Community Health Systems, Inc. (NYSE: CYH) (the “Company”) today
announced financial and operating results for the three and nine
months ended September 30, 2016.
On April 29, 2016, the Company completed the spin-off of Quorum
Health Corporation (“QHC”), comprised of 38 affiliated hospitals
and related outpatient services in 16 states, together with Quorum
Health Resources, LLC, a subsidiary providing management advisory
and consulting services to non-affiliated hospitals. Following the
spin-off, QHC became an independent public company with its common
stock listed for trading under the symbol “QHC” on the New York
Stock Exchange. Financial and statistical data reported in this
earnings release include QHC operating results through the spin-off
date. Same-store operating results and statistical data exclude
information for the hospitals divested in the spin-off of QHC in
both the 2016 periods and the comparable periods in 2015.
Net operating revenues for the three months ended September 30,
2016, totaled $4.380 billion, a 9.6 percent decrease compared with
$4.846 billion for the same period in 2015. Income from continuing
operations attributable to Community Health Systems, Inc. common
stockholders decreased to a loss of $(77) million, or $(0.69) per
share (diluted), for the three months ended September 30, 2016,
compared with income from continuing operations of $60 million, or
$0.51 per share (diluted), for the same period in 2015. During the
three months ended September 30, 2016, the Company recorded a
non-cash impairment charge totaling $39 million, primarily related
to the allocation of hospital reporting unit goodwill to four
hospitals classified as held for sale in September 2016 upon the
execution of a definitive agreement to sell these hospitals as
announced by the Company on September 29, 2016, as well as the
Company’s update to the previous estimated impairment of goodwill
and other long-lived assets recorded during the three months ended
June 30, 2016. This update to the estimated goodwill impairment
charge was based on the Company’s updated valuation assumptions, as
well as information obtained from third-party valuation services.
These impairment charges do not have an impact on the calculation
of the Company’s financial covenants under the Company’s Credit
Facility. The results for the three months ended September 30,
2016, included the loss of $(0.28) per share (diluted) related to
impairment of goodwill and long-lived assets and loss of $(0.06)
per share (diluted) related to government and other legal
settlements for several legal matters settled in principle and
related legal expenses. Excluding these items, income from
continuing operations was a loss of $(0.35) per share
(diluted).
Net income attributable to Community Health Systems, Inc. common
stockholders was a loss of $(0.71) per share (diluted) for the
three months ended September 30, 2016, compared with income of
$0.44 per share (diluted) for the same period in 2015. Discontinued
operations for the three months ended September 30, 2016, consisted
of $(0.02) per share (diluted) of losses from operations of
entities sold or held for sale for a total after-tax loss of
approximately $(2) million or $(0.02) per share (diluted).
Weighted-average shares outstanding (diluted) were 111 million for
the three months ended September 30, 2016, and 116 million for the
three months ended September 30, 2015.
Net cash provided by operating activities for the three months
ended September 30, 2016, was $178 million compared with $111
million for the same period in 2015, representing a 60.4 percent
increase. Adjusted EBITDA for the three months ended September 30,
2016, was $465 million compared with $661 million for the same
period in 2015, representing a 29.7 percent decrease.
The consolidated operating results for the three months ended
September 30, 2016, reflect a 12.4 percent decrease in total
admissions, and a 13.0 percent decrease in total adjusted
admissions, compared with the same period in 2015. On a same-store
basis, admissions decreased 2.1 percent and adjusted admissions
decreased 1.5 percent during the three months ended September 30,
2016, compared with the same period in 2015. On a same-store basis,
net operating revenues increased 1.2 percent during the three
months ended September 30, 2016, compared with the same period in
2015.
Net operating revenues for the nine months ended September 30,
2016, totaled $13.969 billion, a 4.6 percent decrease compared with
$14.639 billion for the same period in 2015. Income from continuing
operations attributable to Community Health Systems, Inc. common
stockholders decreased to a loss of $(1.495) billion, or $(13.50)
per share (diluted), for the nine months ended September 30, 2016,
compared with income from continuing operations of $268 million, or
$2.32 per share (diluted), for the same period in 2015. During the
nine months ended September 30, 2016, the Company recorded non-cash
impairment charges totaling $1.695 billion, primarily from an
impairment charge of $1.395 billion on the value of goodwill for
the Company’s hospital reporting unit, and impairment charges
totaling approximately $300 million to reduce the value of
long-lived assets at certain under-performing hospitals and
hospitals that the Company has closed, sold, or has identified for
sale. The estimated impairment charge recorded for goodwill
incurred during the three months ended June 30, 2016, resulted from
a determination that the carrying value of the Company’s hospital
operations reporting unit exceeded its fair value, primarily as the
result of the decline in the Company’s market capitalization and
fair value of long-term debt during the three months ended June 30,
2016, as well as a decrease in the estimated future earnings of the
Company compared to previous estimates. As noted above, the
goodwill impairment charge originally estimated at June 30, 2016
was updated during the three months ended September 30, 2016. These
impairment charges do not have an impact on the calculation of the
Company’s financial covenants under the Company’s Credit Facility.
The results for the nine months ended September 30, 2016, included
the loss of $(13.72) per share (diluted) related to impairment of
goodwill and long-lived assets, loss of $(0.18) per share (diluted)
from early extinguishment of debt, loss of $(0.06) per share
(diluted) related to government and other legal settlements for
several legal matters settled in principle and related legal
expenses, loss of $(0.08) per share (diluted) related to expenses
from the spin-off of QHC, which were partially offset by income of
$0.54 per share (diluted) related to the gain on sale of
investments in unconsolidated affiliates in connection with the
Company’s sale of its minority equity interests in five hospitals
located in Las Vegas, Nevada, on April 29, 2016. Excluding these
items, income from continuing operations was $0.00 per share
(diluted).
Net income attributable to Community Health Systems, Inc. common
stockholders was a loss of $(13.55) per share (diluted) for the
nine months ended September 30, 2016, compared with income of $2.08
per share (diluted) for the same period in 2015. Discontinued
operations for the nine months ended September 30, 2016, consisted
of $(0.04) per share (diluted) of losses from operations of
entities sold or held for sale and $(0.01) per share (diluted) of
expenses related to the impairment of long-lived assets held for
sale, for a total after-tax loss of approximately $(5) million, or
$(0.05) per share (diluted). Weighted-average shares outstanding
(diluted) were 111 million for the nine months ended September 30,
2016, and 116 million for the nine months ended September 30,
2015.
Net cash provided by operating activities for the nine months
ended September 30, 2016, was $810 million compared with $615
million for the same period in 2015, representing a 31.7 percent
increase. Adjusted EBITDA for the nine months ended September 30,
2016, was $1.661 billion compared with $2.144 billion for the same
period in 2015, representing a 22.5 percent decrease.
The consolidated operating results for the nine months ended
September 30, 2016, reflect a 7.9 percent decrease in total
admissions, and a 6.9 percent decrease in total adjusted
admissions, compared with the same period in 2015. On a same-store
basis, admissions decreased 2.0 percent and adjusted admissions
decreased 0.2 percent during the nine months ended September 30,
2016, compared with the same period in 2015. On a same-store basis,
net operating revenues increased 1.6 percent during the nine months
ended September 30, 2016, compared with the same period in
2015.
As initially disclosed on September 19, 2016, the Company
announced that, with the assistance of advisors, it is exploring a
variety of options with financial sponsors, as well as other
potential alternatives. The discussions are at a very preliminary
stage and there is no timeline established for this review. There
can be no certainty that the exploration will result in any kind of
transaction. As previously disclosed, the Company does not expect
to make further public comment regarding these matters while the
exploration process takes place. In addition, the Board of
Directors of the Company adopted a Stockholder Protection Rights
Agreement on October 3, 2016. For additional information regarding
this Stockholder Protection Rights Agreement, see the Company’s
press release and Current Report on Form 8-K, each filed on October
3, 2016.
Adjusted EBITDA, a non-GAAP financial measure, is EBITDA
adjusted to add back net income attributable to noncontrolling
interests and to exclude the effect of discontinued operations,
loss from early extinguishment of debt, impairment of goodwill and
long-lived assets, gain on sale of investments in unconsolidated
affiliates, acquisition and integration expenses from the
acquisition of Health Management Associates, Inc. (“HMA”), expense
incurred related to the spin-off of QHC, expense incurred related
to the divestiture of the home care division, expense related to
government and other legal settlements and related costs, and
expense from fair value adjustments related to the HMA legal
proceedings, accounted for at fair value, underlying the CVR
agreement, and related legal expenses. For information regarding
why the Company believes Adjusted EBITDA presents useful
information to investors, and for a reconciliation of Adjusted
EBITDA to net cash provided by operating activities, see footnote
(e) to the Financial Highlights, Financial Statements and Selected
Operating Data below.
Commenting on the results, Wayne T. Smith, chairman and chief
executive officer of Community Health Systems, Inc., said, “Our
operating and financial performance in the third quarter was below
expectations due to lower than expected volumes and higher than
expected expenses in certain areas. Moving into the fourth quarter,
we are intensely focused on driving operational improvements and
generating better results. We believe that performance
improvements, combined with our portfolio rationalization efforts,
should ultimately create a stronger portfolio of hospitals for the
future.”
Included on pages 16, 17, 18 and 19 of this press release are
tables setting forth the Company’s updated 2016 annual earnings
guidance. The 2016 guidance is based on the Company’s historical
operating performance, current trends and other assumptions that
the Company believes are reasonable at this time, and reflects the
impact of the spin-off of QHC and other planned divestitures that
the Company expects to occur in 2016.
Community Health Systems, Inc. is one of the largest publicly
traded hospital companies in the United States and a leading
operator of general acute care hospitals in communities across the
country. After giving effect to the spin-off noted above, the
Company, through its subsidiaries, owns, leases or operates 158
affiliated hospitals in 22 states with an aggregate of nearly
27,000 licensed beds.
The Company’s headquarters are located in Franklin, Tennessee, a
suburb south of Nashville. Shares in Community Health Systems, Inc.
are traded on the New York Stock Exchange under the symbol “CYH.”
More information about the Company can be found on its website at
www.chs.net.
Community Health Systems, Inc. will hold a conference call on
Wednesday, November 2, 2016, at 10:00 a.m. Central, 11:00 a.m.
Eastern, to review financial and operating results for the third
quarter ended September 30, 2016. Investors will have the
opportunity to listen to a live Internet broadcast of the
conference call by clicking on the Investor Relations link of the
Company’s website at www.chs.net. To listen to the live call,
please go to the website at least fifteen minutes early to
register, download and install any necessary audio software. For
those who cannot listen to the live broadcast, a replay will
be available shortly after the call and will continue to be
available through November 9, 2016. Copies of this press release
and conference call slide show, as well as the Company’s Current
Report on Form 8-K (including this press release), will be
available on the Company’s website at www.chs.net.
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES Financial
Highlights (a)(b)(c)(d) (In millions, except per share amounts)
(Unaudited)
Three Months Ended Nine Months
Ended September 30, September 30, 2016
2015 2016 2015 Net operating revenues $
4,380 $ 4,846 $ 13,969 $ 14,639 (Loss) income from continuing
operations (f), (i), (k) (54 ) 83 (1,422 ) 335
Net (loss) income attributable to
Community Health Systems, Inc. stockholders
(79 ) 52 (1,500 ) 241 Adjusted EBITDA (e) 465 661 1,661 2,144 Net
cash provided by operating activities 178 111 810 615 Basic
(loss) earnings per share attributable to Community Health Systems,
Inc. common stockholders: Continuing operations (f), (i) $ (0.69 )
$ 0.52 $ (13.50 ) $ 2.33 Discontinued operations (0.02 )
(0.07 ) (0.05 ) (0.24 ) Net (loss) income $
(0.71 ) $ 0.45 $ (13.55 ) $ 2.09 Diluted
(loss) earnings per share attributable to Community Health Systems,
Inc. common stockholders: Continuing operations (f), (h), (i) $
(0.69 ) $ 0.51 $ (13.50 ) $ 2.32 Discontinued operations
(0.02 ) (0.07 ) (0.05 ) (0.24 ) Net (loss)
income (h) $ (0.71 ) $ 0.44 $ (13.55 ) $ 2.08
Weighted-average number of shares outstanding (g): Basic 111 115
111 115 Diluted 111 116 111 116
____
For footnotes, see pages 12, 13, 14 and
15. CYH Announces Third Quarter 2016 Results
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES Condensed
Consolidated Statements of (Loss) Income (a)(b)(c)(d) (In
millions, except per share amounts) (Unaudited)
Three
Months Ended September 30, 2016 2015
Amount
% of
NetOperatingRevenues
Amount
% of
NetOperatingRevenues
Operating revenues (net of contractual allowances and discounts) $
5,084 $ 5,580 Provision for bad debts 704
734 Net operating revenues 4,380
100.0 % 4,846 100.0 % Operating costs and
expenses: Salaries and benefits 2,067 47.2 % 2,240 46.2 % Supplies
723 16.5 % 762 15.7 % Other operating expenses 1,026 23.4 % 1,144
23.7 % Government and other legal settlements and related costs (j)
10 0.2 % - - % Electronic health records incentive reimbursement (5
) (0.1 )% (54 ) (1.1 )% Rent 109 2.5 % 115 2.4 % Depreciation and
amortization 265 6.1 % 288 5.9 % Impairment of goodwill and
long-lived assets (i) 39 0.9 % - - %
Total operating costs and expenses 4,234 96.7 %
4,495 92.8 % Income from operations (f), (i)
146 3.3 % 351 7.2 % Interest expense, net 233 5.3 % 242 4.9 %
Equity in earnings of unconsolidated affiliates (4 ) (0.1 )%
(12 ) (0.2 )%
(Loss) income from continuing operations
before income taxes
(83 ) (1.9 )% 121 2.5 % (Benefit from) provision for income taxes
(29 ) (0.7 )% 38 0.8 % (Loss) income from
continuing operations (f), (i), (k) (54 ) (1.2 )% 83
1.7 % Discontinued operations, net of taxes: Loss
from operations of entities sold or held for sale (2 ) (0.0 )% (5 )
(0.1 )% Loss on sale, net - - % (3 ) (0.1 )%
Loss from discontinued operations, net of taxes (2 ) (0.0 )%
(8 ) (0.2 )% Net (loss) income (56 ) (1.2 )% 75 1.5 % Less:
Net income attributable to noncontrolling interests 23
0.6 % 23 0.4 % Net (loss) income attributable
to Community Health Systems, Inc. stockholders $ (79 ) (1.8 )% $ 52
1.1 %
Basic (loss) earnings per share
attributable to Community Health Systems, Inc. common
stockholders:
Continuing operations (f), (i), (k) $ (0.69 ) $ 0.52 Discontinued
operations (0.02 ) (0.07 ) Net (loss) income $ (0.71
) $ 0.45
Diluted (loss) earnings per share
attributable to Community Health Systems, Inc. common
stockholders:
Continuing operations (f), (h), (i), (k) $ (0.69 ) $ 0.51
Discontinued operations (0.02 ) (0.07 ) Net (loss)
income (h) $ (0.71 ) $ 0.44 Weighted-average number
of shares outstanding (g): Basic 111 115
Diluted 111 116
____
For footnotes, see pages 12, 13, 14 and
15.
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES Condensed
Consolidated Statements of (Loss) Income (a)(b)(c)(d) (In
millions, except per share amounts) (Unaudited)
Nine
Months Ended September 30, 2016 2015
Amount
% of
NetOperatingRevenues
Amount
% of
NetOperatingRevenues
Operating revenues (net of contractual allowances and discounts) $
16,128 $ 16,840 Provision for bad debts 2,159
2,201 Net operating revenues 13,969
100.0 % 14,639 100.0 % Operating costs
and expenses: Salaries and benefits 6,537 46.8 % 6,714 45.9 %
Supplies 2,281 16.3 % 2,274 15.5 % Other operating expenses 3,256
23.4 % 3,370 23.0 % Government and other legal settlements and
related costs (j) 10 0.1 % 1 - % Electronic health records
incentive reimbursement (54 ) (0.4 )% (135 ) (0.9 )% Rent 340 2.4 %
344 2.3 % Depreciation and amortization 839 6.0 % 875 6.0 %
Impairment of goodwill and long-lived assets (i) 1,695
12.1 % 6 - % Total operating costs and
expenses 14,904 106.7 % 13,449 91.8 %
(Loss) income from operations (f), (i) (935 ) (6.7 )% 1,190
8.2 % Interest expense, net 730 5.2 % 723 5.0 % Loss from early
extinguishment of debt 30 0.3 % 16 0.1 % Gain on sale of
investments in unconsolidated affiliates (k) (94 ) (0.7 )% - - %
Equity in earnings of unconsolidated affiliates (38 ) (0.3
)% (51 ) (0.3 )%
(Loss) income from continuing operations
before income taxes
(1,563 ) (11.2 )% 502 3.4 % (Benefit from) provision for income
taxes (141 ) (1.0 )% 167 1.1 % (Loss) income
from continuing operations (f), (i), (k) (1,422 ) (10.2 )%
335 2.3 % Discontinued operations, net of
taxes: Loss from operations of entities sold or held for sale (4 )
- % (22 ) (0.2 )% Impairment of hospitals sold or held for sale (1
) - % (2 ) - % Loss on sale, net - - % (3 ) -
% Loss from discontinued operations, net of taxes (5 ) - %
(27 ) (0.2 )% Net (loss) income (1,427 ) (10.2 )% 308 2.1 %
Less: Net income attributable to noncontrolling interests 73
0.5 % 67 0.5 % Net (loss) income attributable
to Community Health Systems, Inc. stockholders $ (1,500 ) (10.7 )%
$ 241 1.6 %
Basic (loss) earnings per share
attributable to Community Health Systems, Inc. common
stockholders:
Continuing operations (f), (i), (k) $ (13.50 ) $ 2.33 Discontinued
operations (0.05 ) (0.24 ) Net (loss) income $ (13.55
) $ 2.09
Diluted (loss) earnings per share
attributable to Community Health Systems, Inc. common
stockholders:
Continuing operations (f), (h), (i), (k) $ (13.50 ) $ 2.32
Discontinued operations (0.05 ) (0.24 ) Net (loss)
income (h) $ (13.55 ) $ 2.08 Weighted-average number
of shares outstanding (g): Basic 111 115
Diluted 111 116
____
For footnotes, see pages 12, 13, 14 and
15.
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES Condensed
Consolidated Statements of Comprehensive (Loss) Income (In
millions) (Unaudited)
Three Months Ended Nine
Months Ended September 30, September 30,
2016 2015 2016 2015 Net (loss)
income $ (56 ) $ 75 $ (1,427 ) $ 308 Other comprehensive income
(loss), net of income taxes: Net change in fair value of interest
rate swaps, net of tax 10 (21 ) (11 ) (22 ) Net change in fair
value of available-for-sale securities, net of tax (7 ) (9 ) (8 )
(10 )
Amortization and recognition of
unrecognized pension cost components, net of tax
- 1 3 2
Other comprehensive income (loss) 3 (29 )
(16 ) (30 ) Comprehensive (loss) income (53 ) 46
(1,443 ) 278 Less: Comprehensive income attributable to
noncontrolling interests 23 23
73 67
Comprehensive (loss) income attributable
to Community Health Systems, Inc. stockholders
$ (76 ) $ 23 $ (1,516 ) $ 211
____
For footnotes, see pages 12, 13, 14 and
15.
COMMUNITY HEALTH SYSTEMS, INC. AND
SUBSIDIARIES Selected Operating Data (a)(c) (Dollars in
millions) (Unaudited)
Three Months Ended September
30, Consolidated Same-Store 2016
2015 % Change 2016 2015 % Change
Number of hospitals (at end of period) 155 195 152 152 Licensed
beds (at end of period) 26,246 30,019 25,945 26,169 Beds in service
(at end of period) 23,231 26,309 23,066 23,164 Admissions 201,957
230,510 -12.4 % 200,365 204,600 -2.1 % Adjusted admissions 445,817
512,465 -13.0 % 441,545 448,317 -1.5 % Patient days 898,177
1,003,025 892,828 900,086 Average length of stay (days) 4.4 4.4 4.5
4.4 Occupancy rate (average beds in service) 41.9 % 41.6 % 42.0 %
42.4 % Net operating revenues $ 4,380 $ 4,846 -9.6 % $ 4,321 $
4,268 1.2 %
Net inpatient revenues as a % of net
patient revenues before provision for bad debts
42.6 % 41.7 % 42.6 % 41.7 %
Net outpatient revenues as a % of net
patient revenues before provision for bad debts
57.4 % 58.3 % 57.4 % 58.3 % Income from operations (f), (i) $ 146 $
351 -58.4 %
Income from operations as a % of net
operating revenues
3.3 % 7.2 % Depreciation and amortization $ 265 $ 288 Equity in
earnings of unconsolidated affiliates $ (4 ) $ (12 ) Liquidity
Data: Adjusted EBITDA (e) $ 465 $ 661 -29.7 %
Adjusted EBITDA as a % of net operating
revenues
10.6 % 13.6 % Net cash provided by operating activities $ 178 $ 111
60.4 %
Net cash provided by operating activities
as a % of net operating revenues
4.1 % 2.3 %
____
For footnotes, see pages 12, 13, 14 and
15.
COMMUNITY HEALTH SYSTEMS, INC. AND
SUBSIDIARIES Selected Operating Data (a)(c) (Dollars in
millions) (Unaudited)
Nine Months Ended September 30,
Consolidated Same-Store 2016 2015 %
Change 2016 2015 % Change Number of
hospitals (at end of period) 155 195 152 152 Licensed beds (at end
of period) 26,246 30,019 25,945 26,169 Beds in service (at end of
period) 23,231 26,309 23,066 23,164 Admissions 653,916 710,042 -7.9
% 616,756 629,656 -2.0 % Adjusted admissions 1,427,298 1,533,763
-6.9 % 1,337,641 1,340,485 -0.2 % Patient days 2,921,895 3,163,346
2,773,674 2,841,861 Average length of stay (days) 4.5 4.5 4.5 4.5
Occupancy rate (average beds in service) 43.3 % 43.9 % 43.6 % 44.8
% Net operating revenues $ 13,969 $ 14,639 -4.6 % $ 13,081 $ 12,870
1.6 %
Net inpatient revenues as a % of net
patient revenues before provision for bad debts
43.1 % 42.8 % 43.1 % 42.8 %
Net outpatient revenues as a % of net
patient revenues before provision for bad debts
56.9 % 57.2 % 56.9 % 57.2 % (Loss) income from operations (f), (i)
$ (935 ) $ 1,190 -178.6 %
(Loss) income from operations as a % of
net operating revenues
-6.7 % 8.1 % Depreciation and amortization $ 839 $ 875 Equity in
earnings of unconsolidated affiliates $ (38 ) $ (51 ) Liquidity
Data: Adjusted EBITDA (e) $ 1,661 $ 2,144 -22.5 %
Adjusted EBITDA as a % of net operating
revenues
11.9 % 14.6 % Net cash provided by operating activities $ 810 $ 615
31.7 %
Net cash provided by operating activities
as a % of net operating revenues
5.8 % 4.2 %
____
For footnotes, see pages 12, 13, 14 and
15.
COMMUNITY HEALTH SYSTEMS,
INC. AND SUBSIDIARIES Condensed Consolidated Balance Sheets
(b) (In millions, except share data) (Unaudited)
September 30, 2016 December 31, 2015 ASSETS
Current assets Cash and cash equivalents $ 133 $ 184
Patient accounts receivable, net of
allowance for doubtful accounts of $3,754 and $4,110 at September
30, 2016 and December 31, 2015, respectively
3,179 3,611 Supplies 527 580 Prepaid income taxes 33 27 Prepaid
expenses and taxes 208 197
Other current assets (including assets of
hospitals held for sale of $11 and $17 at September 30, 2016 and
December 31, 2015, respectively)
461 567 Total current assets
4,541 5,166 Property and equipment 13,378
14,906 Less accumulated depreciation and amortization (4,548
) (4,794 ) Property and equipment, net 8,830
10,112 Goodwill 6,901 8,965
Other assets, net (including assets of
hospitals held for sale of $109 and $41 at September 30, 2016 and
December 31, 2015, respectively)
1,955 2,352 Total assets $ 22,227
$ 26,595
LIABILITIES AND EQUITY Current
liabilities Current maturities of long-term debt $ 240 $ 229
Accounts payable 1,018 1,258 Accrued interest 151 227
Accrued liabilities (including liabilities
of hospitals held for sale of $13 and $6 at September 30, 2016 and
December 31, 2015, respectively)
1,277 1,358 Total current liabilities
2,686 3,072 Long-term debt
15,082 16,556 Deferred income taxes 357
593 Other long-term liabilities 1,622
1,698 Total liabilities 19,747
21,919 Redeemable noncontrolling interests in equity
of consolidated subsidiaries 553 571
EQUITY Community Health Systems, Inc. stockholders’ equity:
Preferred stock, $.01 par value per share, 100,000,000 shares
authorized; none issued - -
Common stock, $.01 par value per share,
300,000,000 shares authorized; 113,633,148 shares issued and
outstanding at September 30, 2016, and 113,732,933 shares issued
and 112,757,384 shares outstanding at December 31, 2015
1 1 Additional paid-in capital 1,967 1,963
Treasury stock, at cost, no shares at
September 30, 2016 and 975,549 shares at December 31, 2015
- (7 ) Accumulated other comprehensive loss (87 ) (73 )
(Accumulated deficit) retained earnings (60 ) 2,135
Total Community Health Systems, Inc. stockholders’ equity
1,821 4,019 Noncontrolling interests in equity of consolidated
subsidiaries 106 86 Total equity
1,927 4,105 Total liabilities and equity $
22,227 $ 26,595
____
For footnotes, see pages 12, 13, 14 and
15.
COMMUNITY HEALTH SYSTEMS,
INC. AND SUBSIDIARIES Condensed Consolidated Statements of
Cash Flows (b) (In millions) (Unaudited)
Nine Months
Ended September 30, 2016 2015 Cash flows
from operating activities Net (loss) income $ (1,427 ) $ 308
Adjustments to reconcile net (loss) income to net cash provided by
operating activities: Depreciation and amortization 839 876
Government and other legal settlements and related costs (j) 10 1
Stock-based compensation expense 36 44 Loss on sale, net - 4
Impairment of hospitals sold or held for sale 1 8 Impairment of
goodwill and long-lived assets (i) 1,695 - Loss from early
extinguishment of debt 30 16 Gain on sale of investments in
unconsolidated affiliates (94 ) - Other non-cash expenses, net 19
22 Changes in operating assets and liabilities, net of effects of
acquisitions and divestitures: Patient accounts receivable (40 )
(291 ) Supplies, prepaid expenses and other current assets 64 (72 )
Accounts payable, accrued liabilities and income taxes (256 ) (239
) Other (67 ) (62 ) Net cash provided by operating
activities 810 615 Cash flows
from investing activities Acquisitions of facilities and other
related equipment (122 ) (41 ) Purchases of property and equipment
(561 ) (696 ) Proceeds from disposition of hospitals and other
ancillary operations 12 87 Proceeds from sale of property and
equipment 10 13 Purchases of available-for-sale securities (395 )
(127 ) Proceeds from sales of available-for-sale securities 386 123
Proceeds from sale of investments in unconsolidated affiliates 403
- Distribution from Quorum Health Corporation 1,219 - Increase in
other investments (201 ) (136 ) Net cash provided by
(used in) investing activities 751 (777 )
Cash flows from financing activities Proceeds from exercise
of stock options - 24 Repurchase of restricted stock shares for
payroll tax withholding requirements (5 ) (20 ) Deferred financing
costs and other debt-related costs (22 ) (30 ) Redemption of
noncontrolling investments in joint ventures (19 ) (18 )
Distributions to noncontrolling investors in joint ventures (69 )
(69 ) Borrowings under credit agreements 3,929 3,464 Proceeds from
receivables facility 66 112 Repayments of long-term indebtedness
(5,492 ) (3,624 ) Net cash used in financing
activities (1,612 ) (161 ) Net change in cash
and cash equivalents (51 ) (323 ) Cash and cash equivalents at
beginning of period 184 509 Cash and
cash equivalents at end of period $ 133 $ 186
____
For footnotes, see pages 12, 13, 14 and
15.
Footnotes to Financial Highlights,
Financial Statements and Selected Operating Data
(a) Continuing operating results exclude discontinued
operations for the three and nine months ended September 30, 2016
and 2015. Both financial and statistical results exclude entities
in discontinued operations for all periods presented. Same-store
operating results and statistical data exclude information for the
hospitals divested in the spin-off of QHC in both the 2016 periods
and the comparable periods in 2015. (b) The contingent value
right (“CVR”) entitles the holder to receive a cash payment up to
$1.00 per CVR (subject to downward adjustment but not below zero),
subject to the final resolution of certain legal matters pertaining
to HMA, as defined in the CVR agreement. If the aggregate amount of
applicable losses under the CVR agreement exceeds a deductible of
$18 million, then the amount payable in respect of each CVR shall
be reduced (but not below zero) by an amount equal to the quotient
obtained by dividing: (a) the product of (i) all losses in excess
of the deductible and (ii) 90%; by (b) the number of CVRs
outstanding on the date on which final resolution of the existing
litigation occurs. Since the HMA acquisition date of January 27,
2014, approximately $31 million in costs have been incurred and
approximately $30 million of settlements have been paid related to
certain HMA legal matters, which collectively exceed the deductible
of $18 million under the CVR agreement. The Company previously
recorded an estimated fair value of the remaining underlying claims
that will be covered by the CVR of $284 million as part of the
acquisition accounting for HMA, which has been adjusted to its
estimated fair value of $259 million at September 30, 2016. In
addition, although future legal fees (which are expensed as
incurred) associated with the HMA legal matters have not been
accrued or included in the table below, such legal fees are taken
into account in determining the total amount of reductions applied
to the amounts owed to CVR holders. The following table
presents the impact of the recorded amounts as described above as
applied to the CVR and the $18 million deductible and 10%
co-insurance amounts (in millions):
As of
September 30, 2016 Legal and other related costs
incurred to date $ 31 Settlements 30 Estimated liability for
probable contingencies - Estimated liability for unresolved
contingencies at fair value 259
Costs incurred plus certain estimated
liabilities for CVR-related matters
320 Allocated to: CHS deductible of $18 million (18 ) CHS
co-insurance at 10% (29 )
Recorded amounts that reduce CVR value
after giving effect to deductible and co-insurance
$ 273 CVRs outstanding 265 (c)
Included in discontinued operations for the three and nine
months ended September 30, 2016, are three smaller hospitals that
are being actively marketed for sale. Included in discontinued
operations for the three and nine months ended September 30, 2015,
were several hospitals held for sale at December 31, 2014, some of
which were sold during the year ended December 31, 2015. The
after-tax loss for the sold or held for sale hospitals, including
an impairment charge on certain long-lived assets sold or held for
sale, was approximately $2 million and $8 million for the three
months ended September 30, 2016 and 2015, respectively, and
approximately $5 million and $27 million for the nine months ended
September 30, 2016 and 2015, respectively. (d) The following
table provides information needed to calculate (loss) income per
share, which is adjusted for income attributable to noncontrolling
interests (in millions):
Three Months Ended
Nine Months Ended September 30,
September 30, 2016 2015
2016 2015
(Loss) income from continuing operations
attributable to Community Health Systems, Inc. common
stockholders:
(Loss) income from continuing operations, net of taxes $ (54 ) $ 83
$ (1,422 ) $ 335
Less: Income from continuing operations
attributable to noncontrolling interests, net of taxes
23 23 73 67
(Loss) income from continuing operations
attributable to Community Health Systems, Inc. common stockholders
— basic and diluted
$ (77 ) $ 60 $ (1,495 ) $ 268
Loss from discontinued operations
attributable to Community Health Systems, Inc. common
stockholders:
Loss from discontinued operations, net of taxes $ (2 ) $ (8 ) $ (5
) $ (27 )
Less: Loss from discontinued operations
attributable to noncontrolling interests, net of taxes
- - - -
Loss from discontinued operations
attributable to Community Health Systems, Inc. common stockholders
— basic and diluted
$ (2 ) $ (8 ) $ (5 ) $ (27 )
Footnotes to Financial Highlights,
Financial Statements and Selected Operating Data
(Continued)
(e) EBITDA is a non-GAAP financial measure which
consists of net (loss) income attributable to Community Health
Systems, Inc. before interest, income taxes, and depreciation and
amortization. Adjusted EBITDA, also a non-GAAP financial measure,
is EBITDA adjusted to add back net income attributable to
noncontrolling interests and to exclude the effect of discontinued
operations, loss from early extinguishment of debt, impairment of
goodwill and long-lived assets, gain on sale of investments in
unconsolidated affiliates, acquisition and integration expenses
from the acquisition of HMA, expense incurred related to the
spin-off of QHC, expense incurred related to the divestiture of the
home care division, expense related to government and other legal
settlements and related costs, and expense from fair value
adjustments related to the HMA legal proceedings, accounted for at
fair value, underlying the CVR agreement, and related legal
expenses. The Company has from time to time sold noncontrolling
interests in certain of its subsidiaries or acquired subsidiaries
with existing noncontrolling interest ownership positions. The
Company believes that it is useful to present Adjusted EBITDA
because it adds back the portion of EBITDA attributable to these
third-party interests and clarifies for investors the Company’s
portion of EBITDA generated by continuing operations. The Company
uses Adjusted EBITDA as a measure of liquidity. The Company has
also presented Adjusted EBITDA in this release because it believes
it provides investors with additional information about the
Company’s ability to incur and service debt and make capital
expenditures. Adjusted EBITDA also aligns with a similar metric as
defined in the Company’s senior secured credit facility, which is a
key component in the determination of the Company’s compliance with
some of the covenants under the Company’s senior secured credit
facility, and is used to determine the interest rate and commitment
fee payable under the senior secured credit facility.
Adjusted EBITDA is not a measurement of financial performance or
liquidity under U.S. GAAP. It should not be considered in isolation
or as a substitute for net income, operating income, cash flows
from operating, investing or financing activities or any other
measure calculated in accordance with U.S. GAAP. The items excluded
from Adjusted EBITDA are significant components in understanding
and evaluating financial performance and liquidity. This
calculation of Adjusted EBITDA may not be comparable to similarly
titled measures reported by other companies. The following
table reflects the calculation of Adjusted EBITDA, as defined, from
(loss) income from continuing operations before income taxes and
reconciles Adjusted EBITDA to net cash provided by operating
activities as derived directly from the condensed consolidated
financial statements (in millions):
Three Months
Ended Nine Months Ended September
30, September 30, 2016 2015
2016 2015 (Loss) income from continuing
operations before income taxes $ (83 ) $ 121 $ (1,563 ) $ 502
Adjustments: Depreciation and amortization 265 288 839 875 Interest
expense, net 233 242 730 723 Loss from early extinguishment of debt
- - 30 16 Impairment of goodwill and long-lived assets 39 - 1,695 6
Gain on sale of investments in unconsolidated affiliates - - (94 )
- Expenses related to the acquisition and integration of HMA - - -
1 Expense from government and other legal settlements and related
costs 10 - 10 1
Expense from fair value adjustments and
legal expenses related to cases covered by the CVR
- - 1 10 Expenses related to the divestiture of home care division
1 - 1 - Expenses related to the spin-off of QHC -
10 12 10 Adjusted EBITDA
$ 465 $ 661 $ 1,661 $ 2,144 Adjusted EBITDA $ 465 $ 661 $
1,661 $ 2,144 Interest expense, net (233 ) (242 ) (730 ) (723 )
Benefit from (provision for) income taxes 29 (38 ) 141 (167 )
Loss from operations of entities sold or
held for sale, net of taxes
(2 ) (5 ) (4 ) (22 ) Other non-cash expenses, net 7 39 56 63
Changes in operating assets and
liabilities, net of effects of acquisitions and divestitures
(88 ) (304 ) (314 ) (680 ) Net cash
provided by operating activities $ 178 $ 111 $ 810
$ 615 (f) Included in non-same-store
(loss) income from operations and (loss) income from continuing
operations are pre-tax charges related to acquisition costs of $1
million and $2 million for the three months ended September 30,
2016 and 2015, respectively, and $4 million and $6 million for the
nine months ended September 30, 2016 and 2015, respectively.
Footnotes to Financial Highlights,
Financial Statements and Selected Operating Data
(Continued)
(g) The following table sets forth components reconciling
the basic weighted-average number of shares to the diluted
weighted-average number of shares (in millions):
Three Months Ended Nine Months Ended
September 30, September 30, 2016
2015 2016 2015
Weighted-average number of shares
outstanding - basic
111 115 111 115 Add effect of dilutive securities: Stock awards and
options - 1 - 1
Weighted-average number of shares
outstanding - diluted
111 116 111 116 The Company generated a loss from
continuing operations attributable to Community Health Systems,
Inc. common stockholders for the three and nine months ended
September 30, 2016, so the effect of dilutive securities is not
considered because their effect would be antidilutive. If the
Company had generated income from continuing operations during the
three and nine months ended September 30, 2016, the effect of
restricted stock awards, employee stock options, and other
equity-based awards on the diluted shares calculation would have
been an increase in shares of 445,732 shares and 225,334 shares,
respectively. (h) The following supplemental tables
reconcile (loss) income from continuing operations and net (loss)
income attributable to Community Health Systems, Inc. common
stockholders, as reported, on a per share (diluted) basis, with the
adjustments described herein (total per share amounts may not add
due to rounding):
Three Months Ended
Nine Months Ended September 30, September
30, 2016 2015 2016
2015 (per share - diluted) (per share -
diluted) (Loss) income from continuing operations, as
reported $ (0.69 ) $ 0.51 $ (13.50 ) $ 2.32 Adjustments: Loss from
early extinguishment of debt - - 0.18 0.09 Impairment of goodwill
and long-lived assets 0.28 - 13.72 0.04
Expense from government and other legal
settlements and related costs
0.06 - 0.06 0.01
Expense from fair value adjustments and
legal expenses related to cases covered by the CVR
- - - 0.05 Gain on sale of investments in unconsolidated affiliates
- - (0.54 ) - Expense related to the spin-off of QHC -
0.05 0.08 0.05
(Loss) income from continuing operations,
excluding adjustments
$ (0.35 ) $ 0.56 $ - $ 2.55
Three Months
Ended Nine Months Ended September 30,
September 30, 2016 2015 2016
2015 (per share - diluted) (per share -
diluted) Net (loss) income, as reported $ (0.71 ) $ 0.44
$ (13.55 ) $ 2.08 Adjustments: Loss from early extinguishment of
debt - - 0.18 0.09 Impairment of goodwill and long-lived assets
0.28 - 13.72 0.04
Expense from government and other legal
settlements and related costs
0.06 - 0.06 0.01
Expense from fair value adjustments and
legal expenses related to cases covered by the CVR
- - - 0.05 Gain on sale of investments in unconsolidated affiliates
- - (0.54 ) - Expense related to the spin-off of QHC -
0.05 0.08 0.05 Net (loss)
income, excluding adjustments $ (0.37 ) $ 0.49 $ (0.04 ) $ 2.31
Footnotes to Financial Highlights,
Financial Statements and Selected Operating Data
(Continued)
(i) Both income from operations and loss from
continuing operations for the three months ended September 30,
2016, included an impairment charge of approximately $39 million,
primarily related to the allocation of hospital reporting unit
goodwill to four hospitals classified as held for sale in September
2016 upon the execution of a definitive agreement to sell such
hospitals as announced by us on September 29, 2016, as well as the
updated measurement of the estimated impairment charge recorded
during the three months ended June 30, 2016. Both loss from
operations and loss from continuing operations for the nine months
ended September 30, 2016, included an impairment charge of
approximately $1.695 billion, of which $1.395 billion was a charge
related to the write-down of a portion of the goodwill for the
Company’s hospital operation reporting unit, and $283 million was a
charge related to the adjustment of the fair value of long-lived
assets at certain of the Company’s underperforming hospitals and
some of the hospitals that the Company has been or is currently
marketing for sale that have experienced declining operating
results or have had a decline in their estimated fair value. The
estimated impairment charge recorded for goodwill incurred during
the three months ended June 30, 2016, resulted from a determination
that the carrying value of the Company’s hospital operations
reporting unit exceeded its fair value, primarily as the result of
the decline in the Company’s market capitalization and fair value
of long-term debt during the three months ended June 30, 2016, as
well as a decrease in the estimated future earnings of the Company
compared to previous estimates. The goodwill impairment charge
originally estimated at June 30, 2016 was updated during the three
months ended September 30, 2016 based on the Company’s updated
valuation assumptions, as well as information obtained from
third-party valuation services. Also, included in loss from
operations and loss from continuing operations for the nine months
ended September 30, 2016, was an impairment charge of approximately
$17 million incurred during the three months ended March 31, 2016,
related to the write-down of a portion of the goodwill allocated to
the divestitures of Lehigh Regional Medical Center and Bartow
Regional Medical Center, as well as the impairment of certain
long-lived assets at one of the Company’s smaller hospitals where
the decision was made during the quarter ended March 31, 2016, to
permanently close the hospital. These impairment charges do not
have an impact on the calculation of the Company’s financial
covenants under the Company’s Credit Facility. Both income from
operations and income from continuing operations for the three and
nine months ended September 30, 2015, include an impairment charge
of approximately $6 million related to the allocated reporting unit
goodwill for one hospital where a definitive agreement to sell the
hospital was entered into during the quarter ended June 30, 2015.
(j) The $0.06 per share (diluted) of expense for “Government
and other legal settlements and related costs” for the three and
nine months ended September 30, 2016, is the net impact of several
lawsuits settled in principle during the three and nine months
ended September 30, 2016, and related legal expenses. The $0.01 per
share (diluted) of expense for “Government and other legal
settlements and related costs” for the nine months ended September
30, 2015, is the net impact of several qui tam lawsuits settled in
principle during the three months ended September 30, 2015, and
related legal expenses. (k) On April 29, 2016, the Company
sold its unconsolidated minority equity interests in Valley Health
System, LLC, a joint venture with Universal Health Systems, Inc.
(“UHS”) representing four hospitals in Las Vegas, Nevada, in which
the Company owned a 27.5% interest, and in Summerlin Hospital
Medical Center, LLC, a joint venture with UHS representing one
hospital in Las Vegas, Nevada, in which the Company owned a 26.1%
interest. The Company received $403 million in cash in return for
the sale of its equity interests and recognized a gain on sale of
investments in unconsolidated affiliates during the nine months
ended September 30, 2016.
Regulation FD Disclosure
Set forth below is selected information concerning the Company’s
projected consolidated operating results for the year ending
December 31, 2016. These projections update selected guidance
issued on August 2, 2016, and are based on the Company’s historical
operating performance, current trends and other assumptions that
the Company believes are reasonable at this time. The 2016 guidance
should be considered in conjunction with the assumptions included
herein. See pages 18 and 19 for a list of factors that could affect
the future results of the Company or the healthcare industry
generally.
A reconciliation of the Company’s projected 2016 Adjusted
EBITDA, a forward-looking non-GAAP financial measure, to the most
directly comparable GAAP financial measure is omitted from this
release because the Company is unable to provide such
reconciliation without unreasonable effort (the Company’s
presentation of projected net cash provided by operating activities
later in this Regulation FD Disclosure section is not projected
using the same factors as the Adjusted EBITDA guidance, as there
are different assumptions made in connection with the determination
of such projected net cash provided by operating activities
amount). This inability results from the inherent difficulty in
forecasting generally and in quantifying certain projected amounts
that are necessary for such reconciliation. In particular,
sufficient information is not available to calculate certain
adjustments required for such reconciliation without unreasonable
effort, including interest expense, net; provision for (benefit
from) income taxes; other non-cash expenses, net; other changes in
operating assets and liabilities and other adjustments that would
be necessary to prepare a forward-looking statement of cash flows
prepared in accordance with GAAP. For the same reasons, the Company
is unable to address the probable significance of the unavailable
information.
The following is provided as guidance to
analysts and investors:
2016 Projection Range Net operating revenues
less provision for bad debts (in millions) $ 18,300 to
$
18,500
Adjusted EBITDA (in millions) $ 2,200 to $ 2,275 Income from
continuing operations per share - diluted $ 0.30 to $ 0.50
Same-store hospital annual adjusted admissions growth (0.3 )% to
0.3 % Weighted-average diluted shares, in millions 111.5 to 112.5
The following assumptions were used in developing the 2016
guidance provided above:
- The guidance excludes the financial
results of the following:
- Quorum Health Resources, LLC and the 38
hospitals associated with the spin-off of QHC from the spin-off
date of April 29, 2016 through December 31, 2016;
- Our investment in a joint venture
representing five hospitals in Las Vegas, Nevada that was divested
in the second quarter of 2016; and
- Three small hospitals which remain
held-for-sale for which the operating results have been classified
in discontinued operations.
- The Company’s projections also exclude
the following:
- Payments related to the CVRs issued in
connection with the HMA acquisition, and changes in the valuation
of liabilities underlying the CVR;
- Losses from the early extinguishment of
debt;
- Impairment of goodwill and long-lived
assets;
- Resolution of government investigations
or other significant legal settlements;
- Costs incurred in connection with the
spin-off of QHC and the sale of an 80% investment in our home care
division; and
- Other significant gains or losses that
neither relate to the ordinary course of business nor reflect the
Company’s underlying business performance.
Other assumptions used in the above guidance:
- A definitive agreement has been signed,
as announced by us on October 17, 2016, to sell an 80% investment
in our home care division. We expect this sale to close by the end
of the year.
- A definitive agreement has been signed,
as announced by us on September 29, 2016, to sell four rural
hospitals in Mississippi and Florida. We expect this sale to close
in early 2017.
- The 2016 projections include the
results from the date of acquisition of an 80% interest in two
hospitals in La Porte, Indiana, and Knox, Indiana, which were
acquired effective March 1, 2016, and an 80% interest in one
hospital in Fayetteville, Arkansas, which was acquired effective
April 1, 2016.
- Health Information Technology (HITECH)
electronic health records incentive reimbursement of approximately
$70 million for the year ended December 31, 2016.
- Same-store hospital annual adjusted
admissions growth of (0.3)% to 0.3% for 2016, which does not take
into account service closures and weather-related or other unusual
events.
- Expressed as a percentage of net
operating revenues, depreciation and amortization of approximately
6.0% to 6.1% for 2016. Additionally, this is a fixed cost and the
percentages may change as revenue varies. Such amounts exclude the
possible impact of any future hospital fixed asset impairments and
acceleration of amortization of software to be abandoned.
- Interest expense, expressed as a
percentage of net operating revenues, of approximately 5.1% to
5.2%; however, interest expense is a fixed cost and percentages may
vary as revenue varies. Interest expense has been adjusted to
reflect the repayment of debt with proceeds from the QHC spin-off
as well as the anticipated divestitures, based on the expected
timing of those divestitures. Total fixed rate debt, including
swaps, is expected to average approximately 65% to 75% of total
debt during 2016.
- Expressed as a percentage of net
operating revenues, equity in earnings of unconsolidated affiliates
of approximately 0.20% to 0.25% for 2016.
- Expressed as a percentage of net
operating revenues, net income attributable to noncontrolling
interests of approximately 0.5% to 0.6% for 2016.
- Expressed as a percentage of income
from continuing operations before income taxes, provision for
income tax of approximately 15.0% to 20.0% for 2016.
- Capital expenditures are projected as
follows (in millions):
2016 Guidance Total $725 to
$800
- Net cash provided by operating
activities, excluding costs incurred in connection with the
spin-off of QHC, cash flows related to the CVR and settlement of
legal contingencies, is projected as follows (in millions):
2016 Guidance Total $1,200 to
$1,375
- Weighted-average shares outstanding are
projected to be between approximately 111.5 million to 112.5
million for the year ended 2016.
This press release contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as
amended, Section 21E of the Securities Exchange Act of 1934, as
amended, and the Private Securities Litigation Reform Act of 1995
that involve risk and uncertainties. All statements in this press
release other than statements of historical fact, including
statements regarding projections, expected operating results, and
other events that depend upon or refer to future events or
conditions or that include words such as “expects,” “anticipates,”
“intends,” “plans,” “believes,” “estimates,” “thinks,” and similar
expressions, are forward-looking statements. Although the Company
believes that these forward-looking statements are based on
reasonable assumptions, these assumptions are inherently subject to
significant economic and competitive uncertainties and
contingencies, which are difficult or impossible to predict
accurately and may be beyond the control of the Company.
Accordingly, the Company cannot give any assurance that its
expectations will in fact occur and cautions that actual results
may differ materially from those in the forward-looking statements.
A number of factors could affect the future results of the Company
or the healthcare industry generally and could cause the Company’s
expected results to differ materially from those expressed in this
press release.
These factors include, among other things:
- general economic and business
conditions, both nationally and in the regions in which we
operate;
- implementation, effect of, and changes
to, adopted and potential federal and state healthcare reform
legislation and other federal, state or local laws or regulations
affecting the healthcare industry;
- the extent to which states support
increases, decreases or changes in Medicaid programs, implement
health insurance exchanges or alter the provision of healthcare to
state residents through regulation or otherwise;
- the success and long-term viability of
health insurance exchanges, which may be impacted by whether a
sufficient number of payors participate;
- risks associated with our substantial
indebtedness, leverage and debt service obligations, including our
ability to incur additional indebtedness;
- demographic changes;
- changes in, or the failure to comply
with, governmental regulations;
- potential adverse impact of known and
unknown government investigations, audits, and federal and state
false claims act litigation and other legal proceedings;
- our ability, where appropriate, to
enter into and maintain provider arrangements with payors and the
terms of these arrangements, which may be further impacted by the
increasing consolidation of health insurers and managed care
companies;
- changes in, or the failure to comply
with, contract terms with payors and changes in reimbursement rates
paid by federal or state healthcare programs or commercial
payors;
- any potential additional impairments in
the carrying value of goodwill (or additional changes in the
estimated goodwill impairment charge incurred during the three
months ended June 30, 2016, as the result of our ongoing review of
updated valuation information as part of our step two goodwill
analysis), other intangible assets, or other long-lived assets, or
changes in the useful lives of other intangible assets;
- changes in inpatient or outpatient
Medicare and Medicaid payment levels;
- the effects related to the continued
implementation of the sequestration spending reductions and the
potential for future deficit reduction legislation;
- increases in the amount and risk of
collectability of patient accounts receivable, including the impact
of the implementation of ICD-10 and decreases in collectability
which may result from, among other things, self-pay growth in
states that have not expanded Medicaid and difficulties in
recovering payments for which patients are responsible, including
co-pays and deductibles;
- the efforts of insurers, healthcare
providers and others to contain healthcare costs, including the
trend toward value-based purchasing;
- our ongoing ability to demonstrate
meaningful use of certified electronic health record technology and
recognize income for the related Medicare or Medicaid incentive
payments;
- increases in wages as a result of
inflation or competition for highly technical positions and rising
supply and drug costs due to market pressure from pharmaceutical
companies and new product releases;
- liabilities and other claims asserted
against us, including self-insured malpractice claims;
- competition;
- our ability to attract and retain, at
reasonable employment costs, qualified personnel, key management,
physicians, nurses and other healthcare workers;
- trends toward treatment of patients in
less acute or specialty healthcare settings, including ambulatory
surgery centers or specialty hospitals;
- changes in medical or other
technology;
- changes in U.S. generally accepted
accounting principles;
- the availability and terms of capital
to fund additional acquisitions or replacement facilities or other
capital expenditures;
- our ability to successfully make
acquisitions or complete divestitures, including the intended
disposition of certain hospitals, our ability to complete any such
acquisitions or divestitures on desired terms or at all (including
to realize the anticipated amount of proceeds from contemplated
dispositions), the timing of the completion of any such
acquisitions or divestitures, and our ability to realize the
intended benefits from any such acquisitions or divestitures;
- our ability to successfully integrate
any acquired hospitals, including those of HMA, or to recognize
expected synergies from acquisitions;
- the impact of seasonal severe weather
conditions;
- our ability to obtain adequate levels
of general and professional liability insurance;
- timeliness of reimbursement payments
received under government programs;
- effects related to outbreaks of
infectious diseases;
- the impact of the external, criminal
cyber-attack suffered by us in the second quarter of 2014,
including potential reputational damage, the outcome of our
investigation and any potential governmental inquiries, the outcome
of litigation filed against us in connection with this
cyber-attack, the extent of remediation costs and additional
operating or other expenses that we may continue to incur, and the
impact of potential future cyber-attacks or security breaches;
- the effects of the spin-off of QHC that
was completed on April 29, 2016, on our business, including our
ability to achieve the anticipated benefits of the spin-off;
- any effects of our recently announced
adoption of a Stockholder Protection Rights Agreement;
- any effects related to our previously
announced exploration of strategic alternatives; and
- the other risk factors set forth in our
other public filings with the Securities and Exchange
Commission.
The consolidated operating results for the three and nine months
ended September 30, 2016, are not necessarily indicative of the
results that may be experienced for any future periods. The Company
cautions that the projections for calendar year 2016 set forth in
this press release are given as of the date hereof based on
currently available information. The Company undertakes no
obligation to revise or update any forward-looking statements, or
to make any other forward-looking statements, whether as a result
of new information, future events or otherwise.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20161101006539/en/
Community Health Systems, Inc.W. Larry Cash,
615-465-7000President of Financial Services and Chief Financial
Officer
Community Health Systems (NYSE:CYH)
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