Community Health Systems, Inc. (NYSE: CYH) (the “Company”) today
announced financial and operating results for the three months and
year ended December 31, 2023.
Commenting on the results, Tim L. Hingtgen, chief executive
officer of Community Health Systems, Inc., said, "Operational and
financial results improved in 2023 as patient demand for our
services increased, resulting in growth in same-store admissions,
adjusted admissions, surgeries and ER visits. Our staff recruitment
and retention initiatives generated solid gains in the number of
bedside nurses and other patient care positions in our hospitals,
which significantly reduced contract labor utilization. We also
experienced growth that is directly attributable to our investments
in facility expansions, physician recruitment and service line
development. We expect this progress and momentum to continue in
2024.”
The following highlights the financial and operating results for
the three months ended December 31, 2023.
- Net operating revenues totaled $3.181 billion.
- Net income attributable to Community Health Systems, Inc.
stockholders was $46 million, or $0.35 per share (diluted),
compared to $414 million, or $3.18 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 $(0.41) per share
(diluted), compared to net income of $1.50 per share (diluted) for
the same period in 2022.
- Adjusted EBITDA was $386 million.
- Net cash provided by operating activities was $90 million
for the three months ended December 31, 2023, compared to $9
million for the same period in 2022.
- Approximately $402 million principal amount of notes
outstanding were extinguished via repurchases during the three
months ended December 31, 2023.
- Completed offering of $1.000 billion Senior Secured Notes
due 2032 and used proceeds to purchase $985 million of Senior
Secured Notes due 2026 via a tender offer.
- On a same-store basis, admissions increased 1.9 percent and
adjusted admissions increased 3.6 percent, compared to the same
period in 2022.
Three Months Ended December 31, 2023
Net operating revenues for the three months ended December 31,
2023, totaled $3.181 billion, a 1.2 percent increase compared to
$3.142 billion for the same period in 2022. On a same-store basis,
net operating revenues increased 4.1 percent for the three months
ended December 31, 2023, compared to the same period in 2022. Net
operating revenues for the three months ended December 31, 2023,
reflect a 0.7 percent increase in admissions and a 1.9 percent
increase in adjusted admissions, compared to the same period in
2022. On a same-store basis, admissions increased 1.9 percent and
adjusted admissions increased 3.6 percent for the three months
ended December 31, 2023, compared to the same period in 2022.
Net income attributable to Community Health Systems, Inc.
stockholders was $46 million, or $0.35 per share (diluted), for the
three months ended December 31, 2023, compared to $414 million, or
$3.18 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 $(0.41) per share (diluted) for the three months
ended December 31, 2023, compared to net income of $1.50 per share
(diluted) for the same period in 2022. Pandemic relief funds did
not materially impact net income attributable to Community Health
Systems, Inc. stockholders during the three months ended December
31, 2023 and 2022.
Adjusted EBITDA for the three months ended December 31, 2023,
was $386 million compared to $404 million for the same period in
2022. Pandemic relief funds did not materially impact Adjusted
EBITDA during the three months ended December 31, 2023 and
2022.
The decrease in net income attributable to Community Health
Systems, Inc. stockholders and the decrease in Adjusted EBITDA for
the three months ended December 31, 2023, compared to the same
period in 2022, are primarily due to higher costs for supplemental
reimbursement programs, increased rates for outsourced medical
specialists, and higher costs for professional liability insurance,
partially offset by stronger inpatient volumes, increased
reimbursement rates and reduced expense for contract labor.
Year Ended December 31, 2023
Net operating revenues for the year ended December 31, 2023,
totaled $12.490 billion, a 2.3 percent increase compared to $12.211
billion for the same period in 2022. On a same-store basis, net
operating revenues increased 4.8 percent for the year ended
December 31, 2023, compared to the same period in 2022. Net
operating revenues for the year ended December 31, 2023, reflect a
0.3 percent increase in admissions and a 1.7 percent increase in
adjusted admissions, compared to the same period in 2022. On a
same-store basis, admissions increased 3.5 percent and adjusted
admissions increased 5.3 percent for the year ended December 31,
2023, compared to the same period in 2022.
Net loss attributable to Community Health Systems, Inc.
stockholders was $(133) million, or $(1.02) per share (diluted),
for the year ended December 31, 2023, compared to net income of $46
million, or $0.35 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 $(1.39) per share (diluted) for the year
ended December 31, 2023, compared to $(1.38) per share (diluted)
for the same period in 2022. During the year ended December 31,
2023, pandemic relief funds did not materially impact net loss
attributable to Community Health Systems, Inc. stockholders. During
the year ended December 31, 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 $133 million, or $1.02 on a per share
(diluted) basis.
Adjusted EBITDA for the year ended December 31, 2023, was $1.453
billion compared to $1.466 billion for the same period in 2022.
During the year ended December 31, 2023, pandemic relief funds did
not materially impact Adjusted EBITDA. During the year ended
December 31, 2022, pandemic relief funds had a positive impact on
Adjusted EBITDA of approximately $173 million.
The increase in net (loss) income attributable to Community
Health Systems, Inc. stockholders and the decrease in Adjusted
EBITDA for the year ended December 31, 2023, compared to the same
period in 2022, are primarily due to 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, partially offset by stronger inpatient and outpatient
volumes, increased reimbursement rates, higher acuity, an increase
in non-patient revenue and reduced expense for contract labor.
Financing Activity
During the three months ended December 31, 2023, the Company
extinguished approximately $402 million principal amount of notes
through a combination of open market purchases, and privately
negotiated repurchases with a limited number of holders.
Additionally, the Company completed a private offering of $1.000
billion principal amount of 10.875% Senior Secured Notes due 2032
on December 22, 2023 and used the net proceeds, together with cash
on hand, to purchase $985 million aggregate principal amount of its
8.000% Senior Secured Notes due 2026 through a tender offer which
was funded on December 28, 2023. Together, these transactions
resulted in the recognition of a pre-tax gain from early
extinguishment of debt of approximately $72 million during the
three months ended December 31, 2023.
Other
During 2023, the Company completed the divestiture of eight
hospitals and the sale of a majority interest in another hospital.
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. On July 1, 2023,
the Company completed the divestiture of one hospital. On September
1, 2023, the Company completed the sale of a majority interest in
one hospital. On November 1, 2023, the Company completed the
divestiture of two hospitals. On December 1, 2023, the Company
completed the divestiture of three hospitals.
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 2023 and 2022.
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 as completed
during the third quarter of 2021, 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 income (loss) attributable
to Community Health Systems, Inc. stockholders, see footnote (c) to
the Financial Highlights, Financial Statements and Selected
Operating Data below.
Additionally, this press release presents adjusted net (loss)
income attributable to Community Health Systems, Inc. stockholders
per share (diluted), a non-GAAP financial measure, to reflect the
impact on net income (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 income (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.
Included on pages 16, 17, 18, 19 and 20 of this press release
are tables setting forth the Company’s 2024 annual earnings
guidance. The 2024 guidance is based on the Company’s historical
operating performance, current trends and other assumptions the
Company believes are reasonable at this time as more specifically
discussed below.
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 40 distinct markets across 15
states. As of February 20, 2024, the Company’s subsidiaries own or
lease 71 affiliated hospitals with approximately 12,000 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
Wednesday, February 21, 2024 at 10:00 a.m. Central, 11:00 a.m.
Eastern, to review financial and operating results for the fourth
quarter and year ended December 31, 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
Year Ended
December 31,
December 31,
2023
2022
2023
2022
Net operating revenues
$
3,181
$
3,142
$
12,490
$
12,211
Net income (f)
85
446
16
179
Net income (loss) attributable to
Community Health Systems, Inc. stockholders
46
414
(133
)
46
Adjusted EBITDA (c)
386
404
1,453
1,466
Net cash provided by operating
activities
90
9
210
300
Earnings (loss) per share attributable to
Community Health Systems, Inc. stockholders:
Basic (f)
$
0.35
$
3.21
$
(1.02
)
$
0.35
Diluted (e), (f)
0.35
3.18
(1.02
)
0.35
Weighted-average number of shares
outstanding (d):
Basic
131
129
130
129
Diluted
132
130
130
130
_____________
For footnotes, see pages 13, 14 and
15.
COMMUNITY HEALTH SYSTEMS, INC.
AND SUBSIDIARIES
Condensed Consolidated
Statements of Income (a)(b)
(In millions, except per share
amounts)
(Unaudited)
Three Months Ended December
31,
2023
2022
% of Net
% of Net
Operating
Operating
Amount
Revenues
Amount
Revenues
Net operating revenues
$
3,181
100.0
%
$
3,142
100.0
%
Operating costs and expenses:
Salaries and benefits
1,374
43.2
%
1,357
43.2
%
Supplies
509
16.0
%
498
15.8
%
Other operating expenses
849
26.7
%
826
26.4
%
Lease cost and rent
79
2.5
%
82
2.6
%
Pandemic relief funds
-
-
%
(2
)
(0.1
)%
Depreciation and amortization
121
3.8
%
136
4.3
%
Impairment and (gain) loss on sale of
businesses, net (f)
(78
)
(2.5
)%
17
0.5
%
Total operating costs and expenses
2,854
89.7
%
2,914
92.7
%
Income from operations (f)
327
10.3
%
228
7.3
%
Interest expense, net
209
6.6
%
205
6.6
%
Gain from early extinguishment of debt
(72
)
(2.3
)%
(180
)
(5.7
)%
Gain from CoreTrust Transaction
-
-
%
(119
)
(3.8
)%
Equity in earnings of unconsolidated
affiliates
(3
)
(0.1
)%
(3
)
(0.1
)%
Income before income taxes
193
6.1
%
325
10.3
%
Provision for (benefit from) income
taxes
108
3.4
%
(121
)
(3.9
)%
Net income (f)
85
2.7
%
446
14.2
%
Less: Net income attributable to
noncontrolling interests
39
1.3
%
32
1.0
%
Net income attributable to Community
Health Systems, Inc. stockholders
$
46
1.4
%
$
414
13.2
%
Earnings per share attributable to
Community Health Systems, Inc. stockholders:
Basic (f)
$
0.35
$
3.21
Diluted (e), (f)
$
0.35
$
3.18
Weighted-average number of shares
outstanding (d):
Basic
131
129
Diluted
132
130
___________
For footnotes, see pages 13, 14 and
15.
COMMUNITY HEALTH SYSTEMS, INC.
AND SUBSIDIARIES
Condensed Consolidated
Statements of (Loss) Income (a)(b)
(In millions, except per share
amounts)
(Unaudited)
Year Ended December
31,
2023
2022
% of Net
% of Net
Operating
Operating
Amount
Revenues
Amount
Revenues
Net operating revenues
$
12,490
100.0
%
$
12,211
100.0
%
Operating costs and expenses:
Salaries and benefits
5,415
43.4
%
5,330
43.6
%
Supplies
1,993
16.0
%
1,975
16.2
%
Other operating expenses
3,388
27.0
%
3,336
27.3
%
Lease cost and rent
319
2.6
%
317
2.6
%
Pandemic relief funds
-
-
%
(173
)
(1.4
)%
Depreciation and amortization
505
4.0
%
534
4.4
%
Impairment and (gain) loss on sale of
businesses, net (f)
(87
)
(0.7
)%
71
0.6
%
Total operating costs and expenses
11,533
92.3
%
11,390
93.3
%
Income from operations (f)
957
7.7
%
821
6.7
%
Interest expense, net
830
6.7
%
858
7.0
%
Gain from early extinguishment of debt
(72
)
(0.6
)%
(253
)
(2.1
)%
Gain from CoreTrust Transaction
-
-
%
(119
)
(1.0
)%
Equity in earnings of unconsolidated
affiliates
(8
)
(0.1
)%
(14
)
(0.1
)%
Income before income taxes
207
1.7
%
349
2.9
%
Provision for income taxes
191
1.6
%
170
1.4
%
Net income (f)
16
0.1
%
179
1.5
%
Less: Net income attributable to
noncontrolling interests
149
1.2
%
133
1.1
%
Net (loss) income attributable to
Community Health Systems, Inc. stockholders
$
(133
)
(1.1
)%
$
46
0.4
%
(Loss) earnings per share attributable to
Community Health Systems, Inc. stockholders:
Basic (f)
$
(1.02
)
$
0.35
Diluted (e), (f)
$
(1.02
)
$
0.35
Weighted-average number of shares
outstanding (d):
Basic
130
129
Diluted
130
130
___________
For footnotes, see pages 13, 14 and
15.
COMMUNITY HEALTH SYSTEMS, INC.
AND SUBSIDIARIES
Condensed Consolidated
Statements of Comprehensive Income (Loss)
(In millions)
(Unaudited)
Three Months Ended
Year Ended
December 31,
December 31,
2023
2022
2023
2022
Net income
$
85
$
446
$
16
$
179
Other comprehensive income (loss), net of
income taxes:
Net change in fair value of
available-for-sale debt securities, net of tax
7
2
6
(17
)
Amortization and recognition of
unrecognized pension cost components, net of tax
1
10
1
10
Other comprehensive income (loss)
8
12
7
(7
)
Comprehensive income
93
458
23
172
Less: Comprehensive income attributable to
noncontrolling interests
39
32
149
133
Comprehensive income (loss) attributable
to Community Health Systems, Inc. stockholders
$
54
$
426
$
(126
)
$
39
___________
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 December
31,
Consolidated
Same-Store
2023
2022
% Change
2023
2022
% Change
Number of hospitals (at end of period)
71
80
71
71
Licensed beds (at end of period)
11,902
12,832
11,902
11,884
Beds in service (at end of period)
10,234
10,936
10,234
10,081
Admissions
110,874
110,084
0.7
%
105,092
103,101
1.9
%
Adjusted admissions
252,875
248,072
1.9
%
239,707
231,489
3.6
%
Patient days
503,631
506,387
473,380
475,858
Average length of stay (days)
4.5
4.6
4.5
4.6
Occupancy rate (average beds in
service)
53.5
%
50.0
%
50.3
%
51.3
%
Net operating revenues
$
3,181
$
3,142
1.2
%
$
3,105
$
2,984
4.1
%
Net inpatient revenues as a % of net
operating revenues
46.0
%
46.3
%
45.7
%
46.5
%
Net outpatient revenues as a % of net
operating revenues
54.0
%
53.7
%
54.3
%
53.5
%
Income from operations (f)
$
327
$
228
43.4
%
Income from operations as a % of net
operating revenues
10.3
%
7.3
%
Depreciation and amortization
$
121
$
136
Equity in earnings of unconsolidated
affiliates
$
(3
)
$
(3
)
Net income attributable to Community
Health Systems, Inc. stockholders
$
46
$
414
-88.9
%
Net income attributable to Community
Health Systems, Inc. stockholders as a % of net operating
revenues
1.4
%
13.2
%
Adjusted EBITDA (c)
$
386
$
404
-4.5
%
Adjusted EBITDA as a % of net operating
revenues
12.1
%
12.9
%
Net cash provided by operating
activities
$
90
$
9
900.0
%
___________
For footnotes, see pages 13, 14 and
15.
COMMUNITY HEALTH SYSTEMS, INC.
AND SUBSIDIARIES
Selected Operating Data
(a)
(Dollars in millions)
(Unaudited)
Year Ended December
31,
Consolidated
Same-Store
2023
2022
% Change
2023
2022
% Change
Number of hospitals (at end of period)
71
80
71
71
Licensed beds (at end of period)
11,902
12,832
11,902
11,884
Beds in service (at end of period)
10,234
10,936
10,234
10,081
Admissions
435,913
434,765
0.3
%
413,529
399,355
3.5
%
Adjusted admissions
992,552
975,737
1.7
%
942,074
894,388
5.3
%
Patient days
1,957,536
2,052,864
1,864,128
1,895,988
Average length of stay (days)
4.5
4.7
4.5
4.7
Occupancy rate (average beds in
service)
52.4
%
49.2
%
49.9
%
51.5
%
Net operating revenues
$
12,490
$
12,211
2.3
%
$
12,009
$
11,457
4.8
%
Net inpatient revenues as a % of net
operating revenues
46.6
%
46.8
%
46.4
%
46.9
%
Net outpatient revenues as a % of net
operating revenues
53.4
%
53.2
%
53.6
%
53.1
%
Income from operations (f)
$
957
$
821
16.6
%
Income from operations as a % of net
operating revenues
7.7
%
6.7
%
Depreciation and amortization
$
505
$
534
Equity in earnings of unconsolidated
affiliates
$
(8
)
$
(14
)
Net (loss) income attributable to
Community Health Systems, Inc. stockholders
$
(133
)
$
46
-389.1
%
Net (loss) income attributable to
Community Health Systems, Inc. stockholders as a % of net operating
revenues
-1.1
%
0.4
%
Adjusted EBITDA (c)
$
1,453
$
1,466
-0.9
%
Adjusted EBITDA as a % of net operating
revenues
11.6
%
12.0
%
Net cash provided by operating
activities
$
210
$
300
-30.0
%
___________
For footnotes, see pages 13, 14 and
15.
COMMUNITY HEALTH SYSTEMS, INC.
AND SUBSIDIARIES
Condensed Consolidated Balance
Sheets
(In millions, except share
data)
(Unaudited)
December 31, 2023
December 31, 2022
ASSETS
Current assets
Cash and cash equivalents
$
38
$
118
Patient accounts receivable
2,231
2,040
Supplies
328
353
Prepaid income taxes
76
99
Prepaid expenses and taxes
260
237
Other current assets
275
235
Total current assets
3,208
3,082
Property and equipment:
Land and improvements
474
497
Buildings and improvements
5,951
6,038
Equipment and fixtures
3,086
3,104
Property and equipment
9,511
9,639
Less accumulated depreciation and
amortization
(4,304
)
(4,274
)
Property and equipment, net
5,207
5,365
Goodwill
3,958
4,166
Deferred income taxes
29
49
Other assets, net of accumulated
amortization of $1,494 and $1,392 at December 31, 2023 and 2022,
respectively
2,053
2,007
Total assets
$
14,455
$
14,669
LIABILITIES AND STOCKHOLDERS’
DEFICIT
Current liabilities
Current maturities of long-term debt
$
21
$
21
Current operating lease liabilities
124
148
Accounts payable
912
773
Accrued liabilities:
Employee compensation
571
637
Accrued interest
160
189
Other
354
418
Total current liabilities
2,142
2,186
Long-term debt (g)
11,466
11,614
Deferred income taxes
369
354
Long-term operating lease liabilities
563
605
Other long-term liabilities
739
644
Total liabilities
15,279
15,403
Redeemable noncontrolling interests in
equity of consolidated subsidiaries
323
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; 136,774,911 shares issued and
outstanding at December 31, 2023, and 134,703,717 shares issued and
outstanding at December 31, 2022
1
1
Additional paid-in capital
2,185
2,084
Accumulated other comprehensive loss
(14
)
(21
)
Accumulated deficit
(3,564
)
(3,431
)
Total Community Health Systems, Inc.
stockholders’ deficit
(1,392
)
(1,367
)
Noncontrolling interests in equity of
consolidated subsidiaries
245
92
Total stockholders’ deficit
(1,147
)
(1,275
)
Total liabilities and stockholders’
deficit
$
14,455
$
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)
Year Ended December
31,
2023
2022
Cash flows from operating activities
Net income
$
16
$
179
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization
505
534
Deferred income taxes
35
165
Stock-based compensation expense
22
20
Impairment and (gain) loss on sale of
businesses, net (f)
(87
)
71
Gain from early extinguishment of debt
(72
)
(253
)
Gain from CoreTrust Transaction
-
(119
)
Other non-cash expenses, net
181
182
Changes in operating assets and
liabilities, net of effects of acquisitions and divestitures:
Patient accounts receivable
(193
)
22
Supplies, prepaid expenses and other
current assets
(82
)
(128
)
Accounts payable, accrued liabilities and
income taxes
(50
)
(158
)
Other
(65
)
(215
)
Net cash provided by operating
activities
210
300
Cash flows from investing activities
Acquisitions of facilities and other
related businesses
(38
)
(9
)
Purchases of property and equipment
(467
)
(415
)
Proceeds from disposition of hospitals and
other ancillary operations
432
89
Proceeds from sale of property and
equipment
28
38
Purchases of available-for-sale debt
securities and equity securities
(137
)
(114
)
Proceeds from sales of available-for-sale
debt securities and equity securities
232
110
Distribution of CoreTrust proceeds
-
121
Purchases of investments in unconsolidated
affiliates
(11
)
(19
)
Increase in other investments
(65
)
(60
)
Net cash used in investing activities
(26
)
(259
)
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
(3
)
(74
)
Proceeds from noncontrolling investors in
joint ventures
5
13
Redemption of noncontrolling investments
in joint ventures
(1
)
(5
)
Distributions to noncontrolling investors
in joint ventures
(141
)
(125
)
Other borrowings
39
48
Issuance of long-term debt
989
1,535
Proceeds from ABL Facility
3,176
542
Repayments of long-term indebtedness
(4,324
)
(2,356
)
Net cash used in financing activities
(264
)
(430
)
Net change in cash and cash
equivalents
(80
)
(389
)
Cash and cash equivalents at beginning of
period
118
507
Cash and cash equivalents at end of
period
$
38
$
118
___________
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 2023 and 2022. There were no
discontinued operations reported for 2023 and 2022.
(b)
The following table provides information
needed to calculate earnings (loss) per share, which is adjusted
for income attributable to noncontrolling interests (in
millions):
Three Months Ended
Year Ended
December 31,
December 31,
2023
2022
2023
2022
Net income (loss) attributable to
Community Health Systems, Inc. stockholders:
Net income
$
85
$
446
$
16
$
179
Less: Income attributable to
noncontrolling interests, net of taxes
39
32
149
133
Net income (loss) attributable to
Community Health Systems, Inc. stockholders — basic and diluted
$
46
$
414
$
(133
)
$
46
(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 previously disclosed multi-year initiative to
modernize and consolidate technology platforms and associated
processes, gain on sale of equity interests in Macon Healthcare,
LLC as completed during the third quarter of 2021, 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 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 income (loss) attributable to Community
Health Systems, Inc. stockholders as derived directly from the
condensed consolidated financial statements (in millions):
Three Months Ended
Year Ended
December 31,
December 31,
2023
2022
2023
2022
Net income (loss) attributable to
Community Health Systems, Inc. stockholders
$
46
$
414
$
(133
)
$
46
Adjustments:
Provision for (benefit from) income
taxes
108
(121
)
191
170
Depreciation and amortization
121
136
505
534
Net income attributable to noncontrolling
interests
39
32
149
133
Interest expense, net
209
205
830
858
Gain from early extinguishment of debt
(72
)
(180
)
(72
)
(253
)
Impairment and (gain) loss on sale of
businesses, net
(78
)
17
(87
)
71
Gain from CoreTrust Transaction
-
(119
)
-
(119
)
Expense from government and other legal
matters and related costs
3
-
36
5
Expense from business transformation
costs
9
-
22
-
Expense related to employee termination
benefits and other restructuring charges
1
5
12
6
Change in estimate for professional claims
liability related to divested locations
-
15
-
15
Adjusted EBITDA
$
386
$
404
$
1,453
$
1,466
(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
Year Ended
December 31,
December 31,
2023
2022
2023
2022
Weighted-average number of shares
outstanding - basic
131
129
130
129
Add effect of dilutive securities:
Stock awards and options
1
1
-
1
Weighted-average number of shares
outstanding - diluted
132
130
130
130
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 the year ended December 31,
2023, 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 422,487
shares during the year ended December 31, 2023.
(e)
The following supplemental table
reconciles net income (loss) attributable to Community Health
Systems, Inc. stockholders, as reported, on a per share (diluted)
basis, to net (loss) income 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) income attributable to Community Health
Systems, Inc. stockholders per share (diluted) presents useful
information to investors by highlighting the impact on net income
(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
Year Ended
December 31,
December 31,
2023
2022
2023
2022
Net income (loss) per share (diluted), as
reported
$
0.35
$
3.18
$
(1.02
)
$
0.35
Adjustments:
Gain from early extinguishment of debt
(0.47
)
(1.18
)
(0.47
)
(1.60
)
Impairment and (gain) loss on sale of
businesses, net
(0.37
)
0.10
(0.33
)
0.42
Gain from CoreTrust Transaction
-
(0.71
)
-
(0.71
)
Expense from government and other legal
matters and related costs
0.02
-
0.22
0.03
Expense from business transformation
costs
0.05
-
0.13
-
Expense related to employee termination
benefits and other restructuring charges
-
0.03
0.07
0.04
Change in estimate for professional claims
liability related to divested locations
-
0.09
-
0.09
Net (loss) income per share (diluted),
excluding adjustments
$
(0.41
)
$
1.50
$
(1.39
)
$
(1.38
)
(f)
Both income from operations and net income
included a net non-cash income of $78 million and expense of $17
million for the three months ended December 31, 2023 and 2022,
respectively, and a net non-cash income of $87 million and expense
of $71 million for the years ended December 31, 2023 and 2022,
respectively, primarily from gains and losses 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 gains, losses
and 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 December 31, 2023, the Company had outstanding
borrowings of $247 million and approximately $637 million of
additional borrowing capacity (after taking into consideration $81
million of outstanding letters of credit) under the ABL
Facility.
Regulation FD Disclosure
Set forth below is selected information concerning the Company’s
projected consolidated operating results for the year ending
December 31, 2024. These projections are based on the Company’s
historical operating performance, current trends and other
assumptions that the Company believes are reasonable at this time.
The 2024 guidance should be considered in conjunction with the
assumptions included herein. See pages 18, 19 and 20 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:
2024 Projection Range
Net operating revenues (in millions)
$
12,300
to
$
12,700
Adjusted EBITDA (in millions)
$
1,475
to
$
1,625
Net loss per share - diluted
$
(0.65
)
to
$
(0.05
)
Weighted-average diluted shares (in
millions)
132
to
133
The following assumptions were used in developing the 2024
guidance provided above:
- The Company’s projections exclude the following:
- Effect of debt refinancing activities, including gains and
losses from early extinguishment of debt;
- Impairment of goodwill and long-lived assets;
- The impact of any potential future divestitures;
- Gains or losses from the sales of businesses;
- Employee termination benefits and restructuring costs;
- Resolution of government investigations or other significant
legal settlements;
- Costs incurred in connection with divestitures;
- Expense for third-party consulting costs associated with
significant process and systems redesign across multiple functions
as part of the Company's previously disclosed business
transformation initiative; and
- Other significant gains or losses that neither relate to the
ordinary course of business nor reflect the Company’s underlying
business performance.
Other assumptions used in the above guidance:
- Expressed as a percentage of net operating revenues,
depreciation and amortization of approximately 4.0% for 2024.
Additionally, this is a fixed cost and the percentages may vary
based on changes in net operating revenues. Such amounts exclude
the possible impact of any future hospital fixed asset
impairments.
- Interest expense is estimated to be between $820 million and
$840 million while cash paid for interest, which excludes the
amortization of deferred financing costs, is expected to be $730
million to $750 million. Total fixed rate debt is expected to
average approximately 99% of total debt during 2024.
- Expressed as a percentage of net operating revenues, net income
attributable to noncontrolling interests of approximately 1.2% to
1.3% for 2024.
- Expressed as a percentage of net operating revenues, provision
for income taxes of approximately 0.8% to 0.9% for 2024.
A reconciliation of the Company’s projected 2024 Adjusted
EBITDA, a forward-looking non-GAAP financial measure, to the
Company’s projected net loss attributable to Community Health
Systems, Inc. stockholders, the most directly comparable GAAP
financial measure, is shown below (in millions):
Year Ending
December 31, 2024
Low
High
Net loss attributable to Community Health
Systems, Inc. stockholders (1)
$
(86
)
$
(7
)
Adjustments:
Depreciation and amortization
490
510
Interest expense, net
820
840
Provision for income taxes
106
122
Net income attributable to noncontrolling
interests
145
160
Adjusted EBITDA (1)
$
1,475
$
1,625
(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 attributable to Community
Health Systems, Inc. stockholders to Adjusted EBITDA such as, but
not limited to, losses (gains) from early extinguishment of debt,
impairment and (gain) loss on sale of businesses and expense from
government and other legal matters 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):
2024
Guidance
Total
$
350
to
$
400
- Net cash provided by operating activities, including estimated
cash payments for income taxes of $150 million to $200 million, are
projected as follows (in millions):
2024
Guidance
Total
$
500
to
$
650
- Diluted weighted-average shares outstanding are projected to be
approximately 132 million to 133 million for 2024.
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, and
current geopolitical instability, as well as the potential impact
on us of financial, credit and capital conditions, including the
potential impact of such conditions on 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;
- the extent to and manner in which states adopt changes to
Medicaid programs, implement health insurance exchanges or alter or
reduce the provision of, or payment for, healthcare to state
residents through legislation, regulation or otherwise;
- changes related to health insurance enrollment, including those
affecting the beneficiary enrollment process and the stability of
health insurance exchanges;
- 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;
- demographic changes;
- 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, methodologies or
rates paid by federal or state healthcare programs or commercial
payors;
- 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;
- 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;
- the effects related to 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 inability of third parties with whom we contract to provide
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;
- competition;
- 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;
- changes in U.S. GAAP;
- the availability and terms of capital to fund any additional
acquisitions or replacement facilities or other capital
expenditures;
- our ability to successfully make acquisitions or complete
divestitures, 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
general liability, professional liability, cyber 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 months and year
ended December 31, 2023, are not necessarily indicative of the
results that may be experienced for any future periods. The Company
cautions that the projections for calendar year 2024 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
(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/20240220745314/en/
Investor Contact: Kevin Hammons President and Chief Financial
Officer (615) 465-7000
Community Health Systems (NYSE:CYH)
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Community Health Systems (NYSE:CYH)
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