Securities and Exchange Commission Filing is
an Important Step Forward in Plan to Create New Publicly Traded
Hospital Company
Community Health Systems, Inc. (NYSE: CYH) announced today that
it has filed the initial Form 10 Registration Statement with the
Securities and Exchange Commission (SEC) in connection with its
previously announced plan to spin off Quorum Health Corporation.
The spin-off transaction will create a new, publicly traded company
owning or leasing and operating 38 affiliated hospitals and related
outpatient services, together with Quorum Health Resources, LLC, a
subsidiary that provides management and consulting services to
non-affiliated hospitals. The filing includes detailed information
about the transaction and Quorum Health Corporation’s operations
and historical financial performance. The initial Form 10 filing
will be updated with additional information in subsequent
amendments.
Community Health Systems, Inc. also named Quorum Health
Corporation’s top executives today. Thomas D. Miller will serve as
chief executive officer of the new company, and Michael J. Culotta
will serve as chief financial officer.
Thomas D. Miller, Chief Executive Officer
Thomas D. Miller currently serves as president of Division V
Operations for Community Health Systems and oversees the operations
of affiliated hospitals in Indiana, New Jersey, Ohio and
Pennsylvania. He joined Community Health Systems in connection with
the acquisition of Triad Hospitals, Inc. in July 2007. Mr. Miller
has more than 30 years of experience in hospital operations and
executive management. Prior to joining Community Health Systems,
from 1998 through 2007, he served as the president and chief
executive officer of Lutheran Health Network in northeast Indiana,
a system that has grown to include eight hospital facilities.
During the early years of his tenure at Lutheran, the health system
was operated by Quorum Health Group, Inc., a predecessor of Quorum
Health Resources. Mr. Miller holds a bachelor’s degree from Auburn
University and a master’s degree in hospital and health
administration from the University of Alabama at Birmingham. He
currently serves on the Board of Trustees of the American Hospital
Association.
Michael J. Culotta, Chief Financial Officer
Michael J. Culotta currently serves as vice president of
Investor Relations for Community Health Systems. Mr. Culotta joined
Community Health Systems in 2013. He is an experienced healthcare
finance executive who has served as chief financial officer at two
publicly traded companies, both of which were successful spin-offs.
From 2007 to 2013, Mr. Culotta was chief financial officer of
PharMerica Corporation. He held the same role at LifePoint
Hospitals from 2001 to 2007. Prior to that, Mr. Culotta was a
partner with Ernst & Young where he worked for 24 years. He
earned his bachelor’s degree from Louisiana State University and is
a Certified Public Accountant, licensed in Tennessee, Texas and
Florida.
“The filing of the Form 10 represents an important step forward
in our plans to reorganize our portfolio into two strong companies
that are each uniquely positioned for future growth,” said
Wayne T. Smith, chairman and chief executive officer of
Community Health Systems, Inc. “We have selected capable,
experienced executives to lead the new company. Tom Miller is an
accomplished healthcare executive who has contributed to the growth
of our organization by strategically advancing the operational and
financial performance of the hospitals in his Division. He is an
entrepreneur at heart who has led the successful integration of
some of our most significant hospital acquisitions. Mike Culotta is
a highly regarded healthcare executive who brings a broad range of
finance and investor relations experience to Quorum Health
Corporation. He has a keen understanding of hospital operations and
adeptly navigates the complexities of healthcare finance. Tom and
Mike fully embrace the opportunities available to the new company,
and we are confident that, with their leadership, Quorum Health
Corporation can become a vibrant, successful healthcare
enterprise.”
Quorum Health Corporation will include 38 affiliated hospitals
with an aggregate of 3,587 beds operating in 16 states. The
majority of the hospitals in Quorum Health Corporation’s portfolio
are in cities and counties having populations of 50,000 or less,
and in 84% of these markets, the hospital is the sole provider of
acute care services. The new company will also include Quorum
Health Resources, LLC which provides management and consulting
services to approximately 150 non-affiliated hospitals across the
United States. In 2014, the businesses that will comprise Quorum
Health Corporation generated net operating revenues of $2.1 billion
and adjusted EBITDA of $265 million.
The spin-off transaction is expected to qualify as a tax-free
distribution to Community Health Systems, Inc. and its
stockholders. It is subject to customary conditions, certain legal
and valuation opinions, effectiveness of the Form 10, and final
approval and declaration of the distribution by the Community
Health Systems, Inc. Board of Directors. The transaction is
expected to close during the first quarter of 2016. Quorum Health
Corporation intends to have its common stock authorized for listing
on the New York Stock Exchange under the symbol “QHC.”
A copy of the Form 10 Registration Statement is available on the
Investor Relations page of Community Health Systems’ website:
www.chs.net.
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 south of
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.
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.
The following table reconciles adjusted EBITDA, as defined, to
net cash provided by operating activities as derived from the
audited combined financial statements of Quorum Health included in
the Form 10.
Year EndedDecember
31,2014
(In thousands) Adjusted EBITDA $ 264,825 Interest
expense, net (92,926 ) Provision for income taxes (5,579 ) Deferred
income taxes 5,007 Legal settlements (30,374 ) Other non-cash
expenses, net 495
Changes in operating assets and
liabilities, net of effects of acquisitions and divestitures:
Patient accounts receivable (86,168 ) Supplies, prepaid expenses
and other current assets (21,910 ) Accounts payable, accrued
liabilities and income taxes 12,924 Other (3,250 ) Net cash
provided by operating activities $ 43,044
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.
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version on businesswire.com: http://www.businesswire.com/news/home/20150904005740/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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