Form 10-Q/A
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-Q/A
Amendment
No. 1
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2008
Commission file number 001-15925
COMMUNITY HEALTH SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
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Delaware
(State or other jurisdiction of
incorporation or organization)
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13-3893191
(I.R.S. Employer
Identification Number) |
4000 Meridian Boulevard
Franklin, Tennessee
(Address of principal executive offices)
37067
(Zip Code)
615-465-7000
(Registrants telephone number)
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
Yes þ No o
Indicate by check mark whether
the registrant is a large accelerated filer, an accelerated filer,
a non-accelerated filer, or a smaller reporting company.
See the definitions of large
accelerated filer, accelerated filer
and smaller
reporting company in Rule 12b-2 of the
Exchange Act. (Check one):
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Large accelerated filer þ |
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Accelerated filer o |
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Non-accelerated filer o
(Do not check if a smaller reporting company) |
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Smaller reporting company
o |
Indicated by check mark whether the registrant is a shell company (as defined in Rule 126-2 of
the Exchange Act).
Yes o No þ
As of April 21, 2008, there were outstanding 96,231,791 shares of the Registrants Common
Stock, $.01 par value.
Table of Contents
Community Health Systems, Inc.
Form 10-Q/A
For the Three Months Ended March 31, 2008
1
EXPLANATORY NOTE
The Company is filing this Amendment No. 1 to its Quarterly Report on
Form 10-Q/A for the three months ended March 31, 2008 that was originally
filed on May 2, 2008 (the original Form 10-Q) to conform
Part I, Item 1 (Financial Statements) of the original Form 10-Q to
reflect revisions
previously made in the Companys quarterly filings on Form 10-Q for the
periods ended June 30, 2008 and September 30, 2008 (see Notes 1 and
17). This Amendment No. 1 will
subsequently be incorporated by reference into a Registration
Statement on Form S-3ASR.
Absent the filing of a registration statement under the Securities Act of 1933, the
revisions were deemed to be immaterial and would not otherwise have required an
amendment to the original Form 10-Q, and would have instead been
reflected in the Companys Quarterly Report on Form 10-Q for the three
months ending March 31, 2009.
Other than as specified above, this Amendment No. 1 on Form 10-Q/A does not modify,
update or affect any other disclosures or financial statements set forth in the
original Form 10-Q. Furthermore, this Amendment No. 1 on Form 10-Q/A does
not purport to provide a general update or discussion of any developments
of the Company subsequent to the filing of the original Form 10-Q.
Accordingly, the original Form 10-Q as amended by
this Amendment No. 1 on Form 10-Q/A, should be read in conjunction with the Companys
filings made with the Securities and Exchange Commission subsequent to the date of the original Form 10-Q.
2
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
(Unaudited)
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March 31, |
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December 31, |
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2008 |
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2007 |
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ASSETS |
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Current assets |
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Cash and cash equivalents |
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$ |
164,353 |
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$ |
132,874 |
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Patient accounts receivable, net of allowance for doubtful accounts of $1,036,766 and
$1,033,516 at March 31, 2008, and December 31, 2007, respectively |
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1,625,658 |
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1,533,798 |
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Supplies |
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264,061 |
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262,903 |
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Prepaid income taxes |
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110,160 |
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99,417 |
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Deferred income taxes |
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113,741 |
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113,741 |
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Prepaid expenses and taxes |
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83,852 |
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70,339 |
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Other current assets |
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244,567 |
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339,826 |
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Total current assets |
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2,606,392 |
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2,552,898 |
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Property and equipment |
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6,338,689 |
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6,310,240 |
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Less accumulated depreciation and amortization |
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(900,292 |
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(797,666 |
) |
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Property and equipment, net |
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5,438,397 |
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5,512,574 |
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Goodwill |
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4,375,293 |
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4,247,714 |
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Other assets, net |
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912,267 |
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1,180,457 |
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Total assets |
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$ |
13,332,349 |
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$ |
13,493,643 |
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LIABILITIES AND STOCKHOLDERS EQUITY |
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Current liabilities |
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Current maturities of long-term debt |
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$ |
19,476 |
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$ |
20,710 |
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Accounts payable |
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461,437 |
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492,693 |
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Current income taxes payable |
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Accrued interest |
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90,442 |
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153,832 |
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Accrued liabilities |
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731,271 |
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780,700 |
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Total current liabilities |
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1,302,626 |
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1,447,935 |
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Long-term debt |
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8,886,355 |
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9,077,367 |
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Deferred income taxes |
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407,947 |
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407,947 |
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Other long-term liabilities |
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679,722 |
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483,459 |
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Minority interests in equity of consolidated subsidiaries |
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384,129 |
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366,131 |
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Stockholders equity |
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Preferred stock, $.01 par value per share, 100,000,000 shares authorized,
none issued |
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Common stock, $.01 par value per share, 300,000,000 shares authorized;
97,195,340 shares issued and 96,219,791 shares outstanding
at March 31, 2008, and 96,611,085 shares issued and 95,635,536 shares
outstanding at December 31, 2007 |
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972 |
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966 |
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Additional paid-in capital |
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1,247,241 |
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1,240,308 |
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Treasury stock, at cost, 975,549 shares at March 31, 2008 and
December 31, 2007 |
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(6,678 |
) |
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(6,678 |
) |
Accumulated other comprehensive income |
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(188,037 |
) |
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(81,737 |
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Retained earnings |
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618,072 |
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557,945 |
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Total stockholders equity |
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1,671,570 |
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1,710,804 |
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Total liabilities and stockholders equity |
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$ |
13,332,349 |
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$ |
13,493,643 |
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See accompanying notes to the condensed consolidated financial statements.
3
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except share and per share data)
(Unaudited)
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Three Months Ended |
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March 31, |
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2008 |
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2007 |
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Net operating revenues |
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$ |
2,727,554 |
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$ |
1,154,278 |
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Operating costs and expenses: |
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Salaries and benefits |
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1,087,770 |
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462,765 |
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Provision for bad debts |
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297,080 |
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128,054 |
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Supplies |
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386,409 |
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134,294 |
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Other operating expenses |
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526,167 |
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234,165 |
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Rent |
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59,857 |
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24,756 |
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Depreciation and amortization |
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122,715 |
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48,497 |
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Total operating costs and expenses |
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2,479,998 |
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1,032,531 |
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Income from operations |
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247,556 |
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121,747 |
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Interest expense, net |
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165,702 |
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28,433 |
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Loss from early extinguishment of debt |
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1,328 |
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Minority interest in earnings |
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9,682 |
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193 |
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Equity in earnings of unconsolidated affiliates |
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(12,884 |
) |
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Income from continuing operations
before income taxes |
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83,728 |
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93,121 |
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Provision for income taxes |
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32,235 |
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35,832 |
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Income from continuing operations |
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51,493 |
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57,289 |
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Discontinued operations, net of taxes: |
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Loss from operations of hospitals sold and hospital held for sale |
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(983 |
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(2,965 |
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Gain on sale of hospitals, net |
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9,617 |
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Income (loss) on discontinued operations |
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8,634 |
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(2,965 |
) |
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Net income |
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$ |
60,127 |
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$ |
54,324 |
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Income from continuing operations per common share: |
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Basic |
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$ |
0.55 |
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$ |
0.61 |
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Diluted |
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$ |
0.54 |
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$ |
0.61 |
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Net income per common share: |
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Basic |
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$ |
0.64 |
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$ |
0.58 |
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Diluted |
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$ |
0.63 |
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$ |
0.58 |
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Weighted-average number of shares outstanding: |
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Basic |
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94,107,532 |
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93,402,545 |
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Diluted |
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95,006,721 |
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94,365,292 |
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See accompanying notes to the condensed consolidated financial statements.
4
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
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Three Months Ended |
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March 31, |
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2008 |
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2007 |
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Cash
flows from operating activities |
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Net income |
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$ |
60,127 |
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$ |
54,324 |
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Adjustments to reconcile net income to net cash provided by
operating activities: |
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Depreciation and amortization |
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122,478 |
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51,270 |
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Minority interest in earnings |
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9,682 |
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193 |
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Stock-based compensation expense |
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13,246 |
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6,330 |
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Gain on sale of hospitals, net |
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(12,885 |
) |
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Excess tax benefits relating to stock-based compensation |
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947 |
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(758 |
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Other non-cash expenses, net |
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2,770 |
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132 |
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Changes in operating assets and liabilities, net of effects of acquisitions and divestitures: |
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Patient accounts receivable |
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(100,057 |
) |
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(33,322 |
) |
Supplies, prepaid expenses and other current assets |
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(26,584 |
) |
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(7,867 |
) |
Accounts payable, accrued liabilities and income taxes |
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(81,965 |
) |
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45,688 |
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Other |
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67,374 |
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4,357 |
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Net cash provided by operating activities |
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55,133 |
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120,347 |
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Cash flows from investing activities |
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Acquisitions of facilities and other related equipment |
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(1,705 |
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(44,039 |
) |
Purchases of property and equipment |
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(141,693 |
) |
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(44,789 |
) |
Disposition of hospitals |
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365,680 |
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Proceeds from sale of property and equipment |
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13,717 |
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134 |
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Increase in other assets |
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(98,182 |
) |
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(7,051 |
) |
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Net cash provided by (used in) investing activities |
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137,817 |
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(95,745 |
) |
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Cash
flows from financing activities |
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Proceeds from exercise of stock options |
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94 |
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3,311 |
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Excess tax benefits relating to stock-based compensation |
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(947 |
) |
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758 |
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Deferred financing costs |
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(2,232 |
) |
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(14 |
) |
Proceeds from minority investors in joint ventures |
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12,881 |
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1,019 |
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Redemption of minority investments in joint ventures |
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(1,253 |
) |
Distributions to minority investors in joint ventures |
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(7,524 |
) |
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(1,079 |
) |
Borrowings under credit agreement |
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25,000 |
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Repayments of long-term indebtedness |
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(188,743 |
) |
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(5,032 |
) |
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Net cash used in financing activities |
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(161,471 |
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(2,290 |
) |
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Net change in cash and cash equivalents |
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31,479 |
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22,312 |
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Cash and cash equivalents at beginning of period |
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132,874 |
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40,566 |
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Cash and cash equivalents at end of period |
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$ |
164,353 |
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$ |
62,878 |
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See accompanying notes to the condensed consolidated financial statements.
5
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. BASIS OF PRESENTATION
The unaudited condensed consolidated financial statements of Community Health Systems, Inc. and its
subsidiaries (the Company) as of March 31, 2008 and for the three month periods ended March 31,
2008 and March 31, 2007, have been prepared in accordance with accounting principles generally
accepted in the United States of America (GAAP). In the opinion of management, such information
contains all adjustments, consisting only of normal recurring adjustments, necessary for a fair
presentation of the results for such periods. All intercompany transactions and balances have been
eliminated. The results of operations for the three months ended March 31, 2008, are not
necessarily indicative of the results to be expected for the full fiscal year ending December 31,
2008. Certain information and disclosures normally included in the notes to consolidated financial
statements have been condensed or omitted as permitted by the rules and regulations of the
Securities and Exchange Commission (SEC). The Company believes the disclosures are adequate to
make the information presented not misleading. The accompanying unaudited condensed consolidated
financial statements should be read in conjunction with the consolidated financial statements and
notes thereto for the year ended December 31, 2007, contained in the Companys Annual Report on
Form 10-K.
The
presentation of gross property and equipment and accumulated
depreciation and amortization at March 31, 2008 and December 31, 2007 has been corrected
to reflect certain assets acquired from Triad Hospitals, Inc.
(Triad). This correction increased both gross property
and equipment and accumulated depreciation and amortization by $108.3 million
and did not impact the net balance of property and
equipment as previously presented on the accompanying condensed consolidated balance sheets.
The correction of assets of hospitals held for sale at December 31, 2007 on the accompanying
condensed consolidated balance sheet decreased the assets held for
sale by $54.6 million and
increased investments in unconsolidated affiliates by $54.6 million, related to those hospitals
sold during the first quarter of 2008. This correction did not change the consolidated total
of Other assets, net as presented in the accompanying condensed consolidated balance sheet.
Note 5 (Acquisitions and Divestitures) and Note 11 (Equity Investments) were revised
accordingly to reflect this correction. The condensed consolidated statement of cash
flows for the three months ended March 31, 2008 was revised to reflect the reclassification
of $46.3 million of expenditures for computer hardware and
internal-use software resulting in a
reduction of net cash provided by investing activities with a corresponding increase to
net cash provided by operating activities, which was previously corrected
beginning in the six-month period ended June 30, 2008 (also see Note
17).
2. ACCOUNTING FOR STOCK-BASED COMPENSATION
Stock-based compensation awards are granted under the Community Health Systems, Inc. Amended and
Restated 2000 Stock Option and Award Plan (the 2000 Plan). The 2000 Plan allows for the grant of
incentive stock options intended to qualify under Section 422 of the Internal Revenue Code, as well
as stock options which do not so qualify, stock appreciation rights, restricted stock, performance
units and performance shares, phantom stock awards and share awards. Persons eligible to receive
grants under the 2000 Plan include the Companys directors, officers, employees and consultants.
To date, the options granted under the 2000 Plan have all been nonqualified stock options for tax
purposes. Generally, vesting of these granted options occurs in one third increments on each of
the first three anniversaries of the award date. Options granted prior to 2005 have a 10 year
contractual term, options granted in 2005 through 2007 have an 8 year contractual term and options
granted in 2008 have a 10 year contractual term. The exercise price of options granted to
employees under the 2000 Plan were equal to the fair value of the Companys common stock on the
option grant date. As of March 31, 2008, 3,525,142 shares of unissued common stock remain reserved
for future grants under the 2000 Plan.
The following table reflects the impact of total compensation expense related to stock-based equity
plans under the Statement of Financial Accounting Standards (SFAS) No. 123(R), on the reported
operating results for the respective periods (in thousands, except per share data):
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Three months ended |
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March 31, |
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2008 |
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|
2007 |
|
Effect on income from continuing
operations before income taxes |
|
$ |
(13,246 |
) |
|
$ |
(6,330 |
) |
|
|
|
|
|
|
|
|
|
|
|
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|
Effect on net income |
|
$ |
(8,047 |
) |
|
$ |
(3,845 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect on net income per share-diluted |
|
$ |
(0.08 |
) |
|
$ |
(0.04 |
) |
|
|
|
|
|
|
|
SFAS No. 123(R) also requires the benefits of tax deductions in excess of the recognized tax
benefit on compensation expense to be reported as a financing cash flow, rather than as an
operating cash flow as required under Accounting Principles Board Opinion No. 25, Accounting for
Stock Issued to Employees and related interpretations. This requirement increased the Companys
net operating cash flows and decreased the Companys financing cash flows by $0.9 million for the
three months ended March 31, 2008. This requirement reduced the Companys net operating cash flows
and increased the Companys financing cash flows by $0.8 million for the three months ended March
31, 2007.
At March 31, 2008, $98.1 million of unrecognized stock-based compensation expense from all
outstanding unvested stock options and restricted stock is expected to be recognized over a
weighted-average period of 22 months.
The fair value of stock options was estimated using the Black Scholes option pricing model during
the three months ended March 31, 2008 and 2007, with the following assumptions:
6
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
2. ACCOUNTING FOR STOCK-BASED COMPENSATION (Continued)
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|
|
|
|
|
Three months ended |
|
|
March 31, |
|
|
2008 |
|
2007 |
Expected volatility |
|
|
24.1 |
% |
|
|
25.6 |
% |
Expected dividends |
|
|
0 |
|
|
|
0 |
|
Expected term |
|
4 years |
|
|
4 years |
|
Risk-free interest rate |
|
|
2.57 |
% |
|
|
4.48 |
% |
In determining expected return, the Company examined concentrations of option holdings, historical
patterns of option exercises and forfeitures, as well as forward looking factors, in an effort to
determine if there were any discernable employee populations. From this analysis, the Company
identified two employee populations, one consisting primarily of certain senior executives and the
other consisting of all other recipients.
The expected volatility rate was estimated based on historical volatility. In determining expected
volatility, the Company also reviewed the market-based implied volatility of actively traded
options of its common stock and determined that historical volatility did not differ significantly
from the implied volatility.
The expected life computation is based on historical exercise and cancellation patterns and forward
looking factors, where present, for each population identified. The risk-free interest rate is
based on the U.S. Treasury yield curve in effect at the time of the grant. The pre-vesting
forfeiture rate is based on historical rates and forward looking factors for each population
identified. The Company adjusts the estimated forfeiture rate to its actual experience. Options
outstanding and exercisable under the 2000 Plan as of March 31, 2008, and changes
during the three months then ended were as follows (in thousands, except share and per share data):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
average |
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
remaining |
|
|
Aggregate |
|
|
|
|
|
|
|
average |
|
|
contractual |
|
|
intrinsic |
|
|
|
|
|
|
|
exercise |
|
|
term |
|
|
value as of |
|
|
|
Shares |
|
|
price |
|
|
(in years) |
|
|
March 31, 2008 |
|
Outstanding at December 31, 2007 |
|
|
8,439,015 |
|
|
$ |
30.90 |
|
|
|
|
|
|
|
|
|
Granted |
|
|
996,500 |
|
|
|
32.28 |
|
|
|
|
|
|
|
|
|
Exercised |
|
|
(11,666 |
) |
|
|
23.26 |
|
|
|
|
|
|
|
|
|
Forfeited and cancelled |
|
|
(172,600 |
) |
|
|
35.02 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at March 31, 2008 |
|
|
9,251,249 |
|
|
$ |
30.98 |
|
|
6.4 years |
|
$ |
43,418 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at March 31, 2008 |
|
|
4,805,509 |
|
|
$ |
25.64 |
|
|
5.5 years |
|
$ |
41,971 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The weighted-average grant date fair value of stock options granted during the three months ended
March 31, 2008, was $7.55. The aggregate intrinsic value (the number of in-the-money stock options
multiplied by the difference between the Companys closing stock price on the last trading day of
the reporting period ($33.57) and the exercise price of the respective stock options) in the table
above represents the amount that would have been received by the option holders had all option
holders exercised their options on March 31, 2008. This amount changes based on the market value
of the Companys common stock. The aggregate intrinsic value of options exercised during the three
months ended March 31, 2008 was $0.1 million and the aggregate intrinsic value of options exercised
during the three months ended March 31, 2007 was $1.4 million. The aggregate intrinsic value of
options vested and expected to vest approximates that of the outstanding options.
The Company has also awarded restricted stock under the 2000 Plan to its directors and various
subsidiaries employees. The restrictions on these shares generally lapse in one-third increments
on each of the first three anniversaries of the award date, except for restricted stock granted on
July 25, 2007, which restrictions generally lapse equally on the first two anniversaries of the
award date. Certain of the restricted stock awards granted to the Companys senior executives also
contain a performance objective that must be met in addition to the vesting requirements. If the
performance objective is not attained the awards will be forfeited in their entirety. Once the
performance objective has been attained, restrictions will lapse in one-third increments on
7
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
2. ACCOUNTING FOR STOCK-BASED COMPENSATION (Continued)
each of the first three anniversaries of the award date with the exception of the July 25, 2007
restricted stock awards, which have no additional time vesting restrictions. Notwithstanding the
above mentioned performance objectives and vesting requirements, the restrictions will lapse
earlier in the event of death, disability, termination of employment of the holder of the
restricted stock by employer for any reason other than for cause or in the event of change in
control of the Company. Restricted stock awards subject to performance standards are not
considered outstanding for purposes of determining earnings per share until the performance
objectives have been satisfied.
Restricted stock outstanding under the 2000 Plan as of March 31, 2008, and changes during the three
months then ended are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
average |
|
|
|
|
|
|
fair |
|
|
Shares |
|
value |
Unvested at December 31, 2007 |
|
|
1,956,543 |
|
|
$ |
38.04 |
|
Granted |
|
|
748,500 |
|
|
|
32.38 |
|
Vested |
|
|
(592,505 |
) |
|
|
36.09 |
|
Forfeited |
|
|
(3,000 |
) |
|
|
37.20 |
|
|
|
|
|
|
|
|
|
|
Unvested at March 31, 2008 |
|
|
2,109,538 |
|
|
|
36.58 |
|
|
|
|
|
|
|
|
|
|
As of March 31, 2008, there was $64.8 million of unrecognized stock-based compensation expense
related to unvested restricted stock expected to be recognized over a weighted-average period of 21
months.
Under the Directors Fee Deferral Plan, the Companys outside directors may elect to receive share
equivalent units in lieu of cash for their directors fee. Share equivalent units are calculated
by dividing the deferred directors fees by the closing market price of the Companys common stock
on the last trading day of the reporting period. These units are held in the plan until the
director electing to receive the share equivalent units retires or otherwise terminates his/her
directorship with the Company. Share equivalent units are converted to shares of common stock of
the Company at the time of distribution. The following table represents the amount of directors
fees which were deferred and the equivalent units into which they converted for each of the
respective periods:
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
|
March 31, |
|
|
|
2008 |
|
|
2007 |
|
Directors fees earned
and deferred into plan |
|
$ |
40,875 |
|
|
$ |
35,875 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equivalent units |
|
|
1,217.605 |
|
|
|
1,017.731 |
|
|
|
|
|
|
|
|
At March 31, 2008, there are a total of 14,626.137 units deferred in the plan with an aggregate
fair value of $0.5 million, based on the closing market price of the Companys common stock on the
last trading day of the reporting period of $33.57.
3. COST OF REVENUE
The majority of the Companys operating costs and expenses are cost of revenue items. Operating
costs that could be classified as general and administrative by the Company would include the
Companys corporate office costs at the Companys Franklin, Tennessee office, which were $38.1
million and $23.1 million for the three month periods ended March 31, 2008 and 2007, respectively.
Included in these amounts is stock-based compensation expense of $13.2 million and $6.3 million for
the three month periods ended March 31, 2008 and 2007, respectively.
4. USE OF ESTIMATES
The preparation of financial statements in conformity with GAAP requires management to make
estimates and assumptions that affect the amounts reported in the condensed consolidated financial
statements. Actual results could differ from these estimates.
8
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
5. ACQUISITIONS AND DIVESTITURES
Triad Acquisition
On July 25, 2007, the Company completed its acquisition of Triad. Triad owned and operated 50
hospitals in non-urban and middle market communities in 17 states, as well as the Republic of
Ireland. Immediately following the acquisition, on a combined basis, the Company owned and
operated 128 hospitals in 28 states, as well as the Republic of Ireland. As of December 31, 2007,
two hospitals acquired from Triad had been sold and six hospitals acquired from Triad were
classified as held for sale. During the three months ended March 31, 2008, the Company completed
the sale of five of the six former Triad hospitals held for sale at December 31, 2007. The Company also
provides management and consulting services on a contract basis to independent hospitals, through
its subsidiary, Quorum Health Resources, LLC, which was acquired as part of the acquisition of
Triad. The Company acquired Triad for approximately $6.836 billion, including the assumption of
$1.686 billion of existing indebtedness.
In connection with the consummation of the acquisition of Triad, the Company obtained $7.215
billion of senior secured financing under a new credit facility (the New Credit Facility) and its
wholly-owned subsidiary CHS/Community Health Systems, Inc. (CHS) issued $3.021
billion aggregate principal amount of 8.875% senior notes due 2015 (the Notes). The Company used
the net proceeds of $3.000 billion from the Notes offering and the net proceeds of $6.065 billion
of term loans under the New Credit Facility to acquire the outstanding shares of Triad, to
refinance certain of Triads indebtedness and the Companys indebtedness, to complete certain
related transactions, to pay certain costs and expenses of the transactions and for general
corporate uses. This New Credit Facility also provides an additional $750 million revolving credit
facility and a $300 million delayed draw term loan facility for future acquisitions, working
capital and general corporate purposes. The delayed draw term loan was reduced from $400 million
to $300 million at the request of the Company in the fourth quarter of 2007.
The total cost of the Triad acquisition has been allocated to the assets acquired and liabilities
assumed based upon their respective preliminary estimated fair values in accordance with SFAS No.
141. The purchase price represented a premium over the fair value of the net tangible and
identifiable intangible assets acquired for reasons such as:
|
|
strategically, Triad had operations in five states in which the Company previously had no
operations; |
|
|
|
the combined company has smaller concentrations of credit risk through greater geographic
diversification; |
|
|
|
many support functions will be centralized; and |
|
|
|
duplicate corporate functions will be eliminated. |
The allocation process requires the analysis of acquired fixed assets, contracts, contractual
commitments, and legal contingencies to identify and record the fair value of all assets acquired
and liabilities assumed. The values of certain assets and liabilities are based on preliminary
valuations and are subject to adjustment as additional information is obtained. Such additional
information includes, but is not limited to: valuations of property and equipment, valuation of
equity investments and intangible assets, valuation of contractual commitments, finalization of
involuntary termination of employees, and review of open cost report settlement periods. The
Company is also negotiating the termination of certain assumed contracts it deems unfavorable, such
as various physician and service contracts. Under GAAP, the Company has up to twelve months from
the closing of the acquisition to complete its valuations and complete contract terminations in
order for these terminations to be considered in the allocation process. The Company expects to
complete the allocation of the total cost of the Triad acquisition in the second quarter of 2008.
Material adjustments to goodwill may result upon the completion of these matters.
Other Acquisitions
Effective April 1, 2007, the Company completed its acquisition of Lincoln General Hospital (157
licensed beds), located in Ruston, Louisiana. The total consideration for this hospital was
approximately $49.4 million, of which $44.7 million was paid in cash and $4.7 million was assumed
in liabilities. On May 1, 2007, the Company completed its acquisition of Porter Health (301
licensed beds), located in Valparaiso, Indiana, with a satellite campus in Portage, Indiana and
outpatient medical campuses located in Chesterton, Demotte, and Hebron, Indiana. As part of this
acquisition, the Company has agreed to construct a 225-bed replacement facility for the Valparaiso
hospital no later than April 2011. The total consideration for Porter Health was approximately
$113.4 million, of which $88.9 million was paid in cash and $24.5 million was assumed in
liabilities. The Company has estimated its purchase price allocation relating to these acquisitions
resulting in approximately $8.1 million of goodwill being recorded. The allocation of Porter
Health is preliminary pending, among other things, finalization of valuation of tangible and
intangible assets. These acquisition transactions were accounted for using the purchase method of
accounting. The
9
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
5. ACQUISITIONS AND DIVESTITURES (Continued)
allocation of the purchase price has been determined by the Company based upon available
information and is subject to settling amounts related to purchased working capital and in some
instances final appraisals. Adjustments to the purchase price allocation are not expected to be
material.
Discontinued Operations
Effective March 1, 2008, the Company sold Woodland Medical Center (100 licensed beds) located in
Cullman, Alabama; Parkway Medical Center (108 licensed beds) located in Decatur, Alabama; Hartselle
Medical Center (150 licensed beds) located in Hartselle, Alabama; Jacksonville Medical Center (89
licensed beds) located in Jacksonville, Alabama; National Park Medical Center (166 licensed beds)
located in Hot Springs, Arkansas; St. Marys Regional Medical Center (170 licensed beds) located in
Russellville, Arkansas; Mineral Area Regional Medical Center (135 licensed beds) located in
Farmington, Missouri; Willamette Valley Medical Center (80 licensed beds) located in McMinnville,
Oregon; and White County Community Hospital (60 licensed beds) located in Sparta, Tennessee, to
Capella Healthcare, Inc., headquartered in Franklin, Tennessee. The proceeds from this sale were
$315 million in cash.
Effective February 21, 2008, the Company sold THI Ireland Holdings Limited, a private limited
company incorporated in the Republic of Ireland, which leased and managed the operations of Beacon
Medical Center (122 licensed beds) located in Dublin, Ireland, to Beacon Medical Group Limited,
headquartered in Dublin, Ireland. The proceeds from this sale were $1.5 million in cash.
Effective February 1, 2008, the Company sold Russell County Medical Center (78 licensed beds)
located in Lebanon, Virginia to Mountain States Health Alliance, headquartered in Johnson City,
Tennessee. The proceeds from this sale were $48.6 million in cash.
Effective November 30, 2007, the Company sold Barberton Citizens Hospital (312 licensed beds)
located in Barberton, Ohio to Summa Health System of Akron, Ohio. The proceeds from this sale were
$53.8 million in cash.
Effective October 31, 2007, the Company sold its 60% membership interest in Northeast Arkansas
Medical Center, a 104 bed facility in Jonesboro, Arkansas to Baptist Memorial Health Care
(Baptist), headquartered in Memphis, Tennessee for $16.8 million. In connection with this
transaction, the Company also sold real estate and other assets to a subsidiary of Baptist for
$26.2 million in cash.
Effective September 1, 2007, the Company sold its partnership interest in River West L.P., which
owned and operated River West Medical Center (an 80 bed facility) located in Plaquemine, Louisiana
to an affiliate of Shiloh Health Services, Inc. of Lubbock, Texas. The proceeds from this sale were
$0.3 million in cash.
As of March 31, 2008, the Company had one hospital classified as held for sale.
In connection with the above actions and in accordance with SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets, the Company has classified the results of operations
of the above mentioned hospitals as discontinued operations in the accompanying condensed
consolidated statements of income.
Net operating revenues and income (loss) on discontinued operations for the respective periods are
as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
|
March 31, |
|
|
|
2008 |
|
|
2007 |
|
Net operating revenues |
|
$ |
106,633 |
|
|
$ |
49,719 |
|
|
|
|
|
|
|
|
Loss from operations of hospitals sold or held
for sale before income taxes |
|
|
(789 |
) |
|
|
(4,789 |
) |
Gain on sale of hospitals, net |
|
|
17,724 |
|
|
|
|
|
|
|
|
|
|
|
|
Income from discontinued operations before taxes |
|
|
16,935 |
|
|
|
(4,789 |
) |
Income tax (expense) benefit |
|
|
(8,301 |
) |
|
|
1,824 |
|
|
|
|
|
|
|
|
Income (loss) on discontinued operations, net of tax |
|
$ |
8,634 |
|
|
$ |
(2,965 |
) |
|
|
|
|
|
|
|
10
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
5. ACQUISITIONS AND DIVESTITURES (Continued)
The computation of income from discontinued operations, before taxes, for the three months ended
March 31, 2008 includes the net write-off of $96.3 million of tangible assets and $32.5 million of
goodwill (including $21.3 million of goodwill included in non-current assets held for sale at
December 31, 2007) at the hospitals sold during the three months ended March 31, 2008.
Interest expense was allocated to discontinued operations based on estimated sale proceeds
available for debt repayment.
The assets and liabilities of one hospital held for sale as of March 31, 2008 are included in the
accompanying condensed consolidated balance sheet as follows: current assets of $19.7 million,
included in other current assets; net property and equipment of $53.3 million and other long-term
assets of $0.1 million, included in other assets; and current liabilities of $23.5 million,
included in other accrued liabilities.
The assets and liabilities of the hospitals held for sale as of December 31, 2007 are included in
the accompanying condensed consolidated balance sheet as follows: current assets of $118.9 million,
included in other current assets; net property and equipment of $331.1 million and other long-term
assets of $31.4 million, included in other assets; and current liabilities of $67.6 million,
included in accrued liabilities.
6. INCOME TAXES
The Company adopted the provisions of FASB Interpretation No. 48, Accounting for Uncertainty in
Income Taxes (FIN 48), on January 1, 2007. The total amount of unrecognized benefit that would
affect the effective tax rate, if recognized, is approximately $5.9 million as of March 31, 2008.
It is the Companys policy to recognize interest and penalties accrued related to unrecognized
benefits in its condensed consolidated statements of income as income tax expense. During the three months ended March
31, 2008, the Company recorded approximately $0.2 million in interest and penalties related to
prior state income tax returns through its income tax provision from continuing operations and
which are included in its FIN 48 liability at March 31, 2008. A total of approximately $1.9 million
of interest and penalties is included in the amount of FIN 48 liability at March 31, 2008.
The Companys unrecognized tax benefits consist primarily of state exposure items. The Company
believes that it is reasonably possible that approximately $1.2 million of its current unrecognized
tax benefit may decrease within the next twelve months as a result of a lapse of the statute of
limitations and settlements with taxing authorities.
The Company or one of its subsidiaries files income tax returns in the U.S. federal jurisdiction
and various state jurisdictions. With few exceptions, the Company is no longer subject to U.S.
federal or state income tax examinations for years prior to 2003.
The IRS
has concluded an examination of the federal income tax returns of
Triad for the short taxable years ended April 27, 2001,
June 30, 2001 and December 31, 2001, and the taxable years
ended December 31, 2002 and 2003. The Company has received a
closing letter from the IRS with respect to the examination for those
tax years. The settlement was not material to the Companys
consolidated results of operations or consolidated financial position.
Cash paid for income taxes, net of refunds received, resulted in a net cash refund of $2.8 million
for the three months ended March 31, 2008 and net cash paid of $13.2 million during the three
months ended March 31, 2007.
7. GOODWILL AND OTHER INTANGIBLE ASSETS
The changes in the carrying amount of goodwill for the three months ended March 31, 2008, are as
follows (in thousands):
|
|
|
|
|
Balance as of December 31, 2007 |
|
$ |
4,247,714 |
|
Goodwill acquired as part of acquisitions during 2008 |
|
|
114 |
|
Consideration adjustments and finalization of purchase price
allocations for acquisitions completed prior to 2008 |
|
|
138,626 |
|
Goodwill written-off as part of disposals |
|
|
(11,161 |
) |
|
|
|
|
Balance as of March 31, 2008 |
|
$ |
4,375,293 |
|
|
|
|
|
Goodwill related to the former Triad hospitals of $3.039 billion has not been allocated to the
reporting unit level as of March 31, 2008 because the final purchase price allocation has not been
completed (see Note 5).
The Company completed its most recent annual goodwill impairment test as required by SFAS No. 142,
Goodwill and Other Intangible Assets, during 2007, using a measurement date of September 30,
2007. Based on the results of the impairment test, the Company was not required to recognize an
impairment of goodwill in 2007.
11
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
7. GOODWILL AND OTHER INTANGIBLE ASSETS (Continued)
The gross carrying amount of the Companys other intangible assets was $202.3 million at March 31,
2008 and $194.6 million at December 31, 2007, and the net carrying amount was $187.1 million at
March 31, 2008 and $181.0 million at December 31, 2007. Other intangible assets are included in
other assets, net on the Companys condensed consolidated balance sheets.
The weighted-average amortization period for the intangible assets subject to amortization is
approximately eight years. There are no expected residual values related to these intangible
assets. Amortization expense on these intangible assets during the three months ended March 31,
2008 and March 31, 2007 was $2.4 million and $0.5 million, respectively. Amortization expense on
intangible assets is estimated to be $11.6 million for the remainder of 2008, $14.0 million in
2009, $13.0 million in 2010, $11.9 million in 2011, $9.7 million in 2012, and $0.3 million in 2013
and thereafter.
8. EARNINGS PER SHARE
The following table sets forth the components of the numerator and denominator for the computation
of basic and diluted income from continuing operations per share (in thousands, except share data):
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31, |
|
|
|
2008 |
|
|
2007 |
|
Numerator: |
|
|
|
|
|
|
|
|
Numerator for basic earnings per share - |
|
|
|
|
|
|
|
|
Income from continuing operations available to
common stockholders basic |
|
$ |
51,493 |
|
|
$ |
57,289 |
|
|
|
|
|
|
|
|
Numerator for diluted earnings per share - |
|
|
|
|
|
|
|
|
Income from continuing operations available
to common stockholders diluted |
|
$ |
51,493 |
|
|
$ |
57,289 |
|
|
|
|
|
|
|
|
Denominator: |
|
|
|
|
|
|
|
|
Weighted-average number of shares outstanding basic |
|
|
94,107,532 |
|
|
|
93,402,545 |
|
Effect of dilutive securities: |
|
|
|
|
|
|
|
|
Non-employee director options |
|
|
|
|
|
|
11,826 |
|
Restricted stock awards |
|
|
77,299 |
|
|
|
36,235 |
|
Employee options |
|
|
821,890 |
|
|
|
914,686 |
|
|
|
|
|
|
|
|
Weighted-average number of shares outstanding diluted |
|
|
95,006,721 |
|
|
|
94,365,292 |
|
|
|
|
|
|
|
|
Dilutive securities outstanding not included in the
computation of earning per share because their effect is
antidilutive: |
|
|
|
|
|
|
|
|
Employee options |
|
|
4,361,131 |
|
|
|
1,926,567 |
|
9. STOCKHOLDERS EQUITY
Authorized capital shares of the Company include 400,000,000 shares of capital stock consisting of
300,000,000 shares of common stock and 100,000,000 shares of preferred stock. Each of the
aforementioned classes of capital stock has a par value of $.01 per share. Shares of preferred
stock, none of which are outstanding as of March 31, 2008 may be issued in one or more series
having such rights, preferences and other provisions as determined by the Board of Directors
without approval by the holders of common stock.
On January 14, 2006, the Company commenced an open market repurchase program for up to 5,000,000
shares of the Companys common stock, not to exceed $200 million in repurchases. Under this
program, the Company repurchased the entire 5,000,000 shares at a weighted average price of $35.23.
This program concluded on November 8, 2006 when the maximum number of shares had been repurchased.
This repurchase plan followed a prior repurchase plan for up to 5,000,000 shares which concluded on
January 13, 2006. The Company repurchased 3,029,700 shares at a weighted average price of $31.20
per share under this program. On December 13, 2006, the Company commenced another open market
repurchase program for up to 5,000,000 shares of the Companys common stock, not to exceed $200
million in repurchases. This program will conclude at the earlier of three years or when the
maximum number of shares has been repurchased. As of March 31, 2008, the Company has not
repurchased any shares under this program.
12
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
10. COMPREHENSIVE INCOME
The following table presents the components of comprehensive income, net of related taxes. The net
change in fair value of interest rate swap agreements is a function of the spread between the fixed
interest rate of each swap and the underlying variable interest rate under the Companys New Credit
Facility, the change in fair value of available for sale securities is the unrealized gain (losses)
on the related investments and the amortization of unrecognized pension cost components is the
amortization of prior service costs and credits and actuarial gains and losses (in thousands):
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
|
March 31, |
|
|
|
2008 |
|
|
2007 |
|
Net income |
|
$ |
60,127 |
|
|
$ |
54,324 |
|
Net change in fair value of interest rate swaps |
|
|
(104,554 |
) |
|
|
(3,870 |
) |
Net change in fair value of available for sale securities |
|
|
(753 |
) |
|
|
(213 |
) |
Amortization of unrecognized pension components |
|
|
(993 |
) |
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income |
|
$ |
(46,173 |
) |
|
$ |
50,241 |
|
|
|
|
|
|
|
|
The net change in fair value of the interest rate swaps, the net change in fair value of available
for sale securities and amortization of unrecognized pension cost components are included in
stockholders equity on the accompanying condensed consolidated balance sheets.
11. EQUITY INVESTMENTS
The Company owns equity interests of 27.5% in four hospitals in Las Vegas, Nevada, and 26.1% in one
hospital in Las Vegas, Nevada in which Universal Health Systems, Inc. owns the majority interest;
an equity interest of 38.0% in a hospital in Macon, Georgia in which HCA Inc. owns the majority
interest; and an equity interest of 50.0% in a hospital in El Dorado, Arkansas in which the SHARE
Foundation, a not-for-profit foundation, owns the remaining 50.0%. These equity investments were
acquired as part of the acquisition of Triad. The Company uses the equity method of accounting for
its investments in these entities. The balance of the Companys investment in unconsolidated
affiliates is $276.5 million and $267.8 million at March 31, 2008 and December 31, 2007,
respectively, and is included in other assets in the accompanying condensed consolidated balance
sheets. Included in the Companys results of operations for the quarter ended March 31, 2008, is
$12.9 million representing the Companys equity in pre-tax earnings from investments in
unconsolidated affiliates.
Summarized combined financial information for the three months ended March 31, 2008, for the
unconsolidated entities in which the Company owns an equity interest is as follows (in thousands):
|
|
|
|
|
|
|
For the three months ended |
|
|
March 31, 2008 |
Revenues |
|
$ |
363,667 |
|
Net income |
|
|
50,955 |
|
12. LONG-TERM DEBT
Terminated Credit Facility and Notes
On
August 19, 2004, CHS entered into a $1.625 billion senior secured credit facility with a
consortium of lenders which was subsequently amended on December 16, 2004, July 8, 2005 and
December 13, 2006 (the Terminated Credit Facility). The purpose of the Terminated Credit Facility
was to refinance and replace the Companys previous credit agreement, repay specified other
indebtedness, and fund general corporate purposes, including amending the credit facility to permit
declaration and payment of cash dividends, to repurchase shares or make other distributions,
subject to certain restrictions. The Terminated Credit Facility consisted of a $1.2 billion term
loan that was due to mature in 2011 and a $425 million revolving credit facility that was due to
mature in 2009. The First Incremental Facility Amendment, dated as of December 13, 2006, increased
the Companys term loans by $400 million (the Incremental Term Loan Facility) and also gave the
Company the ability to add up to $400 million of additional term loans. The full amount of the
Incremental Term Loan Facility was funded on December 13, 2006, and the proceeds were used to repay
the full outstanding amount (approximately $326 million) of the revolving credit facility under the
Terminated Credit Agreement and the balance was available to be used for general corporate
purposes. The Company was able to elect from time to time an interest rate per annum for the
borrowings under the term loan, including the incremental term loan,
13
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
12. LONG-TERM DEBT (Continued)
and revolving credit facility equal to (a) an alternate base rate, which would have been equal to
the greatest of (i) the Prime Rate (as defined) in effect and (ii) the Federal Funds Effective Rate
(as defined), plus 50 basis points, plus (1) 75 basis points for the term loan and (2) the
Applicable Margin (as defined) for revolving credit loans or (b) the Eurodollar Rate (as defined)
plus (1) 175 basis points for the term loan and (2) the Applicable Margin for Eurodollar revolving
credit loans. The Company also paid a commitment fee for the daily average unused commitments under
the revolving credit facility. The commitment fee was based on a pricing grid depending on the
Applicable Margin for Eurodollar revolving credit loans and ranged from 0.250% to 0.500%. The
commitment fee was payable quarterly in arrears and on the revolving credit termination date with
respect to the available revolving credit commitments. In addition, the Company paid fees for each
letter of credit issued under the credit facility.
On
December 16, 2004, the Company issued $300 million 6-1/2% senior subordinated notes due 2012. On
April 8, 2005, the Company exchanged these notes for notes having substantially the same terms as
the outstanding notes, except the exchanged notes were registered under the Securities Act of 1933,
as amended (the 1933 Act). The debt was repaid in 2007.
New Credit Facility and Notes
On July 25, 2007, the New Credit Facility was entered into with a syndicate of financial
institutions led by Credit Suisse, as administrative agent and collateral agent. The New Credit
Facility consists of a $6.065 billion funded term loan facility with a maturity of seven years, a
$400 million delayed draw term loan facility with a maturity of seven years and a $750 million
revolving credit facility with a maturity of six years. As of December 31, 2007, the $400 million
delayed draw term loan had been reduced to $300 million at the request of the Company. The
revolving credit facility also includes a subfacility for letters of credit and a swingline
subfacility. As previously disclosed, in connection with the consummation of the acquisition of
Triad, the Company used a portion of the net proceeds from its New Credit Facility and the Notes
offering to repay its outstanding debt under the Terminated Credit Facility, the 6-1/2% Notes and
certain of Triads existing indebtedness. During the third quarter of 2007, the Company recorded a
pre-tax write-off of approximately $13.9 million in deferred loan costs relative to the early
extinguishment of the debt under the Terminated Credit Facility and incurred tender and
solicitation fees of approximately $13.4 million on the early repayment of the Companys $300
million aggregate principal amount of 6-1/2% Senior Subordinated Notes due 2012 through a cash
tender offer and consent solicitation.
The New Credit Facility requires quarterly amortization payments of each term
loan facility equal to 0.25% of the outstanding amount of the term loans, if any, with the
outstanding principal balance payable on July 25, 2014.
The term loan facility must be prepaid in an amount equal to (1) 100% of the net cash proceeds of
certain asset sales and dispositions by the Company and its subsidiaries, subject to certain
exceptions and reinvestment rights, (2) 100% of the net cash proceeds of issuances of certain debt
obligations or receivables based financing by the Company and its subsidiaries, subject to certain
exceptions, and (3) 50%, subject to reduction to a lower percentage based on the Companys leverage
ratio (as defined in the New Credit Facility generally as the ratio of total debt on the date of
determination to the Companys EBITDA, as defined, for the four quarters most recently ended prior
to such date), of excess cash flow (as defined) for any year, commencing in 2008, subject to
certain exceptions. Voluntary prepayments and commitment reductions are permitted in whole or in
part, without any premium or penalty, subject to minimum prepayment or reduction requirements.
The obligor under the New Credit Facility is CHS. All of the obligations under the
New Credit Facility are unconditionally guaranteed by the Company and certain existing and
subsequently acquired or organized domestic subsidiaries. All obligations under the New Credit
Facility and the related guarantees are secured by a perfected first priority lien or security
interest in substantially all of the assets of the Company, CHS and each
subsidiary guarantor, including equity interests held by the Company, CHS or any
subsidiary guarantor, but excluding, among others, the equity interests of non-significant
subsidiaries, syndication subsidiaries, securitization subsidiaries and joint venture subsidiaries.
The loans under the New Credit Facility will bear interest on the outstanding unpaid principal
amount at a rate equal to an applicable percentage plus, at the Companys option, either (a) an
Alternate Base Rate (as defined) determined by reference to the greater of (1) the Prime Rate (as
defined) announced by Credit Suisse or (2) the Federal Funds Effective Rate (as defined) plus
one-half of 1.0%, or (b) a reserve adjusted London interbank offered rate for dollars (Eurodollar
Rate) (as defined). The applicable percentage for term loans is 1.25% for Alternate Base Rate loans
and 2.25% for Eurodollar rate loans. The applicable percentage for revolving loans is initially
1.25% for Alternate Base Rate revolving loans and 2.25% for Eurodollar revolving loans, in each
case subject to reduction based on the Companys leverage ratio. Loans under the swingline
subfacility bear interest at the rate applicable to Alternate Base Rate loans under the revolving
credit facility.
14
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
12. LONG-TERM DEBT (Continued)
CHS has agreed to pay letter of credit fees equal to the applicable percentage then in
effect with respect to Eurodollar rate loans under the revolving credit facility times the maximum
aggregate amount available to be drawn under all letters of credit outstanding under the
subfacility for letters of credit. The issuer of any letter of credit issued under the subfacility
for letters of credit will also receive a customary fronting fee and other customary processing
charges. CHS is initially obligated to pay commitment fees of 0.50% per annum (subject to
reduction based upon the Companys leverage ratio) on the unused portion of the revolving credit
facility. For purposes of this calculation, swingline loans are not treated as usage of the
revolving credit facility. CHS is also obligated to pay commitment fees of 0.50% per annum
for the first six months after the closing of the New Credit Facility, 0.75% per annum for the next
three months thereafter and 1.0% per annum thereafter, in each case on the unused amount of the
delayed draw term loan facility. The Company paid arrangement fees on the closing of the New Credit
Facility and will pay an annual administrative agent fee.
The New Credit Facility contains customary representations and warranties, subject to limitations
and exceptions, and customary covenants restricting, subject to certain exceptions, the Companys
and its subsidiaries ability to, among other things (1) declare dividends, make distributions or
redeem or repurchase capital stock, (2) prepay, redeem or repurchase other debt, (3) incur liens or
grant negative pledges, (4) make loans and investments and enter into acquisitions and joint
ventures, (5) incur additional indebtedness or provide certain guarantees, (6) make capital
expenditures, (7) engage in mergers, acquisitions and asset sales, (8) conduct transactions with
affiliates, (9) alter the nature of the Companys businesses, (10) grant certain guarantees with
respect to physician practices, (11) engage in sale and leaseback transactions or (12) change the
Companys fiscal year. The Company is also required to comply with specified financial covenants
(consisting of a leverage ratio and an interest coverage ratio) and various affirmative covenants.
Events of default under the New Credit Facility include, but are not limited to, (1) the Companys
failure to pay principal, interest, fees or other amounts under the credit agreement when due
(taking into account any applicable grace period), (2) any representation or warranty proving to
have been materially incorrect when made, (3) covenant defaults subject, with respect to certain
covenants, to a grace period, (4) bankruptcy events, (5) a cross default to certain other debt, (6)
certain undischarged judgments (not paid within an applicable grace period), (7) a change of
control, (8) certain ERISA-related defaults, and (9) the invalidity or impairment of specified
security interests, guarantees or subordination provisions in favor of the administrative agent or
lenders under the New Credit Facility.
The Notes
were issued by CHS in connection with the Triad acquisition in the
principal amount of $3.021 billion. These Notes will mature on July 15, 2015. The Notes bear
interest at the rate of 8.875% per annum, payable semiannually in arrears on January 15 and July
15, commencing January 15, 2008. Interest on the Notes accrue from the date of original issuance.
Interest will be calculated on the basis of 360-day year comprised of twelve 30-day months.
Except as set forth below, CHS is not entitled to redeem the Notes prior to July
15, 2011.
On and after July 15, 2011, CHS is entitled, at its option, to redeem all or a
portion of the Notes upon not less than 30 nor more than 60 days notice, at the redemption prices
(expressed as a percentage of principal amount on the redemption date), plus accrued and unpaid
interest, if any, to the redemption date (subject to the right of holders of record on the relevant
record date to receive interest due on the relevant interest payment date), if redeemed during the
12-month period commencing on July 15 of the years set forth below:
|
|
|
|
|
Period |
|
Redemption Price |
2011 |
|
|
104.438 |
% |
2012 |
|
|
102.219 |
% |
2013 and thereafter |
|
|
100.000 |
% |
15
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
12. LONG-TERM DEBT (Continued)
In addition, any time prior to July 15, 2010,
CHS is entitled, at its option, on
one or more occasions to redeem the Notes (which include additional Notes (the Additional Notes),
if any which may be issued from time to time under the indenture under which the Notes were issued)
in an aggregate principal amount not to exceed 35% of the aggregate principal amount of the Notes
(which includes Additional Notes, if any) originally issued at a redemption price (expressed as a
percentage of principal amount) of 108.875%, plus accrued and unpaid interest to the redemption
date, with the Net Cash Proceeds (as defined) from one or more Public Equity Offerings (as defined)
(provided that if the Public Equity Offering is an offering by the Company, a portion of the Net
Cash Proceeds thereof equal to the amount required to redeem any such Notes is contributed to the
equity capital of CHS); provided, however, that:
|
1) |
|
at least 65% of such aggregate principal amount
of Notes originally issued remains outstanding immediately
after the occurrence of each such redemption (other than the
Notes held, directly or indirectly, by the Company or its
subsidiaries); and |
|
|
2) |
|
each such redemption occurs within 90 days after
the date of the related Public Equity Offering. |
CHS is entitled, at its option, to redeem the Notes, in whole or in part, at any
time prior to July 15, 2011, upon not less than 30 or more than 60 days notice, at a redemption
price equal to 100% of the principal amount of Notes redeemed plus the Application Premium (as
defined), and accrued and unpaid interest, if any, as of the applicable redemption date.
Pursuant to a registration rights agreement entered into at the time of the issuance of the Notes
as a result of an exchange offer made by CHS, substantially all of the Notes
issued in July 2007 were exchanged in November 2007 for new notes (the Exchange Notes) having
terms substantially identical in all material respects to the Notes (except that the Exchange Notes
were issued under a registration statement pursuant to the 1933 Act). References to the Notes
shall also be deemed to include Exchange Notes unless the context provides otherwise.
During the quarter ended March 31, 2008, the Company repurchased on the open market and cancelled
$62.7 million of the Notes. This resulted in a loss from early extinguishment of debt of $1.3
million with an after-tax impact of $0.9 million.
As of
March 31, 2008, the availability for additional borrowings under
the New Credit
Facility was $1.050 billion (consisting of a $750 million revolving credit facility and a $300
million delayed draw term loan facility), of which $35 million was set aside for outstanding
letters of credit. CHS also has the ability to add up to $300 million of borrowing capacity
from receivable transactions (including securitizations) under the New Credit Facility which has
not yet been accessed. CHS also has the ability to amend the New Credit Facility to provide
for one or more tranches of term loans in an aggregate principal
amount of $600 million, which CHS has not yet accessed. As of
March 31, 2008, the weighted-average interest rate
under the New Credit Facility was 5.7%.
Cash paid for interest, net of interest income, was $229.1 million and $25.9 million during the
three months ended March 31, 2008 and 2007, respectively.
13. RECENT ACCOUNTING PRONOUNCEMENTS
In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and
Financial Liabilities Including an Amendment of FASB Statement No. 115 (SFAS No. 159). SFAS
No. 159 expands the use of fair value accounting but does not affect existing standards that
require assets or liabilities to be carried at fair value. SFAS No. 159 permits an entity, on a
contract-by-contract basis, to make an irrevocable election to account for certain types of
financial instruments and warranty and insurance contracts at fair value, rather than historical
cost, with changes in the fair value, whether realized or unrealized, recognized in earnings. SFAS
No. 159 is effective for fiscal years beginning after November 15, 2007. The Company adopted SFAS
No. 159 as of January 1, 2008. The adoption of this statement has not had a material effect on the
Companys consolidated results of operations or consolidated financial position.
16
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
13. RECENT ACCOUNTING PRONOUNCEMENTS (Continued)
In December 2007, the FASB issued SFAS No. 141(R), Business Combinations (SFAS No. 141(R)).
SFAS No. 141(R) replaces SFAS No. 141 and addresses the recognition and accounting for identifiable
assets acquired, liabilities assumed, and noncontrolling interests in business combinations. This
standard will require more assets and liabilities to be recorded at fair value and will require
expense recognition (rather than capitalization) of certain pre-acquisition costs. This standard
also will require any adjustments to acquired deferred tax assets and liabilities occurring after
the related allocation period to be made through earnings. Furthermore, this standard requires this
treatment of acquired deferred tax assets and liabilities also be applied to acquisitions occurring
prior to the effective date of this standard. SFAS No. 141(R) is effective for fiscal years
beginning after December 15, 2008 and is required to be adopted prospectively with no early
adoption permitted. SFAS No. 141(R) will be adopted by the Company in the first quarter of 2009.
The Company is currently assessing the potential impact that SFAS No. 141(R) will have on its
consolidated results of operations or financial position.
In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial
Statements (SFAS No. 160). SFAS No. 160 addresses the accounting and reporting framework for
noncontrolling ownership interests in consolidated subsidiaries of the parent. SFAS No. 160 also
establishes disclosure requirements that clearly identify and distinguish between the interests of
the parent company and the interests of the noncontrolling owners and that require minority
ownership interests be presented separately within equity in the consolidated financial statements.
SFAS No. 160 is effective for fiscal years beginning after December 15, 2008, and will be adopted
by the Company in the first quarter of 2009. The Company is currently assessing the potential
impact that SFAS No. 160 will have on its consolidated results of operations or financial position.
In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging
Activities (SFAS No. 161). SFAS No. 161 expands the disclosure requirements for derivative
instruments and for hedging activities in order to provide additional understanding of how an
entity uses derivative instruments and how they are accounted for and reported in an entitys
financial statements. The new disclosure requirements for SFAS No. 161 are effective for fiscal
years beginning after November 15, 2008, and will be adopted by the Company in the first quarter of
2009.
14. SEGMENT INFORMATION
The Company operates in three distinct operating segments, represented by the hospital operations
(which includes our general acute care hospitals and related healthcare entities that provide
inpatient and outpatient health care services), the home health agencies operations (which provide
in-home outpatient care), and our hospital management services business (which provides executive
management and consulting services to non-affliated acute care hospitals). Only the hospital
operations segment meets the criteria in SFAS No. 131, Disclosure about Segments of an Enterprise
and Related Information (SFAS No. 131), as a separate reportable segment. The financial
information for the home health agencies and management services segments do not meet the
quantitative thresholds defined in SFAS No. 131 and are combined into the corporate and all other
reportable segment.
The distribution between reportable segments of our revenues and income from continuing operations
before income taxes is summarized in the following tables (in thousands):
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended March 31, |
|
|
|
2008 |
|
|
2007 |
|
Revenues: |
|
|
|
|
|
|
|
|
Hospital operations |
|
$ |
2,664,016 |
|
|
$ |
1,130,207 |
|
Corporate and all other |
|
|
63,538 |
|
|
|
24,071 |
|
|
|
|
|
|
|
|
|
|
$ |
2,727,554 |
|
|
$ |
1,154,278 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations before income taxes: |
|
|
|
|
|
|
|
|
Hospital operations |
|
$ |
117,892 |
|
|
$ |
113,529 |
|
Corporate and all other |
|
|
(34,164 |
) |
|
|
(20,408 |
) |
|
|
|
|
|
|
|
|
|
$ |
83,728 |
|
|
$ |
93,121 |
|
|
|
|
|
|
|
|
15. FAIR VALUE
In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (SFAS No. 157), which defines
fair value, provides a framework for measuring fair value, and expands disclosures required for fair value measurements. SFAS No. 157
applies to other accounting pronouncements that require fair value measurement; it does not require any new fair value measurements.
SFAS No. 157 is effective for fiscal years beginning after November 15, 2007, and was adopted by the Company as of January 1, 2008.
The adoption of this statement has not had a material effect on the
Companys consolidated results of operations or consolidated financial position.
In February 2008, the FASB issued FASB Statement of Position No.157-2, Effective Date of FASB Statement No. 157, (FSP 157-2). FSP 157-2
deferred the effective date of the provisions of SFAS No. 157 for all non-financial assets and non-financial liabilities to fiscal
years beginning after November 15, 2008, and will be adopted by the Company in the first quarter of 2009. The Company is currently
assessing the potential impact of SFAS No. 157 for non-financial
assets and non-financial liabilities on its consolidated
statements of financial position and results of operations.
Fair Value Hierarchy
SFAS No. 157 classifies the inputs used to measure fair value into the following hierarchy:
|
|
|
Level 1:
|
|
Quoted market prices in active markets for identical assets or liabilities. |
Level 2:
|
|
Observable market-based inputs or unobservable inputs that are corroborated by market data. |
Level 3:
|
|
Unobservable inputs that are supported by little or no market activity and are significant to the
fair value of the assets or liabilities. Level 3 includes values determined using pricing models,
discounted cash flow methodologies, or similar techniques reflecting the Companys own assumptions. |
The following table sets forth, by level within the fair value hierarchy,
the financial assets and liabilities recorded at fair value on a recurring basis as of March 31, 2008
(in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
Available-for-sale securities |
|
$ |
7,968 |
|
|
$ |
7,968 |
|
|
$ |
|
|
|
$ |
|
|
Trading securities |
|
|
31,749 |
|
|
|
31,749 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
39,717 |
|
|
$ |
39,717 |
|
|
$ |
|
|
|
$ |
|
|
Fair value of interest |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
rate swap
agreements |
|
$ |
290,553 |
|
|
$ |
|
|
|
$ |
290,553 |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
$ |
290,553 |
|
|
$ |
|
|
|
$ |
290,553 |
|
|
$ |
|
|
Available-for-sale securities and trading securities classified as Level 1 are measured using quoted market prices. The fair value
of the Companys interest rate swap agreements are classified as Level 2, and are estimated using an income approach based on
the LIBOR swap rate, which is observable at commonly quoted intervals for the full term of the swap.
16. CONTINGENCIES
The Company is a party to various legal proceedings incidental to its business. In the opinion of
management, any ultimate liability with respect to these actions will not have a material adverse
effect on the Companys consolidated financial position, cash flows or results of operations. In
addition, in connection with the closing of the Triad acquisition on July 25, 2007, the
17
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)
16. CONTINGENCIES (Continued)
Company has assumed both recorded and unrecorded contingencies of Triad. The Companys management
is not aware of any unrecorded contingencies assumed in connection with the Triad acquisition,
whose ultimate outcome will have a material adverse effect on the Companys consolidated financial
position, cash flows or results of operations.
In a letter dated October 4, 2007, the Civil Division of the Department of Justice notified the
Company that, as a result of an investigation into the way in which different state Medicaid
programs apply to the federal government for matching or supplemental funds that are ultimately
used to pay for a small portion of the services provided to Medicaid and indigent patients, it
believes the Company and three of its New Mexico hospitals have caused the State of New Mexico to
submit improper claims for federal funds in violation of the federal False Claims Act. In a letter
dated January 22, 2008, the Civil Division notified the Company that based on its investigation, it
has calculated that these three hospitals received ineligible federal participation payments from
August 2000 to June 2006 of approximately $27.5 million. The Civil Division also advised the
Company that were it to proceed to trial, it would seek treble damages plus an appropriate penalty
for each of the violations of the False Claims Act. The Company continues to believe that it has
not violated the False Claims Act, and is continuing discussions with the Civil Division in an
effort to resolve this matter.
17. SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION
In connection with the consummation of the Triad acquisition in
July 2007, the Company obtained $7.215 billion of senior
secured financing under the New Credit Facility and CHS issued
the Notes in the aggregate principal amount of
$3.021 billion. The Notes are senior unsecured obligations
of CHS and are guaranteed on a senior basis by the Company and
by certain existing and subsequently acquired or organized 100%
owned domestic subsidiaries.
The Notes are fully and unconditionally guaranteed on a joint
and several basis. The following condensed consolidating
financial statements present Community Health Systems, Inc. (as
parent guarantor), CHS (as the issuer), the subsidiary
guarantors, the subsidiary non-guarantors and eliminations.
These supplemental condensed consolidating financial statements
have been prepared and presented in accordance with SEC
Regulation S-X
Rule 3-10
Financial Statements of Guarantors and Issuers of
Guaranteed Securities Registered or Being Registered.
The presentation of intercompany balances and allocated income
tax expense in the Companys previously issued supplemental
condensed consolidating financial statements is being corrected
as follows:
|
|
|
|
|
Intercompany receivables and payables are presented gross in the
supplemental consolidating balance sheets; the intercompany
balances were previously reported net as intercompany
(receivable) payable. In addition, a portion of the
intercompany (receivable) payable was netted against
long-term debt payable (receivable) of the issuer
and other guarantors.
|
|
|
|
Cash flows from intercompany transactions are presented in cash
flows from financing activities, as changes in intercompany
balances with affiliates, net; these cash flows were previous
reported in cash flows from operating activities as
advances to subsidiaries, net of return of
investment and other operating cash flows.
|
|
|
|
Income tax expense is allocated from the parent guarantor to the
income producing operations (other guarantors and
non-guarantors) and the issuer through a deemed capital
contribution; income tax expense
was previously allocated entirely to the parent guarantor, which
is the tax paying entity. As this approach represents an
allocation, the income tax expense allocation is considered
non-cash for statement of cash flow purposes.
|
|
|
|
Interest expense, net has been presented to reflect net interest
expense and interest income from outstanding long-term debt and
intercompany balances; these interest expense and interest
income amounts were previously netted within certain
subsidiaries.
|
|
Additionally, cash flows from expenditures for computer hardware
and internal-use software have been reclassified to a reduction of net cash provided
by investing activities with a corresponding increase to net cash
provided by operating activities (see Note 1).
The Companys intercompany activity consists primarily of
daily cash transfers for purposes of cash management, the
allocation of certain expenses and expenditures paid for by the
parent on behalf of the subsidiaries, and the push down of
investment in its subsidiaries. The Companys subsidiaries
generally do not purchase services from one another and
therefore the intercompany transactions do not represent revenue
generating transactions. All intercompany transactions eliminate
in consolidation. Therefore, the aforementioned corrections do
not impact the Companys consolidated balance sheet,
consolidated statement of income or consolidated statement of
cash flows for any period presented. Management believes the
effects of these corrections are not material to the
Companys previously issued consolidated financial
statements. The following table discloses
the impact of these corrections on each of the respective line
items of the supplemental condensed consolidating financial
statements as of March 31, 2008 and December 31, 2007
and for the periods ending March 31, 2008 and
2007 (in thousands).
18
COMMUNITY
HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
|
|
|
Other
|
|
|
Non-
|
|
|
|
|
|
|
|
|
|
Guarantor
|
|
|
Issuer
|
|
|
Guarantors
|
|
|
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
Condensed Consolidating Balance Sheet
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of March 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As reported
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prepaid expenses and taxes
|
|
$
|
|
|
|
$
|
58
|
|
|
$
|
180,024
|
|
|
$
|
13,930
|
|
|
$
|
|
|
|
$
|
194,012
|
|
Total current assets
|
|
|
113,741
|
|
|
|
448
|
|
|
|
1,709,370
|
|
|
|
832,359
|
|
|
|
(49,526
|
)
|
|
|
2,606,392
|
|
Intercompany receivables (non-current)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
|
21,126
|
|
|
|
|
|
|
|
2,435,773
|
|
|
|
1,918,394
|
|
|
|
|
|
|
|
4,375,293
|
|
Net investment in subsidiaries
|
|
|
1,506,013
|
|
|
|
1,234,270
|
|
|
|
3,680,406
|
|
|
|
|
|
|
|
(6,420,689
|
)
|
|
|
|
|
Total Assets
|
|
|
1,640,880
|
|
|
|
1,420,794
|
|
|
|
11,656,624
|
|
|
|
5,084,266
|
|
|
|
(6,470,215
|
)
|
|
|
13,332,349
|
|
Long-term debt
|
|
|
4
|
|
|
|
4,325,296
|
|
|
|
4,509,849
|
|
|
|
51,206
|
|
|
|
|
|
|
|
8,886,355
|
|
Intercompany payables (non-current)
|
|
|
(438,836
|
)
|
|
|
(4,698,000
|
)
|
|
|
4,841,662
|
|
|
|
4,101,680
|
|
|
|
(3,806,506
|
)
|
|
|
|
|
Additional paid-in capital
|
|
|
1,247,241
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,247,241
|
|
Retained earnings
|
|
|
618,072
|
|
|
|
1,694,047
|
|
|
|
1,232,700
|
|
|
|
(118,796
|
)
|
|
|
(2,807,951
|
)
|
|
|
618,072
|
|
Total stockholders equity
|
|
|
1,671,570
|
|
|
|
1,506,010
|
|
|
|
1,226,967
|
|
|
|
(118,794
|
)
|
|
|
(2,614,183
|
)
|
|
|
1,671,570
|
|
Total liabilities and stockholders equity
|
|
|
1,640,880
|
|
|
|
1,420,794
|
|
|
|
11,656,624
|
|
|
|
5,084,266
|
|
|
|
(6,470,215
|
)
|
|
|
13,332,349
|
|
As adjusted(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prepaid expenses and taxes
|
|
|
110,160
|
|
|
|
58
|
|
|
|
69,864
|
|
|
|
13,930
|
|
|
|
|
|
|
|
194,012
|
|
Total current assets
|
|
|
223,901
|
|
|
|
448
|
|
|
|
1,599,210
|
|
|
|
832,359
|
|
|
|
(49,526
|
)
|
|
|
2,606,392
|
|
Intercompany receivables (non-current)
|
|
|
928,672
|
|
|
|
9,198,002
|
|
|
|
10,361,700
|
|
|
|
1,937,602
|
|
|
|
(22,425,976
|
)
|
|
|
|
|
Goodwill
|
|
|
|
|
|
|
|
|
|
|
2,456,899
|
|
|
|
1,918,394
|
|
|
|
|
|
|
|
4,375,293
|
|
Net investment in subsidiaries
|
|
|
1,473,779
|
|
|
|
4,194,870
|
|
|
|
2,380,982
|
|
|
|
|
|
|
|
(8,049,631
|
)
|
|
|
|
|
Total Assets
|
|
|
2,626,352
|
|
|
|
13,579,396
|
|
|
|
20,629,866
|
|
|
|
7,021,868
|
|
|
|
(30,525,133
|
)
|
|
|
13,332,349
|
|
Long-term debt
|
|
|
4
|
|
|
|
8,825,296
|
|
|
|
54,667
|
|
|
|
6,388
|
|
|
|
|
|
|
|
8,886,355
|
|
Intercompany payables (non-current)
|
|
|
546,636
|
|
|
|
2,992,838
|
|
|
|
18,370,619
|
|
|
|
6,084,100
|
|
|
|
(27,994,193
|
)
|
|
|
|
|
Additional paid-in capital
|
|
|
1,247,241
|
|
|
|
639,797
|
|
|
|
435,885
|
|
|
|
|
|
|
|
(1,075,682
|
)
|
|
|
1,247,241
|
|
Retained earnings
|
|
|
618,072
|
|
|
|
1,022,014
|
|
|
|
696,282
|
|
|
|
(118,796
|
)
|
|
|
(1,599,500
|
)
|
|
|
618,072
|
|
Total stockholders equity
|
|
|
1,671,570
|
|
|
|
1,473,774
|
|
|
|
1,126,434
|
|
|
|
(118,794
|
)
|
|
|
(2,481,414
|
)
|
|
|
1,671,570
|
|
Total liabilities and stockholders equity
|
|
|
2,626,352
|
|
|
|
13,579,396
|
|
|
|
20,629,866
|
|
|
|
7,021,868
|
|
|
|
(30,525,133
|
)
|
|
|
13,332,349
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidating Statement of Cash Flows
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended March 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As reported
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities
|
|
|
853
|
|
|
|
164,026
|
|
|
|
321,361
|
|
|
|
(427,836
|
)
|
|
|
(49,526
|
)
|
|
|
8,878
|
|
Purchases of property and equipment
|
|
|
|
|
|
|
|
|
|
|
(84,607
|
)
|
|
|
(52,464
|
)
|
|
|
|
|
|
|
(137,071
|
)
|
Investments in other assets
|
|
|
|
|
|
|
|
|
|
|
(12,889
|
)
|
|
|
(43,660
|
)
|
|
|
|
|
|
|
(56,549 |
)
|
Net cash provided by (used in) investing activities
|
|
|
|
|
|
|
|
|
|
|
(98,277
|
)
|
|
|
282,349
|
|
|
|
|
|
|
|
184,072
|
|
Changes in intercompany balances with affiliates, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
activities
|
|
|
(853
|
)
|
|
|
(164,026
|
)
|
|
|
(123,280
|
)
|
|
|
126,688
|
|
|
|
|
|
|
|
(161,471
|
)
|
As adjusted(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities
|
|
|
(45,719
|
)
|
|
|
(102,699
|
)
|
|
|
366,178
|
|
|
|
(113,101
|
)
|
|
|
(49,526
|
)
|
|
|
55,133
|
|
Purchases of property and equipment
|
|
|
|
|
|
|
|
|
|
|
(89,229
|
)
|
|
|
(52,464
|
)
|
|
|
|
|
|
|
(141,693
|
)
|
Investments in other assets
|
|
|
|
|
|
|
|
|
|
|
(54,522
|
)
|
|
|
(43,660
|
)
|
|
|
|
|
|
|
(98,182 |
)
|
Net cash provided by (used in) investing activities
|
|
|
|
|
|
|
|
|
|
|
(144,532
|
)
|
|
|
282,349
|
|
|
|
|
|
|
|
137,817
|
|
Changes in intercompany balances with affiliates, net
|
|
|
46,572
|
|
|
|
266,725
|
|
|
|
(43,380
|
)
|
|
|
(269,917
|
)
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities
|
|
|
45,719
|
|
|
|
102,699
|
|
|
|
(121,842
|
)
|
|
|
(188,047
|
)
|
|
|
|
|
|
|
(161,471
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidating Statement of Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended March 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As reported
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net
|
|
|
|
|
|
|
72,577
|
|
|
|
75,937
|
|
|
|
17,188
|
|
|
|
|
|
|
|
165,702
|
|
Equity in earnings of unconsolidated affiliates
|
|
|
(92,362
|
)
|
|
|
(166,267
|
)
|
|
|
(20,967
|
)
|
|
|
|
|
|
|
266,712
|
|
|
|
(12,884
|
)
|
Income (loss) from continuing operations before income taxes
|
|
|
92,362
|
|
|
|
92,362
|
|
|
|
166,029
|
|
|
|
(313
|
)
|
|
|
(266,712
|
)
|
|
|
83,728
|
|
Provision for income taxes
|
|
|
32,235
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32,235
|
|
Income (loss) from continuing operations
|
|
|
60,127
|
|
|
|
92,362
|
|
|
|
166,029
|
|
|
|
(313
|
)
|
|
|
(266,712
|
)
|
|
|
51,493
|
|
Net income
|
|
|
60,127
|
|
|
|
92,362
|
|
|
|
166,029
|
|
|
|
8,321
|
|
|
|
(266,712
|
)
|
|
|
60,127
|
|
As adjusted(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net
|
|
|
|
|
|
|
12,924
|
|
|
|
135,591
|
|
|
|
17,187
|
|
|
|
|
|
|
|
165,702
|
|
Equity in earnings of unconsolidated affiliates
|
|
|
(60,127
|
)
|
|
|
(65,733
|
)
|
|
|
(21,088
|
)
|
|
|
|
|
|
|
134,064
|
|
|
|
(12,884
|
)
|
Income (loss) from continuing operations before income taxes
|
|
|
60,127
|
|
|
|
51,481
|
|
|
|
106,496
|
|
|
|
(312
|
)
|
|
|
(134,064
|
)
|
|
|
83,728
|
|
Provision for income taxes
|
|
|
|
|
|
|
(8,646
|
)
|
|
|
41,001
|
|
|
|
(120
|
)
|
|
|
|
|
|
|
32,235
|
|
Income (loss) from continuing operations
|
|
|
60,127
|
|
|
|
60,127
|
|
|
|
65,495
|
|
|
|
(192
|
)
|
|
|
(134,064
|
)
|
|
|
51,493
|
|
Net income
|
|
$
|
60,127
|
|
|
$
|
60,127
|
|
|
$
|
65,495
|
|
|
$
|
8,442
|
|
|
$
|
(134,064
|
)
|
|
$
|
60,127
|
|
19
COMMUNITY
HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
|
|
|
Other
|
|
|
Non-
|
|
|
|
|
|
|
|
|
|
Guarantor
|
|
|
Issuer
|
|
|
Guarantors
|
|
|
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
Condensed Consolidating Balance Sheet |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As reported |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prepaid expenses and taxes |
|
$ |
|
|
|
$ |
102 |
|
|
$ |
156,733 |
|
|
$ |
12,921 |
|
|
$ |
|
|
|
$ |
169,756 |
|
Total current assets |
|
|
113,741 |
|
|
|
102 |
|
|
|
1,518,022 |
|
|
|
921,033 |
|
|
|
|
|
|
|
2,552,898 |
|
Intercompany receivables (non-current) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill |
|
|
96,671 |
|
|
|
|
|
|
|
2,162,601 |
|
|
|
1,988,442 |
|
|
|
|
|
|
|
4,247,714 |
|
Net investment in subsidiaries |
|
|
1,519,952 |
|
|
|
1,464,944 |
|
|
|
4,968,905 |
|
|
|
|
|
|
|
(7,953,801 |
) |
|
|
|
|
Total Assets |
|
|
1,730,364 |
|
|
|
1,654,186 |
|
|
|
12,593,604 |
|
|
|
5,469,290 |
|
|
|
(7,953,801 |
) |
|
|
13,493,643 |
|
Long-term debt |
|
|
4 |
|
|
|
4,487,090 |
|
|
|
4,633,801 |
|
|
|
(43,528 |
) |
|
|
|
|
|
|
9,077,367 |
|
Intercompany payables (non-current) |
|
|
(385,872 |
) |
|
|
(4,627,439 |
) |
|
|
5,956,358 |
|
|
|
4,562,215 |
|
|
|
(5,505,262 |
) |
|
|
|
|
Other long-term liabilities |
|
|
(2,519 |
) |
|
|
121,482 |
|
|
|
188,316 |
|
|
|
176,180 |
|
|
|
|
|
|
|
483,459 |
|
Additional paid-in capital |
|
|
1,240,308 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,240,308 |
|
Retained earnings |
|
|
557,945 |
|
|
|
1,601,686 |
|
|
|
1,066,671 |
|
|
|
(134,094 |
) |
|
|
(2,534,263 |
) |
|
|
557,945 |
|
Total stockholders equity |
|
|
1,710,804 |
|
|
|
1,519,949 |
|
|
|
1,062,682 |
|
|
|
(134,092 |
) |
|
|
(2,448,539 |
) |
|
|
1,710,804 |
|
Total liabilities and stockholders equity |
|
|
1,730,364 |
|
|
|
1,654,186 |
|
|
|
12,593,604 |
|
|
|
5,469,290 |
|
|
|
(7,953,801 |
) |
|
|
13,493,643 |
|
As adjusted(l) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prepaid expenses and taxes |
|
|
99,417 |
|
|
|
102 |
|
|
|
57,316 |
|
|
|
12,921 |
|
|
|
|
|
|
|
169,756 |
|
Total current assets |
|
|
213,158 |
|
|
|
102 |
|
|
|
1,418,605 |
|
|
|
921,033 |
|
|
|
|
|
|
|
2,552,898 |
|
Intercompany receivables (non-current) |
|
|
1,085,684 |
|
|
|
9,129,859 |
|
|
|
18,854,467 |
|
|
|
884,296 |
|
|
|
(29,954,306 |
) |
|
|
|
|
Goodwill |
|
|
|
|
|
|
|
|
|
|
2,259,113 |
|
|
|
1,988,601 |
|
|
|
|
|
|
|
4,247,714 |
|
Net investment in subsidiaries |
|
|
957,750 |
|
|
|
4,168,316 |
|
|
|
2,485,035 |
|
|
|
|
|
|
|
(7,611,101 |
) |
|
|
|
|
Total Assets |
|
|
2,256,592 |
|
|
|
13,487,417 |
|
|
|
28,961,296 |
|
|
|
6,353,745 |
|
|
|
(37,565,407 |
) |
|
|
13,493,643 |
|
Long-term debt |
|
|
4 |
|
|
|
8,987,090 |
|
|
|
62,792 |
|
|
|
27,481 |
|
|
|
|
|
|
|
9,077,367 |
|
Intercompany payables (non-current) |
|
|
137,837 |
|
|
|
3,267,993 |
|
|
|
27,008,767 |
|
|
|
5,378,021 |
|
|
|
(35,792,618 |
) |
|
|
|
|
Other long-term liabilities |
|
|
|
|
|
|
121,482 |
|
|
|
188,316 |
|
|
|
173,661 |
|
|
|
|
|
|
|
483,459 |
|
Additional paid-in capital |
|
|
1,240,308 |
|
|
|
434,505 |
|
|
|
398,338 |
|
|
|
|
|
|
|
(832,843 |
) |
|
|
1,240,308 |
|
Retained earnings |
|
|
557,945 |
|
|
|
604,980 |
|
|
|
554,624 |
|
|
|
(133,935 |
) |
|
|
(1,025,669 |
) |
|
|
557,945 |
|
Total stockholders equity |
|
|
1,710,804 |
|
|
|
957,748 |
|
|
|
948,974 |
|
|
|
(133,933 |
) |
|
|
(1,772,789 |
) |
|
|
1,710,804 |
|
Total liabilities and stockholders
equity |
|
|
2,256,592 |
|
|
|
13,487,417 |
|
|
|
28,961,296 |
|
|
|
6,353,745 |
|
|
|
(37,565,407 |
) |
|
|
13,493,643 |
|
|
Condensed Consolidating Statement of Cash Flows |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended March 31, 2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As reported |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities |
|
|
(4,158 |
) |
|
|
4,014 |
|
|
|
108,210 |
|
|
|
12,281 |
|
|
|
|
|
|
|
120,347 |
|
Changes in intercompany balances with affiliates, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities |
|
|
4,158 |
|
|
|
(4,014 |
) |
|
|
(827 |
) |
|
|
(1,607 |
) |
|
|
|
|
|
|
(2,290 |
) |
As adjusted (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities |
|
|
26,447 |
|
|
|
(2,561 |
) |
|
|
104,366 |
|
|
|
(7,905 |
) |
|
|
|
|
|
|
120,347 |
|
Changes in intercompany balances with affiliates, net |
|
|
(30,605 |
) |
|
|
6,575 |
|
|
|
3,844 |
|
|
|
20,186 |
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities |
|
|
(26,447 |
) |
|
|
2,561 |
|
|
|
3,017 |
|
|
|
18,579 |
|
|
|
|
|
|
|
(2,290 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidating Statement of Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended March 31, 2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As reported |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net |
|
|
|
|
|
|
|
|
|
|
21,681 |
|
|
|
6,752 |
|
|
|
|
|
|
|
28,433 |
|
Equity in earnings of unconsolidated affiliates |
|
|
(90,156 |
) |
|
|
(90,156 |
) |
|
|
6,499 |
|
|
|
|
|
|
|
173,813 |
|
|
|
|
|
Income (loss) from continuing operations before income taxes |
|
|
90,156 |
|
|
|
90,156 |
|
|
|
89,641 |
|
|
|
(3,019 |
) |
|
|
(173,813 |
) |
|
|
93,121 |
|
Provision for income taxes |
|
|
35,832 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
35,832 |
|
Income (loss) from continuing operations |
|
|
54,324 |
|
|
|
90,156 |
|
|
|
89,641 |
|
|
|
(3,019 |
) |
|
|
(173,813 |
) |
|
|
57,289 |
|
Net income |
|
|
54,324 |
|
|
|
90,156 |
|
|
|
89,641 |
|
|
|
(5,984 |
) |
|
|
(173,813 |
) |
|
|
54,324 |
|
As adjusted (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net |
|
|
|
|
|
|
1,369 |
|
|
|
20,312 |
|
|
|
6,752 |
|
|
|
|
|
|
|
28,433 |
|
Equity in earnings of unconsolidated affiliates |
|
|
(54,324 |
) |
|
|
(57,291 |
) |
|
|
5,339 |
|
|
|
|
|
|
|
106,276 |
|
|
|
|
|
Income (loss) from continuing operations before income taxes |
|
|
54,324 |
|
|
|
55,922 |
|
|
|
92,170 |
|
|
|
(3,019 |
) |
|
|
(106,276 |
) |
|
|
93,121 |
|
Provision for income taxes |
|
|
|
|
|
|
1,598 |
|
|
|
35,393 |
|
|
|
(1,159 |
) |
|
|
|
|
|
|
35,832 |
|
Income (loss) from continuing operations |
|
|
54,324 |
|
|
|
54,324 |
|
|
|
56,777 |
|
|
|
(1,860 |
) |
|
|
(106,276 |
) |
|
|
57,289 |
|
Net income |
|
|
54,324 |
|
|
|
54,324 |
|
|
|
56,777 |
|
|
|
(4,825 |
) |
|
|
(106,276 |
) |
|
|
54,324 |
|
|
|
|
(1) |
|
Includes effects of reclassification for discontinued operations and for conforming corrections as applied to other periods presented. |
20
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)
Condensed Consolidated Balance Sheet
March 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent |
|
|
|
|
|
|
Other |
|
|
Non- |
|
|
|
|
|
|
|
|
|
Guarantor |
|
|
Issuer |
|
|
Guarantors |
|
|
Guarantors |
|
|
Eliminations |
|
|
Consolidated |
|
|
|
(In thousands, except share data) |
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
|
|
|
$ |
|
|
|
$ |
213,879 |
|
|
$ |
|
|
|
$ |
(49,526 |
) |
|
$ |
164,353 |
|
Patient accounts receivable, net of allowance
for doubtful accounts |
|
|
|
|
|
|
|
|
|
|
1,021,244 |
|
|
|
604,414 |
|
|
|
|
|
|
|
1,625,658 |
|
Supplies |
|
|
|
|
|
|
|
|
|
|
164,622 |
|
|
|
99,439 |
|
|
|
|
|
|
|
264,061 |
|
Deferred income taxes |
|
|
113,741 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
113,741 |
|
Prepaid expenses and taxes |
|
|
110,160 |
|
|
|
58 |
|
|
|
69,864 |
|
|
|
13,930 |
|
|
|
|
|
|
|
194,012 |
|
Other current assets |
|
|
|
|
|
|
390 |
|
|
|
129,601 |
|
|
|
114,576 |
|
|
|
|
|
|
|
244,567 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets |
|
|
223,901 |
|
|
|
448 |
|
|
|
1,599,210 |
|
|
|
832,359 |
|
|
|
(49,526 |
) |
|
|
2,606,392 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intercompany receivable |
|
|
928,672 |
|
|
|
9,198,002 |
|
|
|
10,361,700 |
|
|
|
1,937,602 |
|
|
|
(22,425,976 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net |
|
|
|
|
|
|
|
|
|
|
3,343,680 |
|
|
|
2,094,717 |
|
|
|
|
|
|
|
5,438,397 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill |
|
|
|
|
|
|
|
|
|
|
2,456,899 |
|
|
|
1,918,394 |
|
|
|
|
|
|
|
4,375,293 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other assets, net |
|
|
|
|
|
|
186,076 |
|
|
|
487,395 |
|
|
|
238,796 |
|
|
|
|
|
|
|
912,267 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment in subsidiaries |
|
|
1,473,779 |
|
|
|
4,194,870 |
|
|
|
2,380,982 |
|
|
|
|
|
|
|
(8,049,631 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
2,626,352 |
|
|
$ |
13,579,396 |
|
|
$ |
20,629,866 |
|
|
$ |
7,021,868 |
|
|
$ |
(30,525,133 |
) |
|
$ |
13,332,349 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current maturities of long-term debt |
|
$ |
|
|
|
$ |
|
|
|
$ |
14,667 |
|
|
$ |
4,809 |
|
|
$ |
|
|
|
$ |
19,476 |
|
Accounts payable |
|
|
|
|
|
|
41 |
|
|
|
339,276 |
|
|
|
171,646 |
|
|
|
(49,526 |
) |
|
|
461,437 |
|
Current income taxes payable |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued liabilities |
|
|
|
|
|
|
|
|
|
|
434,906 |
|
|
|
296,365 |
|
|
|
|
|
|
|
731,271 |
|
Interest payable (receivable) |
|
|
|
|
|
|
2,599 |
|
|
|
88,205 |
|
|
|
(362 |
) |
|
|
|
|
|
|
90,442 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
|
|
|
|
2,640 |
|
|
|
877,054 |
|
|
|
472,458 |
|
|
|
(49,526 |
) |
|
|
1,302,626 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt payable |
|
|
4 |
|
|
|
8,825,296 |
|
|
|
54,667 |
|
|
|
6,388 |
|
|
|
|
|
|
|
8,886,355 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intercompany payable |
|
|
546,636 |
|
|
|
2,992,838 |
|
|
|
18,370,619 |
|
|
|
6,084,100 |
|
|
|
(27,994,193 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred income taxes |
|
|
407,947 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
407,947 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other long-term liabilities |
|
|
195 |
|
|
|
284,848 |
|
|
|
198,936 |
|
|
|
195,743 |
|
|
|
|
|
|
|
679,722 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minority interests in equity of
consolidated subsidiaries |
|
|
|
|
|
|
|
|
|
|
2,156 |
|
|
|
381,973 |
|
|
|
|
|
|
|
384,129 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock |
|
|
972 |
|
|
|
|
|
|
|
1 |
|
|
|
2 |
|
|
|
(3 |
) |
|
|
972 |
|
Additional paid-in capital |
|
|
1,247,241 |
|
|
|
639,797 |
|
|
|
435,885 |
|
|
|
|
|
|
|
(1,075,682 |
) |
|
|
1,247,241 |
|
Treasury stock, at cost, 975,549 shares |
|
|
(6,678 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6,678 |
) |
Accumulated other comprehensive income (loss) |
|
|
(188,037 |
) |
|
|
(188,037 |
) |
|
|
(5,734 |
) |
|
|
|
|
|
|
193,771 |
|
|
|
(188,037 |
) |
Retained earnings |
|
|
618,072 |
|
|
|
1,022,014 |
|
|
|
696,282 |
|
|
|
(118,796 |
) |
|
|
(1,599,500 |
) |
|
|
618,072 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity |
|
|
1,671,570 |
|
|
|
1,473,774 |
|
|
|
1,126,434 |
|
|
|
(118,794 |
) |
|
|
(2,481,414 |
) |
|
|
1,671,570 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity |
|
$ |
2,626,352 |
|
|
$ |
13,579,396 |
|
|
$ |
20,629,866 |
|
|
$ |
7,021,868 |
|
|
$ |
(30,525,133 |
) |
|
$ |
13,332,349 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)
Condensed Consolidated Balance Sheet
December 31, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent |
|
|
|
|
|
|
Other |
|
|
Non- |
|
|
|
|
|
|
|
|
|
Guarantor |
|
|
Issuer |
|
|
Guarantors |
|
|
Guarantors |
|
|
Eliminations |
|
|
Consolidated |
|
|
|
(In thousands, except share data) |
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
|
|
|
$ |
|
|
|
$ |
114,075 |
|
|
$ |
18,799 |
|
|
$ |
|
|
|
$ |
132,874 |
|
Patient accounts receivable, net of allowance
for doubtful accounts |
|
|
|
|
|
|
|
|
|
|
954,106 |
|
|
|
579,692 |
|
|
|
|
|
|
|
1,533,798 |
|
Supplies |
|
|
|
|
|
|
|
|
|
|
163,961 |
|
|
|
98,942 |
|
|
|
|
|
|
|
262,903 |
|
Deferred income taxes |
|
|
113,741 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
113,741 |
|
Prepaid expenses and taxes |
|
|
99,417 |
|
|
|
102 |
|
|
|
57,316 |
|
|
|
12,921 |
|
|
|
|
|
|
|
169,756 |
|
Other current assets |
|
|
|
|
|
|
|
|
|
|
129,147 |
|
|
|
210,679 |
|
|
|
|
|
|
|
339,826 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets |
|
|
213,158 |
|
|
|
102 |
|
|
|
1,418,605 |
|
|
|
921,033 |
|
|
|
|
|
|
|
2,552,898 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intercompany receivable |
|
|
1,085,684 |
|
|
|
9,129,859 |
|
|
|
18,854,467 |
|
|
|
884,296 |
|
|
|
(29,954,306 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net |
|
|
|
|
|
|
|
|
|
|
3,667,487 |
|
|
|
1,845,087 |
|
|
|
|
|
|
|
5,512,574 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill |
|
|
|
|
|
|
|
|
|
|
2,259,113 |
|
|
|
1,988,601 |
|
|
|
|
|
|
|
4,247,714 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other assets, net |
|
|
|
|
|
|
189,140 |
|
|
|
276,589 |
|
|
|
714,728 |
|
|
|
|
|
|
|
1,180,457 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment in subsidiaries |
|
|
957,750 |
|
|
|
4,168,316 |
|
|
|
2,485,035 |
|
|
|
|
|
|
|
(7,611,101 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
2,256,592 |
|
|
$ |
13,487,417 |
|
|
$ |
28,961,296 |
|
|
$ |
6,353,745 |
|
|
$ |
(37,565,407 |
) |
|
$ |
13,493,643 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current maturities of long-term debt |
|
$ |
|
|
|
$ |
|
|
|
$ |
16,603 |
|
|
$ |
4,107 |
|
|
$ |
|
|
|
$ |
20,710 |
|
Accounts payable |
|
|
|
|
|
|
19 |
|
|
|
276,503 |
|
|
|
216,171 |
|
|
|
|
|
|
|
492,693 |
|
Current income taxes payable |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred income taxes current |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued liabilities |
|
|
|
|
|
|
|
|
|
|
437,808 |
|
|
|
342,892 |
|
|
|
|
|
|
|
780,700 |
|
Interest payable (receivable) |
|
|
|
|
|
|
153,085 |
|
|
|
8,042 |
|
|
|
(7,295 |
) |
|
|
|
|
|
|
153,832 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
|
|
|
|
153,104 |
|
|
|
738,956 |
|
|
|
555,875 |
|
|
|
|
|
|
|
1,447,935 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt payable (receivable) |
|
|
4 |
|
|
|
8,987,090 |
|
|
|
62,792 |
|
|
|
27,481 |
|
|
|
|
|
|
|
9,077,367 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intercompany payable |
|
|
137,837 |
|
|
|
3,267,993 |
|
|
|
27,008,767 |
|
|
|
5,378,021 |
|
|
|
(35,792,618 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred income taxes |
|
|
407,947 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
407,947 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other long-term liabilities |
|
|
|
|
|
|
121,482 |
|
|
|
188,316 |
|
|
|
173,661 |
|
|
|
|
|
|
|
483,459 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minority interests in equity of consolidated subsidiaries |
|
|
|
|
|
|
|
|
|
|
13,491 |
|
|
|
352,640 |
|
|
|
|
|
|
|
366,131 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock |
|
|
966 |
|
|
|
|
|
|
|
1 |
|
|
|
2 |
|
|
|
(3 |
) |
|
|
966 |
|
Additional paid-in capital |
|
|
1,240,308 |
|
|
|
434,505 |
|
|
|
398,338 |
|
|
|
|
|
|
|
(832,843 |
) |
|
|
1,240,308 |
|
Treasury stock, at cost, 975,549 shares |
|
|
(6,678 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6,678 |
) |
Accumulated other comprehensive income (loss) |
|
|
(81,737 |
) |
|
|
(81,737 |
) |
|
|
(3,989 |
) |
|
|
|
|
|
|
85,726 |
|
|
|
(81,737 |
) |
Retained earnings |
|
|
557,945 |
|
|
|
604,980 |
|
|
|
554,624 |
|
|
|
(133,935 |
) |
|
|
(1,025,669 |
) |
|
|
557,945 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity |
|
|
1,710,804 |
|
|
|
957,748 |
|
|
|
948,974 |
|
|
|
(133,933 |
) |
|
|
(1,772,789 |
) |
|
|
1,710,804 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity |
|
$ |
2,256,592 |
|
|
$ |
13,487,417 |
|
|
$ |
28,961,296 |
|
|
$ |
6,353,745 |
|
|
$ |
(37,565,407 |
) |
|
$ |
13,493,643 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)
Condensed Consolidated Statement of Income
Three Months Ended March 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent |
|
|
|
|
|
|
Other |
|
|
Non- |
|
|
|
|
|
|
|
|
|
Guarantor |
|
|
Issuer |
|
|
Guarantors |
|
|
Guarantors |
|
|
Eliminations |
|
|
Consolidated |
|
|
|
(In thousands) |
|
Net operating revenues |
|
$ |
|
|
|
$ |
|
|
|
$ |
1,688,744 |
|
|
$ |
1,038,810 |
|
|
$ |
|
|
|
$ |
2,727,554 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and benefits |
|
|
|
|
|
|
|
|
|
|
638,641 |
|
|
|
449,129 |
|
|
|
|
|
|
|
1,087,770 |
|
Provision for bad debts |
|
|
|
|
|
|
|
|
|
|
193,890 |
|
|
|
103,190 |
|
|
|
|
|
|
|
297,080 |
|
Supplies |
|
|
|
|
|
|
|
|
|
|
226,130 |
|
|
|
160,279 |
|
|
|
|
|
|
|
386,409 |
|
Other operating expenses |
|
|
|
|
|
|
|
|
|
|
300,191 |
|
|
|
225,976 |
|
|
|
|
|
|
|
526,167 |
|
Rent |
|
|
|
|
|
|
|
|
|
|
31,301 |
|
|
|
28,556 |
|
|
|
|
|
|
|
59,857 |
|
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
|
77,785 |
|
|
|
44,930 |
|
|
|
|
|
|
|
122,715 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
operating costs and expenses |
|
|
|
|
|
|
|
|
|
|
1,467,938 |
|
|
|
1,012,060 |
|
|
|
|
|
|
|
2,479,998 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations |
|
|
|
|
|
|
|
|
|
|
220,806 |
|
|
|
26,750 |
|
|
|
|
|
|
|
247,556 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net |
|
|
|
|
|
|
12,924 |
|
|
|
135,591 |
|
|
|
17,187 |
|
|
|
|
|
|
|
165,702 |
|
Loss from early extinguishment of debt |
|
|
|
|
|
|
1,328 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,328 |
|
Minority interest in earnings |
|
|
|
|
|
|
|
|
|
|
(193 |
) |
|
|
9,875 |
|
|
|
|
|
|
|
9,682 |
|
Equity in earnings of subsididary |
|
|
(60,127 |
) |
|
|
(65,733 |
) |
|
|
(21,088 |
) |
|
|
|
|
|
|
134,064 |
|
|
|
(12,884 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
(loss) from continuing operations
before income taxes |
|
|
60,127 |
|
|
|
51,481 |
|
|
|
106,496 |
|
|
|
(312 |
) |
|
|
(134,064 |
) |
|
|
83,728 |
|
Provision for income taxes |
|
|
|
|
|
|
(8,646 |
) |
|
|
41,001 |
|
|
|
(120 |
) |
|
|
|
|
|
|
32,235 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
(loss) from continuing operations |
|
|
60,127 |
|
|
|
60,127 |
|
|
|
65,495 |
|
|
|
(192 |
) |
|
|
(134,064 |
) |
|
|
51,493 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued operations, net of taxes: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations of
hospitals sold and held for sale |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(983 |
) |
|
|
|
|
|
|
(983 |
) |
Gain on sale of hospitals, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,617 |
|
|
|
|
|
|
|
9,617 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income on discontinued operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,634 |
|
|
|
|
|
|
|
8,634 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
60,127 |
|
|
$ |
60,127 |
|
|
$ |
65,495 |
|
|
$ |
8,442 |
|
|
$ |
(134,064 |
) |
|
$ |
60,127 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)
Condensed Consolidated Statement of Income
Three Months Ended March 31, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent |
|
|
|
|
|
|
Other |
|
|
Non- |
|
|
|
|
|
|
|
|
|
Guarantor |
|
|
Issuer |
|
|
Guarantors |
|
|
Guarantors |
|
|
Eliminations |
|
|
Consolidated |
|
|
|
(In thousands) |
|
Net operating revenues |
|
$ |
|
|
|
$ |
|
|
|
$ |
921,231 |
|
|
$ |
233,047 |
|
|
$ |
|
|
|
$ |
1,154,278 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and benefits |
|
|
|
|
|
|
|
|
|
|
352,482 |
|
|
|
110,283 |
|
|
|
|
|
|
|
462,765 |
|
Provision for bad debts |
|
|
|
|
|
|
|
|
|
|
105,540 |
|
|
|
22,514 |
|
|
|
|
|
|
|
128,054 |
|
Supplies |
|
|
|
|
|
|
|
|
|
|
107,117 |
|
|
|
27,177 |
|
|
|
|
|
|
|
134,294 |
|
Other operating expenses |
|
|
|
|
|
|
|
|
|
|
180,001 |
|
|
|
54,164 |
|
|
|
|
|
|
|
234,165 |
|
Rent |
|
|
|
|
|
|
|
|
|
|
17,679 |
|
|
|
7,077 |
|
|
|
|
|
|
|
24,756 |
|
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
|
40,591 |
|
|
|
7,906 |
|
|
|
|
|
|
|
48,497 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
operating costs and expenses |
|
|
|
|
|
|
|
|
|
|
803,410 |
|
|
|
229,121 |
|
|
|
|
|
|
|
1,032,531 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations |
|
|
|
|
|
|
|
|
|
|
117,821 |
|
|
|
3,926 |
|
|
|
|
|
|
|
121,747 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net |
|
|
|
|
|
|
1,369 |
|
|
|
20,312 |
|
|
|
6,752 |
|
|
|
|
|
|
|
28,433 |
|
Equity in earnings of subsididary |
|
|
(54,324 |
) |
|
|
(57,291 |
) |
|
|
5,339 |
|
|
|
|
|
|
|
106,276 |
|
|
|
|
|
Minority interest in earnings |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
193 |
|
|
|
|
|
|
|
193 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations
before income taxes |
|
|
54,324 |
|
|
|
55,922 |
|
|
|
92,170 |
|
|
|
(3,019 |
) |
|
|
(106,276 |
) |
|
|
93,121 |
|
Provision for income taxes |
|
|
|
|
|
|
1,598 |
|
|
|
35,393 |
|
|
|
(1,159 |
) |
|
|
|
|
|
|
35,832 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations |
|
|
54,324 |
|
|
|
54,324 |
|
|
|
56,777 |
|
|
|
(1,860 |
) |
|
|
(106,276 |
) |
|
|
57,289 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued operations, net of taxes: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations of
hospitals sold and held for sale |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,965 |
) |
|
|
|
|
|
|
(2,965 |
) |
Loss on sale of hospitals |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss on discontinued operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,965 |
) |
|
|
|
|
|
|
(2,965 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
54,324 |
|
|
$ |
54,324 |
|
|
$ |
56,777 |
|
|
$ |
(4,825 |
) |
|
$ |
(106,276 |
) |
|
$ |
54,324 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)
Condensed Consolidated Statement of Cash Flows
Three Months Ended March 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent |
|
|
|
|
|
|
Other |
|
|
Non- |
|
|
|
|
|
|
|
|
|
Guarantor |
|
|
Issuer |
|
|
Guarantors |
|
|
Guarantors |
|
|
Eliminations |
|
|
Consolidated |
|
|
|
(In thousands) |
|
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash
provided by (used in) operating activities |
|
$ |
(45,719 |
) |
|
$ |
(102,699 |
) |
|
$ |
366,178 |
|
|
$ |
(113,101 |
) |
|
$ |
(49,526 |
) |
|
$ |
55,133 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisitions of facilities and other related equipment |
|
|
|
|
|
|
|
|
|
|
(1,685 |
) |
|
|
(20 |
) |
|
|
|
|
|
|
(1,705 |
) |
Purchases of property and equipment |
|
|
|
|
|
|
|
|
|
|
(89,229 |
) |
|
|
(52,464 |
) |
|
|
|
|
|
|
(141,693 |
) |
Disposition of hospitals |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
365,680 |
|
|
|
|
|
|
|
365,680 |
|
Proceeds from sale of property and equipment |
|
|
|
|
|
|
|
|
|
|
904 |
|
|
|
12,813 |
|
|
|
|
|
|
|
13,717 |
|
Investment in other assets |
|
|
|
|
|
|
|
|
|
|
(54,522 |
) |
|
|
(43,660 |
) |
|
|
|
|
|
|
(98,182 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) investing activities |
|
|
|
|
|
|
|
|
|
|
(144,532 |
) |
|
|
282,349 |
|
|
|
|
|
|
|
137,817 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from exercise of stock options |
|
|
94 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
94 |
|
Deferred financing costs |
|
|
|
|
|
|
(2,232 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,232 |
) |
Excess tax benefits relating to stock-based compensation |
|
|
(947 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(947 |
) |
Proceeds from minority investors in joint ventures |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,881 |
|
|
|
|
|
|
|
12,881 |
|
Redemption of minority investments in joint ventures |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributions to minority investors in joint ventures |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7,524 |
) |
|
|
|
|
|
|
(7,524 |
) |
Changes in
intercompany balances with affiliates, net |
|
|
46,572 |
|
|
|
266,725 |
|
|
|
(43,380 |
) |
|
|
(269,917 |
) |
|
|
|
|
|
|
|
|
Borrowings under credit agreement |
|
|
|
|
|
|
25,000 |
|
|
|
44,818 |
|
|
|
(44,818 |
) |
|
|
|
|
|
|
25,000 |
|
(Repayments)
borrowings of long-term indebtedness |
|
|
|
|
|
|
(186,794 |
) |
|
|
(123,280 |
) |
|
|
121,331 |
|
|
|
|
|
|
|
(188,743 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities |
|
|
45,719 |
|
|
|
102,699 |
|
|
|
(121,842 |
) |
|
|
(188,047 |
) |
|
|
|
|
|
|
(161,471 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change in cash and cash equivalents |
|
|
|
|
|
|
|
|
|
|
99,804 |
|
|
|
(18,799 |
) |
|
|
(49,526 |
) |
|
|
31,479 |
|
Cash and cash equivalents at beginning of period |
|
|
|
|
|
|
|
|
|
|
114,075 |
|
|
|
18,799 |
|
|
|
|
|
|
|
132,874 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period |
|
$ |
|
|
|
$ |
|
|
|
$ |
213,879 |
|
|
$ |
|
|
|
$ |
(49,526 |
) |
|
$ |
164,353 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Condensed Consolidated Statement of Cash Flows
Three Months Ended March 31, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent |
|
|
|
|
|
|
Other |
|
|
Non- |
|
|
|
|
|
|
|
|
|
Guarantor |
|
|
Issuer |
|
|
Guarantors |
|
|
Guarantors |
|
|
Eliminations |
|
|
Consolidated |
|
|
|
(In thousands) |
|
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities |
|
$ |
26,447 |
|
|
$ |
(2,561 |
) |
|
$ |
104,366 |
|
|
$ |
(7,905 |
) |
|
|
|
|
|
|
120,347 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisitions of facilities and other related equipment |
|
|
|
|
|
|
|
|
|
|
(41,141 |
) |
|
|
(2,898 |
) |
|
|
|
|
|
|
(44,039 |
) |
Purchases of property and equipment |
|
|
|
|
|
|
|
|
|
|
(37,521 |
) |
|
|
(7,268 |
) |
|
|
|
|
|
|
(44,789 |
) |
Disposition of hospitals |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from sale of property and equipment |
|
|
|
|
|
|
|
|
|
|
77 |
|
|
|
57 |
|
|
|
|
|
|
|
134 |
|
Investment in other assets |
|
|
|
|
|
|
|
|
|
|
(6,570 |
) |
|
|
(481 |
) |
|
|
|
|
|
|
(7,051 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) investing activities |
|
|
|
|
|
|
|
|
|
|
(85,155 |
) |
|
|
(10,590 |
) |
|
|
|
|
|
|
(95,745 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from exercise of stock options |
|
|
3,311 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,311 |
|
Deferred financing costs |
|
|
|
|
|
|
(14 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(14 |
) |
Excess tax benefits relating to stock-based compensation |
|
|
758 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
758 |
|
Proceeds from minority investors in joint ventures |
|
|
89 |
|
|
|
|
|
|
|
|
|
|
|
930 |
|
|
|
|
|
|
|
1,019 |
|
Redemption of minority investments in joint ventures |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,253 |
) |
|
|
|
|
|
|
(1,253 |
) |
Distributions to minority investors in joint ventures |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,079 |
) |
|
|
|
|
|
|
(1,079 |
) |
Changes in
intercompany balances with affiliates, net |
|
|
(30,605 |
) |
|
|
6,575 |
|
|
|
3,844 |
|
|
|
20,186 |
|
|
|
|
|
|
|
|
|
Borrowings under credit agreement |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repayments of long-term indebtedness |
|
|
|
|
|
|
(4,000 |
) |
|
|
(827 |
) |
|
|
(205 |
) |
|
|
|
|
|
|
(5,032 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities |
|
|
(26,447 |
) |
|
|
2,561 |
|
|
|
3,017 |
|
|
|
18,579 |
|
|
|
|
|
|
|
(2,290 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change in cash and cash equivalents |
|
|
|
|
|
|
|
|
|
|
22,228 |
|
|
|
84 |
|
|
|
|
|
|
|
22,312 |
|
Cash and cash equivalents at beginning of period |
|
|
|
|
|
|
|
|
|
|
28,560 |
|
|
|
12,006 |
|
|
|
|
|
|
|
40,566 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period |
|
$ |
|
|
|
$ |
|
|
|
$ |
50,788 |
|
|
$ |
12,090 |
|
|
$ |
|
|
|
$ |
62,878 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26
|
|
|
Item 6. |
|
Exhibits |
|
31.1 |
|
Certification of Chief Executive Officer pursuant to Section
302 of the Sarbanes-Oxley Act of 2002. |
|
31.2 |
|
Certification of Chief Financial Officer pursuant to Section
302 of the Sarbanes-Oxley Act of 2002. |
|
32.1 |
|
Certification of Chief Executive Officer pursuant to 18 U.S.C.
Section 1350, adopted pursuant to Section 906 of the
Sarbanes-Oxley
Act of 2002. |
|
32.2 |
|
Certification of Chief Executive Financial Officer pursuant to
18 U.S.C. Section 1350, adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002. |
27
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused
this Form 10-Q/A to be signed on its behalf by the undersigned, thereunto duly authorized.
|
|
|
|
|
|
|
|
|
COMMUNITY HEALTH SYSTEMS, INC. |
|
|
|
|
|
|
(Registrant) |
|
|
|
|
|
|
|
|
|
|
|
By:
|
|
/s/ Wayne T. Smith
Wayne T. Smith
|
|
|
|
|
|
|
Chairman of the Board,
President and Chief Executive Officer
(principal executive officer) |
|
|
|
|
|
|
|
|
|
|
|
By:
|
|
/s/ W. Larry Cash
W. Larry Cash
|
|
|
|
|
|
|
Executive Vice President, Chief Financial
Officer and Director |
|
|
|
|
|
|
(principal financial officer) |
|
|
|
|
|
|
|
|
|
|
|
By:
|
|
/s/ T. Mark Buford
T. Mark Buford
Vice President and Corporate Controller
|
|
|
|
|
|
|
(principal accounting officer) |
|
|
|
Date: December 22, 2008 |
|
|
|
|
28
Index to Exhibits
|
|
|
No. |
|
Description |
31.1
|
|
Certification of Chief Executive Officer pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002. |
|
|
|
31.2
|
|
Certification of Chief Financial Officer pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002. |
|
|
|
32.1
|
|
Certification of Chief Executive Officer pursuant to 18 U.S.C.
Section 1350, adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002. |
|
|
|
32.2
|
|
Certification of Chief Financial Officer pursuant to 18 U.S.C.
Section 1350, adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002. |
29
EX-31.1
Exhibit 31.1
I, Wayne T. Smith, certify that:
1. |
|
I have reviewed this quarterly report on Form 10-Q/A of Community Health Systems, Inc.; |
|
2. |
|
Based on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements made, in light
of the circumstances under which such statements were made, not misleading with respect to the
period covered by this report; |
|
3. |
|
Based on my knowledge, the financial statements, and other financial information included in
this report, fairly present in all material respects the financial condition,
results of operations and cash flows of the registrant as of, and for, the periods presented
in this report; |
|
4. |
|
The registrants other certifying officer and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and have: |
|
|
|
a) designed such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material information
relating to the registrant, including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in which this report
is being prepared; |
|
|
|
b) designed such internal controls over financial reporting, or caused such internal control
over financial reporting to be designed under our supervision, to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting
principles; |
|
|
|
c) evaluated the effectiveness of the registrants disclosure controls and procedures and
presented in this report our conclusions about the effectiveness of the disclosure controls
and procedures, as of the end of the period covered by this report based on such evaluation;
and |
|
|
|
d) disclosed in this report any change in the registrants internal control over financial
reporting that occurred during the registrants most recent fiscal quarter (the registrants
fourth fiscal quarter in the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrants internal control over financial
reporting; and |
|
5. |
|
The registrants other certifying officer and I have disclosed, based on our most recent
evaluation of internal control over financial reporting, to the registrants auditors and the
audit committee of the registrants board of directors: |
|
|
|
a) all significant deficiencies and material weaknesses in the design or operation of
internal control over financial reporting which are reasonably likely to adversely affect
the registrants ability to record, process, summarize and report financial information; and |
|
|
|
b) any fraud, whether or not material, that involves management or other employees who have
a significant role in the registrants internal control over financial reporting. |
|
|
|
|
|
Date: December 22, 2008
|
|
/s/ Wayne T. Smith
Wayne T. Smith
Chairman of the Board, President
and Chief Executive Officer
|
|
|
EX-31.2
Exhibit 31.2
I, W. Larry Cash, certify that:
1. |
|
I have reviewed this quarterly report on Form 10-Q/A of Community Health Systems, Inc.; |
|
2. |
|
Based on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements made, in light
of the circumstances under which such statements were made, not misleading with respect to the
period covered by this report; |
|
3. |
|
Based on my knowledge, the financial statements, and other financial information included in
this report, fairly present in all material respects the financial condition,
results of operations and cash flows of the registrant as of, and for, the periods presented
in this report; |
|
4. |
|
The registrants other certifying officer and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and have: |
|
|
|
a) designed such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material information
relating to the registrant, including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in which this report
is being prepared; |
|
|
|
b) designed such internal controls over financial reporting, or caused such internal control
over financial reporting to be designed under our supervision, to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting
principles; |
|
|
|
c) evaluated the effectiveness of the registrants disclosure controls and procedures and
presented in this report our conclusions about the effectiveness of the disclosure controls
and procedures, as of the end of the period covered by this report based on such evaluation;
and |
|
|
|
d) disclosed in this report any change in the registrants internal control over financial
reporting that occurred during the registrants most recent fiscal quarter (the registrants
fourth fiscal quarter in the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrants internal control over financial
reporting; and |
|
5. |
|
The registrants other certifying officer and I have disclosed, based on our most recent
evaluation of internal control over financial reporting, to the registrants auditors and the
audit committee of the registrants board of directors: |
|
|
|
a) all significant deficiencies and material weaknesses in the design or operation of
internal control over financial reporting which are reasonably likely to adversely affect
the registrants ability to record, process, summarize and report financial information; and |
|
|
|
b) any fraud, whether or not material, that involves management or other employees who have
a significant role in the registrants internal control over financial reporting. |
|
|
|
|
|
Date: December 22, 2008
|
|
/s/ W. Larry Cash
|
|
|
|
|
W. Larry Cash
Executive Vice President, Chief
Financial Officer and Director |
|
|
EX-32.1
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Community Health Systems, Inc. (the Company) on
Form 10-Q/A for the period ending March 31, 2008, as filed with the Securities and Exchange
Commission on the date hereof (the Report), I, Wayne T. Smith, Chairman of the Board, President
and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted
pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
|
(1) |
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of
the Securities Exchange Act of 1934; and |
|
(2) |
|
The information contained in the Report fairly presents, in all material
respects, the financial condition and result of operations of the Company. |
|
|
|
/s/ Wayne T. Smith
Wayne T. Smith
|
|
|
Chairman of the Board, President and Chief Executive Officer |
December 22, 2008
A signed original of this written statement required by Section 906 has been provided to Community
Health Systems, Inc. and will be retained by Community Health Systems, Inc. and furnished to the
Securities and Exchange Commission or its staff upon request.
EX-32.2
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Community Health Systems, Inc. (the Company) on
Form 10-Q/A for the period ending March 31, 2008, as filed with the Securities and Exchange
Commission on the date hereof (the Report), I, W. Larry Cash, Executive Vice President, Chief
Financial Officer and Director of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted
pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
|
(1) |
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of
the Securities Exchange Act of 1934; and |
|
(2) |
|
The information contained in the Report fairly presents, in all material
respects, the financial condition and result of operations of the Company. |
|
|
|
/s/ W. Larry Cash
W. Larry Cash
|
|
|
Executive Vice President, Chief Financial Officer and Director |
December 22, 2008
A signed original of this written statement required by Section 906 has been provided to Community
Health Systems, Inc. and will be retained by Community Health Systems, Inc. and furnished to the
Securities and Exchange Commission or its staff upon request.