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CYH Announces First Quarter 2017 Results

Key Takeaway: and Chief Financial Officer HEALTH SYSTEMS, INC. ANNOUNCES FIRST QUARTER 2017 RESULTS WITH NET OPERATING REVENUES OF $4.486 BILLION FRANKLIN, Tenn. (May 1, 2017) Community Health Systems, Inc. (NYSE: CYH) (the Company ) today announced financial and operating results for the

Full Press Release Details

and Chief Financial Officer
HEALTH SYSTEMS, INC. ANNOUNCES
FIRST QUARTER 2017 RESULTS WITH NET OPERATING REVENUES OF $4.486 BILLION
FRANKLIN, Tenn. (May 1, 2017) Community Health Systems, Inc. (NYSE: CYH) (the Company ) today announced financial and operating results for
the three months ended March 31, 2017.
The following highlights the financial and operating results for the three months ended
March 31, 2017, that are further discussed below:
Financial and statistical data reported in this earnings release for 2016 include the following in operating results through the effective
date of each respective transaction:
CYH Announces First Quarter 2017 Results
Net operating revenues for the three months ended March 31, 2017, totaled $4.486
billion, a 10.3 percent decrease, compared with $4.999 billion for the same period in 2016. Loss from continuing operations attributable to Community Health Systems, Inc. common stockholders was $(198) million, or $(1.78) per share (diluted), for
the three months ended March 31, 2017, compared with income from continuing operations of $12 million, or $0.11 per share (diluted), for the same period in 2016. During the three months ended March 31, 2017, the Company recorded a non-cash
expense totaling $250 million related to impairment charges to reduce the value of long-lived assets, primarily allocated goodwill, at hospitals that the Company has identified for sale. The impairment charges do not have an impact on the
calculation of the Company s financial covenants under the Company s Credit Facility.
The results for the three months ended
March 31, 2017, included the loss of $(1.92) per share (diluted) related to impairment and (gain) loss on sale of businesses, loss of $(0.12) per share (diluted) from early extinguishment of debt, and loss of $(0.04) per share (diluted) related
to expense from fair value adjustments on the CVR agreement liability accounted for at fair value related to the HMA legal proceedings, and related legal expenses. These expenses were partially offset by income of $0.23 per share (diluted) related
to government and other legal settlements, net of related legal expenses, primarily as a result of the previously announced settlement of the shareholder derivative action in January 2017. Excluding these items, income from continuing operations was
$0.08 per share (diluted).
Net loss attributable to Community Health Systems, Inc. common stockholders was $(199) million, or $(1.79) per
share (diluted) for the three months ended March 31, 2017, compared with net income of $11 million, or $0.10 per share (diluted) for the same period in 2016. Discontinued operations for the three months ended March 31, 2017, consisted of
$(0.01) per share (diluted) of losses from operations of entities sold or held for sale for an after-tax loss of approximately $(1) million. Weighted-average shares outstanding (diluted) were 111 million for the three months ended
March 31, 2017, and 110 million for the three months ended March 31, 2016. Adjusted EBITDA for the three months ended March 31, 2017, was $527 million compared with $633 million for the same period in 2016, representing a 16.7
The consolidated operating results for the three months ended March 31, 2017, reflect an 11.5 percent decrease in
total admissions, and a 12.5 percent decrease in total adjusted admissions, compared with the same period in 2016. On a same-store basis, admissions decreased 1.5 percent and adjusted admissions decreased 1.4 percent during the three months ended
March 31, 2017, compared with the same period in 2016. On a same-store basis, net operating revenues increased 0.7 percent during the three months ended March 31, 2017, compared with the same period in 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 and (gain) loss on sale of businesses, gain on sale of investments in unconsolidated affiliates, expense incurred related to the spin-off of QHC,
expense incurred related to the sale of a majority ownership interest in the Company s home care division, (income) expense related to government and other legal settlements and related costs, and 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.
CYH Announces First Quarter 2017 Results
Commenting on the results, Wayne T. Smith, chairman and chief executive officer of Community
Health Systems, Inc., said, We continue to make good progress on our strategic and operational initiatives, and we are pleased to see these efforts reflected in our first quarter results. We are focused on performance improvements that we
believe will yield additional efficiencies as we move through 2017. At the same time, we are making progress with our portfolio rationalization strategy as we work to create a stronger, more sustainable company for the future and further reduce our
Included on pages 14, 15, 16 and 17 of this press release are tables setting forth the Company s 2017 annual earnings
guidance. The updated 2017 guidance is based on the Company s historical operating performance, current trends and other assumptions that the Company believes are reasonable at this time, and reflects the impact of 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. The Company, through its subsidiaries, owns, leases or operates 146 affiliated hospitals in 21 states with an aggregate of approximately 24,000 licensed
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, May 2, 2017, at 11:00 a.m. Central, 12:00 noon Eastern, to review
financial and operating results for the first quarter ended March 31, 2017. Investors will have the opportunity to listen to a live Internet broadcast of the conference call by clicking on the Investor Relations link of the Company s
website at www.chs.net. To listen to the live call, please go to the website at least fifteen minutes early to register, download and install any necessary audio software. For those who cannot listen to the live broadcast, a replay will
be available shortly after the call and will continue to be available through May 9, 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.
CYH Announces First Quarter 2017 Results
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
Financial Highlights (a)(b)(c)(d)
(In millions, except per share amounts)
Three Months Ended March 31,
2017 2016
Net operating revenues $ 4,486 $ 4,999
(Loss) income from continuing operations (f), (i) (176 ) 37
Net (loss) income attributable to Community Health Systems, Inc. stockholders (199 ) 11
Adjusted EBITDA (e) 527 633
Net cash provided by operating activities 242 294
Basic (loss) earnings per share attributable to Community Health Systems, Inc. common stockholders:
Continuing operations (f), (i) $ (1.78 ) $ 0.11
Discontinued operations (0.01 ) (0.01 )
Net (loss) income $ (1.79 ) $ 0.10
Diluted (loss) earnings per share attributable to Community Health Systems, Inc. common stockholders:
Continuing operations (f), (h), (i) $ (1.78 ) $ 0.11
Discontinued operations (0.01 ) (0.01 )
Net (loss) income (h) $ (1.79 ) $ 0.10
Weighted-average number of shares outstanding (g):
Basic 111 110
Diluted 111 110
footnotes, see pages 10, 11, 12 and 13.
CYH Announces First Quarter 2017 Results
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Loss (Income) (a)(b)(c)(d)
(In millions, except per share amounts)
Three Months Ended March 31,
2017 2016
Amount % of Net Operating Revenues Amount % of Net Operating Revenues
Operating revenues (net of contractual allowances and discounts) $ 5,168 $ 5,754
Provision for bad debts 682 755
Net operating revenues 4,486 100.0% 4,999 100.0%
Operating costs and expenses:
Salaries and benefits 2,061 45.9% 2,317 46.3%
Supplies 749 16.7% 799 16.0%
Other operating expenses 1,057 23.5% 1,173 23.5%
Government and other legal settlements and related costs (j) (41 ) (0.9)% %
Electronic health records incentive reimbursement (6 ) (0.1)% (18 ) (0.4)%
Rent 109 2.4% 119 2.4%
Depreciation and amortization 236 5.3% 298 6.0%
Impairment and (gain) loss on sale of businesses, net (i) 250 5.6% 17 0.3%
Total operating costs and expenses 4,415 98.4% 4,705 94.1%
Income from operations (f), (i) 71 1.6% 294 5.9%
Interest expense, net 229 5.1% 251 5.0%
Loss from early extinguishment of debt 21 0.5% %
Equity in earnings of unconsolidated affiliates (3 ) (0.1)% (20 ) (0.4)%
(Loss) income from continuing operations before income taxes (176 ) (3.9)% 63 1.3%
Provision for income taxes % 26 0.6%
(Loss) income from continuing operations (f), (i) (176 ) (3.9)% 37 0.7%
Discontinued operations, net of taxes:
Loss from operations of entities sold or held for sale (1 ) % %
Impairment of hospitals sold or held for sale % (1 ) %
Loss from discontinued operations, net of taxes (1 ) % (1 ) %
Net (loss) income (177 ) (3.9)% 36 0.7%
Less: Net income attributable to noncontrolling interests 22 0.5% 25 0.5%
Net (loss) income attributable to Community Health Systems, Inc. stockholders $ (199 ) (4.4)% $ 11 0.2%
Basic (loss) income per share attributable to Community Health Systems, Inc. common stockholders:
Continuing operations (f), (i) $ (1.78 ) $ 0.11
Discontinued operations (0.01 ) (0.01 )
Net (loss) income $ (1.79 ) $ 0.10
Diluted (loss) income per share attributable to Community Health Systems, Inc. common stockholders:
Continuing operations (f), (h), (i) $ (1.78 ) $ 0.11
Discontinued operations (0.01 ) (0.01 )
Net (loss) income (h) $ (1.79 ) $ 0.10
Weighted-average number of shares outstanding (g):
Basic 111 110
Diluted 111 110
footnotes, see pages 10, 11, 12 and 13.
CYH Announces First Quarter 2017 Results
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Comprehensive Loss
Three Months Ended March 31,
2017 2016
Net (loss) income $ (177 ) $ 36
Other comprehensive income (loss), net of income taxes:
Net change in fair value of interest rate swaps, net of tax 5 (19 )
Net change in fair value of available-for-sale securities, net of tax 3 2
Amortization and recognition of unrecognized pension cost components, net of tax 1
Other comprehensive income (loss) 8 (16 )
Comprehensive (loss) income (169 ) 20
Less: Comprehensive income attributable to noncontrolling interests 22 25
Comprehensive loss attributable to Community Health Systems, Inc. stockholders $ (191 ) $ (5 )
footnotes, see pages 10, 11, 12 and 13.
CYH Announces First Quarter 2017 Results
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
Selected Operating Data (a)(c)
(Dollars in millions)
Three Months Ended March 31,
Consolidated Same-Store
2017 2016 % Change 2017 2016 % Change
Number of hospitals (at end of period) 155 194 154 154
Licensed beds (at end of period) 26,009 29,936 25,989 26,261
Beds in service (at end of period) 23,336 26,285 23,316 23,300
Admissions 212,242 239,700 -11.5 % 211,090 214,289 -1.5 %
Adjusted admissions 449,012 513,192 -12.5 % 446,053 452,436 -1.4 %
Patient days 972,885 1,076,226 969,056 973,873
Average length of stay (days) 4.6 4.5 4.6 4.5
Occupancy rate (average beds in service) 46.5 % 45.1 % 46.5 % 46.1 %
Net operating revenues $ 4,486 $ 4,999 -10.3 % $ 4,424 $ 4,392 0.7 %
Net inpatient revenues as a % of net patient revenues before provision for bad debts 43.9 % 43.9 % 43.9 % 44.2 %
Net outpatient revenues as a % of net patient revenues before provision for bad debts 56.1 % 56.1 % 56.1 % 55.8 %
Income from operations (f), (i) $ 71 $ 294 -75.9 %
Income from operations as a % of net operating revenues 1.6 % 5.9 %
Depreciation and amortization $ 236 $ 298
Equity in earnings of unconsolidated affiliates $ (3 ) $ (20 )
Net (loss) income attributable to Community Health Systems, Inc. stockholders $ (199 ) $ 11 -1909.1 %
Net (loss) income attributable to Community Health Systems, Inc. stockholders as a % of net operating revenues -4.4 % 0.2 %
Adjusted EBITDA (e) $ 527 $ 633 -16.7 %
Adjusted EBITDA as a % of net operating revenues 11.7 % 12.7 %
Net cash provided by operating activities $ 242 $ 294 -17.7 %
footnotes, see pages 10, 11, 12 and 13.
CYH Announces First Quarter 2017 Results
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets (b)
(In millions, except share data)
March 31, 2017 December 31, 2016
ASSETS
Current assets
Cash and cash equivalents $ 247 $ 238
Patient accounts receivable, net of allowance for doubtful accounts of $3,729 and $3,773 at March 31, 2017 and December 31, 2016, respectively 3,164 3,176
Supplies 458 480
Prepaid income taxes 17 17
Prepaid expenses and taxes 218 187
Other current assets 671 568
Total current assets 4,775 4,666
Property and equipment, gross 11,824 12,422
Less accumulated depreciation and amortization (4,185 ) (4,273 )
Property and equipment, net 7,639 8,149
Goodwill 6,327 6,521
Other assets, net 2,919 2,608
Total assets $ 21,660 $ 21,944
LIABILITIES AND EQUITY
Current liabilities
Current maturities of long-term debt $ 558 $ 455
Accounts payable 988 995
Accrued interest 145 207
Accrued liabilities 1,305 1,230
Total current liabilities 2,996 2,887
Long-term debt 14,687 14,789
Deferred income taxes 415 411
Other long-term liabilities 1,469 1,575
Total liabilities 19,567 19,662
Redeemable noncontrolling interests in equity of consolidated subsidiaries 552 554
EQUITY
Community Health Systems, Inc. stockholders equity:
Preferred stock, $.01 par value per share, 100,000,000 shares authorized; none issued
Common stock, $.01 par value per share, 300,000,000 shares authorized; 114,690,205 shares issued and outstanding at March 31, 2017, and 113,876,580 shares issued and outstanding at December 31, 2016 1 1
Additional paid-in capital 1,980 1,975
Accumulated other comprehensive loss (54 ) (62 )
Accumulated deficit (498 ) (299 )
Total Community Health Systems, Inc. stockholders equity 1,429 1,615
Noncontrolling interests in equity of consolidated subsidiaries 112 113
Total equity 1,541 1,728
Total liabilities and equity $ 21,660 $ 21,944
footnotes, see pages 10, 11, 12 and 13.
CYH Announces First Quarter 2017 Results
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows (b)
Three Months Ended March 31,
2017 2016
Cash flows from operating activities
Net (loss) income $ (177 ) $ 36
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization 236 298
Government and other legal settlements and related costs (j) (1 )
Stock-based compensation expense 9 14
Impairment of hospitals sold or held for sale 1
Impairment and (gain) loss on sale of businesses, net (i) 250 17
Loss from early extinguishment of debt 21
Other non-cash expenses, net 8 14
Changes in operating assets and liabilities, net of effects of acquisitions and divestitures:
Patient accounts receivable 11 (109 )
Supplies, prepaid expenses and other current assets (67 ) (14 )
Accounts payable, accrued liabilities and income taxes (14 ) 64
Other (34 ) (27 )
Net cash provided by operating activities 242 294
Cash flows from investing activities
Acquisitions of facilities and other related equipment (2 ) (99 )
Purchases of property and equipment (146 ) (224 )
Proceeds from disposition of hospitals and other ancillary operations 12
Proceeds from sale of property and equipment 4
Purchases of available-for-sale securities (12 ) (37 )
Proceeds from sales of available-for-sale securities 26 40
Increase in other investments (37 ) (67 )
Net cash used in investing activities (171 ) (371 )
Cash flows from financing activities
Repurchase of restricted stock shares for payroll tax withholding requirements (5 ) (7 )
Deferred financing costs and other debt-related costs (40 )
Proceeds from noncontrolling investors in joint ventures 5
Redemption of noncontrolling investments in joint ventures (4 ) (16 )
Distributions to noncontrolling investors in joint ventures (28 ) (18 )
Borrowings under credit agreements 610 1,564
Issuance of long-term debt 2,200
Proceeds from receivables facility 26 31
Repayments of long-term indebtedness (2,826 ) (1,480 )
Net cash (used in) provided by financing activities (62 ) 74
Net change in cash and cash equivalents 9 (3 )
Cash and cash equivalents at beginning of period 238 184
Cash and cash equivalents at end of period $ 247 $ 181
footnotes, see pages 10, 11, 12 and 13.
CYH Announces First Quarter 2017 Results
Footnotes to Financial Highlights, Financial Statements and Selected Operating Data
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 March 31, 2017
Legal and other related costs incurred to date $ 33
Settlements 30
Estimated liability for probable contingencies
Estimated liability for unresolved contingencies at fair value 258
Costs incurred plus certain estimated liabilities for CVR-related matters 321
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 $ 274
CVRs outstanding 265
Three Months Ended March 31,
2017 2016
(Loss) income from continuing operations attributable to Community Health Systems, Inc. common stockholders:
(Loss) income from continuing operations, net of taxes $ (176 ) $ 37
Less: Income from continuing operations attributable to noncontrolling interests, net of taxes 22 25
(Loss) income from continuing operations attributable to Community Health Systems, Inc. common stockholders basic and diluted $ (198 ) $ 12
CYH Announces First Quarter 2017 Results
Footnotes to Financial Highlights, Financial Statements and Selected Operating Data
Three Months Ended March 31,
2017 2016
Loss from discontinued operations attributable to Community Health Systems, Inc. common stockholders:
Loss from discontinued operations, net of taxes $ (1 ) $ (1 )
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 $ (1 ) $ (1 )
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.
CYH Announces First Quarter 2017 Results
Footnotes to Financial Highlights, Financial Statements and Selected Operating Data
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 March 31,
2017 2016
Net (loss) income attributable to Community Health Systems, Inc. stockholders $ (199 ) $ 11
Adjustments:
Provision for income taxes 26
Depreciation and amortization 236 298
Net income attributable to noncontrolling interests 22 25
Loss from discontinued operations 1 1
Interest expense, net 229 251
Loss from early extinguishment of debt 21
Impairment and (gain) loss on sale of businesses, net 250 17
(Income) expense from government and other legal settlements and related costs (41 )
Expense from fair value adjustments and legal expenses related to cases covered by the CVR 7
Expenses related to the sale of a majority interest in home care division 1
Expenses related to the spin-off of QHC 4
Adjusted EBITDA $ 527 $ 633
Last updated: May 1, 2017