Full Press Release Details
COMMUNITY HEALTH SYSTEMS, INC. ANNOUNCES
FOURTH QUARTER AND YEAR ENDED 2018 RESULTS AND GUIDANCE
FRANKLIN, Tenn. (February 20, 2019) Community Health Systems, Inc. (NYSE: CYH) (the Company ) today announced financial and operating
results for the three months and year ended December 31, 2018.
The following highlights the financial and operating results for the
three months ended December 31, 2018.
Net operating revenues for the three months ended
December 31, 2018, totaled $3.453 billion, a 12.9 percent increase, compared with $3.059 billion for the same period in 2017.
Net loss attributable to Community Health Systems, Inc. common stockholders was $(328) million, or $(2.91) per share (diluted), for the three
months ended December 31, 2018, compared with $(2.013) billion, or $(17.98) per share (diluted), for the same period in 2017. Excluding the adjusting items as presented in the table in footnote (e) on page 15, net loss attributable to
Community Health Systems, Inc. common stockholders was $(0.42) per share (diluted), for the three months ended December 31, 2018, compared with $(0.28) per share (diluted) for the same period in 2017. Weighted-average shares outstanding
(diluted) were 113 million for the three months ended December 31, 2018, and 112 million for the three months ended December 31, 2017. Adjusted EBITDA for the three months ended December 31, 2018, was $419 million
compared with $409 million for the same period in 2017, representing a 2.4 percent increase.
The consolidated operating results
for the three months ended December 31, 2018, reflect a 9.7 percent decrease in total admissions, and a 9.8 percent decrease in total adjusted admissions, compared with the same period in 2017. On a same-store basis, admissions
decreased 0.5 percent and adjusted admissions increased 0.1 percent for the three months ended December 31, 2018, compared with the same period in 2017. On a same-store basis, net operating revenues increased 1.9 percent for the
three months ended December 31, 2018, compared with the same period in 2017.
Net operating revenues for the year ended
December 31, 2018, totaled $14.155 billion, a 7.8 percent decrease, compared with $15.353 billion for the same period in 2017.
CYH Announces Fourth Quarter and Year-End 2018 Results
Net loss attributable to Community Health Systems, Inc. common stockholders was $(788)
million, or $(6.99) per share (diluted), for the year ended December 31, 2018, compared with $(2.459) billion, or $(22.00) per share (diluted), for the same period in 2017. Excluding the adjusting items as presented in the table in footnote
(e) on page 15, net loss attributable to Community Health Systems, Inc. common stockholders was $(1.94) per share (diluted) for the year ended December 31, 2018, compared with net loss of $(1.26) per share (diluted) for the same period in
2017. Weighted-average shares outstanding (diluted) were 113 million for the year ended December 31, 2018, and 112 million for the year ended December 31, 2017. Adjusted EBITDA for the year ended December 31, 2018, was
$1.642 billion compared with $1.703 billion for the same period in 2017, representing a 3.6 percent decrease.
consolidated operating results for the year ended December 31, 2018, reflect a 15.0 percent decrease in total admissions, and a 15.3 percent decrease in total adjusted admissions, compared with the same period in 2017. On a same-store
basis, admissions decreased 1.3 percent and adjusted admissions decreased 0.4 percent for the year ended December 31, 2018, compared with the same period in 2017. On a same-store basis, net operating revenues increased
2.8 percent for the year ended December 31, 2018, compared with the same period in 2017.
Commenting on the results, Wayne T.
Smith, chairman and chief executive officer of Community Health Systems, Inc., said, Our fourth quarter marked a strong finish to the year. During 2018, our market leaders made significant progress across areas such as our patient safety and
connectivity, competitive position in core markets, and operational efficiency. These strategic investments and our solid execution drove enhanced same store performance during 2018. In 2019, we believe that we have a number of opportunities to
further leverage these strategic initiatives to drive incremental growth, and achieve additional progress as we further strengthen our core portfolio and reduce our debt.
On February 15, 2019, the Company amended its Credit Facility, with requisite covenant lender approval, to amend the first lien net debt
to EBITDA ratio financial covenant and to reduce the extended revolving credit commitments to $385 million. In addition, the Company agreed pursuant to the amendment to further restrict its ability to make restricted payments.
The Company completed 11 hospital divestitures during 2018 and has completed three additional hospital divestitures to date in 2019. In
addition, the Company has entered into definitive agreements to sell four additional hospitals, which divestitures have not yet been completed. The Company also permanently closed three hospitals in 2018. The Company intends to continue its
portfolio rationalization strategy in 2019 and is pursuing additional interests for sale transactions, which are currently in various stages of negotiation with potential buyers. There can be no assurance that these potential divestitures (or the
potential divestitures currently subject to definitive agreements) will be completed, or if they are completed, the ultimate timing of the completion of these divestitures. The Company continues to receive interest from potential acquirers for
certain of its hospitals.
On September 25, 2018, the Company issued a press release to announce a global resolution and settlement
agreements ending the U.S. Department of Justice investigation into certain conduct of Health Management Associates, Inc. ( HMA ) and its affiliated entities and settling qui tam lawsuits that were initiated and pending, and known to the
Company, before the Company s acquisition by merger of HMA in 2014. The Company previously recorded an estimated liability at fair value of the remaining underlying claims that are covered by the CVR agreement as part of the acquisition
accounting for HMA. Under this settlement, the Company made payments totaling $266 million, including interest, in the fourth quarter of 2018. In addition, certain components of the settlement payment are not deductible for income taxes because
of recent changes to the U.S. tax code from the Tax Cuts and Jobs Act enacted in December 2017, which resulted in approximately $34 million in deferred tax expense during 2018 related to the previously recorded deferred tax assets. After giving
effect to this settlement, as previously disclosed, no amount was payable by the Company under the CVR agreement, and the CVRs have been removed from listing with Nasdaq and deregistered with the Securities and Exchange Commission.
CYH Announces Fourth Quarter and Year-End 2018 Results
Financial and statistical data for 2018 and 2017 presented in this press release includes the
operating results of divested hospitals through the effective closing date of each respective divestiture. Same-store operating results exclude the results of the hospitals divested or closed in 2018 and 2017, and is adjusted to exclude the impact
of the change in estimate related to net patient revenue recorded during the three months ended December 31, 2017.
Information About Non-GAAP Financial Measures
This earnings release presents Adjusted EBITDA, a non-GAAP financial measure, which is EBITDA adjusted to add back net income attributable to noncontrolling interests and to exclude the effect of discontinued operations, loss (gain) 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, expense (income) related to government and other legal settlements and related costs, expense related to employee termination benefits and other restructuring charges, expense
(income) from settlement and fair value adjustments on the CVR agreement liability related to the HMA legal proceedings and related legal expenses, and the overall impact of the change in estimate related to net patient revenue recorded in the
fourth quarter of 2017 resulting from the increase in contractual allowances and the provision for bad debts.
For information regarding
why the Company believes Adjusted EBITDA provides useful information to investors, and for a reconciliation of Adjusted EBITDA to net income attributable to Community Health Systems, Inc. stockholders, see footnote (c) to the Financial
Highlights, Financial Statements and Selected Operating Data below.
Additionally, this earnings release presents adjusted loss from
continuing operations attributable to Community Health Systems, Inc. common stockholders per share (diluted) and adjusted net loss attributable to Community Health Systems, Inc. common stockholders per share (diluted) to reflect the impact on these
earnings per share figures from the selected items used in the calculation of Adjusted EBITDA. For a presentation and reconciliation of these non-GAAP financial measures, and information regarding why the
Company believes these non-GAAP financial measures provide useful information to investors, see footnote (e) to the Financial Highlights, Financial Statements and Selected Operating Data below.
Included on pages 17, 18, 19 and 20 of this press release are tables setting forth the Company s 2019 annual earnings guidance. The 2019
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 in 2019.
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 110 affiliated hospitals in 19 states with an aggregate of approximately 18,000 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 Thursday, February 21, 2019, 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, 2018. 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 for approximately 30 days. 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 2018 Results
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
Financial Highlights (a)(b)
(In millions, except per share amounts)
| Three Months Ended December 31, | Year Ended December 31, | |||||||||||||||
| 2018 | 2017 | 2018 | 2017 | |||||||||||||
| Net operating revenues (h) | $ | 3,453 | $ | 3,059 | $ | 14,155 | $ | 15,353 | ||||||||
| Loss from continuing operations (f), (g) | (299 | ) | (2,004 | ) | (704 | ) | (2,384 | ) | ||||||||
| Net loss attributable to Community Health Systems, Inc. stockholders | (328 | ) | (2,013 | ) | (788 | ) | (2,459 | ) | ||||||||
| Adjusted EBITDA (c) | 419 | 409 | 1,642 | 1,703 | ||||||||||||
| Net cash (used in) provided by operating activities | (165 | ) | 156 | 274 | 773 | |||||||||||
| Basic loss per share attributable to Community Health Systems, Inc. common stockholders: | ||||||||||||||||
| Continuing operations (f), (g) | $ | (2.91 | ) | $ | (17.95 | ) | $ | (6.99 | ) | $ | (21.89 | ) | ||||
| Discontinued operations | (0.03 | ) | (0.11 | ) | ||||||||||||
| Net loss | $ | (2.91 | ) | $ | (17.98 | ) | $ | (6.99 | ) | $ | (22.00 | ) | ||||
| Diluted loss per share attributable to Community Health Systems, Inc. common stockholders: | ||||||||||||||||
| Continuing operations (e), (f), (g) | $ | (2.91 | ) | $ | (17.95 | ) | $ | (6.99 | ) | $ | (21.89 | ) | ||||
| Discontinued operations | (0.03 | ) | (0.11 | ) | ||||||||||||
| Net loss (e) | $ | (2.91 | ) | $ | (17.98 | ) | $ | (6.99 | ) | $ | (22.00 | ) | ||||
| Weighted-average number of shares outstanding (d): | ||||||||||||||||
| Basic | 113 | 112 | 113 | 112 | ||||||||||||
| Diluted | 113 | 112 | 113 | 112 |
footnotes, see pages 12, 13, 14, 15 and 16.
CYH Announces Fourth Quarter and Year-End 2018 Results
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Loss (a)(b)
(In millions, except per share amounts)
| Three Months Ended December 31, | ||||||||||||||||
| 2018 | 2017 | |||||||||||||||
| Amount | % of Net Operating Revenues | Amount | % of Net Operating Revenues | |||||||||||||
| Operating revenues (net of contractual allowances and discounts) | $ | 4,076 | ||||||||||||||
| Provision for bad debts | 1,017 | |||||||||||||||
| Net operating revenues (h) | $ | 3,453 | 100.0 | % | 3,059 | 100.0 | % | |||||||||
| Operating costs and expenses: | ||||||||||||||||
| Salaries and benefits | 1,534 | 44.4 | % | 1,671 | 54.6 | % | ||||||||||
| Supplies | 582 | 16.9 | % | 616 | 20.1 | % | ||||||||||
| Other operating expenses | 849 | 24.6 | % | 881 | 28.9 | % | ||||||||||
| Government and other legal settlements and related costs (g) | 2 | 0.1 | % | 1 | % | |||||||||||
| Electronic health records incentive reimbursement | (2 | ) | (0.1 | )% | (3 | ) | (0.1 | )% | ||||||||
| Rent | 81 | 2.3 | % | 88 | 2.9 | % | ||||||||||
| Depreciation and amortization | 169 | 4.9 | % | 196 | 6.4 | % | ||||||||||
| Impairment and (gain) loss on sale of businesses, net (f) | 354 | 10.3 | % | 1,760 | 57.5 | % | ||||||||||
| Total operating costs and expenses | 3,569 | 103.4 | % | 5,210 | 170.3 | % | ||||||||||
| Loss from operations (f), (g) | (116 | ) | (3.4 | )% | (2,151 | ) | (70.3 | )% | ||||||||
| Interest expense, net | 257 | 7.4 | % | 225 | 7.4 | % | ||||||||||
| Loss from early extinguishment of debt | 1 | 0.0 | % | 5 | 0.2 | % | ||||||||||
| Equity in earnings of unconsolidated affiliates | (5 | ) | (0.1 | )% | (2 | ) | (0.1 | )% | ||||||||
| Loss from continuing operations before income taxes | (369 | ) | (10.7 | )% | (2,379 | ) | (77.8 | )% | ||||||||
| Benefit from income taxes | (70 | ) | (2.0 | )% | (375 | ) | (12.3 | )% | ||||||||
| Loss from continuing operations (f), (g) | (299 | ) | (8.7 | )% | (2,004 | ) | (65.5 | )% | ||||||||
| Discontinued operations, net of taxes: | ||||||||||||||||
| Loss from operations of entities sold or held for sale | % | (3 | ) | (0.1 | )% | |||||||||||
| Impairment of hospitals sold or held for sale | % | % | ||||||||||||||
| Loss from discontinued operations, net of taxes | % | (3 | ) | (0.1 | )% | |||||||||||
| Net loss | (299 | ) | (8.7 | )% | (2,007 | ) | (65.6 | )% | ||||||||
| Less: Net income attributable to noncontrolling interests | 29 | 0.8 | % | 6 | 0.2 | % | ||||||||||
| Net loss attributable to Community Health Systems, Inc. stockholders | $ | (328 | ) | (9.5 | )% | $ | (2,013 | ) | (65.8 | )% | ||||||
| Basic loss per share attributable to Community Health Systems, Inc. common stockholders: | ||||||||||||||||
| Continuing operations (f), (g) | $ | (2.91 | ) | $ | (17.95 | ) | ||||||||||
| Discontinued operations | (0.03 | ) | ||||||||||||||
| Net loss | $ | (2.91 | ) | $ | (17.98 | ) | ||||||||||
| Diluted loss per share attributable to Community Health Systems, Inc. common stockholders: | ||||||||||||||||
| Continuing operations (e), (f), (g) | $ | (2.91 | ) | $ | (17.95 | ) | ||||||||||
| Discontinued operations | (0.03 | ) | ||||||||||||||
| Net loss (e) | $ | (2.91 | ) | $ | (17.98 | ) | ||||||||||
| Weighted-average number of shares outstanding (d): | ||||||||||||||||
| Basic | 113 | 112 | ||||||||||||||
| Diluted | 113 | 112 |
footnotes, see pages 12, 13, 14, 15 and 16.
CYH Announces Fourth Quarter and Year-End 2018 Results
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Loss (a)(b)
(In millions, except per share amounts)
| Year Ended December 31, | ||||||||||||||||
| 2018 | 2017 | |||||||||||||||
| Amount | % of Net Operating Revenues | Amount | % of Net Operating Revenues | |||||||||||||
| Operating revenues (net of contractual allowances and discounts) | $ | 18,398 | ||||||||||||||
| Provision for bad debts | 3,045 | |||||||||||||||
| Net operating revenues (h) | $ | 14,155 | 100.0 | % | 15,353 | 100.0 | % | |||||||||
| Operating costs and expenses: | ||||||||||||||||
| Salaries and benefits | 6,384 | 45.1 | % | 7,376 | 48.0 | % | ||||||||||
| Supplies | 2,355 | 16.6 | % | 2,672 | 17.4 | % | ||||||||||
| Other operating expenses | 3,496 | 24.7 | % | 3,864 | 25.2 | % | ||||||||||
| Government and other legal settlements and related costs (g) | 11 | 0.1 | % | (31 | ) | (0.2 | )% | |||||||||
| Electronic health records incentive reimbursement | (4 | ) | % | (28 | ) | (0.2 | )% | |||||||||
| Rent | 337 | 2.4 | % | 394 | 2.6 | % | ||||||||||
| Depreciation and amortization | 700 | 4.9 | % | 861 | 5.6 | % | ||||||||||
| Impairment and (gain) loss on sale of businesses, net (f) | 668 | 4.7 | % | 2,123 | 13.8 | % | ||||||||||
| Total operating costs and expenses | 13,947 | 98.5 | % | 17,231 | 112.2 | % | ||||||||||
| Income (loss) from operations (f), (g) | 208 | 1.5 | % | (1,878 | ) | (12.2 | )% | |||||||||
| Interest expense, net | 976 | 6.9 | % | 931 | 6.1 | % | ||||||||||
| (Gain) loss from early extinguishment of debt | (31 | ) | (0.2 | )% | 40 | 0.3 | % | |||||||||
| Equity in earnings of unconsolidated affiliates | (22 | ) | (0.2 | )% | (16 | ) | (0.1 | )% | ||||||||
| Loss from continuing operations before income taxes | (715 | ) | (5.0 | )% | (2,833 | ) | (18.5 | )% | ||||||||
| Benefit from income taxes | (11 | ) | % | (449 | ) | (3.0 | )% | |||||||||
| Loss from continuing operations (f), (g) | (704 | ) | (5.0 | )% | (2,384 | ) | (15.5 | )% | ||||||||
| Discontinued operations, net of taxes: | ||||||||||||||||
| Loss from operations of entities sold or held for sale | % | (6 | ) | (0.1 | )% | |||||||||||
| Impairment of hospitals sold or held for sale | % | (6 | ) | % | ||||||||||||
| Loss from discontinued operations, net of taxes | % | (12 | ) | (0.1 | )% | |||||||||||
| Net loss | (704 | ) | (5.0 | )% | (2,396 | ) | (15.6 | )% | ||||||||
| Less: Net income attributable to noncontrolling interests | 84 | 0.6 | % | 63 | 0.4 | % | ||||||||||
| Net loss attributable to Community Health Systems, Inc. stockholders | $ | (788 | ) | (5.6 | )% | $ | (2,459 | ) | (16.0 | )% | ||||||
| Basic loss per share attributable to Community Health Systems, Inc. common stockholders: | ||||||||||||||||
| Continuing operations (f), (g) | $ | (6.99 | ) | $ | (21.89 | ) | ||||||||||
| Discontinued operations | (0.11 | ) | ||||||||||||||
| Net loss | $ | (6.99 | ) | $ | (22.00 | ) | ||||||||||
| Diluted loss per share attributable to Community Health Systems, Inc. common stockholders: | ||||||||||||||||
| Continuing operations (e), (f), (g) | $ | (6.99 | ) | $ | (21.89 | ) | ||||||||||
| Discontinued operations | (0.11 | ) | ||||||||||||||
| Net loss (e) | $ | (6.99 | ) | $ | (22.00 | ) | ||||||||||
| Weighted-average number of shares outstanding (d): | ||||||||||||||||
| Basic | 113 | 112 | ||||||||||||||
| Diluted | 113 | 112 |
footnotes, see pages 12, 13, 14, 15 and 16.
CYH Announces Fourth Quarter and Year-End 2018 Results
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Comprehensive Loss
| Three Months Ended December 31, | Year Ended December 31, | |||||||||||||||
| 2018 | 2017 | 2018 | 2017 | |||||||||||||
| Net loss | $ | (299 | ) | $ | (2,007 | ) | $ | (704 | ) | $ | (2,396 | ) | ||||
| Other comprehensive (loss) income, net of income taxes: | ||||||||||||||||
| Net change in fair value of interest rate swaps, net of tax | (6 | ) | 11 | 20 | 19 | |||||||||||
| Net change in fair value of available-for-sale securities, net of tax | 1 | 1 | (2 | ) | 8 | |||||||||||
| Amortization and recognition of unrecognized pension cost components, net of tax | (2 | ) | 12 | (1 | ) | 14 | ||||||||||
| Other comprehensive (loss) income | (7 | ) | 24 | 17 | 41 | |||||||||||
| Comprehensive loss | (306 | ) | (1,983 | ) | (687 | ) | (2,355 | ) | ||||||||
| Less: Comprehensive income attributable to noncontrolling interests | 29 | 6 | 84 | 63 | ||||||||||||
| Comprehensive loss attributable to Community Health Systems, Inc. stockholders | $ | (335 | ) | $ | (1,989 | ) | $ | (771 | ) | $ | (2,418 | ) |
footnotes, see pages 12, 13, 14, 15 and 16.
CYH Announces Fourth Quarter and Year-End 2018 Results
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
Selected Operating Data (a)
(Dollars in millions)
| Three Months Ended December 31, | ||||||||||||||||||||||||
| Consolidated | Same-Store | |||||||||||||||||||||||
| 2018 | 2017 | % Change | 2018 | 2017 | % Change | |||||||||||||||||||
| Number of hospitals (at end of period) | 113 | 125 | 112 | 112 | ||||||||||||||||||||
| Licensed beds (at end of period) | 18,227 | 20,850 | 18,101 | 18,204 | ||||||||||||||||||||
| Beds in service (at end of period) | 16,297 | 18,457 | 16,187 | 16,340 | ||||||||||||||||||||
| Admissions | 148,402 | 164,365 | -9.7 | % | 145,169 | 145,875 | -0.5 | % | ||||||||||||||||
| Adjusted admissions | 320,447 | 355,418 | -9.8 | % | 312,979 | 312,556 | 0.1 | % | ||||||||||||||||
| Patient days | 664,848 | 726,882 | 650,538 | 644,774 | ||||||||||||||||||||
| Average length of stay (days) | 4.5 | 4.4 | 4.5 | 4.4 | ||||||||||||||||||||
| Occupancy rate (average beds in service) | 43.2 | % | 42.8 | % | 43.7 | % | 42.9 | % | ||||||||||||||||
| Net operating revenues (h) | $ | 3,453 | $ | 3,059 | 12.9 | % | $ | 3,400 | $ | 3,337 | 1.9 | % | ||||||||||||
| Net inpatient revenues as a % of net operating revenues (1) | 47.6 | % | 47.2 | % | 47.5 | % | 46.9 | % | ||||||||||||||||
| Net outpatient revenues as a % of net operating revenues (1) | 52.4 | % | 52.8 | % | 52.5 | % | 53.1 | % | ||||||||||||||||
| Loss from operations (f), (g) | $ | (116 | ) | $ | (2,151 | ) | 94.6 | % | ||||||||||||||||
| Loss from operations as a % of net operating revenues | -3.4 | % | -70.3 | % | ||||||||||||||||||||
| Depreciation and amortization | $ | 169 | $ | 196 | ||||||||||||||||||||
| Equity in earnings of unconsolidated affiliates | $ | (5 | ) | $ | (2 | ) | ||||||||||||||||||
| Net loss attributable to Community Health Systems, Inc. stockholders | $ | (328) | $ | (2,013 | ) | 83.7 | % | |||||||||||||||||
| Net loss attributable to Community Health Systems, Inc. stockholders as a % of net operating revenues | -9.5 | % | -65.8 | % | ||||||||||||||||||||
| Adjusted EBITDA (c) | $ | 419 | $ | 409 | 2.4 | % | ||||||||||||||||||
| Adjusted EBITDA as a % of net operating revenues | 12.1 | % | 13.4 | % | ||||||||||||||||||||
| Net cash (used in) provided by operating activities | $ | (165 | ) | $ | 156 | -205.8 | % |