Community Health Systems, Inc. (NYSE: CYH) (the “Company”)
announced today that it plans to create a new publicly traded
hospital company by spinning off to Community Health Systems’
stockholders a group of 38 hospitals and Quorum Health Resources,
LLC, a leading hospital management and consulting business. The new
company will be named Quorum Health Corporation to leverage the
existing strength of the Quorum brand. The spin-off is intended to
be tax-free to Community Health Systems and its stockholders and is
expected to be completed in the first quarter of 2016.
Quorum Health Corporation will be headquartered in middle
Tennessee and will operate independently with its own board of
directors and management team. It will include a diversified
portfolio of 38 hospitals with an aggregate of 3,635 licensed beds
across 16 states. The hospitals that will comprise Quorum Health
Corporation have strong market positions and are primarily located
in cities or counties having populations of 50,000 or less. In 84
percent of these markets, the hospital is the sole provider of
acute care hospital services. In 2014, The Joint Commission
recognized 74 percent of the hospitals that will become part of
Quorum Health Corporation as Top Performers in Key Quality
Measures. The new company will also include Quorum Health
Resources, which provides hospital management and consulting
services to 150 non-affiliated hospitals across the United States,
most of which are located in similar markets as Quorum Health
Corporation’s sole provider hospitals.
In 2014, the businesses that will comprise Quorum Health
Corporation generated unaudited annual net revenue of approximately
$2.1 billion and adjusted EBITDA of approximately $255 million.
Benefits of the
Transaction
- Creates New Healthcare Company
Poised for Growth. With an attractive portfolio of high-quality
community hospitals, streamlined management structure and
independent access to capital markets, Quorum Health Corporation is
expected to have an enhanced ability to drive growth by
capitalizing on acquisition opportunities consistent with its
portfolio, developing facility specific operating strategies
aligned with its community needs and better leveraging its
management and consulting capabilities.
- Community Health Systems to Sharpen
Focus and Growth Profile. The spin-off will result in
additional opportunities for profitable growth for Community Health
Systems, as the Company will focus primarily on larger markets and
on investing in strengthening its regional healthcare networks,
while maintaining the benefits of scale from being one of the
largest hospital companies in the country.
- Designed to Increase Stockholder
Value. Community Health Systems stockholders will have the
opportunity to realize the unique growth potential of two focused
healthcare companies that will be better positioned to pursue their
distinct business strategies.
- Tax-Free Transaction to Community
Health Systems Stockholders. The distribution is intended to
qualify as tax-free to Community Health Systems stockholders for
U.S. federal income tax purposes.
“This significant transaction will realign our portfolio into
two strong and focused companies that can respond to market demands
with greater agility and that are better positioned to take
advantage of growth opportunities, while creating additional value
for our stockholders,” said Wayne T. Smith, chairman and chief
executive officer of Community Health Systems, Inc. “Over the past
30 years, Community Health Systems has evolved from a collection of
smaller hospitals into a much more complex and diversified
portfolio of hospitals, outpatient services, and healthcare systems
across the country. We know how important hospitals are to their
communities and recognize that smaller facilities have distinct
opportunities and different challenges than those in larger
markets, where the majority of our assets are located.”
Smith continued, “This transaction will allow Quorum Health
Corporation’s hospitals to focus on the changes in the healthcare
delivery system, which are different in smaller community hospitals
than in our larger and more urbanized markets. At the same time,
the transaction will facilitate a sharper focus on the hospitals
that are retained by Community Health Systems, especially in
high-opportunity markets and in areas where we are building
regional healthcare networks.”
Smith concluded, “Our stockholders have benefited from our
acquisitiveness as we have grown the size and value of our company.
We view this transaction as the best next step in our continuous
effort to return value to our stockholders.”
Quorum Health Corporation will launch with the benefit of
transitional services from Community Health Systems, including
purchased services in select areas such as information technology,
billing and collections and payroll services. When the transaction
is complete, Community Health Systems, Inc. will remain one of the
largest publicly traded U.S. hospital companies with 160 affiliated
hospitals in 22 states.
The transaction is expected to qualify as a tax-free
distribution to Community Health Systems and its stockholders.
Quorum Health Corporation expects to file its Form 10 with the
Securities and Exchange Commission before the end of the third
quarter. The Form 10 will contain detailed information about the
new company, its management team, the spin-off transaction, and
other related matters.
The transaction is subject to customary conditions, certain
legal and valuation opinions, effectiveness of the Form 10 filing,
and final approval and declaration of the distribution by the
Community Health Systems, Inc. Board of Directors. The transaction
is not subject to a stockholder vote. There can be no assurance
regarding the ultimate timing of the spin-off or that it will be
completed. Community Health Systems may, at any time, and for any
reason until the proposed transaction is complete, abandon the
spin-off or modify or change the terms. Quorum Health Corporation
intends to have its common stock authorized for listing on the New
York Stock Exchange. The Contingent Value Rights issued in
connection with the Health Management Associates, Inc. transaction
in January 2014 will be unaffected by this transaction.
Quorum Health
Corporation Hospitals
Cherokee Medical Center
Centre, Alabama DeKalb Regional Medical Center Fort Payne, Alabama
L.V. Stabler Memorial Hospital Greenville, Alabama Forrest City
Medical Center Forrest City, Arkansas Helena Regional Medical
Center Helena, Arkansas Barstow Community Hospital Barstow,
California Watsonville Community Hospital Watsonville, California
Trinity Hospital of Augusta Augusta, Georgia Fannin Regional
Hospital Blue Ridge, Georgia Clearview Regional Medical Center
Monroe, Georgia Barrow Regional Medical Center Winder, Georgia
Union County Hospital Anna, Illinois Metro South Medical Center
Blue Island, Illinois Galesburg Cottage Hospital Galesburg,
Illinois Gateway Regional Medical Center Granite City, Illinois
Heartland Regional Medical Center Marion, Illinois Crossroads
Community Hospital Mt. Vernon, Illinois Red Bud Regional Hospital
Red Bud, Illinois Vista Medical Center Waukegan, Illinois Vista
Medical Center – West Waukegan, Illinois Kentucky River Medical
Center Jackson, Kentucky Three Rivers Medical Center Louisa,
Kentucky Paul B. Hall Regional Medical Center Paintsville, Kentucky
Mesa View Regional Hospital Mesquite, Nevada Mimbres Memorial
Hospital Deming, New Mexico Alta Vista Regional Hospital Las Vegas,
New Mexico Sandhills Regional Medical Center Hamlet, North Carolina
Martin General Hospital Williamston, North Carolina Affinity
Medical Center Massillon, Ohio McKenzie-Willamette Medical Center
Springfield, Oregon Lock Haven Hospital Lock Haven, Pennsylvania
Sunbury Community Hospital Sunbury, Pennsylvania Henderson County
Community Hospital Lexington, Tennessee McKenzie Regional Hospital
McKenzie, Tennessee Big Bend Regional Medical Center Alpine, Texas
Scenic Mountain Medical Center Big Spring, Texas Mountain West
Medical Center Tooele, Utah Evanston Regional Hospital Evanston,
Wyoming
Conference Call
Community Health Systems, Inc. will hold a conference call on
Tuesday, August 4, 2015, at 10:00 a.m. Central, 11:00 a.m. Eastern,
to discuss this transaction and to review financial and operating
results for the second quarter ended June 30, 2015. 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. 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 to be available
through September 5, 2015.
Advisors
Credit Suisse is serving as Community Health Systems’ financial
advisor, and Bass, Berry & Sims PLC and Bradley Arant Boult
Cummings LLP are serving as legal advisors to Community Health
Systems in connection with the proposed spin-off.
About Community Health Systems, Inc.
Community Health Systems, Inc. is one of the largest publicly
traded hospital companies in the United States and a leading
operator of general acute care hospitals in communities across the
country. Through its subsidiaries, the company currently owns,
leases or operates 198 affiliated hospitals in 29 states with an
aggregate of approximately 30,000 licensed beds. The Company’s
headquarters are located in Franklin, Tennessee, a suburb of south
Nashville. Shares in Community Health Systems, Inc. are traded on
the New York Stock Exchange under the symbol “CYH.” More
information about the Company can be found on its website at
www.chs.net.
Forward-Looking Statements
Certain statements contained in this communication may
constitute “forward-looking statements” within the meaning of the
Private Securities Litigation Reform Act of 1995. These statements
include, but are not limited to, statements regarding the expected
timing of the completion of the spin-off transaction, the benefits
of the spin-off transaction to either Community Health Systems or
Quorum Health Corporation, the tax-free treatment of the spin-off
transaction, the anticipated management of the business to be spun
off, the market position of the business to be spun off and other
statements that are not historical facts. Such statements are based
on the views and assumptions of the management of the Company and
are subject to significant risks and uncertainties. There can be no
assurance that the proposed transaction or these future events will
occur as anticipated, if at all, or that actual results will be as
expected. Actual future events or results may differ materially
from these statements. Such differences may result from a number of
factors, including but not limited to: the timing and completion of
the proposed transaction; a failure to obtain necessary regulatory
approvals; a failure to obtain assurances of anticipated tax
treatment; a deterioration in the business or prospects of the
Company or Quorum Health Corporation; adverse developments in the
Company or Quorum Health Corporation’s markets; adverse
developments in the U.S. or global capital markets, credit markets
or economies generally; the risk that the benefits of the proposed
transaction may not be fully realized or may take longer to realize
than expected; the impact of the proposed transaction on the
Company’s third-party relationships; the Company’s ability
following completion of the spin-off to identify and acquire
additional hospitals in larger and more urbanized markets with
terms that are attractive to the Company and to integrate such
acquired hospitals; and changes in regulatory, social and political
conditions. Additional risks and factors that may affect results
are set forth in the Company’s filings with the Securities and
Exchange Commission, including the Company’s most recent Annual
Report on Form 10-K.
The forward-looking statements speak only as of the date of this
communication. The Company does not undertake any obligation to
update these statements.
Non-GAAP Financial Measures
EBITDA is a non-GAAP financial measure which consists of net
income attributable to Quorum Health Corporation, before interest,
income taxes, and depreciation and amortization. Adjusted EBITDA is
EBITDA adjusted to exclude impairment of long-lived assets, net
income attributable to noncontrolling interests, and expenses
related to legal settlements and related costs. Community Health
Systems believes that it is useful to present adjusted EBITDA
because it clarifies for investors Quorum Health Corporation’s
portion of EBITDA generated by continuing operations. Community
Health Systems uses adjusted EBITDA as a measure of liquidity.
Community Health Systems has also presented Quorum Health
Corporation’s adjusted EBITDA in this communication because it
believes it provides investors with additional information about
Quorum Health Corporation’s ability to incur and service debt and
make capital expenditures.
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.
Because certain terms of the spin-off have not yet been
determined, including as to the balance sheet and statement of cash
flows of Quorum Health Corporation, it is not reasonably possible
at this time to provide the net income for Quorum Health
Corporation or a reconciliation to the estimated adjusted EBITDA
figure included in this communication. Historical GAAP financial
information for Community Health Systems is included in its most
recent Annual Report on Form 10-K filed with the SEC, and
historical GAAP financial information for Quorum Health Corporation
will be included in the Form 10 registration statement relating to
the spin-off.
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version on businesswire.com: http://www.businesswire.com/news/home/20150803006222/en/
Community Health Systems, Inc.Investor Contact:W.
Larry Cash, 615-465-7000President of Financial Services and Chief
Financial OfficerorMedia Contact:Tomi Galin,
615-628-6607Senior Vice President, Corporate Communications,
Marketing and Public Affairs
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