Community Health Systems, Inc. (NYSE: CYH) (the “Company”) today
announced financial and operating results for the three and six
months ended June 30, 2020.
The following highlights the financial and operating results for
the three months ended June 30, 2020.
- Net operating revenues totaled $2.519 billion.
- Net income attributable to Community Health Systems, Inc.
common stockholders was $70 million, or $0.61 per share (diluted),
compared with net loss of $(167) million, or $(1.47) per share
(diluted), for the same period in 2019. Excluding the adjusting
items as presented in the table in footnote (e) on page 16, net
income attributable to Community Health Systems, Inc. common
stockholders was $0.85 per share (diluted), compared to net loss of
$(0.47) per share (diluted) for the same period in 2019.
- Adjusted EBITDA was $454 million.
- Net cash provided by operating activities was $1.652
billion, compared with $132 million for the same period in
2019.
- On a same-store basis, admissions decreased 18.1 percent and
adjusted admissions decreased 24.2 percent, compared with the same
period in 2019.
- As discussed further below, developments related to the
impact of a novel strain of coronavirus (“COVID-19”) adversely
affected patient volumes and operating results which were
mitigated, in part, by government stimulus measures.
Net operating revenues for the three months ended June 30, 2020,
totaled $2.519 billion, a 23.7 percent decrease, compared with
$3.302 billion for the same period in 2019.
Net income attributable to Community Health Systems, Inc. common
stockholders was $70 million, or $0.61 per share (diluted), for the
three months ended June 30, 2020, compared with net loss of $(167)
million, or $(1.47) per share (diluted), for the same period in
2019. Excluding the adjusting items as presented in the table in
footnote (e) on page 16, net income attributable to Community
Health Systems, Inc. common stockholders was $0.85 per share
(diluted), for the three months ended June 30, 2020, compared to
net loss of $(0.47) per share (diluted) for the same period in
2019. Payments received by the Company through the Public Health
and Social Services Emergency Fund (the “PHSSEF”), as more
specifically described below, had a positive impact on net income
attributable to Community Health Systems, Inc. common stockholders
(both on a consolidated and adjusted basis) of approximately $333
million, or $2.89 on a per share (diluted) basis, for the three
months ended June 30, 2020. Weighted-average shares outstanding
(diluted) were 115 million and 114 million for the three months
ended June 30, 2020 and 2019, respectively.
Adjusted EBITDA for the three months ended June 30, 2020, was
$454 million compared with $402 million for the same period in
2019. Payments received through the PHSSEF had a positive impact on
Adjusted EBITDA for the three months ended June 30, 2020 in the
amount of $448 million.
The consolidated operating results for the three months ended
June 30, 2020, reflect a 23.6 percent decrease in admissions and a
29.2 percent decrease in adjusted admissions, compared with the
same period in 2019. On a same-store basis, admissions decreased
18.1 percent and adjusted admissions decreased 24.2 percent for the
three months ended June 30, 2020, compared with the same period in
2019. Volume declines were most pronounced in the month of April
2020 and declined to a lesser degree in the months of May and June
2020. On a same-store basis, net operating revenues decreased 18.4
percent for the three months ended June 30, 2020, compared with the
same period in 2019.
Net operating revenues for the six months ended June 30, 2020,
totaled $5.544 billion, a 17.0 percent decrease, compared with
$6.679 billion for the same period in 2019.
Net income attributable to Community Health Systems, Inc. common
stockholders was $87 million, or $0.76 per share (diluted), for the
six months ended June 30, 2020, compared with net loss of $(285)
million, or $(2.51) per share (diluted), for the same period in
2019. Excluding the adjusting items as presented in the table in
footnote (e) on page 16, net loss attributable to Community Health
Systems, Inc. common stockholders was $(0.73) per share (diluted),
for the six months ended June 30, 2020, compared to $(1.00) per
share (diluted) for the same period in 2019. The change in tax
valuation allowance (which was one of the aforementioned adjusting
items) had a positive impact of $240 million, or $2.09 per share
(diluted), on net income attributable to Community Health Systems,
Inc. common stockholders, and arose from discrete tax benefits
related to the release of federal and state valuation allowances on
IRC Section 163(j) interest carryforwards as a result of an
increase to the deductible interest expense allowed for 2019 and
2020 under the Coronavirus Aid, Relief and Economic Security Act
(the “CARES Act”) that was enacted during the six months ended June
30, 2020. In addition, payments received by the Company through the
PHSSEF, as more specifically described below, had a positive impact
on net income attributable to Community Health Systems, Inc. common
stockholders (both on a consolidated and adjusted basis) of
approximately $333 million, or $2.90 on a per share (diluted)
basis, for the six months ended June 30, 2020. Weighted-average
shares outstanding (diluted) were 115 million and 114 million for
the six months ended June 30, 2020 and 2019, respectively.
Adjusted EBITDA for the six months ended June 30, 2020, was $763
million compared with $793 million for the same period in 2019.
Payments received through the PHSSEF had a positive impact on
Adjusted EBITDA for the six months ended June 30, 2020 in the
amount of $448 million.
The consolidated operating results for the six months ended June
30, 2020, reflect an 18.3 percent decrease in admissions and a 21.0
percent decrease in adjusted admissions, compared with the same
period in 2019. On a same-store basis, admissions decreased 11.5
percent and adjusted admissions decreased 14.5 percent for the six
months ended June 30, 2020, compared with the same period in 2019.
Volume declines were most pronounced in the month of April 2020 and
declined to a lesser degree in the months of May and June 2020. On
a same-store basis, net operating revenues decreased 10.9 percent
for the six months ended June 30, 2020, compared with the same
period in 2019.
Commenting on the results, Wayne T. Smith, chairman and chief
executive officer of Community Health Systems, Inc., said, “The
COVID-19 pandemic continues to be an unprecedented public health
crisis that has forever changed our country and the healthcare
industry. Our response to this crisis is guided by our most
important priority - to provide safe, quality healthcare for the
patients who put their trust in us. We are forever grateful to our
incredible physicians, nurses and other caregivers who bravely step
up and step forward every day to care for their patients,
communities and each other. And, we thank all of America’s
healthcare workers for their compassionate, professional, and truly
heroic actions in this pandemic.
“I am proud of our hospital leadership teams and the corporate
support teams that have demonstrated agility and resilience under
pressure and leveraged all of the resources of our organization to
support their community response as well as one another. We will
continue to adapt to this evolving situation with a steadfast
commitment to provide the best possible response to this public
health crisis, while at the same time focusing on long-term growth
for all of the Company’s stakeholders.”
COVID – 19 Pandemic:
The COVID-19 pandemic had an adverse impact on the Company’s
operations and financial results for the three and six months ended
June 30, 2020 beginning in the second half of March 2020 as the
result of decreases in net operating revenues driven by a decline
in patient volumes and increases in expenses related to supply
chain and other expenditures.
The Company previously announced in the Current Report on Form
8-K filed by the Company on April 6, 2020 (the “April 6 Form 8-K”),
that it was withdrawing its 2020 financial guidance issued in its
earnings release dated February 19, 2020. Consistent with
disclosures made by the Company in the April 6 Form 8-K and in the
Company’s earnings release for the first quarter filed on April 28,
2020, the Company is not able to fully quantify the impact that the
COVID-19 pandemic will have on its financial results during 2020,
but expects developments related to the COVID-19 pandemic,
including the CARES Act and PPPHCE Act as further discussed below,
to materially affect the Company’s financial performance in 2020.
Moreover, as a result of the continuously changing and
unpredictable environment related to the COVID-19 pandemic, the
Company is not providing guidance in this earnings release.
As a result of the COVID-19 pandemic, federal and state
governments have passed legislation, promulgated regulations, and
taken other administrative actions intended to assist healthcare
providers in providing care to COVID-19 and other patients during
the public health emergency. Sources of relief include the CARES
Act, which was enacted on March 27, 2020, and the Paycheck
Protection Program and Health Care Enhancement Act (the “PPPHCE
Act”), which was enacted on April 24, 2020. Together, the CARES Act
and the PPPHCE Act include $175 billion in funding to be
distributed to eligible providers through the PHSSEF. In addition,
the CARES Act provided for an expansion of the Medicare Accelerated
and Advance Payment Program.
During the three months ended June 30, 2020, the Company
received approximately $564 million in payments through the PHSSEF
in both general and targeted distributions, net of amounts received
for previously divested entities that are required to be repaid to
the U.S. Department of Health and Human Services (“HHS”). PHSSEF
payments are intended to compensate healthcare providers for lost
revenues and incremental expenses incurred in response to the
COVID-19 pandemic and are not required to be repaid provided that
recipients attest to and comply with certain terms and conditions,
including limitations on balance billing and not using funds
received from the PHSSEF to reimburse expenses or losses that other
sources are obligated to reimburse. Approximately $448 million of
the PHSSEF payments qualified as income for reimbursement of lost
revenues and incremental expenses and was recognized as a reduction
in operating costs and expenses during the three and six months
ended June 30, 2020. Amounts not recognized as a reduction to
operating costs and expenses or that have not been refunded to HHS
as of June 30, 2020, are reflected within accrued liabilities-other
in the condensed consolidated balance sheet, and such unrecognized
amounts may be recognized as a reduction in operating costs and
expenses in future periods if the underlying conditions for
recognition are met. Additionally, approximately $109 million in
payments through the PHSSEF have been received in July 2020 which
did not qualify for recognition during the three months ended June
30, 2020.
Medicare accelerated payments of approximately $1.2 billion were
received during the three months ended June 30, 2020, via the
Medicare Accelerated and Advance Payment Program. These are
advances that providers must repay. The Medicare accelerated
payments are interest free for up to 12 months and the program
currently requires that the Centers for Medicare and Medicaid
Services (“CMS”) recoup the accelerated payments beginning 120 days
after receipt by the provider, by withholding future Medicare
fee-for-service payments for claims until such time as the full
accelerated payment has been recouped. The program currently
requires that any outstanding balance remaining after 12 months
must be repaid by the provider or be subjected to a 10.25% annual
interest rate. Recoupment of accelerated Medicare payments received
by the Company is currently expected to begin in August 2020. As of
June 30, 2020, Medicare accelerated payments are reflected within
accrued liabilities-other in the condensed consolidated balance
sheet. Effective April 26, 2020, CMS is reevaluating pending and
new applications for accelerated payments in light of significant
other relief provided by the CARES Act and the PPPHCE Act.
Accordingly, the Company does not expect to receive additional
Medicare accelerated payments.
The PHSSEF payments received to date as noted above and which
the Company may receive in the future under the CARES Act and the
PPPHCE Act, have been and may continue to be beneficial in
partially mitigating the impact of the COVID-19 pandemic on the
Company’s results of operations and financial position.
Additionally, the federal government may consider additional
stimulus and relief efforts, but we are unable to predict whether
additional stimulus measures will be enacted or their impact, if
any. The Company is unable to assess the extent to which
anticipated ongoing negative impacts on the Company arising from
the COVID-19 pandemic will be offset by amounts which the Company
may recognize or receive in the future under the CARES Act, the
PPPHCE Act and any future stimulus measures.
The Company completed the divestiture of three hospitals on
January 1, 2020 (in respect of which the Company received proceeds
at a preliminary closing on December 31, 2019), two hospitals on
May 1, 2020, and two hospitals on July 1, 2020 (in respect of which
the Company received proceeds at a preliminary closing on June 30,
2020) for a total of seven hospitals. In addition, the Company has
entered into definitive agreements to sell a total of five
hospitals, for which the Company expects to receive aggregate
proceeds of approximately $430 million. These divestitures, subject
to definitive agreements, which are expected to be completed at
various times during the third and fourth quarters of 2020, will
mark the end of the Company’s formal portfolio rationalization
strategy, which commenced in 2017. There can be no assurance that
these potential divestitures subject to definitive agreements will
be completed, or if they are completed, the ultimate timing of the
completion of these divestitures. The Company continues to receive
interest from potential acquirers for certain of its hospitals, and
may, from time to time, consider selling additional hospitals
following the completion of the Company’s formal portfolio
rationalization strategy.
Financial and statistical data for 2019 and 2020 presented in
this press release includes the operating results of divested
hospitals through the effective closing date of each respective
divestiture. Same-store operating results exclude the results of a
hospital acquired in 2019 and the hospitals divested in 2019 and
2020.
Information About Non-GAAP Financial Measures
This earnings release presents Adjusted EBITDA, a non-GAAP
financial measure, which is EBITDA adjusted to add back net income
attributable to noncontrolling interests and to exclude loss (gain)
from early extinguishment of debt, impairment and loss on sale of
businesses, expense related to government and other legal
settlements and related costs, expense related to employee
termination benefits and other restructuring charges, expense from
settlement and fair value adjustments on the CVR agreement
liability related to the Health Management Associates, Inc. (“HMA”)
legal proceedings and related legal expenses, the impact of changes
in estimate to increase the professional liability claims accrual
recorded during the second quarter of 2019 (which estimate was
further revised in the third quarter of 2019 based on updated
actuarial analysis) with respect to claims incurred in 2016 and
prior years and expense related to the valuation allowance recorded
in the second quarter of 2019 to reserve the outstanding balance of
a promissory note received from the buyer in connection with the
sale of two of the Company’s hospitals in 2017, as well as income
from a reduction of the valuation allowance on the outstanding
balance of a promissory note from the buyer of another hospital.
For information regarding why the Company believes Adjusted EBITDA
provides useful information to investors, and for a reconciliation
of Adjusted EBITDA to net income (loss) attributable to Community
Health Systems, Inc. stockholders, see footnote (c) to the
Financial Highlights, Financial Statements and Selected Operating
Data below.
Additionally, this earnings release presents adjusted net income
(loss) attributable to Community Health Systems, Inc. common
stockholders per share (diluted), a non-GAAP financial measure, to
reflect the impact on net income (loss) attributable to Community
Health Systems, Inc. common stockholders per share (diluted) from
the selected items used in the calculation of Adjusted EBITDA. For
information regarding why the Company believes this non-GAAP
financial measure provides useful information to investors, and for
a reconciliation of this non-GAAP financial measure to net income
(loss) attributable to Community Health Systems, Inc. common
stockholders per share (diluted), see footnote (e) to the Financial
Highlights, Financial Statements and Selected Operating Data
below.
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. The Company, through its subsidiaries, owns, leases or
operates 95 affiliated hospitals in 16 states with an aggregate of
approximately 15,000 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.
Community Health Systems, Inc. will hold a conference call on
Wednesday, July 29, 2020, at 10:00 a.m. Central, 11:00 a.m.
Eastern, to review financial and operating results for the second
quarter ended June 30, 2020. 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 for approximately 30 days. Copies
of this press release and conference call slide show, as well as
the Company’s Current Report on Form 8-K (including this press
release), will be available on the Company’s website at
www.chs.net.
COMMUNITY HEALTH SYSTEMS, INC.
AND SUBSIDIARIES
Financial Highlights
(a)(b)
(In millions, except per share
amounts)
(Unaudited)
Three Months Ended
Six Months Ended
June 30,
June 30,
2020
2019
2020
2019
Net operating revenues $
2,519
$
3,302
$
5,544
$
6,679
Net income (loss) (f), (g)
93
(146
)
126
(246
)
Net income (loss) attributable to Community Health Systems, Inc.
stockholders
70
(167
)
87
(285
)
Adjusted EBITDA (c)
454
402
763
793
Net cash provided by operating activities
1,652
132
1,710
265
Earnings (loss) per share attributable to Community Health
Systems, Inc. common stockholders: Basic (f), (g) $
0.61
$
(1.47
)
$
0.76
$
(2.51
)
Diluted (e), (f), (g)
0.61
(1.47
)
0.76
(2.51
)
Weighted-average number of shares outstanding (d): Basic
115
114
115
114
Diluted
115
114
115
114
____ For footnotes, see pages 14, 15 and
16.
COMMUNITY HEALTH SYSTEMS, INC.
AND SUBSIDIARIES
Condensed Consolidated
Statements of Income (Loss) (a)(b)
(In millions, except per share
amounts)
(Unaudited)
Three Months Ended June
30,
2020
2019
% of Net
% of Net
Operating
Operating
Amount
Revenues
Amount
Revenues
Net operating revenues $
2,519
100.0
%
$
3,302
100.0
%
Operating costs and expenses: Salaries and benefits
1,282
50.9
%
1,488
45.1
%
Supplies
418
16.6
%
539
16.3
%
Other operating expenses
736
29.1
%
893
27.0
%
Government and other legal settlements and related costs (g)
2
0.1
%
4
0.1
%
Lease cost and rent
82
3.3
%
81
2.5
%
Pandemic relief funds
(448
)
(17.8
)%
-
-
%
Depreciation and amortization
141
5.6
%
153
4.6
%
Impairment and loss on sale of businesses, net (f)
10
0.4
%
33
1.0
%
Total operating costs and expenses
2,223
88.2
%
3,191
96.6
%
Income from operations (f), (g)
296
11.8
%
111
3.4
%
Interest expense, net
260
10.4
%
265
8.0
%
Equity in earnings of unconsolidated affiliates
1
0.0
%
(5
)
(0.1
)%
Income (loss) before income taxes
35
1.4
%
(149
)
(4.5
)%
Benefit from income taxes
(58
)
(2.3
)%
(3
)
(0.1
)%
Net income (loss) (f), (g)
93
3.7
%
(146
)
(4.4
)%
Less: Net income attributable to noncontrolling interests
23
0.9
%
21
0.7
%
Net income (loss) attributable to Community Health Systems, Inc.
stockholders $
70
2.8
%
$
(167
)
(5.1
)%
Earnings (loss) per share attributable to Community Health Systems,
Inc. common stockholders: Basic (f), (g) $
0.61
$
(1.47
)
Diluted (e), (f), (g) $
0.61
$
(1.47
)
Weighted-average number of shares outstanding (d): Basic
115
114
Diluted
115
114
____ For footnotes, see pages 14, 15 and
16.
COMMUNITY HEALTH SYSTEMS, INC.
AND SUBSIDIARIES
Condensed Consolidated
Statements of Income (Loss) (a)(b)
(In millions, except per share
amounts)
(Unaudited)
Six Months Ended June
30,
2020
2019
% of Net
% of Net
Operating
Operating
Amount
Revenues
Amount
Revenues
Net operating revenues $
5,544
100.0
%
$
6,679
100.0
%
Operating costs and expenses: Salaries and benefits
2,690
48.5
%
3,030
45.4
%
Supplies
916
16.5
%
1,097
16.4
%
Other operating expenses
1,472
26.7
%
1,704
25.5
%
Government and other legal settlements and related costs (g)
4
0.1
%
9
0.1
%
Lease cost and rent
163
2.9
%
162
2.4
%
Pandemic relief funds
(448
)
(8.1
)%
-
-
%
Depreciation and amortization
285
5.1
%
305
4.6
%
Impairment and loss on sale of businesses, net (f)
56
1.0
%
71
1.1
%
Total operating costs and expenses
5,138
92.7
%
6,378
95.5
%
Income from operations (f), (g)
406
7.3
%
301
4.5
%
Interest expense, net
523
9.4
%
522
7.8
%
Loss from early extinguishment of debt
4
0.1
%
31
0.5
%
Equity in earnings of unconsolidated affiliates
(6
)
(0.1
)%
(9
)
(0.2
)%
Loss before income taxes
(115
)
(2.1
)%
(243
)
(3.6
)%
(Benefit from) provision for income taxes
(241
)
(4.4
)%
3
0.1
%
Net income (loss) (f), (g)
126
2.3
%
(246
)
(3.7
)%
Less: Net income attributable to noncontrolling interests
39
0.7
%
39
0.6
%
Net income (loss) attributable to Community Health Systems, Inc.
stockholders $
87
1.6
%
$
(285
)
(4.3
)%
Earnings (loss) per share attributable to Community Health Systems,
Inc. common stockholders: Basic (f), (g) $
0.76
$
(2.51
)
Diluted (e), (f), (g) $
0.76
$
(2.51
)
Weighted-average number of shares outstanding (d): Basic
115
114
Diluted
115
114
____ For footnotes, see pages 14, 15 and
16.
COMMUNITY HEALTH SYSTEMS, INC.
AND SUBSIDIARIES
Condensed Consolidated
Statements of Comprehensive Income (Loss)
(In millions)
(Unaudited)
Three Months Ended
Six Months Ended
June 30,
June 30,
2020
2019
2020
2019
Net income (loss) $
93
$
(146
)
$
126
$
(246
)
Other comprehensive income (loss), net of income taxes: Net change
in fair value of interest rate swaps, net of tax
-
-
-
(2
)
Net change in fair value of available-for-sale debt securities, net
of tax
2
2
4
4
Other comprehensive income
2
2
4
2
Comprehensive income (loss)
95
(144
)
130
(244
)
Less: Comprehensive income attributable to noncontrolling interests
23
21
39
39
Comprehensive income (loss) attributable to Community Health
Systems, Inc. stockholders $
72
$
(165
)
$
91
$
(283
)
____ For footnotes, see pages 14, 15 and
16.
COMMUNITY HEALTH SYSTEMS, INC.
AND SUBSIDIARIES
Selected Operating Data
(a)
(Dollars in millions)
(Unaudited)
Three Months Ended June
30,
Consolidated
Same-Store
2020
2019
% Change
2020
2019
% Change
Number of hospitals (at end of period)
97
107
96
96
Licensed beds (at end of period)
15,562
17,062
15,381
15,646
Beds in service (at end of period)
13,702
15,206
13,627
13,876
Admissions
106,481
139,400
-23.6
%
106,076
129,463
-18.1
%
Adjusted admissions
214,373
302,964
-29.2
%
213,295
281,409
-24.2
%
Patient days
486,920
622,046
485,010
576,766
Average length of stay (days)
4.6
4.5
4.6
4.5
Occupancy rate (average beds in service)
39.0
%
45.1
%
39.1
%
45.8
%
Net operating revenues
$
2,519
$
3,302
-23.7
%
$
2,525
$
3,096
-18.4
%
Net inpatient revenues as a % of net operating revenues 51.4 % 47.0
% 51.4 % 46.8 % Net outpatient revenues as a % of net operating
revenues 48.6 % 53.0 % 48.6 % 53.2 % Income from operations (f),
(g)
$
296
$
111
166.7
%
Income from operations as a % of net operating revenues 11.8 % 3.4
% Depreciation and amortization
$
141
$
153
Equity in earnings of unconsolidated affiliates
$
1
$
(5
)
Net income (loss) attributable to Community Health Systems, Inc.
stockholders $
70
$
(167
)
141.9
%
Net income (loss) attributable to Community Health Systems, Inc.
stockholders as a % of net operating revenues 2.8 % -5.1 % Adjusted
EBITDA (c)
$
454
$
402
12.9
%
Adjusted EBITDA as a % of net operating revenues 18.0 % 12.2 % Net
cash provided by operating activities
$
1,652
$
132
1151.5
%
____ For footnotes, see pages 14, 15 and
16.
COMMUNITY HEALTH SYSTEMS, INC.
AND SUBSIDIARIES
Selected Operating Data
(a)
(Dollars in millions)
(Unaudited)
Six Months Ended June
30,
Consolidated
Same-Store
2020
2019
% Change
2020
2019
% Change
Number of hospitals (at end of period)
97
107
96
96
Licensed beds (at end of period)
15,562
17,062
15,381
15,646
Beds in service (at end of period)
13,702
15,206
13,627
13,876
Admissions
234,729
287,288
-18.3
%
233,490
263,884
-11.5
%
Adjusted admissions
484,395
612,829
-21.0
%
480,994
562,678
-14.5
%
Patient days
1,066,857
1,299,127
1,061,587
1,188,067
Average length of stay (days)
4.5
4.5
4.5
4.5
Occupancy rate (average beds in service)
42.6
%
46.5
%
42.7
%
47.4
%
Net operating revenues
$
5,544
$
6,679
-17.0
%
$
5,532
$
6,211
-10.9
%
Net inpatient revenues as a % of net operating revenues 49.5 % 47.9
% 49.5 % 47.7 % Net outpatient revenues as a % of net operating
revenues 50.5 % 52.1 % 50.5 % 52.3 % Income from operations (f),
(g)
$
406
$
301
34.9
%
Income from operations as a % of net operating revenues 7.3 % 4.5 %
Depreciation and amortization
$
285
$
305
Equity in earnings of unconsolidated affiliates
$
(6
)
$
(9
)
Net income (loss) attributable to Community Health Systems, Inc.
stockholders $ 87
$
(285
)
130.5
%
Net income (loss) attributable to Community Health Systems, Inc.
stockholders as a % of net operating revenues 1.6 % -4.3 % Adjusted
EBITDA (c)
$
763
$
793
-3.8
%
Adjusted EBITDA as a % of net operating revenues 13.8 % 11.9 % Net
cash provided by operating activities
$
1,710
$
265
545.3
%
____ For footnotes, see pages 14, 15 and
16.
COMMUNITY HEALTH SYSTEMS, INC.
AND SUBSIDIARIES
Condensed Consolidated Balance
Sheets
(In millions, except share
data)
(Unaudited)
June 30, 2020
December 31, 2019
ASSETS Current assets Cash and cash equivalents $
1,552
$
216
Patient accounts receivable
1,925
2,258
Supplies
337
354
Prepaid income taxes
47
48
Prepaid expenses and taxes
178
193
Other current assets
374
358
Total current assets
4,413
3,427
Property and equipment
9,328
9,653
Less accumulated depreciation and amortization
(4,019
)
(4,045
)
Property and equipment, net
5,309
5,608
Goodwill
4,225
4,328
Deferred income taxes
107
38
Other assets, net
2,361
2,208
Total assets $
16,415
$
15,609
LIABILITIES AND STOCKHOLDERS’ DEFICIT Current
liabilities Current maturities of long-term debt $
30
$
20
Current operating lease liabilities
135
136
Accounts payable
677
811
Accrued liabilities: Employee compensation
492
594
Accrued interest
211
189
Other
1,877
532
Total current liabilities
3,422
2,282
Long-term debt (h)
13,106
13,385
Deferred income taxes
29
200
Long-term operating lease liabilities
508
487
Other long-term liabilities
913
894
Total liabilities
17,978
17,248
Redeemable noncontrolling interests in equity of consolidated
subsidiaries
489
502
STOCKHOLDERS’ DEFICIT Community Health Systems, Inc. stockholders’
deficit: 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; 119,628,652 shares issued and outstanding at June 30,
2020, and 117,822,631 shares issued and outstanding at December 31,
2019
1
1
Additional paid-in capital
2,008
2,008
Accumulated other comprehensive loss
(5
)
(9
)
Accumulated deficit
(4,131
)
(4,218
)
Total Community Health Systems, Inc. stockholders’ deficit
(2,127
)
(2,218
)
Noncontrolling interests in equity of consolidated subsidiaries
75
77
Total stockholders’ deficit
(2,052
)
(2,141
)
Total liabilities and stockholders’ deficit $
16,415
$
15,609
____ For footnotes, see pages 14, 15 and
16.
COMMUNITY HEALTH SYSTEMS, INC.
AND SUBSIDIARIES
Condensed Consolidated
Statements of Cash Flows
(In millions)
(Unaudited)
Six Months Ended June
30,
2020
2019
Cash flows from operating activities Net income (loss) $
126
$
(246
)
Adjustments to reconcile net income (loss) to net cash provided by
operating activities: Depreciation and amortization
285
305
Deferred income taxes
(242
)
2
Government and other legal settlements and related costs (g)
4
9
Stock-based compensation expense
5
6
Impairment and loss on sale of businesses, net (f)
56
71
Loss from early extinguishment of debt
4
31
Other non-cash expenses, net
73
101
Changes in operating assets and liabilities, net of effects of
acquisitions and divestitures: Patient accounts receivable
313
(7
)
Supplies, prepaid expenses and other current assets
21
72
Medicare accelerated payments
1,158
-
Unrecognized pandemic relief funds
116
-
Accounts payable, accrued liabilities and income taxes
(160
)
25
Other
(49
)
(104
)
Net cash provided by operating activities
1,710
265
Cash flows from investing activities Acquisitions of
facilities and other related businesses
-
(13
)
Purchases of property and equipment
(192
)
(212
)
Proceeds from disposition of hospitals and other ancillary
operations
152
161
Proceeds from sale of property and equipment
2
1
Purchases of available-for-sale debt securities and equity
securities
(39
)
(39
)
Proceeds from sales of available-for-sale debt securities and
equity securities
43
52
Increase in other investments
(19
)
(97
)
Net cash used in investing activities
(53
)
(147
)
Cash flows from financing activities Repurchase of
restricted stock shares for payroll tax withholding requirements
(1
)
(1
)
Deferred financing costs and other debt-related costs
(32
)
(28
)
Proceeds from noncontrolling investors in joint ventures
-
2
Redemption of noncontrolling investments in joint ventures
(2
)
(2
)
Distributions to noncontrolling investors in joint ventures
(57
)
(57
)
Proceeds from sale-lease back
2
-
Other borrowings
31
23
Issuance of long-term debt
1,462
2,034
Proceeds from ABL facility
540
25
Repayments of long-term indebtedness
(2,264
)
(2,103
)
Net cash used in financing activities
(321
)
(107
)
Net change in cash and cash equivalents
1,336
11
Cash and cash equivalents at beginning of period
216
196
Cash and cash equivalents at end of period $
1,552
$
207
____
For footnotes, see pages 14, 15 and
16.
Footnotes to Financial Highlights, Financial
Statements and Selected Operating Data
(a) Both financial and statistical results include the operating
results of divested hospitals through the effective closing date of
each respective divestiture. Same-store operating results and
statistical information exclude the results of a hospital acquired
in 2019 and the hospitals divested in 2019 and 2020. There were no
discontinued operations reported for 2019 and 2020.
(b) The following table provides information needed to calculate
earnings (loss) per share, which is adjusted for income
attributable to noncontrolling interests (in millions):
Three Months Ended
Six Months Ended
June 30,
June 30,
2020
2019
2020
2019
Net income (loss) attributable to Community Health Systems, Inc.
common stockholders: Net income (loss) $
93
$
(146
)
$
126
$
(246
)
Less: Income attributable to noncontrolling interests, net of taxes
23
21
39
39
Net income (loss) attributable to Community Health Systems, Inc.
common stockholders — basic and diluted $
70
$
(167
)
$
87
$
(285
)
(c) EBITDA is a non-GAAP financial measure which consists of net
income (loss) attributable to Community Health Systems, Inc. before
interest, income taxes, and depreciation and amortization. Adjusted
EBITDA, also a non-GAAP financial measure, is EBITDA adjusted to
add back net income attributable to noncontrolling interests and to
exclude loss (gain) from early extinguishment of debt, impairment
and loss on sale of businesses, expense related to government and
other legal settlements and related costs, expense related to
employee termination benefits and other restructuring charges,
expense from settlement and fair value adjustments on the CVR
agreement liability related to the HMA legal proceedings and
related legal expenses, the impact of changes in estimate to
increase the professional liability claims accrual recorded during
the second quarter of 2019 (which estimate was further revised in
the third quarter of 2019 based on updated actuarial analysis) with
respect to claims incurred in 2016 and prior years, and expense
related to the valuation allowance recorded in the second quarter
of 2019 to reserve the outstanding balance of a promissory note
received from the buyer in connection with the sale of two of the
Company’s hospitals in 2017, as well as income from a reduction of
the valuation allowance on the outstanding balance of a promissory
note from the buyer of another hospital. 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 adds back 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 reports Adjusted EBITDA as a
measure of financial performance. Adjusted EBITDA is a key measure
used by management to assess the operating performance of the
Company’s hospital operations and to make decisions on the
allocation of resources. Adjusted EBITDA is also used to evaluate
the performance of the Company’s executive management team and is
one of the primary metrics used in connection with determining
short-term cash incentive compensation and the achievement of
vesting criteria with respect to performance-based equity awards.
In addition, management utilizes Adjusted EBITDA in assessing the
Company’s consolidated results of operations and operational
performance and in comparing the Company’s results of operations
between periods. The Company believes it is useful to provide
investors and other users of the Company’s financial statements
this performance measure to align with how management assesses the
Company’s results of operations. Adjusted EBITDA also is comparable
to a similar metric called Consolidated EBITDA, as defined in the
Company’s asset-based loan facility (the “ABL Facility”), which is
a key component in the determination of the Company’s compliance
with certain covenants under the ABL Facility (including the
Company’s ability to service debt and incur capital expenditures),
and is used to determine the interest rate and commitment fee
payable under the ABL Facility (although Adjusted EBITDA does not
include all of the adjustments described in the ABL Facility).
Footnotes to Financial Highlights,
Financial Statements and Selected Operating Data
(Continued)
Adjusted EBITDA is not a measurement of financial performance
under U.S. GAAP. It should not be considered in isolation or as a
substitute for net income, operating income, or any other
performance measure calculated in accordance with U.S. GAAP. The
items excluded from Adjusted EBITDA are significant components in
understanding and evaluating financial performance. The Company
believes such adjustments are appropriate as the magnitude and
frequency of such items can vary significantly and are not related
to the assessment of normal operating performance. Additionally,
this calculation of Adjusted EBITDA may not be comparable to
similarly titled measures reported by other companies.
The following table reflects the reconciliation of Adjusted
EBITDA, as defined, to net income (loss) attributable to Community
Health Systems, Inc. stockholders as derived directly from the
condensed consolidated financial statements (in millions):
Three Months Ended
Six Months Ended
June 30,
June 30,
2020
2019
2020
2019
Net income (loss) attributable to Community Health Systems, Inc.
stockholders
$
70
$
(167
)
$
87
$
(285
)
Adjustments: (Benefit from) provision for income taxes
(58
)
(3
)
(241
)
3
Depreciation and amortization
141
153
285
305
Net income attributable to noncontrolling interests
23
21
39
39
Interest expense, net
260
265
523
522
Loss from early extinguishment of debt
-
-
4
31
Impairment and loss on sale of businesses, net
10
33
56
71
Expense from government and other legal settlements and related
costs
2
4
4
9
Expense from settlement and legal expenses related to cases covered
by the CVR
1
2
1
4
Expense related to employee termination benefits and other
restructuring charges
5
1
5
1
Change in valuation allowances recorded for promissory notes
-
23
-
23
Change in estimate for professional liability claims accrual
-
70
-
70
Adjusted EBITDA $
454
$
402
$
763
$
793
(d) The following table sets forth components reconciling the
basic weighted-average number of shares to the diluted
weighted-average number of shares (in millions):
Three Months Ended
Six Months Ended
June 30,
June 30,
2020
2019
2020
2019
Weighted-average number of shares outstanding - basic
115
114
115
114
Add effect of dilutive securities: Stock awards and options
-
-
-
-
Weighted-average number of shares outstanding - diluted
115
114
115
114
The effect of restricted stock and stock option awards on the
diluted shares calculation was an increase of 41,253 shares and
59,533 shares during the three and six months ended June 30, 2020,
respectively. The Company generated a net loss attributable to
Community Health Systems, Inc. common stockholders for the three
and six months ended June 30, 2019, so the effect of dilutive
securities is not considered because their effect would be
antidilutive. If the Company had generated net income during the
three and six months ended June 30, 2019, the effect of restricted
stock and stock option awards on the diluted shares calculation
would have been an increase in shares of 30,472 and 44,867,
respectively.
Footnotes to Financial Highlights, Financial
Statements and Selected Operating Data (Continued)
(e) The following supplemental table reconciles net income
(loss) attributable to Community Health Systems, Inc. common
stockholders, as reported, on a per share (diluted) basis, to net
income (loss) attributable to Community Health Systems, Inc. common
stockholders per share (diluted) with the adjustments described
herein (total per share amounts may not add due to rounding). The
Company believes that the presentation of non‑GAAP adjusted net
income (loss) attributable to Community Health Systems, Inc. common
stockholders per share (diluted) presents useful information to
investors by highlighting the impact on net income (loss)
attributable to Community Health Systems, Inc. common stockholders
per share (diluted) of selected items used in calculating Adjusted
EBITDA which may not reflect the Company’s underlying operating
performance and assisting in comparing the Company’s results of
operations between periods.
Three Months Ended
Six Months Ended
June 30,
June 30,
2020
2019
2020
2019
Net income (loss), as reported
$ 0.61
$ (1.47
)
$ 0.76
$ (2.51
)
Adjustments: Loss from early extinguishment of debt
-
-
0.03
0.21
Impairment and loss on sale of businesses, net
0.19
0.33
0.50
0.58
Expense from government and other legal settlements and related
costs
0.01
0.03
0.03
0.06
Expense from settlement and legal expenses related to cases covered
by the CVR
-
0.01 0.01 0.02 Expense related to employee termination benefits and
other restructuring charges
0.04
0.01 0.04 0.01 Change in valuation allowances recorded for
promissory notes
-
0.15
-
0.15
Change in estimate for professional liability claims accrual
-
0.47
-
0.47
Change in tax valuation allowance
-
-
(2.09
)
-
Net income (loss), excluding adjustments
$ 0.85
$ (0.47
)
$ (0.73
)
$ (1.00
)
(f) Both income from operations and net income (loss) for the
three months ended June 30, 2020 and 2019, included non-cash
expense of approximately $10 million and $33 million, respectively,
primarily from impairment charges to reduce the value of long-lived
assets, including allocated goodwill, at hospitals that the Company
has identified for sale or has sold, and at certain underperforming
hospitals. Both income from operations and net income (loss) for
the six months ended June 30, 2020 and 2019, included non-cash
expense of approximately $56 million and $71 million, respectively,
primarily from impairment charges to reduce the value of long-lived
assets, including allocated goodwill, at hospitals that the Company
has identified for sale or has sold, and at certain underperforming
hospitals. These impairment charges do not have an impact on the
calculation of the Company’s financial covenants under the ABL
Facility.
(g) The $(0.01) per share (diluted) and $(0.03) per share
(diluted) of expense for “Government and other legal settlements
and related costs” for the three months ended June 30, 2020 and
2019, respectively, is the net impact of several lawsuits settled
in principle during the related periods, and related legal
expenses. The $(0.03) per share (diluted) and $(0.06) per share
(diluted) of expense for “Government and other legal settlements
and related costs” for the six months ended June 30, 2020 and 2019,
respectively, is the net impact of several lawsuits settled in
principle during the related periods, and related legal
expenses.
(h) At June 30, 2020, the Company had no outstanding borrowings
and approximately $434 million of borrowing capacity (after taking
into consideration $180 million of outstanding letters of credit)
under the ABL Facility, with the ability to increase borrowings up
to $1.0 billion.
Forward-Looking Statements
This press release contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as
amended, Section 21E of the Securities Exchange Act of 1934, as
amended, and the Private Securities Litigation Reform Act of 1995
that involve risk and uncertainties. All statements in this press
release other than statements of historical fact, including
statements regarding expected operating results, and other events
that depend upon or refer to future events or conditions or that
include words such as “expects,” “anticipates,” “intends,” “plans,”
“believes,” “estimates,” “thinks,” and similar expressions, are
forward-looking statements. 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 may be 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
press release.
These factors include, among other things:
- developments related to COVID-19, including, without
limitation, related to the length and severity of the pandemic; the
volume of canceled or rescheduled procedures; the volume of
COVID-19 patients cared for across our health systems; the timing
and availability of effective medical treatments and vaccines;
measures we are taking to respond to the COVID-19 pandemic; the
impact of government and administrative regulation on us; changes
in net revenue due to patient volumes, payor mix and negative
macroeconomic conditions; increased expenses related to labor,
supply chain or other expenditures; workforce disruptions; and
supply shortages and disruptions;
- uncertainty regarding the implementation of the CARES Act, the
PPPHCE Act, and any other future stimulus measures related to
COVID-19, including the magnitude and timing of any future payments
or benefits we may receive or realize thereunder;
- general economic and business conditions, both nationally and
in the regions in which we operate, including economic and business
conditions resulting from the COVID-19 pandemic;
- the impact of current or future federal and state health reform
initiatives, including, without limitation, the Affordable Care
Act, and the potential for the Affordable Care Act to be repealed
or found unconstitutional or otherwise invalidated, or for
additional changes to the law, its implementation or its
interpretation (including through executive orders and court
challenges);
- the extent to and manner in which states support increases,
decreases or changes in Medicaid programs, implement health
insurance exchanges or alter the provision of healthcare to state
residents through regulation or otherwise;
- the future and long-term viability of health insurance
exchanges and potential changes to the beneficiary enrollment
process;
- risks associated with our substantial indebtedness, leverage
and debt service obligations, including our ability to refinance
such indebtedness on acceptable terms or to incur additional
indebtedness, and our ability to remain in compliance with debt
covenants, as well as risks associated with disruptions in the
financial and capital markets as the result of the COVID‑19
pandemic which could impact us from a financing and liquidity
perspective;
- demographic changes;
- changes in, or the failure to comply with, federal, state or
local laws or governmental regulations affecting our business,
including any such laws or governmental regulations which are
adopted in connection with the COVID-19 pandemic;
- potential adverse impact of known and unknown government
investigations, audits, and federal and state false claims act
litigation and other legal proceedings;
- our ability, where appropriate, to enter into and maintain
provider arrangements with payors and the terms of these
arrangements, which may be further affected by the increasing
consolidation of health insurers and managed care companies and
vertical integration efforts involving payors and healthcare
providers;
- changes in, or the failure to comply with, contract terms with
payors and changes in reimbursement policies or rates paid by
federal or state healthcare programs or commercial payors;
- any potential additional impairments in the carrying value of
goodwill, other intangible assets, or other long-lived assets, or
changes in the useful lives of other intangible assets;
- changes in inpatient or outpatient Medicare and Medicaid
payment levels and methodologies;
- the effects related to the continued implementation of the
sequestration spending reductions and the potential for future
deficit reduction legislation;
- increases in the amount and risk of collectability of patient
accounts receivable, including decreases in collectability which
may result from, among other things, self-pay growth and
difficulties in recovering payments for which patients are
responsible, including co-pays and deductibles;
- the efforts of insurers, healthcare providers, large employer
groups and others to contain healthcare costs, including the trend
toward value-based purchasing;
- increases in wages as a result of inflation or competition for
highly technical positions and rising supply and drug 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, at reasonable employment
costs, qualified personnel, key management, physicians, nurses and
other healthcare workers;
- trends toward treatment of patients in less acute or specialty
healthcare settings, including ambulatory surgery centers or
specialty hospitals or via telehealth;
- changes in medical or other technology;
- changes in U.S. GAAP;
- the availability and terms of capital to fund any additional
acquisitions or replacement facilities or other capital
expenditures;
- our ability to successfully make acquisitions or complete
divestitures, including the disposition of hospitals and
non‑hospital businesses pursuant to our portfolio rationalization
and deleveraging strategy, our ability to complete any such
acquisitions or divestitures on desired terms or at all, the timing
of the completion of any such acquisitions or divestitures, and our
ability to realize the intended benefits from any such acquisitions
or divestitures;
- the impact that changes in our relationships with joint venture
or syndication partners could have on effectively operating our
hospitals or ancillary services or in advancing strategic
opportunities;
- our ability to successfully integrate any acquired hospitals,
or to recognize expected synergies from acquisitions;
- the impact of seasonal severe weather conditions, including the
timing and amount of insurance recoveries in relation to severe
weather events;
- our ability to obtain adequate levels of insurance, including
general liability, professional liability, and directors and
officers liability insurance;
- timeliness of reimbursement payments received under government
programs;
- effects related to pandemics, epidemics, or outbreaks of
infectious diseases, including the novel coronavirus causing the
disease known as COVID-19 as noted above;
- the impact of cyber-attacks or security breaches;
- any failure to comply with the terms of the Corporate Integrity
Agreement;
- the concentration of our revenue in a small number of
states;
- our ability to realize anticipated cost savings and other
benefits from our current strategic and operational cost savings
initiatives;
- changes in interpretations, assumptions and expectations
regarding the Tax Cuts and Jobs Act; and
- the other risk factors set forth in our in our Annual Report on
Form 10-K for the year ended December 31, 2019, filed with the
Securities and Exchange Commission on February 20, 2020, our
Quarterly Report on Form 10-Q for the three months ended March 31,
2020, filed on April 29, 2020, and other public filings with the
Securities and Exchange Commission.
The consolidated operating results for the three and six months
ended June 30, 2020, are not necessarily indicative of the results
that may be experienced for any future periods. 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.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200728005910/en/
Investor Contact: Kevin Hammons Executive Vice President and
Chief Financial Officer (615) 465-7000
Community Health Systems (NYSE:CYH)
Historical Stock Chart
From Mar 2024 to Apr 2024
Community Health Systems (NYSE:CYH)
Historical Stock Chart
From Apr 2023 to Apr 2024