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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
April 19, 2004
Date of Report (date of earliest event reported)
COMMUNITY HEALTH SYSTEMS, INC.
(Exact name of Registrant as specified in charter)
| Delaware (State or other jurisdiction of incorporation) |
001-15925 (Commission File Number) |
13-3893191 (I.R.S. Employer Identification No.) |
||
155 Franklin Road, Suite 400 Brentwood, Tennessee 37027 (Address of principal executive offices) |
||||
Registrant's telephone number, including area code: (615) 373-9600
ITEM 12. Results of Operations And Financial Condition.
The following information is being furnished pursuant to Item 12, "Results of Operations and Financial Condition." Consequently, it is not deemed "filed" for the purposes of Section 18 of the Securities Exchange Act of 1934 (the "Exchange Act"), or otherwise subject to the liabilities of that section. It may only be incorporated by reference in another filing under the Exchange Act or Securities Act of 1933 if such subsequent filing specifically references this Form 8-K. On April 18, 2004, Community Health Systems, Inc. (the "Company"), announced operating results for the quarter ended March 31, 2004. A copy of the related press release is attached as Exhibit 99.1 to this Form 8-K.
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Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.
| Date: April 19, 2004 | COMMUNITY HEALTH SYSTEMS, INC. (Registrant) |
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By: |
/s/ WAYNE T. SMITH Wayne T. Smith Chairman of the Board, President and Chief Executive Officer (principal executive officer) |
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By: |
/s/ W. LARRY CASH W. Larry Cash Executive Vice President, Chief Financial Officer and Director (principal financial officer) |
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By: |
/s/ T. MARK BUFORD T. Mark Buford Vice President and Corporate Controller (principal accounting officer) |
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Index to Exhibits Filed with the Current Report on Form 8-K Dated April 19, 2004
| Exhibit Number |
Description |
|
|---|---|---|
| 99.1 | Press Release dated April 18, 2004 |
SIGNATURES
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Exhibit Number 99.1
| Investor Contact: | W. Larry Cash Executive Vice President and Chief Financial Officer (615) 373-9600 |
COMMUNITY HEALTH SYSTEMS, INC. ANNOUNCES
FIRST QUARTER 2004 RESULTS WITH
NET OPERATING REVENUES UP 24.7%, NET INCOME UP 21.4% AND
NET INCOME PER SHARE (DILUTED) UP 18.2%
BRENTWOOD, Tenn. (April 18, 2004)—Community Health Systems, Inc. (NYSE: CYH) today announced financial and operating results for the first quarter ended March 31, 2004.
Net operating revenues for the first quarter ended March 31, 2004, totaled $822.4 million, a 24.7% increase compared with $659.3 million for the same period last year. Net income increased 21.4% to $40.7 million, or $0.39 per share (diluted), on 109.1 million weighted average shares outstanding for the quarter ended March 31, 2004, compared with $33.5 million, or $0.33 per share (diluted), on 107.8 million weighted average shares outstanding for the same period last year. Refer to page 3 for "Financial Highlights."
Adjusted EBITDA for the first quarter of 2004 was $125.0 million, compared with $106.6 million for the same period last year, representing a 17.3% increase. Adjusted EBITDA is EBITDA adjusted to exclude minority interest in earnings. The Company uses adjusted EBITDA as a measure of liquidity. Net cash provided by operating activities for the first quarter of 2004 was $61.7 million, compared with $8.5 million for the same period last year. The change between periods would not have been as large, had net cash provided by operating activities for both periods not been lowered primarily by the build-up of accounts receivable related to acquisitions, refer to page 3, footnote (c).
The consolidated financial results for the first quarter ended March 31, 2004, reflect a 17.8% increase in total admissions, compared with the first quarter of 2003. This increase is attributable to the Company's acquisition success and strong internal growth. On a same-store basis, admissions increased 1.9% and net operating revenues increased 8.2%, compared with the same period last year. The Company has had consistent same-store net operating revenue growth, as these results represent the 17th consecutive quarter of 8.0% growth or better.
"The financial and operating results for the first quarter indicate a solid start to 2004 for Community Health Systems," commented Wayne T. Smith, chairman, president and chief executive officer of Community Health Systems, Inc. "Our ability to consistently deliver higher net operating revenues and earnings and drive volumes in our hospital facilities every quarter reaffirms our confidence in the strength of our operating strategy. Our standardized and centralized operating platform has continued to be a key differentiator for the Company as further evidenced by our impressive same-store growth metrics for the first quarter. This strategic approach has allowed us to effectively implement our systems and processes into acquired facilities, thereby improving hospital operations and ultimately delivering more favorable and consistent results."
"Community Health Systems continues to be a leader in the non-urban hospital industry as a result of the successful execution of our acquisition strategy," Smith added. "Our growing recognition in the marketplace as the acquirer of choice has allowed us to continue to build on this momentum. We are off to a promising start for 2004 with the execution of a definitive agreement to acquire Galesburg
Cottage Hospital in Illinois. We believe the investment opportunities in well-managed, non-urban hospitals continue to look favorable for proven operators like Community Health Systems. We intend to leverage our favorable track record and strong community relationships into further opportunities in 2004, and remain confident we will meet our acquisition goals this year."
Located in the Nashville, Tennessee suburb of Brentwood, Community Health Systems is a leading operator of general acute care hospitals in non-urban communities throughout the country. Through its subsidiaries, the Company currently owns, leases or operates 72 hospitals in 22 states. Its hospitals offer a broad range of inpatient medical and surgical services, outpatient treatment and skilled nursing care. Shares in Community Health Systems, Inc. are traded on the New York Stock Exchange under the symbol "CYH."
Community Health Systems will provide a pre-recorded management presentation discussing these results. This presentation will be available online with accompanying slides at www.chs.net and www.fulldisclosure.com beginning at 9:30 a.m. Central time, 10:30 a.m. Eastern time, and will be available online through May 19, 2004. A digital recording of the call will also be available by dialing (800) 642-1687 or (706) 645-9291 and will continue through April 26, 2004. To access this recording, please enter 6656265 when prompted for the Conference I.D. A copy of the Company's Form 8-K (including this press release) will also be available on the Company's website at www.chs.net.
Statements contained in this news release regarding expected operating results, acquisition transactions and other events are forward-looking statements that involve risk and uncertainties. Actual future events or results may differ materially from these statements. Readers are referred to the documents filed by Community Health Systems, Inc. with the Securities and Exchange Commission, including the Company's Registration Statement on Form S-3 (Registration Statement No. 333-112084), and Form 10-K for the year ended December 31, 2003. These filings identify important risk factors and other uncertainties that could cause actual results to differ from those contained in the forward-looking statements.
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COMMUNITY HEALTH SYSTEMS, INC.
Financial Highlights
(Unaudited)
(In thousands, except net income per share amounts)
| |
Three Months Ended March 31, |
||||||
|---|---|---|---|---|---|---|---|
| |
2004 |
2003 |
|||||
| Net operating revenues | $ | 822,376 | $ | 659,277 | |||
| Adjusted EBITDA(a) | $ | 125,023 | $ | 106,574 | |||
| Net income | $ | 40,726 | $ | 33,539 | |||
| Net income per share—basic | $ | 0.41 | $ | 0.34 | |||
| Weighted average number of shares outstanding—basic | 98,699 | 98,355 | |||||
| Net income per share—diluted | $ | 0.39 | $ | 0.33 | |||
| Weighted average number of shares outstanding—diluted | 109,136 | (b) | 107,820 | (b) | |||
Net cash provided by operating activities |
$ |
61,731 |
(c) |
$ |
8,510 |
(c) |
|
- (a)
- EBITDA
consists of income before interest, income taxes, and depreciation and amortization. Adjusted EBITDA is EBITDA adjusted to exclude minority interest in earnings. We have from
time to time sold minority interests in certain of our subsidiaries or acquired subsidiaries with existing minority interest ownership positions. We believe that it is useful to present adjusted
EBITDA because it excludes the portion of EBITDA attributable to these third party interests and clarifies for investors our Company's portion of EBITDA generated by our operations. We use adjusted
EBITDA as a measure of liquidity. We have included this measure because we believe it provides investors with additional information about our ability to incur and service debt and make capital
expenditures. Adjusted EBITDA is the key component in the determination of our compliance with some of the covenants under our senior secured credit facility, as well as to determine the interest rate
and commitment fee payable under the senior secured credit facility.
- Adjusted EBITDA is not a measurement of financial performance or liquidity under generally accepted accounting principles. 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 generally accepted accounting principles. The items excluded from adjusted EBITDA are significant components in understanding and evaluating financial performance and liquidity. Our calculation of adjusted EBITDA may not be comparable to similarly titled measures reported by other companies.
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- The following table reconciles adjusted EBITDA, as defined, to our net cash provided by operating activities as derived directly from our consolidated financial statements for the three months ended March 31, 2004 and 2003 (in thousands):
| |
Three Months Ended March 31, |
||||||
|---|---|---|---|---|---|---|---|
| |
2004 |
2003 |
|||||
| Adjusted EBITDA | $ | 125,023 | $ | 106,574 | |||
| Interest expense, net | (18,772 | ) | (17,016 | ) | |||
| Provision for income taxes | (26,701 | ) | (22,405 | ) | |||
| Other non-cash expenses, net | (491 | ) | (22 | ) | |||
| Net changes in operating assets and liabilities, net of effects of acquisitions | (17,328 | ) | (58,621 | ) | |||
| Net cash provided by operating activities | $ | 61,731 | $ | 8,510 | |||
- (b)
- Adjusted
to include assumed exercise of employee stock options and assumed conversion of convertible notes. Since the income per share impact of the conversion of the convertible
notes is less than the basic income per share for both periods presented, the convertible notes are dilutive and accordingly, must be included in the fully diluted calculation (after tax interest
savings of $2.2 million per quarter and 8.6 million shares added to the number of weighted average diluted shares).
- (c)
- The change in net cash provided by operating activities between the three months ended March 31, 2004 and the same period in 2003 is an increase of 625%. Net cash provided by operating activities for the three months ended March 31, 2004, was lower by approximately $9.0 million due primarily to the use of cash to cover the continued build-up of accounts receivable related to the Company's acquisition completed in the fourth quarter of 2003 where we did not purchase the seller's accounts receivable. Net cash provided by operating activities for the three months ended March 31, 2003, was lower by approximately $26.5 million due primarily to the use of cash to cover the build-up of accounts receivable related to the acquisition of seven hospitals on January 1, 2003 where we did not purchase the seller's accounts receivable. Had net cash provided by operating activities for both periods not been lowered primarily by the build-up of accounts receivable related to acquisitions, the change between periods would have been an increase of approximately 102%.
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COMMUNITY HEALTH SYSTEMS, INC.
Condensed Consolidated Statements of Operations
(Unaudited)
(In thousands, except net income per share amounts)
| |
Three Months Ended March 31, |
|||||||
|---|---|---|---|---|---|---|---|---|
| |
2004 |
2003 |
||||||
| Net operating revenues | $ | 822,376 | $ | 659,277 | ||||
| Operating expenses: | ||||||||
| Salaries and benefits | 330,428 | 268,772 | ||||||
| Provision for bad debts | 86,111 | 62,341 | ||||||
| Supplies | 99,392 | 76,820 | ||||||
| Other operating expenses | 181,422 | 144,770 | ||||||
| Depreciation and amortization | 38,451 | 33,242 | ||||||
| Minority interests in earnings | 373 | 372 | ||||||
| Total expenses | 736,177 | 586,317 | ||||||
| Income from operations | 86,199 | 72,960 | ||||||
| Interest expense, net | 18,772 | 17,016 | ||||||
| Income before income taxes | 67,427 | 55,944 | ||||||
| Provision for income taxes | 26,701 | 22,405 | ||||||
| Net income | $ | 40,726 | $ | 33,539 | ||||
| Net income per share—basic | $ | 0.41 | $ | 0.34 | ||||
| Net income per share—diluted | $ | 0.39 | $ | 0.33 | ||||
| Weighted average number of shares outstanding: | ||||||||
| Basic | 98,699 | 98,355 | ||||||
| Diluted | 109,136 | 107,820 | ||||||
| Net income per share calculation: | ||||||||
| Net income | $ | 40,726 | $ | 33,539 | ||||
| Add—Convertible notes interest, net of taxes | 2,189 | 2,189 | ||||||
| Adjusted net income | $ | 42,915 | $ | 35,728 | ||||
| Weighted average number of shares outstanding—basic | 98,699 | 98,355 | ||||||
| Add effect of dilutive securities: | ||||||||
| Unvested common shares | 39 | 133 | ||||||
| Employee stock options | 1,816 | 750 | ||||||
| Convertible notes | 8,582 | 8,582 | ||||||
| Weighted average number of shares outstanding—diluted | 109,136 | 107,820 | ||||||
| Net income per share—diluted | $ | 0.39 | $ | 0.33 | ||||
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COMMUNITY HEALTH SYSTEMS, INC.
Selected Operating Data
(Unaudited)
($ in thousands)
| |
For the Three Months Ended March 31, |
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|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| |
Consolidated |
Same-Store |
|||||||||||||||
| |
2004 |
2003 |
% Change |
2004 |
2003 |
% Change |
|||||||||||
| Number of hospitals | 72 | 70 | 69 | 69 | |||||||||||||
| Licensed beds | 7,810 | 6,972 | 6,854 | 6,909 | |||||||||||||
| Beds in service | 6,187 | 5,403 | 5,384 | 5,364 | |||||||||||||
| Admissions | 72,633 | 61,648 | 17.8 | % | 62,602 | 61,429 | 1.9 | % | |||||||||
| Adjusted admissions | 130,972 | 110,730 | 18.3 | % | 112,678 | 110,328 | 2.1 | % | |||||||||
| Patient days | 300,657 | 245,252 | 22.6 | % | 252,634 | 244,388 | 3.4 | % | |||||||||
| Average length of stay (days) | 4.1 | 4.0 | 4.0 | 4.0 | |||||||||||||
| Occupancy rate (average beds in service) | 53.4 | % | 50.6 | % | 51.6 | % | 50.7 | % | |||||||||
| Net operating revenues | $ | 822,376 | $ | 659,277 | 24.7 | % | $ | 708,908 | $ | 655,273 | 8.2 | % | |||||
| Net inpatient revenue as a % of total net operating revenues | 51.3 | % | 53.1 | % | 51.8 | % | 53.0 | % | |||||||||
| Net outpatient revenue as a % of total net operating revenues | 47.2 | % | 45.8 | % | 46.9 | % | 45.8 | % | |||||||||
| Income from operations | $ | 86,199 | $ | 72,960 | 18.1 | % | $ | 78,745 | $ | 72,606 | 8.5 | % | |||||
| Income from operations as a % of net operating revenues | 10.5 | % | 11.1 | % | 11.1 | % | 11.1 | % | |||||||||
| Depreciation and amortization | $ | 38,451 | $ | 33,242 | $ | 33,973 | $ | 33,041 | |||||||||
| Minority interest in earnings | $ | 373 | $ | 372 | $ | 373 | $ | 372 | |||||||||
Liquidity Data: |
|||||||||||||||||
| Adjusted EBITDA | $ | 125,023 | $ | 106,574 | 17.3 | % | |||||||||||
| Adjusted EBITDA as a % of net operating revenues | 15.2 | % | 16.2 | % | |||||||||||||
| Net cash provided by operating activities | $ | 61,731 | $ | 8,510 | |||||||||||||
| Net cash provided by operating activities as a % of net operating revenue | 7.5 | % | 1.3 | % | |||||||||||||
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COMMUNITY HEALTH SYSTEMS, INC.
Condensed Consolidated Balance Sheets
(Unaudited)
($ in thousands)
| |
March 31, 2004 |
December 31, 2003 |
|||||||
|---|---|---|---|---|---|---|---|---|---|
| ASSETS | |||||||||
| Current assets: | |||||||||
| Cash and cash equivalents | $ | 16,100 | $ | 16,331 | |||||
| Patient accounts receivable, net | 583,875 | 559,097 | |||||||
| Other current assets | 120,010 | 120,652 | |||||||
| Total current assets | 719,985 | 696,080 | |||||||
| Property and equipment | 1,804,419 | 1,772,461 | |||||||
| Less accumulated depreciation and amortization | (405,970 | ) | (377,116 | ) | |||||
| Property and equipment, net | 1,398,449 | 1,395,345 | |||||||
| Goodwill, net | 1,159,263 | 1,155,797 | |||||||
| Other assets, net | 102,566 | 102,989 | |||||||
| Total assets | $ | 3,380,263 | $ | 3,350,211 | |||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||||
| Current liabilities: | |||||||||
| Current maturities of long-term debt | $ | 22,163 | $ | 29,677 | |||||
| Accounts payable and accrued liabilities | 355,881 | 368,387 | |||||||
| Total current liabilities | 378,044 | 398,064 | |||||||
| Long-term debt | 1,441,294 | 1,444,981 | |||||||
| Other long-term liabilities | 173,050 | 156,577 | |||||||
| Stockholders' equity | 1,387,875 | 1,350,589 | |||||||
| Total liabilities and stockholders' equity | $ | 3,380,263 | $ | 3,350,211 | |||||
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COMMUNITY HEALTH SYSTEMS, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
($ in thousands)
| |
Three Months Ended March 31, |
||||||||
|---|---|---|---|---|---|---|---|---|---|
| |
2004 |
2003 |
|||||||
| Cash flows from operating activities | |||||||||
| Net Income | $ | 40,726 | $ | 33,539 | |||||
| Adjustments to reconcile net income to net cash provided by (used in) operating activities: | |||||||||
| Depreciation and amortization | 38,451 | 33,242 | |||||||
| Minority interest in earnings | 373 | 372 | |||||||
| Other non-cash expenses, net | (491 | ) | (22 | ) | |||||
| Net changes in operating assets and liabilities, net of effects of acquisitions | (17,328 | ) | (58,621 | ) | |||||
| Net cash provided by operating activities | 61,731 | 8,510 | |||||||
| Cash flows from investing activities | |||||||||
| Acquisitions of facilities and other related equipment | (3,986 | ) | (147,241 | ) | |||||
| Purchases of property and equipment, net | (39,058 | ) | (32,258 | ) | |||||
| Increase in other assets | (7,408 | ) | (7,428 | ) | |||||
| Net cash used in investing activities | (50,452 | ) | (186,927 | ) | |||||
| Cash flows from financing activities | |||||||||
| Proceeds from exercise of stock options | 1,012 | 133 | |||||||
| Stock buy-back | — | (10,290 | ) | ||||||
| Redemption of minority investments in joint ventures | (993 | ) | (86 | ) | |||||
| Distribution to minority investors in joint ventures | (328 | ) | (1,161 | ) | |||||
| Borrowing under credit agreement | 34,440 | 80,000 | |||||||
| Repayments of long-term indebtedness | (45,641 | ) | (3,460 | ) | |||||
| Net cash provided by (used in) financing activities | (11,510 | ) | 65,136 | ||||||
| Net change in cash and cash equivalents | (231 | ) | (113,281 | ) | |||||
| Cash and cash equivalents at beginning of period | 16,331 | 132,844 | |||||||
| Cash and cash equivalents at end of period | $ | 16,100 | $ | 19,563 | |||||
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COMMUNITY HEALTH SYSTEMS, INC. ANNOUNCES FIRST QUARTER 2004 RESULTS WITH NET OPERATING REVENUES UP 24.7%, NET INCOME UP 21.4% AND NET INCOME PER SHARE (DILUTED) UP 18.2%
COMMUNITY HEALTH SYSTEMS, INC. Condensed Consolidated Statements of Operations (Unaudited) (In thousands, except net income per share amounts)
COMMUNITY HEALTH SYSTEMS, INC. Condensed Consolidated Balance Sheets (Unaudited) ($ in thousands)
COMMUNITY HEALTH SYSTEMS, INC. Condensed Consolidated Statements of Cash Flows (Unaudited) ($ in thousands)