e8vk
 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
July 28, 2010
Date of Report (date of earliest event reported)
 
COMMUNITY HEALTH SYSTEMS, INC.
(Exact name of Registrant as specified in charter)
 
         
Delaware   001-15925   13-3893191
(State or other jurisdiction
of incorporation)
  (Commission File Number)   (I.R.S. Employer
Identification No.)
 
4000 Meridian Boulevard
Franklin, Tennessee 37067
(Address of principal executive offices)
Registrant’s telephone number, including area code: (615) 465-7000
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240 .14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 
 

 


 

     The information contained in this Form 8-K (including the exhibits hereto) shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act, except as shall be expressly set forth by specific reference in any such filing.
ITEM 2.02 Results of Operations and Financial Condition
     On July 28, 2010, Community Health Systems, Inc. (the “Company”) announced operating results for the second quarter and six months ended June 30, 2010. A copy of the press release making this announcement is attached as Exhibit 99.1 to this Form 8-K.
ITEM 7.01 Regulation FD Disclosure
     The earnings release referred to in item 2.02 above also includes an update of the Company’s previous 2010 guidance. This guidance reaffirms the Company’s previous annual earnings guidance provided on April 21, 2010, as modified to reflect certain changes as detailed in the guidance assumptions on page 12, 13 and 14. A copy of the press release making this announcement is attached as Exhibit 99.1 to this Form 8-K.
ITEM 9.01 Financial Statements and Exhibits
     Exhibits
     The following exhibits are furnished herewith:
     99.1 Community Health Systems, Inc. Press Release dated July 28, 2010.

2


 

SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.
         
Date: July 28, 2010  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
Senior Vice President and Chief Accounting Officer
(principal accounting officer) 
 

3


 

Index to Exhibits
     
Exhibit Number   Description
99.1
  Press Release dated July 28, 2010

4

exv99w1
     
(CHS LOGO)
  Exhibit Number 99.1
     
Investor Contact:
  W. Larry Cash
 
  Executive Vice President
 
  and Chief Financial Officer
 
  (615) 465-7000
COMMUNITY HEALTH SYSTEMS, INC. ANNOUNCES
SECOND QUARTER 2010 RESULTS WITH NET OPERATING REVENUES OF $3.2 BILLION
     FRANKLIN, TENN. (July 28, 2010) — Community Health Systems, Inc. (NYSE: CYH) today announced financial and operating results for the three and six months ended June 30, 2010.
     Net operating revenues for the three months ended June 30, 2010, totaled $3.2 billion, a 5.1 percent increase compared with $3.0 billion for the same period in 2009. Income from continuing operations increased to $86.3 million for the three months ended June 30, 2010, compared with $74.5 million for the same period in 2009. Income from continuing operations attributable to Community Health Systems, Inc. common stockholders increased to $0.74 per share (diluted), on 94.7 million weighted-average shares outstanding for the three months ended June 30, 2010, compared with $0.66 per share (diluted), on 91.1 million weighted-average shares outstanding for the same period in 2009. Net income attributable to Community Health Systems, Inc. common stockholders increased 17.9 percent to $70.1 million, or $0.74 per share (diluted), for the three months ended June 30, 2010, compared with $59.4 million, or $0.65 per share (diluted), for the same period in 2009.
     Adjusted EBITDA for the three months ended June 30, 2010, was $443.1 million, compared with $415.6 million for the same period in 2009, representing a 6.6 percent increase. Adjusted EBITDA is EBITDA adjusted to exclude discontinued operations, gain/loss from early extinguishment of debt and net income attributable to noncontrolling interests. The Company uses adjusted EBITDA as a measure of liquidity. Net cash provided by operating activities for the three months ended June 30, 2010, was $242.4 million, compared with $285.0 million for the same period in 2009.
     The consolidated financial results for the three months ended June 30, 2010, reflect a 1.4 percent decrease in total admissions and a 0.6 percent increase in total adjusted admissions compared with the same period in 2009. On a same-store basis, admissions decreased 2.5 percent and adjusted admissions decreased 0.9 percent, compared with the same period in 2009. On a same-store basis, net operating revenues increased 3.2 percent, compared with the same period in 2009.
     Net operating revenues for the six months ended June 30, 2010, totaled $6.3 billion, a 6.8 percent increase compared with $5.9 billion for the same period in 2009. Income from continuing operations increased to $171.3 million for the six months ended June 30, 2010, compared with $145.3 million for the same period in 2009. Income from continuing operations attributable to Community Health Systems, Inc. common stockholders increased to $1.49 per share (diluted), on 93.8 million weighted-average shares outstanding for the six months ended June 30, 2010, compared with $1.29 per share (diluted), on 90.7 million weighted-average shares outstanding for the same period in 2009. Net income attributable to Community Health Systems, Inc. common stockholders increased 18.4 percent to $140.1 million, or $1.49 per share (diluted), for the six months ended June 30, 2010, compared with $118.4 million, or $1.31 per share (diluted), for the same period in 2009.
     Adjusted EBITDA for the six months ended June 30, 2010, was $876.4 million, compared with $819.1 million for the same period in 2009, representing a 7.0 percent increase. Net cash provided by operating activities for the six months ended June 30, 2010, was $541.8 million, compared with $544.4 million for the same period of 2009.
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CYH Announces Second Quarter 2010 Results
Page 2
July 28, 2010
     The consolidated financial results for the six months ended June 30, 2010, reflect a 0.8 percent increase in total admissions and a 2.6 percent increase in total adjusted admissions compared with the same period in 2009. This increase was due primarily to acquisitions. On a same-store basis, admissions decreased 1.8 percent and adjusted admissions decreased 0.4 percent, compared with the same period in 2009. On a same-store basis, net operating revenues increased 3.5 percent, compared with the same period in 2009.
     Commenting on the results, Wayne T. Smith, chairman, president and chief executive officer of Community Health Systems, Inc., said, “Community Health Systems delivered another solid operating performance for the second quarter of 2010, in spite of the ongoing challenges in the economy. Our ability to continue to drive revenues and achieve solid margins demonstrates consistent execution of our centralized operating strategy and our focus on efficient expense management throughout our hospital network.”
     On July 7, 2010, the Company announced that one or more of its subsidiaries had acquired substantially all the assets of Marion Regional Healthcare System located in Marion, South Carolina.
     “We have continued to selectively acquire new facilities that fit our operating profile,” added Smith. “In today’s economic environment, there are a growing number of hospitals who want a proven operator to provide the resources and expertise that will enable them to deliver quality healthcare close to home. We have consistently demonstrated our ability to deliver favorable operating results through our efforts to implement best practices in all of our hospitals.”
     Included on pages 12, 13 and 14 of this press release are tables setting forth the Company’s updated 2010 guidance. This guidance reaffirms the Company’s previous annual earnings guidance provided on April 21, 2010, as modified to reflect certain changes as detailed in the guidance assumptions.
     Located in the Nashville, Tennessee, suburb of Franklin, Community Health Systems, Inc. is the largest publicly-traded hospital company in the United States and a leading operator of general acute care hospitals in non-urban and mid-size markets throughout the country. Through its subsidiaries, the Company currently owns, leases or operates 123 hospitals in 29 states with an aggregate of approximately 18,400 licensed beds. Its hospitals offer a broad range of inpatient and surgical services, outpatient treatment and skilled nursing care. In addition, through its subsidiary, Quorum Health Resources, LLC, the Company provides management and consulting services to over 150 independent non-affiliated general acute care hospitals located throughout the United States. Shares in Community Health Systems, Inc. are traded on the New York Stock Exchange under the symbol “CYH.”
     Community Health Systems, Inc. will hold a conference call to discuss this press release on Thursday, July 29, 2010, at 10:30 a.m. Central, 11:30 a.m. Eastern. Investors will have the opportunity to listen to a live internet broadcast of the conference call by clicking on the Investor Relations link of the Company’s website at www.chs.net, or at www.earnings.com. To listen to the live call, please go to the website at least fifteen minutes early to register, download and install any necessary audio software. For those who cannot listen to the live broadcast, a replay will be available shortly after the call and will continue through August 22, 2010. Copies of the Company’s Form 8-K (including this press release) and conference call slide show are available on the Company’s website at www.chs.net.
     Statements contained in this news release regarding expected operating results, acquisition transactions or divestitures and other events are forward-looking statements that involve risk and uncertainties. Actual future events or results may differ materially from these statements. Readers are referred to the documents filed by Community Health Systems, Inc. with the Securities and Exchange Commission, including the Company’s annual report on Form 10-K, current reports on Form 8-K and quarterly reports on Form 10-Q. These filings identify important risk factors and other uncertainties that could cause actual results to differ from those contained in the forward-looking statements. The Company undertakes no obligation to revise or update any forward-looking statements, or to make any other forward-looking statements, whether as a result of new information, future events or otherwise.
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CYH Announces Second Quarter 2010 Results
Page 3
July 28, 2010
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
Financial Highlights (a)(b)

(in thousands, except per share amounts)
(Unaudited)
                                 
    Three Months Ended     Six Months Ended  
    June 30,     June 30,  
    2010     2009     2010     2009  
Net operating revenues
  $ 3,171,024     $ 3,016,961     $ 6,331,746     $ 5,929,710  
Adjusted EBITDA (c)
  $ 443,130     $ 415,633     $ 876,409     $ 819,149  
Income from continuing operations (d)(e)(f)
  $ 86,342     $ 74,498     $ 171,338     $ 145,318  
Net income attributable to Community Health Systems, Inc.
  $ 70,065     $ 59,435     $ 140,072     $ 118,350  
 
                               
Basic earnings per share attributable to Community Health Systems, Inc. common stockholders (g):
                               
Continuing operations
  $ 0.75     $ 0.66     $ 1.51     $ 1.30  
Discontinued operations
          (0.01 )           0.01  
 
                       
Net income
  $ 0.75     $ 0.66     $ 1.51     $ 1.31  
 
                       
 
                               
Diluted earnings per share attributable to Community Health Systems, Inc. common stockholders (g):
                               
Continuing operations
  $ 0.74     $ 0.66     $ 1.49     $ 1.29  
Discontinued operations
          (0.01 )           0.01  
 
                       
Net income
  $ 0.74     $ 0.65     $ 1.49     $ 1.31  
 
                       
 
                               
Weighted-average number of shares outstanding:
                               
Basic (h)
    93,359       90,359       92,492       90,170  
Diluted (h)
    94,712       91,071       93,779       90,666  
 
                               
Net cash provided by operating activities
  $ 242,432     $ 284,980     $ 541,792     $ 544,407  
 
For footnotes, see pages 10 and 11.
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CYH Announces Second Quarter 2010 Results
Page 4
July 28, 2010
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Income (a)(b)

(in thousands, except per share amounts)
(Unaudited)
                                 
            Three Months Ended          
    June 30,  
    2010     2009  
            % of Net             % of Net  
    Amount     Operating Revenue     Amount     Operating Revenue  
Net operating revenues
  $ 3,171,024       100.0 %   $ 3,016,961       100.0 %
 
                       
 
                               
Operating costs and expenses:
                               
Salaries and benefits
    1,267,762       40.0 %     1,201,680       39.8 %
Provision for bad debts
    381,450       12.0 %     362,462       12.0 %
Supplies
    438,602       13.8 %     419,956       13.9 %
Other operating expenses
    587,827       18.5 %     567,813       18.9 %
Rent
    63,230       2.0 %     61,200       2.0 %
Depreciation and amortization
    153,381       4.9 %     142,447       4.7 %
 
                       
Total operating costs and expenses
    2,892,252       91.2 %     2,755,558       91.3 %
 
                       
 
                               
Income from operations (f)
    278,772       8.8 %     261,403       8.7 %
Interest expense, net
    161,841       5.1 %     161,473       5.4 %
Loss from early extinguishment of debt
          0.0 %     6       0.0 %
Equity in earnings of unconsolidated affiliates
    (10,977 )     -0.3 %     (11,783 )     -0.4 %
 
                       
Income from continuing operations before income taxes
    127,908       4.0 %     111,707       3.7 %
Provision for income taxes
    41,566       1.3 %     37,209       1.2 %
 
                       
Income from continuing operations (d)(e)(f)
    86,342       2.7 %     74,498       2.5 %
 
                       
 
                               
Discontinued operations, net of taxes (b):
                               
Loss from operations of hospitals sold and hospitals held for sale (e)
          0.0 %     (508 )     0.0 %
Loss on sale of hospitals, net
          0.0 %           0.0 %
 
                       
Loss from discontinued operations
          0.0 %     (508 )     0.0 %
 
                       
Net income
    86,342       2.7 %     73,990       2.5 %
Less: Net income attributable to noncontrolling interests (a)
    16,277       0.5 %     14,555       0.5 %
 
                       
Net income attributable to Community Health Systems, Inc.
  $ 70,065       2.2 %   $ 59,435       2.0 %
 
                       
 
                               
Basic earnings per share attributable to Community Health Systems, Inc. common stockholders (g):
                               
Continuing operations
  $ 0.75             $ 0.66          
Discontinued operations
                  (0.01 )        
 
                           
Net income
  $ 0.75             $ 0.66          
 
                           
 
                               
Diluted earnings per share attributable to Community Health Systems, Inc. common stockholders (g):
                               
Continuing operations
  $ 0.74             $ 0.66          
Discontinued operations
                  (0.01 )        
 
                           
Net income
  $ 0.74             $ 0.65          
 
                           
 
                               
Weighted-average number of shares outstanding (h):
                               
Basic
    93,359               90,359          
 
                           
Diluted
    94,712               91,071          
 
                           
 
For footnotes, see pages 10 and 11.
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CYH Announces Second Quarter 2010 Results
Page 5
July 28, 2010
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Income (a)(b)

(in thousands, except per share amounts)
(Unaudited)
                                 
    Six Months Ended  
    June 30,  
    2010     2009  
            % of Net             % of Net  
            Operating             Operating  
    Amount     Revenue     Amount     Revenue  
Net operating revenues
  $ 6,331,746       100.0 %   $ 5,929,710       100.0 %
 
                       
 
                               
Operating costs and expenses:
                               
Salaries and benefits
    2,550,593       40.3 %     2,375,120       40.1 %
Provision for bad debts
    759,524       12.0 %     700,230       11.8 %
Supplies
    869,054       13.7 %     825,593       13.9 %
Other operating expenses
    1,172,080       18.6 %     1,112,790       18.8 %
Rent
    127,651       2.0 %     121,528       2.0 %
Depreciation and amortization
    301,060       4.7 %     278,008       4.7 %
 
                       
Total operating costs and expenses
    5,779,962       91.3 %     5,413,269       91.3 %
 
                       
 
                               
Income from operations (f)
    551,784       8.7 %     516,441       8.7 %
Interest expense, net
    322,297       5.1 %     325,386       5.4 %
Gain from early extinguishment of debt
          0.0 %     (2,406 )     0.0 %
Equity in earnings of unconsolidated affiliates
    (23,565 )     -0.4 %     (24,700 )     -0.4 %
 
                       
Income from continuing operations before income taxes
    253,052       4.0 %     218,161       3.7 %
Provision for income taxes
    81,714       1.3 %     72,843       1.2 %
 
                       
Income from continuing operations (d)(e)(f)
    171,338       2.7 %     145,318       2.5 %
 
                       
 
                               
Discontinued operations, net of taxes (b):
                               
Income from operations of hospitals sold and hospitals held for sale (e)
          0.0 %     1,977       0.0 %
Loss on sale of hospitals, net
          0.0 %     (405 )     0.0 %
 
                       
Income from discontinued operations
          0.0 %     1,572       0.0 %
 
                       
Net income
    171,338       2.7 %     146,890       2.5 %
Less: Net income attributable to noncontrolling interests (a)
    31,266       0.5 %     28,540       0.5 %
 
                       
Net income attributable to Community Health Systems, Inc.
  $ 140,072       2.2 %   $ 118,350       2.0 %
 
                       
 
                               
Basic earnings per share attributable to Community Health Systems, Inc. common stockholders (g):
                               
Continuing operations
  $ 1.51             $ 1.30          
Discontinued operations
                  0.01          
 
                           
Net income
  $ 1.51             $ 1.31          
 
                           
 
                               
Diluted earnings per share attributable to Community Health Systems, Inc. common stockholders (g):
                               
Continuing operations
  $ 1.49             $ 1.29          
Discontinued operations
                  0.01          
 
                           
Net income
  $ 1.49             $ 1.31          
 
                           
 
                               
Weighted-average number of shares outstanding (h):
                               
Basic
    92,492               90,170          
 
                           
Diluted
    93,779               90,666          
 
                           
 
For footnotes, see pages 10 and 11.
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CYH Announces Second Quarter 2010 Results
Page 6
July 28, 2010
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
Selected Operating Data (b)

($ in thousands)
(Unaudited)
                                                 
    For the Three Months Ended June 30,  
    Consolidated     Same-Store  
    2010     2009     % Change     2010     2009     % Change  
Number of hospitals (at end of period)
    122       122               122       122          
Licensed beds (at end of period)
    18,279       18,130               18,279       18,130          
Beds in service (at end of period)
    15,972       16,077               15,972       16,077          
Admissions
    171,082       173,494       -1.4 %     169,234       173,494       -2.5 %
Adjusted admissions
    323,267       321,383       0.6 %     318,446       321,383       -0.9 %
Patient days
    721,659       731,059               710,593       731,059          
Average length of stay (days)
    4.2       4.2               4.2       4.2          
Occupancy rate (average beds in service)
    49.7 %     51.1 %             49.4 %     51.1 %        
Net operating revenues
  $ 3,171,024     $ 3,016,961       5.1 %   $ 3,114,943     $ 3,016,942       3.2 %
Net inpatient revenue as a % of total net operating revenues
    48.7 %     49.4 %             49.1 %     49.4 %        
Net outpatient revenue as a % of total net operating revenues
    49.4 %     48.2 %             48.9 %     48.2 %        
Income from operations (f)
  $ 278,772     $ 261,403       6.6 %   $ 286,429     $ 266,188       7.6 %
Income from operations as a % of net operating revenues
    8.8 %     8.7 %             9.2 %     8.8 %        
 
                                               
Depreciation and amortization
  $ 153,381     $ 142,447             $ 150,640     $ 142,426          
 
                                               
Equity in earnings of unconsolidated affiliates
  $ (10,977 )   $ (11,783 )           $ (10,921 )   $ (11,724 )        
 
                                               
Liquidity Data:
                                               
Adjusted EBITDA (c)
  $ 443,130     $ 415,633       6.6 %                        
Adjusted EBITDA as a % of net operating revenues
    14.0 %     13.8 %                                
 
                                               
Net cash provided by operating activities
  $ 242,432     $ 284,980                                  
 
                                               
Net cash provided by operating activities as a % of net operating revenues
    7.6 %     9.4 %                                
 
For footnotes, see pages 10 and 11.
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CYH Announces Second Quarter 2010 Results
Page 7
July 28, 2010
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
Selected Operating Data (b)

($ in thousands)
(Unaudited)
                                                 
    For the Six Months Ended June 30,  
    Consolidated     Same-Store  
    2010     2009     % Change     2010     2009     % Change  
Number of hospitals (at end of period)
    122       122               122       122          
Licensed beds (at end of period)
    18,279       18,130               18,279       18,130          
Beds in service (at end of period)
    15,972       16,077               15,972       16,077          
Admissions
    348,495       345,814       0.8 %     339,465       345,814       -1.8 %
Adjusted admissions
    647,505       630,845       2.6 %     628,459       630,845       -0.4 %
Patient days
    1,482,884       1,472,947               1,432,254       1,472,947          
Average length of stay (days)
    4.3       4.3               4.2       4.3          
Occupancy rate (average beds in service)
    51.4 %     52.5 %             50.9 %     52.5 %        
Net operating revenues
  $ 6,331,746     $ 5,929,710       6.8 %   $ 6,135,426     $ 5,928,631       3.5 %
Net inpatient revenue as a % of total net operating revenues
    49.6 %     50.1 %             50.0 %     50.1 %        
Net outpatient revenue as a % of total net operating revenues
    48.4 %     47.6 %             48.0 %     47.6 %        
Income from operations (f)
  $ 551,784     $ 516,441       6.8 %   $ 555,202     $ 523,325       6.1 %
Income from operations as a % of net operating revenues
    8.7 %     8.7 %             9.0 %     8.8 %        
 
                                               
Depreciation and amortization
  $ 301,060     $ 278,008             $ 292,455     $ 278,019          
 
                                               
Equity in earnings of unconsolidated affiliates
  $ (23,565 )   $ (24,700 )           $ (23,353 )   $ (24,628 )        
 
                                               
Liquidity Data:
                                               
Adjusted EBITDA (c)
  $ 876,409     $ 819,149       7.0 %                        
Adjusted EBITDA as a % of net operating revenues
    13.8 %     13.8 %                                
 
                                               
Net cash provided by operating activities
  $ 541,792     $ 544,407                                  
 
                                               
Net cash provided by operating activities as a % of net operating revenues
    8.6 %     9.2 %                                
 
For footnotes, see pages 10 and 11.
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CYH Announces Second Quarter 2010 Results
Page 8
July 28, 2010
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets (a)

(in thousands, except share data)
(Unaudited)
                 
    June 30,     December 31,  
    2010     2009  
ASSETS
               
Current assets
               
Cash and cash equivalents
  $ 548,754     $ 344,541  
Patient accounts receivable, net of allowance for doubtful accounts of $1,493,207 and $1,417,188 at June 30, 2010 and December 31, 2009, respectively
    1,681,799       1,617,903  
Supplies
    307,373       302,609  
Prepaid income taxes
    75,997       45,414  
Deferred income taxes
    78,962       80,714  
Prepaid expenses and taxes
    98,780       89,475  
Other current assets
    188,538       194,339  
 
           
Total current assets
    2,980,203       2,674,995  
 
           
Property and equipment
    7,969,992       7,787,256  
Less accumulated depreciation and amortization
    (1,885,006 )     (1,655,010 )
 
           
Property and equipment, net
    6,084,986       6,132,246  
 
           
Goodwill
    4,161,196       4,157,927  
 
           
Other assets, net
    1,087,046       1,056,304  
 
           
Total assets
  $ 14,313,431     $ 14,021,472  
 
           
 
               
LIABILITIES
               
Current liabilities
               
Current maturities of long-term debt
  $ 64,095     $ 66,470  
Accounts payable
    514,601       428,565  
Deferred income taxes
    28,431       28,397  
Accrued interest
    147,348       145,201  
Accrued liabilities
    746,773       789,163  
 
           
Total current liabilities
    1,501,248       1,457,796  
 
           
Long-term debt
    8,819,162       8,844,638  
 
           
Deferred income taxes
    474,748       475,812  
 
           
Other long-term liabilities
    966,288       858,952  
 
           
Total liabilities
    11,761,446       11,637,198  
 
           
 
               
Redeemable noncontrolling interests in equity of consolidated subsidiaries
    388,385       368,857  
 
           
 
               
EQUITY
               
Community Health Systems, Inc. stockholders’ equity
               
Preferred stock, $.01 par value per share, 100,000,000 shares authorized; none issued
           
Common stock, $.01 par value per share, 300,000,000 shares authorized; 96,540,756 shares issued and 95,565,207 shares outstanding at June 30, 2010, and 94,013,537 shares issued and 93,037,988 shares outstanding at December 31, 2009
    965       940  
Additional paid-in capital
    1,208,782       1,158,359  
Treasury stock, at cost, 975,549 shares at June 30, 2010 and December 31, 2009
    (6,678 )     (6,678 )
Accumulated other comprehensive loss
    (260,573 )     (221,385 )
Retained earnings
    1,159,471       1,019,399  
 
           
Total Community Health Systems, Inc. stockholders’ equity
    2,101,967       1,950,635  
Noncontrolling interests in equity of consolidated subsidiaries
    61,633       64,782  
 
           
Total equity
    2,163,600       2,015,417  
 
           
Total liabilities and equity
  $ 14,313,431     $ 14,021,472  
 
           
 
For footnotes, see pages 10 and 11.

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CYH Announces Second Quarter 2010 Results
Page 9
July 28, 2010
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows

(in thousands)
(Unaudited)
                 
    Six Months Ended  
    June 30,  
    2010     2009  
Cash flows from operating activities
               
Net income
  $ 171,338     $ 146,890  
Adjustments to reconcile net income to net cash provided by operating activities:
               
Depreciation and amortization
    301,060       278,340  
Stock-based compensation expense
    20,418       24,805  
Loss on sale of hospitals and partnership interest, net
          405  
(Excess tax benefit) income tax payable increase relating to stock-based compensation
    (10,104 )     3,389  
Gain on early extinguishment of debt
          (2,406 )
Other non-cash expenses, net
    (2,342 )     (6,472 )
Changes in operating assets and liabilities, net of effects of acquisitions and divestitures:
               
Patient accounts receivable
    (63,896 )     8,937  
Supplies, prepaid expenses and other current assets
    (1,147 )     5,198  
Accounts payable, accrued liabilities and income taxes
    114,100       72,042  
Other
    12,365       13,279  
 
           
Net cash provided by operating activities
    541,792       544,407  
 
           
Cash flows from investing activities
               
Acquisitions of facilities and other related equipment
    (2,413 )     (210,904 )
Purchases of property and equipment
    (263,924 )     (267,275 )
Proceeds from disposition of hospitals and other ancillary operations
          89,909  
Proceeds from sale of property and equipment
    2,307       355  
Increase in other non-operating assets
    (64,258 )     (74,506 )
 
           
Net cash used in investing activities
    (328,288 )     (462,421 )
 
           
Cash flows from financing activities
               
Proceeds from exercise of stock options
    53,615       3,445  
Excess tax benefit (income tax payable increase) relating to stock-based compensation
    10,104       (3,389 )
Deferred financing costs
          (207 )
Stock buy-back
    (12,242 )      
Proceeds from noncontrolling investors in joint ventures
    5,155       26,314  
Redemption of noncontrolling investments in joint ventures
    (2,395 )     (1,631 )
Distributions to noncontrolling investors in joint ventures
    (29,371 )     (22,166 )
Borrowings under credit agreement
          200,000  
Repayments of long-term indebtedness
    (34,157 )     (236,182 )
 
           
Net cash used in financing activities
    (9,291 )     (33,816 )
 
           
Net change in cash and cash equivalents
    204,213       48,170  
Cash and cash equivalents at beginning of period
    344,541       220,655  
 
           
Cash and cash equivalents at end of period
  $ 548,754     $ 268,825  
 
           

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CYH Announces Second Quarter 2010 Results
Page 10
July 28, 2010
Footnotes to Financial Statements
 
(a)   The following table provides information needed to calculate income per share which is adjusted for noncontrolling interests (in thousands).
                                 
    Three Months Ended     Six Months Ended  
    June 30,     June 30,  
    2010     2009     2010     2009  
Income from continuing operations attributable to Community Health Systems, Inc. common stockholders:
                               
Income from continuing operations, net of taxes
  $ 86,342     $ 74,498     $ 171,338     $ 145,318  
Less: Income from continuing operations attributable to noncontrolling interests, net of taxes
    16,277       14,555       31,266       28,185  
 
                       
Income from continuing operations attributable to Community Health Systems, Inc. common stockholders — basic and diluted
  $ 70,065     $ 59,943     $ 140,072     $ 117,133  
 
                       
Income from discontinued operations attributable to Community Health Systems, Inc. common stockholders:
                               
(Loss) income from discontinued operations, net of taxes
  $     $ (508 )   $     $ 1,572  
Less: Income from discontinued operations attributable to noncontrolling interests, net of taxes
                      355  
 
                       
(Loss) income from discontinued operations attributable to Community Health Systems, Inc. common stockholders — basic and diluted
  $     $ (508 )   $     $ 1,217  
 
                       
 
(b)   Continuing operating results exclude discontinued operations for all periods presented, as applicable.
 
(c)   EBITDA consists of net income attributable to Community Health Systems, Inc. before interest, income taxes, and depreciation and amortization. Adjusted EBITDA is EBITDA adjusted to exclude discontinued operations, gain/loss from early extinguishment of debt and net income attributable to noncontrolling interests. The Company has from time to time sold noncontrolling interests in certain of its subsidiaries or acquired subsidiaries with existing noncontrolling interest ownership positions. The Company believes that it is useful to present adjusted EBITDA because it excludes the portion of EBITDA attributable to these third party interests and clarifies for investors the Company’s portion of EBITDA generated by continuing operations. The Company uses adjusted EBITDA as a measure of liquidity. The Company has included this measure because it believes it provides investors with additional information about the Company’s ability to incur and service debt and make capital expenditures. Adjusted EBITDA is the basis for a key component in the determination of the Company’s compliance with some of the covenants under the Company’s senior secured credit facility, as well as to determine the interest rate and commitment fee payable under the senior secured credit facility.
 
    Adjusted EBITDA is not a measurement of financial performance or liquidity under U.S. GAAP. It should not be considered in isolation or as a substitute for net income, operating income, cash flows from operating, investing or financing activities, or any other measure calculated in accordance with U.S. GAAP. The items excluded from adjusted EBITDA are significant components in understanding and evaluating financial performance and liquidity. This calculation of adjusted EBITDA may not be comparable to similarly titled measures reported by other companies.
 
Footnotes continued on the next page.
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CYH Announces Second Quarter 2010 Results
Page 11
July 28, 2010
Footnotes to Financial Statements (Continued)
    The following table reconciles adjusted EBITDA, as defined, to net cash provided by operating activities as derived directly from the condensed consolidated financial statements (in thousands):
                                 
    Three Months Ended     Six Months Ended  
    June 30,     June 30,  
    2010     2009     2010     2009  
Adjusted EBITDA
  $ 443,130     $ 415,633     $ 876,409     $ 819,149  
Interest expense, net
    (161,841 )     (161,473 )     (322,297 )     (325,386 )
Provision for income taxes
    (41,566 )     (37,209 )     (81,714 )     (72,843 )
Income from operations of hospitals sold and hospitals held for sale, net of taxes
          899             1,977  
Other non-cash expenses, net
    6,514       12,516       7,971       22,054  
Net changes in operating assets and liabilities, net of effects of acquisitions
    (3,805 )     54,614       61,423       99,456  
 
                       
Net cash provided by operating activities
  $ 242,432     $ 284,980     $ 541,792     $ 544,407  
 
                       
 
(d)   Included in income from continuing operations for the six months ended June 30, 2009, is a gain from early extinguishment of debt of $2.4 million with an after-tax impact of $1.5 million related to the repurchases on the open market and cancellation of $121.5 million of Senior Notes and the early payment of $110.4 million of term loans under the Company’s Credit Facility.
 
(e)   Included in discontinued operations for the six months ended June 30, 2009 is Presbyterian Hospital of Denton (255 licensed beds) located in Denton, Texas, which was conveyed to the noncontrolling partner on March 31, 2009.
 
(f)   Included in income from operations and income from continuing operations for the three months and six months ended June 30, 2010, are the following non-same-store charges:
    Pre-tax charges of $1.2 million, and $1.8 million, respectively, related to acquisition costs required to be expensed pursuant to business combination accounting rules; and
 
    Pre-tax charges of $1.7 million, and $3.1 million, respectively, for system conversion costs related to conversion of Triad’s former IT systems to the Company’s IT system.
 
(g)   Total per share amounts may not add due to rounding.
 
(h)   The following table sets forth components reconciling the basic weighted-average number of shares to the diluted weighted-average number of shares (in thousands):
                                 
    Three Months Ended     Six Months Ended  
    June 30,     June 30,  
    2010     2009     2010     2009  
Weighted-average number of shares outstanding — basic
    93,359       90,359       92,492       90,170  
Add effect of dilutive securities:
                               
Stock awards and options
    1,353       712       1,287       496  
 
                       
Weighted-average number of shares outstanding — diluted
    94,712       91,071       93,779       90,666  
 
                       
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CYH Announces Second Quarter 2010 Results
Page 12
July 28, 2010
Regulation FD Disclosure
     The following table sets forth selected information concerning the Company’s updated projected consolidated operating results for the year ending December 31, 2010. These projections are based on the Company’s historical operating performance, current trends and other assumptions that the Company believes are reasonable at this time. This guidance reaffirms the Company’s previous annual earnings guidance for 2010 provided on April 21, 2010, as modified to reflect certain changes as detailed in the guidance assumptions below. See page 14 for a list of factors that could affect the future results of the Company or the healthcare industry generally.
     The following is provided as guidance to analysts and investors:
                 
    Updated 2010  
    Projection  
    Range  
Net operating revenues (in millions)
  $ 12,900   to $ 13,200  
 
Adjusted EBITDA (in millions)
  $ 1,745   to $ 1,775  
 
Income from continuing operations per share — diluted
  $ 2.90   to $ 3.00  
 
Same hospitals annual admissions/adjusted admissions growth
    -1.0%   to   1.0 %
 
Weighted-average diluted shares (in millions)
    93   to   94  
 
Acquisitions of new hospitals
    2          
The following assumptions were used in developing the 2010 guidance provided above:
  One of the two projected acquisitions for 2010 has been completed.
 
  Projected 2010 same hospital annual admissions/adjusted admissions growth does not take into account service closures and other unusual events.
 
  Expressed as a percent of net operating revenues, the provision for bad debts is projected to be approximately 12.4% to 12.7% for 2010. These percentages may vary depending on changes in payor mix.
 
  Expressed as a percent of net operating revenues, depreciation and amortization is projected to be approximately 4.6% to 4.8% for 2010; however, this is a fixed cost and the percentages may vary as revenue varies. Excludes possible impact of any future fair-value adjustments to investments and hospital fixed assets.
 
  2010 projection assumes an estimate of $0.03 to $0.05 per share (diluted) of acquisition costs that are required to be expensed.
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CYH Announces Second Quarter 2010 Results
Page 13
July 28, 2010
  For the purpose of providing interest expense guidance, the Company assumes that the borrowing rate under the Company’s $7.2 billion Senior Secured Credit Facility for 2010 will remain relatively stable with the rates existing currently, particularly since the Company is a party to interest rate swap agreements (with original maturities equal to or greater than 2 years) in an amount equal to approximately 92% of our outstanding variable interest rate debt. These swap agreements limit the effect of changes in interest rates. Based on these assumptions, expressed as a percentage of net operating revenues, interest expense is projected to be approximately 5.0% to 5.2% of net revenue guidance for 2010; however, these percentages will vary as revenue and interest rates vary. No new financing is currently anticipated.
 
  On December 9, 2009, the Company adopted a new open market repurchase program for up to three million shares of the Company’s common stock, not to exceed $100 million in purchases. The repurchase program will conclude at the earliest of three years, when the maximum number of shares has been repurchased or when the maximum dollar amount has been reached. Through July 28, 2010, approximately 1.5 million shares with a value of approximately $50.0 million were purchased under this repurchase plan.
 
  Expressed as a percentage of net operating revenues, equity in earnings of unconsolidated affiliates is projected to be approximately 0.3% to 0.4% for 2010.
 
  Expressed as a percentage of net operating revenues, net income attributable to noncontrolling interests is projected to be approximately 0.5% to 0.7% for 2010.
 
  Expressed as a percentage of income from continuing operations before income taxes, provision for income tax is projected to be approximately 31.0% to 34.0% for 2010. The income tax projection includes possible additional unrecognized tax benefits and tax revaluations that may be recognized prior to the end of 2010.
 
  Capital expenditures, excluding any significant information system upgrades that may be made related to electronic health records, is projected as follows (in millions):
                 
    2010  
    Guidance  
Total
  $650 to $ 750  
  Net cash provided by operating activities are projected as follows (in millions):
                 
    2010  
    Guidance  
Total
  $1,000 to $ 1,100  
  The Company’s guidance does not take into account resolution of certain pending government investigations and lawsuits.
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CYH Announces Second Quarter 2010 Results
Page 14
July 28, 2010
     The projections set forth in this report constitute forward-looking statements within the meaning of Section 27A of the Securities Act, Section 21E of the Exchange Act and the Private Securities Litigation Reform Act of 1995. Although the Company believes that these forward-looking statements are based on reasonable assumptions, these assumptions are inherently subject to significant economic and competitive uncertainties and contingencies, which are difficult or impossible to predict accurately and are beyond the control of the Company. Accordingly, the Company cannot give any assurance that its expectations will in fact occur and cautions that actual results may differ materially from those in the forward-looking statements. A number of factors could affect the future results of the Company or the healthcare industry generally and could cause the Company’s expected results to differ materially from those expressed in this filing.
These factors include, among other things:
    general economic and business conditions, both nationally and in the regions in which we operate;
 
    implementation and effect of newly-adopted federal healthcare legislation and potential state healthcare legislation;
 
    risks associated with our substantial indebtedness, leverage, and debt service obligations;
 
    demographic changes;
 
    changes in, or the failure to comply with, governmental regulations;
 
    potential adverse impact of known and unknown government investigations, audits, and Federal and State False Claims Act litigation;
 
    our ability, where appropriate, to enter into and maintain managed care provider arrangements and the terms of these arrangements;
 
    changes in, or the failure to comply with, managed care provider contracts could result in disputes and changes in reimbursement that could be applied retroactively;
 
    changes in inpatient or outpatient Medicare and Medicaid payment levels;
 
    increases in the amount and risk of collectability of patient accounts receivable;
 
    increases in wages as a result of inflation or competition for highly technical positions and rising supply costs due to market pressure from pharmaceutical companies and new product releases;
 
    liabilities and other claims asserted against us, including self-insured malpractice claims;
 
    competition;
 
    our ability to attract and retain, without significant employment costs, qualified personnel, key management, physicians, nurses and other health care workers;
 
    trends toward treatment of patients in less acute or specialty healthcare settings, including ambulatory surgery centers or specialty hospitals;
 
    changes in medical or other technology;
 
    changes in U.S. generally accepted accounting principles;
 
    the availability and terms of capital to fund additional acquisitions or replacement facilities;
 
    our ability to successfully acquire additional hospitals and complete the sale of hospitals held for sale;
 
    our ability to successfully integrate any acquired hospitals or to recognize expected synergies from such acquisitions;
 
    our ability to obtain adequate levels of general and professional liability insurance;
 
    timeliness of reimbursement payments received under government programs; and
 
    the other risk factors set forth in our public filings with the Securities and Exchange Commission.
     The consolidated operating results for the three and six months ended June 30, 2010, are not necessarily indicative of the results that may be experienced for any such future period or for any future year, including the full year of 2010.
     The Company cautions that the projections for calendar year 2010 set forth in this press release are given as of the date hereof based on currently available information. The Company is not undertaking any obligation to update these projections as conditions change or other information becomes available.
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