Full Press Release Details
| Investor Contact: | W. Larry Cash | |
| President of Financial Services | ||
| and Chief Financial Officer | ||
| (615) 465-7000 |
COMMUNITY HEALTH SYSTEMS, INC. ANNOUNCES
FOURTH QUARTER AND YEAR-END 2016 RESULTS AND 2017 GUIDANCE
FRANKLIN, Tenn. (February 20, 2017) Community Health Systems, Inc. (NYSE: CYH) (the
Company ) today announced financial and operating results for the three months and year ended December 31, 2016.
following highlights the financial and operating results for the three months ended December 31, 2016, that are further discussed below:
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.
CYH Announces Fourth Quarter and Year-End 2016 Results
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
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.
CYH Announces Fourth Quarter and Year-End 2016 Results
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.
CYH Announces Fourth Quarter and Year-End 2016 Results
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.
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.
CYH Announces Fourth Quarter and Year-End 2016 Results
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
Financial Highlights (a)(b)(c)(d)
(In millions, except per share amounts)
| 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 |
footnotes, see pages 13, 14, 15 and 16.
CYH Announces Fourth Quarter and Year-End 2016 Results
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Loss (a)(b)(c)(d)
(In millions, except per share amounts)
| 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 |
footnotes, see pages 13, 14, 15 and 16.
CYH Announces Fourth Quarter and Year-End 2016 Results
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of (Loss) Income (a)(b)(c)(d)
(In millions, except per share amounts)
| 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 |
footnotes, see pages 13, 14, 15 and 16.
CYH Announces Fourth Quarter and Year-End 2016 Results