Community Health Systems, Inc. Announces Third Quarter 2013 Results with Net Operating Revenues of $3.2 Billion
Community Health Systems, Inc.W. Larry Cash, 615-465-7000Executive Vice President and Chief Financial Officer
Community Health Systems, Inc. (NYSE: CYH) (the “Company”) today announced financial and operating results for the three and nine months ended September 30, 2013.
Net operating revenues for the three months ended September 30, 2013, totaled $3.218 billion, a 0.2 percent increase compared with $3.212 billion for the same period in 2012. Income from continuing operations decreased to $21.6 million for the three months ended September 30, 2013, compared with $58.8 million for the same period in 2012. Both income from continuing operations and net income attributable to Community Health Systems, Inc. common stockholders were $0.04 per share (diluted) for the three months ended September 30, 2013, compared with $0.49 per share (diluted) for the same period in 2012. We are currently in negotiations with the Department of Justice about resolving its claims in connection with the Department’s investigation into the Company’s short stay hospital admissions for the years 2005-2010, as well as their investigation at our hospital in Laredo, Texas. Based on those negotiations, which are not final, we believe that a reserve of $98 million, or $0.65 per share (diluted), is sufficient to cover the federal government’s claims for Medicare admissions, certain claims specifically related to our hospital in Laredo, Texas, and on other related legal expenses. This reserve is not meant to include claims in this investigation arising from Tricare, Medicaid, or third party legal expenses. The results for the three months ended September 30, 2013, include $0.65 per share (diluted) of expenses related to this reserve as well as $0.03 per share (diluted) of expenses related to the anticipated acquisition of Health Management Associates, Inc. (“HMA”). Excluding these expenses, both income from continuing operations and net income attributable to Community Health Systems, Inc. common stockholders were $0.72 per share (diluted) for the three months ended September 30, 2013. For the three months ended September 30, 2012, excluding the loss from early extinguishment of debt of $0.37 per share (diluted), both income from continuing operations and net income attributable to Community Health Systems, Inc. common stockholders were $0.86 per share (diluted). Weighted-average shares outstanding (diluted) were 94.5 million for the three months ended September 30, 2013, and 90.0 million for the three months ended September 30, 2012.
Adjusted EBITDA for the three months ended September 30, 2013, was $375.2 million compared with $477.3 million for the same period in 2012, representing a 21.4 percent decrease. Excluding the $98.0 million reserve for governmental settlement referenced above and $4.2 million of expenses related to the anticipated HMA acquisition, Adjusted EBITDA was $477.4 million for the three months ended September 30, 2013. Adjusted EBITDA is EBITDA adjusted to exclude discontinued operations, loss from early extinguishment of debt, and net income attributable to non-controlling interests. The Company uses Adjusted EBITDA as a measure of liquidity. A reconciliation of Adjusted EBITDA to net cash provided by operating activities is included in the attached footnotes.
The consolidated and same-store operating results for the three months ended September 30, 2013, reflect a 6.8 percent decrease in total admissions and a 3.9 percent decrease in total adjusted admissions compared with the same period in 2012. On a same-store basis, net operating revenues increased 0.2 percent compared with the same period in 2012.
Net operating revenues for the nine months ended September 30, 2013, totaled $9.766 billion, a 0.1 percent increase compared with $9.752 billion for the same period in 2012. Income from continuing operations decreased to $165.0 million, or $1.21 per share (diluted), for the nine months ended September 30, 2013, compared with $260.6 million, or $2.27 per share (diluted), for the same period in 2012. Net income attributable to Community Health Systems, Inc. common stockholders was $1.21 per share (diluted) for the nine months ended September 30, 2013, compared with $2.27 per share (diluted) for the same period in 2012. The results for the nine months ended September 30, 2013, include $0.65 per share (diluted) of expenses related to a reserve to cover certain governmental claims and other related costs, $0.04 per share (diluted) of expenses related to the anticipated acquisition of HMA, and a $0.01 per share (diluted) loss from the early extinguishment of debt. Excluding these items, both income from continuing operations and net income attributable to Community Health Systems, Inc. common stockholders were $1.91 per share (diluted) for the nine months ended September 30, 2013. For comparison, excluding a $0.48 per share (diluted) net benefit from the resolution of an industry-wide governmental settlement and a payment update relating to prior periods, a $0.10 per share (diluted) charge to establish reserves for certain legal matters, and a $0.81 per share (diluted) loss from the early extinguishment of debt, both income from continuing operations and net income attributable to Community Health Systems, Inc. common stockholders were $2.70 per share (diluted) for the nine months ended September 30, 2012. Weighted-average shares outstanding (diluted) were 93.5 million for the nine months ended September 30, 2013, and 89.5 million for the nine months ended September 30, 2012.
Adjusted EBITDA for the nine months ended September 30, 2013, was $1.28 billion compared with $1.50 billion for the same period in 2012, representing a 14.2 percent decrease. Excluding the $98.0 million reserve for governmental settlement referenced above and $5.3 million of expenses related to the anticipated HMA acquisition, Adjusted EBITDA was $1.39 billion for the nine months ended September 30, 2013. A reconciliation of Adjusted EBITDA to net cash provided by operating activities is included in the attached footnotes.
The consolidated operating results for the nine months ended September 30, 2013, reflect a 5.4 percent decrease in total admissions and a 3.1 percent decrease in total adjusted admissions compared with the same period in 2012. On a same-store basis, admissions decreased 6.2 percent while adjusted admissions decreased 3.9 percent compared with the same period in 2012. On a same-store basis, net operating revenues increased 0.2 percent compared with the same period in 2012.
Commenting on the results, Wayne T. Smith, chairman, president and chief executive officer of Community Health Systems, Inc. said, “We are pleased with our results for the third quarter of 2013 during what has continued to be a very challenging operating environment for healthcare providers. Our net operating revenues improved over the prior year period on both a consolidated and same store basis in spite of ongoing volume weakness. We have begun to realize the benefits of our cost management initiatives, and we remain focused on driving operating efficiencies across our hospital network. We believe we have the right strategies in place as we continue to position Community Health Systems to fully benefit from healthcare reform.”
Included on pages 15, 16, 17 and 18 of this press release are tables setting forth the Company’s updated 2013 annual earnings guidance. The 2013 guidance is based on the Company’s historical operating performance, current trends and other assumptions that the Company believes are reasonable at this time.
Located in the Nashville, Tennessee, suburb of Franklin, 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 non-urban and mid-size markets throughout the country. Through its subsidiaries, the Company currently owns, leases or operates 135 hospitals in 29 states with an aggregate of approximately 20,000 licensed beds. Its hospitals offer a broad range of inpatient and surgical services, outpatient treatment and skilled nursing care. In addition, through its subsidiary, Quorum Health Resources, LLC, the Company provides management and consulting services to non-affiliated general acute-care hospitals located throughout the United States. Shares in Community Health Systems, Inc. are traded on the New York Stock Exchange under the symbol “CYH.”
Community Health Systems, Inc. will hold a conference call on Thursday, October 31, 2013, at 10:00 a.m. Central, 11:00 a.m. Eastern, to review financial and operating results for the third quarter ended September 30, 2013. 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 . To listen to the live call, please go to the website at least fifteen minutes early to register, download and install any necessary audio software. For those who cannot listen to the live broadcast, a replay will be available shortly after the call and will continue to be available through November 30, 2013. Copies of the Company’s current report on Form 8-K (including this press release) and conference call slide show will be available on the Company’s website at .
The following tables set forth selected information concerning the Company’s projected consolidated operating results for the year ending December 31, 2013. These projections update previous guidance provided on July 29, 2013, and are based on the Company’s historical operating performance, current trends and other assumptions that the Company believes are reasonable at this time. The 2013 guidance should be considered in conjunction with the assumptions included herein. See page 16 for a list of factors that could affect the future results of the Company or the healthcare industry generally.
The following is provided as guidance to analysts and investors:
The following assumptions were used in developing the 2013 guidance provided above:
This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act, Section 21E of the Exchange Act 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 are 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:
The consolidated operating results for the three and nine months ended September 30, 2013, are not necessarily indicative of the results that may be experienced for any such future period or for any future year. The Company cautions that the projections for calendar year 2013 set forth in this press release are given as of the date hereof based on currently available information. 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.