Community Health Systems, Inc. (NYSE: CYH) (the “Company”) today
announced financial and operating results for the three months and
year ended December 31, 2016.
The following highlights the financial and operating results for
the three months ended December 31, 2016, that are further
discussed below:
- Net operating revenues totaled
$4.469 billion.
- Net loss attributable to Community
Health Systems, Inc. common stockholders was $(220) million, or
$(1.99) per share (diluted), compared with $(83) million, or
$(0.73) per share (diluted) for the same period in 2015.
- Adjusted EBITDA was $564
million.
- Loss from continuing operations
attributable to Community Health Systems, Inc. common stockholders
was $(1.91) per share (diluted).
- Adjusted for certain items discussed
below, income from continuing operations attributable to Community
Health Systems, Inc. common stockholders was $0.46 per share
(diluted).
- Cash flow from operations was $327
million, compared with $306 million for the same period in 2015,
representing a 6.9 percent increase.
- On a same-store basis, both
admissions and adjusted admissions decreased 1.4 percent, compared
with the same period in 2015.
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 December 31,
2016, totaled $4.469 billion, a 6.9 percent decrease, compared with
$4.798 billion for the same period in 2015. Loss from continuing
operations attributable to Community Health Systems, Inc. common
stockholders increased to a loss of $(211) million, or $(1.91) per
share (diluted), for the three months ended December 31, 2016,
compared with a loss from continuing operations of $(74) million,
or $(0.66) per share (diluted), for the same period in 2015. During
the three months ended December 31, 2016, the Company recorded a
non-cash net expense totaling $224 million, primarily related to
impairment charges totaling approximately $315 million to reduce
the value of long-lived assets, primarily allocated goodwill, at
hospitals that the Company has identified for sale and certain
under-performing hospitals. These impairment charges were partially
offset by the gain of $91 million on the sale of a majority
ownership interest in the Company’s home care division, which
closed on December 31, 2016. The impairment charges do not have an
impact on the calculation of the Company’s financial covenants
under the Company’s Credit Facility.
The results for the three months ended December 31, 2016,
included the loss of $(2.35) per share (diluted) related to
impairment and (gain) loss on sale of businesses, and loss of
$(0.03) per share (diluted) related to government and other legal
settlements and related legal expenses, and loss of $(0.02) per
share (diluted) related to expenses from the spin-off of QHC. These
expenses were partially offset by income of $0.04 per share
(diluted) related to income from fair value adjustments on the CVR
agreement liability accounted for at fair value related to the HMA
legal proceedings, and related legal expenses. Excluding these
items, income from continuing operations was $0.46 per share
(diluted). The financial results for the three months and year
ended December 31, 2015, include a $169 million increase in the
Company’s allowance for doubtful accounts on the December 31, 2015
consolidated balance sheet and a corresponding $169 million
increase to the provision for bad debts related to a change in
estimate recorded during the three months ended December 31, 2015.
This adjustment reduced net operating revenues and adjusted EBITDA
by $169 million and income from continuing operations by $108
million, or $0.96 and $0.94 per share (diluted), for the three
months and year ended December 31, 2015, respectively.
Net loss attributable to Community Health Systems, Inc. common
stockholders was $(220) million, or $(1.99) per share (diluted) for
the three months ended December 31, 2016, compared with $(83)
million, or $(0.73) per share (diluted) for the same period in
2015. Discontinued operations for the three months ended December
31, 2016, consisted of $(0.03) per share (diluted) of losses from
operations of entities sold or held for sale and $(0.06) per share
(diluted) of expense related to the impairment of long-lived assets
held for sale, for a total after-tax loss of approximately $(9)
million or $(0.09) per share (diluted). Weighted-average shares
outstanding (diluted) were 111 million for the three months ended
December 31, 2016, and 113 million for the three months ended
December 31, 2015. Adjusted EBITDA for the three months ended
December 31, 2016, was $564 million compared with $527 million for
the same period in 2015, representing a 7.0 percent increase.
The consolidated operating results for the three months ended
December 31, 2016, reflect an 11.6 percent decrease in total
admissions, and a 12.7 percent decrease in total adjusted
admissions, compared with the same period in 2015. On a same-store
basis, both admissions and adjusted admissions decreased 1.4
percent during the three months ended December 31, 2016, compared
with the same period in 2015. On a same-store basis, net operating
revenues increased 0.5 percent during the three months ended
December 31, 2016, compared with the same period in 2015.
Net operating revenues for the year ended December 31, 2016,
totaled $18.438 billion, a 5.1 percent decrease compared with
$19.437 billion for the same period in 2015. Income from continuing
operations attributable to Community Health Systems, Inc. common
stockholders decreased to a loss of $(1.706) billion, or $(15.41)
per share (diluted), for the year ended December 31, 2016, compared
with income from continuing operations of $194 million, or $1.68
per share (diluted), for the same period in 2015. During the year
ended December 31, 2016, the Company recorded non-cash impairment
charges totaling $1.919 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 $615 million to reduce the value of long-lived
assets, primarily allocated goodwill, at certain under-performing
hospitals and hospitals that the Company has closed, sold, or has
identified for sale. These impairment charges were partially offset
by the gain of $91 million on the sale of a majority ownership
interest in the Company’s home care division in the fourth quarter
as noted above. The impairment charge recorded for goodwill 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. During the three months ended
December 31, 2016, the Company performed its required annual
goodwill impairment analysis, which indicated no additional
goodwill impairment. 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 year ended December 31, 2016, included the
loss of $(16.07) per share (diluted) related to impairment and
(gain) loss on sale of businesses, loss of $(0.17) per share
(diluted) from early extinguishment of debt, loss of $(0.09) per
share (diluted) related to government and other legal settlements
and related legal expenses, loss of $(0.10) per share (diluted)
related to expenses from the spin-off of QHC and loss of $(0.01)
per share (diluted) of expense incurred related to the sale of a
majority ownership interest in the Company’s home care division.
These expenses were partially offset by income of $0.04 per share
(diluted) related to income from fair value adjustments on the CVR
agreement liability accounted for at fair value related to the HMA
legal proceedings, and related legal expenses, and 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 $0.46 per share (diluted).
Net income attributable to Community Health Systems, Inc. common
stockholders was a loss of $(1.721) billion, or $(15.54) per share
(diluted) for the year ended December 31, 2016, compared with
income of $158 million, or $1.37 per share (diluted) for the same
period in 2015. Discontinued operations for the year ended December
31, 2016, consisted of $(0.06) per share (diluted) of losses from
operations of entities sold or held for sale and $(0.07) per share
(diluted) of expenses related to the impairment of long-lived
assets held for sale, for a total after-tax loss of approximately
$(15) million, or $(0.13) per share (diluted). Weighted-average
shares outstanding (diluted) were 111 million for the year ended
December 31, 2016, and 115 million for the year ended December 31,
2015. Adjusted EBITDA for the year ended December 31, 2016, was
$2.225 billion compared with $2.670 billion for the same period in
2015, representing a 16.7 percent decrease.
The consolidated operating results for the year ended December
31, 2016, reflect an 8.8 percent decrease in total admissions, and
an 8.4 percent decrease in total adjusted admissions, compared with
the same period in 2015. On a same-store basis, admissions
decreased 1.9 percent and adjusted admissions decreased 0.5 percent
during the year ended December 31, 2016, compared with the same
period in 2015. On a same-store basis, net operating revenues
increased 1.4 percent during the year ended December 31, 2016,
compared with the same period in 2015.
Adjusted EBITDA, a non-GAAP financial measure, is EBITDA
adjusted to add back net income attributable to noncontrolling
interests and to exclude the effect of discontinued operations,
loss from early extinguishment of debt, impairment and (gain) loss
on sale of businesses, gain on sale of investments in
unconsolidated affiliates, 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 sale of a majority ownership interest in the
Company’s home care division, expense related to government and
other legal settlements and related costs, and (income) expense
from fair value adjustments on the CVR agreement liability
accounted for at fair value related to the HMA legal proceedings,
and related legal expenses. For information regarding why the
Company believes Adjusted EBITDA presents useful information to
investors, and for a reconciliation of Adjusted EBITDA to net
income attributable to Community Health Systems, Inc. stockholders,
see footnote (e) to the Financial Highlights, Financial Statements
and Selected Operating Data below.
Commenting on the results, Wayne T. Smith, chairman and chief
executive officer of Community Health Systems, Inc., said, “We
concluded the year with solid results in the fourth quarter,
including sequential improvements in same-store net operating
revenue, adjusted EBITDA and cash flow from operations. Significant
progress has been made in our work to divest certain hospitals and
other operations, enabling a reduction in our debt and the
opportunity to reshape our portfolio into a stronger, more
sustainable organization. Moving forward in 2017 and beyond, we are
intently focused on efficiency improvements in our operations,
strategic initiatives that enhance growth in our markets, and
portfolio optimization that reduces our total debt. Most
importantly, we remain committed to providing high-quality, safe
healthcare for the patients and communities we serve.”
Included on pages 17, 18, 19 and 20 of this press release are
tables setting forth the Company’s 2017 annual earnings guidance.
The 2017 guidance is based on the Company’s historical operating
performance, current trends and other assumptions that the Company
believes are reasonable at this time, and reflects the impact of
planned divestitures that the Company expects to occur in 2017.
Community Health Systems, Inc. is one of the largest publicly
traded hospital companies in the United States and a leading
operator of general acute care hospitals in communities across the
country. 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
approximately 26,000 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
Tuesday, February 21, 2017, at 10:00 a.m. Central, 11:00 a.m.
Eastern, to review financial and operating results for the fourth
quarter and year ended December 31, 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 February 28, 2017. Copies of this press release
and conference call slide show, as well as the Company’s Current
Report on Form 8-K (including this press release), will be
available on the Company’s website at www.chs.net.
COMMUNITY HEALTH SYSTEMS,
INC. AND SUBSIDIARIES Financial Highlights (a)(b)(c)(d)
(In millions, except per share amounts) (Unaudited)
Three Months Ended
Year Ended December 31, December 31,
2016 2015 2016 2015 Net
operating revenues $ 4,469 $ 4,798 $ 18,438 $ 19,437 (Loss) income
from continuing operations (f), (i), (k) (189 ) (40 ) (1,611 ) 295
Net (loss) income attributable to
Community Health Systems, Inc. stockholders
(220 ) (83 ) (1,721 ) 158 Adjusted EBITDA (e) 564 527 2,225 2,670
Net cash provided by operating activities 327 306 1,137 921
Basic (loss) earnings per share
attributable to Community Health Systems, Inc. common stockholders
(l):
Continuing operations (f), (i), (k) $ (1.91 ) $ (0.66 ) $ (15.41 )
$ 1.69 Discontinued operations (0.09 ) (0.08 )
(0.13 ) (0.31 ) Net (loss) income $ (1.99 ) $ (0.73 ) $
(15.54 ) $ 1.38
Diluted (loss) earnings per share
attributable to Community Health Systems, Inc. common stockholders
(l):
Continuing operations (f), (h), (i), (k) $ (1.91 ) $ (0.66 ) $
(15.41 ) $ 1.68 Discontinued operations (0.09 ) (0.08
) (0.13 ) (0.31 ) Net (loss) income (h) $ (1.99 ) $
(0.73 ) $ (15.54 ) $ 1.37
Weighted-average number of shares outstanding (g): Basic 111 113
111 114 Diluted 111 113 111 115
____
For footnotes, see pages 13, 14, 15 and
16.
COMMUNITY
HEALTH SYSTEMS, INC. AND SUBSIDIARIES Condensed Consolidated
Statements of Loss (a)(b)(c)(d) (In millions, except per share
amounts) (Unaudited)
Three Months Ended December 31,
2016 2015 Amount
% of Net
Operating
Revenues
Amount
% of Net
Operating
Revenues
Operating revenues (net of contractual allowances and discounts) $
5,147 $ 5,724 Provision for bad debts 678 926
Net operating revenues 4,469 100.0 %
4,798 100.0 % Operating costs and expenses:
Salaries and benefits 2,087 46.7 % 2,278 47.5 % Supplies 730 16.3 %
773 16.1 % Other operating expenses 992 22.2 % 1,151 23.9 %
Government and other legal settlements and related costs (j) 5 0.1
% 3 0.1 % Electronic health records incentive reimbursement (15 )
(0.3 )% (25 ) (0.5 )% Rent 110 2.5 % 113 2.4 % Depreciation and
amortization 261 5.8 % 297 6.2 %
Impairment and (gain) loss on sale of
businesses, net (i)
224 5.0 % 62 1.3 % Total operating
costs and expenses 4,394 98.3 % 4,652
97.0 %
Income from operations (f), (i) 75 1.7 % 146 3.0 % Interest
expense, net 232 5.2 % 249 5.2 % Equity in earnings of
unconsolidated affiliates (5 ) (0.1 )% (12 ) (0.3 )%
Loss from continuing operations before
income taxes
(152 ) (3.4 )% (91 ) (1.9 )% Provision for (benefit from) income
taxes 37 0.8 % (51 ) (1.1 )% Loss from
continuing operations (f), (i) (189 ) (4.2 )% (40 )
(0.8 )% Discontinued operations, net of taxes: Loss from
operations of entities sold or held for sale (3 ) (0.1 )% (5 ) (0.1
)% Impairment of hospitals sold or held for sale (6 ) (0.1
)% (4 ) (0.1 )% Loss from discontinued operations, net of
taxes (9 ) (0.2 )% (9 ) (0.2 )% Net loss (198 ) (4.4
)% (49 ) (1.0 )% Less: Net income attributable to noncontrolling
interests 22 0.5 % 34 0.7 % Net loss
attributable to Community Health Systems, Inc. stockholders $ (220
) (4.9 )% $ (83 ) (1.7 )%
Basic loss per share attributable to
Community Health Systems, Inc. common stockholders (l):
Continuing operations (f), (i) $ (1.91 ) $ (0.66 ) Discontinued
operations (0.09 ) (0.08 ) Net loss $ (1.99 ) $ (0.73
)
Diluted loss per share attributable to
Community Health Systems, Inc. common stockholders (l):
Continuing operations (f), (h), (i) $ (1.91 ) $ (0.66 )
Discontinued operations (0.09 ) (0.08 ) Net loss (h)
$ (1.99 ) $ (0.73 ) Weighted-average number of shares
outstanding (g): Basic 111 113 Diluted
111 113 116
____
For footnotes, see pages 13, 14, 15 and
16.
COMMUNITY
HEALTH SYSTEMS, INC. AND SUBSIDIARIES Condensed Consolidated
Statements of (Loss) Income (a)(b)(c)(d) (In millions, except
per share amounts) (Unaudited)
Year Ended December 31,
2016 2015 Amount
% of Net
Operating
Revenues
Amount
% of Net
Operating
Revenues
Operating revenues (net of contractual allowances and discounts) $
21,275 $ 22,564 Provision for bad debts 2,837
3,127 Net operating revenues 18,438
100.0 % 19,437 100.0 % Operating costs
and expenses: Salaries and benefits 8,624 46.8 % 8,991 46.3 %
Supplies 3,011 16.3 % 3,048 15.7 % Other operating expenses 4,248
23.1 % 4,520 23.2 % Government and other legal settlements and
related costs (j) 16 0.1 % 4 - % Electronic health records
incentive reimbursement (70 ) (0.4 )% (160 ) (0.8 )% Rent 450 2.4 %
457 2.4 % Depreciation and amortization 1,100 6.0 % 1,172 6.0 %
Impairment and (gain) loss on sale of businesses, net (i) 1,919
10.4 % 68 0.3 % Total operating costs and
expenses 19,298 104.7 % 18,100 93.1 %
(Loss) income from operations (f), (i) (860 ) (4.7 )% 1,337
6.9 % Interest expense, net 962 5.2 % 973 5.0 % Loss from early
extinguishment of debt 30 0.2 % 16 0.1 % Gain on sale of
investments in unconsolidated affiliates (k) (94 ) (0.5 )% - - %
Equity in earnings of unconsolidated affiliates (43 ) (0.3
)% (63 ) (0.3 )%
(Loss) income from continuing operations
before income taxes
(1,715 ) (9.3 )% 411 2.1 % (Benefit from) provision for income
taxes (104 ) (0.6 )% 116 0.6 % (Loss) income
from continuing operations (f), (i), (k) (1,611 ) (8.7 )%
295 1.5 % Discontinued operations, net of taxes: Loss
from operations of entities sold or held for sale (7 ) - % (27 )
(0.2 )% Impairment of hospitals sold or held for sale (8 ) (0.1 )%
(5 ) - % Loss on sale, net - - % (4 ) - % Loss
from discontinued operations, net of taxes (15 ) (0.1 )%
(36 ) (0.2 )% Net (loss) income (1,626 ) (8.8 )% 259 1.3 %
Less: Net income attributable to noncontrolling interests 95
0.5 % 101 0.5 % Net (loss) income attributable
to Community Health Systems, Inc. stockholders $ (1,721 ) (9.3 )% $
158 0.8 %
Basic (loss) earnings per share
attributable to Community Health Systems, Inc. common
stockholders:
Continuing operations (f), (i), (k) $ (15.41 ) $ 1.69 Discontinued
operations (0.13 ) (0.31 ) Net (loss) income $ (15.54
) $ 1.38
Diluted (loss) earnings per share
attributable to Community Health Systems, Inc. common
stockholders:
Continuing operations (f), (h), (i), (k) $ (15.41 ) $ 1.68
Discontinued operations (0.13 ) (0.31 ) Net (loss)
income (h) $ (15.54 ) $ 1.37 Weighted-average number
of shares outstanding (g): Basic 111 114
Diluted 111 115
____
For footnotes, see pages 13, 14, 15 and
16.
COMMUNITY
HEALTH SYSTEMS, INC. AND SUBSIDIARIES Condensed Consolidated
Statements of Comprehensive (Loss) Income (In millions)
(Unaudited)
Three Months Ended Year Ended December
31, December 31, 2016 2015 2016
2015 Net (loss) income $ (198 ) $ (49 ) $ (1,626 ) $
259 Other comprehensive income (loss), net of income taxes: Net
change in fair value of interest rate swaps, net of tax 28 16 17 (6
) Net change in fair value of available-for-sale securities, net of
tax (3 ) 4 (11 ) (5 )
Amortization and recognition of
unrecognized pension cost components, net of tax
(1 ) - 3 1 Other
comprehensive income (loss) 24 20
9 (10 ) Comprehensive (loss) income (174 ) (29
) (1,617 ) 249 Less: Comprehensive income attributable to
noncontrolling interests 22 34 95
101
Comprehensive (loss) income attributable
to Community Health Systems, Inc. stockholders
$ (196 ) $ (63 ) $ (1,712 ) $ 148
____
For footnotes, see pages 13, 14, 15 and
16.
COMMUNITY
HEALTH SYSTEMS, INC. AND SUBSIDIARIES Selected Operating
Data (a)(c) (Dollars in millions) (Unaudited)
Three Months Ended December 31,
Consolidated Same-Store 2016 2015 %
Change 2016 2015 % Change Number of
hospitals (at end of period) 155 194 152 152 Licensed beds (at end
of period) 26,222 29,853 25,921 26,013 Beds in service (at end of
period) 23,229 26,312 23,064 23,167 Admissions 203,496 230,250
-11.6 % 201,803 204,727 -1.4 % Adjusted admissions 440,160 504,119
-12.7 % 435,605 441,727 -1.4 % Patient days 910,209 1,011,868
904,723 910,403 Average length of stay (days) 4.5 4.4 4.5 4.4
Occupancy rate (average beds in service) 42.6 % 41.8 % 42.7 % 42.7
% Net operating revenues $ 4,469 $ 4,798 -6.9 % $ 4,404 $ 4,382 0.5
%
Net inpatient revenues as a % of net
patient revenues before provision for bad debts
43.6 % 43.0 % 43.7 % 42.9 %
Net outpatient revenues as a % of net
patient revenues before provision for bad debts
56.4 % 57.0 % 56.3 % 57.1 % Income from operations (f), (i) $ 75 $
146 -48.6 %
Income from operations as a % of net
operating revenues
1.7 % 3.0 % Depreciation and amortization $ 261 $ 297 Equity in
earnings of unconsolidated affiliates $ (5 ) $ (12 )
Net loss attributable to Community Health
Systems, Inc. stockholders
$ (220 ) $ (83 ) 165.1 %
Net loss attributable to Community Health
Systems, Inc. stockholders as a % of net operating revenues
-4.9 % -1.7 % Adjusted EBITDA (e) $ 564 $ 527 7.0 %
Adjusted EBITDA as a % of net operating
revenues
12.6 % 11.0 % Net cash provided by operating activities $ 327 $ 306
6.9 %
____
For footnotes, see pages 13, 14, 15 and
16.
COMMUNITY
HEALTH SYSTEMS, INC. AND SUBSIDIARIES Selected Operating
Data (a)(c) (Dollars in millions) (Unaudited)
Year Ended December 31, Consolidated
Same-Store 2016 2015 % Change
2016 2015 % Change Number of hospitals (at end
of period) 155 194 152 152 Licensed beds (at end of period) 26,222
29,853 25,921 26,013 Beds in service (at end of period) 23,229
26,312 23,064 23,167 Admissions 857,412 940,292 -8.8 % 818,559
834,383 -1.9 % Adjusted admissions 1,867,348 2,038,103 -8.4 %
1,773,093 1,782,134 -0.5 % Patient days 3,832,104 4,175,214
3,678,397 3,752,264 Average length of stay (days) 4.5 4.4 4.5 4.5
Occupancy rate (average beds in service) 43.1 % 43.3 % 43.4 % 44.3
% Net operating revenues $ 18,438 $ 19,437 -5.1 % $ 17,481 $ 17,248
1.4 %
Net inpatient revenues as a % of net
patient revenues before provision for bad debts
43.2 % 42.8 % 43.3 % 42.8 %
Net outpatient revenues as a % of net
patient revenues before provision for bad debts
56.8 % 57.2 % 56.7 % 57.2 % (Loss) income from operations (f), (i)
$ (860 ) $ 1,337 -164.3 %
(Loss) income from operations as a % of
net operating revenues
-4.7 % 6.9 % Depreciation and amortization $ 1,100 $ 1,172 Equity
in earnings of unconsolidated affiliates
$
(43
)
$ (63 )
Net loss (income) attributable to
Community Health Systems, Inc. stockholders
$ (1,721 ) $ 158 -1189.2 %
Net loss (income) attributable to
Community Health Systems, Inc. stockholders as a % of net operating
revenues
-9.3 % 0.8 % Adjusted EBITDA (e) $ 2,225 $ 2,670 -16.7 %
Adjusted EBITDA as a % of net operating
revenues
12.1 % 13.7 % Net cash provided by operating activities $ 1,137 $
921 23.5 %
____
For footnotes, see pages 13, 14, 15 and
16.
COMMUNITY
HEALTH SYSTEMS, INC. AND SUBSIDIARIES Condensed Consolidated
Balance Sheets (b) (In millions, except share data) (Unaudited)
December 31, 2016
December 31, 2015 ASSETS Current assets Cash and cash
equivalents $ 238 $ 184
Patient accounts receivable, net of
allowance for doubtful accounts of $3,773 and $4,110 at December
31, 2016 and 2015, respectively
3,176 3,611 Supplies 480 580 Prepaid income taxes 17 27 Prepaid
expenses and taxes 187 197
Other current assets (including assets of
hospitals held for sale of $117 and $17 at December 31, 2016 and
2015, respectively)
568 567 Total current assets
4,666 5,166 Property and equipment: Land and
improvements 782 969 Buildings and improvements 7,438 9,051
Equipment and fixtures 4,202 4,886
Property and equipment, gross 12,422 14,906 Less accumulated
depreciation and amortization (4,273 ) (4,794 )
Property and equipment, net 8,149 10,112
Goodwill 6,521 8,965
Other assets, net of accumulated
amortization of $929 and $903 at December 31, 2016 and 2015,
respectively (including assets of hospitals held for sale of $878
and $41 at December 31, 2016 and 2015, respectively)
2,608 2,352 Total assets $ 21,944
$ 26,595
LIABILITIES AND EQUITY Current
liabilities Current maturities of long-term debt $ 455 $ 229
Accounts payable 995 1,258 Accrued liabilities: Employee
compensation 731 823 Interest 207 227
Other (including liabilities of hospitals
held for sale of $81 and $6 at December 31, 2016 and 2015,
respectively)
499 535 Total current liabilities
2,887 3,072 Long-term debt
14,789 16,556 Deferred income taxes 411
593 Other long-term liabilities 1,575
1,698 Total liabilities 19,662
21,919 Redeemable noncontrolling interests in equity
of consolidated subsidiaries 554 571 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; 113,876,580 shares issued and
outstanding at December 31, 2016, and 113,732,933 shares issued and
112,757,384 shares outstanding at December 31, 2015
1 1 Additional paid-in capital 1,975 1,963
Treasury stock, at cost, no shares at
December 31, 2016 and 975,549 shares at December 31, 2015
- (7 ) Accumulated other comprehensive loss (62 ) (73 )
(Accumulated deficit) retained earnings (299 ) 2,135
Total Community Health Systems, Inc. stockholders’ equity
1,615 4,019 Noncontrolling interests in equity of consolidated
subsidiaries 113 86 Total equity
1,728 4,105 Total liabilities and equity $
21,944 $ 26,595
____
For footnotes, see pages 13, 14, 15 and
16.
COMMUNITY
HEALTH SYSTEMS, INC. AND SUBSIDIARIES Condensed Consolidated
Statements of Cash Flows (b) (In millions) (Unaudited)
Year Ended December 31,
2016 2015 Cash flows from operating activities
Net (loss) income $ (1,626 ) $ 259 Adjustments to reconcile net
(loss) income to net cash provided by operating activities:
Depreciation and amortization 1,100 1,174 Deferred income taxes
(116 ) 103 Government and other legal settlements and related costs
(j) 16 4 Stock-based compensation expense 46 59 Loss on sale, net -
4 Impairment of hospitals sold or held for sale 8 5 Impairment and
(gain) loss on sale of businesses, net (i) 1,919 68 Loss from early
extinguishment of debt 30 16 Gain on sale of investments in
unconsolidated affiliates (94 ) - Other non-cash expenses, net 31
47 Changes in operating assets and liabilities, net of effects of
acquisitions and divestitures: Patient accounts receivable (96 )
(219 ) Supplies, prepaid expenses and other current assets 25 (68 )
Accounts payable, accrued liabilities and income taxes (137 ) (478
) Other 31 (53 ) Net cash provided by
operating activities 1,137 921
Cash flows from investing activities Acquisitions of facilities and
other related equipment (123 ) (57 ) Purchases of property and
equipment (744 ) (953 ) Proceeds from disposition of hospitals and
other ancillary operations 143 155 Proceeds from sale of property
and equipment 15 15 Purchases of available-for-sale securities (505
) (162 ) Proceeds from sales of available-for-sale securities 464
156 Proceeds from sale of investments in unconsolidated affiliates
403 - Distribution from Quorum Health Corporation 1,219 - Increase
in other investments (242 ) (205 ) Net cash provided
by (used in) investing activities 630 (1,051 )
Cash flows from financing activities Proceeds from exercise
of stock options - 25 Repurchase of restricted stock shares for
payroll tax withholding requirements (6 ) (20 ) Stock buy-back -
(159 ) Deferred financing costs and other debt-related costs (26 )
(30 ) Proceeds from noncontrolling investors in joint ventures - 47
Redemption of noncontrolling investments in joint ventures (19 )
(36 ) Distributions to noncontrolling investors in joint ventures
(92 ) (100 ) Proceeds from sale-lease back 159 - Borrowings under
credit agreements 4,879 4,922 Proceeds from receivables facility
107 206 Repayments of long-term indebtedness (6,715 )
(5,050 ) Net cash used in financing activities (1,713 )
(195 ) Net change in cash and cash equivalents 54
(325 ) Cash and cash equivalents at beginning of period 184
509 Cash and cash equivalents at end of period
$ 238 $ 184
____
For footnotes, see pages 13, 14, 15 and
16.
Footnotes to Financial Highlights, Financial
Statements and Selected Operating Data
(a) Continuing operating results exclude discontinued operations
for the three months and year ended December 31, 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 $32 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 $252
million at December 31, 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. For the
CVR valuation at December 31, 2016, the change in fair value from
the previous quarter was primarily the result of an increase in the
discount rate applied to the estimated settlement amount.
The following table presents the impact of the recorded amounts
as described above as applied to the CVR and the $18 million
deductible and 10% co-insurance amounts (in millions):
As of December 31, 2016
Legal and other related costs incurred to date $ 32 Settlements 30
Estimated liability for probable contingencies - Estimated
liability for unresolved contingencies at fair value 252
Costs incurred plus certain estimated
liabilities for CVR-related matters
314 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
$ 267 CVRs outstanding 265
(c) Included in discontinued operations for the three months and
year ended December 31, 2016, are three smaller hospitals that are
being actively marketed for sale. Included in discontinued
operations for the three months and year ended December 31, 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 $9 million for both of the three month
periods ended December 31, 2016 and 2015, respectively, and
approximately $15 million and $36 million for the year ended
December 31, 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
Year Ended December 31, December 31,
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 $ (189 ) $
(40 ) $ (1,611 ) $ 295
Less: Income from continuing operations
attributable to noncontrolling interests, net of taxes
22 34 95 101
(Loss) income from continuing operations
attributable to Community Health Systems, Inc. common stockholders
— basic and diluted
$ (211 ) $ (74 ) $ (1,706 ) $ 194
Loss from discontinued operations
attributable to Community Health Systems, Inc. common
stockholders:
Loss from discontinued operations, net of taxes $ (9 ) $ (9 ) $ (15
) $ (36 )
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
$ (9 ) $ (9 ) $ (15 ) $ (36 )
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 and (gain) loss on sale of
businesses, 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 sale of a majority ownership
interest in the Company’s home care division, expense related to
government and other legal settlements and related costs, and
(income) expense from fair value adjustments on the CVR agreement
liability accounted for at fair value related to the HMA legal
proceedings, and related legal expenses. 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 now reports Adjusted EBITDA as a
measure of financial performance rather than as a liquidity
measure. Adjusted EBITDA is a key measure used by management to
assess the operating performance of the Company’s hospital
operations and to make decisions on the allocation of resources.
Adjusted EBITDA is also used to evaluate the performance of the
Company’s executive management team and is one of the primary
targets used to determine short-term cash incentive compensation.
In addition, management utilizes Adjusted EBITDA in assessing the
Company’s consolidated results of operations and operational
performance and in comparing the Company’s results of operations
between periods. The Company believes it is useful to provide
investors and other users of the Company’s financial statements
this performance measure to align with how management assesses the
Company’s results of operations. Adjusted EBITDA also is comparable
to a similar metric called Consolidated EBITDA, as defined in the
Company’s senior secured credit facility, which is a key component
in the determination of the Company’s compliance with some of the
covenants under the Company’s senior secured credit facility
(including the Company’s ability to service debt and incur capital
expenditures), and is used to determine the interest rate and
commitment fee payable under the senior secured credit facility
(although Adjusted EBITDA does not include all of the adjustments
described in the senior secured credit facility).
Adjusted EBITDA is not a measurement of financial performance
under U.S. GAAP. It should not be considered in isolation or as a
substitute for net income, operating income, or any other
performance measure calculated in accordance with U.S. GAAP. The
items excluded from Adjusted EBITDA are significant components in
understanding and evaluating financial performance. The Company
believes such adjustments are appropriate as the magnitude and
frequency of such items can vary significantly and are not related
to the assessment of normal operating performance. Additionally,
this calculation of Adjusted EBITDA may not be comparable to
similarly titled measures reported by other companies.
The following table reflects the reconciliation of Adjusted
EBITDA, as defined, to net (loss) income attributable to Community
Health Systems, Inc. stockholders as derived directly from the
condensed consolidated financial statements (in millions):
Three Months Ended
Year Ended December 31, December 31,
2016 2015 2016
2015
Net (loss) income attributable to
Community Health Systems, Inc. stockholders
$ (220 ) $ (83 ) $ (1,721 ) $ 158 Adjustments: Provision for
(benefit from) income taxes 37 (51 ) (104 ) 116 Depreciation and
amortization 261 297 1,100 1,172 Net income attributable to
noncontrolling interests 22 34 95 101 Loss from discontinued
operations 9 9 15 36 Interest expense, net 232 249 962 973 Loss
from early extinguishment of debt - - 30 16 Impairment and (gain)
loss on sale of businesses, net 224 62 1,919 68 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 5 3
16 4
(Income) expense from fair value
adjustments and legal expenses related to cases covered by the
CVR
(6 ) - (6 ) 8 Expenses related to the sale of a majority interest
in home care division - - 1 - Expenses related to the spin-off of
QHC - 7 12 17
Adjusted EBITDA $ 564 $ 527 $ 2,225 $ 2,670
(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 December 31, 2016 and 2015, respectively, and $5
million and $8 million for the year ended December 31, 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
Year Ended December 31, December 31,
2016 2015 2016
2015
Weighted-average number of shares
outstanding - basic
111 113 111 114 Add effect of dilutive securities: Stock awards and
options - - - 1
Weighted-average number of shares
outstanding - diluted
111 113 111 115
The Company generated a loss from continuing operations
attributable to Community Health Systems, Inc. common stockholders
for the three months and year ended December 31, 2016, and the
three months ended December 31, 2015, so the effect of dilutive
securities is not considered because their effect would be
antidilutive. If the Company had generated income from continuing
operations during the three months and year ended December 31,
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 2,938,406
shares and 2,554,627 shares, respectively. If the Company had
generated income from continuing operations during the three months
ended December 31, 2015, 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
644,334 shares.
(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
Year Ended December 31, December 31,
2016 2015 2016
2015 (Loss) income from continuing operations, as
reported $ (1.91 ) $ (0.66 ) $ (15.41 ) $ 1.68 Adjustments: Loss
from early extinguishment of debt - - 0.17 0.09 Impairment and
(gain) loss on sale of businesses, net 2.35 0.33 16.07 0.36
Expense from government and other legal
settlements and related costs
0.03 0.02 0.09 0.02
(Income) expense from fair value
adjustments and legal expenses related to cases covered by the
CVR
(0.04 ) - (0.04 ) 0.05 Gain on sale of investments in
unconsolidated affiliates - - (0.54 ) - Expense related to the
spin-off of QHC 0.02 0.04 0.10 0.09
Expenses related to the sale of a majority
interest in home care division
- - 0.01 -
Income (loss) from continuing operations,
excluding adjustments
$ 0.46 $ (0.28 ) $ 0.46 $ 2.29
Three
Months Ended Year Ended December 31, December
31, 2016 2015 2016 2015 Net
(loss) income, as reported $ (1.99 ) $ (0.73 ) $ (15.54 ) $ 1.37
Adjustments: Loss from early extinguishment of debt - - 0.17 0.09
Impairment and (gain) loss on sale of businesses, net 2.35 0.33
16.07 0.36
Expense from government and other legal
settlements and related costs
0.03 0.02 0.09 0.02
(Income) expense from fair value
adjustments and legal expenses related to cases covered by the
CVR
(0.04 ) - (0.04 ) 0.05 Gain on sale of investments in
unconsolidated affiliates - - (0.54 ) - Expense related to the
spin-off of QHC 0.02 0.04 0.10 0.09
Expenses related to the sale of a majority
interest in home care division
- - 0.01 - Net
income (loss), excluding adjustments $ 0.37 $ (0.35 ) $ 0.33
$ 1.98
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 December 31, 2016, included
non-cash net expense of approximately $224 million, primarily
related to impairment charges totaling approximately $315 million
to reduce the value of long-lived assets, primarily allocated
goodwill, at certain under-performing hospitals and hospitals that
the Company has identified for sale, which were partially offset by
the gain of $91 million on the sale of a majority ownership
interest in the Company’s home care division. Both loss from
operations and loss from continuing operations for the year ended
December 31, 2016, included an impairment charge of approximately
$1.919 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 $598 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. These
impairment charges were partially offset by the gain on the sale of
a majority ownership interest in the Company’s home care division
of $91 million. 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 finalized 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 year ended December 31, 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.
Loss from continuing operations for the three months ended
December 31, 2015, includes an impairment charge of approximately
$62 million related to the impairment of certain long-lived assets
for several smaller hospitals recorded during the three months
ended December 31, 2015. Income from continuing operations for the
year ended December 31, 2015, includes an impairment charge of
approximately $68 million which consists of $6 million related to
the allocated reporting unit goodwill for one hospital sold during
the three months ended September 30, 2015 and $62 million related
to the impairment of certain long-lived assets for several smaller
hospitals recorded during the three months ended December 31, 2015.
These hospitals were identified as having permanent indicators of
impairment due to a history of negative operating results and
declining volumes, resulting in a decline in projections of future
cash flows and estimated fair values.
(j) The $0.03 per share (diluted) and $0.09 per share (diluted)
of expense for “Government and other legal settlements and related
costs” for the three months and year ended December 31, 2016,
respectively, is the net impact of several lawsuits settled in
principle during the year ended December 31, 2016, and related
legal expenses. The $0.02 per share (diluted) of expense for
“Government and other legal settlements and related costs” for the
three months and year ended December 31, 2015, is the net impact of
several qui tam lawsuits settled in principle during the year ended
December 31, 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 $94 million gain on sale of investments
in unconsolidated affiliates during the year ended December 31,
2016.
(l) Total per share amounts may not add due to rounding.
Regulation FD Disclosure
Set forth below is selected information concerning the Company’s
projected consolidated operating results for the year ending
December 31, 2017. These projections are based on the
Company’s historical operating performance, current trends and
other assumptions that the Company believes are reasonable at this
time. The 2017 guidance should be considered in conjunction with
the assumptions included herein. See pages 19 and 20 for a list of
factors that could affect the future results of the Company or the
healthcare industry generally.
The following is provided as guidance to analysts and
investors:
2017 Projection Range Net operating
revenues less provision for bad debts (in millions) $ 15,800
to $ 16,200 Adjusted EBITDA (in millions) $
2,000 to $ 2,175 Income from continuing operations per share -
diluted $ 0.30 to $ 1.10 Same-store hospital annual adjusted
admissions growth 0.0 % to 1.5 % Weighted-average diluted shares,
in millions 112.0 to 113.0
- The divestiture of 25 hospitals, in
respect of which the Company has entered into a definitive
agreement or non-binding letters of intent, consisting of ten
separate contemplated transactions. These hospitals generated
approximately $3.0 billion of net revenue in 2016 with mid-single
digit Adjusted EBITDA margins. The Company assumes these
divestitures will generate approximately $1.5 billion in proceeds.
In addition, the divestiture of other hospitals representing
approximately 4% to 5% of 2016 net operating revenues having
mid-single digit Adjusted EBITDA margins. The Company assumes all
of these divestitures will close at various dates during the first
nine months of 2017.
- The Company’s projections also exclude
the following:
- Gains associated with the settlement of
the shareholder derivative action in January 2017;
- Payments related to the CVRs issued in
connection with the HMA acquisition, and changes in the valuation
of liabilities underlying the CVR;
- Losses from the early extinguishment of
debt;
- Impairment of goodwill and long-lived
assets;
- Restructuring costs;
- Resolution of government investigations
or other significant legal settlements;
- Costs incurred in connection with the
planned divestitures; and
- Other significant gains or losses that
neither relate to the ordinary course of business nor reflect the
Company’s underlying business performance.
- The Company has three small hospitals
which remain held for sale for which the operating results have
been classified in discontinued operations and excluded from the
Company’s guidance.
Other assumptions used in the above guidance:
- Health Information Technology (HITECH)
electronic health records incentive reimbursement of approximately
$15 million to $20 million for the year ended December 31,
2017.
- Same-store hospital annual adjusted
admissions growth of 0.0% to 1.5% for 2017, which does not take
into account service closures and weather-related or other unusual
events.
- Expressed as a percentage of net
operating revenues, depreciation and amortization of approximately
6.0% to 6.1% for 2017. Additionally, this is a fixed cost and the
percentages may change as revenue varies. Such amounts exclude the
possible impact of any future hospital fixed asset impairments and
acceleration of amortization of software to be abandoned.
- Interest expense, expressed as a
percentage of net operating revenues, of approximately 5.4% to
5.5%; however, interest expense may vary as revenue varies.
Interest expense has been adjusted to reflect the repayment of debt
with proceeds from 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 2017.
- Expressed as a percentage of net
operating revenues, net income attributable to noncontrolling
interests of approximately 0.6% to 0.7% for 2017.
- Expressed as a percentage of income
from continuing operations before income taxes, provision for
income taxes of approximately 30.0% to 31.0% for 2017, which
includes the impact of adopting ASU 2016-09 on the tax provision
for the vesting of equity-based compensation.
A reconciliation of the Company’s projected 2017 Adjusted
EBITDA, a forward-looking non-GAAP financial measure, to the
Company’s projected net income attributable to Community Health
Systems, Inc. stockholders, the most directly comparable GAAP
financial measure, is shown below:
Year Ending December 31, 2017
Low High
Net income attributable to Community
Health Systems, Inc. stockholders (1)
$ 34 $ 124 Adjustments: Depreciation and amortization 950 970
Interest expense, net 865 875 Provision for income taxes 56 101 Net
income attributable to noncontrolling interests 95
105 Adjusted EBITDA (1) $ 2,000 $ 2,175
(1) The Company does not include in this reconciliation the
impact of certain items that would be included in a reconciliation
of historical net income attributable to Community Health Systems,
Inc. stockholders to Adjusted EBITDA such as, but not limited to,
losses from early extinguishment of debt, impairment and (gain)
loss on sale of businesses, and expense (income) related to
government and other legal settlements and related costs, in light
of the fact that such items are not determinable and/or the
inherent difficulty in quantifying such projected amounts, and are
therefore not included in the Company’s forecast shown above.
- Capital expenditures are projected as
follows (in millions):
2017 Guidance Total $625
to $775
- Net cash provided by operating
activities, excluding cash flows related to the CVR and settlement
of legal contingencies, is projected as follows (in millions):
2017 Guidance Total $1,050 to
$1,225
- Weighted-average shares outstanding are
projected to be between approximately 112 million to 113 million
for 2017.
This press release contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as
amended, Section 21E of the Securities Exchange Act of 1934, as
amended, and the Private Securities Litigation Reform Act of 1995
that involve risk and uncertainties. All statements in this press
release other than statements of historical fact, including
statements regarding projections, expected operating results, and
other events that depend upon or refer to future events or
conditions or that include words such as “expects,” “anticipates,”
“intends,” “plans,” “believes,” “estimates,” “thinks,” and similar
expressions, are forward-looking statements. Although the Company
believes that these forward-looking statements are based on
reasonable assumptions, these assumptions are inherently subject to
significant economic and competitive uncertainties and
contingencies, which are difficult or impossible to predict
accurately and may be beyond the control of the Company.
Accordingly, the Company cannot give any assurance that its
expectations will in fact occur and cautions that actual results
may differ materially from those in the forward-looking statements.
A number of factors could affect the future results of the Company
or the healthcare industry generally and could cause the Company’s
expected results to differ materially from those expressed in this
press release.
These factors include, among other things:
- general economic and business
conditions, both nationally and in the regions in which we
operate;
- the impact of the 2016 federal
elections, which may lead to the repeal of or significant changes
to the Affordable Care Act, its implementation or its
interpretation, as well as changes in other federal, state or local
laws or regulations affecting our business;
- the extent to which states support
increases, decreases or changes in Medicaid programs, implement
health insurance exchanges or alter the provision of healthcare to
state residents through regulation or otherwise;
- the future and long-term viability of
health insurance exchanges, which may be affected by whether a
sufficient number of payors participate as well as the impact of
the 2016 federal elections on the Affordable Care Act;
- risks associated with our substantial
indebtedness, leverage and debt service obligations, including our
ability to refinance such indebtedness on acceptable terms or to
incur additional indebtedness;
- demographic changes;
- changes in, or the failure to comply
with, governmental regulations;
- potential adverse impact of known and
unknown government investigations, audits, and federal and state
false claims act litigation and other legal proceedings;
- our ability, where appropriate, to
enter into and maintain provider arrangements with payors and the
terms of these arrangements, which may be further affected by the
increasing consolidation of health insurers and managed care
companies;
- changes in, or the failure to comply
with, contract terms with payors and changes in reimbursement rates
paid by federal or state healthcare programs or commercial
payors;
- any potential additional impairments in
the carrying value of goodwill, other intangible assets, or other
long-lived assets, or changes in the useful lives of other
intangible assets;
- changes in inpatient or outpatient
Medicare and Medicaid payment levels;
- the effects related to the continued
implementation of the sequestration spending reductions and the
potential for future deficit reduction legislation;
- increases in the amount and risk of
collectability of patient accounts receivable, including decreases
in collectability which may result from, among other things,
self-pay growth in states that have not expanded Medicaid and
difficulties in recovering payments for which patients are
responsible, including co-pays and deductibles;
- the efforts of insurers, healthcare
providers and others to contain healthcare costs, including the
trend toward value-based purchasing;
- our ongoing ability to demonstrate
meaningful use of certified electronic health record technology and
recognize income for the related Medicare or Medicaid incentive
payments to the extent such payments have not expired;
- increases in wages as a result of
inflation or competition for highly technical positions and rising
supply and drug costs due to market pressure from pharmaceutical
companies and new product releases;
- liabilities and other claims asserted
against us, including self-insured malpractice claims;
- competition;
- our ability to attract and retain, at
reasonable employment costs, qualified personnel, key management,
physicians, nurses and other healthcare workers;
- trends toward treatment of patients in
less acute or specialty healthcare settings, including ambulatory
surgery centers or specialty hospitals;
- changes in medical or other
technology;
- changes in U.S. generally accepted
accounting principles;
- the availability and terms of capital
to fund any additional acquisitions or replacement facilities or
other capital expenditures;
- our ability to successfully make
acquisitions or complete divestitures, including the disposition of
hospitals and non-hospital businesses pursuant to our portfolio
rationalization and deleveraging strategy, our ability to complete
any such acquisitions or divestitures on desired terms or at all
(including to realize the anticipated amount of proceeds from
contemplated dispositions), the timing of the completion of any
such acquisitions or divestitures, and our ability to realize the
intended benefits from any such acquisitions or divestitures;
- 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;
- any failure to comply with the terms of
the Corporate Integrity Agreement;
- the concentration of our revenue in a
small number of states;
- our ability to realize anticipated cost
savings and other benefits from our current strategic and
operational cost savings initiatives;
- any effects of our previously 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 months and year
ended December 31, 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 2017 set forth in
this press release are given as of the date hereof based on
currently available information. The Company undertakes no
obligation to revise or update any forward-looking statements, or
to make any other forward-looking statements, whether as a result
of new information, future events or otherwise.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170220005681/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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