the excess of the fair value of the consideration conveyed in the acquisition over the fair value of the net assets acquired.
Acquisition and integration expenses related to prospective and closed acquisitions included in other operating expenses on the consolidated
statements of loss were $2 million, $3 million and $2 million for the years ended December 31, 2019, 2018 and 2017, respectively.
Effective June 1, 2019, one or more subsidiaries of the Company completed the acquisition of Northwest Mississippi Medical Center in
Clarksdale, Mississippi. This healthcare system includes 181 licensed beds and other outpatient and ancillary services. The total cash consideration paid for operating assets was approximately $2 million with additional consideration of
$9 million in assumed liabilities, for a total consideration of $11 million. This hospital was acquired in conjunction with the bankruptcy proceedings for the previous owner that acquired the hospital from the Company in 2017 as part of an
agreement with the local county government associated with its lease of the hospital building. Based on the Companys final purchase price allocation relating to this acquisition as of December 31, 2019, no goodwill has been recorded.
Prior to the completion of the acquisition, the Company initiated a plan to sell this hospital and as such has classified this hospital as held for sale at December 31, 2019.
111
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Other Acquisitions
During the years ended December 31, 2019, 2018 and 2017, one or more subsidiaries of the Company paid approximately $8 million,
$26 million and $6 million, respectively, to acquire the operating assets and related businesses of certain physician practices, clinics and other ancillary businesses that operate within the communities served by the Companys
affiliated hospitals. In connection with these acquisitions, during the year ended December 31, 2019, the Company allocated approximately $4 million of the consideration paid to property and equipment and net working capital and the
remainder, approximately $4 million consisting of intangible assets that do not qualify for separate recognition, to goodwill. In connection with these acquisitions, during the year ended December 31, 2018, the Company allocated
approximately $10 million of the consideration paid to property and equipment and net working capital and the remainder, approximately $22 million consisting of intangible assets that do not qualify for separate recognition, to goodwill.
The value of noncontrolling interests acquired in these acquisitions was $6 million. During the year ended December 31, 2017, the Company allocated approximately $2 million of the consideration paid to property and equipment and net
working capital and the remainder, approximately $4 million consisting of intangible assets that do not qualify for separate recognition, to goodwill. No value was allocated to noncontrolling interests recorded in these acquisitions.
Divestitures
In April 2014, FASB
issued ASU 2014-08, which changed the requirements for reporting discontinued operations. Under this accounting standard, a discontinued operation is a disposal that represents a strategic shift that has (or
will have) a major effect on an entitys operations and financial results. Additional disclosures are required for significant components of the entity that are disposed of or are held for sale but do not qualify as discontinued operations.
This ASU was adopted on January 1, 2015 and is required to be applied on a prospective basis for disposals or components initially classified as held for sale after adoption. As a result, the following divestitures occurring subsequent to the
date of adoption are included in continuing operations for the years ended December 31, 2019, 2018 and 2017.
The following table
provides a summary of hospitals included in continuing operations that the Company divested during the years ended December 31, 2019, 2018, and 2017:
|
|
|
|
|
|
|
|
|
|
|
Hospital
|
|
Buyer
|
|
City, State
|
|
Licensed
Beds
|
|
|
Effective Date
|
2019 Divestitures:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bluefield Regional Medical Center
|
|
Princeton Community Hospital Association
|
|
Bluefield, WV
|
|
|
92
|
|
|
October 1, 2019
|
Lake Wales Medical Center
|
|
Adventist Health System
|
|
Lake Wales, FL
|
|
|
160
|
|
|
September 1, 2019
|
Heart of Florida Regional Medical Center
|
|
Adventist Health System
|
|
Davenport, FL
|
|
|
193
|
|
|
September 1, 2019
|
College Station Medical Center
|
|
St. Joseph Regional Health Center
|
|
College Station, TX
|
|
|
167
|
|
|
August 1, 2019
|
Tennova Healthcare Lebanon
|
|
Vanderbilt University Medical Center
|
|
Lebanon, TN
|
|
|
245
|
|
|
August 1, 2019
|
Chester Regional Medical Center
|
|
Medical University Hospital Authority
|
|
Chester, SC
|
|
|
82
|
|
|
March 1, 2019
|
Carolinas Hospital System Florence
|
|
Medical University Hospital Authority
|
|
Florence, SC
|
|
|
396
|
|
|
March 1, 2019
|
Springs Memorial Hospital
|
|
Medical University Hospital Authority
|
|
Lancaster, SC
|
|
|
225
|
|
|
March 1, 2019
|
112
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
Hospital
|
|
Buyer
|
|
City, State
|
|
Licensed
Beds
|
|
|
Effective Date
|
Carolinas Hospital System Marion
|
|
Medical University Hospital Authority
|
|
Mullins, SC
|
|
|
124
|
|
|
March 1, 2019
|
Memorial Hospital of Salem County
|
|
Community Healthcare Associates, LLC
|
|
Salem, NJ
|
|
|
126
|
|
|
January 31, 2019
|
Mary Black Health System Spartanburg
|
|
Spartanburg Regional Healthcare System
|
|
Spartanburg, SC
|
|
|
207
|
|
|
January 1, 2019
|
Mary Black Health System Gaffney
|
|
Spartanburg Regional Healthcare System
|
|
Gaffney, SC
|
|
|
125
|
|
|
January 1, 2019
|
|
|
|
|
|
2018 Divestitures:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sparks Regional Medical Center
|
|
Baptist Health
|
|
Fort Smith, AR
|
|
|
492
|
|
|
November 1, 2018
|
Sparks Medical Center Van Buren
|
|
Baptist Health
|
|
Van Buren, AR
|
|
|
103
|
|
|
November 1, 2018
|
AllianceHealth Deaconess
|
|
INTEGRIS Health
|
|
Oklahoma City, OK
|
|
|
238
|
|
|
October 1, 2018
|
Munroe Regional Medical Center
|
|
Adventist Health System
|
|
Ocala, FL
|
|
|
425
|
|
|
August 1, 2018
|
Tennova Healthcare Dyersburg Regional
|
|
West Tennessee Healthcare
|
|
Dyersburg, TN
|
|
|
225
|
|
|
June 1, 2018
|
Tennova Healthcare Regional Jackson
|
|
West Tennessee Healthcare
|
|
Jackson, TN
|
|
|
150
|
|
|
June 1, 2018
|
Tennova Healthcare Volunteer Martin
|
|
West Tennessee Healthcare
|
|
Martin, TN
|
|
|
100
|
|
|
June 1, 2018
|
Williamson Memorial Hospital
|
|
Mingo Health Partners, LLC
|
|
Williamson, WV
|
|
|
76
|
|
|
June 1, 2018
|
Byrd Regional Hospital
|
|
Allegiance Health Management
|
|
Leesville, LA
|
|
|
60
|
|
|
June 1, 2018
|
Tennova Healthcare Jamestown
|
|
Rennova Health, Inc.
|
|
Jamestown, TN
|
|
|
85
|
|
|
June 1, 2018
|
Bayfront Health Dade City
|
|
Adventist Health System
|
|
Dade City, FL
|
|
|
120
|
|
|
April 1, 2018
|
|
|
|
|
|
2017 Divestitures:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Highlands Regional Medical Center
|
|
HCA Healthcare, Inc. (HCA)
|
|
Sebring, FL
|
|
|
126
|
|
|
November 1, 2017
|
Merit Health Northwest Mississippi
|
|
Curae Health, Inc.
|
|
Clarksdale, MS
|
|
|
181
|
|
|
November 1, 2017
|
Weatherford Regional Medical Center
|
|
HCA
|
|
Weatherford, TX
|
|
|
103
|
|
|
October 1, 2017
|
Brandywine Hospital
|
|
Reading Health System
|
|
Coatesville, PA
|
|
|
169
|
|
|
October 1, 2017
|
Chestnut Hill Hospital
|
|
Reading Health System
|
|
Philadelphia, PA
|
|
|
148
|
|
|
October 1, 2017
|
Jennersville Hospital
|
|
Reading Health System
|
|
West Grove, PA
|
|
|
63
|
|
|
October 1, 2017
|
Phoenixville Hospital
|
|
Reading Health System
|
|
Phoenixville, PA
|
|
|
151
|
|
|
October 1, 2017
|
Pottstown Memorial Medical Center
|
|
Reading Health System
|
|
Pottstown, PA
|
|
|
232
|
|
|
October 1, 2017
|
Yakima Regional Medical and Cardiac Center
|
|
Regional Health
|
|
Yakima, WA
|
|
|
214
|
|
|
September 1, 2017
|
113
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
Hospital
|
|
Buyer
|
|
City, State
|
|
Licensed
Beds
|
|
|
Effective Date
|
Toppenish Community Hospital
|
|
Regional Health
|
|
Toppenish, WA
|
|
|
63
|
|
|
September 1, 2017
|
Memorial Hospital of York
|
|
PinnacleHealth System
|
|
York, PA
|
|
|
100
|
|
|
July 1, 2017
|
Lancaster Regional Medical Center
|
|
PinnacleHealth System
|
|
Lancaster, PA
|
|
|
214
|
|
|
July 1, 2017
|
Heart of Lancaster Regional Medical Center
|
|
PinnacleHealth System
|
|
Lititz, PA
|
|
|
148
|
|
|
July 1, 2017
|
Carlisle Regional Medical Center
|
|
PinnacleHealth System
|
|
Carlisle, PA
|
|
|
165
|
|
|
July 1, 2017
|
Tomball Regional Medical Center
|
|
HCA
|
|
Tomball, TX
|
|
|
350
|
|
|
July 1, 2017
|
South Texas Regional Medical Center
|
|
HCA
|
|
Jourdanton, TX
|
|
|
67
|
|
|
July 1, 2017
|
Deaconess Hospital
|
|
MultiCare Health System
|
|
Spokane, WA
|
|
|
388
|
|
|
July 1, 2017
|
Valley Hospital
|
|
MultiCare Health System
|
|
Spokane Valley, WA
|
|
|
123
|
|
|
July 1, 2017
|
Lake Area Medical Center
|
|
CHRISTUS Health
|
|
Lake Charles, LA
|
|
|
88
|
|
|
June 30, 2017
|
Easton Hospital
|
|
Steward Health, Inc.
|
|
Easton, PA
|
|
|
196
|
|
|
May 1, 2017
|
Sharon Regional Health System
|
|
Steward Health, Inc.
|
|
Sharon, PA
|
|
|
258
|
|
|
May 1, 2017
|
Northside Medical Center
|
|
Steward Health, Inc.
|
|
Youngstown, OH
|
|
|
355
|
|
|
May 1, 2017
|
Trumbull Memorial Hospital
|
|
Steward Health, Inc.
|
|
Warren, OH
|
|
|
311
|
|
|
May 1, 2017
|
Hillside Rehabilitation Hospital
|
|
Steward Health, Inc.
|
|
Warren, OH
|
|
|
69
|
|
|
May 1, 2017
|
Wuesthoff Health System Rockledge
|
|
Steward Health, Inc.
|
|
Rockledge, FL
|
|
|
298
|
|
|
May 1, 2017
|
Wuesthoff Health System Melbourne
|
|
Steward Health, Inc.
|
|
Melbourne, FL
|
|
|
119
|
|
|
May 1, 2017
|
Sebastian River Medical Center
|
|
Steward Health, Inc.
|
|
Sebastian, FL
|
|
|
154
|
|
|
May 1, 2017
|
Stringfellow Memorial Hospital
|
|
The Health Care Authority of the City of Anniston
|
|
Anniston, AL
|
|
|
125
|
|
|
May 1, 2017
|
Merit Health Gilmore Memorial
|
|
Curae Health, Inc.
|
|
Amory, MS
|
|
|
95
|
|
|
May 1, 2017
|
Merit Health Batesville
|
|
Curae Health, Inc.
|
|
Batesville, MS
|
|
|
112
|
|
|
May 1, 2017
|
On May 1, 2017, one or more subsidiaries of the Company sold AllianceHealth Pryor (52 licensed beds) in
Pryor, Oklahoma, and its associated assets to Ardent Health Services Inc. for approximately $1 million in cash. This hospital has been reported in the consolidated statements of loss in discontinued operations.
114
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Net operating revenues and loss from discontinued operations for the respective periods are
as follows (in millions):
|
|
|
|
|
|
|
Year Ended
December 31,
2017
|
|
Net operating revenues
|
|
$
|
79
|
|
|
|
|
|
|
Loss from operations of entities sold or held for sale before income taxes
|
|
|
(10
|
)
|
Impairment of hospitals sold or held for sale
|
|
|
(8
|
)
|
Loss on sale, net
|
|
|
(1
|
)
|
|
|
|
|
|
Loss from discontinued operations, before taxes
|
|
|
(19
|
)
|
Income tax benefit
|
|
|
(7
|
)
|
|
|
|
|
|
Loss from discontinued operations, net of taxes
|
|
$
|
(12
|
)
|
|
|
|
|
|
As part of its ongoing evaluation of the fair value of the hospitals it is marketing for sale, the Company
recorded an impairment charge on the carrying value of the long-lived assets at these hospitals in discontinued operations of $6 million, net of tax, for the year ended December 31, 2017. There was no impairment charge recorded for the
years ended December 31, 2019 and 2018. Interest expense was allocated to discontinued operations based on sale proceeds available for debt repayment.
The following table discloses amounts included in the consolidated balance sheet for the hospitals classified as held for sale as of
December 31, 2019 and 2018 (in millions):
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2019
|
|
|
2018
|
|
Other current assets
|
|
$
|
25
|
|
|
$
|
21
|
|
Other assets, net
|
|
|
262
|
|
|
|
154
|
|
Accrued liabilities
|
|
|
43
|
|
|
|
44
|
|
Financial and statistical data reported in this Annual Report on Form
10-K (Form 10-K) includes operating results for hospitals held for sale at December 31, 2019 and for the 53 hospitals that were divested during 2019,
2018 and 2017 through the effective date of each respective transaction. Summary financial results of these hospitals included in continuing operations for the periods included in the accompanying consolidated statements of loss are as follows (in
millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2019
|
|
|
2018
|
|
|
2017
|
|
Loss from operations before income taxes
|
|
$
|
(105
|
)
|
|
$
|
(470
|
)
|
|
$
|
(703
|
)
|
Less: Loss attributable to noncontrolling interests
|
|
|
-
|
|
|
|
1
|
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations before income taxes attributable to Community Health Systems, Inc.
stockholders
|
|
$
|
(105
|
)
|
|
$
|
(471
|
)
|
|
$
|
(701
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The operating results for these held for sale or divested hospitals included impairment charges of
approximately $102 million, $415 million and $368 million that were allocated to the divestitures during the years ended December 31, 2019, 2018 and 2017, respectively.
115
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Other Hospital Closures
During the three months ended December 31, 2018, the Company completed the planned closure of Tennova Physicians Regional Medical
Center in Knoxville, Tennessee and Tennova Lakeway Regional Medical Center in Morristown, Tennessee. The Company recorded an impairment charge of approximately $27 million during the three months ended December 31, 2018, to adjust
the fair value of the supplies, inventory and long-lived assets of these hospitals, including property and equipment and capitalized software costs, based on their estimated fair value and future utilization.
During the three months ended June 30, 2018, the Company completed the planned closure of Twin Rivers Regional Medical Center in Kennett,
Missouri. The Company recorded an impairment charge of approximately $4 million during the three months ended June 30, 2018, to adjust the fair value of the supplies, inventory and long-lived assets of this hospital, including property and
equipment and capitalized software costs, based on their estimated fair value and future utilization.
4. GOODWILL AND OTHER INTANGIBLE
ASSETS
Goodwill
The
changes in the carrying amount of goodwill for the years ended December 31, 2019 and 2018 are as follows (in millions):
|
|
|
|
|
|
|
|
|
Balance, beginning balance
|
|
2019
|
|
|
2018
|
|
Goodwill
|
|
$
|
7,373
|
|
|
$
|
7,537
|
|
Accumulated impairment losses
|
|
|
(2,814)
|
|
|
|
(2,814)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,559
|
|
|
|
4,723
|
|
|
|
|
|
|
|
|
|
|
Goodwill acquired as part of acquisitions during current year
|
|
|
4
|
|
|
|
22
|
|
Goodwill allocated to hospitals held for sale
|
|
|
(235
|
)
|
|
|
(186
|
)
|
|
|
|
|
|
|
|
|
|
Balance, end of year
|
|
|
|
|
|
|
|
|
Goodwill
|
|
|
7,142
|
|
|
|
7,373
|
|
Accumulated impairment losses
|
|
|
(2,814
|
)
|
|
|
(2,814
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
4,328
|
|
|
$
|
4,559
|
|
|
|
|
|
|
|
|
|
|
Goodwill is allocated to each identified reporting unit, which is defined as an operating segment or one level
below the operating segment (referred to as a component of the entity). Management has determined that the Companys operating segment meets the criteria to be classified as a reporting unit. At December 31, 2019, after giving effect to
2019 divestiture activity, the Company had approximately $4.3 billion of goodwill recorded.
Goodwill is evaluated for impairment
annually and when an event occurs or circumstances change that, more likely than not, reduce the fair value of the reporting unit below its carrying value. During 2017, the Company early adopted ASU 2017-04,
which allows a company to record a goodwill impairment when the reporting units carrying value exceeds the fair value determined in step one. The Company performed its annual goodwill impairment evaluation during the fourth quarter of 2019
using the October 31, 2019 measurement date, which indicated no impairment.
The Company estimates the fair value of the reporting
unit using both a discounted cash flow model as well as a market multiple model. The cash flow forecasts are adjusted by an appropriate discount rate based on the Companys estimate of a market participants weighted-average cost of
capital. These models are both based on
116
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
the Companys best estimate of future revenues and operating costs and are reconciled to the Companys consolidated market capitalization, with consideration of the amount a potential
acquirer would be required to pay, in the form of a control premium, in order to gain sufficient ownership to set policies, direct operations and control management decisions.
While no impairment was indicated in the Companys annual goodwill evaluations as of the October 31, 2019 and October 31, 2018
measurement dates, the reduction in the Companys fair value and the resulting goodwill impairment charges recorded in 2016 and 2017 reduced the carrying value of the Companys hospital operations reporting unit to an amount equal to its
estimated fair values as of such prior year measurement dates. This increases the risk that future declines in fair value could result in goodwill impairment. The determination of fair value in the Companys goodwill impairment analysis is
based on an estimate of fair value for each reporting unit utilizing known and estimated inputs at the evaluation date. Some of those inputs include, but are not limited to, the most recent price of the Companys common stock or fair value of
long-term debt, estimates of future revenue and expense growth, estimated market multiples, expected capital expenditures, income tax rates, and costs of invested capital. Future estimates of fair value could be adversely affected if the actual
outcome of one or more of these assumptions changes materially in the future, including further decline in the Companys stock price or fair value of long-term debt, lower than expected hospital volumes, higher market interest rates or
increased operating costs. Such changes impacting the calculation of fair value could result in a material impairment charge in the future.
The determination of fair value of the Companys hospital operations reporting unit as part of its goodwill impairment measurement
represents a Level 3 fair value measurement in the fair value hierarchy due to its use of internal projections and unobservable measurement inputs.
Intangible Assets
No intangible
assets other than goodwill were acquired during the years ended December 31, 2019 and 2018. The gross carrying amount of the Companys other intangible assets subject to amortization was $1 million at both December 31, 2019 and
2018, and the net carrying amount was less than $1 million at December 31, 2019 and 2018. The carrying amount of the Companys other intangible assets not subject to amortization was $63 million and $67 million at
December 31, 2019 and 2018, respectively. Other intangible assets are included in other assets, net on the Companys consolidated balance sheets. Substantially all of the Companys intangible assets are contract-based intangible
assets related to operating licenses, management contracts, or non-compete agreements entered into in connection with prior acquisitions.
The weighted-average remaining amortization period for the intangible assets subject to amortization is approximately one year. There are no
expected residual values related to these intangible assets. Amortization expense on these intangible assets was less than $1 million, $3 million and $4 million during the years ended December 31, 2019, 2018 and 2017,
respectively. Amortization expense on intangible assets is estimated to be less than $1 million in 2020.
The gross carrying amount
of capitalized software for internal use was approximately $1.1 billion and $1.2 billion at December 31, 2019 and 2018, respectively, and the net carrying amount was approximately $321 million and $355 million at
December 31, 2019 and 2018, respectively. The estimated amortization period for capitalized internal-use software is generally three years, except for capitalized costs related to significant system
conversions, for which the estimated amortization period is generally eight to ten years. There is no expected residual value for capitalized internal-use software. At December 31, 2019, there were
approximately $42 million of capitalized costs for internal-use software that is currently in the development stage and will begin amortization once the software project is complete and ready for its
intended use. Amortization expense on
117
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
capitalized internal-use software was $121 million, $140 million and $178 million during the years ended December 31, 2019, 2018 and
2017, respectively. Amortization expense on capitalized internal-use software is estimated to be $114 million in 2020, $93 million in 2021, $55 million in 2022, $26 million in 2023,
$22 million in 2024 and $11 million thereafter.
5. INCOME TAXES
The provision for (benefit from) income taxes for loss from continuing operations consists of the following (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2019
|
|
|
2018
|
|
|
2017
|
|
Current:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
(38
|
)
|
|
$
|
1
|
|
|
$
|
-
|
|
State
|
|
|
(5
|
)
|
|
|
(9
|
)
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(43
|
)
|
|
|
(8
|
)
|
|
|
5
|
|
Deferred:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
|
179
|
|
|
|
50
|
|
|
|
(485
|
)
|
State
|
|
|
24
|
|
|
|
(53
|
)
|
|
|
31
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
203
|
|
|
|
(3
|
)
|
|
|
(454
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total provision for (benefit from) income taxes for loss from continuing
operations
|
|
$
|
160
|
|
|
$
|
(11
|
)
|
|
$
|
(449
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table reconciles the differences between the statutory federal income tax rate and the effective
tax rate (dollars in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2019
|
|
|
2018
|
|
|
2017
|
|
|
|
Amount
|
|
|
%
|
|
|
Amount
|
|
|
%
|
|
|
Amount
|
|
|
%
|
|
Benefit from income taxes at statutory federal rate
|
|
$
|
(90
|
)
|
|
|
21.0
|
%
|
|
$
|
(150
|
)
|
|
|
21.0
|
%
|
|
$
|
(991
|
)
|
|
|
35.0
|
%
|
State income taxes, net of federal income tax benefit
|
|
|
(104
|
)
|
|
|
24.3
|
|
|
|
(114
|
)
|
|
|
16.0
|
|
|
|
(10
|
)
|
|
|
0.3
|
|
Net income attributable to noncontrolling interests
|
|
|
(18
|
)
|
|
|
4.2
|
|
|
|
(18
|
)
|
|
|
2.5
|
|
|
|
(22
|
)
|
|
|
0.8
|
|
Change in valuation allowance
|
|
|
340
|
|
|
|
(79.2
|
)
|
|
|
212
|
|
|
|
(29.7
|
)
|
|
|
26
|
|
|
|
(0.9
|
)
|
Change in uncertain tax position
|
|
|
-
|
|
|
|
-
|
|
|
|
9
|
|
|
|
(1.3
|
)
|
|
|
-
|
|
|
|
-
|
|
Federal rate change
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
32
|
|
|
|
(1.1
|
)
|
Federal and state tax credits
|
|
|
-
|
|
|
|
-
|
|
|
|
(17
|
)
|
|
|
2.4
|
|
|
|
(5
|
)
|
|
|
0.1
|
|
Nondeductible goodwill
|
|
|
11
|
|
|
|
(2.6
|
)
|
|
|
30
|
|
|
|
(4.2
|
)
|
|
|
504
|
|
|
|
(17.8
|
)
|
Nondeductible settlements
|
|
|
-
|
|
|
|
-
|
|
|
|
22
|
|
|
|
(3.1
|
)
|
|
|
-
|
|
|
|
-
|
|
Nondeductible loss on divestiture
|
|
|
15
|
|
|
|
(3.5
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Other
|
|
|
6
|
|
|
|
(1.4
|
)
|
|
|
15
|
|
|
|
(2.1
|
)
|
|
|
17
|
|
|
|
(0.6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for (benefit from) income taxes and effective tax rate for loss from continuing
operations
|
|
$
|
160
|
|
|
|
(37.2
|
) %
|
|
$
|
(11
|
)
|
|
|
1.5
|
%
|
|
$
|
(449
|
)
|
|
|
15.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
118
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The Companys effective tax rates were (37.2)%, 1.5% and 15.8% for the years ended
December 31, 2019, 2018 and 2017, respectively. The decrease in the Companys effective tax rate for the year ended December 31, 2019, when compared to the year ended December 31, 2018, was primarily due to an increase in the
valuation allowance recognized on (i) IRC Section 163(j) interest carryforwards and (ii) original issue discount deferred tax asset generated with the 2019 Exchange Offer. The decrease in the Companys effective tax rate for the
year ended December 31, 2018, when compared to the year ended December 31, 2017, was primarily due to the increase in valuation allowance recognized on IRC Section 163(j) interest carryforwards partially offset by the release of
certain state valuation allowances on net operating loss carryforwards in certain jurisdictions.
Deferred income taxes are based on the
estimated future tax effects of differences between the financial statement and tax bases of assets and liabilities under the provisions of the enacted tax laws. Deferred income taxes as of December 31, 2019 and 2018 consist of (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2019
|
|
|
2018
|
|
|
|
Assets
|
|
|
Liabilities
|
|
|
Assets
|
|
|
Liabilities
|
|
Net operating loss and credit carryforwards
|
|
$
|
775
|
|
|
$
|
-
|
|
|
$
|
743
|
|
|
$
|
-
|
|
Property and equipment
|
|
|
-
|
|
|
|
335
|
|
|
|
-
|
|
|
|
237
|
|
Self-insurance liabilities
|
|
|
48
|
|
|
|
-
|
|
|
|
69
|
|
|
|
-
|
|
Prepaid expenses
|
|
|
-
|
|
|
|
30
|
|
|
|
-
|
|
|
|
27
|
|
Intangibles
|
|
|
-
|
|
|
|
149
|
|
|
|
-
|
|
|
|
134
|
|
Investments in unconsolidated affiliates
|
|
|
-
|
|
|
|
57
|
|
|
|
-
|
|
|
|
55
|
|
Other liabilities
|
|
|
-
|
|
|
|
9
|
|
|
|
-
|
|
|
|
14
|
|
IRC Section 481(a) - mixed service cost
|
|
|
-
|
|
|
|
216
|
|
|
|
-
|
|
|
|
-
|
|
Long-term debt and interest
|
|
|
312
|
|
|
|
-
|
|
|
|
84
|
|
|
|
-
|
|
Accounts receivable
|
|
|
62
|
|
|
|
-
|
|
|
|
58
|
|
|
|
-
|
|
IRC Section 163(j) interest limitation
|
|
|
296
|
|
|
|
-
|
|
|
|
144
|
|
|
|
-
|
|
Accrued vacation
|
|
|
24
|
|
|
|
-
|
|
|
|
26
|
|
|
|
-
|
|
Accrued bonus
|
|
|
31
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Other comprehensive income
|
|
|
5
|
|
|
|
-
|
|
|
|
4
|
|
|
|
-
|
|
Right-of-use
assets
|
|
|
-
|
|
|
|
145
|
|
|
|
-
|
|
|
|
-
|
|
Right-of-use
liability
|
|
|
149
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Stock-based compensation
|
|
|
5
|
|
|
|
-
|
|
|
|
4
|
|
|
|
-
|
|
Deferred compensation
|
|
|
70
|
|
|
|
-
|
|
|
|
64
|
|
|
|
-
|
|
Other
|
|
|
51
|
|
|
|
-
|
|
|
|
15
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
1,828
|
|
|
|
941
|
|
|
|
1,211
|
|
|
|
467
|
|
Valuation allowance
|
|
|
(1,049
|
)
|
|
|
-
|
|
|
|
(701
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deferred income taxes
|
|
$
|
779
|
|
|
$
|
941
|
|
|
$
|
510
|
|
|
$
|
467
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company believes that the net deferred tax assets will ultimately be realized, except as noted below. Its
conclusion is based on its estimate of future taxable income and the expected timing of temporary difference reversals. The Company has gross federal net operating loss carryforwards of approximately $662 million and state net operating loss
carryforwards of approximately $8.6 billion, which expire from 2020 to 2039. The Companys tax affected federal and state net operating loss and credit carryforwards are approximately $169 million and $606 million, respectively.
A valuation allowance of approximately $1.0 billion has been recognized for state net operating loss carryforwards, state credit carryforwards and federal and state deferred tax assets that the Company does not expect to be able to utilize
prior to the expiration of the carryforward period.
119
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
With respect to the deferred tax liability pertaining to intangibles, as included above, goodwill purchased in connection with certain of the Companys business acquisitions is amortizable
for income tax reporting purposes. However, for financial reporting purposes, there is no corresponding amortization allowed with respect to such purchased goodwill.
The valuation allowance for federal and state jurisdictions where the Company concluded that the associated deferred tax assets would not be
realized increased by $221 million and $127 million, respectively, for the year ended December 31, 2019, and increased by $151 million and $17 million, respectively, for the year ended December 31, 2018.
The total amount of unrecognized benefit that would affect the effective tax rate, if recognized, was approximately $1 million as of
December 31, 2019. A total of approximately $1 million of interest and penalties is included in the amount of the liability for uncertain tax positions at December 31, 2019. It is the Companys policy to recognize interest and
penalties related to unrecognized benefits in its consolidated statements of loss as income tax expense.
It is possible the amount of
unrecognized tax benefit could change in the next 12 months as a result of a lapse of the statute of limitations and settlements with taxing authorities; however, the Company does not anticipate the change will have a material impact on the
Companys consolidated results of operations or consolidated financial position.
The following is a tabular reconciliation of the
total amount of unrecognized tax benefit for the years ended December 31, 2019, 2018 and 2017 (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2019
|
|
|
2018
|
|
|
2017
|
|
Unrecognized tax benefit, beginning of year
|
|
$
|
29
|
|
|
$
|
18
|
|
|
$
|
18
|
|
Gross increases tax positions in current period
|
|
|
10
|
|
|
|
11
|
|
|
|
-
|
|
Settlements
|
|
|
(13
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrecognized tax benefit, end of year
|
|
$
|
26
|
|
|
$
|
29
|
|
|
$
|
18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Companys federal income tax returns for the 2009 and 2010 tax years have been settled with the
Internal Revenue Service. The results of these examinations were not material to the Companys consolidated results of operations or consolidated financial position. The Companys federal income tax returns for the 2014 and 2015 tax years
remain under examination by the Internal Revenue Service. The Company believes the results of these examinations will not be material to its consolidated results of operations or consolidated financial position. The Company has extended the federal
statute of limitations through December 31, 2020 for the tax periods ended December 31, 2014 and 2015.
Cash paid for income
taxes, net of refunds received, resulted in a net refund of $3 million and $19 million during the years ended December 31, 2019 and 2018, respectively, and net cash paid of $4 million during the year ended December 31, 2017.
120
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
6. LONG-TERM DEBT
Long-term debt, net of unamortized debt issuance costs and discounts or premiums, consists of the following (in millions):
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2019
|
|
|
2018
|
|
Credit Facility:
|
|
|
|
|
|
|
|
|
Term H Loan
|
|
$
|
-
|
|
|
$
|
1,622
|
|
Revolving Credit Facility
|
|
|
-
|
|
|
|
-
|
|
8% Senior Notes due 2019
|
|
|
-
|
|
|
|
155
|
|
71⁄8% Senior
Notes due 2020
|
|
|
-
|
|
|
|
121
|
|
51⁄8% Senior
Secured Notes due 2021
|
|
|
1,000
|
|
|
|
1,000
|
|
67⁄8% Senior
Notes due 2022
|
|
|
231
|
|
|
|
2,632
|
|
61⁄4% Senior
Secured Notes due 2023
|
|
|
3,100
|
|
|
|
3,100
|
|
85⁄8% Senior
Secured Notes due 2024
|
|
|
1,033
|
|
|
|
1,033
|
|
8% Senior Secured Notes due 2026
|
|
|
2,101
|
|
|
|
-
|
|
8% Senior Secured Notes due 2027
|
|
|
700
|
|
|
|
-
|
|
67⁄8% Senior
Notes due 2028
|
|
|
1,700
|
|
|
|
-
|
|
97⁄8%
Junior-Priority Secured Notes due 2023
|
|
|
1,770
|
|
|
|
1,770
|
|
81⁄8%
Junior-Priority Secured Notes due 2024
|
|
|
1,355
|
|
|
|
1,355
|
|
ABL Facility
|
|
|
273
|
|
|
|
698
|
|
Finance lease and financing obligations
|
|
|
272
|
|
|
|
231
|
|
Other
|
|
|
17
|
|
|
|
43
|
|
Less: Unamortized deferred debt issuance costs and note premium
|
|
|
(147
|
)
|
|
|
(164
|
)
|
|
|
|
|
|
|
|
|
|
Total debt
|
|
|
13,405
|
|
|
|
13,596
|
|
Less: Current maturities
|
|
|
(20
|
)
|
|
|
(204
|
)
|
|
|
|
|
|
|
|
|
|
Total long-term debt
|
|
$
|
13,385
|
|
|
$
|
13,392
|
|
|
|
|
|
|
|
|
|
|
Credit Facility
The Companys wholly-owned subsidiary, CHS/Community Health Systems, Inc. (CHS), had senior secured financing under a credit
facility with a syndicate of financial institutions led by Credit Suisse, as administrative agent and collateral agent (the Credit Facility), which at December 31, 2018 included (i) a revolving credit facility with commitments
through January 27, 2021 of $425 million (the Revolving Facility), and (ii) a Term H facility due 2021 (the Term H Facility). The Revolving Facility included a subfacility for letters of credit. The Revolving
Facility was repaid in full and terminated in connection with the completion of the offering of the Additional 2026 Notes on November 19, 2019, as discussed below.
The loans under the Credit Facility bore interest on the outstanding unpaid principal amount at a rate equal to an applicable percentage plus,
at CHS option, either (a) an Alternate Base Rate (as defined) determined by reference to the greater of (1) the Prime Rate (as defined) announced by Credit Suisse or (2) the NYFRB Rate (as defined) plus 0.50% or (3) the
adjusted London Interbank Offered Rate (LIBOR) on such day for a three-month interest period commencing on the second business day after such day plus 1% or (b) LIBOR. In addition, the margin in respect of the Revolving Facility was
subject to adjustment determined by reference to a leverage-based pricing grid. Prior to the refinancing discussed below, loans in respect of the Revolving Facility accrued interest at a rate per annum equal to LIBOR plus 2.75%, in the case of LIBOR
borrowings, and Alternate Base Rate plus 1.75%, in the case of Alternate Base Rate borrowings. Prior to the refinancing discussed below, the
121
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Term H Loan accrued interest at a rate per annum equal to LIBOR plus 3.25%, in the case of LIBOR borrowings, and Alternate Base Rate plus 2.25%, in the case of Alternate Base Rate borrowings. The
Term H Loan was subject to a 1.00% LIBOR floor and a 2.00% Alternate Base Rate floor.
The term loan facility was required to be prepaid
in an amount equal to (1) 100% of the net cash proceeds of certain asset sales and dispositions by the Company and its subsidiaries, subject to certain exceptions and reinvestment rights, (2) 100% of the net cash proceeds of issuances of certain
debt obligations or receivables-based financing by the Company and its subsidiaries, subject to certain exceptions, and (3) 75%, subject to reduction to a lower percentage based on the Companys first lien net leverage ratio (as defined in the
Credit Facility generally as the ratio of first lien net debt on the date of determination to the Companys consolidated EBITDA, as defined, for the four quarters most recently ended prior to such date), of excess cash flow (as defined) for any
year, subject to certain exceptions. Voluntary prepayments and commitment reductions were permitted in whole or in part, without any premium or penalty, subject to minimum prepayment or reduction requirements. There were no scheduled principal
amortization payments on the Term H Facility after December 31, 2018.
The borrower under the Credit Facility was CHS. All of the
obligations under the Credit Facility were unconditionally guaranteed by the Company and certain of its existing and subsequently acquired or organized domestic subsidiaries. All obligations under the Credit Facility and the related guarantees were
secured by a perfected first priority lien or security interest in substantially all of the assets of the Company, CHS and each subsidiary guarantor, including equity interests held by the Company, CHS or any subsidiary guarantor, but excluding,
among others, the equity interests of non-significant subsidiaries, syndication subsidiaries, securitization subsidiaries and joint venture subsidiaries, and subject to the revolving asset-based loan facility (the ABL Facility). Such assets constituted substantially the same assets, subject to certain exceptions, that secured (i) on a first lien basis CHS obligations under
the 51⁄8% Senior Secured Notes due 2021, the 61⁄4% Senior Secured Notes due
2023, the 85⁄8% Senior Secured Notes due 2024 and the 8% Senior Secured Notes due 2026 (in each case, as defined below) and (ii) on a junior-priority basis the
97⁄8% Junior-Priority Secured Notes due 2023 and the 81⁄8% Junior-Priority
Secured Notes due 2024 (in each case, as defined below).
CHS agreed to pay letter of credit fees equal to the applicable percentage then
in effect with respect to LIBOR borrowings under the Revolving Facility times the maximum aggregate amount available to be drawn under all letters of credit outstanding under the subfacility for letters of credit. The issuer of any letter of credit
issued under the subfacility for letters of credit also received a customary fronting fee and other customary processing charges. CHS was obligated to pay commitment fees of 0.50% per annum (subject to adjustment based upon the Companys
leverage ratio) on the unused portion of the Revolving Facility.
On February 15, 2019, the Company and CHS entered into Amendment
No. 1 (the Agreement), among the Company, CHS, the subsidiary guarantors party thereto, the lenders party thereto and Credit Suisse AG, Cayman Islands Branch, as administrative agent and collateral agent, to the Credit Facility. The
Credit Facility was amended by the Agreement, with requisite covenant lender approval, to amend the first lien net debt to EBITDA ratio financial covenant and to reduce the extended revolving credit commitments to $385 million. The amended
financial covenant provided for a maximum first lien net debt to EBITDA ratio of 5.00 to 1.00 from July 1, 2018 through December 31, 2018, 5.25 to 1.00 from January 1, 2019 through December 31, 2019, 5.00 to 1.00 from
January 1, 2020 through June 30, 2020, 4.50 to 1.00 from July 1, 2020 through September 30, 2020, and 4.25 to 1.00 thereafter. In addition, CHS agreed pursuant to the Agreement to further restrict its ability to make restricted
payments. The revolving credit commitments terminated on November 19, 2019.
On March 6, 2019, CHS completed a private offering
of $1.601 billion aggregate principal amount of 8% Senior Secured Notes due March 15, 2026 (the 8% Senior Secured Notes due 2026). The terms of the 8%
122
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Senior Secured Notes due 2026 are discussed below. Using the proceeds from the offering, the Company repaid the outstanding balance owed under the Term H Facility and paid fees and expenses
related to the offering.
On November 19, 2019, CHS completed a tack-on offering of an
additional $500 million aggregate principal amount of the 8% Senior Secured Notes due 2026 (the Additional 2026 Notes). Upon completion of such offering, $2.101 billion aggregate principal amount of 8% Senior Secured Notes due
2026 were outstanding. CHS used the proceeds from the Additional 2026 Notes to repay amounts outstanding under the Revolving Facility, redeem all $121 million aggregate principal amount of CHS then outstanding 71⁄8% Senior Notes due July 15, 2020 (the 71⁄8% Senior Notes due
2020) and repay borrowings outstanding under the ABL Facility. CHS terminated the Revolving Facility upon consummation of the Additional 2026 Notes offering and the outstanding letters of credit were moved under the ABL Facility.
8% Senior Notes due 2019
On
November 22, 2011, CHS completed a private offering of $1.0 billion aggregate principal amount of 8% Senior Notes due November 15, 2019 (the 8% Senior Notes due 2019). The net proceeds from this issuance, together with
available cash on hand, were used to finance the purchase of up to $1.0 billion aggregate principal amount of CHS then outstanding 87⁄8% Senior Notes due
2015 and related fees and expenses. On March 21, 2012, CHS completed an offering of an additional $1.0 billion aggregate principal amount of 8% Senior Notes due 2019, which were issued in a private placement (at a premium of 102.5%). The
net proceeds from this issuance were used to finance the purchase of approximately $850 million aggregate principal amount of CHS then outstanding 87⁄8%
Senior Notes due 2015, to pay related fees and expenses and for general corporate purposes. The 8% Senior Notes due 2019 bore interest at 8.000% per annum, payable semi-annually in arrears on May 15 and November 15 of each year. Interest
on the 8% Senior Notes due 2019 accrued from the date of original issuance. Interest was calculated on the basis of a 360-day year comprised of twelve 30-day months.
On June 22, 2018, CHS issued approximately $1.770 billion aggregate principal amount of new
97⁄8% Junior-Priority Secured Notes due June 30, 2023 (the 97⁄8%
Junior-Priority Secured Notes due 2023) in exchange for the same amount of 8% Senior Notes due 2019. The terms of the 97⁄8% Junior-Priority Secured Notes due
2023 are described below. Following this exchange, CHS had $155 million aggregate principal amount of 8% Senior Notes due 2019 outstanding, which was repaid in full on November 15, 2019.
71⁄8% Senior Notes due 2020
On July 18, 2012, CHS completed a public offering of $1.2 billion aggregate principal amount of
71⁄8% Senior Notes due 2020. The net proceeds from this issuance were used to finance the purchase or redemption of $934 million aggregate principal amount of
CHS then outstanding 87⁄8% Senior Notes due 2015, to pay for consents delivered in connection with a related tender offer, to pay related fees and expenses,
and for general corporate purposes. The 71⁄8% Senior Notes due 2020 bore interest at 7.125% per annum, payable semiannually in arrears on July 15 and
January 15 of each year. Interest on the 71⁄8% Senior Notes due 2020 accrued from the date of original issuance. Interest was calculated on the basis of a 360-day year comprised of twelve 30-day months.
On
June 22, 2018, CHS issued approximately $1.079 billion aggregate principal amount of new 81⁄8% Junior-Priority Secured Notes due June 30, 2024 (the
81⁄8% Junior-Priority Secured Notes due 2024) in exchange for the same amount of 71⁄8% Senior Notes due 2020. The terms of the 81⁄8% Junior-Priority Secured Notes due 2024 are described below. Following this
exchange, CHS had $121 million aggregate principal amount of 71⁄8% Senior Notes due 2020 outstanding.
On December 4, 2019, CHS used the proceeds from the Additional 2026 Notes to repay the $121 million aggregate principal amount of
the then outstanding 71⁄8% Senior Notes due 2020.
123
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
51⁄8% Senior
Secured Notes due 2021
On January 27, 2014, CHS completed a private offering of $1.0 billion aggregate principal amount
of 51⁄8% Senior Secured Notes due August 1, 2021 (the 51⁄8% Senior
Secured Notes due 2021). The net proceeds from this issuance were used to finance the Companys acquisition by merger of Health Management Associates, Inc. (HMA). The 51⁄8% Senior Secured Notes due 2021 bear interest at a rate of 5.125% per annum, payable semi-annually in arrears on February 1 and August 1 of each year. Interest on the
51⁄8% Senior Secured Notes due 2021 accrues from the date of original issuance. Interest is calculated on the basis of a
360-day year comprised of twelve 30-day months. The 51⁄8% Senior Secured Notes due
2021 are unconditionally guaranteed on a senior-priority secured basis by the Company and each of the CHS current and future domestic subsidiaries that provide guarantees under the ABL Facility, any capital market debt securities of CHS (including
CHS outstanding senior notes) and certain other long-term debt of CHS.
The 51⁄8% Senior Secured Notes due 2021 and the related guarantees are secured by shared (i) first-priority liens on the collateral (the Non-ABL Priority
Collateral) that also secures on a first-priority basis CHS senior-priority secured notes and (ii) second-priority liens on the collateral (the ABL-Priority Collateral) that
secures on a first-priority basis the ABL Facility (and also secures on a second-priority basis CHSs senior-priority secured notes), in each case subject to permitted liens described in the indenture governing the 51⁄8% Senior Secured Notes due 2021.
CHS is entitled, at
its option, to redeem all or a portion of the 51⁄8% Senior Secured Notes due 2021 upon not less than 30 nor more than 60 days notice, at the following
redemption prices (expressed as a percentage of principal amount on the redemption date), plus accrued and unpaid interest, if any, to the redemption date (subject to the right of holders of record on the relevant record date to receive interest due
on the relevant interest payment date), if redeemed during the periods set forth below:
|
|
|
|
|
Period
|
|
Redemption Price
|
|
February 1, 2019 to January 31, 2020
|
|
|
101.281 %
|
|
February 1, 2020 to January 31, 2021
|
|
|
100.000 %
|
|
Pursuant to a registration rights agreement entered into at the time of the issuance of the 51⁄8% Senior Secured Notes due 2021, as a result of an exchange offer made by CHS, all of the 51⁄8% Senior Secured Notes due 2021 issued in January 2014 were exchanged in October 2014 for new notes (the 2021 Exchange Notes) having terms substantially identical in all material respects to the 51⁄8% Senior Secured Notes due 2021 (except that the exchange notes were issued under a registration statement pursuant to the 1933 Act). References to the 51⁄8% Senior Secured Notes due 2021 shall be deemed to be the 2021 Exchange Notes unless the context provides otherwise.
As discussed more fully in Note 16, the Company announced, on January 23, 2020, that CHS commenced a cash tender offer for any and all of
the outstanding 51⁄8% Senior Secured Notes due 2021 and issued a conditional notice of redemption to redeem all of the
51⁄8% Senior Secured Notes due 2021 not purchased by CHS in the tender offer at a redemption price of 100.000% of the principal amount thereof plus accrued interest
to, but not including, February 22, 2020.
67⁄8% Senior
Notes due 2022
On January 27, 2014, CHS completed a private offering of $3.0 billion aggregate principal amount of 67⁄8% Senior Notes due February 1, 2022 (the 67⁄8% Senior Notes due
2022). The net proceeds from this issuance were used to finance the HMA merger. The 67⁄8% Senior Notes due 2022 bear interest at a rate of 6.875% per annum,
payable semiannually in arrears on February 1 and August 1 of each year. Interest on the 67⁄8% Senior
124
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Notes due 2022 accrues from the date of original issuance. Interest is calculated on the basis of a 360-day year comprised of twelve 30-day months. The 67⁄8% Senior Notes due 2022 are unconditionally guaranteed on a senior-priority unsecured basis by the Company
and each of the CHS current and future domestic subsidiaries that provide guarantees under the ABL Facility, any capital market debt securities of CHS (including CHS outstanding senior notes) and certain other long-term debt of CHS.
CHS is entitled, at its option, to redeem all or a portion of the 67⁄8% Senior Notes due 2022 upon not less than 30 nor more than 60 days notice, at the following redemption prices (expressed as a percentage of principal amount on the redemption date), plus accrued and unpaid
interest, if any, to the redemption date (subject to the right of holders of record on the relevant record date to receive interest due on the relevant interest payment date), if redeemed during the periods set forth below:
|
|
|
|
|
Period
|
|
Redemption Price
|
|
February 1, 2019 to January 31, 2020
|
|
|
101.719 %
|
|
February 1, 2020 to January 31, 2022
|
|
|
100.000 %
|
|
Pursuant to a registration rights agreement entered into at the time of the issuance of the 67⁄8% Senior Notes due 2022, as a result of an exchange offer made by CHS, all of the
67⁄8% Senior Notes due 2022 issued in January 2014 were exchanged in October 2014 for new notes (the 67⁄8% Exchange Notes) having terms substantially identical in all material respects to the 67⁄8% Senior Notes due 2022
(except that the exchange notes were issued under a registration statement pursuant to the 1933 Act). References to the 67⁄8% Senior Notes due 2022 shall be deemed
to be the 67⁄8% Exchange Notes unless the context provides otherwise.
On June 22, 2018, CHS issued approximately $276 million aggregate principal amount of the
81⁄8% Junior-Priority Secured Notes due 2024 in exchange for approximately $368 million of 67⁄8% Senior Notes due 2022.
On November 19, 2019, CHS issued approximately $700 million
aggregate principal amount of 8% Senior Secured Notes due December 15, 2027 (the 8% Senior Secured Notes due 2027) and approximately $1.7 billion aggregate principal amount of 67⁄8% Senior Notes due April 1, 2028 (the 67⁄8% Senior Notes due 2028) in exchange for approximately
$2.4 billion of 67⁄8% Senior Notes due 2022 (the 2019 Exchange Offer). Following the 2019 Exchange Offer, CHS had approximately $231 million
aggregate principal amount of 67⁄8% Senior Notes due 2022 outstanding.
61⁄4% Senior Secured Notes due 2023
On March 16, 2017, CHS completed a public offering of $2.2 billion aggregate principal amount of
61⁄4% Senior Secured Notes due March 31, 2023 (the 61⁄4% Senior
Secured Notes due 2023). The net proceeds from this issuance were used to finance the purchase or redemption of $700 million aggregate principal amount of CHS then outstanding 51⁄8% Senior Secured Notes due 2018 and related fees and expenses, and the repayment of $1.445 billion of the then outstanding Term F Facility. On May 12, 2017, CHS completed a tack-on offering of $900 million aggregate principal amount of 61⁄4% Senior Secured Notes due 2023, increasing the total
aggregate principal amount of 61⁄4% Senior Secured Notes due 2023 to $3.1 billion. A portion of the net proceeds from this issuance were used to finance the
repayment of approximately $713 million aggregate principal amount of CHS then outstanding Term A Facility and related fees and expenses. The tack-on notes have identical terms, other than issue
date and issue price, as the 61⁄4% Senior Secured Notes due 2023 issued on March 16, 2017. The 61⁄4% Senior Secured Notes due 2023 bear interest at a rate of 6.250% per annum, payable semiannually in arrears on March 31 and September 30 of each year. Interest on the
61⁄4% Senior Secured Notes due 2023 accrues from the date of original issuance. Interest is calculated on the basis of a
360-day year comprised of twelve 30-day months. The 61⁄4% Senior Secured Notes due
2023 are scheduled to mature on March 31, 2023. The 61⁄4% Senior Secured Notes due 2023 are unconditionally guaranteed on a senior-priority
125
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
secured basis by the Company and each of the CHS current and future domestic subsidiaries that provide guarantees under the ABL Facility, any capital market debt securities of CHS (including
CHS outstanding senior notes) and certain other long-term debt of CHS.
The 61⁄4% Senior Secured Notes due 2023 and the related guarantees are secured by shared (i) first-priority liens on the Non-ABL Priority Collateral that also secures on a
first-priority basis CHSs senior-priority secured notes and (ii) second-priority liens on the ABL Collateral, in each case subject to permitted liens described in the indenture governing the 61⁄4% Senior Secured Notes due 2023.
CHS is entitled, at its option, to redeem
all or a portion of the 61⁄4% Senior Secured Notes due 2023 at any time prior to March 31, 2020, upon not less than 30 nor more than 60 days notice, at a
price equal to 100% of the principal amount of the 61⁄4% Senior Secured Notes due 2023 redeemed plus accrued and unpaid interest, if any, plus a
make-whole premium, as described in the indenture governing the 61⁄4% Senior Secured Notes due 2023. In addition, CHS may redeem up to 40% of the
aggregate principal amount of the 61⁄4% Senior Secured Notes due 2023 at any time prior to March 31, 2020 using the net proceeds from certain equity offerings
at the redemption price of 106.250% of the principal amount of the 61⁄4% Senior Secured Notes due 2023 redeemed, plus accrued and unpaid interest, if any.
CHS may redeem some or all of the 61⁄4% Senior Secured
Notes due 2023 at any time on or after March 31, 2020 upon not less than 30 nor more than 60 days notice, at the following redemption prices (expressed as a percentage of principal amount on the redemption date), plus accrued and unpaid
interest, if any, to the redemption date (subject to the right of holders of record on the relevant record date to receive interest due on the relevant interest payment date), if redeemed during the periods set forth below:
|
|
|
|
|
Period
|
|
Redemption Price
|
|
March 31, 2020 to March 30, 2021
|
|
|
103.125 %
|
|
March 31, 2021 to March 30, 2022
|
|
|
101.563 %
|
|
March 31, 2022 to March 30, 2023
|
|
|
100.000 %
|
|
As discussed more fully in Note 16, approximately $426 million aggregate principal amount of 61⁄4% Senior Secured Notes due 2023 were purchased in one or more privately negotiated transactions on February 6, 2020.
97⁄8% Junior-Priority Secured Notes due 2023
On June 22, 2018, CHS completed a private offering of $1.770 billion aggregate principal amount of the 97⁄8% Junior-Priority Secured Notes due 2023 in exchange for the same amount of 8% Senior Notes due 2019. The 97⁄8% Junior-Priority Secured Notes due 2023 bore interest at a rate of 11.000% per annum, solely for the period from the issue date of such 97⁄8% Junior-Priority Secured Notes due 2023 to, but excluding, June 22, 2019, after which they bear interest at a rate of 9.875% per annum. Interest is payable semi-annually in arrears on June 30 and
December 31 of each year. The 97⁄8% Junior-Priority Secured Notes due 2023 are scheduled to mature on June 20, 2023. The
97⁄8% Junior-Priority Secured Notes due 2023 are unconditionally guaranteed on a junior-priority secured basis by the Company and each of the CHS current and future
domestic subsidiaries that provide guarantees under CHS ABL Facility, any capital market debt securities of CHS (including CHS outstanding senior notes) and certain other long-term debt of CHS.
The 97⁄8% Junior-Priority Secured Notes due 2023 and the
related guarantees are secured by shared (i) second-priority liens on the Non-ABL Priority Collateral that secures on a first-priority basis the CHSs senior-priority secured notes and
(ii) third-priority liens on the ABL-Priority Collateral that secures on a first-priority basis the ABL Facility (and also secures on a second-priority basis CHSs senior-priority secured notes), in
each case subject to permitted liens described in the indenture governing the 97⁄8% Junior-Priority Secured Notes due 2023.
126
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Prior to June 30, 2020, CHS may redeem some or all of the
97⁄8% Junior-Priority Secured Notes due 2023 at a redemption price equal to 100% of the principal amount of the notes redeemed plus accrued and unpaid interest, if
any, plus a make-whole premium, as described in the indenture governing the 97⁄8% Junior-Priority Secured Notes due 2023. In addition, at any time prior
to June 30, 2020, CHS may redeem up to 40% of the aggregate principal amount of the 97⁄8% Junior-Priority Secured Notes due 2023 with the proceeds from certain
equity offerings at the redemption price of 109.875%, plus accrued and unpaid interest, if any, to, but excluding, the applicable redemption date.
After June 30, 2020, CHS is entitled, at its option, to redeem all or a portion of the 97⁄8% Junior-Priority Secured Notes due 2023 upon not less than 15 nor more than 60 days notice, at the following redemption prices (expressed as a percentage of principal amount on the redemption date), plus
accrued and unpaid interest, if any, to the redemption date (subject to the right of holders of record on the relevant record date to receive interest due on the relevant interest payment date), if redeemed during the periods set forth below:
|
|
|
|
|
Period
|
|
Redemption Price
|
|
June 30, 2020 to June 29, 2021
|
|
|
107.406 %
|
|
June 30, 2021 to June 29, 2022
|
|
|
103.703 %
|
|
June 30, 2022 to June 29, 2023
|
|
|
100.000 %
|
|
81⁄8% Junior-Priority Secured Notes
due 2024
On June 22, 2018, CHS completed a private offering of $1.355 billion aggregate principal amount of the 81⁄8% Junior-Priority Secured Notes due 2024 in exchange for approximately $1.079 billion of 71⁄8% Senior Notes due 2020 and approximately $368 million of 67⁄8% Senior Notes due 2022. The
81⁄8% Junior-Priority Secured Notes due 2024 bear interest at a rate of 8.125% per annum, payable semi-annually in arrears on June 30 and December 31 of
each year. The 81⁄8% Junior-Priority Secured Notes due 2024 are scheduled to mature on June 20, 2024. The 81⁄8% Junior-Priority Secured Notes due 2024 are unconditionally guaranteed on a junior-priority secured basis by the Company and each of the CHS current and future domestic subsidiaries that provide guarantees under
CHS ABL Facility, any capital market debt securities of CHS (including CHS outstanding senior notes) and certain other long-term debt of CHS.
The 81⁄8% Junior-Priority Secured Notes due 2024 and the
related guarantees are secured by shared (i) second-priority liens on the Non-ABL Priority Collateral that secures on a first-priority basis the CHSs senior-priority secured notes and
(ii) third-priority liens on the ABL-Priority Collateral that secures on a first-priority basis the ABL Facility (and also secures on a second-priority basis CHSs senior-priority secured notes), in
each case subject to permitted liens described in the indenture governing the 81⁄8% Junior-Priority Secured Notes due 2024.
Prior to June 30, 2021, CHS may redeem some or all of the
81⁄8% Junior-Priority Secured Notes due 2024 at a redemption price equal to 100% of the principal amount of the notes redeemed plus accrued and unpaid interest, if
any, plus a make-whole premium, as described in the indenture governing the 81⁄8% Junior-Priority Secured Notes due 2024. In addition, at any time prior
to June 30, 2021, CHS may redeem up to 40% of the aggregate principal amount of the 81⁄8% Junior-Priority Secured Notes due 2024 with the proceeds from certain
equity offerings at the redemption price of 108.125%, plus accrued and unpaid interest, if any, to, but excluding, the applicable redemption date.
After June 30, 2021, CHS is entitled, at its option, to redeem all or a portion of the 81⁄8% Junior-Priority Secured Notes due 2024 upon not less than 15 nor more than 60 days notice, at the following redemption prices (expressed as a percentage of principal amount on the redemption date), plus
accrued and unpaid interest, if any,
127
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
to the redemption date (subject to the right of holders of record on the relevant record date to receive interest due on the relevant interest payment date), if redeemed during the periods set
forth below:
|
|
|
|
|
Period
|
|
Redemption Price
|
|
June 30, 2021 to June 29, 2022
|
|
|
104.063 %
|
|
June 30, 2022 to June 29, 2023
|
|
|
102.031 %
|
|
June 30, 2023 to June 29, 2024
|
|
|
100.000 %
|
|
The indentures governing each of the 97⁄8% Junior-Priority Secured Notes due 2023 and 81⁄8% Junior-Priority Secured Notes due 2024 also prohibited CHS from purchasing,
repurchasing, redeeming, defeasing or otherwise acquiring or retiring any outstanding 71⁄8% Senior Notes due 2020 with: (a) cash or cash equivalents on hand as
of the consummation of such 2018 exchange offers; (b) cash generated from operations; (c) proceeds from assets sales; or (d) proceeds from the issuance of, or in exchange for, secured debt, in each case, prior to May 15, 2020.
CHS received a waiver from requisite holders of each series of the 97⁄8% Junior-Priority Secured Notes due 2023 and 81⁄8% Junior-Priority Secured Notes due 2024 waiving these restrictions prior to consummating the 2019 Exchange Offer.
85⁄8% Senior Secured Notes due 2024
On July 6, 2018, CHS completed a private offering of $1.033 billion aggregate principal amount of
85⁄8% Senior Secured Notes due January 15, 2024 (the 85⁄8% Senior
Secured Notes due 2024). The 85⁄8% Senior Secured Notes due 2024 bear interest at a rate of 8.625% per annum payable semi-annually in arrears on
January 15 and July 15 of each year. The 85⁄8% Senior Secured Notes due 2024 are unconditionally guaranteed on a senior-priority secured basis by the
Company and each of the CHS current and future domestic subsidiaries that provide guarantees under CHS ABL Facility, any capital market debt securities of CHS (including CHS outstanding senior notes) and certain other long-term debt of
CHS.
The 85⁄8% Senior Secured Notes due 2024 and the
related guarantees are secured by shared (i) first-priority liens on the Non-ABL Priority Collateral and (ii) second-priority liens on the ABL Priority Collateral that secures on a first-priority
basis the ABL Facility, in each case subject to permitted liens described in the indenture governing the 85⁄8% Senior Secured Notes due 2024.
Prior to January 15, 2021, CHS may redeem some or all of the 85⁄8% Senior Secured Notes due 2024 at a redemption price equal to 100% of the principal amount of the notes redeemed plus accrued and unpaid interest, if any, plus a make-whole premium, as described in
the indenture governing the 85⁄8% Senior Secured Notes due 2024. In addition, at any time prior to January 15, 2021, CHS may redeem up to 40% of the aggregate
principal amount of the 85⁄8% Senior Secured Notes due 2024 with the proceeds from certain equity offerings at the redemption price of 108.625%, plus accrued and
unpaid interest, if any, to, but excluding, the applicable redemption date.
After January 15, 2021, CHS is entitled, at its option,
to redeem all or a portion of the 85⁄8% Senior Secured Notes due 2024 upon not less than 15 nor more than 60 days notice, at the following redemption prices
(expressed as a percentage of principal amount on the redemption date), plus accrued and unpaid interest, if any, to the redemption date (subject to the right of holders of record on the relevant record date to receive interest due on the relevant
interest payment date), if redeemed during the periods set forth below:
|
|
|
|
|
Period
|
|
Redemption Price
|
|
January 15, 2021 to January 14, 2022
|
|
|
104.313 %
|
|
January 15, 2022 to January 14, 2023
|
|
|
102.156 %
|
|
January 15, 2023 to January 14, 2024
|
|
|
100.000 %
|
|
128
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
8% Senior Secured Notes due 2026
On March 6, 2019, CHS completed a private offering of $1.601 billion aggregate principal amount of the 8% Senior Secured Notes due
2026. The net proceeds from this issuance were used to finance the repayment of approximately $1.557 billion aggregate principal amount of CHS then outstanding Term H Facility and related fees and expenses. On November 19, 2019, CHS
completed a tack-on offering of $500 million aggregate principal amount of the Additional 2026 Notes, increasing the total aggregate principal amount of the 8% Senior Secured Notes due 2026 to
$2.101 billion. CHS used the proceeds from the Additional 2026 Notes to repay amounts outstanding under the Revolving Facility, redeem all $121 million aggregate principal amount of CHS then outstanding
71⁄8% Senior Notes due 2020 and repay borrowings outstanding under the ABL Facility. The Additional 2026 Notes have identical terms, other than issue date, issue
price and the date from which interest initially accrued, as the 8% Senior Secured Notes due 2026 issued on March 6, 2019. The 8% Senior Secured Notes due 2026 bear interest at a rate of 8.000% per annum, payable semi-annually in arrears on
March 15 and September 15 of each year. Interest on the 8% Senior Secured Notes due 2026 accrues from the initial issuance date of the 8% Senior Secured Notes due 2026. Interest is calculated on the basis of a 360-day year comprised of twelve 30-day months. The 8% Senior Secured Notes due 2026 are scheduled to mature on March 15, 2026.
The 8% Senior Secured Notes due 2026 are unconditionally guaranteed on a senior-priority secured basis by the Company and each of the CHS
current and future domestic subsidiaries that provide guarantees under the ABL Facility, any capital market debt securities of CHS (including CHS outstanding senior notes) and certain other long-term debt of CHS.
The 8% Senior Secured Notes due 2026 and the related guarantees are secured by shared (i) first-priority liens on the Non-ABL Priority Collateral and (ii) second-priority liens on the ABL Priority Collateral that secures on a first-priority basis the ABL Facility, in each case subject to permitted liens described in the
indenture governing the 8% Senior Secured Notes due 2026.
Prior to March 15, 2022, CHS may redeem some or all of the 8% Senior
Secured Notes due 2026 at a redemption price equal to 100% of the principal amount of the notes redeemed plus accrued and unpaid interest, if any, plus a make-whole premium, as described in the indenture governing the 8% Senior Secured
Notes due 2026. In addition, at any time prior to March 15, 2022, CHS may redeem up to 40% of the aggregate principal amount of the 8% Senior Secured Notes due 2026 with the proceeds from certain equity offerings at the redemption price of
108.000%, plus accrued and unpaid interest, if any, to, but excluding, the applicable redemption date.
After March 15, 2022, CHS is
entitled, at its option, to redeem all or a portion of the 8% Senior Secured Notes due 2026 upon not less than 15 nor more than 60 days notice, at the following redemption prices (expressed as a percentage of principal amount on the redemption
date), plus accrued and unpaid interest, if any, to the redemption date (subject to the right of holders of record on the relevant record date to receive interest due on the relevant interest payment date), if redeemed during the periods set forth
below:
|
|
|
|
|
Period
|
|
Redemption Price
|
|
March 15, 2022 to March 14, 2023
|
|
|
104.000 %
|
|
March 15, 2023 to March 14, 2024
|
|
|
102.000 %
|
|
March 15, 2024 to March 14, 2026
|
|
|
100.000 %
|
|
8% Senior Secured Notes due 2027
On November 19, 2019, CHS issued approximately $700 million aggregate principal amount of the 8% Senior Secured Notes due 2027 in
connection with the 2019 Exchange Offer. No cash proceeds were received from the
129
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2019 Exchange Offer. The 8% Senior Secured Notes due 2027 bear interest at a rate of 8.000% per annum, payable semi-annually in arrears on June 15 and December 15 of each year. Interest
on the 8% Senior Secured Notes due 2027 accrues from the initial issuance date of the 8% Senior Secured Notes due 2027. Interest is calculated on the basis of a 360-day year comprised of twelve 30-day months. The 8% Senior Secured Notes due 2027 are scheduled to mature on December 15, 2027. The 8% Senior Secured Notes due 2027 are unconditionally guaranteed on a senior-priority secured basis by the
Company and each of the CHS current and future domestic subsidiaries that provide guarantees under the ABL Facility, any capital market debt securities of CHS (including CHS outstanding senior notes) and certain other long-term debt of CHS.
The 8% Senior Secured Notes due 2027 and the related guarantees are secured by shared (i) first-priority liens on the Non-ABL Priority Collateral and (ii) second-priority liens on the ABL Priority Collateral that secures on a first-priority basis the ABL Facility, in each case subject to permitted liens described in the
indenture governing the 8% Senior Secured Notes due 2027.
CHS is entitled, at its option, to redeem all or a portion of the 8% Senior
Secured Notes due 2027 at any time prior to December 15, 2022, upon not less than 15 nor more than 60 days notice, at a price equal to 100% of the principal amount of the 8% Senior Secured Notes due 2027 redeemed plus accrued and unpaid
interest, if any, plus a make-whole premium, as described in the indenture governing the 8% Senior Secured Notes due 2027. In addition, CHS may redeem up to 40% of the aggregate principal amount of the 8% Senior Secured Notes due 2027 at
any time prior to December 15, 2022 using the net proceeds from certain equity offerings at the redemption price of 108.000% of the principal amount of the 8% Senior Secured Notes due 2027 redeemed, plus accrued and unpaid interest, if any.
CHS may redeem some or all of the 8% Senior Secured Notes due 2027 at any time on or after December 15, 2022 upon not less than 15
nor more than 60 days notice, at the following redemption prices (expressed as a percentage of principal amount on the redemption date), plus accrued and unpaid interest, if any, to the redemption date (subject to the right of holders of
record on the relevant record date to receive interest due on the relevant interest payment date), if redeemed during the periods set forth below:
|
|
|
|
|
Period
|
|
Redemption Price
|
|
December 15, 2022 to December 14, 2023
|
|
|
104.000 %
|
|
December 15, 2023 to December 14, 2024
|
|
|
102.000 %
|
|
December 15, 2024 to December 14, 2027
|
|
|
100.000 %
|
|
67⁄8% Senior Notes due 2028
On November 19, 2019, CHS issued approximately $1.7 billion aggregate principal amount of the 67⁄8% Senior Notes due 2028 in connection with the 2019 Exchange Offer. No cash proceeds were received in the 2019 Exchange Offer. The
67⁄8% Senior Notes due 2028 bear interest at a rate of 6.875% per annum, payable semi-annually in arrears on April 1 and October 1 of each year. Interest
on the 67⁄8% Senior 2028 Notes accrues from the initial issuance date of the
67⁄8% Senior Notes due 2028. Interest is calculated on the basis of a 360-day year comprised of twelve 30-day months. The 67⁄8% Senior Notes due 2028 are scheduled to mature on April 1, 2028.
The 67⁄8% Senior Notes due 2028 are unconditionally
guaranteed on a senior-priority unsecured basis by the Company and each of the CHS current and future domestic subsidiaries that provide guarantees under the ABL Facility, any capital market debt securities of CHS (including CHS outstanding
senior notes) and certain other long-term debt of CHS.
CHS is entitled, at its option, to redeem all or a portion of the 67⁄8% Senior Notes due 2028 at any time prior to April 1, 2023, upon not less than 15 nor more than 60 days notice, at a price equal to 100% of the principal
130
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
amount of the 67⁄8% Senior Notes due 2028 redeemed plus accrued and unpaid interest, if any, plus a
make-whole premium, as described in the indenture governing the 67⁄8% Senior Notes due 2028. In addition, the Issuer may redeem up to 40% of the
aggregate principal amount of the 67⁄8% Senior Notes due 2028 at any time prior to April 1, 2023 using the net proceeds from certain equity offerings at the
redemption price of 106.875% of the principal amount of the 67⁄8% Senior Notes due 2028 redeemed, plus accrued and unpaid interest, if any.
CHS may redeem some or all of the 67⁄8% Senior Notes due
2028 at any time on or after April 1, 2023 upon not less than 15 nor more than 60 days notice, at the following redemption prices (expressed as a percentage of principal amount on the redemption date), plus accrued and unpaid interest, if
any, to the redemption date (subject to the right of holders of record on the relevant record date to receive interest due on the relevant interest payment date), if redeemed during the periods set forth below:
|
|
|
|
|
Period
|
|
Redemption Price
|
|
April 1, 2023 to March 31, 2024
|
|
|
103.438 %
|
|
April 1, 2024 to March 31, 2025
|
|
|
101.719 %
|
|
April 1, 2025 to March 31, 2028
|
|
|
100.000 %
|
|
ABL Facility
On April 3, 2018, the Company and CHS entered into an asset-based loan (ABL) credit agreement (the ABL Credit Agreement) with
JPMorgan Chase Bank, N.A., as administrative agent, and the lenders and other agents party thereto. Pursuant to the ABL Credit Agreement, the lenders have extended to CHS a revolving asset-based loan facility (the ABL Facility) in the
maximum aggregate principal amount of $1.0 billion, subject to borrowing base capacity. On November 12, 2019, the Company and CHS entered into Amendment No. 2 to the ABL Facility, resulting in an increase of the portion of the
commitments under the ABL Facility that are available in the form of letters of credit from $50 million to $200 million. CHS and all domestic subsidiaries of CHS that guarantee CHS other outstanding senior and senior secured
indebtedness guarantee the obligations of CHS under the ABL Facility. Subject to certain exceptions, all obligations under the ABL Facility and the related guarantees are secured by a perfected first-priority security interest in substantially all
of the receivables, deposit, collection and other accounts and contract rights, books, records and other instruments related to the foregoing of the Company, CHS and the guarantors, as well as a perfected junior-priority security interest in
substantially all of the other assets of the Company, CHS and the guarantors, subject to customary exceptions and intercreditor arrangements. In connection with entering into the ABL Credit Agreement and the ABL Facility, the Company repaid in full
and terminated its accounts receivable loan agreement with a group of lenders and banks. At December 31, 2019, the available borrowing base under the ABL Facility was $860 million, of which the Company had outstanding borrowings of
$273 million and letters of credit issued of $145 million. The issued letters of credit were primarily in support of potential insurance-related claims and certain bonds.
Borrowings under the ABL Facility bear interest at a rate per annum equal to an applicable percentage, plus, at the Borrowers option,
either (a) an Alternative base rate or (b) a LIBOR rate. From and after December 31, 2018, the applicable percentage under the ABL Facility is determined based on excess availability as a percentage of the maximum commitment amount
under the ABL Facility at a rate per annum of 1.25%, 1.50% and 1.75% for loans based on the Alternative base rate and 2.25%, 2.50% and 2.75% for loans based on the LIBOR rate. From and after September 30, 2018, the applicable commitment fee
rate under the ABL Facility is determined based on average utilization as a percentage of the maximum commitment amount under the ABL Facility at a rate per annum of either 0.50% or 0.625% times the unused portion of the ABL Facility.
Principal amounts outstanding under the ABL Facility will be due and payable in full on April 3, 2023. The ABL Facility includes a 91-day springing maturity applicable if more than $250 million in the aggregate principal amount of the 51⁄8% Senior Secured
Notes due 2021, 67⁄8% Senior Notes due 2022 or 61⁄4% Senior
131
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Secured Notes due 2023 or any indebtedness incurred to refinance the foregoing are scheduled to mature or similarly become due on a date prior to April 3, 2023. In such event, principal
amounts outstanding under the ABL Facility will be accelerated and all amounts outstanding under the ABL Facility will become immediately due and payable.
The ABL Facility contains customary representations and warranties, subject to limitations and exceptions, and customary covenants restricting
the Companys ability, subject to certain exceptions, to, among other things (1) declare dividends, make distributions or redeem or repurchase capital stock, (2) prepay, redeem or repurchase other debt, (3) incur liens or grant
negative pledges, (4) make loans and investments and enter into acquisitions and joint ventures, (5) incur additional indebtedness or provide certain guarantees, (6) engage in mergers, acquisitions and asset sales, (7) conduct
transactions with affiliates, (8) alter the nature of the Companys, CHS or the guarantors businesses, (9) grant certain guarantees with respect to physician practices, (10) engage in sale and leaseback transactions
or (11) change the Companys fiscal year. The Company is also required to comply with a consolidated fixed coverage ratio, upon certain triggering events described below, and various affirmative covenants. The consolidated fixed coverage
ratio is calculated as the ratio of (x) consolidated EBITDA (as defined in the ABL Facility) less capital expenditures to (y) the sum of consolidated interest expense (as defined in the ABL Facility), scheduled principal payments, income
taxes and restricted payments made in cash or in permitted investments. For purposes of calculating the consolidated fixed charge coverage ratio, the calculation of consolidated EBITDA as defined in the ABL Facility is a trailing 12-month calculation that begins with the Companys consolidated net income, with certain adjustments for interest, taxes, depreciation and amortization, net income attributable to noncontrolling interests,
stock compensation expense, restructuring costs, and the financial impact of other non-cash or non-recurring items recorded during any such 12-month period. The consolidated fixed charge coverage ratio is a required covenant only in periods where the total borrowings outstanding under the ABL Facility reduce the amount available in the facility to less
than the greater of (i) $95 million and (ii) 10% of the calculated borrowing base. As a result, in the event the Company has less than $95 million available under the ABL Facility, the Company would need to comply with the consolidated
fixed charge coverage ratio. At December 31, 2019, the Company is not subject to the consolidated fixed charge coverage ratio as such triggering event had not occurred during the last twelve months ended December 31, 2019.
In addition, in the event the amount of borrowings and letters of credit outstanding at any time under the ABL Facility exceeds the borrowing
base at such time, the Company will be required to, first, repay outstanding borrowings and, second, replace or cash collateralize outstanding letters of credit, in an aggregate amount sufficient to eliminate such excess.
Events of default under the ABL Facility include, but are not limited to, (1) CHS failure to pay principal, interest, fees or other
amounts under the ABL Facility Agreement when due (taking into account any applicable grace period), (2) any representation or warranty proving to have been materially incorrect when made, (3) covenant defaults subject, with respect to certain
covenants, to an available cure and applicable grace periods, (4) bankruptcy and insolvency events, (5) a cross default to certain other debt, (6) certain undischarged judgments (not paid within an applicable grace period), (7) a
change of control (as defined), (8) certain ERISA-related defaults and (9) the invalidity or impairment of specified security interests, guarantees or subordination provisions in favor of the ABL Agent or lenders under the ABL Facility.
Loss (Gain) from Early Extinguishment of Debt
The financing and repayment transactions discussed above resulted in a loss from early extinguishment of debt of $54 million and
$40 million for the years ended December 31, 2019 and 2017, respectively, and a gain from the early extinguishment of debt of $31 million for the year ended December 31, 2018, and an
after-tax loss of $42 million and $26 million for the years ended December 31, 2019 and 2017, respectively, and an after-tax gain of $23 million for
the year ended December 31, 2018.
132
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Other Debt
As of December 31, 2019, other debt consisted primarily of other obligations maturing in various installments through 2024.
To limit the effect of changes in interest rates on a portion of the Companys long-term borrowings, the Company is a party to one
interest swap agreement with a notional amount of approximately $300 million as of December 31, 2019. The Company receives a variable rate of interest on this swap based on the three-month LIBOR in exchange for the payment of a fixed rate
of interest. See Note 7 for additional information regarding these swaps.
As of December 31, 2019, the scheduled maturities of
long-term debt outstanding, including finance lease obligations for each of the next five years and thereafter are as follows (in millions):
|
|
|
|
|
Year Ending December 31,
|
|
Amount
|
|
2020
|
|
$
|
20
|
|
2021
|
|
|
1,010
|
|
2022
|
|
|
237
|
|
2023
|
|
|
5,149
|
|
2024
|
|
|
2,393
|
|
Thereafter
|
|
|
4,743
|
|
|
|
|
|
|
Total maturities
|
|
|
13,552
|
|
Less: Deferred debt issuance costs
|
|
|
(132
|
)
|
Plus: Unamortized note premium
|
|
|
(15
|
)
|
|
|
|
|
|
Total long-term debt
|
|
$
|
13,405
|
|
|
|
|
|
|
The Company paid interest of $1.0 billion, $936 million and $852 million on borrowings during
the years ended December 31, 2019, 2018 and 2017, respectively.
133
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
7. FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of financial instruments has been estimated by the Company using available market information as of December 31, 2019 and
2018, and valuation methodologies considered appropriate. The estimates presented in the table below are not necessarily indicative of amounts the Company could realize in a current market exchange (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2019
|
|
|
December 31, 2018
|
|
|
|
Carrying
Amount
|
|
|
Estimated Fair
Value
|
|
|
Carrying
Amount
|
|
|
Estimated Fair
Value
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
216
|
|
|
$
|
216
|
|
|
$
|
196
|
|
|
$
|
196
|
|
Investments in equity securities
|
|
|
141
|
|
|
|
141
|
|
|
|
137
|
|
|
|
137
|
|
Available-for-sale
debt securities
|
|
|
101
|
|
|
|
101
|
|
|
|
93
|
|
|
|
93
|
|
Trading securities
|
|
|
12
|
|
|
|
12
|
|
|
|
11
|
|
|
|
11
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contingent Value Right
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Credit Facility
|
|
|
-
|
|
|
|
-
|
|
|
|
1,602
|
|
|
|
1,564
|
|
8% Senior Notes due 2019
|
|
|
-
|
|
|
|
-
|
|
|
|
155
|
|
|
|
146
|
|
71⁄8% Senior
Notes due 2020
|
|
|
-
|
|
|
|
-
|
|
|
|
121
|
|
|
|
100
|
|
51⁄8% Senior
Secured Notes due 2021
|
|
|
990
|
|
|
|
1,003
|
|
|
|
984
|
|
|
|
934
|
|
67⁄8% Senior
Notes due 2022
|
|
|
229
|
|
|
|
188
|
|
|
|
2,593
|
|
|
|
1,175
|
|
61⁄4% Senior
Secured Notes due 2023
|
|
|
3,074
|
|
|
|
3,148
|
|
|
|
3,067
|
|
|
|
2,819
|
|
85⁄8% Senior
Secured Notes due 2024
|
|
|
1,023
|
|
|
|
1,099
|
|
|
|
1,021
|
|
|
|
1,025
|
|
8% Senior Secured Notes due 2026
|
|
|
2,070
|
|
|
|
2,182
|
|
|
|
-
|
|
|
|
-
|
|
8% Senior Secured Notes due 2027
|
|
|
691
|
|
|
|
700
|
|
|
|
-
|
|
|
|
-
|
|
67⁄8% Senior
Notes due 2028
|
|
|
1,678
|
|
|
|
1,700
|
|
|
|
-
|
|
|
|
-
|
|
97⁄8%
Junior-Priority Secured Notes due 2023
|
|
|
1,754
|
|
|
|
1,539
|
|
|
|
1,750
|
|
|
|
1,380
|
|
81⁄8%
Junior-Priority Secured Notes due 2024
|
|
|
1,340
|
|
|
|
1,113
|
|
|
|
1,338
|
|
|
|
976
|
|
ABL Facility and other debt
|
|
|
285
|
|
|
|
285
|
|
|
|
734
|
|
|
|
734
|
|
The carrying value of the Companys long-term debt in the above table is presented net of unamortized
deferred debt issuance costs. The estimated fair value is determined using the methodologies discussed below in accordance with accounting standards related to the determination of fair value based on the U.S. GAAP fair value hierarchy as discussed
in Note 8. The estimated fair value for financial instruments with a fair value that does not equal its carrying value is considered a Level 1 valuation. The Company utilizes the market approach and obtains indicative pricing through
publicly available subscription services such as Bloomberg or from the administrative agent to the Credit Facility to determine fair values where relevant.
Cash and cash equivalents. The carrying amount approximates fair value due to the short-term maturity of these instruments
(less than three months).
134
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Investments in equity securities. Estimated fair value is based on closing
price as quoted in public markets. Prior to the adoption of ASU 2016-01 on January 1, 2018, such investments were classified as either
available-for-sale or trading securities.
Available-for-sale debt securities. Estimated fair value is based on closing price as quoted in public markets or other various valuation techniques.
Trading securities. Estimated fair value is based on closing price as quoted in public markets.
Contingent Value Right. Estimated fair value is based on the closing price as quoted on the public market where the CVR was
traded.
Credit Facility. Estimated fair value is based on publicly available trading activity and supported with
information from the Companys bankers regarding relevant pricing for trading activity among the Companys lending institutions.
8% Senior Notes due 2019. Estimated fair value is based on the closing market price for these notes.
71⁄8% Senior Notes due
2020. Estimated fair value is based on the closing market price for these notes.
51⁄8% Senior Secured Notes due
2021. Estimated fair value is based on the closing market price for these notes.
67⁄8% Senior Notes due
2022. Estimated fair value is based on the closing market price for these notes.
61⁄4% Senior Secured Notes due
2023. Estimated fair value is based on the closing market price for these notes.
85⁄8% Senior Secured Notes due
2024. Estimated fair value is based on the closing market price for these notes.
8% Senior Secured Notes due
2026. Estimated fair value is based on the closing market price for these notes.
8% Senior Secured Notes due
2027. Estimated fair value is based on the closing market price for these notes.
67⁄8% Senior Secured Notes due
2028. Estimated fair value is based on the closing market price for these notes.
97⁄8% Junior-Priority Secured Notes due
2023. Estimated fair value is based on the closing market price for these notes.
81⁄8%
Junior-Priority Secured Notes due 2024. Estimated fair value is based on the closing market price for these notes.
ABL Facility and other debt. The carrying amount of the ABL Facility and all other debt approximates fair value due to the
nature of these obligations.
Interest rate swaps. The fair value of interest rate swap agreements is the amount at
which they could be settled, based on estimates calculated by the Company using a discounted cash flow analysis based on observable market inputs and validated by comparison to estimates obtained from the counterparty. The Company incorporates
credit valuation adjustments (CVAs) to appropriately reflect both its own nonperformance or
135
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
credit risk and the respective counterpartys nonperformance or credit risk in the fair value measurements. In adjusting the fair value of its interest rate swap agreements for the effect of
nonperformance or credit risk, the Company has considered the impact of any netting features included in the agreements.
At
December 31, 2019, the Company had one interest rate swap with a notional amount of approximately $300 million, a fixed interest rate of 2.892%, a termination date of August 30, 2020, and a fair value of approximately $2 million.
The counterparty to the interest rate swap agreement exposes the Company to credit risk in the event of nonperformance by such counterparty. However, at December 31, 2019, the Company does not anticipate nonperformance by the counterparty. The
Company does not hold or issue derivative financial instruments for trading purposes.
The Company is exposed to certain risks relating to
its ongoing business operations. The risk managed by using derivative instruments is interest rate risk. Companies are required to recognize all derivative instruments as either assets or liabilities at fair value in the consolidated statement of
financial position. For derivative instruments that are designated and qualify as cash flow hedges, the effective portion of the gain or loss on the derivative is reported as a component of other comprehensive income (OCI) and
reclassified into earnings in the same period or periods during which the hedged transactions affect earnings. Gains and losses on the derivative representing either ineffectiveness or hedge components excluded from the assessment of effectiveness
are recognized in current earnings.
Assuming no change in interest rates in effect as of December 31, 2019, less than
$1 million of interest income resulting from the spread between the fixed and floating rates defined in the interest rate swap agreement will be recognized during the next 12 months.
The following tabular disclosure provides the amount of pre-tax (loss) gain recognized as a component
of OCI during the years ended December 31, 2019, 2018 and 2017 (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount of Pre-Tax (Loss) Gain
Recognized in OCI (Effective Portion)
|
|
Derivatives in Cash Flow Hedging Relationships
|
|
Year Ended December 31,
|
|
|
|
2019
|
|
|
2018
|
|
|
2017
|
|
Interest rate swaps
|
|
$
|
(3
|
)
|
|
$
|
17
|
|
|
$
|
2
|
|
The following tabular disclosure provides the location of the effective portion of the pre-tax loss reclassified from accumulated other comprehensive loss (AOCL) into interest expense on the consolidated statements of loss income during the years ended December 31, 2019, 2018 and 2017
(in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
Location of Loss Reclassified from
AOCL into Income (Effective Portion)
|
|
Amount of Pre-Tax Loss Reclassified from
AOCL into Income (Effective Portion)
|
|
|
Year Ended December 31,
|
|
|
|
2019
|
|
|
2018
|
|
|
2017
|
|
Interest expense, net
|
|
$
|
-
|
|
|
$
|
2
|
|
|
$
|
30
|
|
136
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The fair values of derivative instruments in the consolidated balance sheets as of
December 31, 2019 and 2018 were as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset Derivatives
|
|
|
Liability Derivatives
|
|
|
|
December 31, 2019
|
|
|
December 31, 2018
|
|
|
December 31, 2019
|
|
|
December 31, 2018
|
|
|
|
Balance
Sheet
Location
|
|
Fair Value
|
|
|
Balance
Sheet
Location
|
|
Fair Value
|
|
|
Balance
Sheet
Location
|
|
Fair Value
|
|
|
Balance
Sheet
Location
|
|
Fair Value
|
|
Derivatives designated as hedging instruments
|
|
Other
assets,
net
|
|
$
|
-
|
|
|
Other
assets,
net
|
|
$
|
3
|
|
|
Other
long-
term
liabilities
|
|
$
|
2
|
|
|
Other
long-
term
liabilities
|
|
$
|
2
|
|
8. FAIR VALUE
Fair Value Hierarchy
Fair value
is a market-based measurement, not an entity-specific measurement. Therefore, a fair value measurement should be determined based on the assumptions that market participants would use in pricing the asset or liability. As a basis for considering
market participant assumptions in fair value measurements, the Company utilizes the U.S. GAAP fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting
entity (observable inputs that are classified within Levels 1 and 2 of the hierarchy) and the reporting entitys own assumption about market participant assumptions (unobservable inputs classified within Level 3 of the hierarchy).
The inputs used to measure fair value are classified into the following fair value hierarchy:
Level 1: Quoted market prices in active markets for identical assets or liabilities.
Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market
data.
Level 3: Unobservable inputs that are supported by little or no market activity and are
significant to the fair value of the assets or liabilities. Level 3 includes values determined using pricing models, discounted cash flow methodologies, or similar techniques reflecting the Companys own assumptions.
In instances where the determination of the fair value hierarchy measurement is based on inputs from different levels of the fair value
hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The Companys assessment of the
significance of a particular input to the fair value measurement in its entirety requires judgment of factors specific to the asset or liability. Transfers between levels within the fair value hierarchy are recognized by the Company on the date of
the change in circumstances that requires such transfer. There were no transfers between levels during the years ending December 31, 2019 or December 31, 2018.
137
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following table sets forth, by level within the fair value hierarchy, the financial
assets and liabilities recorded at fair value on a recurring basis as of December 31, 2019 and 2018 (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2019
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Investments in equity securities
|
|
$
|
141
|
|
|
$
|
141
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Available-for-sale
debt securities
|
|
|
101
|
|
|
|
-
|
|
|
|
101
|
|
|
|
-
|
|
Trading securities
|
|
|
12
|
|
|
|
-
|
|
|
|
12
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
254
|
|
|
$
|
141
|
|
|
$
|
113
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of interest rate swap agreements
|
|
$
|
2
|
|
|
$
|
-
|
|
|
$
|
2
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
$
|
2
|
|
|
$
|
-
|
|
|
$
|
2
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2018
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Investments in equity securities
|
|
$
|
137
|
|
|
$
|
137
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Available-for-sale
debt securities
|
|
|
93
|
|
|
|
-
|
|
|
|
93
|
|
|
|
-
|
|
Trading securities
|
|
|
11
|
|
|
|
-
|
|
|
|
11
|
|
|
|
-
|
|
Fair value of interest rate swap agreements
|
|
|
3
|
|
|
|
-
|
|
|
|
3
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
244
|
|
|
$
|
137
|
|
|
$
|
107
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contingent Value Right (CVR)
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Fair value of interest rate swap agreements
|
|
|
2
|
|
|
|
-
|
|
|
|
2
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
$
|
2
|
|
|
$
|
-
|
|
|
$
|
2
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments in Equity Securities,
Available-for-Sale Debt Securities and Trading Securities
Investments in equity securities and trading securities classified as Level 1 are measured using quoted market prices. Level 2 available-for-sale debt securities and trading securities primarily consisted of bonds and notes issued by the United States government and its agencies and domestic and
foreign corporations. The estimated fair values of these securities are determined using various valuation techniques, including a multi-dimensional relational model that incorporates standard observable inputs and assumptions such as benchmark
yields, reported trades, broker/dealer quotes, issuer spreads, benchmark securities, bids/offers and other pertinent reference data.
138
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Supplemental information regarding the Companys available-for-sale debt securities (all of which had no withdrawal restrictions) is set forth in the table below (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortized
Cost
|
|
|
Gross
Unrealized
Gains
|
|
|
Gross
Unrealized
Losses
|
|
|
Estimated
Fair
Values
|
|
As of December 31, 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Government
|
|
$
|
54
|
|
|
$
|
1
|
|
|
$
|
(1
|
)
|
|
$
|
54
|
|
Corporate
|
|
|
33
|
|
|
|
1
|
|
|
|
-
|
|
|
|
34
|
|
Mortgage and asset-backed securities
|
|
|
13
|
|
|
|
-
|
|
|
|
-
|
|
|
|
13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
100
|
|
|
$
|
2
|
|
|
$
|
(1
|
)
|
|
$
|
101
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortized
Cost
|
|
|
Gross
Unrealized
Gains
|
|
|
Gross
Unrealized
Losses
|
|
|
Estimated
Fair
Values
|
|
As of December 31, 2018:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Government
|
|
$
|
54
|
|
|
$
|
-
|
|
|
$
|
(3
|
)
|
|
$
|
51
|
|
Corporate
|
|
|
34
|
|
|
|
-
|
|
|
|
(2
|
)
|
|
|
32
|
|
Mortgage and asset-backed securities
|
|
|
10
|
|
|
|
-
|
|
|
|
-
|
|
|
|
10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
98
|
|
|
$
|
-
|
|
|
$
|
(5
|
)
|
|
$
|
93
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2019 and 2018, investments with aggregate estimated fair values of approximately
$51 million (71 investments) and $89 million (121 investments), respectively, generated the gross unrealized losses disclosed in the above table. At each reporting date, the Company performs an evaluation of impaired securities to
determine if the unrealized losses are other-than-temporary. This evaluation considers a number of factors including, but not limited to, the length of time and extent to which the fair value has been less than cost, and managements ability
and intent to hold the securities until fair value recovers. Based on the results of this evaluation, management concluded that as of December 31, 2019, there were no other-than-temporary losses related to available-for-sale debt securities. The recent declines in value of the securities and/or length of time they have been below cost, as well as the Companys ability and intent to hold the securities for
a reasonable period of time sufficient for a projected recovery of fair value, have caused management to conclude that the securities, that have generated gross unrealized losses, were not other-than-temporarily impaired. Management will continue to
monitor and evaluate the recoverability of the Companys available-for-sale debt securities.
139
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The contractual maturities of debt-based securities held by the Company as of
December 31, 2019 and 2018, excluding mutual fund holdings, are set forth in the table below (in millions). Expected maturities will differ from contractual maturities because the issuers of the debt securities may have the right to prepay
their obligations without prepayment penalties.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2019
|
|
|
December 31, 2018
|
|
|
|
Amortized
Cost
|
|
|
Estimated Fair
Values
|
|
|
Amortized
Cost
|
|
|
Estimated Fair
Values
|
|
Within 1 year
|
|
$
|
9
|
|
|
$
|
9
|
|
|
$
|
14
|
|
|
$
|
14
|
|
After 1 year and through year 5
|
|
|
19
|
|
|
|
20
|
|
|
|
20
|
|
|
|
19
|
|
After 5 years and through year 10
|
|
|
29
|
|
|
|
29
|
|
|
|
25
|
|
|
|
24
|
|
After 10 years
|
|
|
43
|
|
|
|
43
|
|
|
|
39
|
|
|
|
36
|
|
Gross realized gains and losses on sales of
available-for-sale debt securities are summarized in the table below (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2019
|
|
|
2018
|
|
|
2017
|
|
Realized gains
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
3
|
|
Realized losses
|
|
|
-
|
|
|
|
-
|
|
|
|
(2
|
)
|
Other investment income, which includes interest and dividends, related to all investment securities were
$7 million, $7 million and $8 million for the years ended December 31, 2019, 2018 and 2017, respectively.
Net gains
and losses recognized during the years ended December 31, 2019 and 2018 for investments in equity securities, which are broken out between investments sold during the year and investments held at the end of the year, are summarized in the table
below (in millions):
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2019
|
|
|
2018
|
|
Net gains and (losses), beginning of year
|
|
$
|
15
|
|
|
$
|
(7
|
)
|
Less: Net gains and (losses) recognized during the year on equity securities sold during the
year
|
|
|
2
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
Unrealized gains and (losses) recognized during the year on equity securities held, end of
year
|
|
$
|
13
|
|
|
|
(8
|
)
|
|
|
|
|
|
|
|
|
|
Contingent Value Right (CVR)
The CVRs represented the estimate of the fair value for the contingent consideration paid to HMA shareholders as part of the HMA merger. The
CVRs were listed on the Nasdaq and the valuation of the CVRs was based on the quoted trading price for the CVRs on the last day of the period. Changes in the estimated fair value of the CVRs were recorded through the consolidated statements of loss.
In January 2019, the CVRs were terminated and removed from listing with Nasdaq after the determination that no amount was payable under the CVR agreement.
CVR-related Liability
The CVR-related legal liability (prior to being reclassified as a current liability on the
Companys consolidated balance sheet as noted below) represented the Companys estimate of fair value of the liability associated with
140
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
the legal matters assumed in the HMA merger, which at December 31, 2017 was included in other long-term liabilities in the accompanying consolidated balance sheet. This liability did not
include those matters previously accrued by HMA as a probable contingency, which were settled and paid during the year ended December 31, 2015. To develop the estimate of fair value, the Company engaged an independent third-party valuation firm
to measure the liability. The valuation was made utilizing the Companys estimates of future outcomes for each legal case and simulating future outcomes based on the timing, probability and distribution of several scenarios using a Monte Carlo
simulation model. Other inputs were then utilized for discounting the liability to the measurement date. The HMA legal matters underlying this fair value estimate were evaluated by management to determine the likelihood and impact of each of the
potential outcomes. Using that information, as well as the potential correlation and variability associated with each case, a fair value was determined for the estimated future cash outflows to conclude or settle the HMA legal matters included in
the analysis, excluding legal fees (which are expensed as incurred). Because of the unobservable nature of the majority of the inputs used to value the liability, the Company classified the fair value measurement as a Level 3 measurement in the
fair value hierarchy. Prior to December 31, 2018, changes in the fair value of the CVR related legal liability were recorded in future periods through the consolidated statements of loss.
At December 31, 2018, the CVR-related legal liability was zero after taking into account the
Companys payment of the amounts agreed to in the final global resolution and settlement of certain HMA legal matters during the three months ended December 31, 2018.
Fair Value of Interest Rate Swap Agreements
The valuation of the Companys interest rate swap agreements is determined using market valuation techniques, including discounted cash
flow analysis on the expected cash flows of each agreement. This analysis reflects the contractual terms of the agreement, including the period to maturity, and uses observable market-based inputs, including forward interest rate curves. The fair
value of interest rate swap agreements are determined by netting the discounted future fixed cash payments and the discounted expected variable cash receipts. The variable cash receipts are based on the expectation of future interest rates based on
observable market forward interest rate curves and the notional amount being hedged.
The Company incorporates CVAs to appropriately
reflect both its own nonperformance or credit risk and the respective counterpartys nonperformance or credit risk in the fair value measurements. In adjusting the fair value of its interest rate swap agreements for the effect of nonperformance
or credit risk, the Company has considered the impact of any netting features included in the agreements. The CVA on the Companys interest rate swap agreements had an immaterial effect on the fair value of the related asset or liability at
December 31, 2019 and 2018.
The majority of the inputs used to value the Companys interest rate swap agreements, including the
forward interest rate curves and market perceptions of the Companys credit risk used in the CVAs, are observable inputs available to a market participant. As a result, the Company has determined that the interest rate swap valuations are
classified in Level 2 of the fair value hierarchy.
9. LEASES
The Company utilizes operating and finance leases for the use of certain hospitals, medical office buildings, and medical equipment. All lease
agreements generally require the Company to pay maintenance, repairs, property taxes and insurance costs, which are variable amounts based on actual costs incurred during each applicable period. Such costs are not included in the determination of
the ROU asset or lease liability. Variable lease cost also includes escalating rent payments that are not fixed at commencement but are based on an index that is determined in future periods over the lease term based on changes in the Consumer Price
Index or other
141
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
measure of cost inflation. Most leases include one or more options to renew the lease at the end of the initial term, with renewal terms that generally extend the lease at the then market rate of
rental payment. Certain leases also include an option to buy the underlying asset at or a short time prior to the termination of the lease. All such options are at the Companys discretion and are evaluated at the commencement of the lease,
with only those that are reasonably certain of exercise included in determining the appropriate lease term. The components of lease cost and rent expense for the year ended December 31, 2019 are as follows (in millions):
|
|
|
|
|
Lease Cost
|
|
Year Ended
December 31,
2019
|
|
Operating lease cost:
|
|
|
|
|
Operating lease cost
|
|
$
|
194
|
|
Short-term rent expense
|
|
|
114
|
|
Variable lease cost
|
|
|
18
|
|
Sublease income
|
|
|
(5
|
)
|
|
|
|
|
|
Total operating lease cost
|
|
$
|
321
|
|
|
|
|
|
|
Finance lease cost:
|
|
|
|
|
Amortization of
right-of-use assets
|
|
$
|
12
|
|
Interest on finance lease liabilities
|
|
|
7
|
|
|
|
|
|
|
Total finance lease cost
|
|
$
|
19
|
|
|
|
|
|
|
Supplemental balance sheet information related to leases was as follows (in millions):
|
|
|
|
|
|
|
|
|
Balance Sheet Classification
|
|
December 31,
2019
|
|
Operating Leases:
|
|
|
|
|
|
|
Operating Lease ROU Assets
|
|
Other assets, net
|
|
$
|
607
|
|
|
|
|
Finance Leases:
|
|
|
|
|
|
|
Finance Lease ROU Assets
|
|
Property and equipment
|
|
|
|
|
|
|
Land and improvements
|
|
$
|
8
|
|
|
|
Buildings and improvements
|
|
|
154
|
|
|
|
Equipment and fixtures
|
|
|
11
|
|
|
|
|
|
|
|
|
|
|
Property and equipment
|
|
|
173
|
|
|
|
Less accumulated depreciation and amortization
|
|
|
(56
|
)
|
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
$
|
117
|
|
|
|
|
|
|
|
|
Current finance lease liabilities
|
|
Current maturities of long-term debt
|
|
$
|
6
|
|
Long-term finance lease liabilities
|
|
Long-term debt
|
|
|
107
|
|
142
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Supplemental cash flow and other information related to leases as of and for the year ended
December 31, 2019 are as follows (dollars in millions):
|
|
|
|
|
Other information
|
|
Year Ended
December 31, 2019
|
|
Cash paid for amounts included in the measurement of lease liabilities:
|
|
|
|
|
Operating cash flows from operating leases (1)
|
|
$
|
167
|
|
Operating cash flows from finance leases
|
|
|
7
|
|
Financing cash flows from finance leases
|
|
|
9
|
|
Right-of-use
assets obtained in exchange for new finance lease liabilities
|
|
|
2
|
|
Right-of-use
assets obtained in exchange for new operating lease liabilities
|
|
|
122
|
|
Weighted-average remaining lease term:
|
|
|
|
|
Operating leases
|
|
|
6 years
|
|
Finance leases
|
|
|
20 years
|
|
Weighted-average discount rate:
|
|
|
|
|
Operating leases
|
|
|
9.1
|
%
|
Finance leases
|
|
|
5.6
|
%
|
(1)
|
Included in the change in other operating assets and liabilities in the consolidated statement of cash flows.
|
On September 19, 2019, the Company completed the sale and leaseback of four medical office buildings for net
proceeds of $56 million to Carter Validus Mission Critical REIT II, Inc. The buildings, with a combined total of 285,337 square feet, are located in three states and support a wide array of diagnostic, medical and surgical services in an
outpatient setting for the respective nearby hospitals. Based on the Companys assessment of the control transfer principle in these leased buildings, the transaction did not qualify for sale treatment and the related leases have been recorded
as financing obligations in long-term debt in the Companys consolidated balance sheet at December 31, 2019. In addition, on December 18, 2019, the Company completed the sale and leaseback of one medical office building for net
proceeds of approximately $4 million to an affiliate of Catalyst Healthcare Real Estate. The 30,000 square foot building is located in Arkansas and supports a wide array of diagnostic, medical and surgical services in an outpatient setting
for the nearby hospital. Based on the Companys assessment of the control transfer principle in this leased building, the transaction does not qualify for sale treatment and the related lease has been recorded as a financing obligation in
long-term debt in the accompanying consolidated balance sheet at December 31, 2019.
On December 22, 2016, the Company
completed the sale and leaseback of ten medical office buildings for net proceeds of $159 million to HCP, Inc. The buildings, with a combined total of 756,183 square feet, are located in five states and support a wide array of diagnostic,
medical and surgical services in an outpatient setting for the respective nearby hospitals. Because of the Companys continuing involvement in these leased buildings, the transaction did not qualify for sale treatment and the related leases
have been recorded as financing obligations in long-term debt in the Companys consolidated balance sheet at December 31, 2018. Upon adoption of ASC 842 on January 1, 2019, the Company reevaluated the classification of these financing
arrangements utilizing the new accounting requirements for sale-leasebacks in ASC 842, concluding that these financing arrangements continue to not qualify for sale treatment and therefore should continue to be classified as financing obligations in
long-term debt. At December 31, 2019, six of these financing obligations remain outstanding and are included in the table below, with the other four medical office buildings having been divested in conjunction with the sale of the related
hospital entity.
143
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Commitments relating to noncancellable operating and finance leases and financing obligations
for each of the next five years and thereafter are as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ending December 31,
|
|
Operating
|
|
|
Finance
|
|
|
Financing
Obligations
|
|
2020
|
|
$
|
184
|
|
|
$
|
12
|
|
|
$
|
12
|
|
2021
|
|
|
150
|
|
|
|
11
|
|
|
|
12
|
|
2022
|
|
|
115
|
|
|
|
9
|
|
|
|
12
|
|
2023
|
|
|
92
|
|
|
|
8
|
|
|
|
12
|
|
2024
|
|
|
71
|
|
|
|
8
|
|
|
|
13
|
|
Thereafter
|
|
|
213
|
|
|
|
156
|
|
|
|
114
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total minimum future payments
|
|
|
825
|
|
|
|
204
|
|
|
|
175
|
|
Less: Imputed interest
|
|
|
(202
|
)
|
|
|
(91
|
)
|
|
|
(16
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
623
|
|
|
|
113
|
|
|
|
159
|
|
Less: Current portion
|
|
|
(136
|
)
|
|
|
(6
|
)
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term liabilities
|
|
$
|
487
|
|
|
$
|
107
|
|
|
$
|
158
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As previously disclosed in the Companys 2018 Form 10-K, which
followed the lease accounting in effect prior to adoption of ASC 842, future commitments relating to noncancellable operating and capital leases and financing obligations for the five years and period thereafter as of December 31, 2018 were as
follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ending December 31,
|
|
Operating(1)
|
|
|
Capital
|
|
|
Financing
Obligations
|
|
2019
|
|
$
|
188
|
|
|
$
|
12
|
|
|
$
|
12
|
|
2020
|
|
|
157
|
|
|
|
10
|
|
|
|
9
|
|
2021
|
|
|
121
|
|
|
|
8
|
|
|
|
10
|
|
2022
|
|
|
98
|
|
|
|
7
|
|
|
|
10
|
|
2023
|
|
|
79
|
|
|
|
14
|
|
|
|
10
|
|
Thereafter
|
|
|
234
|
|
|
|
121
|
|
|
|
106
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total minimum future payments
|
|
$
|
877
|
|
|
|
172
|
|
|
|
157
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Imputed interest
|
|
|
|
|
|
|
(80
|
)
|
|
|
(18
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total capital lease and financing obligations
|
|
|
|
|
|
|
92
|
|
|
|
139
|
|
Less: Current portion
|
|
|
|
|
|
|
(8
|
)
|
|
|
(5
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term capital lease and financing obligations
|
|
|
|
|
|
$
|
84
|
|
|
$
|
134
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Minimum lease payments have not been reduced by minimum sublease rentals due in the future, which are
considered immaterial.
|
As of December 31, 2019, there were approximately $29 million of assets underlying
approved but pending leases that have not yet commenced, primarily for medical equipment.
10. EMPLOYEE BENEFIT PLANS
The Company maintains various benefit plans, including defined contribution plans, defined benefit plans and deferred compensation plans, for
which certain of the Companys subsidiaries are the plan sponsors. The CHS/
144
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Community Health Systems, Inc. Retirement Savings Plan is a defined contribution plan which covers the majority of the Companys employees. Employees at these locations whose employment is
covered by collective bargaining agreements are generally eligible to participate in the CHS/Community Health Systems, Inc. Standard 401(k) Plan. Total expense to the Company under the 401(k) plans was $85 million, $90 million and
$94 million for the years ended December 31, 2019, 2018 and 2017, respectively, and is recorded in salaries and benefits expense on the consolidated statements of loss.
The Company maintains unfunded deferred compensation plans that allow participants to defer receipt of a portion of their compensation. The
liability for the deferred compensation plans was $175 million and $163 million as of December 31, 2019 and 2018, respectively, and is included in other long-term liabilities on the consolidated balance sheets. The Company had assets
of $153 million and $146 million as of December 31, 2019 and 2018, respectively, in a non-qualified plan trust generally designated to pay benefits of the deferred compensation plans, consisting
of equity securities of $23 million and $32 million as of December 31, 2019 and 2018, respectively, and company-owned life insurance contracts of $130 million and $114 million as of December 31, 2019 and 2018,
respectively.
The Company provides an unfunded Supplemental Executive Retirement Plan (SERP) for certain members of its
executive management. The Company uses a December 31 measurement date for the benefit obligations and a January 1 measurement date for its net periodic costs for the SERP. Variances from actuarially assumed rates will result in increases
or decreases in benefit obligations and net periodic cost in future periods. Benefits expense under the SERP was $7 million, $9 million and $16 million for the years ended December 31, 2019, 2018 and 2017, respectively. The
accrued benefit liability for the SERP totaled $72 million and $66 million at December 31, 2019 and 2018, respectively, and is included in other long-term liabilities on the consolidated balance sheets. The weighted-average
assumptions used in determining net periodic cost for the years ended December 31, 2019 and 2018 were a discount rate of 4.2% and 3.4% and an annual salary increase of 3.0% and 2.0%. The Company had equity securities in a rabbi trust generally
designated to pay benefits of the SERP in the amounts of $84 million and $74 million at December 31, 2019 and 2018, respectively. These amounts are included in other assets, net on the consolidated balance sheets.
During 2018, certain members of executive management of the Company that were participants in the SERP retired and met the requirements for
payout of their SERP retirement benefit. The SERP payout provisions require payment to the participant in an actuarially determined lump sum amount six months after the participant retires from the Company. Such amounts were paid out of the rabbi
trust. As required by the pension accounting rules in U.S. GAAP, the Company recognized a non-cash settlement loss of approximately $2 million during the year ended December 31, 2018. There was no
settlement loss during the year ended December 31, 2019.
The Company maintains the CHS/Community Health Systems, Inc. Retirement
Income Plan (Pension Plan), which is a defined benefit, non-contributory pension plan that covers certain employees at three of its formerly owned hospitals. The Pension Plan provides benefits to
covered individuals satisfying certain age and service requirements. Employer contributions to the Pension Plan are in accordance with the minimum funding requirements of the Employee Retirement Income Security Act of 1974, as amended. The Company
expects to make contributions of approximately $1 million to the Pension Plan in 2020. The Company uses a December 31 measurement date for the benefit obligations and a January 1 measurement date for its net periodic costs for the
Pension Plan. Variances from actuarially assumed rates will result in increases or decreases in benefit obligations, net periodic cost and funding requirements in future periods. Benefits expense under the Pension Plan was less than $1 million
for both of the years ended December 31, 2019 and 2018, and was $7 million for the year ended December 31, 2017. The accrued benefit liability for the Pension Plan totaled $12 million and $11 million at December 31,
2019 and 2018, respectively, and is included in other long-term liabilities on the consolidated balance sheets. The weighted-average assumptions used for determining the net periodic cost for the
145
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
year ended December 31, 2019 was a discount rate of 4.2% and the expected long-term rate of return on assets of 6.0%.
11. STOCKHOLDERS DEFICIT
Authorized capital shares of the Company include 400,000,000 shares of capital stock consisting of 300,000,000 shares of common stock and
100,000,000 shares of preferred stock. Each of the aforementioned classes of capital stock has a par value of $0.01 per share. Shares of preferred stock, none of which were outstanding as of December 31, 2019, may be issued in one or more
series having such rights, preferences and other provisions as determined by the Board of Directors without approval by the holders of common stock.
On November 6, 2015, the Company adopted an open market repurchase program for up to 10,000,000 shares of the Companys common
stock, not to exceed $300 million in repurchases. The repurchase program expired on November 6, 2018. During the year ended December 31, 2015, the Company repurchased and retired 532,188 shares at a weighted-average price of $27.31
per share, which is the cumulative number of shares repurchased and retired under this program. No shares were repurchased under this program during the years ended December 31, 2019, 2018 and 2017.
The Company is a holding company which operates through its subsidiaries. The Companys ABL Facility and the indentures governing each
series of the Companys outstanding notes contain various covenants under which the assets of the subsidiaries of the Company are subject to certain restrictions relating to, among other matters, dividends and distributions, as referenced in
the paragraph below.
The ABL Facility and the indentures governing each series of the Companys outstanding notes restrict the
Companys subsidiaries from, among other matters, paying dividends and making distributions to the Company, which thereby limits the Companys ability to pay dividends and/or repurchase stock. As of December 31, 2019, under the most
restrictive test in these agreements (and subject to certain exceptions), the Company has approximately $200 million of capacity to pay permitted dividends and/or repurchase shares of stock or make other restricted payments.
The following schedule discloses the effects of changes in the Companys ownership interest in its less-than-wholly-owned subsidiaries on
Community Health Systems, Inc. stockholders deficit (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2019
|
|
|
2018
|
|
|
2017
|
|
Net loss attributable to Community Health Systems, Inc. stockholders
|
|
$
|
(675
|
)
|
|
$
|
(788
|
)
|
|
$
|
(2,459
|
)
|
Transfers to the noncontrolling interests:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in Community Health Systems, Inc. paid-in-capital for purchase of subsidiary partnership interests
|
|
|
3
|
|
|
|
(4
|
)
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net transfers to the noncontrolling interests
|
|
|
3
|
|
|
|
(4
|
)
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change to Community Health Systems, Inc. stockholders deficit from net loss attributable to
Community Health Systems, Inc. stockholders and transfers to noncontrolling interests
|
|
$
|
(672
|
)
|
|
$
|
(792
|
)
|
|
$
|
(2,461
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
146
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
12. EARNINGS PER SHARE
The following table sets forth the components of the numerator and denominator for the computation of basic and diluted (loss) earnings per
share for loss from continuing operations, discontinued operations and net loss attributable to Community Health Systems, Inc. common stockholders (in millions, except share data):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2019
|
|
|
2018
|
|
|
2017
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations, net of taxes
|
|
$
|
(590
|
)
|
|
$
|
(704
|
)
|
|
$
|
(2,384
|
)
|
Less: Income attributable to noncontrolling interests, net of taxes
|
|
|
85
|
|
|
|
84
|
|
|
|
63
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations attributable to Community Health Systems, Inc. common
stockholders basic and diluted
|
|
$
|
(675
|
)
|
|
$
|
(788
|
)
|
|
$
|
(2,447
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from discontinued operations, net of taxes
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
(12
|
)
|
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
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
(12
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average number of shares outstanding basic
|
|
|
113,739,046
|
|
|
|
112,728,274
|
|
|
|
111,769,821
|
|
Effect of dilutive securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted stock awards
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Employee stock options
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Other equity-based awards
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average number of shares outstanding diluted
|
|
|
113,739,046
|
|
|
|
112,728,274
|
|
|
|
111,769,821
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company generated a loss from continuing operations attributable to Community Health Systems, Inc. common
stockholders for the years ended December 31, 2019, 2018 and 2017, 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
years ended December 31, 2019, 2018 and 2017, the effect of restricted stock awards, employee stock options, and other equity-based awards on the diluted shares calculation would have been an increase in shares of 133,866, 68,687 and 111,464,
respectively.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2019
|
|
|
2018
|
|
|
2017
|
|
Dilutive securities outstanding not included in the computation of earnings per share because
their effect is antidilutive:
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee stock options and restricted stock awards
|
|
|
3,508,968
|
|
|
|
2,152,408
|
|
|
|
3,008,919
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
147
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
13. EQUITY INVESTMENTS
As of December 31, 2019, the Company owned equity interests of 38.0% in two hospitals in Macon, Georgia, in which HCA owns the majority
interest. On December 31, 2016, the Company sold 80% of its ownership interest in the legal entity that owned and operated its home care agency business. As part of the divestiture of its controlling interest in the home care agency business,
the Company recorded an equity method investment representing its remaining 20% ownership.
In March 2005, the Company began purchasing
items, primarily medical supplies, medical equipment and pharmaceuticals, under an agreement with HealthTrust Purchasing Group, L.P. (HealthTrust), a group purchasing organization in which the Company is a noncontrolling partner. As of
December 31, 2019, the Company had a 14.5% ownership interest in HealthTrust.
The Companys investment in all of its
unconsolidated affiliates was $199 million and $192 million at December 31, 2019 and 2018, respectively, and is included in other assets, net in the accompanying consolidated balance sheets. Included in the Companys results of
operations is the Companys equity in pre-tax earnings from all of its investments in unconsolidated affiliates, which was $15 million, $22 million and $16 million for the years ended
December 31, 2019, 2018 and 2017, respectively.
14. OTHER COMPREHENSIVE INCOME
The following tables present information about items reclassified out of accumulated other comprehensive loss by component for the years ended
December 31, 2019 and 2018 (in millions, net of tax):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in Fair
Value of Interest
Rate Swaps
|
|
|
Change
in
Fair Value of
Available-for-Sale
Debt Securities
|
|
|
Change in
Unrecognized
Pension Cost
Components
|
|
|
Accumulated
Comprehensive
(Loss) Income
|
|
Balance as of December 31, 2018
|
|
$
|
5
|
|
|
$
|
(7
|
)
|
|
$
|
(8
|
)
|
|
$
|
(10
|
)
|
Other comprehensive (loss) income before reclassifications
|
|
|
(3
|
)
|
|
|
5
|
|
|
|
(1
|
)
|
|
|
1
|
|
Amounts reclassified from accumulated other comprehensive (loss) income
|
|
|
-
|
|
|
|
(1
|
)
|
|
|
1
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net current-period other comprehensive (loss) income
|
|
|
(3
|
)
|
|
|
4
|
|
|
|
-
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2019
|
|
$
|
2
|
|
|
$
|
(3
|
)
|
|
$
|
(8
|
)
|
|
$
|
(9
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
148
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in Fair
Value of Interest
Rate Swaps
|
|
|
Change in
Fair Value of
Available-for-Sale
Debt
Securities
|
|
|
Change in
Unrecognized
Pension Cost
Components
|
|
|
Accumulated
Comprehensive
(Loss) Income
|
|
Balance as of December 31, 2017
|
|
$
|
(12
|
)
|
|
$
|
(2
|
)
|
|
$
|
(7
|
)
|
|
$
|
(21
|
)
|
Other comprehensive income (loss) before reclassifications
|
|
|
12
|
|
|
|
(2
|
)
|
|
|
(2
|
)
|
|
|
8
|
|
Amounts reclassified from accumulated other comprehensive income
|
|
|
8
|
|
|
|
-
|
|
|
|
1
|
|
|
|
9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net current-period other comprehensive income (loss)
|
|
|
20
|
|
|
|
(2
|
)
|
|
|
(1
|
)
|
|
|
17
|
|
Adoption of ASU 2016-01 and
2018-02
|
|
|
(3
|
)
|
|
|
(3
|
)
|
|
|
-
|
|
|
|
(6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2018
|
|
$
|
5
|
|
|
$
|
(7
|
)
|
|
$
|
(8
|
)
|
|
$
|
(10
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following tables present a subtotal for each significant reclassification to net loss out of AOCL and the
line item affected in the accompanying consolidated statements of loss for the years ended December 31, 2019 and 2018 (in millions):
|
|
|
|
|
|
|
|
|
Amount reclassified
from AOCL
|
|
|
Affected line item in the
statement where net
income (loss) is presented
|
Details about accumulated other
comprehensive income (loss)
components
|
|
Year Ended December 31,
2019
|
|
Gains and losses on cash flow hedges
|
|
|
|
|
|
|
Interest rate swaps
|
|
$
|
-
|
|
|
Interest expense, net
|
|
|
|
-
|
|
|
Tax benefit
|
|
|
|
|
|
|
|
|
|
$
|
-
|
|
|
Net of tax
|
|
|
|
|
|
|
|
Amortization of defined benefit pension items
|
|
|
|
|
|
|
Prior service costs
|
|
$
|
(1
|
)
|
|
Salaries and benefits
|
Settlement losses recognized
|
|
|
-
|
|
|
Salaries and benefits
|
|
|
|
|
|
|
|
|
|
|
(1
|
)
|
|
Total before tax
|
|
|
|
-
|
|
|
Tax benefit
|
|
|
|
|
|
|
|
|
|
$
|
(1
|
)
|
|
Net of tax
|
|
|
|
|
|
|
|
149
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
Amount reclassified from
AOCL
|
|
|
Affected line item in the
statement where net
(loss) income is presented
|
Details about accumulated other
comprehensive (loss) income
components
|
|
Year Ended December 31,
2018
|
|
Gains and losses on cash flow hedges
|
|
|
|
|
|
|
Interest rate swaps
|
|
$
|
(10
|
)
|
|
Interest expense, net
|
|
|
|
2
|
|
|
Tax benefit
|
|
|
|
|
|
|
|
|
|
$
|
(8
|
)
|
|
Net of tax
|
|
|
|
|
|
|
|
Amortization of defined benefit pension items
|
|
|
|
|
|
|
Prior service costs
|
|
$
|
(1
|
)
|
|
Salaries and benefits
|
Settlement losses recognized
|
|
|
(2
|
)
|
|
Salaries and benefits
|
|
|
|
|
|
|
|
|
|
|
(3
|
)
|
|
Total before tax
|
|
|
|
2
|
|
|
Tax benefit
|
|
|
|
|
|
|
|
|
|
$
|
(1
|
)
|
|
Net of tax
|
|
|
|
|
|
|
|
15. COMMITMENTS AND CONTINGENCIES
Construction and Other Capital Commitments. Pursuant to a hospital purchase agreement in effect as of
December 31, 2019, the Company is required to build replacement facilities in La Porte, Indiana and Knox, Indiana. The estimated construction costs, including equipment costs, for the La Porte and Starke replacement facilities are currently
estimated to be approximately $128 million and $15 million, respectively, of which approximately $58 million has been incurred to date for the construction of La Porte. In addition, under other purchase agreements outstanding at
December 31, 2019, the Company has committed to spend approximately $2 million for costs such as capital improvements, equipment, selected leases and physician recruiting. These commitments are required to be fulfilled generally over a
five to seven-year period after acquisition. Through December 31, 2019, the Company has spent approximately $2 million related to these commitments.
Physician Recruiting Commitments. As part of its physician recruitment strategy, the Company provides income
guarantee agreements to certain physicians who agree to relocate to its communities and commit to remain in practice there. Under such agreements, the Company is required to make payments to the physicians in excess of the amounts they earned in
their practice up to the amount of the income guarantee. These income guarantee periods are typically for 12 months. Such payments are recoverable by the Company from physicians who do not fulfill their commitment period, which is typically three
years, to the respective community. At December 31, 2019, the maximum potential amount of future payments under these guarantees in excess of the liability recorded is $19 million.
Professional Liability Claims. As part of the Companys business of owning and operating hospitals, it is
subject to legal actions alleging liability on its part. The Company accrues for losses resulting from such liability claims, as well as loss adjustment expenses that are
out-of-pocket and directly related to such liability claims. These direct out-of-pocket
expenses include fees of outside counsel and experts. The Company does not accrue for costs that are part of corporate overhead, such as the costs of in-house legal and risk management departments. The losses
resulting from professional liability claims primarily consist of estimates for known claims, as well as estimates for incurred but not reported claims. The estimates are based on specific claim facts, historical claim reporting and payment
patterns, the nature and level of hospital operations and actuarially determined projections. The actuarially determined projections are based on the Companys actual claim data, including historic reporting and payment patterns which have been
gathered over an approximate 20-year period.
150
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
As discussed below, since the Company purchases excess insurance on a claims-made basis that transfers risk to third-party insurers, the liability it accrues does include an amount for the losses
covered by its excess insurance. The Company also records a receivable for the expected reimbursement of losses covered by excess insurance. Since the Company believes that the amount and timing of its future claims payments are reliably
determinable, it discounts the amount accrued for losses resulting from professional liability claims using the risk-free interest rate corresponding to the timing of expected payments.
The net present value of the projected payments was discounted using a weighted-average risk-free rate of 2.6%, 3.1% and 2.2% in 2019, 2018
and 2017, respectively. This liability is adjusted for new claims information in the period such information becomes known. The Companys estimated liability for professional and general liability claims was $612 million and
$650 million as of December 31, 2019 and 2018, respectively. The estimated undiscounted claims liability was $663 million and $710 million as of December 31, 2019 and 2018, respectively. The current portion of the liability
for professional and general liability claims was $169 million and $100 million as of December 31, 2019 and 2018, respectively, and is included in other accrued liabilities in the accompanying consolidated balance sheets, with the
long-term portion recorded in other long-term liabilities. Professional malpractice expense includes the losses resulting from professional liability claims and loss adjustment expense, as well as paid excess insurance premiums, and is presented
within other operating expenses in the accompanying consolidated statements of loss.
The Companys processes for obtaining and
analyzing claims and incident data are standardized across all of its hospitals and have been consistent for many years. The Company monitors the outcomes of the medical care services that it provides and for each reported claim, the Company obtains
various information concerning the facts and circumstances related to that claim. In addition, the Company routinely monitors current key statistics and volume indicators in its assessment of utilizing historical trends. The average lag period
between claim occurrence and payment of a final settlement is between three and four years, although the facts and circumstances of individual claims could result in the timing of such payments being different from this average. Since claims are
paid promptly after settlement with the claimant is reached, settled claims represent approximately 1.0% of the total liability at the end of any period.
For purposes of estimating its individual claim accruals, the Company utilizes specific claim information, including the nature of the claim,
the expected claim amount, the year in which the claim occurred and the laws of the jurisdiction in which the claim occurred. Once the case accruals for known claims are determined, information is stratified by loss layers and retentions, accident
years, reported years, geography and claims relating to the acquired HMA hospitals versus claims relating to the Companys other hospitals. Several actuarial methods are used against this data to produce estimates of ultimate paid losses and
reserves for incurred but not reported claims. Each of these methods uses company-specific historical claims data and other information. This company-specific data includes information regarding the Companys business, including historical paid
losses and loss adjustment expenses, historical and current case loss reserves, actual and projected hospital statistical data, a variety of hospital census information, employed physician information, professional liability retentions for each
policy year, geographic information and other data.
Based on these analyses the Company determines its estimate of the professional
liability claims. The determination of managements estimate, including the preparation of the reserve analysis that supports such estimate, involves subjective judgment of the management. Changes in reserving data or the trends and factors
that influence reserving data may signal fundamental shifts in the Companys future claim development patterns or may simply reflect single-period anomalies. Even if a change reflects a fundamental shift, the full extent of the change may not
become evident until years later. Moreover, since the Companys methods and models use different types of data and the Company selects its liability from the results of all of these methods, it typically cannot quantify the precise impact of
such factors on its estimates of the liability. Due to the Companys
151
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
standardized and consistent processes for handling claims and the long history and depth of company-specific data, the Companys methodologies have produced reliably determinable estimates
of ultimate paid losses. Management considers any changes in the amount and pattern of its historical paid losses up through the most recent reporting period to identify any fundamental shifts or trends in claim development experience in determining
the estimate of professional liability claims. However, due to the subjective nature of this estimate and the impact that previously unforeseen shifts in actual claim experience can have, future estimates of professional liability could be adversely
impacted when actual paid losses develop unexpectedly based on assumptions and settlement events that were not previously known or anticipated.
During the nine months ended September 30, 2019, the Company experienced a significant increase in the amounts paid to settle outstanding
professional liability claims, compared to the same period in the prior year and to previous actuarially determined estimates. This increase in claims paid related to claims incurred in 2016 and prior years and was primarily related to divested
hospitals. The settlement of these claims at amounts greater than the previously determined actuarial estimates resulted in the Company recording a $70 million change in estimate during the three months ended June 30, 2019, and an
additional $20 million change in estimate during the three months ended September 30, 2019 based on updated actuarial estimates. No additional change in estimate related to these claims was recorded during the three months ended
December 31, 2019.
The Company is primarily self-insured for professional liability claims; however, the Company obtains excess
insurance that transfers the risk of loss to a third-party insurer for claims in excess of self-insured retentions. The Companys excess insurance is underwritten on a claims-made basis. For claims reported prior to June 1, 2002,
substantially all of the Companys professional and general liability risks were subject to a less than $1 million per occurrence self-insured retention and for claims reported from June 1, 2002 through June 1, 2003, these
self-insured retentions were $2 million per occurrence. Substantially all claims reported after June 1, 2003 and before June 1, 2005 are self-insured up to $4 million per claim. Substantially all claims reported on or after
June 1, 2005 and before June 1, 2014 are self-insured up to $5 million per claim. Substantially all claims reported on or after June 1, 2014 and before June 1, 2018 are self-insured up to $10 million per claim.
Substantially all claims reported on or after June 1, 2018 are self-insured up to $15 million per claim. Management on occasion has selectively increased the insured risk at certain hospitals based upon insurance pricing and other factors
and may continue that practice in the future. Excess insurance for all hospitals has been purchased through commercial insurance companies and generally covers the Company for liabilities in excess of the self-insured retentions. The excess coverage
consists of multiple layers of insurance, the sum of which totals up to $95 million per occurrence and in the aggregate for claims reported on or after June 1, 2003, up to $145 million per occurrence and in the aggregate for claims
reported on or after January 1, 2008, up to $195 million per occurrence and in the aggregate for claims reported on or after June 1, 2010, and up to at least $215 million per occurrence and in the aggregate for claims reported on
or after June 1, 2015. In addition, for integrated occurrence malpractice claims, there is an additional $50 million of excess coverage for claims reported on or after June 1, 2014 and an additional $75 million of excess coverage
for claims reported on or after June 1, 2015. For certain policy years prior to June 1, 2014, if the first aggregate layer of excess coverage becomes fully utilized, then the Companys self-insured retention will increase to
$10 million per claim for any subsequent claims in that policy year until the Companys total aggregate coverage is met. Beginning June 1, 2018, this drop-down provision in the excess policies attaches over the $15 million per
claim self-insured retention.
Effective June 1, 2014, the hospitals acquired from HMA were insured on a claims-made basis as
described above and through commercial insurance companies as described above for substantially all claims reported on or after June 1, 2014 except for physician-related claims with an occurrence date prior to June 1, 2014. Prior to
June 1, 2014, the former HMA hospitals obtained insurance coverage through a wholly-owned captive insurance subsidiary and a risk retention group subsidiary which are domiciled in the Cayman Islands and South Carolina, respectively. Those
insurance subsidiaries, which are collectively referred to as the Insurance Subsidiaries,
152
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
provided (i) claims-made coverage to all of the former HMA hospitals and (ii) occurrence-basis coverage to most of the physicians employed by the former HMA hospitals. The employed
physicians not covered by the Insurance Subsidiaries generally maintained claims-made policies with unrelated third party insurance companies. To mitigate the exposure of the program covering the former HMA hospitals and other healthcare facilities,
the Insurance Subsidiaries bought claims-made reinsurance policies from unrelated third parties for claims above self-retention levels of $10 million or $15 million per claim, depending on the policy year.
Effective January 1, 2008, the former Triad hospitals were insured on a claims-made basis as described above and through commercial
insurance companies as described above for substantially all claims occurring on or after January 1, 2002 and reported on or after January 1, 2008. Substantially all losses for the former Triad hospitals in periods prior to May 1,
1999 were insured through a wholly-owned insurance subsidiary of HCA, Triads owner prior to that time, and excess loss policies maintained by HCA. HCA has agreed to indemnify the former Triad hospitals in respect of claims covered by such
insurance policies arising prior to May 1, 1999. From May 1, 1999 through December 31, 2006, the former Triad hospitals obtained insurance coverage on a claims incurred basis from HCAs wholly-owned insurance subsidiary, with
excess coverage obtained from other carriers that is subject to certain deductibles. Effective for claims incurred after December 31, 2006, Triad began insuring its claims from $1 million to $5 million through its wholly-owned captive
insurance company, replacing the coverage provided by HCA. Substantially all claims occurring during 2007 were self-insured up to $10 million per claim.
Legal Matters. The Company is a party to various legal, regulatory and governmental proceedings incidental to
its business. Based on current knowledge, management does not believe that loss contingencies arising from pending legal, regulatory and governmental matters, including the matters described herein, will have a material adverse effect on the
consolidated financial position or liquidity of the Company. However, in light of the inherent uncertainties involved in pending legal, regulatory and governmental matters, some of which are beyond the Companys control, and the very large or
indeterminate damages sought in some of these matters, an adverse outcome in one or more of these matters could be material to the Companys results of operations or cash flows for any particular reporting period.
With respect to all legal, regulatory and governmental proceedings, the Company considers the likelihood of a negative outcome. If the Company
determines the likelihood of a negative outcome with respect to any such matter is probable and the amount of the loss can be reasonably estimated, the Company records an accrual for the estimated loss for the expected outcome of the matter. If the
likelihood of a negative outcome with respect to material matters is reasonably possible and the Company is able to determine an estimate of the possible loss or a range of loss, whether in excess of a related accrued liability or where there is no
accrued liability, the Company discloses the estimate of the possible loss or range of loss. However, the Company is unable to estimate a possible loss or range of loss in some instances based on the significant uncertainties involved in, and/or the
preliminary nature of, certain legal, regulatory and governmental matters.
In connection with the
spin-off of Quorum Health Corporation (QHC), the Company agreed to indemnify QHC for certain liabilities relating to outcomes or events occurring prior to April 29, 2016, the closing date of
the spin-off, including (i) certain claims and proceedings that were known to be outstanding at or prior to the consummation of the spin-off and involved multiple
facilities and (ii) certain claims, proceedings and investigations by governmental authorities or private plaintiffs related to activities occurring at or related to QHCs healthcare facilities prior to the closing date of the spin-off, but only to the extent, in the case of clause (ii), that such claims are covered by insurance policies maintained by the Company, including professional liability and employer practices. Notwithstanding
the foregoing, the Company is not required to indemnify QHC in respect of any claims or proceedings arising out of or related to the business operations of Quorum Health Resources, LLC at any time or QHCs compliance with the corporate
integrity agreement. Subsequent to the
153
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
spin-off of QHC, the Office of the Inspector General provided the Company with written assurance that it would look solely at QHC for compliance for its
facilities under the Companys Corporate Integrity Agreement; however, the Office of the Inspector General declined to enter into a separate corporate integrity agreement with QHC.
Probable Contingencies
Becker v.
Community Health Systems, Inc. d/b/a Community Health Systems Professional Services Corporation d/b/a Community Health Systems d/b/a Community Health Systems PSC, Inc. d/b/a Rockwood Clinic P.S. and Rockwood Clinic, P.S. (Superior Court, Spokane,
Washington). This suit was filed on February 29, 2012, by a former chief financial officer at Rockwood Clinic in Spokane, Washington. Becker claims he was wrongfully terminated for allegedly refusing to certify a budget for Rockwood Clinic
in 2012. On February 29, 2012, he also filed an administrative complaint with the Department of Labor, Occupational Safety and Health Administration alleging that he is a whistleblower under Sarbanes-Oxley, which was dismissed by the agency and
was appealed to an administrative law judge for a hearing that occurred on January 19-26, 2016. In a decision dated November 9, 2016, the law judge awarded Becker approximately $1.9 million for front
pay, back pay and emotional damages with attorney fees to be later determined. The Company has appealed the award to the Administrative Review Board and is awaiting its decision. At a hearing on July 27, 2012, the trial court dismissed
Community Health Systems, Inc. from the state case and subsequently certified the state case for an interlocutory appeal of the denial to dismiss his employer and the management company. The appellate court accepted the interlocutory appeal, and it
was argued on April 30, 2014. On August 14, 2014, the court denied the Companys appeal. On October 20, 2014, the Company filed a petition to review the denial with the Washington Supreme Court. The appeal was accepted and oral
argument was heard on June 9, 2015. On September 15, 2015, the court denied the Companys appeal and remanded to the trial court; a previous trial setting of September 12, 2016 has been vacated and not reset. On October 15,
2019, the Administrative Review Board released an order to show cause requiring Becker to file a brief to show cause why the Administrative Review Board should not remand the previous administrative decision for a new hearing before a new law judge.
The appeal before the Administrative Review Board is still pending. The Company continues to vigorously defend these actions.
Empire
Health Foundation v. CHS/Community Health Systems, Inc., CHS Washington Holdings, LLC, Spokane Washington Hospital Company, LLC, Spokane Valley Washington Hospital Company, LLC. This suit was filed in the United States District Court for the
Eastern District of Washington on June 12, 2017 by Empire Health Foundation claiming Deaconess and Valley Hospitals failed to abide by charity care obligations allegedly existing in the 2008 Asset Purchase Agreement between Empire Health System
and Company affiliates. The court granted in part and denied in part the hospitals motion to dismiss on October 11, 2017. All parties filed motions for summary judgment, and the court granted in part and denied in part both parties
motions on February 27, 2019 and July 9, 2019. The Company settled this matter during the three months ended September 30, 2019 for $22 million (and recorded a liability equal to the settlement amount as of September 30,
2019), the settlement was paid during the three months ended December 31, 2019.
R2 Investments v Quorum Health Corporation;
Community Health Systems, Inc.; Wayne T. Smith; W. Larry Cash; Thomas D. Miller; Michael J. Culotta; John A. Clerico; James S. Ely, III; John A. Fry; William Norris Jennings; Julia B. North; H. Mitchell Watson, Jr.; H. James Williams. This case
was pending in the Circuit Court for Williamson County, Tennessee and was served on October 26, 2017. The plaintiff alleged common law fraud and violation of Tennessee securities fraud statutes in connection with its purchase of QHC stock and
QHC senior secured notes. The court granted in part and denied in part the director defendants motion to dismiss and denied the remaining defendants motions to dismiss on May 11, 2018. The Company settled and paid this matter during
the three months ended December 31, 2019.
154
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2011 Class Action Shareholder Federal Securities Cases. Three
purported class action cases have been filed in the United States District Court for the Middle District of Tennessee; namely, Norfolk County Retirement System v. Community Health Systems, Inc., et al., filed May 9, 2011; De Zheng v. Community
Health Systems, Inc., et al., filed May 12, 2011; and Minneapolis Firefighters Relief Association v. Community Health Systems, Inc., et al., filed June 21, 2011. All three seek class certification on behalf of purchasers of the
Companys common stock between July 27, 2006 and April 11, 2011 and allege that misleading statements resulted in artificially inflated prices for the Companys common stock. In December 2011, the cases were consolidated for
pretrial purposes and NYC Funds and its counsel were selected as lead plaintiffs/lead plaintiffs counsel. In lieu of ruling on the Companys motion to dismiss, the court permitted the plaintiffs to file a first amended consolidated class
action complaint, which was filed on October 5, 2015. The Companys motion to dismiss was filed on November 4, 2015 and oral argument was held on April 11, 2016. The Companys motion to dismiss was granted on June 16,
2016 and on June 27, 2016, the plaintiffs filed a notice of appeal to the Sixth Circuit Court of Appeals. The matter was heard on May 3, 2017. On December 13, 2017, the Sixth Circuit reversed the trial courts dismissal of the
case and remanded it to the District Court. The Company filed a renewed partial motion to dismiss on February 9, 2018, which was denied by the District Court on September 24, 2018. The Company also filed a petition for a writ of certiorari
to the United States Supreme Court on April 18, 2018 seeking review of the Sixth Circuits decision. The United States Supreme Court denied the petition for a writ of certiorari on October 1, 2018. The District Court granted the
Plaintiffs motion for class certification on July 26, 2019. The Company filed a petition for permission to appeal the District Courts class certification order in the Sixth Circuit Court of Appeals on August 9, 2019, and that
petition was denied on October 23, 2019. Trial for this matter is set for December 1, 2020. On January 21, 2020, the Company and the Plaintiff filed a stipulation of settlement indicating to the District Court that the parties had
reached agreement on the principal terms of a settlement for $53 million. The settlement is subject to the District Courts final approval. The Company recorded a liability of $53 million at December 31, 2019 based on the
proposed settlement agreement.
Summary of Recorded Amounts
The table below presents a reconciliation of the beginning and ending liability balances (in millions) during the years ended
December 31, 2019 and 2018, with respect to the Companys determination of the contingencies of the Company in respect of which an accrual has been recorded.
|
|
|
|
|
|
|
Probable
Contingencies
|
|
Balance as of December 31, 2017
|
|
$
|
14
|
|
Expense
|
|
|
7
|
|
Reserve for insured claim
|
|
|
4
|
|
Cash payments
|
|
|
(6
|
)
|
|
|
|
|
|
Balance as of December 31, 2018
|
|
|
19
|
|
Expense
|
|
|
87
|
|
Reserve for insured claim
|
|
|
(4
|
)
|
Cash payments
|
|
|
(34
|
)
|
|
|
|
|
|
Balance as of December 31, 2019
|
|
$
|
68
|
|
|
|
|
|
|
In accordance with applicable accounting guidance, the Company establishes a liability for litigation,
regulatory and governmental matters for which, based on information currently available, the Company believes that a negative outcome is known or is probable and the amount of the loss is reasonably estimable. For all such matters (whether or not
discussed in this contingencies footnote), such amounts have been recorded in other accrued liabilities on the consolidated balance sheet and are included in the table above. Due to the uncertainties
155
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
and difficulty in predicting the ultimate resolution of these contingencies, the actual amount could differ from the estimated amount reflected as a liability on the consolidated balance sheet.
In the aggregate, attorneys fees and other costs incurred but not included in the table above related to probable contingencies,
and CVR-related contingencies accounted for at fair value, totaled $21 million and $2 million during the years ended December 31, 2019 and 2018, respectively, and are included in other operating
expenses in the accompanying consolidated statements of loss.
Matters for which an Outcome Cannot be Assessed
For the following legal matter, due to the uncertainties surrounding the ultimate outcome of the case, the Company cannot at this time assess
what the outcome may be and is further unable to reasonably estimate any loss or range of loss.
Steadfast Insurance Company, et al v.
Community Health Systems, Inc., CHS/Community Health Systems, Inc., CHSPSC, LLC and Pecos Valley of New Mexico, LLC. This case is filed in the Superior Court for the State of Delaware and involve suits by four excess liability insurers seeking a
declaration that a $73 million judgment rendered against Pecos Valley of New Mexico, LLC in Anne Sperling, et al v. Pecos Valley of New Mexico, LLC is not a covered loss as defined by the policies at issue. The Steadfast complaint was
served on November 30, 2018. On December 13, 2018, Admiral Insurance Company, Endurance Specialty Insurance Ltd, and Illinois Union Insurance Company moved to intervene in the suit as petitioners. The Company has initiated counterclaims
against each insurer, including for bad faith against Steadfast. The judgment against Pecos Valley of New Mexico, LLC, which is the subject of this litigation and which was rendered on September 5, 2018, in First Judicial Court of the State of
New Mexico, is currently on appeal to the Court of Appeals of New Mexico. Trial of this matter is set for December 7, 2020. The Company believes the claims in the Steadfast litigation are without merit and will vigorously defend the case.
16. SUBSEQUENT EVENTS
The Company
has evaluated all material events occurring subsequent to the balance sheet date for events requiring disclosure or recognition in the consolidated financial statements.
On January 1, 2020, one or more subsidiaries of the Company sold Southside Regional Medical Center (300 licensed beds) in Petersburg,
Virginia, Southampton Memorial Hospital (105 licensed beds) in Franklin, Virginia and Southern Virginia Regional Medical Center (80 licensed beds) in Emporia, Virginia and their associated assets to Bon Secours Mercy Health System pursuant to the
terms of a definitive agreement which was entered into on October 28, 2019. The net proceeds from this sale were received at a preliminary closing on December 31, 2019.
On January 23, 2020, the Company announced that CHS commenced a cash tender offer for any and all of the outstanding 51⁄8% Senior Secured Notes due 2021. As of the early tender deadline on February 5, 2020, approximately $632 million aggregate principal amount of 51⁄8% Senior Secured Notes due 2021, or approximately 63.25% of the outstanding 51⁄8%
Senior Secured Notes due 2021, had been validly tendered and not validly withdrawn. In connection with the commencement of the cash tender offer, CHS issued to holders of the 51⁄8% Senior Secured Notes due 2021 a conditional notice of redemption to redeem all of the 51⁄8% Senior Secured Notes due 2021 not
purchased by CHS in the tender offer at a redemption price of 100.000% of the principal amount thereof plus accrued interest to, but not including, February 22, 2020.
On January 30, 2020, one or more affiliates of the Company entered into definitive agreements for the sale of substantially all of the
assets of each of Shands Live Oak Regional Medical Center (25 licensed beds) in Live Oak, Florida and Shands Starke Regional Medical Center (49 licensed beds) in Starke, Florida to affiliates of HCA.
156
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
On February 6, 2020, CHS completed a private offering of $1.462 billion aggregate
principal amount of 65⁄8% Senior Secured Notes due February 15, 2025 (the
65⁄8% Senior Secured Notes due 2025). CHS used the net proceeds of the offering of the 65⁄8% Senior Secured Notes due 2025 to (i) purchase any and all of its 51⁄8% Senior Secured Notes due 2021 validly tendered
and not validly withdrawn in the cash tender offer announced on January 23, 2020, (ii) redeem all of the 51⁄8% Senior Secured Notes due 2021 that were not
purchased pursuant to such tender offer, (iii) purchase in one or more privately negotiated transactions approximately $426 million aggregate principal amount of its 61⁄4% Senior Secured Notes due 2023 and (iv) pay related fees and expenses. The 65⁄8% Senior Secured Notes due 2025 bear
interest at a rate of 6.625% per annum, payable semi-annually in arrears on February 15 and August 15 of each year, commencing on August 15, 2020. The
65⁄8% Senior Secured Notes are scheduled to mature on February 15, 2025. The
65⁄8% Senior Secured Notes due 2025 are unconditionally guaranteed on a senior-priority secured basis by the Company and each of the CHS current and future domestic
subsidiaries that provide guarantees under the ABL Facility, any capital market debt securities of CHS (including CHS outstanding senior notes) and certain other long-term debt of CHS. The 65⁄8% Senior Secured Notes due 2025 and the related guarantees are secured by shared (i) first-priority liens on the Non-ABL Priority Collateral and
(ii) second-priority liens on the ABL Priority Collateral that secures on a first-priority basis the ABL Facility, in each case subject to permitted liens described in the indenture governing the 65⁄8% Senior Secured Notes due 2025.
157
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
17. QUARTERLY FINANCIAL DATA (UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter
|
|
|
|
|
|
|
1st
|
|
|
2nd
|
|
|
3rd
|
|
|
4th
|
|
|
Total (2)
|
|
|
|
(in millions, except share and per share data)
|
|
Year ended December 31, 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net operating revenues
|
|
$
|
3,376
|
|
|
$
|
3,302
|
|
|
$
|
3,246
|
|
|
$
|
3,286
|
|
|
$
|
13,210
|
|
Loss from continuing operations before income taxes
|
|
|
(94
|
)
|
|
|
(149
|
)
|
|
|
(72
|
)
|
|
|
(115
|
)
|
|
|
(430
|
)
|
Loss from continuing operations
|
|
|
(101
|
)
|
|
|
(146
|
)
|
|
|
2
|
|
|
|
(346
|
)
|
|
|
(590
|
)
|
Loss from discontinued operations
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Net loss attributable to Community Health Systems, Inc.
|
|
$
|
(118
|
)
|
|
$
|
(167
|
)
|
|
$
|
(17
|
)
|
|
$
|
(373
|
)
|
|
$
|
(675
|
)
|
Basic loss per share attributable to Community Health Systems, Inc. common
stockholders (1):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
$
|
(1.04
|
)
|
|
$
|
(1.47
|
)
|
|
$
|
(0.15
|
)
|
|
$
|
(3.27
|
)
|
|
$
|
(5.93
|
)
|
Discontinued operations
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(1.04
|
)
|
|
$
|
(1.47
|
)
|
|
$
|
(0.15
|
)
|
|
$
|
(3.27
|
)
|
|
$
|
(5.93
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted loss per share attributable to Community Health Systems, Inc. common
stockholders (1):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
$
|
(1.04
|
)
|
|
$
|
(1.47
|
)
|
|
$
|
(0.15
|
)
|
|
$
|
(3.27
|
)
|
|
$
|
(5.93
|
)
|
Discontinued operations
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(1.04
|
)
|
|
$
|
(1.47
|
)
|
|
$
|
(0.15
|
)
|
|
$
|
(3.27
|
)
|
|
$
|
(5.93
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average number of shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
113,257,608
|
|
|
|
113,862,097
|
|
|
|
113,891,721
|
|
|
|
113,935,629
|
|
|
|
113,739,046
|
|
Diluted
|
|
|
113,257,608
|
|
|
|
113,862,097
|
|
|
|
113,891,721
|
|
|
|
113,935,629
|
|
|
|
113,739,046
|
|
|
|
|
|
|
|
Year ended December 31, 2018:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net operating revenues
|
|
$
|
3,689
|
|
|
$
|
3,562
|
|
|
$
|
3,451
|
|
|
$
|
3,453
|
|
|
$
|
14,155
|
|
Loss from continuing operations before income taxes
|
|
|
(13
|
)
|
|
|
(129
|
)
|
|
|
(204
|
)
|
|
|
(369
|
)
|
|
|
(715
|
)
|
Loss from continuing operations
|
|
|
(6
|
)
|
|
|
(91
|
)
|
|
|
(308
|
)
|
|
|
(299
|
)
|
|
|
(704
|
)
|
Loss from discontinued operations
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Net loss attributable to Community
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Health Systems, Inc.
|
|
$
|
(25
|
)
|
|
$
|
(110
|
)
|
|
$
|
(325
|
)
|
|
$
|
(328
|
)
|
|
$
|
(788
|
)
|
Basic loss per share attributable to Community Health Systems, Inc. common
stockholders (1):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
$
|
(0.22
|
)
|
|
$
|
(0.97
|
)
|
|
$
|
(2.88
|
)
|
|
$
|
(2.91
|
)
|
|
$
|
(6.99
|
)
|
Discontinued operations
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(0.22
|
)
|
|
$
|
(0.97
|
)
|
|
$
|
(2.88
|
)
|
|
$
|
(2.91
|
)
|
|
$
|
(6.99
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted loss per share attributable to Community Health Systems, Inc. common
stockholders (1):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
$
|
(0.22
|
)
|
|
$
|
(0.97
|
)
|
|
$
|
(2.88
|
)
|
|
$
|
(2.91
|
)
|
|
$
|
(6.99
|
)
|
Discontinued operations
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(0.22
|
)
|
|
$
|
(0.97
|
)
|
|
$
|
(2.88
|
)
|
|
$
|
(2.91
|
)
|
|
$
|
(6.99
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average number of shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
112,291,496
|
|
|
|
112,837,944
|
|
|
|
112,865,482
|
|
|
|
112,909,869
|
|
|
|
112,728,274
|
|
Diluted
|
|
|
112,291,496
|
|
|
|
112,837,944
|
|
|
|
112,865,482
|
|
|
|
112,909,869
|
|
|
|
112,728,274
|
|
(1)
|
Total per share amounts may not add due to rounding.
|
(2)
|
Total quarterly amounts may not add due to rounding.
|
158
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
18. SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION
The 67⁄8% Senior Notes due 2022, which are senior
unsecured obligations of CHS, the 51⁄8% Senior Secured Notes due 2021, and the
61⁄4% Senior Secured Notes due 2023 (collectively, the Notes) are guaranteed on a senior basis by the Company and by certain of its existing and
subsequently acquired or organized 100% owned domestic subsidiaries. In addition, equity interests held by the Company in non-guarantor subsidiaries have been pledged as collateral under the Notes, except for
equity interests held in three hospitals owned jointly with a non-profit, health organization. The Notes are fully and unconditionally guaranteed on a joint and several basis, with exceptions considered
customary for such guarantees, limited to the release of the guarantee when a subsidiary guarantors capital stock is sold, or a sale of all of the subsidiary guarantors assets used in operations. The following condensed consolidating
financial statements present Community Health Systems, Inc. (as parent guarantor), CHS (as the issuer), the subsidiary guarantors, the subsidiary non-guarantors and eliminations. These condensed consolidating
financial statements have been prepared and presented in accordance with SEC Regulation S-X Rule 3-10 Financial Statements of Guarantors and Issuers of
Guaranteed Securities Registered or Being Registered.
The accounting policies used in the preparation of this financial information
are consistent with those elsewhere in the consolidated financial statements of the Company, except as noted below:
|
|
|
Intercompany receivables and payables are presented gross in the supplemental condensed consolidating balance
sheets.
|
|
|
|
Cash flows from intercompany transactions are presented in cash flows from financing activities, as changes in
intercompany balances with affiliates, net.
|
|
|
|
Income tax expense is allocated from the parent guarantor to the income producing operations (other guarantors
and non-guarantors) and the issuer through stockholders deficit. As this approach represents an allocation, the income tax expense allocation is considered
non-cash for statement of cash flow purposes.
|
|
|
|
Interest expense, net has been presented to reflect net interest expense and interest income from outstanding
long-term debt and intercompany balances.
|
The Companys intercompany activity consists primarily of daily cash
transfers for purposes of cash management, the allocation of certain expenses and expenditures paid for by the Parent on behalf of its subsidiaries, and the push down of investment in its subsidiaries. This activity also includes the intercompany
transactions between consolidated entities as part of the ABL Facility and Receivables Facility that are further discussed in Note 6. The Companys subsidiaries generally do not purchase services from one another; thus, the intercompany
transactions do not represent revenue generating transactions. All intercompany transactions eliminate in consolidation.
From time to
time, subsidiaries of the Company sell and/or repurchase noncontrolling interests in consolidated subsidiaries, which may change subsidiaries between guarantors and non-guarantors. Amounts for prior periods
have been revised to reflect the status of guarantors and non-guarantors as of December 31, 2019.
159
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Condensed Consolidating Statement of Loss
Year Ended December 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
Guarantor
|
|
|
Issuer
|
|
|
Other
Guarantors
|
|
|
Non -
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
(In millions)
|
|
Net operating revenues
|
|
$
|
-
|
|
|
$
|
46
|
|
|
$
|
8,246
|
|
|
$
|
4,918
|
|
|
$
|
-
|
|
|
$
|
13,210
|
|
Operating costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and benefits
|
|
|
-
|
|
|
|
-
|
|
|
|
3,092
|
|
|
|
2,855
|
|
|
|
-
|
|
|
|
5,947
|
|
Supplies
|
|
|
-
|
|
|
|
-
|
|
|
|
1,444
|
|
|
|
707
|
|
|
|
-
|
|
|
|
2,151
|
|
Other operating expenses
|
|
|
-
|
|
|
|
-
|
|
|
|
2,289
|
|
|
|
1,014
|
|
|
|
-
|
|
|
|
3,303
|
|
Government and other legal settlements and related costs
|
|
|
-
|
|
|
|
-
|
|
|
|
93
|
|
|
|
-
|
|
|
|
-
|
|
|
|
93
|
|
Electronic health records incentive reimbursement
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1
|
)
|
|
|
-
|
|
|
|
(1
|
)
|
Lease cost and rent
|
|
|
-
|
|
|
|
-
|
|
|
|
168
|
|
|
|
153
|
|
|
|
-
|
|
|
|
321
|
|
Depreciation and amortization
|
|
|
-
|
|
|
|
-
|
|
|
|
383
|
|
|
|
225
|
|
|
|
-
|
|
|
|
608
|
|
Impairment and loss on sale of businesses, net
|
|
|
-
|
|
|
|
(2
|
)
|
|
|
121
|
|
|
|
19
|
|
|
|
-
|
|
|
|
138
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating costs and expenses
|
|
|
-
|
|
|
|
(2
|
)
|
|
|
7,590
|
|
|
|
4,972
|
|
|
|
-
|
|
|
|
12,560
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations
|
|
|
-
|
|
|
|
48
|
|
|
|
656
|
|
|
|
(54
|
)
|
|
|
-
|
|
|
|
650
|
|
Interest expense, net
|
|
|
-
|
|
|
|
425
|
|
|
|
667
|
|
|
|
(51
|
)
|
|
|
-
|
|
|
|
1,041
|
|
Loss from early extinguishment of debt
|
|
|
-
|
|
|
|
54
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
54
|
|
Equity in earnings of unconsolidated affiliates
|
|
|
675
|
|
|
|
99
|
|
|
|
(26
|
)
|
|
|
-
|
|
|
|
(763
|
)
|
|
|
(15
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income before income taxes
|
|
|
(675
|
)
|
|
|
(530
|
)
|
|
|
15
|
|
|
|
(3
|
)
|
|
|
763
|
|
|
|
(430
|
)
|
Provision for (benefit from) income taxes
|
|
|
-
|
|
|
|
145
|
|
|
|
(6
|
)
|
|
|
21
|
|
|
|
-
|
|
|
|
160
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income
|
|
|
(675
|
)
|
|
|
(675
|
)
|
|
|
21
|
|
|
|
(24
|
)
|
|
|
763
|
|
|
|
(590
|
)
|
Less: Net income attributable to noncontrolling interests
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
85
|
|
|
|
-
|
|
|
|
85
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income attributable to Community Health Systems, Inc. stockholders
|
|
$
|
(675
|
)
|
|
$
|
(675
|
)
|
|
$
|
21
|
|
|
$
|
(109
|
)
|
|
$
|
763
|
|
|
$
|
(675
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
160
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Condensed Consolidating Statement of Loss
Year Ended December 31, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
Guarantor
|
|
|
Issuer
|
|
|
Other
Guarantors
|
|
|
Non -
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
(In millions)
|
|
Net operating revenues
|
|
$
|
-
|
|
|
$
|
(5
|
)
|
|
$
|
8,111
|
|
|
$
|
6,049
|
|
|
$
|
-
|
|
|
$
|
14,155
|
|
Operating costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and benefits
|
|
|
-
|
|
|
|
-
|
|
|
|
3,030
|
|
|
|
3,354
|
|
|
|
-
|
|
|
|
6,384
|
|
Supplies
|
|
|
-
|
|
|
|
-
|
|
|
|
1,426
|
|
|
|
929
|
|
|
|
-
|
|
|
|
2,355
|
|
Other operating expenses
|
|
|
-
|
|
|
|
-
|
|
|
|
2,109
|
|
|
|
1,387
|
|
|
|
-
|
|
|
|
3,496
|
|
Government and other legal settlements and related costs
|
|
|
-
|
|
|
|
-
|
|
|
|
11
|
|
|
|
-
|
|
|
|
-
|
|
|
|
11
|
|
Electronic health records incentive reimbursement
|
|
|
-
|
|
|
|
-
|
|
|
|
(1
|
)
|
|
|
(3
|
)
|
|
|
-
|
|
|
|
(4
|
)
|
Lease cost and rent
|
|
|
-
|
|
|
|
-
|
|
|
|
166
|
|
|
|
171
|
|
|
|
-
|
|
|
|
337
|
|
Depreciation and amortization
|
|
|
-
|
|
|
|
-
|
|
|
|
414
|
|
|
|
286
|
|
|
|
-
|
|
|
|
700
|
|
Impairment and loss on sale of businesses, net
|
|
|
-
|
|
|
|
29
|
|
|
|
97
|
|
|
|
542
|
|
|
|
-
|
|
|
|
668
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating costs and expenses
|
|
|
-
|
|
|
|
29
|
|
|
|
7,252
|
|
|
|
6,666
|
|
|
|
-
|
|
|
|
13,947
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from operations
|
|
|
-
|
|
|
|
(34
|
)
|
|
|
859
|
|
|
|
(617
|
)
|
|
|
-
|
|
|
|
208
|
|
Interest expense, net
|
|
|
-
|
|
|
|
425
|
|
|
|
494
|
|
|
|
57
|
|
|
|
-
|
|
|
|
976
|
|
(Gain) loss from early extinguishment of debt
|
|
|
-
|
|
|
|
(32
|
)
|
|
|
1
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(31
|
)
|
Equity in earnings of unconsolidated affiliates
|
|
|
788
|
|
|
|
438
|
|
|
|
774
|
|
|
|
-
|
|
|
|
(2,022
|
)
|
|
|
(22
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before income taxes
|
|
|
(788
|
)
|
|
|
(865
|
)
|
|
|
(410
|
)
|
|
|
(674
|
)
|
|
|
2,022
|
|
|
|
(715
|
)
|
(Benefit from) provision for income taxes
|
|
|
-
|
|
|
|
(77
|
)
|
|
|
(7
|
)
|
|
|
73
|
|
|
|
-
|
|
|
|
(11
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
(788
|
)
|
|
|
(788
|
)
|
|
|
(403
|
)
|
|
|
(747
|
)
|
|
|
2,022
|
|
|
|
(704
|
)
|
Less: Net income attributable to noncontrolling interests
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
84
|
|
|
|
-
|
|
|
|
84
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to Community Health Systems, Inc. stockholders
|
|
$
|
(788
|
)
|
|
$
|
(788
|
)
|
|
$
|
(403
|
)
|
|
$
|
(831
|
)
|
|
$
|
2,022
|
|
|
$
|
(788
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
161
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Condensed Consolidating Statement of Loss
Year Ended December 31, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
Guarantor
|
|
|
Issuer
|
|
|
Other
Guarantors
|
|
|
Non -
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
(In millions)
|
|
Operating revenues (net of contractual allowances and discounts)
|
|
$
|
-
|
|
|
$
|
(22
|
)
|
|
$
|
9,421
|
|
|
$
|
8,999
|
|
|
$
|
-
|
|
|
$
|
18,398
|
|
Provision for bad debts
|
|
|
-
|
|
|
|
-
|
|
|
|
1,819
|
|
|
|
1,226
|
|
|
|
-
|
|
|
|
3,045
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net operating revenues
|
|
|
-
|
|
|
|
(22
|
)
|
|
|
7,602
|
|
|
|
7,773
|
|
|
|
-
|
|
|
|
15,353
|
|
Operating costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and benefits
|
|
|
-
|
|
|
|
-
|
|
|
|
3,092
|
|
|
|
4,284
|
|
|
|
-
|
|
|
|
7,376
|
|
Supplies
|
|
|
-
|
|
|
|
-
|
|
|
|
1,397
|
|
|
|
1,275
|
|
|
|
-
|
|
|
|
2,672
|
|
Other operating expenses
|
|
|
-
|
|
|
|
-
|
|
|
|
1,954
|
|
|
|
1,910
|
|
|
|
-
|
|
|
|
3,864
|
|
Government and other legal settlements and related costs
|
|
|
-
|
|
|
|
-
|
|
|
|
(31
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(31
|
)
|
Electronic health records incentive reimbursement
|
|
|
-
|
|
|
|
-
|
|
|
|
(8
|
)
|
|
|
(20
|
)
|
|
|
-
|
|
|
|
(28
|
)
|
Rent
|
|
|
-
|
|
|
|
-
|
|
|
|
166
|
|
|
|
228
|
|
|
|
-
|
|
|
|
394
|
|
Depreciation and amortization
|
|
|
-
|
|
|
|
-
|
|
|
|
434
|
|
|
|
427
|
|
|
|
-
|
|
|
|
861
|
|
Impairment and loss on sale of businesses, net
|
|
|
-
|
|
|
|
-
|
|
|
|
608
|
|
|
|
1,515
|
|
|
|
-
|
|
|
|
2,123
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating costs and expenses
|
|
|
-
|
|
|
|
-
|
|
|
|
7,612
|
|
|
|
9,619
|
|
|
|
-
|
|
|
|
17,231
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
|
-
|
|
|
|
(22
|
)
|
|
|
(10
|
)
|
|
|
(1,846
|
)
|
|
|
-
|
|
|
|
(1,878
|
)
|
Interest expense, net
|
|
|
-
|
|
|
|
327
|
|
|
|
489
|
|
|
|
115
|
|
|
|
-
|
|
|
|
931
|
|
Loss from early extinguishment of debt
|
|
|
-
|
|
|
|
40
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
40
|
|
Equity in earnings of unconsolidated affiliates
|
|
|
2,459
|
|
|
|
1,888
|
|
|
|
1,555
|
|
|
|
-
|
|
|
|
(5,918
|
)
|
|
|
(16
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations before income taxes
|
|
|
(2,459
|
)
|
|
|
(2,277
|
)
|
|
|
(2,054
|
)
|
|
|
(1,961
|
)
|
|
|
5,918
|
|
|
|
(2,833
|
)
|
Provision for (benefit from) income taxes
|
|
|
-
|
|
|
|
182
|
|
|
|
(170
|
)
|
|
|
(461
|
)
|
|
|
-
|
|
|
|
(449
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations
|
|
|
(2,459
|
)
|
|
|
(2,459
|
)
|
|
|
(1,884
|
)
|
|
|
(1,500
|
)
|
|
|
5,918
|
|
|
|
(2,384
|
)
|
Discontinued operations, net of taxes:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations of entities sold or held for sale
|
|
|
-
|
|
|
|
-
|
|
|
|
(4
|
)
|
|
|
(2
|
)
|
|
|
-
|
|
|
|
(6
|
)
|
Impairment of hospitals sold or held for sale
|
|
|
-
|
|
|
|
-
|
|
|
|
(4
|
)
|
|
|
(2
|
)
|
|
|
-
|
|
|
|
(6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from discontinued operations, net of taxes
|
|
|
-
|
|
|
|
-
|
|
|
|
(8
|
)
|
|
|
(4
|
)
|
|
|
-
|
|
|
|
(12
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
(2,459
|
)
|
|
|
(2,459
|
)
|
|
|
(1,892
|
)
|
|
|
(1,504
|
)
|
|
|
5,918
|
|
|
|
(2,396
|
)
|
Less: Net income attributable to noncontrolling interests
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
63
|
|
|
|
-
|
|
|
|
63
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to Community Health Systems, Inc. stockholders
|
|
$
|
(2,459
|
)
|
|
$
|
(2,459
|
)
|
|
$
|
(1,892
|
)
|
|
$
|
(1,567
|
)
|
|
$
|
5,918
|
|
|
$
|
(2,459
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
162
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Condensed Consolidating Statement of Comprehensive (Loss) Income
Year Ended December 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
Guarantor
|
|
|
Issuer
|
|
|
Other
Guarantors
|
|
|
Non -
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
(In millions)
|
|
Net (loss) income
|
|
$
|
(675
|
)
|
|
$
|
(675
|
)
|
|
$
|
21
|
|
|
$
|
(24
|
)
|
|
$
|
763
|
|
|
$
|
(590
|
)
|
Other comprehensive (loss) income, net of income taxes:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change in fair value of interest rate swaps, net of tax
|
|
|
(3
|
)
|
|
|
(3
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
3
|
|
|
|
(3
|
)
|
Net change in fair value of
available-for-sale debt securities, net of tax
|
|
|
4
|
|
|
|
4
|
|
|
|
4
|
|
|
|
-
|
|
|
|
(8
|
)
|
|
|
4
|
|
Amortization and recognition of unrecognized pension cost components, net of tax
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income
|
|
|
1
|
|
|
|
1
|
|
|
|
4
|
|
|
|
-
|
|
|
|
(5
|
)
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive (loss) income
|
|
|
(674
|
)
|
|
|
(674
|
)
|
|
|
25
|
|
|
|
(24
|
)
|
|
|
758
|
|
|
|
(589
|
)
|
Less: Comprehensive income attributable to noncontrolling interests
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
85
|
|
|
|
-
|
|
|
|
85
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive (loss) income attributable to
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Community Health Systems, Inc. stockholders
|
|
$
|
(674
|
)
|
|
$
|
(674
|
)
|
|
$
|
25
|
|
|
$
|
(109
|
)
|
|
$
|
758
|
|
|
$
|
(674
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidating Statement of Comprehensive Loss
Year Ended December 31, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
Guarantor
|
|
|
Issuer
|
|
|
Other
Guarantors
|
|
|
Non -
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
(In millions)
|
|
Net loss
|
|
$
|
(788
|
)
|
|
$
|
(788
|
)
|
|
$
|
(403
|
)
|
|
$
|
(747
|
)
|
|
$
|
2,022
|
|
|
$
|
(704
|
)
|
Other comprehensive income (loss), net of income taxes:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change in fair value of interest rate swaps, net of tax
|
|
|
20
|
|
|
|
20
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(20
|
)
|
|
|
20
|
|
Net change in fair value of
available-for-sale debt securities, net of tax
|
|
|
(2
|
)
|
|
|
(2
|
)
|
|
|
(2
|
)
|
|
|
-
|
|
|
|
4
|
|
|
|
(2
|
)
|
Amortization and recognition of unrecognized pension cost components, net of tax
|
|
|
(1
|
)
|
|
|
(1
|
)
|
|
|
(1
|
)
|
|
|
-
|
|
|
|
2
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss)
|
|
|
17
|
|
|
|
17
|
|
|
|
(3
|
)
|
|
|
-
|
|
|
|
(14
|
)
|
|
|
17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss
|
|
|
(771
|
)
|
|
|
(771
|
)
|
|
|
(406
|
)
|
|
|
(747
|
)
|
|
|
2,008
|
|
|
|
(687
|
)
|
Less: Comprehensive income attributable to noncontrolling interests
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
84
|
|
|
|
-
|
|
|
|
84
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss attributable to Community Health Systems, Inc. stockholders
|
|
$
|
(771
|
)
|
|
$
|
(771
|
)
|
|
$
|
(406
|
)
|
|
$
|
(831
|
)
|
|
$
|
2,008
|
|
|
$
|
(771
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
163
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Condensed Consolidating Statement of Comprehensive Loss
Year Ended December 31, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
Guarantor
|
|
|
Issuer
|
|
|
Other
Guarantors
|
|
|
Non -
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
(In millions)
|
|
Net loss
|
|
$
|
(2,459
|
)
|
|
$
|
(2,459
|
)
|
|
$
|
(1,892
|
)
|
|
$
|
(1,504
|
)
|
|
$
|
5,918
|
|
|
$
|
(2,396
|
)
|
Other comprehensive income, net of income taxes:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change in fair value of interest rate swaps, net of tax
|
|
|
19
|
|
|
|
19
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(19
|
)
|
|
|
19
|
|
Net change in fair value of
available-for-sale debt securities, net of tax
|
|
|
8
|
|
|
|
8
|
|
|
|
8
|
|
|
|
-
|
|
|
|
(16
|
)
|
|
|
8
|
|
Amortization and recognition of unrecognized pension cost components, net of tax
|
|
|
14
|
|
|
|
14
|
|
|
|
14
|
|
|
|
-
|
|
|
|
(28
|
)
|
|
|
14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income
|
|
|
41
|
|
|
|
41
|
|
|
|
22
|
|
|
|
-
|
|
|
|
(63
|
)
|
|
|
41
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss
|
|
|
(2,418
|
)
|
|
|
(2,418
|
)
|
|
|
(1,870
|
)
|
|
|
(1,504
|
)
|
|
|
5,855
|
|
|
|
(2,355
|
)
|
Less: Comprehensive income attributable to noncontrolling interests
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
63
|
|
|
|
-
|
|
|
|
63
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss attributable to
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Community Health Systems, Inc. stockholders
|
|
$
|
(2,418
|
)
|
|
$
|
(2,418
|
)
|
|
$
|
(1,870
|
)
|
|
$
|
(1,567
|
)
|
|
$
|
5,855
|
|
|
$
|
(2,418
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
164
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Condensed Consolidating Balance Sheet
December 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
Guarantor
|
|
|
Issuer
|
|
|
Other
Guarantors
|
|
|
Non -
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
(In millions)
|
|
ASSETS
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
142
|
|
|
$
|
74
|
|
|
$
|
-
|
|
|
$
|
216
|
|
Patient accounts receivable
|
|
|
-
|
|
|
|
-
|
|
|
|
1,822
|
|
|
|
436
|
|
|
|
-
|
|
|
|
2,258
|
|
Supplies
|
|
|
-
|
|
|
|
-
|
|
|
|
242
|
|
|
|
112
|
|
|
|
-
|
|
|
|
354
|
|
Prepaid income taxes
|
|
|
48
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
48
|
|
Prepaid expenses and taxes
|
|
|
-
|
|
|
|
-
|
|
|
|
152
|
|
|
|
41
|
|
|
|
-
|
|
|
|
193
|
|
Other current assets
|
|
|
-
|
|
|
|
-
|
|
|
|
72
|
|
|
|
286
|
|
|
|
-
|
|
|
|
358
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
48
|
|
|
|
-
|
|
|
|
2,430
|
|
|
|
949
|
|
|
|
-
|
|
|
|
3,427
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intercompany receivable
|
|
|
-
|
|
|
|
11,961
|
|
|
|
5,674
|
|
|
|
6,990
|
|
|
|
(24,625
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
|
-
|
|
|
|
-
|
|
|
|
4,206
|
|
|
|
1,402
|
|
|
|
-
|
|
|
|
5,608
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
|
-
|
|
|
|
-
|
|
|
|
2,628
|
|
|
|
1,700
|
|
|
|
-
|
|
|
|
4,328
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred income taxes
|
|
|
38
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
38
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other assets, net
|
|
|
(4
|
)
|
|
|
-
|
|
|
|
1,203
|
|
|
|
1,009
|
|
|
|
-
|
|
|
|
2,208
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment in subsidiaries
|
|
|
-
|
|
|
|
21,736
|
|
|
|
12,433
|
|
|
|
-
|
|
|
|
(34,169
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
82
|
|
|
$
|
33,697
|
|
|
$
|
28,574
|
|
|
$
|
12,050
|
|
|
$
|
(58,794
|
)
|
|
$
|
15,609
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND (DEFICIT) EQUITY
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current maturities of long-term debt
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
18
|
|
|
$
|
2
|
|
|
$
|
-
|
|
|
$
|
20
|
|
Current operating lease liabilities
|
|
|
-
|
|
|
|
-
|
|
|
|
82
|
|
|
|
54
|
|
|
|
-
|
|
|
|
136
|
|
Accounts payable
|
|
|
-
|
|
|
|
11
|
|
|
|
518
|
|
|
|
282
|
|
|
|
-
|
|
|
|
811
|
|
Accrued interest
|
|
|
-
|
|
|
|
189
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
189
|
|
Accrued liabilities
|
|
|
-
|
|
|
|
1
|
|
|
|
650
|
|
|
|
475
|
|
|
|
-
|
|
|
|
1,126
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
-
|
|
|
|
201
|
|
|
|
1,268
|
|
|
|
813
|
|
|
|
-
|
|
|
|
2,282
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt
|
|
|
-
|
|
|
|
13,116
|
|
|
|
208
|
|
|
|
61
|
|
|
|
-
|
|
|
|
13,385
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intercompany payable
|
|
|
2,099
|
|
|
|
22,518
|
|
|
|
26,029
|
|
|
|
13,399
|
|
|
|
(64,045
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred income taxes
|
|
|
200
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
200
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term operating lease liabilities
|
|
|
-
|
|
|
|
-
|
|
|
|
265
|
|
|
|
222
|
|
|
|
-
|
|
|
|
487
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other long-term liabilities
|
|
|
1
|
|
|
|
2
|
|
|
|
580
|
|
|
|
311
|
|
|
|
-
|
|
|
|
894
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
2,300
|
|
|
|
35,837
|
|
|
|
28,350
|
|
|
|
14,806
|
|
|
|
(64,045
|
)
|
|
|
17,248
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Redeemable noncontrolling interests in equity of consolidated subsidiaries
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
502
|
|
|
|
-
|
|
|
|
502
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Deficit) equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Community Health Systems, Inc. stockholders (deficit) equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock
|
|
|
1
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1
|
|
Additional paid-in capital
|
|
|
2,008
|
|
|
|
(487
|
)
|
|
|
198
|
|
|
|
(1,008
|
)
|
|
|
1,297
|
|
|
|
2,008
|
|
Accumulated other comprehensive (loss) income
|
|
|
(9
|
)
|
|
|
(9
|
)
|
|
|
(11
|
)
|
|
|
1
|
|
|
|
19
|
|
|
|
(9
|
)
|
(Accumulated deficit) retained earnings
|
|
|
(4,218
|
)
|
|
|
(1,644
|
)
|
|
|
37
|
|
|
|
(2,328
|
)
|
|
|
3,935
|
|
|
|
(4,218
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Community Health Systems, Inc. stockholders (deficit) equity
|
|
|
(2,218
|
)
|
|
|
(2,140
|
)
|
|
|
224
|
|
|
|
(3,335
|
)
|
|
|
5,251
|
|
|
|
(2,218
|
)
|
Noncontrolling interests in equity of consolidated subsidiaries
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
77
|
|
|
|
-
|
|
|
|
77
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total (deficit) equity
|
|
|
(2,218
|
)
|
|
|
(2,140
|
)
|
|
|
224
|
|
|
|
(3,258
|
)
|
|
|
5,251
|
|
|
|
(2,141
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and (deficit) equity
|
|
$
|
82
|
|
|
$
|
33,697
|
|
|
$
|
28,574
|
|
|
$
|
12,050
|
|
|
$
|
(58,794
|
)
|
|
$
|
15,609
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
165
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Condensed Consolidating Balance Sheet
December 31, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
Guarantor
|
|
|
Issuer
|
|
|
Other
Guarantors
|
|
|
Non -
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
(In millions)
|
|
ASSETS
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
132
|
|
|
$
|
64
|
|
|
$
|
-
|
|
|
$
|
196
|
|
Patient accounts receivable
|
|
|
-
|
|
|
|
-
|
|
|
|
1,844
|
|
|
|
508
|
|
|
|
-
|
|
|
|
2,352
|
|
Supplies
|
|
|
-
|
|
|
|
-
|
|
|
|
269
|
|
|
|
133
|
|
|
|
-
|
|
|
|
402
|
|
Prepaid income taxes
|
|
|
3
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3
|
|
Prepaid expenses and taxes
|
|
|
-
|
|
|
|
-
|
|
|
|
134
|
|
|
|
62
|
|
|
|
-
|
|
|
|
196
|
|
Other current assets
|
|
|
-
|
|
|
|
-
|
|
|
|
84
|
|
|
|
316
|
|
|
|
-
|
|
|
|
400
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
3
|
|
|
|
-
|
|
|
|
2,463
|
|
|
|
1,083
|
|
|
|
-
|
|
|
|
3,549
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intercompany receivable
|
|
|
-
|
|
|
|
12,615
|
|
|
|
4,882
|
|
|
|
6,358
|
|
|
|
(23,855
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
|
-
|
|
|
|
-
|
|
|
|
4,371
|
|
|
|
1,768
|
|
|
|
-
|
|
|
|
6,139
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
|
-
|
|
|
|
-
|
|
|
|
2,704
|
|
|
|
1,855
|
|
|
|
-
|
|
|
|
4,559
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred income taxes
|
|
|
69
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
69
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other assets, net
|
|
|
-
|
|
|
|
25
|
|
|
|
796
|
|
|
|
722
|
|
|
|
-
|
|
|
|
1,543
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment in subsidiaries
|
|
|
-
|
|
|
|
20,742
|
|
|
|
11,784
|
|
|
|
-
|
|
|
|
(32,526
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
72
|
|
|
$
|
33,382
|
|
|
$
|
27,000
|
|
|
$
|
11,786
|
|
|
$
|
(56,381
|
)
|
|
$
|
15,859
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND (DEFICIT) EQUITY
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current maturities of long-term debt
|
|
$
|
-
|
|
|
$
|
155
|
|
|
$
|
22
|
|
|
$
|
27
|
|
|
$
|
-
|
|
|
$
|
204
|
|
Accounts payable
|
|
|
-
|
|
|
|
-
|
|
|
|
574
|
|
|
|
313
|
|
|
|
-
|
|
|
|
887
|
|
Accrued interest
|
|
|
-
|
|
|
|
205
|
|
|
|
-
|
|
|
|
1
|
|
|
|
-
|
|
|
|
206
|
|
Accrued liabilities
|
|
|
-
|
|
|
|
1
|
|
|
|
531
|
|
|
|
563
|
|
|
|
-
|
|
|
|
1,095
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
-
|
|
|
|
361
|
|
|
|
1,127
|
|
|
|
904
|
|
|
|
-
|
|
|
|
2,392
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt
|
|
|
-
|
|
|
|
13,167
|
|
|
|
151
|
|
|
|
74
|
|
|
|
-
|
|
|
|
13,392
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intercompany payable
|
|
|
1,572
|
|
|
|
21,318
|
|
|
|
24,901
|
|
|
|
13,085
|
|
|
|
(60,876
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred income taxes
|
|
|
26
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
26
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other long-term liabilities
|
|
|
9
|
|
|
|
2
|
|
|
|
619
|
|
|
|
378
|
|
|
|
-
|
|
|
|
1,008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
1,607
|
|
|
|
34,848
|
|
|
|
26,798
|
|
|
|
14,441
|
|
|
|
(60,876
|
)
|
|
|
16,818
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Redeemable noncontrolling interests in equity of consolidated subsidiaries
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
504
|
|
|
|
-
|
|
|
|
504
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Deficit) equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Community Health Systems, Inc. stockholders (deficit) equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock
|
|
|
1
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1
|
|
Additional paid-in capital
|
|
|
2,017
|
|
|
|
(329
|
)
|
|
|
193
|
|
|
|
(985
|
)
|
|
|
1,121
|
|
|
|
2,017
|
|
Accumulated other comprehensive loss
|
|
|
(10
|
)
|
|
|
(10
|
)
|
|
|
(11
|
)
|
|
|
(3
|
)
|
|
|
24
|
|
|
|
(10
|
)
|
(Accumulated deficit) retained earnings
|
|
|
(3,543
|
)
|
|
|
(1,127
|
)
|
|
|
20
|
|
|
|
(2,243
|
)
|
|
|
3,350
|
|
|
|
(3,543
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Community Health Systems, Inc. stockholders (deficit) equity
|
|
|
(1,535
|
)
|
|
|
(1,466
|
)
|
|
|
202
|
|
|
|
(3,231
|
)
|
|
|
4,495
|
|
|
|
(1,535
|
)
|
Noncontrolling interests in equity of consolidated subsidiaries
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
72
|
|
|
|
-
|
|
|
|
72
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total (deficit) equity
|
|
|
(1,535
|
)
|
|
|
(1,466
|
)
|
|
|
202
|
|
|
|
(3,159
|
)
|
|
|
4,495
|
|
|
|
(1,463
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and (deficit) equity
|
|
$
|
72
|
|
|
$
|
33,382
|
|
|
$
|
27,000
|
|
|
$
|
11,786
|
|
|
$
|
(56,381
|
)
|
|
$
|
15,859
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
166
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Condensed Consolidating Statement of Cash Flows
Year Ended December 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
Guarantor
|
|
|
Issuer
|
|
|
Other
Guarantors
|
|
|
Non -
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
(In millions)
|
|
Net cash (used in) provided by operating activities
|
|
$
|
(4
|
)
|
|
$
|
(348
|
)
|
|
$
|
600
|
|
|
$
|
137
|
|
|
$
|
-
|
|
|
$
|
385
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisitions of facilities and other related businesses
|
|
|
-
|
|
|
|
-
|
|
|
|
(6
|
)
|
|
|
(7
|
)
|
|
|
-
|
|
|
|
(13
|
)
|
Purchases of property and equipment
|
|
|
-
|
|
|
|
-
|
|
|
|
(366
|
)
|
|
|
(72
|
)
|
|
|
-
|
|
|
|
(438
|
)
|
Proceeds from disposition of hospitals and other ancillary operations
|
|
|
-
|
|
|
|
18
|
|
|
|
30
|
|
|
|
556
|
|
|
|
-
|
|
|
|
604
|
|
Proceeds from sale of property and equipment
|
|
|
-
|
|
|
|
-
|
|
|
|
1
|
|
|
|
2
|
|
|
|
-
|
|
|
|
3
|
|
Purchases of
available-for-sale debt securities and equity securities
|
|
|
-
|
|
|
|
-
|
|
|
|
(19
|
)
|
|
|
(61
|
)
|
|
|
-
|
|
|
|
(80
|
)
|
Proceeds from sales of
available-for-sale debt securities and equity securities
|
|
|
-
|
|
|
|
-
|
|
|
|
31
|
|
|
|
61
|
|
|
|
-
|
|
|
|
92
|
|
Increase in other investments
|
|
|
-
|
|
|
|
-
|
|
|
|
(123
|
)
|
|
|
(47
|
)
|
|
|
-
|
|
|
|
(170
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) investing activities
|
|
|
-
|
|
|
|
18
|
|
|
|
(452
|
)
|
|
|
432
|
|
|
|
-
|
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repurchase of restricted stock shares for payroll tax withholding requirements
|
|
|
(1
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1
|
)
|
Deferred financing costs and other debt-related costs
|
|
|
-
|
|
|
|
(46
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(46
|
)
|
Proceeds from noncontrolling investors in joint ventures
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
10
|
|
|
|
-
|
|
|
|
10
|
|
Redemption of noncontrolling investments in joint ventures
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(11
|
)
|
|
|
-
|
|
|
|
(11
|
)
|
Distributions to noncontrolling investors in joint ventures
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(99
|
)
|
|
|
-
|
|
|
|
(99
|
)
|
Proceeds from sale-lease back
|
|
|
-
|
|
|
|
-
|
|
|
|
60
|
|
|
|
-
|
|
|
|
-
|
|
|
|
60
|
|
Changes in intercompany balances with affiliates, net
|
|
|
5
|
|
|
|
619
|
|
|
|
(189
|
)
|
|
|
(435
|
)
|
|
|
-
|
|
|
|
-
|
|
Borrowings under credit agreements
|
|
|
-
|
|
|
|
-
|
|
|
|
36
|
|
|
|
1
|
|
|
|
-
|
|
|
|
37
|
|
Issuance of long-term debt
|
|
|
-
|
|
|
|
3,042
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3,042
|
|
Proceeds from ABL Facility
|
|
|
-
|
|
|
|
202
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
202
|
|
Repayments of long-term indebtedness
|
|
|
-
|
|
|
|
(3,487
|
)
|
|
|
(45
|
)
|
|
|
(25
|
)
|
|
|
-
|
|
|
|
(3,557
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities
|
|
|
4
|
|
|
|
330
|
|
|
|
(138
|
)
|
|
|
(559
|
)
|
|
|
-
|
|
|
|
(363
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change in cash and cash equivalents
|
|
|
-
|
|
|
|
-
|
|
|
|
10
|
|
|
|
10
|
|
|
|
-
|
|
|
|
20
|
|
Cash and cash equivalents at beginning of period
|
|
|
-
|
|
|
|
-
|
|
|
|
132
|
|
|
|
64
|
|
|
|
-
|
|
|
|
196
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
142
|
|
|
$
|
74
|
|
|
$
|
-
|
|
|
$
|
216
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
167
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Condensed Consolidating Statement of Cash Flows
Year Ended December 31, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
Guarantor
|
|
|
Issuer
|
|
|
Other
Guarantors
|
|
|
Non -
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
(In millions)
|
|
Net cash provided by (used in) operating activities
|
|
$
|
40
|
|
|
$
|
(409
|
)
|
|
$
|
560
|
|
|
$
|
83
|
|
|
$
|
-
|
|
|
$
|
274
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisitions of facilities and other related businesses
|
|
|
-
|
|
|
|
-
|
|
|
|
(3
|
)
|
|
|
(23
|
)
|
|
|
-
|
|
|
|
(26
|
)
|
Purchases of property and equipment
|
|
|
-
|
|
|
|
-
|
|
|
|
(408
|
)
|
|
|
(119
|
)
|
|
|
-
|
|
|
|
(527
|
)
|
Proceeds from disposition of hospitals and other ancillary operations
|
|
|
-
|
|
|
|
-
|
|
|
|
1
|
|
|
|
404
|
|
|
|
-
|
|
|
|
405
|
|
Proceeds from sale of property and equipment
|
|
|
-
|
|
|
|
-
|
|
|
|
5
|
|
|
|
3
|
|
|
|
-
|
|
|
|
8
|
|
Purchases of
available-for-sale debt securities and equity securities
|
|
|
-
|
|
|
|
-
|
|
|
|
(54
|
)
|
|
|
(24
|
)
|
|
|
-
|
|
|
|
(78
|
)
|
Proceeds from sales of
available-for-sale debt securities and equity securities
|
|
|
-
|
|
|
|
-
|
|
|
|
79
|
|
|
|
35
|
|
|
|
-
|
|
|
|
114
|
|
Increase in other investments
|
|
|
-
|
|
|
|
(7
|
)
|
|
|
(112
|
)
|
|
|
(22
|
)
|
|
|
-
|
|
|
|
(141
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by investing activities
|
|
|
-
|
|
|
|
(7
|
)
|
|
|
(492
|
)
|
|
|
254
|
|
|
|
-
|
|
|
|
(245
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repurchase of restricted stock shares for payroll tax withholding requirements
|
|
|
(1
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1
|
)
|
Deferred financing costs and other debt-related costs
|
|
|
-
|
|
|
|
(96
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(96
|
)
|
Proceeds from noncontrolling investors in joint ventures
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3
|
|
|
|
-
|
|
|
|
3
|
|
Redemption of noncontrolling investments in joint ventures
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(31
|
)
|
|
|
-
|
|
|
|
(31
|
)
|
Distributions to noncontrolling investors in joint ventures
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(96
|
)
|
|
|
-
|
|
|
|
(96
|
)
|
Changes in intercompany balances with affiliates, net
|
|
|
(39
|
)
|
|
|
99
|
|
|
|
176
|
|
|
|
(236
|
)
|
|
|
-
|
|
|
|
-
|
|
Borrowings under credit agreements
|
|
|
-
|
|
|
|
-
|
|
|
|
28
|
|
|
|
-
|
|
|
|
-
|
|
|
|
28
|
|
Issuance of long-term debt
|
|
|
-
|
|
|
|
1,033
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,033
|
|
Proceeds from ABL Facility
|
|
|
-
|
|
|
|
748
|
|
|
|
49
|
|
|
|
-
|
|
|
|
-
|
|
|
|
797
|
|
Repayments of long-term indebtedness
|
|
|
-
|
|
|
|
(1,368
|
)
|
|
|
(655
|
)
|
|
|
(10
|
)
|
|
|
-
|
|
|
|
(2,033
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by financing activities
|
|
|
(40
|
)
|
|
|
416
|
|
|
|
(402
|
)
|
|
|
(370
|
)
|
|
|
-
|
|
|
|
(396
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change in cash and cash equivalents
|
|
|
-
|
|
|
|
-
|
|
|
|
(334
|
)
|
|
|
(33
|
)
|
|
|
-
|
|
|
|
(367
|
)
|
Cash and cash equivalents at beginning of period
|
|
|
-
|
|
|
|
-
|
|
|
|
466
|
|
|
|
97
|
|
|
|
-
|
|
|
|
563
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
132
|
|
|
$
|
64
|
|
|
$
|
-
|
|
|
$
|
196
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
168
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Condensed Consolidating Statement of Cash Flows
Year Ended December 31, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
Guarantor
|
|
|
Issuer
|
|
|
Other
Guarantors
|
|
|
Non -
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
(In millions)
|
|
Net cash (used in) provided by operating activities
|
|
$
|
(12
|
)
|
|
$
|
(317
|
)
|
|
$
|
431
|
|
|
$
|
671
|
|
|
$
|
-
|
|
|
$
|
773
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisitions of facilities and other related businesses
|
|
|
-
|
|
|
|
-
|
|
|
|
(1
|
)
|
|
|
(5
|
)
|
|
|
-
|
|
|
|
(6
|
)
|
Purchases of property and equipment
|
|
|
-
|
|
|
|
-
|
|
|
|
(356
|
)
|
|
|
(208
|
)
|
|
|
-
|
|
|
|
(564
|
)
|
Proceeds from disposition of hospitals and other ancillary operations
|
|
|
-
|
|
|
|
-
|
|
|
|
122
|
|
|
|
1,570
|
|
|
|
-
|
|
|
|
1,692
|
|
Proceeds from sale of property and equipment
|
|
|
-
|
|
|
|
-
|
|
|
|
3
|
|
|
|
4
|
|
|
|
-
|
|
|
|
7
|
|
Purchases of
available-for-sale debt securities and equity securities
|
|
|
-
|
|
|
|
-
|
|
|
|
(91
|
)
|
|
|
(34
|
)
|
|
|
-
|
|
|
|
(125
|
)
|
Proceeds from sales of
available-for-sale debt securities and equity securities
|
|
|
-
|
|
|
|
-
|
|
|
|
172
|
|
|
|
36
|
|
|
|
-
|
|
|
|
208
|
|
Increase in other investments
|
|
|
-
|
|
|
|
-
|
|
|
|
(100
|
)
|
|
|
(43
|
)
|
|
|
-
|
|
|
|
(143
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by investing activities
|
|
|
-
|
|
|
|
-
|
|
|
|
(251
|
)
|
|
|
1,320
|
|
|
|
-
|
|
|
|
1,069
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
-
|
|
|
|
(65
|
)
|
|
|
(1
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(66
|
)
|
Proceeds from noncontrolling investors in joint ventures
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
5
|
|
|
|
-
|
|
|
|
5
|
|
Redemption of noncontrolling investments in joint ventures
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(6
|
)
|
|
|
-
|
|
|
|
(6
|
)
|
Distributions to noncontrolling investors in joint ventures
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(100
|
)
|
|
|
-
|
|
|
|
(100
|
)
|
Changes in intercompany balances with affiliates, net
|
|
|
17
|
|
|
|
1,565
|
|
|
|
331
|
|
|
|
(1,913
|
)
|
|
|
-
|
|
|
|
-
|
|
Borrowings under credit agreements
|
|
|
-
|
|
|
|
795
|
|
|
|
30
|
|
|
|
16
|
|
|
|
-
|
|
|
|
841
|
|
Issuance of long-term debt
|
|
|
-
|
|
|
|
3,100
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3,100
|
|
Proceeds from ABL Facility
|
|
|
-
|
|
|
|
-
|
|
|
|
105
|
|
|
|
-
|
|
|
|
-
|
|
|
|
105
|
|
Repayments of long-term indebtedness
|
|
|
-
|
|
|
|
(5,078
|
)
|
|
|
(285
|
)
|
|
|
(28
|
)
|
|
|
-
|
|
|
|
(5,391
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities
|
|
|
12
|
|
|
|
317
|
|
|
|
180
|
|
|
|
(2,026
|
)
|
|
|
-
|
|
|
|
(1,517
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change in cash and cash equivalents
|
|
|
-
|
|
|
|
-
|
|
|
|
360
|
|
|
|
(35
|
)
|
|
|
-
|
|
|
|
325
|
|
Cash and cash equivalents at beginning of period
|
|
|
-
|
|
|
|
-
|
|
|
|
106
|
|
|
|
132
|
|
|
|
-
|
|
|
|
238
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
466
|
|
|
$
|
97
|
|
|
$
|
-
|
|
|
$
|
563
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
169