Community Health Systems, Inc. (NYSE: CYH) (the “Company”) today
announced financial and operating results for the three and six
months ended June 30, 2023.
The following highlights the financial and operating results for
the three months ended June 30, 2023.
- Net operating revenues totaled $3.115 billion.
- Net loss attributable to Community Health Systems, Inc.
stockholders was $(38) million, or $(0.29) per share (diluted),
compared to $(326) million, or $(2.52) per share (diluted), for the
same period in 2022. Excluding the adjusting items as presented in
the table in footnote (e) on page 15, net loss attributable to
Community Health Systems, Inc. stockholders was $(0.22) per share
(diluted), compared to $(2.52) per share (diluted) for the same
period in 2022.
- Adjusted EBITDA was $373 million.
- Net cash provided by operating activities was $86 million
for the three months ended June 30, 2023, compared to $53 million
for the same period in 2022.
- On a same-store basis, admissions increased 4.8 percent and
adjusted admissions increased 4.9 percent, compared to the same
period in 2022.
Commenting on the results, Tim L. Hingtgen, chief executive
officer of Community Health Systems, Inc., said, "Our continued
progress in the second quarter included sequential improvements in
key operating metrics including patient volumes and net operating
revenues, among others. During the quarter, we saw further recovery
in the utilization of our healthcare services and we executed key
growth and expense management initiatives that are producing strong
results for our markets and the Company overall. Other strategic
developments are expected to have a positive impact moving forward,
including recent investments to modernize our business operations.
We are in the process of redesigning numerous workflows that will
further standardize and centralize key business functions across
our organization, which we are referring to as Project Empower. As
part of Project Empower, we are nearing the launch of a new
Enterprise Resource Planning (ERP) platform which will enable us to
leverage this new way of doing business as we streamline and
enhance many business support services.”
Three Months Ended June 30, 2023
Net operating revenues for the three months ended June 30, 2023,
totaled $3.115 billion, a 6.2 percent increase compared to $2.934
billion for the same period in 2022. On a same-store basis, net
operating revenues increased 9.2 percent for the three months ended
June 30, 2023, compared to the same period in 2022. Net operating
revenues for the three months ended June 30, 2023, reflect a 0.9
percent increase in both admissions and adjusted admissions
compared to the same period in 2022. On a same-store basis,
admissions increased 4.8 percent and adjusted admissions increased
4.9 percent for the three months ended June 30, 2023, compared to
the same period in 2022.
Net loss attributable to Community Health Systems, Inc.
stockholders was $(38) million, or $(0.29) per share (diluted), for
the three months ended June 30, 2023, compared to $(326) million,
or $(2.52) per share (diluted), for the same period in 2022.
Excluding the adjusting items as presented in the table in footnote
(e) on page 15, net loss attributable to Community Health Systems,
Inc. stockholders was $(0.22) per share (diluted) for the three
months ended June 30, 2023, compared to $(2.52) per share (diluted)
for the same period in 2022. During the three months ended June 30,
2023, pandemic relief funds did not materially impact net loss
attributable to Community Health Systems, Inc. stockholders. During
the three months ended June 30, 2022, pandemic relief funds had a
positive impact on net loss attributable to Community Health
Systems, Inc. stockholders (both on a consolidated and adjusted
basis) of approximately $6 million, or $0.05 on a per share
(diluted) basis.
Adjusted EBITDA for the three months ended June 30, 2023, was
$373 million compared to $253 million for the same period in 2022.
During the three months ended June 30, 2023, pandemic relief funds
did not materially impact Adjusted EBITDA. During the three months
ended June 30, 2022, pandemic relief funds had a positive impact on
Adjusted EBITDA of approximately $8 million.
The decrease in net loss attributable to Community Health
Systems, Inc. stockholders and increase in Adjusted EBITDA for the
three months ended June 30, 2023, compared to the same period in
2022, is primarily due to higher inpatient and outpatient volumes,
increased reimbursement rates, higher acuity, an increase in
non-patient revenue, and lower costs for contract labor, partially
offset by higher costs for professional liability insurance and
increased rates for outsourced medical specialists.
Six Months Ended June 30, 2023
Net operating revenues for the six months ended June 30, 2023,
totaled $6.223 billion, a 3.0 percent increase compared to $6.044
billion for the same period in 2022. On a same-store basis, net
operating revenues increased 5.3 percent for the six months ended
June 30, 2023, compared to the same period in 2022. Net operating
revenues for the six months ended June 30, 2023, reflect a 1.0
percent increase in admissions and a 3.4 percent increase in
adjusted admissions, compared to the same period in 2022. On a
same-store basis, admissions increased 4.8 percent and adjusted
admissions increased 7.2 percent for the six months ended June 30,
2023, compared to the same period in 2022.
Net loss attributable to Community Health Systems, Inc.
stockholders was $(89) million, or $(0.68) per share (diluted), for
the six months ended June 30, 2023, compared to $(327) million, or
$(2.54) per share (diluted), for the same period in 2022. Excluding
the adjusting items as presented in the table in footnote (e) on
page 15, net loss attributable to Community Health Systems, Inc.
stockholders was $(0.65) per share (diluted) for the six months
ended June 30, 2023, compared to $(2.40) per share (diluted) for
the same period in 2022. During the six months ended June 30, 2023,
pandemic relief funds did not materially impact net loss
attributable to Community Health Systems, Inc. stockholders. During
the six months ended June 30, 2022, pandemic relief funds had a
positive impact on net loss attributable to Community Health
Systems, Inc. stockholders (both on a consolidated and adjusted
basis) of approximately $41 million, or $0.32 on a per share
(diluted) basis.
Adjusted EBITDA for the six months ended June 30, 2023, was $707
million compared to $662 million for the same period in 2022.
During the six months ended June 30, 2023, pandemic relief funds
did not materially impact Adjusted EBITDA. During the six months
ended June 30, 2022, pandemic relief funds had a positive impact on
Adjusted EBITDA of approximately $55 million.
The decrease in net loss attributable to Community Health
Systems, Inc. stockholders and increase in Adjusted EBITDA for the
six months ended June 30, 2023, compared to the same period in
2022, is primarily due to stronger inpatient and outpatient
volumes, increased reimbursement rates, higher acuity, an increase
in non-patient revenue, and reduced expense for contract labor,
partially offset by unfavorable changes in payor mix, a reduction
in pandemic relief funds recognized, increased salaries and
benefits expense, higher costs for professional liability
insurance, and increased rates for outsourced medical
specialists.
Other
During 2023, through the date of this press release, the Company
has completed the divestiture of three hospitals. On January 1,
2023, the Company completed the divestiture of one hospital (in
respect of which the Company received proceeds at a preliminary
closing on December 31, 2022). On April 1, 2023, the Company
completed the divestiture of one hospital (in respect of which the
Company received proceeds at a preliminary closing on March 31,
2023). On July 1, 2023, the Company completed the divestiture of
one hospital (in respect of which the Company received proceeds at
a preliminary closing on June 30, 2023). Financial and statistical
data for 2023 and 2022 presented in this press release includes the
operating results of divested or closed businesses for the periods
prior to the consummation of the respective divestiture or closure.
Same-store operating results and statistical information include
operating results of businesses operated in the comparable current
year and prior year periods and exclude businesses divested or
closed in 2022 and the six months ended June 30, 2023.
Information About Non-GAAP Financial Measures
This press 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 (gain) loss on
sale of businesses, expense related to the Business Transformation
Costs (as defined in footnote (c) to the Financial Highlights,
Financial Statements and Selected Operating Data below), gain on
sale of equity interests in Macon Healthcare, LLC, expense related
to government and other legal matters and related costs, income
during the fourth quarter of 2021 associated with the settlement of
litigation for the recovery of amounts of certain professional
liability claims settled in 2020 covered by third-party insurance
policies, expense related to employee termination benefits and
other restructuring charges, the impact of a change in estimate to
increase the professional liability claims accrual recorded during
the fourth quarter of 2022 with respect to claims incurred in prior
years related to divested locations and the gain on sale by
HealthTrust Purchasing Group, L.P. (“HealthTrust”) of a majority
interest in CoreTrust Holdings, LLC (“CoreTrust”) completed during
the fourth quarter of 2022. For information regarding why the
Company believes Adjusted EBITDA provides useful information to
investors, and for a reconciliation of Adjusted EBITDA to net loss
attributable to Community Health Systems, Inc. stockholders, see
footnote (c) to the Financial Highlights, Financial Statements and
Selected Operating Data below.
Additionally, this press release presents adjusted net loss
attributable to Community Health Systems, Inc. stockholders per
share (diluted), a non-GAAP financial measure, to reflect the
impact on net loss attributable to Community Health Systems, Inc.
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 loss attributable to Community
Health Systems, Inc. stockholders per share (diluted), see footnote
(e) to the Financial Highlights, Financial Statements and Selected
Operating Data below.
The non-GAAP financial measures set forth above are not
measurements of financial performance under U.S. GAAP, and should
not be considered in isolation or as a substitute for any financial
measure calculated in accordance with U.S. GAAP. Additionally, the
calculation of these non-GAAP financial measures may not be
comparable to similarly titled measures disclosed by other
companies.
The Company’s annual earnings guidance for 2023, as provided in
our press release issued on February 15, 2023, is reaffirmed. The
2023 guidance is based on the Company’s historical operating
performance, current trends and other assumptions the Company
believes are reasonable. Assumptions underlying the annual earnings
guidance provided on February 15, 2023 are unchanged.
About Community Health Systems, Inc.
Community Health Systems, Inc. is one of the nation’s largest
healthcare companies. The Company’s affiliates are leading
providers of healthcare services, developing and operating
healthcare delivery systems in 43 distinct markets across 15
states. As of August 2, 2023, the Company’s subsidiaries own or
lease 77 affiliated hospitals with approximately 13,000 beds and
operate more than 1,000 sites of care, including physician
practices, urgent care centers, freestanding emergency departments,
occupational medicine clinics, imaging centers, cancer centers and
ambulatory surgery centers.
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
Thursday, August 3, 2023, at 10:00 a.m. Central, 11:00 a.m.
Eastern, to review financial and operating results for the second
quarter ended June 30, 2023. 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. 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,
2023
2022
2023
2022
Net operating revenues
$
3,115
$
2,934
$
6,223
$
6,044
Net income (loss) (f)
2
(298
)
(18
)
(268
)
Net loss attributable to Community Health
Systems, Inc. stockholders
(38
)
(326
)
(89
)
(327
)
Adjusted EBITDA (c)
373
253
707
662
Net cash provided by operating
activities
86
53
91
154
Loss per share attributable to Community
Health Systems, Inc. stockholders:
Basic (f)
$
(0.29
)
$
(2.52
)
$
(0.68
)
$
(2.54
)
Diluted (e), (f)
(0.29
)
(2.52
)
(0.68
)
(2.54
)
Weighted-average number of shares
outstanding (d):
Basic
131
129
130
128
Diluted
131
129
130
128
_________________________
For footnotes, see pages 13, 14 and
15.
COMMUNITY HEALTH SYSTEMS, INC.
AND SUBSIDIARIES
Condensed Consolidated
Statements of Loss (a)(b)
(In millions, except per share
amounts)
(Unaudited)
Three Months Ended June
30,
2023
2022
% of Net
% of Net
Operating
Operating
Amount
Revenues
Amount
Revenues
Net operating revenues
$
3,115
100.0
%
$
2,934
100.0
%
Operating costs and expenses:
Salaries and benefits
1,338
42.9
%
1,295
44.1
%
Supplies
504
16.2
%
487
16.6
%
Other operating expenses
836
26.8
%
830
28.3
%
Lease cost and rent
80
2.6
%
78
2.7
%
Pandemic relief funds
-
-
%
(8
)
(0.3
)%
Depreciation and amortization
124
4.0
%
133
4.5
%
Impairment and (gain) loss on sale of
businesses, net (f)
(13
)
(0.4
)%
-
-
%
Total operating costs and expenses
2,869
92.1
%
2,815
95.9
%
Income from operations (f)
246
7.9
%
119
4.1
%
Interest expense, net
207
6.6
%
218
7.4
%
Equity in earnings of unconsolidated
affiliates
(1
)
(0.0
)%
(1
)
(0.0
)%
Income (loss) before income taxes
40
1.3
%
(98
)
(3.3
)%
Provision for income taxes
38
1.2
%
200
6.8
%
Net income (loss) (f)
2
0.1
%
(298
)
(10.1
)%
Less: Net income attributable to
noncontrolling interests
40
1.3
%
28
1.0
%
Net loss attributable to Community Health
Systems, Inc. stockholders
$
(38
)
(1.2
)%
$
(326
)
(11.1
)%
Loss per share attributable to Community
Health Systems, Inc. stockholders:
Basic (f)
$
(0.29
)
$
(2.52
)
Diluted (e), (f)
$
(0.29
)
$
(2.52
)
Weighted-average number of shares
outstanding (d):
Basic
131
129
Diluted
131
129
_________________________
For footnotes, see pages 13, 14 and
15.
COMMUNITY HEALTH SYSTEMS, INC.
AND SUBSIDIARIES
Condensed Consolidated
Statements of Loss (a)(b)
(In millions, except per share
amounts)
(Unaudited)
Six Months Ended June
30,
2023
2022
% of Net
% of Net
Operating
Operating
Amount
Revenues
Amount
Revenues
Net operating revenues
$
6,223
100.0
%
$
6,044
100.0
%
Operating costs and expenses:
Salaries and benefits
2,703
43.5
%
2,620
43.4
%
Supplies
1,011
16.2
%
985
16.3
%
Other operating expenses
1,671
26.9
%
1,683
27.8
%
Lease cost and rent
161
2.6
%
155
2.6
%
Pandemic relief funds
-
-
%
(55
)
(0.9
)%
Depreciation and amortization
255
4.1
%
261
4.3
%
Impairment and (gain) loss on sale of
businesses, net (f)
(35
)
(0.6
)%
6
0.1
%
Total operating costs and expenses
5,766
92.7
%
5,655
93.6
%
Income from operations (f)
457
7.3
%
389
6.4
%
Interest expense, net
414
6.6
%
435
7.2
%
Loss from early extinguishment of debt
-
-
%
5
-
%
Equity in earnings of unconsolidated
affiliates
(4
)
(0.1
)%
(6
)
(0.1
)%
Income (loss) before income taxes
47
0.8
%
(45
)
(0.7
)%
Provision for income taxes
65
1.1
%
223
3.7
%
Net loss (f)
(18
)
(0.3
)%
(268
)
(4.4
)%
Less: Net income attributable to
noncontrolling interests
71
1.1
%
59
1.0
%
Net loss attributable to Community Health
Systems, Inc. stockholders
$
(89
)
(1.4
)%
$
(327
)
(5.4
)%
Loss per share attributable to Community
Health Systems, Inc. stockholders:
Basic (f)
$
(0.68
)
$
(2.54
)
Diluted (e), (f)
$
(0.68
)
$
(2.54
)
Weighted-average number of shares
outstanding (d):
Basic
130
128
Diluted
130
128
_________________________
For footnotes, see pages 13, 14 and
15.
COMMUNITY HEALTH SYSTEMS, INC.
AND SUBSIDIARIES
Condensed Consolidated
Statements of Comprehensive Loss
(In millions)
(Unaudited)
Three Months Ended
Six Months Ended
June 30,
June 30,
2023
2022
2023
2022
Net income (loss)
$
2
$
(298
)
$
(18
)
$
(268
)
Other comprehensive (loss) income, net of
income taxes:
Net change in fair value of
available-for-sale debt securities, net of tax
(1
)
(6
)
2
(14
)
Other comprehensive (loss) income
(1
)
(6
)
2
(14
)
Comprehensive income (loss)
1
(304
)
(16
)
(282
)
Less: Comprehensive income attributable to
noncontrolling interests
40
28
71
59
Comprehensive loss attributable to
Community Health Systems, Inc. stockholders
$
(39
)
$
(332
)
$
(87
)
$
(341
)
_________________________
For footnotes, see pages 13, 14 and
15.
COMMUNITY HEALTH SYSTEMS, INC.
AND SUBSIDIARIES
Selected Operating Data
(a)
(Dollars in millions)
(Unaudited)
Three Months Ended June
30,
Consolidated
Same-Store
2023
2022
% Change
2023
2022
% Change
Number of hospitals (at end of period)
78
84
78
78
Licensed beds (at end of period)
12,735
13,341
12,735
12,645
Beds in service (at end of period)
10,843
11,608
10,843
10,912
Admissions
108,799
107,805
0.9
%
108,326
103,356
4.8
%
Adjusted admissions
249,442
247,119
0.9
%
248,087
236,427
4.9
%
Patient days
486,142
498,189
484,735
480,071
Average length of stay (days)
4.5
4.6
4.5
4.6
Occupancy rate (average beds in
service)
49.3
%
47.3
%
49.3
%
48.5
%
Net operating revenues
$
3,115
$
2,934
6.2
%
$
3,104
$
2,842
9.2
%
Net inpatient revenues as a % of net
operating revenues
47.0
%
44.9
%
47.0
%
45.1
%
Net outpatient revenues as a % of net
operating revenues
53.0
%
55.1
%
53.0
%
54.9
%
Income from operations (f)
$
246
$
119
106.7
%
Income from operations as a % of net
operating revenues
7.9
%
4.1
%
Depreciation and amortization
$
124
$
133
Equity in earnings of unconsolidated
affiliates
$
(1
)
$
(1
)
Net loss attributable to Community Health
Systems, Inc. stockholders
$
(38
)
$
(326
)
88.3
%
Net loss attributable to Community Health
Systems, Inc. stockholders as a % of net operating revenues
-1.2
%
-11.1
%
Adjusted EBITDA (c)
$
373
$
253
47.4
%
Adjusted EBITDA as a % of net operating
revenues
12.0
%
8.6
%
Net cash provided by operating
activities
$
86
$
53
62.3
%
_________________________
For footnotes, see pages 13, 14 and
15.
COMMUNITY HEALTH SYSTEMS, INC.
AND SUBSIDIARIES
Selected Operating Data
(a)
(Dollars in millions)
(Unaudited)
Six Months Ended June
30,
Consolidated
Same-Store
2023
2022
% Change
2023
2022
% Change
Number of hospitals (at end of period)
78
84
78
78
Licensed beds (at end of period)
12,735
13,341
12,735
12,645
Beds in service (at end of period)
10,843
11,608
10,843
10,912
Admissions
218,423
216,172
1.0
%
217,063
207,081
4.8
%
Adjusted admissions
495,275
478,926
3.4
%
491,255
458,238
7.2
%
Patient days
994,067
1,049,443
989,478
1,011,899
Average length of stay (days)
4.6
4.9
4.6
4.8
Occupancy rate (average beds in
service)
50.6
%
50.1
%
50.6
%
51.4
%
Net operating revenues
$
6,223
$
6,044
3.0
%
$
6,173
$
5,862
5.3
%
Net inpatient revenues as a % of net
operating revenues
47.1
%
47.2
%
47.1
%
47.5
%
Net outpatient revenues as a % of net
operating revenues
52.9
%
52.8
%
52.9
%
52.5
%
Income from operations (f)
$
457
$
389
17.5
%
Income from operations as a % of net
operating revenues
7.3
%
6.4
%
Depreciation and amortization
$
255
$
261
Equity in earnings of unconsolidated
affiliates
$
(4
)
$
(6
)
Net loss attributable to Community Health
Systems, Inc. stockholders
$
(89
)
$
(327
)
72.8
%
Net loss attributable to Community Health
Systems, Inc. stockholders as a % of net operating revenues
-1.4
%
-5.4
%
Adjusted EBITDA (c)
$
707
$
662
6.8
%
Adjusted EBITDA as a % of net operating
revenues
11.4
%
11.0
%
Net cash provided by operating
activities
$
91
$
154
-40.9
%
_________________________
For footnotes, see pages 13, 14 and
15.
COMMUNITY HEALTH SYSTEMS, INC.
AND SUBSIDIARIES
Condensed Consolidated Balance
Sheets
(In millions, except share
data)
(Unaudited)
June 30, 2023
December 31, 2022
ASSETS
Current assets
Cash and cash equivalents
$
118
$
118
Patient accounts receivable
2,043
2,040
Supplies
333
353
Prepaid income taxes
100
99
Prepaid expenses and taxes
259
237
Other current assets
339
235
Total current assets
3,192
3,082
Property and equipment
9,527
9,639
Less accumulated depreciation and
amortization
(4,277
)
(4,274
)
Property and equipment, net
5,250
5,365
Goodwill
4,054
4,166
Deferred income taxes
49
49
Other asset, net
2,103
2,007
Total assets
$
14,648
$
14,669
LIABILITIES AND STOCKHOLDERS’
DEFICIT
Current liabilities
Current maturities of long-term debt
$
30
$
21
Current operating lease liabilities
134
148
Accounts payable
736
773
Accrued liabilities:
Employee compensation
560
637
Accrued interest
189
189
Other
427
418
Total current liabilities
2,076
2,186
Long-term debt (g)
11,728
11,614
Deferred income taxes
362
354
Long-term operating lease liabilities
580
605
Other long-term liabilities
722
644
Total liabilities
15,468
15,403
Redeemable noncontrolling interests in
equity of consolidated subsidiaries
583
541
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; 136,802,806 shares issued and
outstanding at June 30, 2023, and 134,703,717 shares issued and
outstanding at December 31, 2022
1
1
Additional paid-in capital
2,049
2,084
Accumulated other comprehensive loss
(19
)
(21
)
Accumulated deficit
(3,520
)
(3,431
)
Total Community Health Systems, Inc.
stockholders’ deficit
(1,489
)
(1,367
)
Noncontrolling interests in equity of
consolidated subsidiaries
86
92
Total stockholders’ deficit
(1,403
)
(1,275
)
Total liabilities and stockholders’
deficit
$
14,648
$
14,669
_________________________
For footnotes, see pages 13, 14 and
15.
COMMUNITY HEALTH SYSTEMS, INC.
AND SUBSIDIARIES
Condensed Consolidated
Statements of Cash Flows
(In millions)
(Unaudited)
Six Months Ended June
30,
2023
2022
Cash flows from operating activities
Net loss
$
(18
)
$
(268
)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization
255
261
Deferred income taxes
29
221
Stock-based compensation expense
10
8
Impairment and (gain) loss on sale of
businesses, net (f)
(35
)
6
Loss from early extinguishment of debt
-
5
Other non-cash expenses, net
88
95
Changes in operating assets and
liabilities, net of effects of acquisitions and divestitures:
Patient accounts receivable
(2
)
61
Supplies, prepaid expenses and other
current assets
(73
)
(72
)
Accounts payable, accrued liabilities and
income taxes
(130
)
(63
)
Other
(33
)
(100
)
Net cash provided by operating
activities
91
154
Cash flows from investing activities
Acquisitions of facilities and other
related businesses
(15
)
(4
)
Purchases of property and equipment
(227
)
(191
)
Proceeds from disposition of hospitals and
other ancillary operations
111
3
Proceeds from sale of property and
equipment
24
7
Purchases of available-for-sale debt
securities and equity securities
(99
)
(55
)
Proceeds from sales of available-for-sale
debt securities and equity securities
137
41
Purchases of investments in unconsolidated
affiliates
(7
)
(8
)
Increase in other investments
(29
)
(30
)
Net cash used in investing activities
(105
)
(237
)
Cash flows from financing activities
Repurchase of restricted stock shares for
payroll tax withholding requirements
(4
)
(8
)
Deferred financing costs and other
debt-related costs
-
(73
)
Proceeds from noncontrolling investors in
joint ventures
3
1
Redemption of noncontrolling investments
in joint ventures
(1
)
(1
)
Distributions to noncontrolling investors
in joint ventures
(83
)
(73
)
Other borrowings
29
34
Issuance of long-term debt
-
1,535
Proceeds from ABL Facility
1,527
-
Repayments of long-term indebtedness
(1,457
)
(1,493
)
Net cash provided by (used in) financing
activities
14
(78
)
Net change in cash and cash
equivalents
-
(161
)
Cash and cash equivalents at beginning of
period
118
507
Cash and cash equivalents at end of
period
$
118
$
346
_________________________
For footnotes, see pages 13, 14 and
15.
Footnotes to Financial
Highlights, Financial Statements and Selected Operating
Data
(a)
Both financial and statistical results
include the operating results of divested or closed businesses for
the periods prior to the consummation of the respective divestiture
or closing. Same-store operating results and statistical
information include operating results of businesses operated in the
comparable current year and prior year periods and exclude
businesses divested or closed in 2022 and the six months ended June
30, 2023. There were no discontinued operations reported for 2023
and 2022.
(b)
The following table provides information
needed to calculate loss per share, which is adjusted for income
attributable to noncontrolling interests (in millions):
Three Months Ended
Six Months Ended
June 30,
June 30,
2023
2022
2023
2022
Net loss attributable to Community Health
Systems, Inc. stockholders:
Net income (loss)
$
2
$
(298
)
$
(18
)
$
(268
)
Less: Income attributable to
noncontrolling interests, net of taxes
40
28
71
59
Net loss attributable to Community Health
Systems, Inc. stockholders — basic and diluted
$
(38
)
$
(326
)
$
(89
)
$
(327
)
(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 (gain) loss on
sale of businesses, expense from third-party consulting costs
associated with significant process and systems redesign across
multiple functions (the “Business Transformation Costs”) as part of
the Company’s multi-year initiative to modernize and consolidate
technology platforms and associated processes, gain on sale of
equity interests in Macon Healthcare, LLC, expense related to
government and other legal matters and related costs, income during
the fourth quarter of 2021 associated with the settlement of
litigation for the recovery of amounts of certain professional
liability claims settled in 2020 covered by third-party insurance
policies, expense related to employee termination benefits and
other restructuring charges, the impact of a change in estimate to
increase the professional liability claims accrual recorded during
the fourth quarter of 2022 with respect to claims incurred in prior
years related to divested locations and the gain on sale by
HealthTrust of a majority interest in CoreTrust completed during
the fourth quarter of 2022. The Company has incurred and will
continue to incur expenses, including but not limited to the
Business Transformation Costs, associated with the Company’s
multi-year, transformative initiative to modernize and consolidate
its technology platforms and associated processes, including the
implementation of a core enterprise resource planning (“ERP”)
system and the redesign of associated processes. The Company has
included the Business Transformation Costs as an adjustment in the
calculation of Adjusted EBITDA as a result of the fact that such
costs are discrete third-party consulting costs associated with
this multi-year technology initiative, which costs will not
continue once this initiative has been completed. The Company
believes that the Business Transformation Costs are not reflective
of the Company’s underlying results of operations and that
adjusting for the Business Transformation Costs is consistent with
the intended purpose of Adjusted EBITDA in assessing the Company’s
operational performance and enhancing comparability of the
Company’s operational performance between periods. 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. 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.
Footnotes to Financial
Highlights, Financial Statements and Selected Operating Data
(Continued)
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”) and the Company’s
existing note indentures, which is a key component in the
determination of the Company’s compliance with certain covenants
under the ABL Facility and such note indentures (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).
Adjusted EBITDA includes the Adjusted EBITDA attributable to
hospitals that were divested during the course of such year, but in
each case solely to the extent relating to the period prior to the
consummation of the applicable divestiture. 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
disclosed by other companies. The following table reflects
the reconciliation of Adjusted EBITDA, as defined, to net 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,
2023
2022
2023
2022
Net loss attributable to Community Health
Systems, Inc. stockholders
$
(38
)
$
(326
)
$
(89
)
$
(327
)
Adjustments:
Provision for income taxes
38
200
65
223
Depreciation and amortization
124
133
255
261
Net income attributable to noncontrolling
interests
40
28
71
59
Interest expense, net
207
218
414
435
Loss from early extinguishment of debt
-
-
-
5
Impairment and (gain) loss on sale of
businesses, net
(13
)
-
(35
)
6
Expense from government and other legal
matters and related costs
-
-
10
-
Expense from business transformation
costs
6
-
6
-
Expense related to employee termination
benefits and other restructuring charges
9
-
10
-
Adjusted EBITDA
$
373
$
253
$
707
$
662
(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,
2023
2022
2023
2022
Weighted-average number of shares
outstanding - basic
131
129
130
128
Add effect of dilutive securities:
Stock awards and options
-
-
-
-
Weighted-average number of shares
outstanding - diluted
131
129
130
128
Footnotes to Financial
Highlights, Financial Statements and Selected Operating Data
(Continued)
The Company generated a net loss attributable to Community Health
Systems, Inc. stockholders for each of the three and six-month
periods ended June 30, 2023 and 2022, so the effect of dilutive
securities is not considered because their effect would be
antidilutive. If the Company had generated net income, the effect
of stock awards and options on the diluted shares calculation would
have been an increase of 202,182 shares and 1,152,737 shares during
the three months ended June 30, 2023 and 2022, respectively, and
335,188 shares and 1,675,586 shares during the six months ended
June 30, 2023 and 2022, respectively.
(e)
The following supplemental table
reconciles net loss attributable to Community Health Systems, Inc.
stockholders, as reported, on a per share (diluted) basis, to net
loss attributable to Community Health Systems, Inc. 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 loss
attributable to Community Health Systems, Inc. stockholders per
share (diluted) presents useful information to investors by
highlighting the impact on net loss attributable to Community
Health Systems, Inc. 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,
2023
2022
2023
2022
Net loss per share (diluted), as
reported
$
(0.29
)
$
(2.52
)
$
(0.68
)
$
(2.54
)
Adjustments:
Loss from early extinguishment of debt
-
-
-
0.11
Impairment and (gain) loss on sale of
businesses, net
(0.02
)
-
(0.13
)
0.04
Expense from government and other legal
matters and related costs
-
-
0.06
-
Expense from business transformation
costs
0.04
-
0.04
-
Expense related to employee termination
benefits and other restructuring charges
0.05
-
0.06
-
Net loss per share (diluted), excluding
adjustments
$
(0.22
)
$
(2.52
)
$
(0.65
)
$
(2.40
)
(f)
Both income from operations and net income
(loss) included a net non-cash income of $13 million for the three
months ended June 30, 2023, and a net non-cash income of $35
million and expense of $6 million for the six months ended June 30,
2023 and 2022, respectively, primarily from gains on the sale of
certain businesses during such periods and also impairment charges
to reduce the value of certain long-lived assets at businesses the
Company identified for closure, sale or sold. These impairment
charges do not have an impact on the calculation of the Company’s
financial covenants under the ABL Facility.
(g)
The maximum aggregate principal amount
under the ABL Facility is $1.0 billion, subject to borrowing base
capacity. At June 30, 2023, the Company had outstanding borrowings
of $150 million and approximately $764 million of additional
borrowing capacity (after taking into consideration $85 million of
outstanding letters of credit) under the ABL Facility.
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 projections, 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:
- general economic and business conditions, both nationally and
in the regions in which we operate, including the current negative
macroeconomic conditions, ongoing inflationary pressures that have
significantly increased and may continue to significantly increase
our expenses, the current high interest rate environment, ongoing
challenging labor market conditions and labor shortages, including
the current and/or potential future adverse impact of such economic
conditions and other factors on our net operating revenues
(including our service mix, revenue mix, payor mix and/or patient
volumes) and our ability to collect outstanding receivables, as
well as the potential impact on us of financial and capital market
instability and/or disruptions to the banking system due to bank
failures and other factors, including any potential impact on our
ability to access and or obtain the return of cash and cash
equivalents, and/or our ability to access credit, liquidity and
capital market sources on acceptable terms or at all;
- the impact of current or future federal and state health reform
initiatives, including the Patient Protection and Affordable Care
Act, as amended by the Health Care and Education Reconciliation Act
of 2010 (the “Affordable Care Act”), and the potential for changes
to the Affordable Care Act, 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 legislation, 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;
- changes in, or the failure to comply with, federal, state or
local laws or governmental regulations affecting our business;
- potential adverse impact of known and unknown legal, regulatory
and governmental proceedings and other loss contingencies,
including governmental investigations and audits, and federal and
state false claims act litigation;
- 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 security breaches, cyber-attacks, loss of data, other
cybersecurity threats or incidents, and any actual or perceived
failures to comply with legal requirements governing the privacy
and security of health information or other regulated, sensitive or
confidential information, or legal requirements regarding data
privacy or data protection, and the impact of the security breach
announced by us on February 13, 2023, including legal,
reputational, and financial risks associated with this security
breach, existing and/or any future litigation associated with this
security breach, any potential regulatory inquiries to which we may
become subject in connection with this security breach, and the
extent of remediation and other additional costs that may be
incurred by us in connection with this security breach;
- any potential 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 implementation of the sequestration
spending reductions pursuant to both the Budget Control Act of 2011
and the Pay-As-You-Go Act of 2010 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;
- the impact of competitive labor market conditions and the
shortage of nurses, including in connection with our ability to
hire and retain qualified nurses, physicians, other medical
personnel and key management, and increased labor expenses as a
result of such competitive labor market conditions, inflation and
competition for such positions;
- the non-performance of third parties with whom we contract with
respect to providing hospital-based physicians and the
effectiveness of our efforts to mitigate such non-performance
including through acquisitions of outsourced medical specialist
businesses, engagement with new or replacement providers,
employment of physicians and re-negotiation or assumption of
existing contracts;
- any failure to obtain medical supplies or pharmaceuticals at
favorable prices;
- liabilities and other claims asserted against us, including
self-insured professional liability claims;
- 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;
- any failure of our ongoing process of redesigning and
consolidating key business functions, including through the
implementation of a new core enterprise resource planning system,
to proceed as expected or to be completed successfully;
- 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, 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
and/or outpatient facilities, or to recognize expected synergies
from acquisitions;
- the impact of severe weather conditions and climate change, as
well as the timing and amount of insurance recoveries in relation
to severe weather events;
- our ability to obtain adequate levels of insurance, including
cyber, 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 impact of any future
developments related to COVID-19 and the COVID-19 pandemic on our
business, results of operations, financial condition, and/or cash
flows;
- any failure to comply with our obligations under license or
technology agreements;
- challenging economic conditions in non-urban communities in
which we operate;
- 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;
- any changes in or interpretations of income tax laws and
regulations; and
- the risk factors set forth in our Annual Report on Form 10-K
for the year ended December 31, 2022, filed with the Securities and
Exchange Commission (the “SEC”) on February 17, 2023 and other
filings filed with the SEC.
The consolidated operating results for the three and six months
ended June 30, 2023, are not necessarily indicative of the results
that may be experienced for any future periods. The Company
cautions that the reaffirmation of our guidance for calendar year
2023 (which guidance was originally included in our February 15,
2023 press release) as set forth herein is based on currently
available information. The Company undertakes no obligation to
revise or update any forward-looking statements (including such
guidance), 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/20230802293040/en/
Kevin Hammons President and Chief Financial Officer (615)
465-7000
Community Health Systems (NYSE:CYH)
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