CYH
$6.19
Community Health Systems
$.29
4.92%
Earnings Details
2nd Quarter June 2017
Tuesday, August 1, 2017 4:15:03 PM
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Summary

Community Health Systems Misses

Community Health Systems (CYH) reported a 2nd Quarter June 2017 loss of $0.25 per share on revenue of $4.1 billion. The consensus estimate was a loss of $0.26 per share on revenue of $4.0 billion. The Earnings Whisper number was for a loss of $0.23 per share. Revenue fell 9.7% compared to the same quarter a year ago.

The company said it expects 2017 results to range from a loss of $0.30 per share to earnings of $0.40 per share on revenue of $15.85 billion to $16.05 billion. The current consensus earnings estimate is $0.12 per share on revenue of $15.96 billion for the year ending December 31, 2017.

Community Health Systems Inc provides healthcare services through the hospitals that it owns and operates in non-urban and selected urban markets throughout the United States.

Results
Reported Earnings
($0.25)
Earnings Whisper
($0.23)
Consensus Estimate
($0.26)
Reported Revenue
$4.14 Bil
Revenue Estimate
$4.04 Bil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Community Health Systems, Inc. Announces Second Quarter 2017 Results with Net Operating Revenues of $4.144 Billion

Community Health Systems, Inc. (CYH) (the "Company") today announced financial and operating results for the three and six months ended June 30, 2017.

The following highlights the financial and operating results for the three months ended June 30, 2017, that are further discussed below:

-- Net operating revenues totaled $4.144 billion.

Net loss attributable to Community Health Systems, Inc. common stockholders was $(137) million, or $(1.22) per share (diluted), compared with net loss of $(1.432) billion, or $(12.91) per share (diluted) for the same period in 2016.

-- Adjusted EBITDA was $435 million.

Loss from continuing operations attributable to Community Health Systems, Inc. common stockholders was $(1.17) per share (diluted).

Adjusted for certain items discussed below, loss from continuing operations attributable to Community Health Systems, Inc. common stockholders was $(0.25) per share (diluted).

Cash flow from operations was $261 million, compared with $338 million for the same period in 2016, representing a 22.8 percent decrease.

On a same-store basis, both admissions and adjusted admissions decreased 2.5 percent, compared with the same period in 2016.

Financial and statistical data for 2016 include the following in operating results through the effective date of each respective transaction:

On April 29, 2016, the Company completed the spin-off of Quorum Health Corporation ("QHC"), comprised of 38 affiliated hospitals and related outpatient services in 16 states, together with Quorum Health Resources, LLC, a subsidiary providing management advisory and consulting services to non-affiliated hospitals. Same-store operating results and statistical data exclude information for the hospitals divested in the spin-off of QHC in the comparable period in 2016.

On April 29, 2016, the Company sold its unconsolidated minority equity interests in Valley Health System, LLC and Summerlin Hospital Medical Center, LLC, both joint ventures with Universal Health Systems, Inc. comprising a total of five hospitals in Las Vegas, Nevada.

On December 31, 2016, the Company sold an 80 percent majority ownership interest in its home care division to a subsidiary of Almost Family, Inc. Same-store operating results exclude the home care division in the comparable period in 2016.

On May 1, 2017, the Company sold 11 hospitals as part of its ongoing portfolio rationalization efforts. Same-store operating results exclude the results of these hospitals divested in 2017 and the comparable period in 2016. An additional nine hospitals were sold effective June 30, 2017, and July 1, 2017. Actual and same-store operating results include the results of these hospitals in 2017 and the comparable periods in 2016.

Net operating revenues for the three months ended June 30, 2017, totaled $4.144 billion, a 9.7 percent decrease, compared with $4.590 billion for the same period in 2016. Loss from continuing operations attributable to Community Health Systems, Inc. common stockholders was $(131) million, or $(1.17) per share (diluted), for the three months ended June 30, 2017, compared with $(1.431) billion, or $(12.90) per share (diluted), for the same period in 2016. During the three months ended June 30, 2017, the Company recorded a non-cash expense totaling $80 million related to impairment charges to reduce the value of long-lived assets, primarily allocated goodwill, at hospitals that the Company has identified for sale. The impairment charges do not have an impact on the calculation of the Company’s financial covenants under the Company’s Credit Facility.

The results for the three months ended June 30, 2017, included a loss of $(0.77) per share (diluted) related to impairment and (gain) loss on sale of businesses, loss of $(0.06) per share (diluted) from early extinguishment of debt, loss of $(0.04) per share (diluted) related to government and other legal settlements, loss of $(0.01) per share (diluted) related to employee termination benefits and other restructuring charges, and loss of $(0.04) per share (diluted) related to expense from fair value adjustments on the CVR agreement liability accounted for at fair value related to the HMA legal proceedings, and related legal expenses. Excluding these items, loss from continuing operations was $(0.25) per share (diluted).

Net loss attributable to Community Health Systems, Inc. common stockholders was $(137) million, or $(1.22) per share (diluted) for the three months ended June 30, 2017, compared with $(1.432) billion, or $(12.91) per share (diluted) for the same period in 2016. Discontinued operations for the three months ended June 30, 2017, consisted of $(0.01) per share (diluted) of losses from operations of entities sold or held for sale and $(0.04) per share (diluted) for impairment of hospitals sold or held for sale for a total after-tax loss of approximately $(6) million. Weighted-average shares outstanding (diluted) were 112 million for the three months ended June 30, 2017, and 111 million for the three months ended June 30, 2016. Adjusted EBITDA for the three months ended June 30, 2017, was $435 million compared with $563 million for the same period in 2016, representing a 22.7 percent decrease.

The consolidated operating results for the three months ended June 30, 2017, reflect a 10.8 percent decrease in total admissions, and an 11.2 percent decrease in total adjusted admissions, compared with the same period in 2016. On a same-store basis, both admissions and adjusted admissions decreased 2.5 percent during the three months ended June 30, 2017, compared with the same period in 2016. On a same-store basis, net operating revenues decreased 0.7 percent during the three months ended June 30, 2017, compared with the same period in 2016.

Net operating revenues for the six months ended June 30, 2017, totaled $8.629 billion, a 10.0 percent decrease, compared with $9.589 billion for the same period in 2016. Loss from continuing operations attributable to Community Health Systems, Inc. common stockholders was $(328) million, or $(2.94) per share (diluted), for the six months ended June 30, 2017, compared with $(1.418) billion, or $(12.82) per share (diluted), for the same period in 2016. During the six months ended June 30, 2017, the Company recorded a non-cash expense totaling $330 million related to impairment charges to reduce the value of long-lived assets, primarily allocated goodwill, at hospitals that the Company has identified for sale. The impairment charges do not have an impact on the calculation of the Company’s financial covenants under the Company’s Credit Facility.

The results for the six months ended June 30, 2017, included the loss of $(2.68) per share (diluted) related to impairment and (gain) loss on sale of businesses, loss of $(0.18) per share (diluted) from early extinguishment of debt, loss of $(0.01) per share (diluted) related to employee termination benefits and other restructuring charges, and loss of $(0.08) per share (diluted) related to expense from fair value adjustments on the CVR agreement liability accounted for at fair value related to the HMA legal proceedings, and related legal expenses. These expenses were partially offset by income of $0.19 per share (diluted) related to government and other legal settlements, net of related legal expenses, primarily as a result of the previously announced settlement of the shareholder derivative action in January 2017. Excluding these items, loss from continuing operations was $(0.17) per share (diluted).

Net loss attributable to Community Health Systems, Inc. common stockholders was $(335) million, or $(3.01) per share (diluted) for the six months ended June 30, 2017, compared with $(1.421) billion, or $(12.85) per share (diluted) for the same period in 2016. Discontinued operations for the six months ended June 30, 2017, consisted of $(0.02) per share (diluted) of losses from operations of entities sold or held for sale and $(0.04) per share (diluted) for impairment of hospitals sold or held for sale for a total after-tax loss of approximately $(7) million. Weighted-average shares outstanding (diluted) were 112 million for the six months ended June 30, 2017, and 111 million for the six months ended June 30, 2016. Adjusted EBITDA for the six months ended June 30, 2017, was $963 million compared with $1.196 billion for the same period in 2016, representing a 19.5 percent decrease.

The consolidated operating results for the six months ended June 30, 2017, reflect an 11.1 percent decrease in total admissions, and an 11.9 percent decrease in total adjusted admissions, compared with the same period in 2016. On a same-store basis, both admissions and adjusted admissions decreased 1.8 percent during the six months ended June 30, 2017, compared with the same period in 2016. On a same-store basis, net operating revenues increased 0.1 percent during the six months ended June 30, 2017, compared with the same period in 2016.

The Company completed its divestitures of one hospital on June 30, 2017, and eight hospitals on July 1, 2017, bringing its total completed divestitures to 20 hospitals, out of the previously announced 30 hospitals subject to definitive agreements. The Company expects to complete the sale of the remaining 10 hospitals subject to definitive agreements by September 30, 2017.

In addition to the previously announced divestiture of 30 hospitals, the Company continues to receive interest from acquirers for certain of its hospitals. The Company is pursuing these interests for sale transactions involving hospitals with a combined total of at least $1.5 billion in annual net operating revenues and combined mid-single digit Adjusted EBITDA margins.

Adjusted EBITDA, a non-GAAP financial measure, is EBITDA adjusted to add back net income attributable to noncontrolling interests and to exclude the effect of discontinued operations, loss from early extinguishment of debt, impairment and (gain) loss on sale of businesses, gain on sale of investments in unconsolidated affiliates, expense incurred related to the spin-off of QHC, expense incurred related to the sale of a majority ownership interest in the Company’s home care division, (income) expense related to government and other legal settlements and related costs, expenses related to employee termination benefits and other restructuring charges, and expense (income) from fair value adjustments on the CVR agreement liability accounted for at fair value related to the HMA legal proceedings, and related legal expenses. For information regarding why the Company believes Adjusted EBITDA presents useful information to investors, and for a reconciliation of Adjusted EBITDA to net income attributable to Community Health Systems, Inc. stockholders, see footnote (e) to the Financial Highlights, Financial Statements and Selected Operating Data below.

Commenting on the results, Wayne T. Smith, chairman and chief executive officer of Community Health Systems, Inc., said, "Obviously, we are disappointed with our performance during the second quarter. Our financial results reflect weaker than expected volumes, which negatively affected our net revenue and Adjusted EBITDA performance. We are seeing better results in certain areas, and we continue to work on a number of initiatives to drive operational and financial improvements. In terms of our divestiture program, we completed several transactions during the second quarter and remain on track to complete other announced divestitures in the third quarter of 2017. We also announced that we are pursuing the disposition of additional hospitals, as we shift to a smaller, stronger portfolio of assets."

Included on pages 18, 19, 20 and 21 of this press release are tables setting forth the Company’s 2017 annual earnings guidance. The updated 2017 guidance is based on the Company’s historical operating performance, current trends and other assumptions that the Company believes are reasonable at this time, and reflects the impact of planned divestitures that the Company expects to occur in 2017.

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 137 affiliated hospitals in 21 states with an aggregate of approximately 22,000 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, August 2, 2017, at 10:00 a.m. Central, 11:00 a.m. Eastern, to review financial and operating results for the second quarter ended June 30, 2017. 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 through September 2, 2017. 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)(c)(d)
(In millions, except per share amounts)
(Unaudited)
Three Months Ended
Six Months Ended
June 30,
June 30,
2017
2016
2017
2016
Net operating revenues
$ 4,144
$
4,590
$ 8,629
$
9,589
Loss from continuing operations (f), (i), (j), (k)
(116 )
(1,405 )
(292 )
(1,368 )
Net loss attributable to Community Health Systems, Inc.
(137 )
(1,432 )
(335 )
(1,421 )
stockholders
Adjusted EBITDA (e)
435
563
963
1,196
Net cash provided by operating activities
261
338
503
632
Basic loss per share attributable to Community Health Systems,
Inc. common stockholders (l):
Continuing operations (f), (i), (j), (k)
$ (1.17 )
$ (12.90 )
$ (2.94 )
$
(12.82 )
Discontinued operations
(0.06 )
(0.01 )
(0.06 )
(0.03 )
Net loss
$ (1.22 )
$ (12.91 )
$ (3.01 )
$
(12.85 )
Diluted loss per share attributable to Community Health
Systems, Inc. common stockholders (l):
Continuing operations (f), (h), (i), (j), (k)
$ (1.17 )
$ (12.90 )
$ (2.94 )
$
(12.82 )
Discontinued operations
(0.06 )
(0.01 )
(0.06 )
(0.03 )
Net loss (h)
$ (1.22 )
$ (12.91 )
$ (3.01 )
$
(12.85 )
Weighted-average number of shares outstanding (g):
Basic
112
111
112
111
Diluted
112
111
112
111
__________
For footnotes, see pages 13, 14, 15, 16 and 17.
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Loss (a)(b)(c)(d)
(In millions, except per share amounts)
(Unaudited)
Three Months Ended June 30,
2017
2016
Amount
% of Net
Amount
% of Net
Operating
Operating
Revenues
Revenues
Operating revenues (net of contractual allowances and discounts)
$ 4,823
$
5,290
Provision for bad debts
679
700
Net operating revenues
4,144
100.0
%
4,590
100.0
%
Operating costs and expenses:
Salaries and benefits
1,920
46.3
%
2,154
46.9
%
Supplies
697
16.8
%
759
16.6
%
Other operating expenses
1,017
24.6
%
1,056
23.1
%
Government and other legal settlements and related costs (j)
7
0.2
%
-
-
%
Electronic health records incentive reimbursement
(17 )
(0.4 )
%
(31 )
(0.7 )
%
Rent
104
2.5
%
112
2.4
%
Depreciation and amortization
223
5.4
%
276
6.0
%
Impairment and (gain) loss on sale of businesses, net (i)
80
1.9
%
1,639
35.7
%
Total operating costs and expenses
4,031
97.3
%
5,965
130.0
%
Income (loss) from operations (f), (i), (j)
113
2.7
%
(1,375 )
(30.0 )
%
Interest expense, net
239
5.8
%
246
5.4
%
Loss from early extinguishment of debt
10
0.2
%
30
0.7
%
Gain on sale of investments in unconsolidated affiliates (k)
-
-
%
(94 )
(2.1 )
%
Equity in earnings of unconsolidated affiliates
(5 )
(0.1 )
%
(14 )
(0.4 )
%
Loss from continuing operations before income taxes
(131 )
(3.2 )
%
(1,543 )
(33.6 )
%
Benefit from income taxes
(15 )
(0.4 )
%
(138 )
(3.0 )
%
Loss from continuing operations (f), (i), (j), (k)
(116 )
(2.8 )
%
(1,405 )
(30.6 )
%
Discontinued operations, net of taxes:
Loss from operations of entities sold or held for sale
(1 )
(0.0 )
%
(1 )
-
%
Impairment of hospitals sold or held for sale
(5 )
(0.1 )
%
-
-
%
Loss from discontinued operations, net of taxes
(6 )
(0.1 )
%
(1 )
-
%
Net loss
(122 )
(2.9 )
%
(1,406 )
(30.6 )
%
Less: Net income attributable to noncontrolling interests
15
0.4
%
26
0.6
%
Net loss attributable to Community Health Systems, Inc. stockholders
$
(137 )
(3.3 )
%
$
(1,432 )
(31.2 )
%
Basic loss per share attributable to Community Health Systems,
Inc. common stockholders (l):
Continuing operations (f), (i), (j), (k)
$ (1.17 )
$
(12.90 )
Discontinued operations
(0.06 )
(0.01 )
Net loss
$ (1.22 )
$
(12.91 )
Diluted loss per share attributable to Community Health
Systems, Inc. common stockholders (l):
Continuing operations (f), (h), (i), (j), (k)
$ (1.17 )
$
(12.90 )
Discontinued operations
(0.06 )
(0.01 )
Net loss (h)
$ (1.22 )
$
(12.91 )
Weighted-average number of shares outstanding (g):
Basic
112
111
Diluted
112
111
__________
For footnotes, see pages 13, 14, 15, 16 and 17.
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Loss (a)(b)(c)(d)
(In millions, except per share amounts)
(Unaudited)
Six Months Ended June 30,
2017
2016
Amount
% of Net
Amount
% of Net
Operating
Operating
Revenues
Revenues
Operating revenues (net of contractual allowances and discounts)
$ 9,991
$ 11,044
Provision for bad debts
1,362
1,455
Net operating revenues
8,629
100.0
%
9,589
100.0
%
Operating costs and expenses:
Salaries and benefits
3,981
46.1
%
4,470
46.6
%
Supplies
1,446
16.8
%
1,559
16.3
%
Other operating expenses
2,074
24.1
%
2,229
23.2
%
Government and other legal settlements and related costs (j)
(34 )
(0.4 )
%
1
-
%
Electronic health records incentive reimbursement
(23 )
(0.3 )
%
(49 )
(0.5 )
%
Rent
214
2.5
%
231
2.4
%
Depreciation and amortization
458
5.3
%
574
6.0
%
Impairment and (gain) loss on sale of businesses, net (i)
330
3.8
%
1,656
17.3
%
Total operating costs and expenses
8,446
97.9
%
10,671
111.3
%
Income (loss) from operations (f), (i), (j)
183
2.1
%
(1,082 )
(11.3 )
%
Interest expense, net
468
5.4
%
496
5.2
%
Loss from early extinguishment of debt
31
0.4
%
30
0.3
%
Gain on sale of investments in unconsolidated affiliates (k)
-
-
%
(94 )
(1.0 )
%
Equity in earnings of unconsolidated affiliates
(9 )
(0.1 )
%
(34 )
(0.4 )
%
Loss from continuing operations before income taxes
(307 )
(3.6 )
%
(1,480 )
(15.4 )
%
Benefit from income taxes
(15 )
(0.2 )
%
(112 )
(1.1 )
%
Loss from continuing operations (f), (i), (j), (k)
(292 )
(3.4 )
%
(1,368 )
(14.3 )
%
Discontinued operations, net of taxes:
Loss from operations of entities sold or held for sale
(2 )
-
%
(2 )
-
%
Impairment of hospitals sold or held for sale
(5 )
(0.1 )
%
(1 )
-
%
Loss from discontinued operations, net of taxes
(7 )
(0.1 )
%
(3 )
-
%
Net loss
(299 )
(3.5 )
%
(1,371 )
(14.3 )
%
Less: Net income attributable to noncontrolling interests
36
0.4
%
50
0.5
%
Net loss attributable to Community Health Systems, Inc. stockholders
$
(335 )
(3.9 )
%
$ (1,421 )
(14.8 )
%
Basic loss per share attributable to Community Health Systems,
Inc. common stockholders (l):
Continuing operations (f), (i), (j), (k)
$ (2.94 )
$ (12.82 )
Discontinued operations
(0.06 )
(0.03 )
Net loss
$ (3.01 )
$ (12.85 )
Diluted loss per share attributable to Community Health
Systems, Inc. common stockholders (l):
Continuing operations (f), (h), (i), (j), (k)
$ (2.94 )
$ (12.82 )
Discontinued operations
(0.06 )
(0.03 )
Net loss (h)
$ (3.01 )
$ (12.85 )
Weighted-average number of shares outstanding (g):
Basic
112
111
Diluted
112
111
__________
For footnotes, see pages 13, 14, 15, 16 and 17.
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,
2017
2016
2017
2016
Net loss
$ (122 )
$ (1,406 )
$ (299 )
$
(1,371 )
Other comprehensive income (loss), net of income taxes:
Net change in fair value of interest rate swaps, net of tax
(2 )
(2 )
3
(21 )
Net change in fair value of available-for-sale securities, net of tax
2
(3 )
5
(1 )
1
2
1
3
Amortization and recognition of unrecognized pension cost
components, net of tax
Other comprehensive income (loss)
1
(3 )
9
(19 )
Comprehensive loss
(121 )
(1,409 )
(290 )
(1,390 )
Less: Comprehensive income attributable to noncontrolling interests
15
26
36
50
Comprehensive loss attributable to Community Health Systems, Inc.
$ (136 )
$ (1,435 )
$ (326 )
$
(1,440 )
stockholders
__________
For footnotes, see pages 13, 14, 15, 16 and 17.
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
Selected Operating Data (a)(c)
(Dollars in millions)
(Unaudited)
Three Months Ended June 30,
Consolidated
Same-Store
2017
2016
% Change
2017
2016
% Change
Number of hospitals (at end of period)
143
156
143
143
Licensed beds (at end of period)
23,829
26,366
23,829
24,163
Beds in service (at end of period)
21,549
23,371
21,549
21,673
Admissions
189,435
212,259
-10.8 %
184,992
189,762
-2.5 %
Adjusted admissions
415,515
468,087
-11.2 %
405,584
415,778
-2.5 %
Patient days
840,516
947,492
818,249
842,493
Average length of stay (days)
4.4
4.5
4.4
4.4
Occupancy rate (average beds in service)
41.9 %
42.5 %
41.8 %
42.5 %
Net operating revenues
$
4,144
$
4,590
-9.7 %
$
4,054
$
4,083
-0.7 %
Net inpatient revenues as a % of net patient revenues before
43.3 %
42.8 %
43.2 %
43.1 %
provision for bad debts
Net outpatient revenues as a % of net patient revenues before
56.7 %
57.2 %
56.8 %
56.9 %
provision for bad debts
Income (loss) from operations (f), (i), (j)
$
113
$
(1,375 )
108.2 %
Income (loss) from operations as a % of net operating revenues
2.7 %
-30.0 %
Depreciation and amortization
$
223
$
276
Equity in earnings of unconsolidated affiliates
$
(5 )
$
(14 )
Net loss attributable to Community Health Systems, Inc.
$
(137 )
$
(1,432 )
90.4 %
stockholders
Net loss attributable to Community Health Systems, Inc.
-3.3 %
-31.2 %
stockholders as a % of net operating revenues
Adjusted EBITDA (e)
$
435
$
563
-22.7 %
Adjusted EBITDA as a % of net operating revenues
10.5 %
12.3 %
Net cash provided by operating activities
$
261
$
338
-22.8 %
__________
For footnotes, see pages 13, 14, 15, 16 and 17.
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
Selected Operating Data (a)(c)
(Dollars in millions)
(Unaudited)
Six Months Ended June 30,
Consolidated
Same-Store
2017
2016
% Change
2017
2016
% Change
Number of hospitals (at end of period)
143
156
143
143
Licensed beds (at end of period)
23,829
26,366
23,829
24,163
Beds in service (at end of period)
21,549
23,371
21,549
21,673
Admissions
401,677
451,959
-11.1 %
381,736
388,844
-1.8 %
Adjusted admissions
864,682
981,406
-11.9 %
820,764
835,744
-1.8 %
Patient days
1,813,401
2,023,718
1,715,740
1,740,032
Average length of stay (days)
4.5
4.5
4.5
4.5
Occupancy rate (average beds in service)
44.2 %
43.8 %
44.1 %
44.1 %
Net operating revenues
$
8,629
$
9,589
-10.0 %
$
8,200
$
8,193
0.1 %
Net inpatient revenues as a % of net patient revenues before
43.6 %
43.4 %
43.6 %
43.5 %
provision for bad debts
Net outpatient revenues as a % of net patient revenues before
56.4 %
56.6 %
56.4 %
56.5 %
provision for bad debts
Income (loss) from operations (f), (i), (j)
$
183
$
(1,082 )
116.9 %
Income (loss) from operations as a % of net operating revenues
2.1 %
-11.3 %
Depreciation and amortization
$
458
$
574
Equity in earnings of unconsolidated affiliates
$
(9 )
$
(34 )
Net loss attributable to Community
Health Systems, Inc. stockholders
$
(335 )
$
(1,421 )
76.4 %
Net loss attributable to Community Health Systems, Inc.
-3.9 %
-14.8 %
stockholders as a % of net operating revenues
Adjusted EBITDA (e)
$
963
$
1,196
-19.5 %
Adjusted EBITDA as a % of net operating revenues
11.2 %
12.5 %
Net cash provided by operating activities
$
503
$
632
-20.4 %
__________
For footnotes, see pages 13, 14, 15, 16 and 17.
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets (b)
(In millions, except share data)
(Unaudited)
June 30, 2017
December 31, 2016
ASSETS
Current assets
Cash and cash equivalents
$
768
$
238
2,939
3,176
Patient accounts receivable, net of allowance for doubtful
accounts of $3,620 and $3,773 at June 30, 2017 and December 31,
2016, respectively
Supplies
438
480
Prepaid income taxes
22
17
Prepaid expenses and taxes
210
187
Other current assets
678
568
Total current assets
5,055
4,666
Property and equipment, gross
11,397
12,422
Less accumulated depreciation and amortization
(4,085 )
(4,273 )
Property and equipment, net
7,312
8,149
Goodwill
6,165
6,521
Other assets, net
2,341
2,608
Total assets
$ 20,873
$
21,944
LIABILITIES AND EQUITY
Current liabilities
Current maturities of long-term debt
$
46
$
455
Accounts payable
917
995
Accrued interest
236
207
Accrued liabilities
1,179
1,230
Total current liabilities
2,378
2,887
Long-term debt
14,702
14,789
Deferred income taxes
396
411
Other long-term liabilities
1,456
1,575
Total liabilities
18,932
19,662
Redeemable noncontrolling interests in equity of consolidated
548
554
subsidiaries
EQUITY
Community Health Systems, Inc. stockholders’ equity:
Preferred stock, $.01 par value per share, 100,000,000 shares
-
-
authorized; none issued
1
1
Common stock, $.01 par value per share, 300,000,000 shares
authorized; 114,758,677 shares issued and outstanding at June 30,
2017, and 113,876,580 shares issued and outstanding at December
31, 2016
Additional paid-in capital
1,984
1,975
Accumulated other comprehensive loss
(53 )
(62 )
Accumulated deficit
(634 )
(299 )
Total Community Health Systems, Inc. stockholders’ equity
1,298
1,615
Noncontrolling interests in equity of consolidated subsidiaries
95
113
Total equity
1,393
1,728
Total liabilities and equity
$ 20,873
$
21,944
__________
For footnotes, see pages 13, 14, 15, 16 and 17.
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows (b)
(In millions)
(Unaudited)
Six Months Ended June 30,
2017
2016
Cash flows from operating activities
Net loss
$
(299 )
$
(1,371 )
Adjustments to reconcile net loss to net cash provided by operating
activities:
Depreciation and amortization
458
574
Government and other legal settlements and related costs (j)
6
1
Stock-based compensation expense
15
26
Impairment of hospitals sold or held for sale
5
1
Impairment and (gain) loss on sale of businesses, net (i)
330
1,656
Loss from early extinguishment of debt
31
30
Gain on sale of investments in unconsolidated affiliates (k)
-
(94 )
Other non-cash expenses, net
18
22
Changes in operating assets and liabilities, net of effects of
acquisitions and divestitures:
Patient accounts receivable
186
(40 )
Supplies, prepaid expenses and other current assets
(55 )
31
Accounts payable, accrued liabilities and income taxes
(126 )
(212 )
Other
(66 )
8
Net cash provided by operating activities
503
632
Cash flows from investing activities
Acquisitions of facilities and other related equipment
(4 )
(114 )
Purchases of property and equipment
(274 )
(407 )
Proceeds from disposition of hospitals and other ancillary operations
921
12
Proceeds from sale of property and equipment
3
7
Purchases of available-for-sale securities
(37 )
(63 )
Proceeds from sales of available-for-sale securities
47
233
Proceeds from sale of investments in unconsolidated affiliates
-
403
Distribution from Quorum Health Corporation
-
1,219
Increase in other investments
(60 )
(113 )
Net cash provided by investing activities
596
1,177
Cash flows from financing activities
Repurchase of restricted stock shares for payroll tax withholding
(5 )
(5 )
requirements
Deferred financing costs and other debt-related costs
(62 )
(22 )
Proceeds from noncontrolling investors in joint ventures
5
-
Redemption of noncontrolling investments in joint ventures
(4 )
(16 )
Distributions to noncontrolling investors in joint ventures
(53 )
(47 )
Borrowings under credit agreements
840
2,806
Issuance of long-term debt
3,100
-
Proceeds from receivables facility
26
31
Repayments of long-term indebtedness
(4,416 )
(4,279 )
Net cash used in financing activities
(569 )
(1,532 )
Net change in cash and cash equivalents
530
277
Cash and cash equivalents at beginning of period
238
184
Cash and cash equivalents at end of period
$
768
$
461
__________
For footnotes, see pages 13, 14, 15, 16 and 17.
Footnotes to Financial Highlights, Financial Statements and
Selected Operating Data
(a)
Continuing operating results exclude discontinued operations for the
three and six months ended June 30, 2017 and 2016. Both financial
and statistical results exclude entities in discontinued operations
and hospitals sold during the period for all periods presented.
Same-store operating results and statistical data exclude
information for the hospitals divested in the spin-off of QHC in the
comparable period in 2016.
(b)
The contingent value right ("CVR") entitles the holder to receive a
cash payment up to $1.00 per CVR (subject to downward adjustment but
not below zero), subject to the final resolution of certain legal
matters pertaining to Health Management Associates, Inc. ("HMA"), as
defined in the CVR agreement. If the aggregate amount of applicable
losses under the CVR agreement exceeds a deductible of $18 million,
then the amount payable in respect of each CVR shall be reduced (but
not below zero) by an amount equal to the quotient obtained by
dividing: (a) the product of (i) all losses in excess of the
deductible and (ii) 90%; by (b) the number of CVRs outstanding on
the date on which final resolution of the existing litigation
occurs. Since the HMA acquisition date of January 27, 2014,
approximately $33 million in costs have been incurred and
approximately $30 million of settlements have been paid related to
certain HMA legal matters, which collectively exceed the deductible
of $18 million under the CVR agreement. The Company previously
recorded an estimated fair value of the remaining underlying claims
that will be covered by the CVR of $284 million as part of the
acquisition accounting for HMA, which, after consideration of
amounts paid and current estimates of valuation inputs, has been
adjusted to its estimated fair value of $260 million at June 30,
2017. In addition, although future legal fees (which are expensed as
incurred) associated with the HMA legal matters have not been
accrued or included in the table below, such legal fees are taken
into account in determining the total amount of reductions applied
to the amounts owed to CVR holders. For the CVR valuation at June
30, 2017, the change in fair value from the previous quarter was
primarily the result of a decrease in the discount rate applied to
the estimated settlement amount.
The following table presents the impact of the recorded amounts as
described above as applied to the CVR and the $18 million deductible
and 10% co-insurance amounts (in millions):
As of
June 30,
2017
Legal and other related costs incurred to date
$
33
Settlements
30
Estimated liability for probable contingencies
-
Estimated liability for unresolved contingencies at fair value
260
Costs incurred plus certain estimated liabilities for CVR-related
323
matters
Allocated to:
CHS deductible of $18 million
(18 )
CHS co-insurance at 10%
(29 )
Recorded amounts that reduce CVR value after giving effect to
$
276
deductible and co-insurance
CVRs outstanding
265
(c)
Included in discontinued operations for the three and six months
ended June 30, 2017 and 2016, are three smaller hospitals that are
being actively marketed for sale, one of which was sold effective
May 1, 2017. The after-tax loss for the sold or held for sale
hospitals, was approximately $6 million and $1 million for the three
months ended June 30, 2017 and 2016, respectively, and approximately
$7 million and $3 million for the six months ended June 30, 2017 and
2016, respectively.
(d)
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,
2017
2016
2017
2016
Loss from continuing operations attributable to Community Health
Systems, Inc. common stockholders:
Loss from continuing operations, net of taxes
$ (116 )
$ (1,405 )
$ (292 )
$
(1,368 )
15
26
36
50
Less: Income from continuing operations attributable to
noncontrolling interests, net of taxes
$ (131 )
$ (1,431 )
$ (328 )
$
(1,418 )
Loss from continuing operations attributable to Community Health
Systems, Inc. common stockholders -- basic and diluted
Loss from discontinued operations attributable to Community Health
Systems, Inc. common stockholders:
Loss from discontinued operations, net of taxes
$
(6 )
$
(1 )
$
(7 )
$
(3 )
-
-
-
-
Less: Loss from discontinued operations attributable to
noncontrolling interests, net of taxes
$
(6 )
$
(1 )
$
(7 )
$
(3 )
Loss from discontinued operations attributable to Community Health
Systems, Inc. common stockholders -- basic and diluted
(e)
EBITDA is a non-GAAP financial measure which consists of net 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
the effect of discontinued operations, loss from early
extinguishment of debt, impairment and (gain) loss on sale of
businesses, gain on sale of investments in unconsolidated
affiliates, expense incurred related to the spin-off of QHC, expense
incurred related to the sale of a majority ownership interest in the
Company’s home care division, (income) expense related to government
and other legal settlements and related costs, expense related to
employee termination benefits and other restructuring charges, and
expense (income) from fair value adjustments on the CVR agreement
liability accounted for at fair value related to the HMA legal
proceedings, and related legal expenses. This is the initial period
in which the Company has incurred a significant amount of and
included an adjustment for employee termination benefits and other
restructuring charges in Adjusted EBITDA. The Company has included
this adjustment (and intends to continue including this adjustment
on a prospective basis) based on its belief that such expense, which
may differ significantly between periods in a manner not correlated
with the Company’s ongoing operational performance, is consistent
with management’s intended use of Adjusted EBITDA to assess the
Company’s results of operations and compare operating results
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 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
targets used to determine short-term cash incentive compensation. 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 senior secured credit facility, which is a key component
in the determination of the Company’s compliance with some of the
covenants under the Company’s senior secured credit 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 senior secured credit facility
(although Adjusted EBITDA does not include all of the adjustments
described in the senior secured credit facility).
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 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,
2017
2016
2017
2016
Net loss attributable to Community Health Systems, Inc.
$ (137 )
$ (1,432 )
$ (335 )
$ (1,421 )
stockholders
Adjustments:
Benefit from income taxes
(15 )
(138 )
(15 )
(112 )
Depreciation and amortization
223
276
458
574
Net income attributable to noncontrolling interests
15
26
36
50
Loss from discontinued operations
6
1
7
3
Interest expense, net
239
246
468
496
Loss from early extinguishment of debt
10
30
31
30
Impairment and (gain) loss on sale of businesses, net
80
1,639
330
1,656
Gain on sale of investments in unconsolidated affiliates
-
(94 )
-
(94 )
7
-
(34 )
1
Expense (income) from government and other legal settlements and
related costs
5
(1 )
12
-
Expense (income) from fair value adjustments and legal expenses
related to cases covered by the CVR
Expense related to the sale of a majority interest in home care
-
-
1
-
division
Expense related to the spin-off of QHC
-
10
-
13
2
-
4
-
Expense related to employee termination benefits and other
restructuring charges
Adjusted EBITDA
$
435
$
563
$
963
$
1,196
(f)
Included in non-same-store income (loss) from operations and loss
from continuing operations are pre-tax charges related to
acquisition costs of less than $1 million and $1 million for the
three months ended June 30, 2017 and 2016, and $1 million and $3
million for the six months ended June 30, 2017 and 2016,
respectively.
(g)
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,
2017
2016
2017
2016
Weighted-average number of shares outstanding - basic
112
111
112
111
Add effect of dilutive securities:
Stock awards and options
-
-
-
-
Weighted-average number of shares outstanding - diluted
112
111
112
111
The Company generated a loss from continuing operations attributable
to Community Health Systems, Inc. common stockholders for the three
and six months ended June 30, 2017 and 2016, so the effect of
dilutive securities is not considered because their effect would be
antidilutive. If the Company had generated income from continuing
operations during the three months ended June 30, 2017 and 2016, the
effect of restricted stock awards on the diluted shares calculation
would have been an increase of 215,313 shares and 168,764 shares,
respectively. If the Company had generated income from continuing
operations during the six months ended June 30, 2017 and 2016, the
effect of restricted stock awards on the diluted shares calculation
would have been an increase of 147,043 shares and 115,135 shares,
respectively.
(h)
The following supplemental tables reconcile loss from continuing
operations and net loss attributable to Community Health Systems,
Inc. common stockholders, as reported, on a per share (diluted)
basis, with the adjustments described herein (total per share
amounts may not add due to rounding):
Three Months Ended
Six Months Ended
June 30,
June 30,
2017
2016
2017
2016
Loss from continuing operations, as reported
$ (1.17 )
$ (12.90 )
$ (2.94 )
$ (12.82 )
Adjustments:
Loss from early extinguishment of debt
0.06
0.18
0.18
0.18
Impairment and (gain) loss on sale of businesses, net
0.77
13.29
2.68
13.45
0.04
-
(0.19 )
-
Expense (income) from government and other legal settlements and
related costs
0.04
-
0.08
-
Expense from fair value adjustments and legal expenses related to
cases covered by the CVR
Gain on sale of investments in unconsolidated affiliates
-
(0.54 )
-
(0.54 )
Expense related to the spin-off of QHC
-
0.07
-
0.09
0.01
-
0.01
-
Expense related to employee termination benefits and other
restructuring charges
(Loss) income from continuing operations, excluding adjustments
$ (0.25 )
$
0.09
$ (0.17 )
$
0.36
Three Months Ended
Six Months Ended
June 30,
June 30,
2017
2016
2017
2016
Net loss, as reported
$ (1.22 )
$ (12.91 )
$ (3.01 )
$ (12.85 )
Adjustments:
Loss from early extinguishment of debt
0.06
0.18
0.18
0.18
Impairment and (gain) loss on sale of businesses, net
0.77
13.29
2.68
13.45
0.04
-
(0.19 )
-
Expense (income) from government and other legal settlements and
related costs
0.04
-
0.08
-
Expense from fair value adjustments and legal expenses related to
cases covered by the CVR
Gain on sale of investments in unconsolidated affiliates
-
(0.54 )
-
(0.54 )
Expense related to the spin-off of QHC
-
0.07
-
0.09
0.01
-
0.01
-
Expense related to employee termination benefits and other
restructuring charges
Net (loss) income, excluding adjustments
$ (0.31 )
$
0.08
$ (0.24 )
$
0.33
(i)
Both income from operations and loss from continuing operations for
the three and six months ended June 30, 2017, included non-cash
expense of approximately $80 million and $330 million, respectively,
related to impairment charges to reduce the value of long-lived
assets, primarily allocated goodwill, at hospitals that the Company
has identified for sale or sold. Both loss from operations and loss
from continuing operations for the three and six months ended June
30, 2016, included an impairment charge of approximately $1.639
billion, of which $1.400 billion was a charge related to the
write-down of a portion of the goodwill for the Company’s hospital
operation reporting unit, and $239 million was a charge related to
the adjustment of the fair value of long-lived assets at certain of
the Company’s underperforming hospitals and some of the hospitals
that the Company was marketing for sale that had experienced
declining operating results or had a decline in their estimated fair
value since the Company’s previous impairment review. Of this $239
million impairment charge, $169 million related to the reduction in
value of long-lived assets at such hospitals that the Company was
marketing for sale, and $70 million related to the reduction in
value of long-lived assets at such under-performing hospitals. Also,
included in loss from operations and loss from continuing operations
for the six months ended June 30, 2016, was an impairment charge of
approximately $17 million incurred during the three months ended
March 31, 2016, related to the write-down of a portion of the
goodwill allocated to the divestitures of Lehigh Regional Medical
Center and Bartow Regional Medical Center, as well as the impairment
of certain long-lived assets at one of the Company’s smaller
hospitals where the decision was made during the quarter ended March
31, 2016, to permanently close the hospital. These impairment
charges do not have an impact on the calculation of the Company’s
financial covenants under the Company’s Credit Facility.
(j)
The $(0.04) per share (diluted) of expense for "Government and other
legal settlements and related costs" for the three months ended June
30, 2017, is the settlement in principle of several lawsuits during
the three months ended June 30, 2017, and related legal expenses.
The $0.19 per share (diluted) of income for "Government and other
legal settlements and related costs" for the six months ended June
30, 2017, is primarily the impact of the shareholder derivative
action settled during the six months ended June 30, 2017, net of
related legal expenses.
(k)
On April 29, 2016, the Company sold its unconsolidated minority
equity interests in Valley Health System, LLC, a joint venture with
Universal Health Systems, Inc. ("UHS") representing four hospitals
in Las Vegas, Nevada, in which the Company owned a 27.5% interest,
and in Summerlin Hospital Medical Center, LLC, a joint venture with
UHS representing one hospital in Las Vegas, Nevada, in which the
Company owned a 26.1% interest. The Company received $403 million in
cash in return for the sale of its equity interests and recognized a
$94 million gain on sale of investments in unconsolidated affiliates
during the six months ended June 30, 2016.
(l)
Total per share amounts may not add due to rounding.

Regulation FD Disclosure

Set forth below is selected information concerning the Company’s projected consolidated operating results for the year ending December 31, 2017. These projections update selected guidance issued on May 1, 2017, 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 2017 guidance should be considered in conjunction with the assumptions included herein. See pages 20 and 21 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:

2017 Projection Range
Net operating revenues less provision for bad debts (in millions)
$ 15,850
to
$ 16,050
Adjusted EBITDA (in millions)
$
1,825
to
$
2,000
(Loss) income from continuing operations per share - diluted
$
(0.30 )
to
$
0.40
Same-store hospital annual adjusted admissions decline
(2.0 ) %
to
(1.0 ) %
Weighted-average diluted shares, in millions
112.0
to
113.0

The following assumptions were used in developing the 2017 guidance provided above:

The divestiture of 30 hospitals included in continuing operations, in respect of which the Company has divested or entered into a definitive agreement, consisting of ten separate contemplated transactions. These hospitals generated approximately $3.4 billion of net operating revenues in 2016 with mid-single digit Adjusted EBITDA margins. The Company assumes these divestitures will generate approximately $1.95 billion in gross proceeds, including working capital. The Company assumes all of these divestitures will close at various dates during the first nine months of 2017.

The Company’s projections also exclude the following: -- Gains associated with the settlement of the shareholder derivative action in January 2017;

Payments related to the CVRs issued in connection with the HMA acquisition, and changes in the valuation of liabilities underlying the CVR;

-- Losses from the early extinguishment of debt;

-- Impairment of goodwill and long-lived assets;

-- Employee termination benefits and restructuring costs;

Resolution of government investigations or other significant legal settlements;

-- Costs incurred in connection with the planned divestitures; and

Other significant gains or losses that neither relate to the ordinary course of business nor reflect the Company’s underlying business performance.

The Company has two small hospitals which remain held for sale for which the operating results have been classified in discontinued operations and have been excluded from the Company’s guidance.

Other assumptions used in the above guidance:

Health Information Technology (HITECH) electronic health records incentive reimbursement of approximately $25 million to $30 million for the year ending December 31, 2017.

Same-store hospital annual adjusted admissions decline of (2.0)% to (1.0)% for 2017, which does not take into account service closures and weather-related or other unusual events.

Expressed as a percentage of net operating revenues, depreciation and amortization of approximately 5.7% to 5.8% for 2017. Additionally, this is a fixed cost and the percentages may change as revenue varies. Such amounts exclude the possible impact of any future hospital fixed asset impairments and additional hospitals which may be classified as held for sale.

Interest expense, expressed as a percentage of net operating revenues, of approximately 5.6% to 5.7%; however, interest expense may vary as revenue varies. Interest expense has been adjusted to reflect the Company’s refinancing transactions in March 2017 and May 2017 and the repayment of debt with proceeds from the anticipated divestitures, based on the expected timing of those divestitures. Projected interest expense does not consider any future refinancing transactions. Total fixed rate debt, including swaps, is expected to average approximately 75% to 85% of total debt during 2017.

Expressed as a percentage of net operating revenues, net income attributable to noncontrolling interests of approximately 0.5% to 0.6% for 2017.

Expressed as a percentage of income from continuing operations before income taxes, provision for income taxes of approximately 30.0% to 31.0% for 2017, which includes the impact of adopting ASU 2016-09 on the tax provision for the vesting of equity-based compensation.

A reconciliation of the Company’s projected 2017 Adjusted EBITDA, a forward-looking non-GAAP financial measure, to the Company’s projected net (loss) income attributable to Community Health Systems, Inc. stockholders, the most directly comparable GAAP financial measure, is shown below:

Year Ending
December 31, 2017
Low
High
Net (loss) income attributable to Community Health Systems, Inc.
$
(51 )
$
28
stockholders (1)
Adjustments:
Depreciation and amortization
925
950
Interest expense, net
900
911
(Benefit from) provision for income taxes
(30 )
21
Net income attributable to noncontrolling interests
81
90
Adjusted EBITDA (1)
$
1,825
$
2,000
(1)
The Company does not include in this reconciliation the impact of
certain items not included in the Company’s forecast set forth
above that would be included in a reconciliation of historical net
(loss) income attributable to Community Health Systems, Inc.
stockholders to Adjusted EBITDA such as, but not limited to,
losses from early extinguishment of debt, impairment and (gain)
loss on sale of businesses, and expense (income) related to
government and other legal settlements and related costs, in light
of the fact that such items are not determinable and/or the
inherent difficulty in quantifying such projected amounts on a
forward-looking basis.

Capital expenditures are projected as follows (in millions):

2017
Guidance
Total
$575
to
$725

Net cash provided by operating activities, excluding cash flows related to the CVR and settlement of legal contingencies, is projected as follows (in millions):

2017
Guidance
Total
$975
to
$1,125

Weighted-average shares outstanding are projected to be between approximately 112 million to 113 million for 2017.

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;

the impact of the potential repeal of or significant changes to the Affordable Care Act, its implementation or its interpretation, as well as changes in other federal, state or local laws or regulations affecting our business;

the extent to 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, which may be affected by whether a sufficient number of payors participate as well as the impact of the 2016 federal elections on the Affordable Care Act;

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;

-- demographic changes;

-- changes in, or the failure to comply with, governmental regulations;

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;

changes in, or the failure to comply with, contract terms with payors and changes in reimbursement 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;

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 in states that have not expanded Medicaid and difficulties in recovering payments for which patients are responsible, including co-pays and deductibles;

the efforts of insurers, healthcare providers and others to contain healthcare costs, including the trend toward value-based purchasing;

our ongoing ability to demonstrate meaningful use of certified electronic health record technology and recognize income for the related Medicare or Medicaid incentive payments to the extent such payments have not expired;

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;

-- changes in medical or other technology;

-- changes in U.S. generally accepted accounting principles;

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 (including to realize the anticipated amount of proceeds from contemplated dispositions), 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, including those of HMA, or to recognize expected synergies from acquisitions;

-- the impact of seasonal severe weather conditions;

our ability to obtain adequate levels of general and professional liability insurance;

timeliness of reimbursement payments received under government programs;

-- effects related to outbreaks of infectious diseases;

the impact of the external, criminal cyber-attack suffered by us in the second quarter of 2014, including potential reputational damage, the outcome of our investigation and any potential governmental inquiries, the outcome of litigation filed against us in connection with this cyber-attack, the extent of remediation costs and additional operating or other expenses that we may continue to incur, and the impact of potential future 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; and

the other risk factors set forth in our other public filings with the Securities and Exchange Commission.

The consolidated operating results for the three and six months ended June 30, 2017, are not necessarily indicative of the results that may be experienced for any future periods. The Company cautions that the projections for calendar year 2017 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.

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SOURCE: Community Health Systems, Inc.

Community Health Systems, Inc.
Thomas J. Aaron, 615-465-7000
Executive Vice President and Chief Financial Officer