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CYH Announces Second Quarter 2016 Results

Key Takeaway: Investor Contact: W. Larry Cash President of Financial Services and Chief Financial Officer (615) 465-7000 COMMUNITY HEALTH SYSTEMS, INC. ANNOUNCES SECOND QUARTER 2016 RESULTS WITH NET OPERATING REVENUES OF $4.590 BILLION FRANKLIN, Tenn. (August 2, 2016) - Community Hea

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
SECOND QUARTER 2016 RESULTS WITH NET OPERATING REVENUES OF $4.590 BILLION
FRANKLIN, Tenn. (August 2, 2016) - Community Health Systems, Inc. (NYSE: CYH) (the Company ) today announced financial and operating results for
the three and six months ended June 30, 2016.
On April 29, 2016, the Company completed the spin-off of Quorum Health Corporation
( QHC ), comprised of 38 affiliated hospitals and related outpatient services in 16 states, together with Quorum Health Resources, LLC, a subsidiary providing management advisory and consulting services to non-affiliated hospitals.
Following the spin-off, QHC became an independent public company with its common stock listed for trading under the symbol QHC on the New York Stock Exchange. Financial and statistical data reported in this earnings release include QHC
operating results through the spin-off date. Same-store operating results and statistical data exclude information for the hospitals divested in the spin-off of QHC in both the 2016 periods and the comparable periods in 2015.
Net operating revenues for the three months ended June 30, 2016, totaled $4.590 billion, a 6.0 percent decrease compared with $4.882 billion
for the same period in 2015. Income from continuing operations attributable to Community Health Systems, Inc. common stockholders decreased to a loss of $(1.431) billion, or $(12.90) per share (diluted), for the three months ended June 30, 2016,
compared with income from continuing operations of $117 million, or $1.01 per share (diluted), for the same period in 2015. During the three months ended June 30, 2016, the Company recorded a non-cash impairment charge of $1.400 billion to reduce
the value of goodwill for the Company s hospital reporting unit; a charge of $169 million to reduce the value of long-lived assets at certain hospitals that the Company is currently marketing for sale; and a charge of $70 million to reduce the
value of long-lived assets at certain under-performing hospitals. The impairment charge recorded for goodwill is an estimated charge resulting 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. These impairment charges do not have an impact on the calculation of the Company s financial covenants under the Company s Credit Facility. The results for the three months ended June 30, 2016,
included the loss of $(13.29) per share (diluted) related to impairment of goodwill and long-lived assets, loss of $(0.18) per share (diluted) from early extinguishment of debt and loss of $(0.07) per share (diluted) related to expenses from the
spin-off of QHC, which were partially offset by income of $0.54 per share (diluted) related to the gain on sale of investments in unconsolidated affiliates in connection with the Company s sale of its minority equity interests in five hospitals
located in Las Vegas, Nevada, on April 29, 2016. Excluding these items, income from continuing operations was $0.09 per share (diluted).
Net income attributable to Community Health Systems, Inc. common stockholders was a loss of $(12.91) per share (diluted) for the three months
ended June 30, 2016, compared with income of $0.95 per share (diluted) for the same period in 2015. Discontinued operations for the three months ended June 30, 2016, consisted of $(0.01) per share (diluted) of losses from operations of entities sold
or held for sale for a total after-tax loss of approximately $(1) million or $(0.01) per share (diluted). Weighted-average shares outstanding (diluted) were 111 million for the three months ended June 30, 2016, and 116 million for the three months
ended June 30, 2015.
CYH Announces Second Quarter 2016 Results
Net cash provided by operating activities for the three months ended June 30, 2016, was $338 million compared with $565 million for the same
period in 2015, representing a 40.2 percent decrease. Adjusted EBITDA for the three months ended June 30, 2016, was $563 million compared with $769 million for the same period in 2015, representing a 26.8 percent decrease.
The consolidated operating results for the three months ended June 30, 2016, reflect a 9.1 percent decrease in total admissions, and an 8.5
percent decrease in total adjusted admissions, compared with the same period in 2015. On a same-store basis, admissions decreased 2.1 percent and adjusted admissions decreased 0.6 percent during the three months ended June 30, 2016, compared with
the same period in 2015. On a same-store basis, net operating revenues increased 1.2 percent during the three months ended June 30, 2016, compared with the same period in 2015.
Net operating revenues for the six months ended June 30, 2016, totaled $9.589 billion, a 2.1 percent decrease compared with $9.793 billion for
the same period in 2015. Income from continuing operations attributable to Community Health Systems, Inc. common stockholders decreased to a loss of $(1.418) billion, or $(12.82) per share (diluted), for the six months ended June 30, 2016, compared
with income from continuing operations of $209 million, or $1.80 per share (diluted), for the same period in 2015. The results for the six months ended June 30, 2016, included the loss of $(13.45) per share (diluted) related to impairment of
goodwill and long-lived assets, loss of $(0.18) per share (diluted) from early extinguishment of debt and loss of $(0.09) per share (diluted) related to expenses from the spin-off of QHC, which were partially offset by income of $0.54 per share
(diluted) related to the gain on sale of investments in unconsolidated affiliates, as noted above. Excluding these items, income from continuing operations was $0.36 per share (diluted).
Net income attributable to Community Health Systems, Inc. common stockholders was a loss of $(12.85) per share (diluted) for the six months
ended June 30, 2016, compared with income of $1.64 per share (diluted) for the same period in 2015. Discontinued operations for the six months ended June 30, 2016, consisted of $(0.02) per share (diluted) of losses from operations of entities sold
or held for sale and $(0.01) per share (diluted) of expenses related to the impairment of long-lived assets held for sale, for a total after-tax loss of approximately $(3) million, or $(0.03) per share (diluted). Weighted-average shares outstanding
(diluted) were 111 million for the six months ended June 30, 2016, and 116 million for the six months ended June 30, 2015.
provided by operating activities for the six months ended June 30, 2016, was $632 million compared with $504 million for the same period in 2015, representing a 25.4 percent increase. Adjusted EBITDA for the six months ended June 30, 2016, was
$1.196 billion compared with $1.483 billion for the same period in 2015, representing a 19.4 percent decrease.
The consolidated operating
results for the six months ended June 30, 2016, reflect a 5.7 percent decrease in total admissions, and a 3.9 percent decrease in total adjusted admissions, compared with the same period in 2015. On a same-store basis, admissions decreased 2.1
percent while adjusted admissions increased 0.4 percent during the six months ended June 30, 2016, compared with the same period in 2015. On a same-store basis, net operating revenues increased 1.8 percent during the six months ended June 30, 2016,
compared with the same period in 2015.
CYH Announces Second Quarter 2016 Results
Adjusted EBITDA, a non-GAAP financial measure, is EBITDA adjusted to exclude discontinued operations, loss from early extinguishment of debt,
impairment of goodwill and long-lived assets, gain on sale of investments in unconsolidated affiliates, net income attributable to noncontrolling interests, acquisition and integration expenses from the acquisition of Health Management Associates,
Inc. ( HMA ), expenses incurred related to the spin-off of QHC, expense (income) related to government legal settlements and related costs, and expense (income) from fair value adjustments related to the HMA legal proceedings, accounted
for at fair value, underlying the CVR agreement, and related legal expenses. For information regarding why the Company believes Adjusted EBITDA presents useful information to investors, and for a reconciliation of Adjusted EBITDA to net cash
provided by operating activities, see footnote (e) to the Financial Highlights, Financial Statements and Selected Operating Data below.
Commenting on the results, Wayne T. Smith, chairman and chief executive officer of Community Health Systems, Inc., said, During the
second quarter, we completed the successful spin-off of Quorum Health Corporation. Additional divestiture activity is underway as part of our portfolio rationalization strategy, which we believe will ultimately produce a higher performing, more
sustainable group of hospitals and outpatient services. We also revised our organization structure and promoted key leaders into new roles. While our operating performance fell short of expectations this period, our management team and local
operators are aggressively pursuing key initiatives and growth opportunities in markets where we believe we have the greatest potential to generate better operational and financial results.
Included on pages 16, 17, 18 and 19 of this press release are tables setting forth the Company s updated 2016 annual earnings guidance.
The 2016 guidance is based on the Company s historical operating performance, current trends and other assumptions that the Company believes are reasonable at this time, and reflects the impact of the spin-off of QHC and other planned
divestitures that the Company expects to occur in 2016.
Community Health Systems, Inc. is one of the largest publicly traded hospital
companies in the United States and a leading operator of general acute care hospitals in communities across the country. After giving effect to the spin-off noted above, the Company, through its subsidiaries, owns, leases or operates 159 affiliated
hospitals in 22 states with an aggregate of nearly 27,000 licensed beds.
The Company s headquarters are located in Franklin,
Tennessee, a suburb south of Nashville. Shares in Community Health Systems, Inc. are traded on the New York Stock Exchange under the symbol CYH. More information about the Company can be found on its website at www.chs.net.
Community Health Systems, Inc. will hold a conference call on Wednesday, August 3, 2016, at 10:00 a.m. Central, 11:00 a.m. Eastern, to review
financial and operating results for the second quarter ended June 30, 2016. Investors will have the opportunity to listen to a live internet broadcast of the conference call by clicking on the Investor Relations link of the Company s website at
www.chs.net. To listen to the live call, please go to the website at least fifteen minutes early to register, download and install any necessary audio software. For those who cannot listen to the live broadcast, a replay will be
available shortly after the call and will continue to be available through September 3, 2016. Copies of this press release and conference call slide show, as well as the Company s Current Report on Form 8-K (including this press release), will
be available on the Company s website at www.chs.net.
CYH Announces Second Quarter 2016 Results
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
Financial Highlights (a)(b)(c)(d)
(In millions, except per share amounts)
Three Months Ended June 30, Six Months Ended June 30,
2016 2015 2016 2015
Net operating revenues $ 4,590 $ 4,882 $ 9,589 $ 9,793
(Loss) income from continuing operations (f), (i), (k) (1,405 ) 140 (1,368 ) 252
Net (loss) income attributable to Community Health Systems, Inc. stockholders (1,432 ) 111 (1,421 ) 189
Adjusted EBITDA (e) 563 769 1,196 1,483
Net cash provided by operating activities 338 565 632 504
Basic (loss) earnings per share attributable to Community Health Systems, Inc. common stockholders:
Continuing operations (f), (i) $ (12.90 ) $ 1.02 $ (12.82 ) $ 1.82
Discontinued operations (0.01 ) (0.06 ) (0.03 ) (0.17 )
Net (loss) income $ (12.91 ) $ 0.96 $ (12.85 ) $ 1.65
Diluted (loss) earnings per share attributable to Community Health Systems, Inc. common stockholders (l):
Continuing operations (f), (h), (i) $ (12.90 ) $ 1.01 $ (12.82 ) $ 1.80
Discontinued operations (0.01 ) (0.06 ) (0.03 ) (0.17 )
Net (loss) income (h) $ (12.91 ) $ 0.95 $ (12.85 ) $ 1.64
Weighted-average number of shares outstanding (g):
Basic 111 115 111 115
Diluted 111 116 111 116
footnotes, see pages 12, 13, 14 and 15.
CYH Announces Second Quarter 2016 Results
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of (Loss) Income (a)(b)(c)(d)
(In millions, except per share amounts)
Three Months Ended June 30,
2016 2015
Amount % of Net Operating Revenues Amount % of Net Operating Revenues
Operating revenues (net of contractual allowances and discounts) $ 5,290 $ 5,614
Provision for bad debts 700 732
Net operating revenues 4,590 100.0 % 4,882 100.0 %
Operating costs and expenses:
Salaries and benefits 2,154 46.9 % 2,217 45.4 %
Supplies 759 16.6 % 750 15.4 %
Other operating expenses 1,056 23.1 % 1,125 23.0 %
Government settlement and related costs (j) % (6 ) (0.1 )%
Electronic health records incentive reimbursement (31 ) (0.7 )% (55 ) (1.1 )%
Rent 112 2.4 % 113 2.3 %
Depreciation and amortization 276 6.0 % 291 6.0 %
Impairment of goodwill and long-lived assets (i) 1,639 35.7 % 6 0.1 %
Total operating costs and expenses 5,965 130.0 % 4,441 91.0 %
(Loss) income from operations (f), (i) (1,375 ) (30.0 )% 441 9.0 %
Interest expense, net 246 5.4 % 239 4.9 %
Loss from early extinguishment of debt 30 0.7 % 9 0.2 %
Gain on sale of investments in unconsolidated affiliates (k) (94 ) (2.1 )% %
Equity in earnings of unconsolidated affiliates (14 ) (0.4 )% (21 ) (0.4 )%
(Loss) income from continuing operations before income taxes (1,543 ) (33.6 )% 214 4.3 %
(Benefit from) provision for income taxes (138 ) (3.0 )% 74 1.5 %
(Loss) income from continuing operations (f), (i), (k) (1,405 ) (30.6 )% 140 2.8 %
Discontinued operations, net of taxes:
Loss from operations of entities sold or held for sale (1 ) (0.0 )% (6 ) (0.1 )%
Loss from discontinued operations, net of taxes (1 ) % (6 ) (0.1 )%
Net (loss) income (1,406 ) (30.6 )% 134 2.7 %
Less: Net income attributable to noncontrolling interests 26 0.6 % 23 0.4 %
Net (loss) income attributable to Community Health Systems, Inc. stockholders $ (1,432 ) (31.2 )% $ 111 2.3 %
Basic (loss) earnings per share attributable to Community Health Systems, Inc. common stockholders:
Continuing operations (f), (i), (k) $ (12.90 ) $ 1.02
Discontinued operations (0.01 ) (0.06 )
Net (loss) income $ (12.91 ) $ 0.96
Diluted (loss) earnings per share attributable to Community Health Systems, Inc. common stockholders:
Continuing operations (f), (h), (i), (k) $ (12.90 ) $ 1.01
Discontinued operations (0.01 ) (0.06 )
Net (loss) income (h) $ (12.91 ) $ 0.95
Weighted-average number of shares outstanding (g):
Basic 111 115
Diluted 111 116
footnotes, see pages 12, 13, 14 and 15.
CYH Announces Second Quarter 2016 Results
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of (Loss) Income (a)(b)(c)(d)
(In millions, except per share amounts)
Six Months Ended June 30,
2016 2015
Amount % of Net Operating Revenues Amount % of Net Operating Revenues
Operating revenues (net of contractual allowances and discounts) $ 11,044 $ 11,260
Provision for bad debts 1,455 1,467
Net operating revenues 9,589 100.0 % 9,793 100.0 %
Operating costs and expenses:
Salaries and benefits 4,470 46.6 % 4,474 45.7 %
Supplies 1,559 16.3 % 1,512 15.4 %
Other operating expenses 2,229 23.2 % 2,225 22.8 %
Government settlement and related costs (j) 1 0.0 % 1 0.0 %
Electronic health records incentive reimbursement (49 ) (0.5 )% (81 ) (0.8 )%
Rent 231 2.4 % 229 2.3 %
Depreciation and amortization 574 6.0 % 587 6.0 %
Impairment of goodwill and long-lived assets (i) 1,656 17.3 % 6 0.1 %
Total operating costs and expenses 10,671 111.3 % 8,953 91.5 %
(Loss) income from operations (f), (i) (1,082 ) (11.3 )% 840 8.5 %
Interest expense, net 496 5.2 % 481 4.8 %
Loss from early extinguishment of debt 30 0.3 % 16 0.2 %
Gain on sale of investments in unconsolidated affiliates (k) (94 ) (1.0 )% %
Equity in earnings of unconsolidated affiliates (34 ) (0.4 )% (39 ) (0.4 )%
(Loss) income from continuing operations before income taxes (1,480 ) (15.4 )% 382 3.9 %
(Benefit from) provision for income taxes (112 ) (1.1 )% 130 1.3 %
(Loss) income from continuing operations (f), (i), (k) (1,368 ) (14.3 )% 252 2.6 %
Discontinued operations, net of taxes:
Loss from operations of entities sold or held for sale (2 ) (0.0 )% (17 ) (0.2 )%
Impairment of hospitals sold or held for sale (1 ) (0.0 )% (2 ) (0.0 )%
Loss on sale, net % (1 ) (0.0 )%
Loss from discontinued operations, net of taxes (3 ) (0.0 )% (20 ) (0.2 )%
Net (loss) income (1,371 ) (14.3 )% 232 2.4 %
Less: Net income attributable to noncontrolling interests 50 0.5 % 43 0.5 %
Net (loss) income attributable to Community Health Systems, Inc. stockholders $ (1,421 ) (14.8 )% $ 189 1.9 %
Basic (loss) earnings per share attributable to Community Health Systems, Inc. common stockholders:
Continuing operations (f), (i), (k) $ (12.82 ) $ 1.82
Discontinued operations (0.03 ) (0.17 )
Net (loss) income $ (12.85 ) $ 1.65
Diluted (loss) earnings per share attributable to Community Health Systems, Inc. common stockholders (l):
Continuing operations (f), (h), (i), (k) $ (12.82 ) $ 1.80
Discontinued operations (0.03 ) (0.17 )
Net (loss) income (h) $ (12.85 ) $ 1.64
Weighted-average number of shares outstanding (g):
Basic 111 115
Diluted 111 116
footnotes, see pages 12, 13, 14 and 15.
CYH Announces Second Quarter 2016 Results
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Comprehensive (Loss) Income
Three Months Ended June 30, Six Months Ended June 30,
2016 2015 2016 2015
Net (loss) income $ (1,406 ) $ 134 $ (1,371 ) $ 232
Other comprehensive (loss) income, net of income taxes:
Net change in fair value of interest rate swaps, net of tax (2 ) 8 (21 ) (1 )
Net change in fair value of available-for-sale securities, net of tax (3 ) (2 ) (1 ) (1 )
Amortization and recognition of unrecognized pension cost components, net of tax 2 3 1
Other comprehensive (loss) income (3 ) 6 (19 ) (1 )
Comprehensive (loss) income (1,409 ) 140 (1,390 ) 231
Less: Comprehensive income attributable to noncontrolling interests 26 23 50 43
Comprehensive (loss) income attributable to Community Health Systems, Inc. stockholders $ (1,435 ) $ 117 $ (1,440 ) $ 188
footnotes, see pages 12, 13, 14 and 15.
CYH Announces Second Quarter 2016 Results
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
Selected Operating Data (a)(c)
(Dollars in millions)
Three Months Ended June 30,
Consolidated Same-Store
2016 2015 % Change 2016 2015 % Change
Number of hospitals (at end of period) 156 196 153 153
Licensed beds (at end of period) 26,366 29,964 26,065 26,177
Beds in service (at end of period) 23,371 26,206 23,206 23,112
Admissions 212,259 233,517 -9.1 % 202,702 207,091 -2.1 %
Adjusted admissions 468,087 511,456 -8.5 % 444,270 446,912 -0.6 %
Patient days 947,492 1,033,244 909,067 928,935
Average length of stay (days) 4.5 4.4 4.5 4.5
Occupancy rate (average beds in service) 42.5 % 43.0 % 42.8 % 43.8 %
Net operating revenues $ 4,590 $ 4,882 -6.0 % $ 4,339 $ 4,286 1.2 %
Net inpatient revenues as a % of net patient revenues before provision for bad debts 42.8 % 42.4 % 43.0 % 42.4 %
Net outpatient revenues as a % of net patient revenues before provision for bad debts 57.2 % 57.6 % 57.0 % 57.6 %
(Loss) income from operations (f), (i) $ (1,375 ) $ 441 -411.8 %
(Loss) income from operations as a % of net operating revenues -30.0 % 9.0 %
Depreciation and amortization $ 276 $ 291
Equity in earnings of unconsolidated affiliates $ (14 ) $ (21 )
Liquidity Data:
Adjusted EBITDA (e) $ 563 $ 769 -26.8 %
Adjusted EBITDA as a % of net operating revenues 12.3 % 15.8 %
Net cash provided by operating activities $ 338 $ 565 -40.2 %
Net cash provided by operating activities as a % of net operating revenues 7.4 % 11.6 %
footnotes, see pages 12, 13, 14 and 15.
CYH Announces Second Quarter 2016 Results
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
Selected Operating Data (a)(c)
(Dollars in millions)
Last updated: Aug 2, 2016