Community Health Systems, Inc. Announces Fourth Quarter 2015 Results with Net Operating Revenues of $4.798 Billion
02/15/16
The operating results of
Net operating revenues for the three months ended
Net income attributable to
Adjusted EBITDA for the three months ended
The consolidated operating results for the three months ended
Net operating revenues for the year ended
Net income attributable to
Adjusted EBITDA for the year ended
The consolidated operating results for the year ended
Adjusted EBITDA, a non-GAAP financial measure, is EBITDA adjusted to
exclude discontinued operations, loss from early extinguishment of debt,
impairment of long-lived assets, net income attributable to
noncontrolling interests, acquisition and integration expenses from the
acquisition of HMA, expenses incurred related to the planned spin-off of
Commenting on the results,
Included on pages 16, 17, 18 and 19 of this press release are tables setting forth the Company’s 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.
The Company has announced plans for a spin-off transaction to create a
new, publicly-traded company,
The Company’s headquarters are located in
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES | |||||||||||||||||||||
Financial Highlights (a)(b)(c)(d)(e) | |||||||||||||||||||||
(In millions, except per share amounts) | |||||||||||||||||||||
(Unaudited) | |||||||||||||||||||||
Three Months Ended | Year Ended | ||||||||||||||||||||
December 31, | December 31, | ||||||||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||||||||
Net operating revenues | $ | 4,798 | $ | 4,918 | $ | 19,437 | $ | 18,639 | |||||||||||||
Adjusted EBITDA (f) | 527 | 785 | 2,670 | 2,777 | |||||||||||||||||
(Loss) income from continuing operations (g), (j) | (40 | ) | 165 | 295 | 260 | ||||||||||||||||
Net (loss) income attributable to Community Health | |||||||||||||||||||||
Systems, Inc. stockholders | (83 | ) | 100 | 158 | 92 | ||||||||||||||||
Basic (loss) earnings per share attributable to Community | |||||||||||||||||||||
Health Systems, Inc. common stockholders (m): | |||||||||||||||||||||
Continuing operations (g), (j) | $ | (0.66 | ) | $ | 1.13 | $ | 1.69 | $ | 1.33 | ||||||||||||
Discontinued operations | (0.08 | ) | (0.26 | ) | (0.31 | ) | (0.51 | ) | |||||||||||||
Net (loss) income | $ | (0.73 | ) | $ | 0.88 | $ | 1.38 | $ | 0.82 | ||||||||||||
Diluted (loss) earnings per share attributable to Community | |||||||||||||||||||||
Health Systems, Inc. common stockholders (m): | |||||||||||||||||||||
Continuing operations (g), (j), (k) | $ | (0.66 | ) | $ | 1.12 | $ | 1.68 | $ | 1.32 | ||||||||||||
Discontinued operations | (0.08 | ) | (0.25 | ) | (0.31 | ) | (0.51 | ) | |||||||||||||
Net (loss) income (k) | $ | (0.73 | ) | $ | 0.87 | $ | 1.37 | $ | 0.82 | ||||||||||||
|
|||||||||||||||||||||
Weighted-average number of shares outstanding (h): | |||||||||||||||||||||
Basic | 113 | 114 | 114 | 112 | |||||||||||||||||
Diluted | 113 | 115 | 115 | 113 | |||||||||||||||||
Net cash provided by operating activities | $ | 306 | $ | 976 | $ | 921 | $ | 1,615 | |||||||||||||
____ |
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES | |||||||||||||||||||
Condensed Consolidated Statements of (Loss) Income (a)(b)(c)(d)(e) | |||||||||||||||||||
(In millions, except per share amounts) | |||||||||||||||||||
(Unaudited) | |||||||||||||||||||
Three Months Ended December 31, | |||||||||||||||||||
2015 | 2014 | ||||||||||||||||||
Amount |
% of Net Operating Revenues |
Amount |
% of Net Operating Revenues |
||||||||||||||||
Operating revenues (net of contractual allowances and discounts) | $ | 5,724 | $ | 5,641 | |||||||||||||||
Provision for bad debts | 926 | 723 | |||||||||||||||||
Net operating revenues | 4,798 | 100.0 | % | 4,918 | 100.0 | % | |||||||||||||
Operating costs and expenses: | |||||||||||||||||||
Salaries and benefits | 2,278 | 47.5 | % | 2,221 | 45.2 | % | |||||||||||||
Supplies | 773 | 16.1 | % | 764 | 15.5 | % | |||||||||||||
Other operating expenses | 1,151 | 23.9 | % | 1,073 | 21.9 | % | |||||||||||||
Government settlement and related costs (l) | 3 | 0.1 | % | 24 | 0.5 | % | |||||||||||||
Electronic health records incentive reimbursement | (25 | ) | (0.5 | )% | (47 | ) | (1.0 | )% | |||||||||||
Rent | 113 | 2.4 | % | 115 | 2.3 | % | |||||||||||||
Depreciation and amortization | 297 | 6.2 | % | 291 | 5.9 | % | |||||||||||||
Impairment of long-lived assets (j) | 62 | 1.3 | % | 17 | 0.3 | % | |||||||||||||
Total operating costs and expenses | 4,652 | 97.0 | % | 4,458 | 90.6 | % | |||||||||||||
Income from operations (g), (j) | 146 | 3.0 | % | 460 | 9.4 | % | |||||||||||||
Interest expense, net | 249 | 5.2 | % | 244 | 5.0 | % | |||||||||||||
Equity in earnings of unconsolidated affiliates | (12 | ) | (0.3 | )% | (14 | ) | (0.3 | )% | |||||||||||
(Loss) income from continuing operations before income taxes |
(91 | ) | (1.9 | )% | 230 | 4.7 | % | ||||||||||||
(Benefit from) provision for income taxes | (51 | ) | (1.1 | )% | 65 | 1.4 | % | ||||||||||||
(Loss) income from continuing operations (g), (j) | (40 | ) | (0.8 | )% | 165 | 3.3 | % | ||||||||||||
Discontinued operations, net of taxes: | |||||||||||||||||||
Loss from operations of entities sold or held for sale | (5 | ) | (0.1 | )% | (2 | ) | - | % | |||||||||||
Impairment of hospitals sold or held for sale | (4 | ) | (0.1 | )% | (27 | ) | (0.6 | )% | |||||||||||
Loss from discontinued operations, net of taxes | (9 | ) | (0.2 | )% | (29 | ) | (0.6 | )% | |||||||||||
Net (loss) income | (49 | ) | (1.0 | )% | 136 | 2.7 | % | ||||||||||||
Less: Net income attributable to noncontrolling interests | 34 | 0.7 | % | 36 | 0.7 | % | |||||||||||||
Net (loss) income attributable to Community Health Systems, Inc. stockholders | $ | (83 | ) | (1.7 | )% | $ | 100 | 2.0 | % | ||||||||||
Basic (loss) earnings per share attributable to Community Health Systems, Inc. common stockholders (m): |
|||||||||||||||||||
Continuing operations (g), (j) | $ | (0.66 | ) | $ | 1.13 | ||||||||||||||
Discontinued operations | (0.08 | ) | (0.26 | ) | |||||||||||||||
Net (loss) income | $ | (0.73 | ) | $ | 0.88 | ||||||||||||||
Diluted (loss) earnings per share attributable to Community Health Systems, Inc. common stockholders (m): |
|||||||||||||||||||
Continuing operations (g), (j), (k) | $ | (0.66 | ) | $ | 1.12 | ||||||||||||||
Discontinued operations | (0.08 | ) | (0.25 | ) | |||||||||||||||
Net (loss) income (k) | $ | (0.73 | ) | $ | 0.87 | ||||||||||||||
Weighted-average number of shares outstanding (h): |
|||||||||||||||||||
Basic | 113 | 114 | |||||||||||||||||
Diluted | 113 | 115 | |||||||||||||||||
____ |
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES | ||||||||||||||||||
Condensed Consolidated Statements of Income (a)(b)(c)(d)(e) | ||||||||||||||||||
(In millions, except per share amounts) | ||||||||||||||||||
(Unaudited) | ||||||||||||||||||
Year Ended December 31, | ||||||||||||||||||
2015 | 2014 | |||||||||||||||||
Amount |
% of Net Operating Revenues |
Amount |
% of Net Operating Revenues |
|||||||||||||||
Operating revenues (net of contractual allowances and discounts) | $ | 22,564 | $ | 21,561 | ||||||||||||||
Provision for bad debts | 3,127 | 2,922 | ||||||||||||||||
Net operating revenues | 19,437 | 100.0 | % | 18,639 | 100.0 | % | ||||||||||||
Operating costs and expenses: | ||||||||||||||||||
Salaries and benefits | 8,991 | 46.3 | % | 8,618 | 46.2 | % | ||||||||||||
Supplies | 3,048 | 15.7 | % | 2,862 | 15.4 | % | ||||||||||||
Other operating expenses | 4,520 | 23.2 | % | 4,322 | 23.3 | % | ||||||||||||
Government settlement and related costs (l) | 4 | 0.0 | % | 101 | 0.5 | % | ||||||||||||
Electronic health records incentive reimbursement | (160 | ) | (0.8 | )% | (259 | ) | (1.4 | )% | ||||||||||
Rent | 457 | 2.4 | % | 434 | 2.3 | % | ||||||||||||
Depreciation and amortization | 1,172 | 6.0 | % | 1,106 | 5.9 | % | ||||||||||||
Amortization of software to be abandoned (j) | - | - | % | 75 | 0.4 | % | ||||||||||||
Impairment of long-lived assets (j) | 68 | 0.3 | % | 41 | 0.2 | % | ||||||||||||
Total operating costs and expenses | 18,100 | 93.1 | % | 17,300 | 92.8 | % | ||||||||||||
Income from operations (g), (j) | 1,337 | 6.9 | % | 1,339 | 7.2 | % | ||||||||||||
Interest expense, net | 973 | 5.0 | % | 972 | 5.3 | % | ||||||||||||
Loss from early extinguishment of debt | 16 | 0.1 | % | 73 | 0.4 | % | ||||||||||||
Equity in earnings of unconsolidated affiliates | (63 | ) | (0.3 | )% | (48 | ) | (0.3 | )% | ||||||||||
Income from continuing operations before income taxes |
411 | 2.1 | % | 342 | 1.8 | % | ||||||||||||
Provision for income taxes | 116 | 0.6 | % | 82 | 0.4 | % | ||||||||||||
Income from continuing operations (g), (j) | 295 | 1.5 | % | 260 | 1.4 | % | ||||||||||||
Discontinued operations, net of taxes: | ||||||||||||||||||
Loss from operations of entities sold or held for sale | (27 | ) | (0.2 | )% | (7 | ) | - | % | ||||||||||
Impairment of hospitals sold or held for sale | (5 | ) | - | % | (50 | ) | (0.3 | )% | ||||||||||
Loss on sale, net | (4 | ) | - | % | - | - | % | |||||||||||
Loss from discontinued operations, net of taxes | (36 | ) | (0.2 | )% | (57 | ) | (0.3 | )% | ||||||||||
Net income | 259 | 1.3 | % | 203 | 1.1 | % | ||||||||||||
Less: Net income attributable to noncontrolling interests | 101 | 0.5 | % | 111 | 0.6 | % | ||||||||||||
Net income attributable to Community Health Systems, Inc. stockholders | $ | 158 | 0.8 | % | $ | 92 | 0.5 | % | ||||||||||
Basic earnings (loss) per share attributable to Community Health Systems, Inc. common stockholders (m): |
||||||||||||||||||
Continuing operations (g), (j) | $ | 1.69 | $ | 1.33 | ||||||||||||||
Discontinued operations | (0.31 | ) | (0.51 | ) | ||||||||||||||
Net income | $ | 1.38 | $ | 0.82 | ||||||||||||||
Diluted earnings (loss) per share attributable to Community Health Systems, Inc. common stockholders (m): |
||||||||||||||||||
Continuing operations (g), (j), (k) | $ | 1.68 | $ | 1.32 | ||||||||||||||
Discontinued operations | (0.31 | ) | (0.51 | ) | ||||||||||||||
Net income (k) | $ | 1.37 | $ | 0.82 | ||||||||||||||
Weighted-average number of shares outstanding (h): |
||||||||||||||||||
Basic | 114 | 112 | ||||||||||||||||
Diluted | 115 | 113 | ||||||||||||||||
____ For footnotes, see pages 12, 13, 14 and 15. |
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES | |||||||||||||||||||||
Condensed Consolidated Statements of Comprehensive (Loss) Income (c) | |||||||||||||||||||||
(In millions) | |||||||||||||||||||||
(Unaudited) | |||||||||||||||||||||
Three Months Ended | Year Ended | ||||||||||||||||||||
December 31, | December 31, | ||||||||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||||||||
Net (loss) income | $ | (49 | ) | $ | 136 | $ | 259 | $ | 203 | ||||||||||||
Other comprehensive income (loss), net of income taxes: | |||||||||||||||||||||
Net change in fair value of interest rate swaps, net of tax | 16 | (7 | ) | (6 | ) | 13 | |||||||||||||||
Net change in fair value of available-for-sale securities, net of tax | 4 | 2 | (5 | ) | - | ||||||||||||||||
Amortization and recognition of unrecognized pension cost components, net of tax |
- | (10 | ) | 1 | (9 | ) | |||||||||||||||
Other comprehensive income (loss) | 20 | (15 | ) | (10 | ) | 4 | |||||||||||||||
Comprehensive (loss) income | (29 | ) | 121 | 249 | 207 | ||||||||||||||||
Less: Comprehensive income attributable to noncontrolling interests | 34 | 36 | 101 | 111 | |||||||||||||||||
Comprehensive (loss) income attributable to Community Health Systems, Inc. stockholders |
$ | (63 | ) | $ | 85 | $ | 148 | $ | 96 | ||||||||||||
____ |
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES | |||||||||||||||||||||||||||||
Selected Operating Data (a)(d) | |||||||||||||||||||||||||||||
(Dollars in millions) | |||||||||||||||||||||||||||||
(Unaudited) | |||||||||||||||||||||||||||||
Three Months Ended December 31, | |||||||||||||||||||||||||||||
Consolidated | Same-Store | ||||||||||||||||||||||||||||
2015 | 2014 | % Change | 2015 | 2014 | % Change | ||||||||||||||||||||||||
Number of hospitals (at end of period) | 194 | 197 | 194 | 194 | |||||||||||||||||||||||||
Licensed beds (at end of period) | 29,853 | 30,137 | 29,853 | 30,023 | |||||||||||||||||||||||||
Beds in service (at end of period) | 26,312 | 27,000 | 26,312 | 26,908 | |||||||||||||||||||||||||
Admissions | 230,250 | 238,740 | -3.6 | % | 230,067 | 238,128 | -3.4 | % | |||||||||||||||||||||
Adjusted admissions | 504,119 | 511,988 | -1.5 | % | 503,681 | 509,935 | -1.2 | % | |||||||||||||||||||||
Patient days | 1,011,868 | 1,046,254 | 1,010,993 | 1,044,488 | |||||||||||||||||||||||||
Average length of stay (days) | 4.4 | 4.4 | 4.4 | 4.4 | |||||||||||||||||||||||||
Occupancy rate (average beds in service) | 41.8 | % | 42.4 | % | 41.8 | % | 42.5 | % | |||||||||||||||||||||
Net operating revenues | $ | 4,798 | $ | 4,918 | -2.4 | % | $ | 4,963 | $ | 4,901 | 1.3 | % | |||||||||||||||||
Net inpatient revenues as a % of net patient revenues before provision for bad debts |
43.0 | % | 43.6 | % | 42.9 | % | 43.7 | % | |||||||||||||||||||||
Net outpatient revenues as a % of net patient revenues before provision for bad debts |
57.0 | % | 56.4 | % | 57.1 | % | 56.3 | % | |||||||||||||||||||||
Income from operations (g), (j) | $ | 146 | $ | 460 | -68.3 | % | |||||||||||||||||||||||
Income from operations as a % of net operating revenues |
3.0 | % | 9.4 | % | |||||||||||||||||||||||||
Depreciation and amortization | $ | 297 | $ | 291 | |||||||||||||||||||||||||
Equity in earnings of unconsolidated affiliates | $ | (12 | ) | $ | (14 | ) | |||||||||||||||||||||||
Liquidity Data: | |||||||||||||||||||||||||||||
Adjusted EBITDA (f) | $ | 527 | $ | 785 | -32.9 | % | |||||||||||||||||||||||
Adjusted EBITDA as a % of net | |||||||||||||||||||||||||||||
operating revenues | 11.0 | % | 16.0 | % | |||||||||||||||||||||||||
Net cash provided by operating activities | $ | 306 | $ | 976 | |||||||||||||||||||||||||
Net cash provided by operating activities as a % of net operating revenues |
6.4 | % | 19.8 | % | |||||||||||||||||||||||||
____ |
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES | ||||||||||||||||||||||||
Selected Operating Data (a)(d)(i) | ||||||||||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||||||
Year Ended December 31, | ||||||||||||||||||||||||
Consolidated | Same-Store (1) | |||||||||||||||||||||||
2015 | 2014 | % Change | 2015 | 2014 | % Change | |||||||||||||||||||
Number of hospitals (at end of period) | 194 | 197 | 194 | 194 | ||||||||||||||||||||
Licensed beds (at end of period) | 29,853 | 30,137 | 29,853 | 30,023 | ||||||||||||||||||||
Beds in service (at end of period) | 26,312 | 27,000 | 26,312 | 26,908 | ||||||||||||||||||||
Admissions | 940,292 | 924,557 | 1.7 | % | 929,213 | 946,531 | -1.8 | % | ||||||||||||||||
Adjusted admissions | 2,038,103 | 1,969,770 | 3.5 | % | 2,015,496 | 2,009,847 | 0.3 | % | ||||||||||||||||
Patient days | 4,175,214 | 4,091,183 | 4,119,165 | 4,195,141 | ||||||||||||||||||||
Average length of stay (days) | 4.4 | 4.4 | 4.4 | 4.4 | ||||||||||||||||||||
Occupancy rate (average beds in service) | 43.3 | % | 43.8 | % | 43.5 | % | 43.9 | % | ||||||||||||||||
Net operating revenues | $ | 19,437 | $ | 18,639 | 4.3 | % | $ | 19,432 | $ | 18,973 | 2.4 | % | ||||||||||||
Net inpatient revenues as a % of net patient revenues before provision for bad debts |
42.8 | % | 43.9 | % | 42.8 | % | 44.1 | % | ||||||||||||||||
Net outpatient revenues as a % of net patient revenues before provision for bad debts |
57.2 | % | 56.1 | % | 57.2 | % | 55.9 | % | ||||||||||||||||
Income from operations (g), (j) | $ | 1,337 | $ | 1,339 | -0.1 | % | ||||||||||||||||||
Income from operations as a % of net operating revenues |
6.9 | % | 7.2 | % | ||||||||||||||||||||
Depreciation and amortization | $ | 1,172 | $ | 1,181 | ||||||||||||||||||||
Equity in earnings of unconsolidated affiliates | $ | (63 | ) | $ | (48 | ) | ||||||||||||||||||
Liquidity Data: | ||||||||||||||||||||||||
Adjusted EBITDA (f) | $ | 2,670 | $ | 2,777 | -3.9 | % | ||||||||||||||||||
Adjusted EBITDA as a % of net operating revenues |
13.7 | % | 14.9 | % | ||||||||||||||||||||
Net cash provided by operating activities | $ | 921 | $ | 1,615 | ||||||||||||||||||||
Net cash provided by operating activities as a % of net operating revenues |
4.7 | % | 8.7 | % | ||||||||||||||||||||
(1) For hospitals acquired in the HMA merger, same-store operating results and statistical data reflect the periods from January 1 through December 31, 2015 and 2014, as if such hospitals were owned during both comparable periods. |
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____ |
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES | ||||||
Condensed Consolidated Balance Sheets (b) | ||||||
(In millions, except share data) | ||||||
(Unaudited) | ||||||
December 31, 2015 | December 31, 2014 | |||||
ASSETS | ||||||
Current assets | ||||||
Cash and cash equivalents | $ | 184 | $ | 509 | ||
Patient accounts receivable, net of allowance for doubtful accounts of $4,111 and $3,504 at December 31, 2015 and 2014, respectively |
3,611 | 3,409 | ||||
Supplies | 580 | 557 | ||||
Prepaid income taxes | 27 | 30 | ||||
Deferred income taxes | - | 341 | ||||
Prepaid expenses and taxes | 197 | 192 | ||||
Other current assets (including assets of hospitals held for sale of $17 and $38 at December 31, 2015 and 2014, respectively) |
567 | 528 | ||||
Total current assets | 5,166 | 5,566 | ||||
Property and equipment: | ||||||
Land and improvements | 969 | 946 | ||||
Buildings and improvements | 9,051 | 8,791 | ||||
Equipment and fixtures | 4,886 | 4,527 | ||||
Property and equipment, gross | 14,906 | 14,264 | ||||
Less accumulated depreciation and amortization | (4,794) | (4,095) | ||||
Property and equipment, net | 10,112 | 10,169 | ||||
Goodwill | 8,965 | 8,951 | ||||
Other assets, net of accumulated amortization of $903 and $827 at December 31, 2015 and 2014, respectively (including assets of hospitals held for sale of $41 and $90 at December 31, 2015 and 2014, respectively) |
2,618 | 2,735 | ||||
Total assets | $ | 26,861 | $ | 27,421 | ||
LIABILITIES AND EQUITY | ||||||
Current liabilities | ||||||
Current maturities of long-term debt | $ | 229 | $ | 235 | ||
Accounts payable | 1,258 | 1,293 | ||||
Deferred income taxes | - | 23 | ||||
Accrued liabilities: | ||||||
Employee compensation | 823 | 955 | ||||
Interest | 227 | 227 | ||||
Other (including liabilities of hospitals held for sale of $6 and $10 at December 31, 2015 and 2014, respectively) |
535 | 856 | ||||
Total current liabilities | 3,072 | 3,589 | ||||
Long-term debt | 16,822 | 16,681 | ||||
Deferred income taxes | 593 | 845 | ||||
Other long-term liabilities | 1,698 | 1,692 | ||||
Total liabilities | 22,185 | 22,807 | ||||
Redeemable noncontrolling interests in equity of consolidated subsidiaries | 571 | 531 | ||||
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; 113,732,933 shares issued and 112,757,384 shares outstanding at December 31, 2015, and 117,701,087 shares issued and 116,725,538 shares outstanding at December 31, 2014 |
1 | 1 | ||||
Additional paid-in capital | 1,963 | 2,095 | ||||
Treasury stock, at cost, 975,549 shares at December 31, 2015 and 2014 | (7) | (7) | ||||
Accumulated other comprehensive loss | (73) | (63) | ||||
Retained earnings | 2,135 | 1,977 | ||||
Total Community Health Systems, Inc. stockholders’ equity | 4,019 | 4,003 | ||||
Noncontrolling interests in equity of consolidated subsidiaries | 86 | 80 | ||||
Total equity | 4,105 | 4,083 | ||||
Total liabilities and equity | $ | 26,861 | $ | 27,421 | ||
____ For footnotes, see pages 12, 13, 14 and 15. |
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES | |||||||||||
Condensed Consolidated Statements of Cash Flows (b) | |||||||||||
(In millions) | |||||||||||
(Unaudited) | |||||||||||
Year Ended December 31, | |||||||||||
2015 | 2014 | ||||||||||
Cash flows from operating activities | |||||||||||
Net income | $ | 259 | $ | 203 | |||||||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||
Depreciation and amortization | 1,174 | 1,187 | |||||||||
Deferred income taxes | 103 | 107 | |||||||||
Government settlement and related costs (l) | 4 | 101 | |||||||||
Stock-based compensation expense | 59 | 54 | |||||||||
Loss on sale, net | 4 | - | |||||||||
Impairment of hospitals sold or held for sale | 5 | 50 | |||||||||
Impairment of long-lived assets | 68 | 41 | |||||||||
Loss from early extinguishment of debt | 16 | 73 | |||||||||
Other non-cash expenses, net | 47 | 13 | |||||||||
Changes in operating assets and liabilities, net of effects of acquisitions and divestitures: | |||||||||||
Patient accounts receivable | (219 | ) | (306 | ) | |||||||
Supplies, prepaid expenses and other current assets | (68 | ) | 28 | ||||||||
Accounts payable, accrued liabilities and income taxes | (478 | ) | 147 | ||||||||
Other | (53 | ) | (83 | ) | |||||||
Net cash provided by operating activities | 921 | 1,615 | |||||||||
Cash flows from investing activities | |||||||||||
Acquisitions of facilities and other related equipment | (57 | ) | (3,091 | ) | |||||||
Purchases of property and equipment | (953 | ) | (853 | ) | |||||||
Proceeds from disposition of hospitals and other ancillary operations | 155 | 88 | |||||||||
Proceeds from sale of property and equipment | 15 | 50 | |||||||||
Purchases of available-for-sale securities | (162 | ) | (263 | ) | |||||||
Proceeds from sales of available-for-sale securities | 156 | 229 | |||||||||
Increase in other investments | (205 | ) | (511 | ) | |||||||
Net cash used in investing activities | (1,051 | ) | (4,351 | ) | |||||||
Cash flows from financing activities | |||||||||||
Proceeds from exercise of stock options | 25 | 65 | |||||||||
Repurchase of restricted stock shares for payroll tax withholding requirements | (20 | ) | (11 | ) | |||||||
Stock buy-back | (159 | ) | (9 | ) | |||||||
Deferred financing costs and other debt-related costs | (30 | ) | (276 | ) | |||||||
Proceeds from noncontrolling investors in joint ventures | 47 | 10 | |||||||||
Redemption of noncontrolling investments in joint ventures | (36 | ) | (158 | ) | |||||||
Distributions to noncontrolling investors in joint ventures | (100 | ) | (104 | ) | |||||||
Borrowings under credit agreements | 4,922 | 9,131 | |||||||||
Issuance of long-term debt | - | 4,000 | |||||||||
Proceeds from receivables facility | 206 | 204 | |||||||||
Repayments of long-term indebtedness | (5,050 | ) | (9,980 | ) | |||||||
Net cash (used in) provided by financing activities | (195 | ) | 2,872 | ||||||||
Net change in cash and cash equivalents | (325 | ) | 136 | ||||||||
Cash and cash equivalents at beginning of period | 509 | 373 | |||||||||
Cash and cash equivalents at end of period | $ | 184 | $ | 509 | |||||||
____ |
|||||||||||
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, | |||||||
2015 | |||||||
Legal and other related costs incurred to date | $ | 29 | |||||
Settlements | 28 | ||||||
Estimated liability for probable contingencies | - | ||||||
Estimated liability for unresolved contingencies at fair value | 261 | ||||||
Costs incurred plus certain estimated liabilities for CVR-related matters |
318 | ||||||
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 |
$ | 271 | |||||
CVRs outstanding | 265 | ||||||
(c) The effective date of the HMA acquisition was January 27, 2014.
(d) Included in discontinued operations for the years ended
(e) 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, | ||||||||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||||||||
(Loss) income from continuing operations attributable to Community Health Systems, Inc. common stockholders: |
|||||||||||||||||||||
(Loss) income from continuing operations, net of taxes | $ | (40 | ) | $ | 165 | $ | 295 | $ | 260 | ||||||||||||
Less: Income from continuing operations attributable to noncontrolling interests |
34 | 36 | 101 | 111 | |||||||||||||||||
(Loss) income from continuing operations attributable to Community Health Systems, Inc. common stockholders — basic and diluted |
$ | (74 | ) | $ | 129 | $ | 194 | $ | 149 | ||||||||||||
Loss from discontinued operations attributable to Community Health Systems, Inc. common stockholders: |
|||||||||||||||||||||
Loss from discontinued operations, net of taxes | $ | (9 | ) | $ | (29 | ) | $ | (36 | ) | $ | (57 | ) | |||||||||
Less: Loss from discontinued operations attributable to noncontrolling interests |
- | - | - | - | |||||||||||||||||
Loss from discontinued operations attributable to Community Health Systems, Inc. common stockholders — basic and diluted |
$ | (9 | ) | $ | (29 | ) | $ | (36 | ) | $ | (57 | ) | |||||||||
Footnotes to Financial Highlights, Financial Statements and Selected Operating Data (Continued)
(f) EBITDA is a non-GAAP financial measure which consists of net income
attributable to
Adjusted EBITDA is not a measurement of financial performance or liquidity under U.S. GAAP. It should not be considered in isolation or as a substitute for net income, operating income, cash flows from operating, investing or financing activities or any other measure calculated in accordance with U.S. GAAP. The items excluded from Adjusted EBITDA are significant components in understanding and evaluating financial performance and liquidity. This calculation of Adjusted EBITDA may not be comparable to similarly titled measures reported by other companies.
The following table reflects the calculation of Adjusted EBITDA, as defined, from (loss) income from continuing operations before income taxes and reconciles Adjusted EBITDA to net cash provided by operating activities as derived directly from the condensed consolidated financial statements (in millions):
Three Months Ended | Year Ended | |||||||||||||||||
December 31, | December 31, | |||||||||||||||||
2015 | 2014 | 2015 | 2014 | |||||||||||||||
(Loss) income from continuing operations before income taxes | $ | (91 | ) | $ | 230 | $ | 411 | $ | 342 | |||||||||
Adjustments: | ||||||||||||||||||
Depreciation and amortization | 297 | 291 | 1,172 | 1,106 | ||||||||||||||
Amortization of software to be abandoned | - | - | - | 75 | ||||||||||||||
Interest expense, net | 249 | 244 | 973 | 972 | ||||||||||||||
Loss from early extinguishment of debt | - | - | 16 | 73 | ||||||||||||||
Impairment of long-lived assets | 62 | 17 | 68 | 41 | ||||||||||||||
Expenses related to the acquisition and integration of HMA | - | 1 | 1 | 69 | ||||||||||||||
Expense from government settlement and related costs | 3 | 28 | 4 | 105 | ||||||||||||||
(Income) expense from fair value adjustments and legal expenses related to cases covered by the CVR |
- | (26 | ) | 8 | (6 | ) | ||||||||||||
Expenses related to the planned spin-off of Quorum Health Corporation |
7 | - | 17 | - | ||||||||||||||
Adjusted EBITDA (*) | $ | 527 | $ | 785 | $ | 2,670 | $ | 2,777 | ||||||||||
Adjusted EBITDA (*) | $ | 527 | $ | 785 | $ | 2,670 | $ | 2,777 | ||||||||||
Interest expense, net | (249 | ) | (244 | ) | (973 | ) | (972 | ) | ||||||||||
Benefit from (provision for) income taxes | 51 | (65 | ) | (116 | ) | (82 | ) | |||||||||||
Loss from operations of entities sold or held for sale, net of taxes |
(5 | ) | (2 | ) | (27 | ) | (7 | ) | ||||||||||
Other non-cash expenses, net | 143 | 137 | 211 | 209 | ||||||||||||||
Changes in operating assets and liabilities, net of effects of acquisitions and divestitures |
(161 | ) | 365 | (844 | ) | (310 | ) | |||||||||||
Net cash provided by operating activities | $ | 306 | $ | 976 | $ | 921 | $ | 1,615 | ||||||||||
(*) Included in Adjusted EBITDA for the three months and year ended December 31, 2015 is the $169 million change in estimate for the provision for bad debts. |
||||||||||||||||||
Footnotes to Financial Highlights, Financial Statements and Selected Operating Data (Continued)
(g) Included in non-same-store income from operations and income from
continuing operations are pre-tax charges related to acquisition costs
of
(h) 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, | |||||||||
2015 | 2014 | 2015 | 2014 | |||||||
Weighted-average number of shares outstanding - basic |
113 | 114 | 114 | 112 | ||||||
Add effect of dilutive securities: | ||||||||||
Stock awards and options | - | 1 | 1 | 1 | ||||||
Weighted-average number of shares outstanding - diluted |
113 | 115 | 115 | 113 | ||||||
The Company generated a loss from continuing operations attributable to
(i) For hospitals acquired in the HMA merger, same-store operating
results and statistical data reflect the periods from
(j) Income from continuing operations for the year ended
Footnotes to Financial Highlights, Financial Statements and Selected Operating Data (Continued)
(k) 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, | |||||||||||||||
2015 | 2014 | 2015 | 2014 | |||||||||||||
(per share - diluted) | (per share - diluted) | |||||||||||||||
(Loss) income from continuing operations, as reported (*) | $ | (0.66 | ) | $ | 1.12 | $ | 1.68 | $ | 1.32 | |||||||
Adjustments: | ||||||||||||||||
Loss from early extinguishment of debt | - | - | 0.09 | 0.40 | ||||||||||||
Amortization of software to be abandoned | - | - | - | 0.42 | ||||||||||||
Impairment of long-lived assets | 0.33 | 0.09 | 0.36 | 0.22 | ||||||||||||
Expenses related to the acquisition and integration of HMA | - | 0.01 | - | 0.38 | ||||||||||||
Expense from government settlement and related costs | 0.02 | 0.15 | 0.02 | 0.57 | ||||||||||||
(Income) expense from fair value adjustments and legal expenses related to cases covered by the CVR |
- | (0.14 | ) | 0.05 | (0.03 | ) | ||||||||||
Expenses related to the planned spin-off of Quorum Health Corporation |
0.04 | - | 0.09 | - | ||||||||||||
(Loss) income from continuing operations, excluding adjustments (*) | $ | (0.28 | ) | $ | 1.23 | $ | 2.29 | $ | 3.29 | |||||||
Three Months Ended | Year Ended | |||||||||||||||
December 31, | December 31, | |||||||||||||||
2015 | 2014 | 2015 | 2014 | |||||||||||||
(per share - diluted) | (per share - diluted) | |||||||||||||||
Net (loss) income, as reported (*) | $ | (0.73 | ) | $ | 0.87 | $ | 1.37 | $ | 0.82 | |||||||
Adjustments: | ||||||||||||||||
Loss from early extinguishment of debt | - | - | 0.09 | 0.40 | ||||||||||||
Amortization of software to be abandoned | - | - | - | 0.42 | ||||||||||||
Impairment of long-lived assets | 0.33 | 0.09 | 0.36 | 0.22 | ||||||||||||
Expenses related to the acquisition and integration of HMA | - | 0.01 | - | 0.38 | ||||||||||||
Expense from government settlement and related costs | 0.02 | 0.15 | 0.02 | 0.57 | ||||||||||||
(Income) expense from fair value adjustments and legal expenses related to cases covered by the CVR |
- | (0.14 | ) | 0.05 | (0.03 | ) | ||||||||||
Expenses related to the planned spin-off of Quorum Health Corporation |
0.04 | - | 0.09 | - | ||||||||||||
Net (loss) income, excluding adjustments (*) | $ | (0.35 | ) | $ | 0.97 | $ | 1.98 | $ | 2.79 | |||||||
(*) Included in (loss) income from continuing operations, as reported and as adjusted, and net (loss) income, as reported and as adjusted, for the three months and year ended December 31, 2015 is approximately $0.96 and $0.94 per share (diluted), respectively, related to the $169 million change in estimate for the provision for bad debts during the three months ended December 31, 2015. |
||||||||||||||||
(l) The
(m) 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, 2016. 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 2016 guidance should be considered in conjunction with the assumptions included herein. See pages 18 and 19 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:
2016 Projection Range | ||||||||||||
Net operating revenues less provision for bad debts (in millions) | $ | 20,000 | to | $ | 20,600 | |||||||
Adjusted EBITDA (in millions) | $ | 2,900 | to | $ | 3,050 | |||||||
Income from continuing operations per share - diluted | $ | 3.40 | to | $ | 3.80 | |||||||
Same-store hospital annual adjusted admissions growth | 0.5 | % | to | 2.5 | % | |||||||
Weighted-average diluted shares, in millions | 111.0 | to | 113.0 | |||||||||
The following assumptions were used in developing the 2016 guidance provided above:
-
The guidance includes the 38 hospitals associated with the planned
spin-off of
Quorum Health Corporation as if owned by the Company for the full year. -
The Company’s projections exclude the following:
- 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 long-lived assets;
- Resolution of government investigations or other significant legal settlements;
-
Costs incurred in connection with the planned spin-off transaction
of
Quorum Health Corporation , which consists of 38 hospitals andQuorum Health Resources, LLC ; and - Other significant gains or losses that neither relate to the ordinary course of business nor reflect the Company’s underlying business performance.
- 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 aforementioned guidance. In addition, the Company may also consider additional hospitals for disposition for which the operating results have not been excluded from this guidance.
-
The 2016 projections assume the acquisition of two hospitals in La
Porte,
Indiana , for which a definitive agreement has been signed, and the completion of one additional acquisition in the first half of 2016.
Other assumptions used in the above guidance:
-
Benefits to Adjusted EBITDA from Healthcare Reform in 2016 of an
incremental
$50 million to $75 million of net operating revenues before government deductions. -
Health Information Technology (HITECH) electronic health records
incentive reimbursement of approximately
$70 million to $80 million for the year endedDecember 31, 2016 . - Same-store hospital annual adjusted admissions growth of 0.5% to 2.5% for 2016, 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 2016. 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 4.9% to 5.0%; however, interest expense is a fixed cost and percentages may vary as revenue varies. Total fixed rate debt, including swaps, is expected to average approximately 60% to 70% of total debt during 2016.
- Expressed as a percentage of net operating revenues, equity in earnings of unconsolidated affiliates of approximately 0.25% to 0.35% for 2016.
- Expressed as a percentage of net operating revenues, net income attributable to noncontrolling interests of approximately 0.5% to 0.6% for 2016.
- Expressed as a percentage of income from continuing operations before income taxes, provision for income tax of approximately 31.5% to 33.0% for 2016.
- Capital expenditures are projected as follows (in millions):
2016 | ||||||||||||
Guidance | ||||||||||||
Total | $800 | to | $950 | |||||||||
- Net cash provided by operating activities, excluding cash flows related to the CVR and settlement of legal contingencies, is projected as follows (in millions):
2016 | ||||||||||||
Guidance | ||||||||||||
Total | $1,500 | to | $1,700 | |||||||||
- Weighted average shares outstanding are projected to be between approximately 111 million to 113 million for the year ended 2016.
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;
- implementation, effect of, and changes to, adopted and potential federal and state healthcare reform legislation and other federal, state or local laws or regulations affecting the healthcare industry;
-
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 success and long-term viability of health insurance exchanges, which may be impacted by whether a sufficient number of payors participate;
- risks associated with our substantial indebtedness, leverage, and debt service obligations;
- 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 impacted 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 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 the impact of the implementation of ICD-10 and
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; - 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 additional acquisitions or replacement facilities or other capital expenditures;
- our ability to successfully make acquisitions or complete divestitures;
- our ability to successfully integrate any acquired hospitals, including those of HMA, or to recognize expected synergies from acquisitions;
- the impact of the acquisition of HMA on third-party relationships;
- 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;
- the timing and completion of the previously announced planned spin-off;
- the effects of the planned spin-off on our business, including our ability to achieve the anticipated benefits of the spin-off; 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/20160215005500/en/
Source:
Community Health Systems, Inc.
W. Larry Cash, 615-465-7000
President
of Financial Services and Chief Financial Officer