Community Health Systems, Inc. (NYSE: CYH) (the “Company”) today
announced financial and operating results for the three and nine
months ended September 30, 2024.
The following highlights the financial and operating results for
the three months ended September 30, 2024.
- Net operating revenues totaled $3.090 billion.
- Net loss attributable to Community Health Systems, Inc.
stockholders was $(391) million, or $(2.95) per share (diluted),
compared to $(91) million, or $(0.69) per share (diluted), for the
same period in 2023. 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 $(0.30) per share
(diluted), compared to $(0.33) per share (diluted) for the same
period in 2023.
- Adjusted EBITDA was $347 million.
- Net cash provided by operating activities was $67 million
for the three months ended September 30, 2024, compared to $29
million for the same period in 2023.
- On a same-store basis, admissions increased 2.4 percent and
adjusted admissions increased 2.6 percent, compared to the same
period in 2023.
Commenting on the results, Tim L. Hingtgen, chief executive
officer of Community Health Systems, Inc., said, “Our teams
continued to execute well in a number of areas, advancing key
priorities related to volume growth, operational improvements and
patient outcome success. I especially want to express gratitude for
the extraordinary efforts made across many of our health systems to
ensure the safety of our patients during back-to-back hurricanes
that affected many of our communities.”
Three Months Ended September 30, 2024
Net operating revenues for the three months ended September 30,
2024, totaled $3.090 billion, a 0.1 percent increase compared to
$3.086 billion for the same period in 2023. On a same-store basis,
net operating revenues increased 5.1 percent for the three months
ended September 30, 2024, compared to the same period in 2023. Net
operating revenues for the three months ended September 30, 2024,
reflect a 4.1 percent decrease in admissions and a 3.7 percent
decrease in adjusted admissions, compared to the same period in
2023. On a same-store basis, admissions increased 2.4 percent and
adjusted admissions increased 2.6 percent for the three months
ended September 30, 2024, compared to the same period in 2023.
Net loss attributable to Community Health Systems, Inc.
stockholders was $(391) million, or $(2.95) per share (diluted),
for the three months ended September 30, 2024, compared to $(91)
million, or $(0.69) per share (diluted), for the same period in
2023. 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 $(0.30) per share (diluted) for the
three months ended September 30, 2024, compared to $(0.33) per
share (diluted) for the same period in 2023.
Adjusted EBITDA for the three months ended September 30, 2024,
was $347 million compared to $360 million for the same period in
2023.
The increase in net loss attributable to Community Health
Systems, Inc. stockholders for the three months ended September 30,
2024, compared to the same period in 2023, was driven by the change
in estimate to increase the professional liability claims accrual
and period-over-period changes in impairment and (gain) loss on the
sale of businesses, partially offset by having a benefit from
income taxes in the current period compared to a provision for
income taxes in the prior period. In addition, the increase in net
loss attributable to Community Health Systems, Inc. stockholders
and the decrease in Adjusted EBITDA for the three months ended
September 30, 2024, compared to the same period in 2023, was driven
by increased expense for salaries and benefits, increased costs for
outsourced medical specialists, losses resulting from Hurricane
Helene and increased patient claim denials, partially offset by
higher same-store volumes, increased reimbursement rates, a higher
net benefit from supplemental reimbursement programs, reduced
expense for contract labor and reductions in supplies expense.
Nine Months Ended September 30, 2024
Net operating revenues for the nine months ended September 30,
2024, totaled $9.369 billion, a 0.7 percent increase compared to
$9.308 billion for the same period in 2023. On a same-store basis,
net operating revenues increased 5.2 percent for the nine months
ended September 30, 2024, compared to the same period in 2023. Net
operating revenues for the nine months ended September 30, 2024,
reflect a 3.1 percent decrease in admissions and a 3.4 percent
decrease in adjusted admissions, compared to the same period in
2023. On a same-store basis, admissions increased 3.0 percent and
adjusted admissions increased 2.5 percent for the nine months ended
September 30, 2024, compared to the same period in 2023.
Net loss attributable to Community Health Systems, Inc.
stockholders was $(446) million, or $(3.38) per share (diluted),
for the nine months ended September 30, 2024, compared to $(180)
million, or $(1.38) per share (diluted), for the same period in
2023. 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 $(0.61) per share (diluted) for the
nine months ended September 30, 2024, compared to $(0.98) per share
(diluted) for the same period in 2023.
Adjusted EBITDA for the nine months ended September 30, 2024,
was $1.112 billion compared to $1.068 billion for the same period
in 2023.
The increase in net loss attributable to Community Health
Systems, Inc. stockholders for the nine months ended September 30,
2024, compared to the same period in 2023, is primarily
attributable to period-over-period changes in impairment and (gain)
loss on the sale of businesses and a change in estimate to increase
the professional liability claims accrual, partially offset by a
gain from early extinguishment of debt, having a benefit from
income taxes in the current period compared to a provision for
income taxes in the prior period and the factors that contributed
to the increase in Adjusted EBITDA as noted below. In addition, the
increase in Adjusted EBITDA for the nine months ended September 30,
2024, compared to the same period in 2023, was driven by higher
same-store volumes, increased reimbursement rates, favorable
changes in payor mix, a higher net benefit from supplemental
reimbursement programs, reduced expense for contract labor and
reductions in supplies expense, partially offset by lower acuity
and increased patient claim denials.
Financing Activity
During the three months ended September 30, 2024, the Company
extinguished approximately $143 million principal value of its 5⅝%
Senior Secured Notes due 2027 through open market repurchases
utilizing cash on hand.
Other
During 2024, through the date of this press release, the Company
has completed two hospital divestitures including one on August 1,
2024 and the other on October 1, 2024.
Certain of the Company’s facilities in Florida, Georgia and
Tennessee have experienced an interruption in their business and
incurred additional costs as a direct result of Hurricane Helene,
which made landfall in late September 2024, and Hurricane Milton,
which made landfall in early October 2024. Hurricane Helene
resulted in an estimated loss of operating revenues together with
incremental expenses directly related to hurricane response efforts
of approximately $7 million on a pre-tax basis during the three
months ended September 30, 2024. No insurance proceeds related to
Hurricane Helene were received or recognized during the three
months ended September 30, 2024. Further, taking into account the
timing of these events, it is expected that additional net
operating revenues will be lost and incremental operating expenses
will be incurred for remediation and restoration efforts in the
fourth quarter of 2024 and one or more future periods. Insurance
proceeds, which are expected to cover substantially all of the
Company’s costs related to these events, are expected to be
received in one or more future periods.
Financial and statistical data 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 in 2024 and 2023.
Information About Non-GAAP Financial Measures
This press release presents Adjusted EBITDA, a non-GAAP
financial measure, which is EBITDA adjusted to add back net income
attributable to noncontrolling interests and to exclude loss (gain)
from early extinguishment of debt, impairment and (gain) loss on
sale of businesses, expense related to the Business Transformation
Costs (as defined in footnote (c) to the Financial Highlights,
Financial Statements and Selected Operating Data below), expense
related to government and other legal matters and related costs,
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 as well as a change in estimate
to increase such accrual recorded during the third quarter of 2024
as further described in footnote (c) to the Financial Highlights,
Financial Statements and Selected Operating Data below, and the
gain on sale by HealthTrust Purchasing Group, L.P. (“HealthTrust”)
of a majority interest in CoreTrust Holdings, LLC (“CoreTrust”)
completed during the fourth quarter of 2022. For information
regarding why the Company believes Adjusted EBITDA provides useful
information to investors, and for a reconciliation of Adjusted
EBITDA to net loss attributable to Community Health Systems, Inc.
stockholders, see footnote (c) to the Financial Highlights,
Financial Statements and Selected Operating Data below.
Additionally, this press release presents adjusted net loss
attributable to Community Health Systems, Inc. stockholders per
share (diluted), a non-GAAP financial measure, to reflect the
impact on net loss attributable to Community Health Systems, Inc.
stockholders per share (diluted) from the selected items used in
the calculation of Adjusted EBITDA. For information regarding why
the Company believes this non-GAAP financial measure provides
useful information to investors, and for a reconciliation of this
non-GAAP financial measure to net loss attributable to Community
Health Systems, Inc. stockholders per share (diluted), see footnote
(e) to the Financial Highlights, Financial Statements and Selected
Operating Data below.
The non-GAAP financial measures set forth above are not
measurements of financial performance under U.S. GAAP, and should
not be considered in isolation or as a substitute for any financial
measure calculated in accordance with U.S. GAAP. Additionally, the
calculation of these non-GAAP financial measures may not be
comparable to similarly titled measures disclosed by other
companies.
Included on pages 16, 17, 18, 19 and 20 of this press release
are tables setting forth the Company’s 2024 updated 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 39 distinct markets across 15
states. As of October 23, 2024, the Company’s subsidiaries own or
lease 69 affiliated hospitals with more than 11,000 beds and
operate more than 1,000 sites of care, including physician
practices, urgent care centers, freestanding emergency departments,
occupational medicine clinics, imaging centers, cancer centers and
ambulatory surgery centers.
The Company’s headquarters are located in Franklin, Tennessee, a
suburb south of Nashville. Shares in Community Health Systems, Inc.
are traded on the New York Stock Exchange under the symbol “CYH.”
More information about the Company can be found on its website at
www.chs.net.
Community Health Systems, Inc. will hold a conference call on
Thursday, October 24, 2024 at 10:00 a.m. Central, 11:00 a.m.
Eastern, to review financial and operating results for the third
quarter ended September 30, 2024. 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
Nine Months Ended
September 30,
September 30,
2024
2023
2024
2023
Net operating revenues
$
3,090
$
3,086
$
9,369
$
9,308
Net loss (f)
(355
)
(52
)
(334
)
(70
)
Net loss attributable to Community Health
Systems, Inc. stockholders
(391
)
(91
)
(446
)
(180
)
Adjusted EBITDA (c)
347
360
1,112
1,068
Net cash provided by operating
activities
67
29
264
120
Loss per share attributable to Community
Health Systems, Inc. stockholders:
Basic (f)
$
(2.95
)
$
(0.69
)
$
(3.38
)
$
(1.38
)
Diluted (e), (f)
(2.95
)
(0.69
)
(3.38
)
(1.38
)
Weighted-average number of shares
outstanding (d):
Basic
132
131
132
130
Diluted
132
131
132
130
__________
For footnotes, see pages 13, 14 and
15.
COMMUNITY HEALTH SYSTEMS, INC.
AND SUBSIDIARIES
Condensed Consolidated
Statements of Loss (a)(b)
(In millions, except per share
amounts)
(Unaudited)
Three Months Ended September
30,
2024
2023
% of Net
% of Net
Operating
Operating
Amount
Revenues
Amount
Revenues
Net operating revenues
$
3,090
100.0
%
$
3,086
100.0
%
Operating expenses:
Salaries and benefits
1,359
44.0
%
1,338
43.4
%
Supplies
469
15.2
%
489
15.8
%
Other operating expenses
1,010
32.6
%
853
27.7
%
Lease cost and rent
73
2.4
%
79
2.6
%
Depreciation and amortization
117
3.8
%
128
4.1
%
Impairment and (gain) loss on sale of
businesses, net (f)
267
8.6
%
26
0.8
%
Total operating expenses
3,295
106.6
%
2,913
94.4
%
(Loss) income from operations (f)
(205
)
(6.6
)
%
173
5.6
%
Interest expense, net
216
7.1
%
208
6.8
%
Equity in earnings of unconsolidated
affiliates
(2
)
(0.1
)
%
(2
)
(0.1
)
%
Loss before income taxes
(419
)
(13.6
)
%
(33
)
(1.1
)
%
(Benefit from) provision for income
taxes
(64
)
(2.1
)
%
19
0.6
%
Net loss (f)
(355
)
(11.5
)
%
(52
)
(1.7
)
%
Less: Net income attributable to
noncontrolling interests
36
1.2
%
39
1.2
%
Net loss attributable to Community Health
Systems, Inc. stockholders
$
(391
)
(12.7
)
%
$
(91
)
(2.9
)
%
Loss per share attributable to Community
Health Systems, Inc. stockholders:
Basic (f)
$
(2.95
)
$
(0.69
)
Diluted (e), (f)
$
(2.95
)
$
(0.69
)
Weighted-average number of shares
outstanding (d):
Basic
132
131
Diluted
132
131
__________
For footnotes, see pages 13, 14 and
15.
COMMUNITY HEALTH SYSTEMS, INC.
AND SUBSIDIARIES
Condensed Consolidated
Statements of Loss (a)(b)
(In millions, except per share
amounts)
(Unaudited)
Nine Months Ended September
30,
2024
2023
% of Net
% of Net
Operating
Operating
Amount
Revenues
Amount
Revenues
Net operating revenues
$
9,369
100.0
%
$
9,308
100.0
%
Operating expenses:
Salaries and benefits
4,054
43.3
%
4,040
43.4
%
Supplies
1,439
15.4
%
1,499
16.1
%
Other operating expenses
2,737
29.2
%
2,524
27.1
%
Lease cost and rent
224
2.4
%
240
2.6
%
Depreciation and amortization
357
3.8
%
384
4.1
%
Impairment and (gain) loss on sale of
businesses, net (f)
294
3.1
%
(9
)
(0.1
)
%
Total operating expenses
9,105
97.2
%
8,678
93.2
%
Income from operations (f)
264
2.8
%
630
6.8
%
Interest expense, net
643
6.9
%
621
6.7
%
Gain from early extinguishment of debt
(25
)
(0.3
)
%
-
-
%
Equity in earnings of unconsolidated
affiliates
(7
)
(0.1
)
%
(5
)
(0.1
)
%
(Loss) income before income taxes
(347
)
(3.7
)
%
14
0.2
%
(Benefit from) provision for income
taxes
(13
)
(0.1
)
%
84
1.0
%
Net loss (f)
(334
)
(3.6
)
%
(70
)
(0.8
)
%
Less: Net income attributable to
noncontrolling interests
112
1.2
%
110
1.1
%
Net loss attributable to Community Health
Systems, Inc. stockholders
$
(446
)
(4.8
)
%
$
(180
)
(1.9
)
%
Loss per share attributable to Community
Health Systems, Inc. stockholders:
Basic (f)
$
(3.38
)
$
(1.38
)
Diluted (e), (f)
$
(3.38
)
$
(1.38
)
Weighted-average number of shares
outstanding (d):
Basic
132
130
Diluted
132
130
__________
For footnotes, see pages 13, 14 and
15.
COMMUNITY HEALTH SYSTEMS, INC.
AND SUBSIDIARIES
Condensed Consolidated
Statements of Comprehensive Loss
(In millions)
(Unaudited)
Three Months Ended
Nine Months Ended
September 30,
September 30,
2024
2023
2024
2023
Net loss
$
(355
)
$
(52
)
$
(334
)
$
(70
)
Other comprehensive income (loss), net of
income taxes:
Net change in fair value of
available-for-sale debt securities, net of tax
2
(3
)
4
(1
)
Amortization and recognition of
unrecognized pension cost components, net of tax
2
-
2
-
Other comprehensive income (loss)
4
(3
)
6
(1
)
Comprehensive loss
(351
)
(55
)
(328
)
(71
)
Less: Comprehensive income attributable to
noncontrolling interests
36
39
112
110
Comprehensive loss attributable to
Community Health Systems, Inc. stockholders
$
(387
)
$
(94
)
$
(440
)
$
(181
)
__________
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 September
30,
Consolidated
Same-Store
2024
2023
% Change
2024
2023
% Change
Number of hospitals (at end of period)
70
76
70
70
Licensed beds (at end of period)
11,517
12,494
11,517
11,544
Beds in service (at end of period)
9,889
10,621
9,889
9,917
Admissions
104,593
109,043
-4.1
%
103,774
101,312
2.4
%
Adjusted admissions
240,701
249,988
-3.7
%
238,812
232,799
2.6
%
Patient days
453,053
459,838
449,574
443,819
Average length of stay (days)
4.3
4.2
4.3
4.4
Occupancy rate (average beds in
service)
49.8
%
47.1
%
49.4
%
48.6
%
Net operating revenues
$
3,090
$
3,086
0.1
%
$
3,073
$
2,923
5.1
%
Net inpatient revenues as a % of net
operating revenues
47.2
%
46.5
%
47.2
%
46.2
%
Net outpatient revenues as a % of net
operating revenues
52.8
%
53.5
%
52.8
%
53.8
%
(Loss) income from operations (f)
$
(205
)
$
173
-218.5
%
(Loss) income from operations as a % of
net operating revenues
-6.6
%
5.6
%
Depreciation and amortization
$
117
$
128
Net loss attributable to Community Health
Systems, Inc. stockholders
$
(391
)
$
(91
)
-329.7
%
Net loss attributable to Community Health
Systems, Inc. stockholders as a % of net operating revenues
-12.7
%
-2.9
%
Adjusted EBITDA (c)
$
347
$
360
-3.6
%
Adjusted EBITDA as a % of net operating
revenues
11.2
%
11.7
%
Net cash provided by operating
activities
$
67
$
29
131.0
%
__________
For footnotes, see pages 13, 14 and
15.
COMMUNITY HEALTH SYSTEMS, INC.
AND SUBSIDIARIES
Selected Operating Data
(a)
(Dollars in millions)
(Unaudited)
Nine Months Ended September
30,
Consolidated
Same-Store
2024
2023
% Change
2024
2023
% Change
Number of hospitals (at end of period)
70
76
70
70
Licensed beds (at end of period)
11,517
12,494
11,517
11,544
Beds in service (at end of period)
9,889
10,621
9,889
9,917
Admissions
317,396
327,466
-3.1
%
311,613
302,447
3.0
%
Adjusted admissions
719,941
745,207
-3.4
%
707,201
689,983
2.5
%
Patient days
1,405,286
1,453,905
1,378,445
1,360,574
Average length of stay (days)
4.4
4.4
4.4
4.5
Occupancy rate (average beds in
service)
51.9
%
50.1
%
50.9
%
50.3
%
Net operating revenues
$
9,369
$
9,308
0.7
%
$
9,255
$
8,801
5.2
%
Net inpatient revenues as a % of net
operating revenues
47.6
%
46.9
%
47.5
%
46.7
%
Net outpatient revenues as a % of net
operating revenues
52.4
%
53.1
%
52.5
%
53.3
%
Income from operations (f)
$
264
$
630
-58.1
%
Income from operations as a % of net
operating revenues
2.8
%
6.8
%
Depreciation and amortization
$
357
$
384
Net loss attributable to Community Health
Systems, Inc. stockholders
$
(446
)
$
(180
)
-147.8
%
Net loss attributable to Community Health
Systems, Inc. stockholders as a % of net operating revenues
-4.8
%
-1.9
%
Adjusted EBITDA (c)
$
1,112
$
1,068
4.1
%
Adjusted EBITDA as a % of net operating
revenues
11.9
%
11.5
%
Net cash provided by operating
activities
$
264
$
120
120.0
%
__________
For footnotes, see pages 13, 14 and
15.
COMMUNITY HEALTH SYSTEMS, INC.
AND SUBSIDIARIES
Condensed Consolidated Balance
Sheets
(In millions, except share
data)
(Unaudited)
September 30, 2024
December 31, 2023
ASSETS
Current assets
Cash and cash equivalents
$
33
$
38
Patient accounts receivable
2,043
2,231
Supplies
311
328
Prepaid income taxes
92
76
Prepaid expenses and taxes
227
260
Other current assets
402
275
Total current assets
3,108
3,208
Property and equipment
9,094
9,511
Less accumulated depreciation and
amortization
(4,130
)
(4,304
)
Property and equipment, net
4,964
5,207
Goodwill
3,940
3,958
Deferred income taxes
29
29
Other assets, net
1,864
2,053
Total assets
$
13,905
$
14,455
LIABILITIES AND STOCKHOLDERS’
DEFICIT
Current liabilities
Current maturities of long-term debt
$
20
$
21
Current operating lease liabilities
113
124
Accounts payable
842
912
Accrued liabilities:
Employee compensation
460
571
Accrued interest
198
160
Other
493
354
Total current liabilities
2,126
2,142
Long-term debt (g)
11,467
11,466
Deferred income taxes
239
369
Long-term operating lease liabilities
528
563
Other long-term liabilities
815
739
Total liabilities
15,175
15,279
Redeemable noncontrolling interests in
equity of consolidated subsidiaries
322
323
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; 138,936,058 shares issued and
outstanding at September 30, 2024, and 136,774,911 shares issued
and outstanding at December 31, 2023
1
1
Additional paid-in capital
2,194
2,185
Accumulated other comprehensive loss
(8
)
(14
)
Accumulated deficit
(4,010
)
(3,564
)
Total Community Health Systems, Inc.
stockholders’ deficit
(1,823
)
(1,392
)
Noncontrolling interests in equity of
consolidated subsidiaries
231
245
Total stockholders’ deficit
(1,592
)
(1,147
)
Total liabilities and stockholders’
deficit
$
13,905
$
14,455
__________
For footnotes, see pages 13, 14 and
15.
COMMUNITY HEALTH SYSTEMS, INC.
AND SUBSIDIARIES
Condensed Consolidated
Statements of Cash Flows
(In millions)
(Unaudited)
Nine Months Ended September
30,
2024
2023
Cash flows from operating activities
Net loss
$
(334
)
$
(70
)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization
357
384
Deferred income taxes
(129
)
22
Stock-based compensation expense
12
16
Impairment and (gain) loss on sale of
businesses, net (f)
294
(9
)
Gain from early extinguishment of debt
(25
)
-
Other non-cash expenses, net
142
132
Changes in operating assets and
liabilities, net of effects of
acquisitions and divestitures:
Patient accounts receivable
126
(119
)
Supplies, prepaid expenses and other
current assets
(48
)
(100
)
Accounts payable, accrued liabilities and
income taxes
(119
)
(69
)
Other
(12
)
(67
)
Net cash provided by operating
activities
264
120
Cash flows from investing activities
Acquisitions of facilities and other
related businesses
(1
)
(35
)
Purchases of property and equipment
(251
)
(357
)
Proceeds from disposition of hospitals and
other ancillary operations
174
123
Proceeds from sale of property and
equipment
5
27
Purchases of available-for-sale debt
securities and equity securities
(54
)
(126
)
Proceeds from sales of available-for-sale
debt securities and equity securities
54
221
Purchases of investments in unconsolidated
affiliates
(4
)
(8
)
Increase in other investments
(55
)
(51
)
Net cash used in investing activities
(132
)
(206
)
Cash flows from financing activities
Repurchase of restricted stock shares for
payroll tax withholding requirements
(2
)
(4
)
Deferred financing costs and other
debt-related costs
(8
)
-
Proceeds from noncontrolling investors in
joint ventures
1
4
Redemption of noncontrolling investments
in joint ventures
(3
)
(1
)
Distributions to noncontrolling investors
in joint ventures
(121
)
(108
)
Other borrowings
18
30
Issuance of long-term debt
1,236
-
Proceeds from ABL Facility
2,662
2,290
Repayments of long-term indebtedness
(3,920
)
(2,152
)
Net cash (used in) provided by financing
activities
(137
)
59
Net change in cash and cash
equivalents
(5
)
(27
)
Cash and cash equivalents at beginning of
period
38
118
Cash and cash equivalents at end of
period
$
33
$
91
__________
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 in 2024 and 2023. There were no discontinued
operations reported for the periods presented.
(b)
The following table provides information
needed to calculate loss per share, which is adjusted for income
attributable to noncontrolling interests (in millions):
Three Months Ended
Nine Months Ended
September 30,
September 30,
2024
2023
2024
2023
Net loss attributable to Community Health
Systems, Inc. stockholders:
Net loss
$
(355
)
$
(52
)
$
(334
)
$
(70
)
Less: Income attributable to
noncontrolling interests, net of taxes
36
39
112
110
Net loss attributable to Community Health
Systems, Inc. stockholders — basic and diluted
$
(391
)
$
(91
)
$
(446
)
$
(180
)
(c)
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 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,
expense related to government and other legal matters and related
costs, 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 as well as a change in estimate
to increase such accrual recorded during the third quarter of 2024
as described below, and the gain on sale by HealthTrust of a
majority interest in CoreTrust completed during the fourth quarter
of 2022. The Company has included an adjustment to Adjusted EBITDA
during the three months ended September 30, 2024, for the change in
estimate to increase the professional liability claims accrual
resulting from emergence in the period of adverse developments,
including from social inflationary pressures, which affected the
actuarially determined estimate for the resolution of professional
liability claims. The Company, with input from its third-party
actuary, considered recent increases in the amounts the Company has
paid to resolve outstanding professional liability claims arising
in prior periods as well as increases in individual claim accruals
for unresolved prior period claims, the majority of which increases
in amounts and individual claim accruals relate to divested
locations. The Company believes that this increase in estimate is
not reflective of the Company’s underlying results of operations
and that the exclusion of this item from the calculation of
Adjusted EBITDA for the three months ended September 30, 2024, is
consistent with the intended purpose of Adjusted EBITDA in
assessing the Company’s operational performance and comparing the
Company’s operational performance between periods. The Company has
from time to time sold noncontrolling interests in certain of its
subsidiaries or acquired subsidiaries with existing noncontrolling
interest ownership positions. The Company believes that it is
useful to present Adjusted EBITDA because it adds back the portion
of EBITDA attributable to these third-party interests. The Company
reports Adjusted EBITDA as a measure of financial performance.
Adjusted EBITDA is a key measure used by management to assess the
operating performance of the Company’s hospital operations and to
make decisions on the allocation of resources. Adjusted EBITDA is
also used to evaluate the performance of the Company’s executive
management team and is one of the primary metrics used in
connection with determining short-term cash incentive compensation
and the achievement of vesting criteria with respect to
performance-based equity awards. In addition, management utilizes
Adjusted EBITDA in assessing the Company’s consolidated results of
operations and operational performance and in comparing the
Company’s results of operations between periods.
Footnotes to Financial Highlights, Financial
Statements and Selected Operating Data (Continued)
The Company believes it is useful to provide investors and other
users of the Company’s financial statements this performance
measure to align with how management assesses the Company’s results
of operations. Adjusted EBITDA also is comparable to a similar
metric called Consolidated EBITDA, as defined in the Company’s
asset-based loan facility (the “ABL Facility”) and the Company’s
existing note indentures, which is a key component in the
determination of the Company’s compliance with certain covenants
under the ABL Facility and such note indentures (including the
Company’s ability to service debt and incur capital expenditures),
and is used to determine the interest rate and commitment fee
payable under the ABL Facility (although Adjusted EBITDA does not
include all of the adjustments described in the ABL Facility).
Adjusted EBITDA includes the Adjusted EBITDA attributable to
hospitals that were divested during the course of such year, but in
each case solely to the extent relating to the period prior to the
consummation of the applicable divestiture.
Adjusted EBITDA is not a measurement of financial performance
under U.S. GAAP. It should not be considered in isolation or as a
substitute for net income, operating income, or any other
performance measure calculated in accordance with U.S. GAAP. The
items excluded from Adjusted EBITDA are significant components in
understanding and evaluating financial performance. The Company
believes such adjustments are appropriate as the magnitude and
frequency of such items can vary significantly and are not related
to the assessment of normal operating performance. Additionally,
this calculation of Adjusted EBITDA may not be comparable to
similarly titled measures disclosed by other companies.
The following table reflects the reconciliation of Adjusted
EBITDA, as defined, to net loss attributable to Community Health
Systems, Inc. stockholders as derived directly from the condensed
consolidated financial statements (in millions):
Three Months Ended
Nine Months Ended
September 30,
September 30,
2024
2023
2024
2023
Net loss attributable to Community
Health
Systems, Inc. stockholders
$
(391
)
$
(91
)
$
(446
)
$
(180
)
Adjustments:
(Benefit from) provision for income
taxes
(64
)
19
(13
)
84
Depreciation and amortization
117
128
357
384
Net income attributable to noncontrolling
interests
36
39
112
110
Interest expense, net
216
208
643
621
Gain from early extinguishment of debt
-
-
(25
)
-
Impairment and (gain) loss on sale of
businesses, net
267
26
294
(9
)
Expense from government and other legal
matters and related costs
-
24
-
33
Expense from business transformation
costs
17
6
41
13
Expense related to employee termination
benefits and other restructuring charges
-
1
-
12
Change in estimate for professional claims
liability
149
-
149
-
Adjusted EBITDA
$
347
$
360
$
1,112
$
1,068
(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
Nine Months Ended
September 30,
September 30,
2024
2023
2024
2023
Weighted-average number of shares
outstanding - basic
132
131
132
130
Add effect of dilutive securities:
Stock awards and options
-
-
-
-
Weighted-average number of shares
outstanding - diluted
132
131
132
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 three and nine months
ended September 30, 2024 and 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 1,883,693 shares and 224,178 shares during
the three months ended September 30, 2024 and 2023, respectively,
and 1,064,103 shares and 298,184 shares during the nine months
ended September 30, 2024 and 2023, respectively.
(e)
The following supplemental table
reconciles net loss attributable to Community Health Systems, Inc.
stockholders, as reported, on a per share (diluted) basis, to net
loss attributable to Community Health Systems, Inc. stockholders
per share (diluted) with the adjustments described herein (total
per share amounts may not add due to rounding). The Company
believes that the presentation of non-GAAP adjusted net loss
attributable to Community Health Systems, Inc. stockholders per
share (diluted) presents useful information to investors by
highlighting the impact on net loss attributable to Community
Health Systems, Inc. stockholders per share (diluted) of selected
items used in calculating Adjusted EBITDA which may not reflect the
Company’s underlying operating performance and assisting in
comparing the Company’s results of operations between periods.
Three Months Ended
Nine Months Ended
September 30,
September 30,
2024
2023
2024
2023
Net loss per share (diluted), as
reported
$
(2.95
)
$
(0.69
)
$
(3.38
)
$
(1.38
)
Adjustments:
Gain from early extinguishment of debt
-
-
(0.20
)
-
Impairment and (gain) loss on sale of
businesses, net
1.68
0.18
1.85
0.05
Expense from government and other legal
matters and related costs
-
0.14
-
0.20
Expense from business transformation
costs
0.10
0.04
0.25
0.08
Expense related to employee termination
benefits and other restructuring charges
-
0.01
-
0.07
Change in estimate for professional claims
liability
0.87
-
0.88
-
Net loss per share (diluted), excluding
adjustments
$
(0.30
)
$
(0.33
)
$
(0.61
)
$
(0.98
)
(f)
Both (loss) income from operations and net
loss included a net non-cash impairment expense of $267 million and
$26 million for the three months ended September 30, 2024 and 2023,
respectively, and a net non-cash impairment expense of $294 million
and income of $9 million for the nine months ended September 30,
2024 and 2023, respectively. The impairment expense for 2024 was
primarily from impairment expense to reduce the carrying value of
several assets that were idled, disposed of or held-for-sale and
partially offset by gains on the sale of certain businesses during
the periods. The income for 2023 was primarily from gains on the
sale of certain businesses during the 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 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 September 30, 2024, the Company had outstanding
borrowings of $372 million and approximately $438 million of
additional borrowing capacity (after taking into consideration $66
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 update selected guidance
provided on July 24, 2024, and are based on the Company’s
historical operating performance, current trends and other
assumptions that the Company believes are reasonable at this time.
This 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)
$
12,450
to
$
12,550
Adjusted EBITDA (in millions)
$
1,500
to
$
1,540
Net loss per share - diluted
$
(0.60
)
to
$
(0.50
)
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 3.7% to 3.8% 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 $850 million and
$860 million while cash paid for interest, which excludes the
amortization of deferred financing costs, is expected to be $730
million to $740 million. Total fixed rate debt is expected to
average approximately 97% 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)
$
(79
)
$
(66
)
Adjustments:
Depreciation and amortization
465
480
Interest expense, net
860
850
Provision for income taxes
104
116
Net income attributable to noncontrolling
interests
150
160
Adjusted EBITDA (1)
$
1,500
$
1,540
(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
$
400
to
$
500
- 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 impact of current
negative macroeconomic conditions, inflationary conditions, the
current high interest rate environment, and current geopolitical
instability, as well as the potential impact on us of political,
financial, credit and capital conditions;
- 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;
- judicial developments impacting the Company or the healthcare
industry, including the potential impact of the recent decisions of
the U.S. Supreme Court regarding the actions of federal
agencies;
- 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, including those experienced
with respect to our information systems or the information systems
of third parties with whom we conduct business, 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;
- the development, adoption and use of emerging technologies,
including artificial intelligence and machine learning;
- 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, including in
connection with our ability to hire and retain qualified nurses,
physicians, other medical personnel and key management, and
increased labor expenses arising from inflation and/or 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 realize expected benefits from
acquisitions such as increased growth in patient service
revenues;
- 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 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, 2023, filed with the Securities and
Exchange Commission (the “SEC”) on February 21, 2024 and other
filings filed with the SEC.
The consolidated operating results for the three and nine months
ended September 30, 2024, 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/20241023073443/en/
Investor Contact: Kevin Hammons President and Chief Financial
Officer (615) 465-7000
Community Health Systems (NYSE:CYH)
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