Full Press Release Details
COMMUNITY HEALTH SYSTEMS, INC. ANNOUNCES
SECOND QUARTER 2019 RESULTS
FRANKLIN, Tenn. (August 5, 2019)
Community Health Systems, Inc. (NYSE: CYH) (the Company ) today announced financial and operating results for the three and six months ended June 30, 2019.
The following highlights the financial and operating results for the three months ended June 30, 2019.
Net operating revenues for the three months ended June 30, 2019,
totaled $3.302 billion, a 7.3 percent decrease, compared with $3.562 billion for the same period in 2018.
Net loss attributable to
Community Health Systems, Inc. common stockholders was $(167) million, or $(1.47) per share (diluted), for the three months ended June 30, 2019, compared with $(110) million, or $(0.97) per share (diluted), for the same period in 2018.
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 $(0.47) per share (diluted), for the three months ended June 30, 2019,
compared with net loss of $(0.01) per share (diluted) for the same period in 2018. Weighted-average shares outstanding (diluted) were 114 million for the three months ended June 30, 2019, and 113 million for the three months ended
Adjusted EBITDA for the three months ended June 30, 2019, was $402 million compared with $411 million for the
same period in 2018, representing a 2.2 percent decrease.
The consolidated operating results for the three months ended June 30,
2019, reflect an 11.5 percent decrease in total admissions, and a 12.3 percent decrease in total adjusted admissions, compared with the same period in 2018. On a same-store basis, admissions increased 2.3 percent and adjusted admissions increased
1.8 percent for the three months ended June 30, 2019, compared with the same period in 2018. On a same-store basis, net operating revenues increased 4.9 percent for the three months ended June 30, 2019, compared with the same period in
CYH Announces Second Quarter 2019 Results
Net operating revenues for the six months ended June 30, 2019, totaled $6.679 billion, a
7.9 percent decrease, compared with $7.251 billion for the same period in 2018.
Net loss attributable to Community Health Systems, Inc.
common stockholders was $(285) million, or $(2.51) per share (diluted), for the six months ended June 30, 2019, compared with $(135) million, or $(1.20) per share (diluted), for the same period in 2018. 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 $(1.00) per share (diluted), for the six months ended June 30, 2019, compared with net income of $0.12 per
share (diluted) for the same period in 2018. Weighted-average shares outstanding (diluted) were 114 million for the six months ended June 30, 2019, and 113 million for the six months ended June 30, 2018.
Adjusted EBITDA for the six months ended June 30, 2019, was $793 million compared with $851 million for the same period in 2018,
representing a 6.8 percent decrease.
The consolidated operating results for the six months ended June 30, 2019, reflect a 12.5
percent decrease in both total admissions and total adjusted admissions, compared with the same period in 2018. On a same-store basis, admissions increased 1.1 percent and adjusted admissions increased 1.3 percent for the six months ended
June 30, 2019, compared with the same period in 2018. On a same-store basis, net operating revenues increased 4.0 percent for the six months ended June 30, 2019, compared with the same period in 2018.
Commenting on the results, Wayne T. Smith, chairman and chief executive officer of Community Health Systems, Inc., said, The second
quarter results reflect continued improvements in key operating metrics. Our hospital leadership teams are making progress across our strategic imperatives including Safety and Quality, Operational Excellence, Connected Care, and Competitive
Position. We believe strategic investments in our transfer program, Accountable Care Organizations, service lines, and access points are driving stronger same-store volume and net revenue performance. We also believe that continued execution of
these strategic initiatives, along with effective expense management, will lead to incremental growth in the back half of the year.
The Company completed seven hospital divestitures during the six months ended June 30, 2019 (including two divestitures that
preliminarily closed on December 31, 2018) and completed the divestiture of an additional two hospitals on August 1, 2019. In addition, the Company has entered into definitive agreements to sell three additional hospitals, which
divestitures have not yet been completed. The Company intends to continue its portfolio rationalization strategy during the remainder of 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 divestiture currently subject to a definitive agreement) 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.
Financial and statistical data for 2018 and the three and six months ended June 30, 2019 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 during the six months ended June 30,
CYH Announces Second Quarter 2019 Results
Certain significant adjustments impacting reported amounts for the three and six months ended
June 30, 2019, which have been taken into account in connection with the calculation of Adjusted EBITDA and non-GAAP adjusted net loss attributable to Community Health Systems, Inc. common stockholders per share (diluted) are further discussed
During the year ended December 31, 2017, the Company sold two of its hospitals in the state of Washington to a buyer where a portion of
the proceeds were paid through the issuance of a promissory note for the benefit of CHS/Community Health Systems, Inc., a wholly-owned subsidiary of the Company. During the three months ended June 30, 2019, the buyer of these hospitals, which
was the maker of the note filed for Chapter 11 bankruptcy protection, which caused the Company to reserve the outstanding balance of the note. The Company has petitioned the bankruptcy court for the full amount owed under the note, but based on
management s assessment of the ability of this entity to make payment in connection with these bankruptcy court proceedings, the full amount of the note was reserved during the three months ended June 30, 2019 through a non-cash operating
expense of $23 million included in other operating expenses on the condensed consolidated statement of loss.
The non-cash expense
recorded for this valuation allowance does not have an impact on the calculation of the Company s financial covenants under the Company s Credit Facility.
During the six months ended June 30, 2019, the Company experienced a significant increase in the amounts paid to settle outstanding
professional liability claims, compared to the same period in the prior year and to previous actuarially determined estimates. This increase in claims paid related to claims incurred in 2016 and prior years and was primarily related to divested
hospitals. The settlement of these claims at amounts greater than the previously determined actuarial estimates resulted in the Company recording a $70 million change in estimate during the three months ended June 30, 2019.
This change in estimate is not expected to have a material impact on professional liability expense on a prospective basis and does not have
an impact on the calculation of the Company s financial covenants under the Company s Credit Facility.
Information About Non-GAAP Financial
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, 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, 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, the impact of a change in estimate to increase the professional liability claims accrual recorded during the second quarter of 2019 with respect to claims
incurred in 2016 and prior years and expense related to the valuation allowance recorded in the second quarter of 2019 to reserve the outstanding balance of a promissory note received from the buyer in connection with the sale of two of the
Company s hospitals in 2017 as noted above. For information regarding why the Company believes Adjusted EBITDA provides useful information to investors, and for a reconciliation of Adjusted EBITDA to net (loss) income attributable to Community
Health Systems, Inc. stockholders, see footnote (c) to the Financial Highlights, Financial Statements and Selected Operating Data below.
CYH Announces Second Quarter 2019 Results
Additionally, this earnings release presents adjusted net (loss) income attributable to
Community Health Systems, Inc. common stockholders per share (diluted), a non-GAAP financial measure, to reflect the impact on net (loss) income attributable to Community Health Systems, Inc. common stockholders per share (diluted) from the selected
items used in the calculation of Adjusted EBITDA. For information regarding why the Company believes this non-GAAP financial measure provides useful information to investors, and for a reconciliation of this non-GAAP financial measure to net (loss)
income attributable to Community Health Systems, Inc. common stockholders per share (diluted), see footnote (e) to the Financial Highlights, Financial Statements and Selected Operating Data below.
Included on pages 16, 17, 18 and 19 of this press release are tables setting forth the Company s 2019 updated 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 105 affiliated hospitals in 18 states with an aggregate of approximately 17,000 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, August 6, 2019, at 10:00 a.m. Central, 11:00 a.m. Eastern, to
review financial and operating results for the second quarter ended June 30, 2019. 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 Second Quarter 2019 Results
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
Financial Highlights (a)(b)
(In millions, except per share amounts)
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2019 | 2018 | 2019 | 2018 | |||||||||||||
| Net operating revenues | $ | 3,302 | $ | 3,562 | $ | 6,679 | $ | 7,251 | ||||||||
| Net loss (f), (g) | (146 | ) | (91 | ) | (246 | ) | (98 | ) | ||||||||
| Net loss attributable to Community Health Systems, Inc. stockholders | (167 | ) | (110 | ) | (285 | ) | (135 | ) | ||||||||
| Adjusted EBITDA (c) | 402 | 411 | 793 | 851 | ||||||||||||
| Net cash provided by (used in) operating activities | 132 | (12 | ) | 265 | 94 | |||||||||||
| Loss per share attributable to Community Health Systems, Inc. common stockholders: | ||||||||||||||||
| Basic (f), (g) | $ | (1.47 | ) | $ | (0.97 | ) | $ | (2.51 | ) | $ | (1.20 | ) | ||||
| Diluted (e), (f), (g) | (1.47 | ) | (0.97 | ) | (2.51 | ) | (1.20 | ) | ||||||||
| Weighted-average number of shares outstanding (d): | ||||||||||||||||
| Basic | 114 | 113 | 114 | 113 | ||||||||||||
| Diluted | 114 | 113 | 114 | 113 |
footnotes, see pages 13, 14 and 15.
CYH Announces Second Quarter 2019 Results
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Loss (a)(b)
(In millions, except per share amounts)
| Three Months Ended June 30, | ||||||||||||||||
| 2019 | 2018 | |||||||||||||||
| Amount | % of Net Operating Revenues | Amount | % of Net Operating Revenues | |||||||||||||
| Net operating revenues | $ | 3,302 | 100.0 | % | $ | 3,562 | 100.0 | % | ||||||||
| Operating costs and expenses: | ||||||||||||||||
| Salaries and benefits | 1,488 | 45.1 | % | 1,617 | 45.4 | % | ||||||||||
| Supplies | 539 | 16.3 | % | 592 | 16.6 | % | ||||||||||
| Other operating expenses | 893 | 27.0 | % | 879 | 24.7 | % | ||||||||||
| Government and other legal settlements and related costs (g) | 4 | 0.1 | % | 1 | % | |||||||||||
| Electronic health records incentive reimbursement | % | % | ||||||||||||||
| Lease cost and rent | 81 | 2.5 | % | 85 | 2.4 | % | ||||||||||
| Depreciation and amortization | 153 | 4.6 | % | 177 | 5.0 | % | ||||||||||
| Impairment and (gain) loss on sale of businesses, net (f) | 33 | 1.0 | % | 174 | 4.9 | % | ||||||||||
| Total operating costs and expenses | 3,191 | 96.6 | % | 3,525 | 99.0 | % | ||||||||||
| Income from operations (f), (g) | 111 | 3.4 | % | 37 | 1.0 | % | ||||||||||
| Interest expense, net | 265 | 8.0 | % | 235 | 6.6 | % | ||||||||||
| Loss (gain) from early extinguishment of debt | % | (64 | ) | (1.8 | )% | |||||||||||
| Equity in earnings of unconsolidated affiliates | (5 | ) | (0.1 | )% | (5 | ) | (0.2 | )% | ||||||||
| Loss before income taxes | (149 | ) | (4.5 | )% | (129 | ) | (3.6 | )% | ||||||||
| Benefit from income taxes | (3 | ) | (0.1 | )% | (38 | ) | (1.0 | )% | ||||||||
| Net loss (f), (g) | (146 | ) | (4.4 | )% | (91 | ) | (2.6 | )% | ||||||||
| Less: Net income attributable to noncontrolling interests | 21 | 0.7 | % | 19 | 0.5 | % | ||||||||||
| Net loss attributable to Community Health Systems, Inc. stockholders | $ | (167 | ) | (5.1 | )% | $ | (110 | ) | (3.1 | )% | ||||||
| Loss per share attributable to Community Health Systems, Inc. common stockholders: | ||||||||||||||||
| Basic (f), (g) | $ | (1.47 | ) | $ | (0.97 | ) | ||||||||||
| Diluted (e), (f), (g) | $ | (1.47 | ) | $ | (0.97 | ) | ||||||||||
| Weighted-average number of shares outstanding (d): | ||||||||||||||||
| Basic | 114 | 113 | ||||||||||||||
| Diluted | 114 | 113 |
footnotes, see pages 13, 14 and 15.
CYH Announces Second Quarter 2019 Results
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Loss (a)(b)
(In millions, except per share amounts)
| Six Months Ended June 30, | ||||||||||||||||
| 2019 | 2018 | |||||||||||||||
| Amount | % of Net Operating Revenues | Amount | % of Net Operating Revenues | |||||||||||||
| Net operating revenues | $ | 6,679 | 100.0 | % | $ | 7,251 | 100.0 | % | ||||||||
| Operating costs and expenses: | ||||||||||||||||
| Salaries and benefits | 3,030 | 45.4 | % | 3,265 | 45.0 | % | ||||||||||
| Supplies | 1,097 | 16.4 | % | 1,208 | 16.7 | % | ||||||||||
| Other operating expenses | 1,704 | 25.5 | % | 1,789 | 24.7 | % | ||||||||||
| Government and other legal settlements and related costs (g) | 9 | 0.1 | % | 7 | 0.1 | % | ||||||||||
| Electronic health records incentive reimbursement | % | (1 | ) | % | ||||||||||||
| Lease cost and rent | 162 | 2.4 | % | 173 | 2.4 | % | ||||||||||
| Depreciation and amortization | 305 | 4.6 | % | 358 | 4.9 | % | ||||||||||
| Impairment and (gain) loss on sale of businesses, net (f) | 71 | 1.1 | % | 202 | 2.8 | % | ||||||||||
| Total operating costs and expenses | 6,378 | 95.5 | % | 7,001 | 96.6 | % | ||||||||||
| Income from operations (f), (g) | 301 | 4.5 | % | 250 | 3.4 | % | ||||||||||
| Interest expense, net | 522 | 7.8 | % | 464 | 6.4 | % | ||||||||||
| Loss (gain) from early extinguishment of debt | 31 | 0.5 | % | (59 | ) | (0.8 | )% | |||||||||
| Equity in earnings of unconsolidated affiliates | (9 | ) | (0.2 | )% | (12 | ) | (0.2 | )% | ||||||||
| Loss before income taxes | (243 | ) | (3.6 | )% | (143 | ) | (2.0 | )% | ||||||||
| Provision for (benefit from) income taxes | 3 | 0.1 | % | (45 | ) | (0.6 | )% | |||||||||
| Net loss (f), (g) | (246 | ) | (3.7 | )% | (98 | ) | (1.4 | )% | ||||||||
| Less: Net income attributable to noncontrolling interests | 39 | 0.6 | % | 37 | 0.5 | % | ||||||||||
| Net loss attributable to Community Health Systems, Inc. stockholders | $ | (285 | ) | (4.3 | )% | $ | (135 | ) | (1.9 | )% | ||||||
| Loss per share attributable to Community Health Systems, Inc. common stockholders: | ||||||||||||||||
| Basic (f), (g) | $ | (2.51 | ) | $ | (1.20 | ) | ||||||||||
| Diluted (e), (f), (g) | $ | (2.51 | ) | $ | (1.20 | ) | ||||||||||
| Weighted-average number of shares outstanding (d): | ||||||||||||||||
| Basic | 114 | 113 | ||||||||||||||
| Diluted | 114 | 113 |
footnotes, see pages 13, 14 and 15.
CYH Announces Second Quarter 2019 Results
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Comprehensive Loss