Community Health Systems, Inc. Announces Fourth Quarter and Year-End 2016 Results and 2017 Guidance
02/20/17
The following highlights the financial and operating results for the
three months ended
-
Net operating revenues totaled
$4.469 billion . -
Net loss attributable to
Community Health Systems, Inc. common stockholders was$(220) million , or$(1.99) per share (diluted), compared with$(83) million , or$(0.73) per share (diluted) for the same period in 2015. -
Adjusted EBITDA was
$564 million . -
Loss from continuing operations attributable to
Community Health Systems, Inc. common stockholders was$(1.91) per share (diluted). -
Adjusted for certain items discussed below, income from continuing
operations attributable to
Community Health Systems, Inc. common stockholders was$0.46 per share (diluted). -
Cash flow from operations was
$327 million , compared with$306 million for the same period in 2015, representing a 6.9 percent increase. - On a same-store basis, both admissions and adjusted admissions decreased 1.4 percent, compared with the same period in 2015.
On
Net operating revenues for the three months ended
The results for the three months ended
Net loss attributable to
The consolidated operating results for the three months ended
Net operating revenues for the year ended
The results for the year ended
Net income attributable to
The consolidated operating results for the year ended
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
Commenting on the 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.
The Company’s headquarters are located in
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES | |||||||||||||||||||||
Financial Highlights (a)(b)(c)(d) | |||||||||||||||||||||
(In millions, except per share amounts) | |||||||||||||||||||||
(Unaudited) | |||||||||||||||||||||
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 | |||||||||||||||||
____ For footnotes, see pages 13, 14, 15 and 16. |
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES | |||||||||||||||||||
Condensed Consolidated Statements of Loss (a)(b)(c)(d) | |||||||||||||||||||
(In millions, except per share amounts) | |||||||||||||||||||
(Unaudited) | |||||||||||||||||||
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 | |||||||||||||||||
116 | |||||||||||||||||||
____ For footnotes, see pages 13, 14, 15 and 16. |
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES | |||||||||||||||||||
Condensed Consolidated Statements of (Loss) Income (a)(b)(c)(d) | |||||||||||||||||||
(In millions, except per share amounts) | |||||||||||||||||||
(Unaudited) | |||||||||||||||||||
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 | |||||||||||||||||
____ For footnotes, see pages 13, 14, 15 and 16. |
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES | |||||||||||||||||||||
Condensed Consolidated Statements of Comprehensive (Loss) Income | |||||||||||||||||||||
(In millions) | |||||||||||||||||||||
(Unaudited) | |||||||||||||||||||||
Three Months Ended | Year Ended | ||||||||||||||||||||
December 31, | December 31, | ||||||||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||||||||
Net (loss) income | $ | (198 | ) | $ | (49 | ) | $ | (1,626 | ) | $ | 259 | ||||||||||
Other comprehensive income (loss), net of income taxes: | |||||||||||||||||||||
Net change in fair value of interest rate swaps, net of tax | 28 | 16 | 17 | (6 | ) | ||||||||||||||||
Net change in fair value of available-for-sale securities, net of tax | (3 | ) | 4 | (11 | ) | (5 | ) | ||||||||||||||
Amortization and recognition of unrecognized pension cost components, net of tax |
(1 | ) | - | 3 | 1 | ||||||||||||||||
Other comprehensive income (loss) | 24 | 20 | 9 | (10 | ) | ||||||||||||||||
Comprehensive (loss) income | (174 | ) | (29 | ) | (1,617 | ) | 249 | ||||||||||||||
Less: Comprehensive income attributable to noncontrolling interests | 22 | 34 | 95 | 101 | |||||||||||||||||
|
|||||||||||||||||||||
Comprehensive (loss) income attributable to Community Health Systems, Inc. stockholders |
$ | (196 | ) | $ | (63 | ) | $ | (1,712 | ) | $ | 148 | ||||||||||
____ For footnotes, see pages 13, 14, 15 and 16. |
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES | |||||||||||||||||||||||||||||
Selected Operating Data (a)(c) | |||||||||||||||||||||||||||||
(Dollars in millions) | |||||||||||||||||||||||||||||
(Unaudited) | |||||||||||||||||||||||||||||
Three Months Ended December 31, | |||||||||||||||||||||||||||||
Consolidated | Same-Store | ||||||||||||||||||||||||||||
2016 | 2015 | % Change | 2016 | 2015 | % Change | ||||||||||||||||||||||||
Number of hospitals (at end of period) | 155 | 194 | 152 | 152 | |||||||||||||||||||||||||
Licensed beds (at end of period) | 26,222 | 29,853 | 25,921 | 26,013 | |||||||||||||||||||||||||
Beds in service (at end of period) | 23,229 | 26,312 | 23,064 | 23,167 | |||||||||||||||||||||||||
Admissions | 203,496 | 230,250 | -11.6 | % | 201,803 | 204,727 | -1.4 | % | |||||||||||||||||||||
Adjusted admissions | 440,160 | 504,119 | -12.7 | % | 435,605 | 441,727 | -1.4 | % | |||||||||||||||||||||
Patient days | 910,209 | 1,011,868 | 904,723 | 910,403 | |||||||||||||||||||||||||
Average length of stay (days) | 4.5 | 4.4 | 4.5 | 4.4 | |||||||||||||||||||||||||
Occupancy rate (average beds in service) | 42.6 | % | 41.8 | % | 42.7 | % | 42.7 | % | |||||||||||||||||||||
Net operating revenues | $ | 4,469 | $ | 4,798 | -6.9 | % | $ | 4,404 | $ | 4,382 | 0.5 | % | |||||||||||||||||
Net inpatient revenues as a % of net patient revenues before provision for bad debts |
43.6 | % | 43.0 | % | 43.7 | % | 42.9 | % | |||||||||||||||||||||
Net outpatient revenues as a % of net patient revenues before provision for bad debts |
56.4 | % | 57.0 | % | 56.3 | % | 57.1 | % | |||||||||||||||||||||
Income from operations (f), (i) | $ | 75 | $ | 146 | -48.6 | % | |||||||||||||||||||||||
Income from operations as a % of net operating revenues |
1.7 | % | 3.0 | % | |||||||||||||||||||||||||
Depreciation and amortization | $ | 261 | $ | 297 | |||||||||||||||||||||||||
Equity in earnings of unconsolidated affiliates | $ | (5 | ) | $ | (12 | ) | |||||||||||||||||||||||
Net loss attributable to Community Health Systems, Inc. stockholders |
$ | (220 | ) | $ | (83 | ) | 165.1 | % | |||||||||||||||||||||
Net loss attributable to Community Health Systems, Inc. stockholders as a % of net operating revenues |
-4.9 | % | -1.7 | % | |||||||||||||||||||||||||
Adjusted EBITDA (e) | $ | 564 | $ | 527 | 7.0 | % | |||||||||||||||||||||||
Adjusted EBITDA as a % of net operating revenues |
12.6 | % | 11.0 | % | |||||||||||||||||||||||||
Net cash provided by operating activities | $ | 327 | $ | 306 | 6.9 | % | |||||||||||||||||||||||
____ For footnotes, see pages 13, 14, 15 and 16. |
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES | |||||||||||||||||||||||||||||
Selected Operating Data (a)(c) | |||||||||||||||||||||||||||||
(Dollars in millions) | |||||||||||||||||||||||||||||
(Unaudited) | |||||||||||||||||||||||||||||
Year Ended December 31, | |||||||||||||||||||||||||||||
Consolidated | Same-Store | ||||||||||||||||||||||||||||
2016 | 2015 | % Change | 2016 | 2015 | % Change | ||||||||||||||||||||||||
Number of hospitals (at end of period) | 155 | 194 | 152 | 152 | |||||||||||||||||||||||||
Licensed beds (at end of period) | 26,222 | 29,853 | 25,921 | 26,013 | |||||||||||||||||||||||||
Beds in service (at end of period) | 23,229 | 26,312 | 23,064 | 23,167 | |||||||||||||||||||||||||
Admissions | 857,412 | 940,292 | -8.8 | % | 818,559 | 834,383 | -1.9 | % | |||||||||||||||||||||
Adjusted admissions | 1,867,348 | 2,038,103 | -8.4 | % | 1,773,093 | 1,782,134 | -0.5 | % | |||||||||||||||||||||
Patient days | 3,832,104 | 4,175,214 | 3,678,397 | 3,752,264 | |||||||||||||||||||||||||
Average length of stay (days) | 4.5 | 4.4 | 4.5 | 4.5 | |||||||||||||||||||||||||
Occupancy rate (average beds in service) | 43.1 | % | 43.3 | % | 43.4 | % | 44.3 | % | |||||||||||||||||||||
Net operating revenues | $ | 18,438 | $ | 19,437 | -5.1 | % | $ | 17,481 | $ | 17,248 | 1.4 | % | |||||||||||||||||
Net inpatient revenues as a % of net patient revenues before provision for bad debts |
43.2 | % | 42.8 | % | 43.3 | % | 42.8 | % | |||||||||||||||||||||
Net outpatient revenues as a % of net patient revenues before provision for bad debts |
56.8 | % | 57.2 | % | 56.7 | % | 57.2 | % | |||||||||||||||||||||
(Loss) income from operations (f), (i) | $ | (860 | ) | $ | 1,337 | -164.3 | % | ||||||||||||||||||||||
(Loss) income from operations as a % of net operating revenues |
-4.7 | % | 6.9 | % | |||||||||||||||||||||||||
Depreciation and amortization | $ | 1,100 | $ | 1,172 | |||||||||||||||||||||||||
Equity in earnings of unconsolidated affiliates |
$ |
(43 |
) |
$ | (63 | ) | |||||||||||||||||||||||
Net loss (income) attributable to Community Health Systems, Inc. stockholders |
$ | (1,721 | ) | $ | 158 | -1189.2 | % | ||||||||||||||||||||||
Net loss (income) attributable to Community Health Systems, Inc. stockholders as a % of net operating revenues |
-9.3 | % | 0.8 | % | |||||||||||||||||||||||||
Adjusted EBITDA (e) | $ | 2,225 | $ | 2,670 | -16.7 | % | |||||||||||||||||||||||
Adjusted EBITDA as a % of net operating revenues |
12.1 | % | 13.7 | % | |||||||||||||||||||||||||
Net cash provided by operating activities | $ | 1,137 | $ | 921 | 23.5 | % | |||||||||||||||||||||||
____ For footnotes, see pages 13, 14, 15 and 16. |
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES | |||||||||||
Condensed Consolidated Balance Sheets (b) | |||||||||||
(In millions, except share data) | |||||||||||
(Unaudited) | |||||||||||
December 31, 2016 | December 31, 2015 | ||||||||||
ASSETS | |||||||||||
Current assets | |||||||||||
Cash and cash equivalents | $ | 238 | $ | 184 | |||||||
Patient accounts receivable, net of allowance for doubtful accounts of $3,773 and $4,110 at December 31, 2016 and 2015, respectively |
3,176 | 3,611 | |||||||||
Supplies | 480 | 580 | |||||||||
Prepaid income taxes | 17 | 27 | |||||||||
Prepaid expenses and taxes | 187 | 197 | |||||||||
Other current assets (including assets of hospitals held for sale of $117 and $17 at December 31, 2016 and 2015, respectively) |
568 | 567 | |||||||||
Total current assets | 4,666 | 5,166 | |||||||||
Property and equipment: | |||||||||||
Land and improvements | 782 | 969 | |||||||||
Buildings and improvements | 7,438 | 9,051 | |||||||||
Equipment and fixtures | 4,202 | 4,886 | |||||||||
Property and equipment, gross | 12,422 | 14,906 | |||||||||
Less accumulated depreciation and amortization | (4,273 | ) | (4,794 | ) | |||||||
Property and equipment, net | 8,149 | 10,112 | |||||||||
Goodwill | 6,521 | 8,965 | |||||||||
Other assets, net of accumulated amortization of $929 and $903 at December 31, 2016 and 2015, respectively (including assets of hospitals held for sale of $878 and $41 at December 31, 2016 and 2015, respectively) |
2,608 | 2,352 | |||||||||
Total assets | $ | 21,944 | $ | 26,595 | |||||||
LIABILITIES AND EQUITY | |||||||||||
Current liabilities | |||||||||||
Current maturities of long-term debt | $ | 455 | $ | 229 | |||||||
Accounts payable | 995 | 1,258 | |||||||||
Accrued liabilities: | |||||||||||
Employee compensation | 731 | 823 | |||||||||
Interest | 207 | 227 | |||||||||
Other (including liabilities of hospitals held for sale of $81 and $6 at December 31, 2016 and 2015, respectively) |
499 | 535 | |||||||||
Total current liabilities | 2,887 | 3,072 | |||||||||
Long-term debt | 14,789 | 16,556 | |||||||||
Deferred income taxes | 411 | 593 | |||||||||
Other long-term liabilities | 1,575 | 1,698 | |||||||||
Total liabilities | 19,662 | 21,919 | |||||||||
Redeemable noncontrolling interests in equity of consolidated subsidiaries | 554 | 571 | |||||||||
EQUITY | |||||||||||
Community Health Systems, Inc. stockholders’ equity: | |||||||||||
Preferred stock, $.01 par value per share, 100,000,000 shares authorized; none issued | - | - | |||||||||
Common stock, $.01 par value per share, 300,000,000 shares authorized; 113,876,580 shares issued and outstanding at December 31, 2016, and 113,732,933 shares issued and 112,757,384 shares outstanding at December 31, 2015 |
1 | 1 | |||||||||
Additional paid-in capital | 1,975 | 1,963 | |||||||||
Treasury stock, at cost, no shares at December 31, 2016 and 975,549 shares at December 31, 2015 |
- | (7 | ) | ||||||||
Accumulated other comprehensive loss | (62 | ) | (73 | ) | |||||||
(Accumulated deficit) retained earnings | (299 | ) | 2,135 | ||||||||
Total Community Health Systems, Inc. stockholders’ equity | 1,615 | 4,019 | |||||||||
Noncontrolling interests in equity of consolidated subsidiaries | 113 | 86 | |||||||||
Total equity | 1,728 | 4,105 | |||||||||
Total liabilities and equity | $ | 21,944 | $ | 26,595 | |||||||
____ For footnotes, see pages 13, 14, 15 and 16. |
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES | |||||||||||
Condensed Consolidated Statements of Cash Flows (b) | |||||||||||
(In millions) | |||||||||||
(Unaudited) | |||||||||||
Year Ended December 31, | |||||||||||
2016 | 2015 | ||||||||||
Cash flows from operating activities | |||||||||||
Net (loss) income | $ | (1,626 | ) | $ | 259 | ||||||
Adjustments to reconcile net (loss) income to net cash provided by operating activities: | |||||||||||
Depreciation and amortization | 1,100 | 1,174 | |||||||||
Deferred income taxes | (116 | ) | 103 | ||||||||
Government and other legal settlements and related costs (j) | 16 | 4 | |||||||||
Stock-based compensation expense | 46 | 59 | |||||||||
Loss on sale, net | - | 4 | |||||||||
Impairment of hospitals sold or held for sale | 8 | 5 | |||||||||
Impairment and (gain) loss on sale of businesses, net (i) | 1,919 | 68 | |||||||||
Loss from early extinguishment of debt | 30 | 16 | |||||||||
Gain on sale of investments in unconsolidated affiliates | (94 | ) | - | ||||||||
Other non-cash expenses, net | 31 | 47 | |||||||||
Changes in operating assets and liabilities, net of effects of acquisitions and divestitures: | |||||||||||
Patient accounts receivable | (96 | ) | (219 | ) | |||||||
Supplies, prepaid expenses and other current assets | 25 | (68 | ) | ||||||||
Accounts payable, accrued liabilities and income taxes | (137 | ) | (478 | ) | |||||||
Other | 31 | (53 | ) | ||||||||
Net cash provided by operating activities | 1,137 | 921 | |||||||||
Cash flows from investing activities | |||||||||||
Acquisitions of facilities and other related equipment | (123 | ) | (57 | ) | |||||||
Purchases of property and equipment | (744 | ) | (953 | ) | |||||||
Proceeds from disposition of hospitals and other ancillary operations | 143 | 155 | |||||||||
Proceeds from sale of property and equipment | 15 | 15 | |||||||||
Purchases of available-for-sale securities | (505 | ) | (162 | ) | |||||||
Proceeds from sales of available-for-sale securities | 464 | 156 | |||||||||
Proceeds from sale of investments in unconsolidated affiliates | 403 | - | |||||||||
Distribution from Quorum Health Corporation | 1,219 | - | |||||||||
Increase in other investments | (242 | ) | (205 | ) | |||||||
Net cash provided by (used in) investing activities | 630 | (1,051 | ) | ||||||||
Cash flows from financing activities | |||||||||||
Proceeds from exercise of stock options | - | 25 | |||||||||
Repurchase of restricted stock shares for payroll tax withholding requirements | (6 | ) | (20 | ) | |||||||
Stock buy-back | - | (159 | ) | ||||||||
Deferred financing costs and other debt-related costs | (26 | ) | (30 | ) | |||||||
Proceeds from noncontrolling investors in joint ventures | - | 47 | |||||||||
Redemption of noncontrolling investments in joint ventures | (19 | ) | (36 | ) | |||||||
Distributions to noncontrolling investors in joint ventures | (92 | ) | (100 | ) | |||||||
Proceeds from sale-lease back | 159 | - | |||||||||
Borrowings under credit agreements | 4,879 | 4,922 | |||||||||
Proceeds from receivables facility | 107 | 206 | |||||||||
Repayments of long-term indebtedness | (6,715 | ) | (5,050 | ) | |||||||
Net cash used in financing activities | (1,713 | ) | (195 | ) | |||||||
Net change in cash and cash equivalents | 54 | (325 | ) | ||||||||
Cash and cash equivalents at beginning of period | 184 | 509 | |||||||||
Cash and cash equivalents at end of period | $ | 238 | $ | 184 | |||||||
____ For footnotes, see pages 13, 14, 15 and 16. |
|||||||||||
Footnotes to Financial Highlights, Financial Statements and Selected Operating Data
(a) Continuing operating results exclude discontinued operations for the
three months and year ended
(b) The contingent value right (“CVR”) entitles the holder to receive a
cash payment up to
The following table presents the impact of the recorded amounts as
described above as applied to the CVR and the
As of | ||||||
December 31, | ||||||
2016 | ||||||
Legal and other related costs incurred to date | $ | 32 | ||||
Settlements | 30 | |||||
Estimated liability for probable contingencies | - | |||||
Estimated liability for unresolved contingencies at fair value | 252 | |||||
Costs incurred plus certain estimated liabilities for CVR-related matters |
314 | |||||
Allocated to: | ||||||
CHS deductible of $18 million | (18 | ) | ||||
CHS co-insurance at 10% | (29 | ) | ||||
Recorded amounts that reduce CVR value after giving effect to deductible and co-insurance |
$ | 267 | ||||
CVRs outstanding | 265 | |||||
(c) Included in discontinued operations for the three months and year
ended
(d) The following table provides information needed to calculate (loss) income per share, which is adjusted for income attributable to noncontrolling interests (in millions):
Three Months Ended | Year Ended | ||||||||||||||||||||
December 31, | December 31, | ||||||||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||||||||
(Loss) income from continuing operations attributable to Community Health Systems, Inc. common stockholders: |
|||||||||||||||||||||
(Loss) income from continuing operations, net of taxes | $ | (189 | ) | $ | (40 | ) | $ | (1,611 | ) | $ | 295 | ||||||||||
Less: Income from continuing operations attributable to noncontrolling interests, net of taxes |
22 | 34 | 95 | 101 | |||||||||||||||||
(Loss) income from continuing operations attributable to Community Health Systems, Inc. common stockholders — basic and diluted |
$ | (211 | ) | $ | (74 | ) | $ | (1,706 | ) | $ | 194 | ||||||||||
Loss from discontinued operations attributable to Community Health Systems, Inc. common stockholders: |
|||||||||||||||||||||
Loss from discontinued operations, net of taxes | $ | (9 | ) | $ | (9 | ) | $ | (15 | ) | $ | (36 | ) | |||||||||
Less: Loss from discontinued operations attributable to noncontrolling interests, net of taxes |
- | - | - | - | |||||||||||||||||
Loss from discontinued operations attributable to Community Health Systems, Inc. common stockholders — basic and diluted |
$ | (9 | ) | $ | (9 | ) | $ | (15 | ) | $ | (36 | ) | |||||||||
Footnotes to Financial Highlights, Financial Statements and Selected Operating Data (Continued)
(e) EBITDA is a non-GAAP financial measure which consists of net (loss)
income attributable to
Adjusted EBITDA is not a measurement of financial performance under U.S. GAAP. It should not be considered in isolation or as a substitute for net income, operating income, or any other performance measure calculated in accordance with U.S. GAAP. The items excluded from Adjusted EBITDA are significant components in understanding and evaluating financial performance. The Company believes such adjustments are appropriate as the magnitude and frequency of such items can vary significantly and are not related to the assessment of normal operating performance. Additionally, this calculation of Adjusted EBITDA may not be comparable to similarly titled measures reported by other companies.
The following table reflects the reconciliation of Adjusted EBITDA, as
defined, to net (loss) income attributable to
Three Months Ended | Year Ended | ||||||||||||||||||||
December 31, | December 31, | ||||||||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||||||||
Net (loss) income attributable to Community Health Systems, Inc. stockholders |
$ | (220 | ) | $ | (83 | ) | $ | (1,721 | ) | $ | 158 | ||||||||||
Adjustments: | |||||||||||||||||||||
Provision for (benefit from) income taxes | 37 | (51 | ) | (104 | ) | 116 | |||||||||||||||
Depreciation and amortization | 261 | 297 | 1,100 | 1,172 | |||||||||||||||||
Net income attributable to noncontrolling interests | 22 | 34 | 95 | 101 | |||||||||||||||||
Loss from discontinued operations | 9 | 9 | 15 | 36 | |||||||||||||||||
Interest expense, net | 232 | 249 | 962 | 973 | |||||||||||||||||
Loss from early extinguishment of debt | - | - | 30 | 16 | |||||||||||||||||
Impairment and (gain) loss on sale of businesses, net | 224 | 62 | 1,919 | 68 | |||||||||||||||||
Gain on sale of investments in unconsolidated affiliates | - | - | (94 | ) | - | ||||||||||||||||
Expenses related to the acquisition and integration of HMA | - | - | - | 1 | |||||||||||||||||
Expense from government and other legal settlements and related costs | 5 | 3 | 16 | 4 | |||||||||||||||||
(Income) expense from fair value adjustments and legal expenses related to cases covered by the CVR |
(6 | ) | - | (6 | ) | 8 | |||||||||||||||
Expenses related to the sale of a majority interest in home care division | - | - | 1 | - | |||||||||||||||||
Expenses related to the spin-off of QHC | - | 7 | 12 | 17 | |||||||||||||||||
Adjusted EBITDA | $ | 564 | $ | 527 | $ | 2,225 | $ | 2,670 | |||||||||||||
(f) Included in non-same-store (loss) income from operations and (loss)
income from continuing operations are pre-tax charges related to
acquisition costs of
Footnotes to Financial Highlights, Financial Statements and Selected Operating Data (Continued)
(g) The following table sets forth components reconciling the basic weighted-average number of shares to the diluted weighted-average number of shares (in millions):
Three Months Ended | Year Ended | ||||||||||||
December 31, | December 31, | ||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||
Weighted-average number of shares outstanding - basic |
111 | 113 | 111 | 114 | |||||||||
Add effect of dilutive securities: | |||||||||||||
Stock awards and options | - | - | - | 1 | |||||||||
Weighted-average number of shares outstanding - diluted |
111 | 113 | 111 | 115 | |||||||||
The Company generated a loss from continuing operations attributable to
(h) The following supplemental tables reconcile (loss) income from
continuing operations and net (loss) income attributable to
Three Months Ended | Year Ended | |||||||||||||||||||
December 31, | December 31, | |||||||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||||||
(Loss) income from continuing operations, as reported | $ | (1.91 | ) | $ | (0.66 | ) | $ | (15.41 | ) | $ | 1.68 | |||||||||
Adjustments: | ||||||||||||||||||||
Loss from early extinguishment of debt | - | - | 0.17 | 0.09 | ||||||||||||||||
Impairment and (gain) loss on sale of businesses, net | 2.35 | 0.33 | 16.07 | 0.36 | ||||||||||||||||
Expense from government and other legal settlements and related costs |
0.03 | 0.02 | 0.09 | 0.02 | ||||||||||||||||
(Income) expense from fair value adjustments and legal expenses related to cases covered by the CVR |
(0.04 | ) | - | (0.04 | ) | 0.05 | ||||||||||||||
Gain on sale of investments in unconsolidated affiliates | - | - | (0.54 | ) | - | |||||||||||||||
Expense related to the spin-off of QHC | 0.02 | 0.04 | 0.10 | 0.09 | ||||||||||||||||
Expenses related to the sale of a majority interest in home care division |
- | - | 0.01 | - | ||||||||||||||||
Income (loss) from continuing operations, excluding adjustments |
$ | 0.46 | $ | (0.28 | ) | $ | 0.46 | $ | 2.29 | |||||||||||
Three Months Ended | Year Ended | |||||||||||||||||||
December 31, | December 31, | |||||||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||||||
Net (loss) income, as reported | $ | (1.99 | ) | $ | (0.73 | ) | $ | (15.54 | ) | $ | 1.37 | |||||||||
Adjustments: | ||||||||||||||||||||
Loss from early extinguishment of debt | - | - | 0.17 | 0.09 | ||||||||||||||||
Impairment and (gain) loss on sale of businesses, net | 2.35 | 0.33 | 16.07 | 0.36 | ||||||||||||||||
Expense from government and other legal settlements and related costs |
0.03 | 0.02 | 0.09 | 0.02 | ||||||||||||||||
(Income) expense from fair value adjustments and legal expenses related to cases covered by the CVR |
(0.04 | ) | - | (0.04 | ) | 0.05 | ||||||||||||||
Gain on sale of investments in unconsolidated affiliates | - | - | (0.54 | ) | - | |||||||||||||||
Expense related to the spin-off of QHC | 0.02 | 0.04 | 0.10 | 0.09 | ||||||||||||||||
Expenses related to the sale of a majority interest in home care division |
- | - | 0.01 | - | ||||||||||||||||
Net income (loss), excluding adjustments | $ | 0.37 | $ | (0.35 | ) | $ | 0.33 | $ | 1.98 | |||||||||||
Footnotes to Financial Highlights, Financial Statements and Selected Operating Data (Continued)
(i) Both income from operations and loss from continuing operations for
the three months ended
Loss from continuing operations for the three months ended
(j) The
(k) On
(l) Total per share amounts may not add due to rounding.
Regulation FD Disclosure
Set forth below is selected information concerning the Company’s projected consolidated operating results for the year ending December 31, 2017. These projections are based on the Company’s historical operating performance, current trends and other assumptions that the Company believes are reasonable at this time. The 2017 guidance should be considered in conjunction with the assumptions included herein. See pages 19 and 20 for a list of factors that could affect the future results of the Company or the healthcare industry generally.
The following is provided as guidance to analysts and investors:
2017 Projection Range | |||||||||||||||
Net operating revenues less provision for bad debts (in millions) | $ | 15,800 | to | $ | 16,200 | ||||||||||
Adjusted EBITDA (in millions) | $ | 2,000 | to | $ | 2,175 | ||||||||||
Income from continuing operations per share - diluted | $ | 0.30 | to | $ | 1.10 | ||||||||||
Same-store hospital annual adjusted admissions growth | 0.0 | % | to | 1.5 | % | ||||||||||
Weighted-average diluted shares, in millions | 112.0 | to | 113.0 | ||||||||||||
-
The divestiture of 25 hospitals, in respect of which the Company has
entered into a definitive agreement or non-binding letters of intent,
consisting of ten separate contemplated transactions. These hospitals
generated approximately
$3.0 billion of net revenue in 2016 with mid-single digit Adjusted EBITDA margins. The Company assumes these divestitures will generate approximately$1.5 billion in proceeds. In addition, the divestiture of other hospitals representing approximately 4% to 5% of 2016 net operating revenues having mid-single digit Adjusted EBITDA margins. The Company assumes all of these divestitures will close at various dates during the first nine months of 2017. -
The Company’s projections also exclude the following:
-
Gains associated with the settlement of the shareholder derivative
action in
January 2017 ; - Payments related to the CVRs issued in connection with the HMA acquisition, and changes in the valuation of liabilities underlying the CVR;
- Losses from the early extinguishment of debt;
- Impairment of goodwill and long-lived assets;
- Restructuring costs;
- Resolution of government investigations or other significant legal settlements;
- Costs incurred in connection with the planned divestitures; and
- Other significant gains or losses that neither relate to the ordinary course of business nor reflect the Company’s underlying business performance.
-
Gains associated with the settlement of the shareholder derivative
action in
- The Company has three small hospitals which remain held for sale for which the operating results have been classified in discontinued operations and excluded from the Company’s guidance.
Other assumptions used in the above guidance:
-
Health Information Technology (HITECH) electronic health records
incentive reimbursement of approximately
$15 million to $20 million for the year endedDecember 31, 2017 . - Same-store hospital annual adjusted admissions growth of 0.0% to 1.5% for 2017, which does not take into account service closures and weather-related or other unusual events.
- Expressed as a percentage of net operating revenues, depreciation and amortization of approximately 6.0% to 6.1% for 2017. Additionally, this is a fixed cost and the percentages may change as revenue varies. Such amounts exclude the possible impact of any future hospital fixed asset impairments and acceleration of amortization of software to be abandoned.
- Interest expense, expressed as a percentage of net operating revenues, of approximately 5.4% to 5.5%; however, interest expense may vary as revenue varies. Interest expense has been adjusted to reflect the repayment of debt with proceeds from the anticipated divestitures, based on the expected timing of those divestitures. Total fixed rate debt, including swaps, is expected to average approximately 65% to 75% of total debt during 2017.
- Expressed as a percentage of net operating revenues, net income attributable to noncontrolling interests of approximately 0.6% to 0.7% for 2017.
- Expressed as a percentage of income from continuing operations before income taxes, provision for income taxes of approximately 30.0% to 31.0% for 2017, which includes the impact of adopting ASU 2016-09 on the tax provision for the vesting of equity-based compensation.
A reconciliation of the Company’s projected 2017 Adjusted EBITDA, a
forward-looking non-GAAP financial measure, to the Company’s projected
net income attributable to
Year Ending | |||||||||
December 31, 2017 | |||||||||
Low | High | ||||||||
Net income attributable to Community Health Systems, Inc. stockholders (1) |
$ | 34 | $ | 124 | |||||
Adjustments: | |||||||||
Depreciation and amortization | 950 | 970 | |||||||
Interest expense, net | 865 | 875 | |||||||
Provision for income taxes | 56 | 101 | |||||||
Net income attributable to noncontrolling interests | 95 | 105 | |||||||
Adjusted EBITDA (1) | $ | 2,000 | $ | 2,175 | |||||
(1) The Company does not include in this reconciliation the impact of
certain items that would be included in a reconciliation of historical
net income attributable to
- Capital expenditures are projected as follows (in millions):
2017 | |||||||||||||||
Guidance | |||||||||||||||
Total | $625 | to | $775 | ||||||||||||
- Net cash provided by operating activities, excluding cash flows related to the CVR and settlement of legal contingencies, is projected as follows (in millions):
2017 | |||||||||||||||
Guidance | |||||||||||||||
Total | $1,050 | to | $1,225 | ||||||||||||
- Weighted-average shares outstanding are projected to be between approximately 112 million to 113 million for 2017.
This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995 that involve risk and uncertainties. All statements in this press release other than statements of historical fact, including statements regarding projections, expected operating results, and other events that depend upon or refer to future events or conditions or that include words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “estimates,” “thinks,” and similar expressions, are forward-looking statements. Although the Company believes that these forward-looking statements are based on reasonable assumptions, these assumptions are inherently subject to significant economic and competitive uncertainties and contingencies, which are difficult or impossible to predict accurately and may be beyond the control of the Company. Accordingly, the Company cannot give any assurance that its expectations will in fact occur and cautions that actual results may differ materially from those in the forward-looking statements. A number of factors could affect the future results of the Company or the healthcare industry generally and could cause the Company’s expected results to differ materially from those expressed in this press release.
These factors include, among other things:
- general economic and business conditions, both nationally and in the regions in which we operate;
- the impact of the 2016 federal elections, which may lead to the repeal of or significant changes to the Affordable Care Act, its implementation or its interpretation, as well as changes in other federal, state or local laws or regulations affecting our business;
-
the extent to which states support increases, decreases or changes in
Medicaid programs, implement health insurance exchanges or alter the provision of healthcare to state residents through regulation or otherwise; - the future and long-term viability of health insurance exchanges, which may be affected by whether a sufficient number of payors participate as well as the impact of the 2016 federal elections on the Affordable Care Act;
- risks associated with our substantial indebtedness, leverage and debt service obligations, including our ability to refinance such indebtedness on acceptable terms or to incur additional indebtedness;
- demographic changes;
- changes in, or the failure to comply with, governmental regulations;
- potential adverse impact of known and unknown government investigations, audits, and federal and state false claims act litigation and other legal proceedings;
- our ability, where appropriate, to enter into and maintain provider arrangements with payors and the terms of these arrangements, which may be further affected by the increasing consolidation of health insurers and managed care companies;
- changes in, or the failure to comply with, contract terms with payors and changes in reimbursement rates paid by federal or state healthcare programs or commercial payors;
- any potential additional impairments in the carrying value of goodwill, other intangible assets, or other long-lived assets, or changes in the useful lives of other intangible assets;
-
changes in inpatient or outpatient
Medicare andMedicaid payment levels; - the effects related to the continued implementation of the sequestration spending reductions and the potential for future deficit reduction legislation;
-
increases in the amount and risk of collectability of patient accounts
receivable, including decreases in collectability which may result
from, among other things, self-pay growth in states that have not
expanded
Medicaid and difficulties in recovering payments for which patients are responsible, including co-pays and deductibles; - the efforts of insurers, healthcare providers and others to contain healthcare costs, including the trend toward value-based purchasing;
-
our ongoing ability to demonstrate meaningful use of certified
electronic health record technology and recognize income for the
related
Medicare orMedicaid incentive payments to the extent such payments have not expired; - increases in wages as a result of inflation or competition for highly technical positions and rising supply and drug costs due to market pressure from pharmaceutical companies and new product releases;
- liabilities and other claims asserted against us, including self-insured malpractice claims;
- competition;
- our ability to attract and retain, at reasonable employment costs, qualified personnel, key management, physicians, nurses and other healthcare workers;
- trends toward treatment of patients in less acute or specialty healthcare settings, including ambulatory surgery centers or specialty hospitals;
- changes in medical or other technology;
- changes in U.S. generally accepted accounting principles;
- the availability and terms of capital to fund any additional acquisitions or replacement facilities or other capital expenditures;
- our ability to successfully make acquisitions or complete divestitures, including the disposition of hospitals and non-hospital businesses pursuant to our portfolio rationalization and deleveraging strategy, our ability to complete any such acquisitions or divestitures on desired terms or at all (including to realize the anticipated amount of proceeds from contemplated dispositions), the timing of the completion of any such acquisitions or divestitures, and our ability to realize the intended benefits from any such acquisitions or divestitures;
- our ability to successfully integrate any acquired hospitals, including those of HMA, or to recognize expected synergies from acquisitions;
- the impact of seasonal severe weather conditions;
- our ability to obtain adequate levels of general and professional liability insurance;
- timeliness of reimbursement payments received under government programs;
- effects related to outbreaks of infectious diseases;
- the impact of the external, criminal cyber-attack suffered by us in the second quarter of 2014, including potential reputational damage, the outcome of our investigation and any potential governmental inquiries, the outcome of litigation filed against us in connection with this cyber-attack, the extent of remediation costs and additional operating or other expenses that we may continue to incur, and the impact of potential future cyber-attacks or security breaches;
- any failure to comply with the terms of the Corporate Integrity Agreement;
- the concentration of our revenue in a small number of states;
- our ability to realize anticipated cost savings and other benefits from our current strategic and operational cost savings initiatives;
- any effects of our previously announced adoption of a Stockholder Protection Rights Agreement;
- any effects related to our previously announced exploration of strategic alternatives; and
-
the other risk factors set forth in our other public filings with the
Securities and Exchange Commission .
The consolidated operating results for the three months and year ended
View source version on businesswire.com: http://www.businesswire.com/news/home/20170220005681/en/
Source:
Community Health Systems, Inc.
W. Larry Cash, 615-465-7000
President
of Financial Services and Chief Financial Officer