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
THIRD QUARTER 2016 RESULTS WITH NET OPERATING REVENUES OF $4.380 BILLION
FRANKLIN, Tenn. (November 1, 2016) Community Health Systems, Inc. (NYSE: CYH) (the Company ) today announced financial and operating results
for the three and nine months ended September 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 September 30, 2016, totaled $4.380 billion, a 9.6 percent decrease compared with $4.846
billion for the same period in 2015. Income from continuing operations attributable to Community Health Systems, Inc. common stockholders decreased to a loss of $(77) million, or $(0.69) per share (diluted), for the three months ended September 30,
2016, compared with income from continuing operations of $60 million, or $0.51 per share (diluted), for the same period in 2015. During the three months ended September 30, 2016, the Company recorded a non-cash impairment charge totaling $39
million, primarily related to the allocation of hospital reporting unit goodwill to four hospitals classified as held for sale in September 2016 upon the execution of a definitive agreement to sell these hospitals as announced by the Company on
September 29, 2016, as well as the Company s update to the previous estimated impairment of goodwill and other long-lived assets recorded during the three months ended June 30, 2016. This update to the estimated goodwill impairment charge was
based on the Company s updated valuation assumptions, as well as information obtained from third-party valuation services. 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 September 30, 2016, included the loss of $(0.28) per share (diluted) related to impairment of goodwill and long-lived assets and loss of $(0.06) per share (diluted) related to
government and other legal settlements for several legal matters settled in principle and related legal expenses. Excluding these items, income from continuing operations was a loss of $(0.35) per share (diluted).
Net income attributable to Community Health Systems, Inc. common stockholders was a loss of $(0.71) per share (diluted) for the three months
ended September 30, 2016, compared with income of $0.44 per share (diluted) for the same period in 2015. Discontinued operations for the three months ended September 30, 2016, consisted of $(0.02) per share (diluted) of losses from operations of
entities sold or held for sale for a total after-tax loss of approximately $(2) million or $(0.02) per share (diluted). Weighted-average shares outstanding (diluted) were 111 million for the three months ended September 30, 2016, and 116 million for
the three months ended September 30, 2015.
Net cash provided by operating activities for the three months ended September 30, 2016, was
$178 million compared with $111 million for the same period in 2015, representing a 60.4 percent increase. Adjusted EBITDA for the three months ended September 30, 2016, was $465 million compared with $661 million for the same period in 2015,
representing a 29.7 percent decrease.
CYH Announces Third Quarter 2016 Results
The consolidated operating results for the three months ended September 30, 2016, reflect a
12.4 percent decrease in total admissions, and a 13.0 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 1.5 percent during
the three months ended September 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 September 30, 2016, compared with the same period in 2015.
Net operating revenues for the nine months ended September 30, 2016, totaled $13.969 billion, a 4.6 percent decrease compared with $14.639
billion for the same period in 2015. Income from continuing operations attributable to Community Health Systems, Inc. common stockholders decreased to a loss of $(1.495) billion, or $(13.50) per share (diluted), for the nine months ended September
30, 2016, compared with income from continuing operations of $268 million, or $2.32 per share (diluted), for the same period in 2015. During the nine months ended September 30, 2016, the Company recorded non-cash impairment charges totaling $1.695
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 $300 million to reduce the value of long-lived assets at certain
under-performing hospitals and hospitals that the Company has closed, sold, or has identified for sale. The estimated impairment charge recorded for goodwill incurred 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. As noted above, the goodwill impairment charge originally estimated at June 30, 2016 was updated during the three months ended
September 30, 2016. 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 nine months ended September 30, 2016, included the loss of
$(13.72) per share (diluted) related to impairment of goodwill and long-lived assets, loss of $(0.18) per share (diluted) from early extinguishment of debt, loss of $(0.06) per share (diluted) related to government and other legal settlements for
several legal matters settled in principle and related legal expenses, loss of $(0.08) 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
$0.00 per share (diluted).
Net income attributable to Community Health Systems, Inc. common stockholders was a loss of $(13.55) per share
(diluted) for the nine months ended September 30, 2016, compared with income of $2.08 per share (diluted) for the same period in 2015. Discontinued operations for the nine months ended September 30, 2016, consisted of $(0.04) 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 $(5) million, or $(0.05) per share
(diluted). Weighted-average shares outstanding (diluted) were 111 million for the nine months ended September 30, 2016, and 116 million for the nine months ended September 30, 2015.
Net cash provided by operating activities for the nine months ended September 30, 2016, was $810 million compared with $615 million for the
same period in 2015, representing a 31.7 percent increase. Adjusted EBITDA for the nine months ended September 30, 2016, was $1.661 billion compared with $2.144 billion for the same period in 2015, representing a 22.5 percent decrease.
The consolidated operating results for the nine months ended September 30, 2016, reflect a 7.9 percent decrease in total admissions, and a 6.9
percent decrease in total adjusted admissions, compared with the same period in 2015. On a same-store basis, admissions decreased 2.0 percent and adjusted admissions decreased 0.2 percent during the nine months ended September 30, 2016, compared
with the same period in 2015. On a same-store basis, net operating revenues increased 1.6 percent during the nine months ended September 30, 2016, compared with the same period in 2015.
CYH Announces Third Quarter 2016 Results
As initially disclosed on September 19, 2016, the Company announced that, with the assistance
of advisors, it is exploring a variety of options with financial sponsors, as well as other potential alternatives. The discussions are at a very preliminary stage and there is no timeline established for this review. There can be no certainty that
the exploration will result in any kind of transaction. As previously disclosed, the Company does not expect to make further public comment regarding these matters while the exploration process takes place. In addition, the Board of Directors of the
Company adopted a Stockholder Protection Rights Agreement on October 3, 2016. For additional information regarding this Stockholder Protection Rights Agreement, see the Company s press release and Current Report on Form 8-K, each filed on
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 of goodwill and long-lived assets, 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 divestiture of the home care division, expense related to government and other legal
settlements and related costs, and expense 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, Our
operating and financial performance in the third quarter was below expectations due to lower than expected volumes and higher than expected expenses in certain areas. Moving into the fourth quarter, we are intensely focused on driving
operational improvements and generating better results. We believe that performance improvements, combined with our portfolio rationalization efforts, should ultimately create a stronger portfolio of hospitals for the future.
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 158 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, November 2, 2016, at 10:00 a.m. Central, 11:00 a.m. Eastern, to
review financial and operating results for the third quarter ended September 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 November 9, 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 Third Quarter 2016 Results
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
Financial Highlights (a)(b)(c)(d)
(In millions, except per share amounts)
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2016 | 2015 | 2016 | 2015 | |||||||||||||
| Net operating revenues | $ | 4,380 | $ | 4,846 | $ | 13,969 | $ | 14,639 | ||||||||
| (Loss) income from continuing operations (f), (i), (k) | (54 | ) | 83 | (1,422 | ) | 335 | ||||||||||
| Net (loss) income attributable to Community Health Systems, Inc. stockholders | (79 | ) | 52 | (1,500 | ) | 241 | ||||||||||
| Adjusted EBITDA (e) | 465 | 661 | 1,661 | 2,144 | ||||||||||||
| Net cash provided by operating activities | 178 | 111 | 810 | 615 | ||||||||||||
| Basic (loss) earnings per share attributable to Community Health Systems, Inc. common stockholders: | ||||||||||||||||
| Continuing operations (f), (i) | $ | (0.69 | ) | $ | 0.52 | $ | (13.50 | ) | $ | 2.33 | ||||||
| Discontinued operations | (0.02 | ) | (0.07 | ) | (0.05 | ) | (0.24 | ) | ||||||||
| Net (loss) income | $ | (0.71 | ) | $ | 0.45 | $ | (13.55 | ) | $ | 2.09 | ||||||
| Diluted (loss) earnings per share attributable to Community Health Systems, Inc. common stockholders: | ||||||||||||||||
| Continuing operations (f), (h), (i) | $ | (0.69 | ) | $ | 0.51 | $ | (13.50 | ) | $ | 2.32 | ||||||
| Discontinued operations | (0.02 | ) | (0.07 | ) | (0.05 | ) | (0.24 | ) | ||||||||
| Net (loss) income (h) | $ | (0.71 | ) | $ | 0.44 | $ | (13.55 | ) | $ | 2.08 | ||||||
| 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 Third 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 September 30, | ||||||||||||||||
| 2016 | 2015 | |||||||||||||||
| Amount | % of Net Operating Revenues | Amount | % of Net Operating Revenues | |||||||||||||
| Operating revenues (net of contractual allowances and discounts) | $ | 5,084 | $ | 5,580 | ||||||||||||
| Provision for bad debts | 704 | 734 | ||||||||||||||
| Net operating revenues | 4,380 | 100.0 | % | 4,846 | 100.0 | % | ||||||||||
| Operating costs and expenses: | ||||||||||||||||
| Salaries and benefits | 2,067 | 47.2 | % | 2,240 | 46.2 | % | ||||||||||
| Supplies | 723 | 16.5 | % | 762 | 15.7 | % | ||||||||||
| Other operating expenses | 1,026 | 23.4 | % | 1,144 | 23.7 | % | ||||||||||
| Government and other legal settlements and related costs (j) | 10 | 0.2 | % | % | ||||||||||||
| Electronic health records incentive reimbursement | (5 | ) | (0.1 | )% | (54 | ) | (1.1 | )% | ||||||||
| Rent | 109 | 2.5 | % | 115 | 2.4 | % | ||||||||||
| Depreciation and amortization | 265 | 6.1 | % | 288 | 5.9 | % | ||||||||||
| Impairment of goodwill and long-lived assets (i) | 39 | 0.9 | % | % | ||||||||||||
| Total operating costs and expenses | 4,234 | 96.7 | % | 4,495 | 92.8 | % | ||||||||||
| Income from operations (f), (i) | 146 | 3.3 | % | 351 | 7.2 | % | ||||||||||
| Interest expense, net | 233 | 5.3 | % | 242 | 4.9 | % | ||||||||||
| Equity in earnings of unconsolidated affiliates | (4 | ) | (0.1 | )% | (12 | ) | (0.2 | )% | ||||||||
| (Loss) income from continuing operations before income taxes | (83 | ) | (1.9 | )% | 121 | 2.5 | % | |||||||||
| (Benefit from) provision for income taxes | (29 | ) | (0.7 | )% | 38 | 0.8 | % | |||||||||
| (Loss) income from continuing operations (f), (i), (k) | (54 | ) | (1.2 | )% | 83 | 1.7 | % | |||||||||
| Discontinued operations, net of taxes: | ||||||||||||||||
| Loss from operations of entities sold or held for sale | (2 | ) | (0.0 | )% | (5 | ) | (0.1 | )% | ||||||||
| Loss on sale, net | % | (3 | ) | (0.1 | )% | |||||||||||
| Loss from discontinued operations, net of taxes | (2 | ) | (0.0 | )% | (8 | ) | (0.2 | )% | ||||||||
| Net (loss) income | (56 | ) | (1.2 | )% | 75 | 1.5 | % | |||||||||
| Less: Net income attributable to noncontrolling interests | 23 | 0.6 | % | 23 | 0.4 | % | ||||||||||
| Net (loss) income attributable to Community Health Systems, Inc. stockholders | $ | (79 | ) | (1.8 | )% | $ | 52 | 1.1 | % | |||||||
| Basic (loss) earnings per share attributable to Community Health Systems, Inc. common stockholders: | ||||||||||||||||
| Continuing operations (f), (i), (k) | $ | (0.69 | ) | $ | 0.52 | |||||||||||
| Discontinued operations | (0.02 | ) | (0.07 | ) | ||||||||||||
| Net (loss) income | $ | (0.71 | ) | $ | 0.45 | |||||||||||
| Diluted (loss) earnings per share attributable to Community Health Systems, Inc. common stockholders: | ||||||||||||||||
| Continuing operations (f), (h), (i), (k) | $ | (0.69 | ) | $ | 0.51 | |||||||||||
| Discontinued operations | (0.02 | ) | (0.07 | ) | ||||||||||||
| Net (loss) income (h) | $ | (0.71 | ) | $ | 0.44 | |||||||||||
| Weighted-average number of shares outstanding (g): | ||||||||||||||||
| Basic | 111 | 115 | ||||||||||||||
| Diluted | 111 | 116 |
footnotes, see pages 12, 13, 14 and 15.
CYH Announces Third 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)
| Nine Months Ended September 30, | ||||||||||||||||
| 2016 | 2015 | |||||||||||||||
| Amount | % of Net Operating Revenues | Amount | % of Net Operating Revenues | |||||||||||||
| Operating revenues (net of contractual allowances and discounts) | $ | 16,128 | $ | 16,840 | ||||||||||||
| Provision for bad debts | 2,159 | 2,201 | ||||||||||||||
| Net operating revenues | 13,969 | 100.0 | % | 14,639 | 100.0 | % | ||||||||||
| Operating costs and expenses: | ||||||||||||||||
| Salaries and benefits | 6,537 | 46.8 | % | 6,714 | 45.9 | % | ||||||||||
| Supplies | 2,281 | 16.3 | % | 2,274 | 15.5 | % | ||||||||||
| Other operating expenses | 3,256 | 23.4 | % | 3,370 | 23.0 | % | ||||||||||
| Government and other legal settlements and related costs (j) | 10 | 0.1 | % | 1 | % | |||||||||||
| Electronic health records incentive reimbursement | (54 | ) | (0.4 | )% | (135 | ) | (0.9 | )% | ||||||||
| Rent | 340 | 2.4 | % | 344 | 2.3 | % | ||||||||||
| Depreciation and amortization | 839 | 6.0 | % | 875 | 6.0 | % | ||||||||||
| Impairment of goodwill and long-lived assets (i) | 1,695 | 12.1 | % | 6 | % | |||||||||||
| Total operating costs and expenses | 14,904 | 106.7 | % | 13,449 | 91.8 | % | ||||||||||
| (Loss) income from operations (f), (i) | (935 | ) | (6.7 | )% | 1,190 | 8.2 | % | |||||||||
| Interest expense, net | 730 | 5.2 | % | 723 | 5.0 | % | ||||||||||
| Loss from early extinguishment of debt | 30 | 0.3 | % | 16 | 0.1 | % | ||||||||||
| Gain on sale of investments in unconsolidated affiliates (k) | (94 | ) | (0.7 | )% | % | |||||||||||
| Equity in earnings of unconsolidated affiliates | (38 | ) | (0.3 | )% | (51 | ) | (0.3 | )% | ||||||||
| (Loss) income from continuing operations before income taxes | (1,563 | ) | (11.2 | )% | 502 | 3.4 | % | |||||||||
| (Benefit from) provision for income taxes | (141 | ) | (1.0 | )% | 167 | 1.1 | % | |||||||||
| (Loss) income from continuing operations (f), (i), (k) | (1,422 | ) | (10.2 | )% | 335 | 2.3 | % | |||||||||
| Discontinued operations, net of taxes: | ||||||||||||||||
| Loss from operations of entities sold or held for sale | (4 | ) | % | (22 | ) | (0.2 | )% | |||||||||
| Impairment of hospitals sold or held for sale | (1 | ) | % | (2 | ) | % | ||||||||||
| Loss on sale, net | % | (3 | ) | % | ||||||||||||
| Loss from discontinued operations, net of taxes | (5 | ) | % | (27 | ) | (0.2 | )% | |||||||||
| Net (loss) income | (1,427 | ) | (10.2 | )% | 308 | 2.1 | % | |||||||||
| Less: Net income attributable to noncontrolling interests | 73 | 0.5 | % | 67 | 0.5 | % | ||||||||||
| Net (loss) income attributable to Community Health Systems, Inc. stockholders | $ | (1,500 | ) | (10.7 | )% | $ | 241 | 1.6 | % | |||||||
| Basic (loss) earnings per share attributable to Community Health Systems, Inc. common stockholders: | ||||||||||||||||
| Continuing operations (f), (i), (k) | $ | (13.50 | ) | $ | 2.33 | |||||||||||
| Discontinued operations | (0.05 | ) | (0.24 | ) | ||||||||||||
| Net (loss) income | $ | (13.55 | ) | $ | 2.09 | |||||||||||
| Diluted (loss) earnings per share attributable to Community Health Systems, Inc. common stockholders: | ||||||||||||||||
| Continuing operations (f), (h), (i), (k) | $ | (13.50 | ) | $ | 2.32 | |||||||||||
| Discontinued operations | (0.05 | ) | (0.24 | ) | ||||||||||||
| Net (loss) income (h) | $ | (13.55 | ) | $ | 2.08 | |||||||||||
| Weighted-average number of shares outstanding (g): | ||||||||||||||||
| Basic | 111 | 115 | ||||||||||||||
| Diluted | 111 | 116 |
footnotes, see pages 12, 13, 14 and 15.
CYH Announces Third Quarter 2016 Results
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Comprehensive (Loss) Income
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2016 | 2015 | 2016 | 2015 | |||||||||||||
| Net (loss) income | $ | (56 | ) | $ | 75 | $ | (1,427 | ) | $ | 308 | ||||||
| Other comprehensive income (loss), net of income taxes: | ||||||||||||||||
| Net change in fair value of interest rate swaps, net of tax | 10 | (21 | ) | (11 | ) | (22 | ) | |||||||||
| Net change in fair value of available-for-sale securities, net of tax | (7 | ) | (9 | ) | (8 | ) | (10 | ) | ||||||||
| Amortization and recognition of unrecognized pension cost components, net of tax | 1 | 3 | 2 | |||||||||||||
| Other comprehensive income (loss) | 3 | (29 | ) | (16 | ) | (30 | ) | |||||||||
| Comprehensive (loss) income | (53 | ) | 46 | (1,443 | ) | 278 | ||||||||||
| Less: Comprehensive income attributable to noncontrolling interests | 23 | 23 | 73 | 67 | ||||||||||||
| Comprehensive (loss) income attributable to Community Health Systems, Inc. stockholders | $ | (76 | ) | $ | 23 | $ | (1,516 | ) | $ | 211 |
footnotes, see pages 12, 13, 14 and 15.
CYH Announces Third Quarter 2016 Results
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES