Capital Expenditures
Cash expenditures for purchases of facilities and other related businesses were less than $1 million for the three months ended
March 31, 2020, compared to $4 million for the three months ended March 31, 2019. Our expenditures for the three months ended March 31, 2020 and 2019 were primarily related to physician practices and other ancillary services.
Excluding the cost to construct replacement hospitals, our cash expenditures for routine capital for the three months ended
March 31, 2020 totaled $70 million compared to $117 million for the three months ended March 31, 2019. These capital expenditures related primarily to the purchase of additional equipment, minor renovations and information
systems infrastructure. Costs to construct replacement hospitals totaled $29 million for the three months ended March 31, 2020, compared to $4 million for the three months ended March 31, 2019. The costs to construct replacement
hospitals for the three months ended March 31, 2020 and 2019 primarily represent both planning and construction costs for the replacement facility at La Porte, Indiana.
Pursuant to a hospital purchase agreement from our March 1, 2016 acquisition of La Porte Hospital and Starke Hospital, we committed to
build replacement facilities in both La Porte, Indiana and Knox, Indiana. Under the terms of such agreement, construction of the replacement hospital for LaPorte Hospital is required to be completed within five years of the date of acquisition, or
March 2021. In addition, construction of the replacement facility for Starke Hospital is required to be completed within five years of the date we enter into a new lease with Starke County, Indiana, the hospital lessor, or in the event we do not
enter into a new lease with Starke County, construction shall be completed by September 30, 2026. We have not entered into a new lease with the lessor for Starke Hospital and currently anticipate completing construction of the Starke Hospital
replacement facility in 2026. Construction costs, including equipment costs, for the La Porte and Starke replacement facilities are currently estimated to be approximately $128 million and $15 million, respectively.
Capital Resources
Net working
capital was approximately $1.2 billion at March 31, 2020, compared to $1.1 billion at December 31, 2019. Net working capital increased by approximately $50 million between December 31, 2019 and March 31, 2020. This
increase is primarily due to the increases in other current assets and cash and cash equivalents and a decrease in accounts payable, partially offset by a decrease in patient accounts receivable during the three months ended March 31, 2020.
In addition to cash flows from operations, available sources of capital include amounts available under the asset-based loan (ABL) credit
agreement, or the ABL Credit Agreement, which we entered into on April 3, 2018, as well as anticipated access to public and private debt markets.
Pursuant to the ABL Credit Agreement, the lenders have extended to CHS/Community Health Systems, Inc., or CHS, a revolving asset-based loan
facility, or the ABL Facility, in the maximum aggregate principal amount of $1.0 billion, subject to borrowing base capacity. At March 31, 2020, the available borrowing base under the ABL Facility was $769 million, of which we had
outstanding borrowings of $380 million and letters of credit issued of $150 million. The issued letters of credit were primarily in support of potential insurance-related claims and certain bonds. Principal amounts outstanding under the
ABL Facility will be due and payable in full on April 3, 2023.
The ABL Facility contains customary representations and warranties,
subject to limitations and exceptions, and customary covenants restricting our ability, subject to certain exceptions, 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) engage in mergers, acquisitions and asset sales, (7) conduct transactions with affiliates, (8) alter the nature of our businesses, (9) grant certain guarantees with respect to physician practices, (10) engage in sale and
leaseback transactions or (11) change our fiscal year. We are also required to comply with a consolidated fixed coverage ratio, upon certain triggering events described below, and various affirmative covenants. The consolidated fixed coverage
ratio is calculated as the ratio of (x) consolidated EBITDA (as defined in the ABL Facility) less capital expenditures to (y) the sum of consolidated interest expense (as defined in the ABL Facility), scheduled principal payments, income
taxes and restricted payments made in cash or in permitted investments. For purposes of calculating the consolidated fixed charge coverage ratio, the calculation of consolidated EBITDA as defined in the ABL Facility is a trailing 12-month calculation that begins with our consolidated net income, with certain adjustments for interest, taxes, depreciation and amortization, net income attributable to noncontrolling interests, stock compensation
expense, restructuring costs, and the financial impact of other non-cash or non-recurring items recorded during any such 12-month
period. The consolidated fixed charge coverage ratio is a required covenant only in periods where the total borrowings outstanding under the ABL Facility reduce the amount available in the facility to less than the greater of (i) $95 million or
(ii) 10% of the calculated borrowing base. As a result, in
41