[November 02, 2015] |
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Community Health Systems, Inc. Announces Third Quarter 2015 Results with Net Operating Revenues of $4.846 Billion
Community Health Systems, Inc. (NYSE: CYH) (the "Company") today
announced financial and operating results for the three and nine months
ended September 30, 2015.
The operating results of Health Management Associates, Inc. ("HMA") are
included in the Company's consolidated results and statistical data from
January 27, 2014, the date the Company completed its acquisition of HMA.
For hospitals acquired in the HMA merger, same-store operating results
and statistical data reflect the periods from January 1 through
September 30, 2015 and 2014, as if such hospitals were owned during both
comparable nine-month periods. The Company had previously restated its
prior period financial statements and statistical results to reflect the
reclassification in the fourth quarter of 2014 to discontinued
operations for one hospital that was held for sale at December 31, 2014,
and was subsequently sold during the nine months ended September 30,
2015.
Net operating revenues for the three months ended September 30, 2015,
totaled $4.846 billion, a 1.4 percent increase compared with $4.780
billion for the same period in 2014. Income from continuing operations
attributable to Community Health Systems, Inc. common stockholders
decreased to $60 million, or $0.51 per share (diluted), for the three
months ended September 30, 2015, compared to $61 million, or $0.54 per
share (diluted), for the same period in 2014. The results for the three
months ended September 30, 2015, include $0.05 per share (diluted)
related to expenses from the planned spin-off of Quorum Health
Corporation. Excluding this item, income from continuing operations was
$0.56 per share (diluted). Net income attributable to Community Health
Systems, Inc. common stockholders was $0.44 per share (diluted) for the
three months ended September 30, 2015, compared with $0.54 per share
(diluted) for the same period in 2014. Discontinued operations for the
three months ended September 30, 2015, consisted of $(0.04) per share
(diluted) of losses from operations of entities sold or held for sale
and $(0.03) per share (diluted) of losses on sale, net, for a total
after-tax loss of approximately $(8) million, or $(0.07) per share
(diluted). Weighted-average shares outstanding (diluted) were 116
million for the three months ended September 30, 2015, and 114 million
for the three months ended September 30, 2014.
Adjusted EBITDA for the three months ended September 30, 2015, was $661
million compared with $750 million for the same period in 2014,
representing an 11.9 percent decrease.
The consolidated operating results for the three months ended September
30, 2015, reflect a 1.9 percent decrease in total admissions, compared
with the same period in 2014. Total adjusted admissions increased 0.2
percent for the three months ended September 30, 2015, compared with the
same period in 2014. On a same-store basis, admissions decreased 2.1
percent while adjusted admissions increased 0.1 percent during the three
months ended September 30, 2015, compared with the same period in 2014.
On a same-store basis, net operating revenues increased 1.2 percent
during the three months ended September 30, 2015, compared with the same
period in 2014.
Net operating revenues for the nine months ended September 30, 2015,
totaled $14.639 billion, a 6.7 percent increase compared with $13.721
billion for the same period in 2014. Income from continuing operations
attributable to Community Health Systems, Inc. common stockholders
increased to $268 million, or $2.32 per share (diluted), for the nine
months ended September 30, 2015, compared to $20 million, or $0.18 per
share (diluted), for the same period in 2014. The results for the nine
months ended September 30, 2015, include $0.09 per share (diluted) of
expense related to loss from early extinguishment of debt, $0.05 per
share (diluted) of expense from fair value adjustments related to HMA
legal proceedings, accounted for at fair value, underlying the CVR
agreement, and related legal expenses, $0.04 per share (diluted) related
to impairment of long-lived assets, $0.01 per share (diluted) of
expenses related to government legal settlements for several qui tam
matters settled in principle and related legal expenses and $0.05 per
share (diluted) related to expenses from the planned spin-off of Quorum
Health Corporation. Excluding these items, income from continuing
operations was $2.55 per share (diluted). Net income attributable to
Community Health Systems, Inc. common stockholders was $2.08 per share
(diluted) for the nine months ended September 30, 2015, compared with a
net loss of $(0.07) per share (diluted) for the same period in 2014.
Discontinued operations for the nine months ended September 30, 2015,
consisted of $(0.19) per share (diluted) of losses from operations of
entities sold or held for sale, $(0.01) per share (diluted) of expenses
related to the impairment of long-lived assets held for sale, and
$(0.03) per share (diluted) of losses on sale, net, for a total
after-tax loss of approximately $(27) million, or $(0.24) per share
(diluted). Weighted-average shares outstanding (diluted) were 116
million for the nine months ended September 30, 2015, and 112 million
for the nine months ended September 30, 2014.
Adjusted EBITDA for the nine months ended September 30, 2015, was $2.144
billion compared with $1.993 billion for the same period in 2014,
representing a 7.6 percent increase.
The consolidated operating results for the nine months ended September
30, 2015, reflect a 3.5 percent increase in total admissions, and a 5.2
percent increase in total adjusted admissions, compared with the same
period in 2014. On a same-store basis, admissions decreased 1.3 percent
while adjusted admissions increased 0.8 percent during the nine months
ended September 30, 2015, compared with the same period in 2014. On a
same-store basis, net operating revenues increased 2.8 percent during
the nine months ended September 30, 2015, compared with the same period
in 2014.
Adjusted EBITDA is EBITDA adjusted to exclude discontinued operations,
loss from early extinguishment of debt, impairment of long-lived assets,
net income attributable to noncontrolling interests, acquisition and
integration expenses from the acquisition of HMA, expenses incurred
related to the planned spin-off of Quorum Health Corporation, expense
related to government legal settlements and related costs, and expense
from fair value adjustments related to the HMA legal proceedings,
accounted for at fair value, underlying the CVR agreement, and related
legal expenses. For information regarding why the Company believes
Adjusted EBITDA presents useful information to investors, and for a
reconciliation of Adjusted EBITDA to net cash provided by operating
activities, see footnote (f) to the Financial Highlights, Financial
Statements and Selected Operating Data below.
Commenting on the results, Wayne T. Smith, chairman and chief executive
officer of Community Health Systems, Inc., said, "Our financial and
operating results for the third quarter of 2015 fell short of
expectations and were affected by a number of factors, including volume
weakness, an unfavorable shift in payor mix, and higher operating
expenses, especially in some of the former HMA hospitals. Our management
team is confronting these challenges by engaging in a rigorous review of
our opportunities and implementing action plans to drive immediate
improvements and long-term growth. We are especially focused on
fundamental operating strategies, including volume initiatives, expense
management, productive investments and physician recruitment."
Smith added, "We also believe our previously announced plan to spin off
38 of our affiliated hospitals into Quorum Health Corporation will
further refine our operating focus on both our core markets and regional
networks where we believe we have the greatest potential to leverage
growth opportunities."
Included on pages 15, 16, 17 and 18 of this press release is the
Company's updated 2015 annual earnings guidance. The 2015 guidance is
based on the Company's historical operating performance, current trends
and other assumptions that the Company believes are reasonable at this
time.
Community Health Systems, Inc. is one of the largest publicly-traded
hospital companies in the United States and a leading operator of
general acute care hospitals in communities across the country. Through
its subsidiaries, the Company currently owns, leases or operates 198
affiliated hospitals in 29 states with an aggregate of approximately
30,000 licensed beds.
The Company has announced plans for a spin-off transaction to create a
new, publicly-traded company, Quorum Health Corporation, with 38
affiliated hospitals and related outpatient services in 16 states,
together with Quorum Health Resources, LLC, a subsidiary providing
management and consulting services to non-affiliated hospitals. The
transaction is expected to close during the first quarter of 2016.
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 Tuesday,
November 3, 2015, at 10:00 a.m. Central, 11:00 a.m. Eastern, to review
financial and operating results for the third quarter ended September
30, 2015. Investors will have the opportunity to listen to a live
internet broadcast of the conference call by clicking on the Investor
Relations link of the Company's website at www.chs.net.
To listen to the live call, please go to the website at least fifteen
minutes early to register, download and install any necessary audio
software. For those who cannot listen to the live broadcast, a replay
will be available shortly after the call and will continue to be
available through December 4, 2015. Copies of the Company's Current
Report on Form 8-K (including this press release) and conference call
slide show will be available on the Company's website at www.chs.net.
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COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
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Financial Highlights (a)(b)(c)(d)(e)
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(In millions, except per share amounts)
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(Unaudited)
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Three Months Ended
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Nine Months Ended
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September 30,
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September 30,
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2015
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2014
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2015
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2014
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Net operating revenues
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$
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4,846
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$
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4,780
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$
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14,639
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$
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13,721
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Adjusted EBITDA (f)
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661
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750
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2,144
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1,993
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Income from continuing operations (g), (j)
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83
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94
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335
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95
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Net income (loss) attributable to Community Health Systems, Inc.
stockholders
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52
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62
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241
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(8
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Basic earnings (loss) per share attributable to Community
Health Systems, Inc. common stockholders:
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Continuing operations (g), (j)
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$
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0.52
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$
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0.55
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$
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2.33
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$
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0.18
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Discontinued operations
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(0.07
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0.00
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(0.24
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(0.25
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Net income (loss)
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$
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0.45
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$
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0.55
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$
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2.09
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$
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(0.07
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Diluted earnings (loss) per share attributable to Community
Health Systems, Inc. common stockholders:
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Continuing operations (g), (j), (k)
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$
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0.51
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$
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0.54
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$
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2.32
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$
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0.18
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Discontinued operations
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(0.07
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0.00
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(0.24
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(0.25
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Net income (loss) (k)
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$
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0.44
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$
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0.54
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$
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2.08
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$
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(0.07
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Weighted-average number of shares outstanding (h):
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Basic
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115
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113
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115
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111
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Diluted
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116
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114
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116
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112
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Net cash provided by operating activities
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$
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111
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$
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126
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$
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615
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$
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639
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____
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For footnotes, see pages 12, 13 and 14.
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COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
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Condensed Consolidated Statements of Income (a)(b)(c)(d)(e)
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(In millions, except per share amounts)
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(Unaudited)
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Three Months Ended September 30,
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2015
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2014
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Amount
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% of Net
Operating
Revenues
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Amount
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% of Net
Operating
Revenues
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Operating revenues (net of contractual allowances and discounts)
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$
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5,580
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$
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5,538
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Provision for bad debts
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734
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758
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Net operating revenues
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4,846
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100.0
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%
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4,780
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100.0
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%
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Operating costs and expenses:
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Salaries and benefits
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2,240
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46.2
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%
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2,184
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45.7
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%
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Supplies
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762
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15.7
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%
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730
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15.3
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%
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Other operating expenses
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1,144
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23.7
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%
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1,118
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23.4
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%
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Government settlement and related costs (l)
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-
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-
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%
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77
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1.6
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%
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Electronic health records incentive reimbursement
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(54
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(1.1
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%
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(88
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(1.8
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%
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Rent
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115
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2.4
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%
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110
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2.3
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%
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Depreciation and amortization
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288
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5.9
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%
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279
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5.8
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%
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Total operating costs and expenses
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4,495
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92.8
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%
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4,410
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92.3
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%
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Income from operations (g), (j)
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351
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7.2
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%
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370
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7.7
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%
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Interest expense, net
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242
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4.9
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%
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249
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5.2
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%
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Equity in earnings of unconsolidated affiliates
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(12
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(0.2
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%
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(12
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(0.3
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%
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Income from continuing operations before income taxes
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121
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2.5
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%
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133
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2.8
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%
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Provision for income taxes
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38
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0.8
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%
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39
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0.8
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%
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Income from continuing operations (g), (j)
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83
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1.7
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%
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94
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2.0
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%
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Discontinued operations, net of taxes:
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(Loss) income from operations of entities sold or held for sale
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(5
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(0.1
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%
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1
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-
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%
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Loss on sale, net
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(3
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(0.1
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%
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-
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-
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%
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(Loss) income from discontinued operations, net of taxes
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(8
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(0.2
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%
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1
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0.0
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%
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Net income
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75
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1.5
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%
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95
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2.0
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%
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Less: Net income attributable to noncontrolling interests
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23
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0.4
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%
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33
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0.7
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%
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Net income attributable to Community Health Systems, Inc.
stockholders
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$
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52
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1.1
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%
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$
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62
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1.3
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%
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Basic earnings (loss) per share attributable to Community
Health Systems, Inc. common stockholders:
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Continuing operations (g), (j)
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$
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0.52
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$
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0.55
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Discontinued operations
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(0.07
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0.00
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Net income
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$
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0.45
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$
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0.55
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Diluted earnings (loss) per share attributable to Community
Health Systems, Inc. common stockholders:
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Continuing operations (g), (j), (k)
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$
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0.51
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$
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0.54
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Discontinued operations
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(0.07
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)
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0.00
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Net income (k)
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$
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0.44
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$
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0.54
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Weighted-average number of shares outstanding (h):
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Basic
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115
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113
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Diluted
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116
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114
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____
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For footnotes, see pages 12, 13 and 14.
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COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
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Condensed Consolidated Statements of Income (Loss) (a)(b)(c)(d)(e)
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(In millions, except per share amounts)
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(Unaudited)
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|
|
|
|
|
|
Nine Months Ended September 30,
|
|
|
|
2015
|
|
|
2014
|
|
|
|
Amount
|
|
% of Net
Operating
Revenues
|
|
|
Amount
|
|
% of Net
Operating
Revenues
|
Operating revenues (net of contractual allowances and discounts)
|
|
|
$
|
16,840
|
|
|
|
|
|
|
$
|
15,920
|
|
|
|
|
Provision for bad debts
|
|
|
|
2,201
|
|
|
|
|
|
|
|
2,199
|
|
|
|
|
Net operating revenues
|
|
|
|
14,639
|
|
|
100.0
|
|
%
|
|
|
|
13,721
|
|
|
100.0
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and benefits
|
|
|
|
6,714
|
|
|
45.9
|
|
%
|
|
|
|
6,397
|
|
|
46.6
|
|
%
|
Supplies
|
|
|
|
2,274
|
|
|
15.5
|
|
%
|
|
|
|
2,098
|
|
|
15.3
|
|
%
|
Other operating expenses
|
|
|
|
3,370
|
|
|
23.0
|
|
%
|
|
|
|
3,251
|
|
|
23.7
|
|
%
|
Government settlement and related costs (l)
|
|
|
|
1
|
|
|
0.0
|
|
%
|
|
|
|
77
|
|
|
0.6
|
|
%
|
Electronic health records incentive reimbursement
|
|
|
|
(135
|
)
|
|
(0.9
|
)
|
%
|
|
|
|
(212
|
)
|
|
(1.5
|
)
|
%
|
Rent
|
|
|
|
344
|
|
|
2.3
|
|
%
|
|
|
|
319
|
|
|
2.3
|
|
%
|
Depreciation and amortization
|
|
|
|
875
|
|
|
6.0
|
|
%
|
|
|
|
815
|
|
|
5.9
|
|
%
|
Amortization of software to be abandoned (j)
|
|
|
|
-
|
|
|
-
|
|
%
|
|
|
|
75
|
|
|
0.5
|
|
%
|
Total operating costs and expenses
|
|
|
|
13,443
|
|
|
91.8
|
|
%
|
|
|
|
12,820
|
|
|
93.4
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations (g), (j)
|
|
|
|
1,196
|
|
|
8.2
|
|
%
|
|
|
|
901
|
|
|
6.6
|
|
%
|
Interest expense, net
|
|
|
|
723
|
|
|
5.0
|
|
%
|
|
|
|
728
|
|
|
5.4
|
|
%
|
Loss from early extinguishment of debt
|
|
|
|
16
|
|
|
0.1
|
|
%
|
|
|
|
73
|
|
|
0.5
|
|
%
|
Equity in earnings of unconsolidated affiliates
|
|
|
|
(51
|
)
|
|
(0.3
|
)
|
%
|
|
|
|
(35
|
)
|
|
(0.3
|
)
|
%
|
Impairment of long-lived assets (j)
|
|
|
|
6
|
|
|
0.0
|
|
%
|
|
|
|
24
|
|
|
0.2
|
|
%
|
Income from continuing operations before income taxes
|
|
|
|
502
|
|
|
3.4
|
|
%
|
|
|
|
111
|
|
|
0.8
|
|
%
|
Provision for income taxes
|
|
|
|
167
|
|
|
1.1
|
|
%
|
|
|
|
16
|
|
|
0.1
|
|
%
|
Income from continuing operations (g), (j)
|
|
|
|
335
|
|
|
2.3
|
|
%
|
|
|
|
95
|
|
|
0.7
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued operations, net of taxes:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations of entities sold or held for sale
|
|
|
|
(22
|
)
|
|
(0.2
|
)
|
%
|
|
|
|
(5
|
)
|
|
-
|
|
%
|
Impairment of hospitals sold or held for sale
|
|
|
|
(2
|
)
|
|
-
|
|
%
|
|
|
|
(23
|
)
|
|
(0.2
|
)
|
%
|
Loss on sale, net
|
|
|
|
(3
|
)
|
|
-
|
|
%
|
|
|
|
-
|
|
|
-
|
|
%
|
Loss from discontinued operations, net of taxes
|
|
|
|
(27
|
)
|
|
(0.2
|
)
|
%
|
|
|
|
(28
|
)
|
|
(0.2
|
)
|
%
|
Net income
|
|
|
|
308
|
|
|
2.1
|
|
%
|
|
|
|
67
|
|
|
0.5
|
|
%
|
Less: Net income attributable to noncontrolling interests
|
|
|
|
67
|
|
|
0.5
|
|
%
|
|
|
|
75
|
|
|
0.6
|
|
%
|
Net income (loss) attributable to Community Health Systems, Inc.
stockholders
|
|
|
$
|
241
|
|
|
1.6
|
|
%
|
|
|
$
|
(8
|
)
|
|
(0.1
|
)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings (loss) per share attributable to Community
Health Systems, Inc. common stockholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations (g), (j)
|
|
|
$
|
2.33
|
|
|
|
|
|
|
$
|
0.18
|
|
|
|
|
Discontinued operations
|
|
|
|
(0.24
|
)
|
|
|
|
|
|
|
(0.25
|
)
|
|
|
|
Net income (loss)
|
|
|
$
|
2.09
|
|
|
|
|
|
|
$
|
(0.07
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings (loss) per share attributable to Community
Health Systems, Inc. common stockholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations (g), (j), (k)
|
|
|
$
|
2.32
|
|
|
|
|
|
|
$
|
0.18
|
|
|
|
|
Discontinued operations
|
|
|
|
(0.24
|
)
|
|
|
|
|
|
|
(0.25
|
)
|
|
|
|
Net income (loss) (k)
|
|
|
$
|
2.08
|
|
|
|
|
|
|
$
|
(0.07
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average number of shares outstanding (h):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
115
|
|
|
|
|
|
|
|
111
|
|
|
|
|
Diluted
|
|
|
|
116
|
|
|
|
|
|
|
|
112
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
____
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For footnotes, see pages 12, 13 and 14.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
|
Condensed Consolidated Statements of Comprehensive Income (c)
|
(In millions)
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
2015
|
|
2014
|
|
|
2015
|
|
2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
$
|
75
|
|
|
$
|
95
|
|
|
|
$
|
308
|
|
|
$
|
67
|
|
Other comprehensive (loss) income, net of income taxes:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change in fair value of interest rate swaps, net of tax
|
|
|
|
(21
|
)
|
|
|
11
|
|
|
|
|
(22
|
)
|
|
|
20
|
|
Net change in fair value of available-for-sale securities, net of tax
|
|
|
|
(9
|
)
|
|
|
(5
|
)
|
|
|
|
(10
|
)
|
|
|
(2
|
)
|
Amortization and recognition of unrecognized pension cost
components, net of tax
|
|
|
|
1
|
|
|
|
1
|
|
|
|
|
2
|
|
|
|
1
|
|
Other comprehensive (loss) income
|
|
|
|
(29
|
)
|
|
|
7
|
|
|
|
|
(30
|
)
|
|
|
19
|
|
Comprehensive income
|
|
|
|
46
|
|
|
|
102
|
|
|
|
|
278
|
|
|
|
86
|
|
Less: Comprehensive income attributable to noncontrolling interests
|
|
|
|
23
|
|
|
|
33
|
|
|
|
|
67
|
|
|
|
75
|
|
Comprehensive income attributable to Community Health Systems,
Inc. stockholders
|
|
|
$
|
23
|
|
|
$
|
69
|
|
|
|
$
|
211
|
|
|
$
|
11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
____
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For footnotes, see pages 12, 13 and 14.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
|
Selected Operating Data (a)(d)
|
(Dollars in millions)
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
|
|
Consolidated
|
|
|
Same-Store
|
|
|
|
2015
|
|
2014
|
|
% Change
|
|
|
2015
|
|
2014
|
|
% Change
|
Number of hospitals (at end of period)
|
|
|
|
195
|
|
|
|
195
|
|
|
|
|
|
|
193
|
|
|
|
193
|
|
|
|
Licensed beds (at end of period)
|
|
|
|
30,019
|
|
|
|
29,922
|
|
|
|
|
|
|
29,715
|
|
|
|
29,746
|
|
|
|
Beds in service (at end of period)
|
|
|
|
26,309
|
|
|
|
26,669
|
|
|
|
|
|
|
26,105
|
|
|
|
26,577
|
|
|
|
Admissions
|
|
|
|
230,510
|
|
|
|
235,009
|
|
|
-1.9
|
%
|
|
|
|
229,679
|
|
|
|
234,576
|
|
|
-2.1
|
%
|
Adjusted admissions
|
|
|
|
512,465
|
|
|
|
511,268
|
|
|
0.2
|
%
|
|
|
|
510,330
|
|
|
|
509,702
|
|
|
0.1
|
%
|
Patient days
|
|
|
|
1,003,025
|
|
|
|
1,023,191
|
|
|
|
|
|
|
998,575
|
|
|
|
1,021,919
|
|
|
|
Average length of stay (days)
|
|
|
|
4.4
|
|
|
|
4.4
|
|
|
|
|
|
|
4.3
|
|
|
|
4.4
|
|
|
|
Occupancy rate (average beds in service)
|
|
|
|
41.6
|
%
|
|
|
42.1
|
%
|
|
|
|
|
|
41.6
|
%
|
|
|
42.2
|
%
|
|
|
Net operating revenues
|
|
|
$
|
4,846
|
|
|
$
|
4,780
|
|
|
1.4
|
%
|
|
|
$
|
4,824
|
|
|
$
|
4,769
|
|
|
1.2
|
%
|
Net inpatient revenues as a % of net patient revenues before
provision for bad debts
|
|
|
|
41.7
|
%
|
|
|
43.3
|
%
|
|
|
|
|
|
41.7
|
%
|
|
|
43.3
|
%
|
|
|
Net outpatient revenues as a % of net patient revenues before
provision for bad debts
|
|
|
|
58.3
|
%
|
|
|
56.7
|
%
|
|
|
|
|
|
58.3
|
%
|
|
|
56.7
|
%
|
|
|
Income from operations (g), (j)
|
|
|
$
|
351
|
|
|
$
|
370
|
|
|
-5.1
|
%
|
|
|
|
|
|
|
|
Income from operations as a % of net operating revenues
|
|
|
|
7.2
|
%
|
|
|
7.7
|
%
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
$
|
288
|
|
|
$
|
279
|
|
|
|
|
|
|
|
|
|
|
Equity in earnings of unconsolidated affiliates
|
|
|
$
|
(12
|
)
|
|
$
|
(12
|
)
|
|
|
|
|
|
|
|
|
|
Liquidity Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA (f)
|
|
|
$
|
661
|
|
|
$
|
750
|
|
|
-11.9
|
%
|
|
|
|
|
|
|
|
Adjusted EBITDA as a % of net operating revenues
|
|
|
|
13.6
|
%
|
|
|
15.7
|
%
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
$
|
111
|
|
|
$
|
126
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities as a % of net operating
revenues
|
|
|
|
2.3
|
%
|
|
|
2.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
____
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For footnotes, see pages 12, 13 and 14.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
|
|
Selected Operating Data (a)(d)(i)
|
|
(Dollars in millions)
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30,
|
|
|
|
Consolidated
|
|
|
Same-Store (1)
|
|
|
|
2015
|
|
2014
|
|
% Change
|
|
|
2015
|
|
2014
|
|
% Change
|
|
Number of hospitals (at end of period)
|
|
|
195
|
|
|
|
195
|
|
|
|
|
|
|
193
|
|
|
|
193
|
|
|
|
|
Licensed beds (at end of period)
|
|
|
30,019
|
|
|
|
29,922
|
|
|
|
|
|
|
29,715
|
|
|
|
29,746
|
|
|
|
|
Beds in service (at end of period)
|
|
|
26,309
|
|
|
|
26,669
|
|
|
|
|
|
|
26,105
|
|
|
|
26,577
|
|
|
|
|
Admissions
|
|
|
710,042
|
|
|
|
685,817
|
|
|
3.5
|
%
|
|
|
|
699,146
|
|
|
|
708,403
|
|
|
-1.3
|
%
|
|
Adjusted admissions
|
|
|
1,533,763
|
|
|
|
1,457,740
|
|
|
5.2
|
%
|
|
|
|
1,511,635
|
|
|
|
1,499,856
|
|
|
0.8
|
%
|
|
Patient days
|
|
|
3,163,346
|
|
|
|
3,044,929
|
|
|
|
|
|
|
3,108,172
|
|
|
|
3,150,653
|
|
|
|
|
Average length of stay (days)
|
|
|
4.5
|
|
|
|
4.4
|
|
|
|
|
|
|
4.4
|
|
|
|
4.4
|
|
|
|
|
Occupancy rate (average beds in service)
|
|
|
43.9
|
%
|
|
|
44.3
|
%
|
|
|
|
|
|
43.7
|
%
|
|
|
44.0
|
%
|
|
|
|
Net operating revenues
|
|
$
|
14,639
|
|
|
$
|
13,721
|
|
|
6.7
|
%
|
|
|
$
|
14,469
|
|
|
$
|
14,071
|
|
|
2.8
|
%
|
|
Net inpatient revenues as a % of net patient revenues before
provision for bad debts
|
|
|
42.8
|
%
|
|
|
44.0
|
%
|
|
|
|
|
|
42.7
|
%
|
|
|
44.2
|
%
|
|
|
|
Net outpatient revenues as a % of net patient revenues before
provision for bad debts
|
|
|
57.2
|
%
|
|
|
56.0
|
%
|
|
|
|
|
|
57.3
|
%
|
|
|
55.8
|
%
|
|
|
|
Income from operations (g), (j)
|
|
$
|
1,196
|
|
|
$
|
901
|
|
|
32.7
|
%
|
|
|
|
|
|
|
|
|
Income from operations as a % of net operating revenues
|
|
|
8.2
|
%
|
|
|
6.6
|
%
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
$
|
875
|
|
|
$
|
890
|
|
|
|
|
|
|
|
|
|
|
|
Equity in earnings of unconsolidated affiliates
|
|
$
|
(51
|
)
|
|
$
|
(35
|
)
|
|
|
|
|
|
|
|
|
|
|
Liquidity Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA (f)
|
|
$
|
2,144
|
|
|
$
|
1,993
|
|
|
7.6
|
%
|
|
|
|
|
|
|
|
|
Adjusted EBITDA as a % of net operating revenues
|
|
|
14.6
|
%
|
|
|
14.5
|
%
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
$
|
615
|
|
|
$
|
639
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities as a % of net operating
revenues
|
|
|
4.2
|
%
|
|
|
4.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
For hospitals acquired in the HMA merger, same-store operating
results and statistical data reflect the periods from January 1
through September 30, 2015 and 2014, as if such hospitals were
owned during both comparable periods.
|
____
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For footnotes, see pages 12, 13 and 14.
|
|
|
|
|
|
|
|
|
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
|
Condensed Consolidated Balance Sheets (b)
|
(In millions, except share data)
|
(Unaudited)
|
|
|
|
September 30, 2015
|
|
December 31, 2014
|
ASSETS
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
186
|
|
|
$
|
509
|
|
Patient accounts receivable, net of allowance for doubtful
accounts of $3,825 and $3,504 at September 30, 2015 and December
31, 2014, respectively
|
|
|
3,686
|
|
|
|
3,409
|
|
Supplies
|
|
|
572
|
|
|
|
557
|
|
Prepaid income taxes
|
|
|
-
|
|
|
|
30
|
|
Deferred income taxes
|
|
|
345
|
|
|
|
341
|
|
Prepaid expenses and taxes
|
|
|
215
|
|
|
|
192
|
|
Other current assets (including assets of hospitals held for sale
of $5 and $38 at September 30, 2015 and December 31, 2014,
respectively)
|
|
|
548
|
|
|
|
528
|
|
Total current assets
|
|
|
5,552
|
|
|
|
5,566
|
|
Property and equipment, gross
|
|
|
14,688
|
|
|
|
14,264
|
|
Less accumulated depreciation and amortization
|
|
|
(4,624
|
)
|
|
|
(4,095
|
)
|
Property and equipment, net
|
|
|
10,064
|
|
|
|
10,169
|
|
Goodwill
|
|
|
8,972
|
|
|
|
8,951
|
|
Other assets, net (including assets of hospitals held for sale
of $32 and $90 at September 30, 2015 and December 31, 2014,
respectively)
|
|
|
2,601
|
|
|
|
2,735
|
|
Total assets
|
|
$
|
27,189
|
|
|
$
|
27,421
|
|
|
|
|
|
|
|
|
LIABILITIES AND EQUITY
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
Current maturities of long-term debt
|
|
$
|
240
|
|
|
$
|
235
|
|
Accounts payable
|
|
|
1,214
|
|
|
|
1,293
|
|
Income tax payable
|
|
|
102
|
|
|
|
-
|
|
Deferred income taxes
|
|
|
23
|
|
|
|
23
|
|
Accrued interest
|
|
|
163
|
|
|
|
227
|
|
Accrued liabilities (including liabilities of hospitals held for
sale of $1 and $10 at September 30, 2015 and December 31, 2014,
respectively)
|
|
|
1,412
|
|
|
|
1,811
|
|
Total current liabilities
|
|
|
3,154
|
|
|
|
3,589
|
|
Long-term debt
|
|
|
16,647
|
|
|
|
16,681
|
|
Deferred income taxes
|
|
|
847
|
|
|
|
845
|
|
Other long-term liabilities
|
|
|
1,696
|
|
|
|
1,692
|
|
Total liabilities
|
|
|
22,344
|
|
|
|
22,807
|
|
Redeemable noncontrolling interests in equity of consolidated
subsidiaries
|
|
|
522
|
|
|
|
531
|
|
EQUITY
|
|
|
|
|
|
|
Community Health Systems, Inc. stockholders' equity:
|
|
|
|
|
|
|
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; 119,158,604 shares issued and 118,183,055 shares
outstanding at September 30, 2015, and 117,701,087 shares issued
and 116,725,538 shares outstanding at December 31, 2014
|
|
|
1
|
|
|
|
1
|
|
Additional paid-in capital
|
|
|
2,122
|
|
|
|
2,095
|
|
Treasury stock, at cost, 975,549 shares at September 30, 2015 and
December 31, 2014
|
|
|
(7
|
)
|
|
|
(7
|
)
|
Accumulated other comprehensive loss
|
|
|
(93
|
)
|
|
|
(63
|
)
|
Retained earnings
|
|
|
2,218
|
|
|
|
1,977
|
|
Total Community Health Systems, Inc. stockholders' equity
|
|
|
4,241
|
|
|
|
4,003
|
|
Noncontrolling interests in equity of consolidated subsidiaries
|
|
|
82
|
|
|
|
80
|
|
Total equity
|
|
|
4,323
|
|
|
|
4,083
|
|
Total liabilities and equity
|
|
$
|
27,189
|
|
|
$
|
27,421
|
|
|
|
|
|
|
|
|
|
|
____
|
|
|
|
|
|
|
|
|
For footnotes, see pages 12, 13 and 14.
|
|
|
|
|
|
|
|
|
|
|
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
|
Condensed Consolidated Statements of Cash Flows (b)
|
(In millions)
|
(Unaudited)
|
|
|
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
|
|
2015
|
|
|
2014
|
|
|
|
|
|
|
|
|
|
Cash flows from operating activities
|
|
|
|
|
|
|
|
|
Net income
|
|
|
$
|
308
|
|
|
|
$
|
67
|
|
Adjustments to reconcile net income to net cash provided by
operating activities:
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
|
876
|
|
|
|
|
897
|
|
Government settlement and related costs (l)
|
|
|
|
1
|
|
|
|
|
77
|
|
Stock-based compensation expense
|
|
|
|
44
|
|
|
|
|
36
|
|
Loss on sale, net
|
|
|
|
4
|
|
|
|
|
-
|
|
Impairment of long-lived assets and hospitals sold or held for sale
|
|
|
|
8
|
|
|
|
|
46
|
|
Loss from early extinguishment of debt
|
|
|
|
16
|
|
|
|
|
73
|
|
Excess tax benefit relating to stock-based compensation
|
|
|
|
-
|
|
|
|
|
(4
|
)
|
Other non-cash expenses, net
|
|
|
|
22
|
|
|
|
|
34
|
|
Changes in operating assets and liabilities, net of effects of
acquisitions and divestitures:
|
|
|
|
|
|
|
|
|
Patient accounts receivable
|
|
|
|
(291
|
)
|
|
|
|
(299
|
)
|
Supplies, prepaid expenses and other current assets
|
|
|
|
(72
|
)
|
|
|
|
(39
|
)
|
Accounts payable, accrued liabilities and income taxes
|
|
|
|
(239
|
)
|
|
|
|
(189
|
)
|
Other
|
|
|
|
(62
|
)
|
|
|
|
(60
|
)
|
Net cash provided by operating activities
|
|
|
|
615
|
|
|
|
|
639
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities
|
|
|
|
|
|
|
|
|
Acquisitions of facilities and other related equipment
|
|
|
|
(41
|
)
|
|
|
|
(3,041
|
)
|
Purchases of property and equipment
|
|
|
|
(696
|
)
|
|
|
|
(560
|
)
|
Proceeds from disposition of hospitals and other ancillary operations
|
|
|
|
87
|
|
|
|
|
12
|
|
Proceeds from sale of property and equipment
|
|
|
|
13
|
|
|
|
|
40
|
|
Purchases of available-for-sale securities
|
|
|
|
(127
|
)
|
|
|
|
(198
|
)
|
Proceeds from sales of available-for-sale securities
|
|
|
|
123
|
|
|
|
|
191
|
|
Increase in other investments
|
|
|
|
(136
|
)
|
|
|
|
(387
|
)
|
Net cash used in investing activities
|
|
|
|
(777
|
)
|
|
|
|
(3,943
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
Proceeds from exercise of stock options
|
|
|
|
24
|
|
|
|
|
42
|
|
Repurchase of restricted stock shares for payroll tax withholding
requirements
|
|
|
|
(20
|
)
|
|
|
|
(11
|
)
|
Deferred financing costs and other debt-related costs
|
|
|
|
(30
|
)
|
|
|
|
(272
|
)
|
Excess tax benefit relating to stock-based compensation
|
|
|
|
-
|
|
|
|
|
4
|
|
Proceeds from noncontrolling investors in joint ventures
|
|
|
|
-
|
|
|
|
|
10
|
|
Redemption of noncontrolling investments in joint ventures
|
|
|
|
(18
|
)
|
|
|
|
(8
|
)
|
Distributions to noncontrolling investors in joint ventures
|
|
|
|
(69
|
)
|
|
|
|
(74
|
)
|
Borrowings under credit agreements
|
|
|
|
3,464
|
|
|
|
|
8,348
|
|
Issuance of long-term debt
|
|
|
|
-
|
|
|
|
|
4,000
|
|
Proceeds from receivables facility
|
|
|
|
112
|
|
|
|
|
204
|
|
Repayments of long-term indebtedness
|
|
|
|
(3,624
|
)
|
|
|
|
(9,091
|
)
|
Net cash (used in) provided by financing activities
|
|
|
|
(161
|
)
|
|
|
|
3,152
|
|
|
|
|
|
|
|
|
|
|
Net change in cash and cash equivalents
|
|
|
|
(323
|
)
|
|
|
|
(152
|
)
|
Cash and cash equivalents at beginning of period
|
|
|
|
509
|
|
|
|
|
373
|
|
Cash and cash equivalents at end of period
|
|
|
$
|
186
|
|
|
|
$
|
221
|
|
|
|
|
|
|
|
|
|
|
|
|
____
|
|
|
|
|
|
|
|
|
|
|
For footnotes, see pages 12, 13 and 14.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Footnotes to Financial Highlights, Financial Statements and
Selected Operating Data
|
|
|
(a)
|
Continuing operating results exclude discontinued operations for
the three and nine months ended September 30, 2015 and 2014. Both
financial and statistical results exclude entities in discontinued
operations for all periods presented.
|
|
|
(b)
|
The contingent value right ("CVR") entitles the holder to receive
a cash payment up to $1.00 per CVR (subject to downward adjustment
but not below zero), subject to the final resolution of certain
legal matters pertaining to HMA, as defined in the CVR agreement.
If the aggregate amount of applicable losses under the CVR
agreement exceeds a deductible of $18 million, then the amount
payable in respect of each CVR shall be reduced (but not below
zero) by an amount equal to the quotient obtained by dividing: (a)
the product of (i) all losses in excess of the deductible and (ii)
90%; by (b) the number of CVRs outstanding on the date on which
final resolution of the existing litigation occurs. Since the HMA
acquisition date of January 27, 2014, approximately $28 million in
costs have been incurred and approximately $28 million of
settlements have been paid related to certain HMA legal matters,
which collectively exceed the deductible of $18 million under the
CVR agreement. The Company previously recorded an estimated fair
value of the remaining underlying claims that will be covered by
the CVR of $284 million as part of the acquisition accounting for
HMA, which has been adjusted to its estimated fair value of $263
million at September 30, 2015. In addition, although future legal
fees (which are expensed as incurred) associated with the HMA
legal matters have not been accrued or included in the table
below, such legal fees are taken into account in determining the
total amount of reductions applied to the amounts owed to CVR
holders.
|
|
|
|
The following table presents the impact of the recorded amounts as
described above as applied to the CVR and the $18 million
deductible and 10% co-insurance amounts (in millions):
|
|
|
|
|
|
|
As of
|
|
|
|
|
September 30,
|
|
|
|
|
2015
|
|
Legal and other related costs incurred to date
|
|
|
$
|
28
|
|
|
Settlements
|
|
|
|
28
|
|
|
Estimated liability for probable contingencies
|
|
|
|
-
|
|
|
Estimated liability for unresolved contingencies at fair value
|
|
|
|
263
|
|
|
Costs incurred plus certain estimated liabilities for CVR-related
matters
|
|
|
|
319
|
|
|
Less:
|
|
|
|
|
|
CHS deductible of $18 million
|
|
|
|
(18
|
)
|
|
CHS co-insurance at 10%
|
|
|
|
(30
|
)
|
|
Impact of recorded amounts under CVR agreement after giving effect
to deductible and co-insurance
|
|
|
$
|
271
|
|
|
|
|
|
|
|
|
CVRs outstanding
|
|
|
|
265
|
|
|
|
|
|
|
|
|
(c)
|
The effective date of the HMA acquisition was January 27, 2014.
|
|
|
|
|
|
|
|
(d)
|
Included in discontinued operations for the three and nine months
ended September 30, 2015, is one hospital that was required by the
Federal Trade Commission to be divested as part of its approval of
the HMA acquisition, and this hospital was sold on March 1, 2015.
Management is actively marketing other smaller hospitals included
as held for sale at September 30, 2015. In addition, the Company
sold several smaller hospitals during the nine months ended
September 30, 2015. The after-tax loss for the sold or held for
sale hospitals, including an impairment charge on certain
long-lived assets sold or held for sale, is approximately $8
million and $27 million for the three and nine months ended
September 30, 2015, respectively.
|
|
|
(e)
|
The following table provides information needed to calculate
income per share, which is adjusted for income attributable to
noncontrolling interests (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
|
2015
|
|
2014
|
|
|
2015
|
|
2014
|
|
Income from continuing operations attributable to Community Health
Systems, Inc. common stockholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations, net of taxes
|
|
|
$
|
83
|
|
|
$
|
94
|
|
|
$
|
335
|
|
|
$
|
95
|
|
|
Less: Income from continuing operations attributable to
noncontrolling interests
|
|
|
|
23
|
|
|
|
33
|
|
|
|
67
|
|
|
|
75
|
|
|
Income from continuing operations attributable to Community Health
Systems, Inc. common stockholders - basic and diluted
|
|
|
$
|
60
|
|
|
$
|
61
|
|
|
$
|
268
|
|
|
$
|
20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from discontinued operations attributable to
Community Health Systems, Inc. common stockholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from discontinued operations, net of taxes
|
|
|
$
|
(8
|
)
|
|
$
|
1
|
|
|
$
|
(27
|
)
|
|
$
|
(28
|
)
|
|
Less: Loss from discontinued operations attributable to
noncontrolling interests
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
(Loss) income from discontinued operations attributable to
Community Health Systems, Inc. common stockholders - basic and
diluted
|
|
|
$
|
(8
|
)
|
|
$
|
1
|
|
|
$
|
(27
|
)
|
|
$
|
(28
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(f)
|
EBITDA is a non-GAAP financial measure which consists of net
income attributable to Community Health Systems, Inc. before
interest, income taxes, and depreciation and amortization.
Adjusted EBITDA is EBITDA adjusted to exclude discontinued
operations, loss from early extinguishment of debt, impairment of
long-lived assets, net income attributable to noncontrolling
interests, acquisition and integration expenses from the
acquisition of HMA, expenses incurred related to the planned
spin-off of Quorum Health Corporation, expense related to
government legal settlements and related costs, and expense from
fair value adjustments related to the HMA legal proceedings,
accounted for at fair value, underlying the CVR agreement, and
related legal expenses. 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 excludes the portion of EBITDA
attributable to these third-party interests and clarifies for
investors the Company's portion of EBITDA generated by continuing
operations. The Company uses Adjusted EBITDA as a measure of
liquidity. The Company has also presented Adjusted EBITDA in this
release because it believes it provides investors with additional
information about the Company's ability to incur and service debt
and make capital expenditures. Adjusted EBITDA also aligns with a
similar metric as defined in the Company's senior secured credit
facility, which is a key component in the determination of the
Company's compliance with some of the covenants under the
Company's senior secured credit facility, and is used to determine
the interest rate and commitment fee payable under the senior
secured credit facility.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA is not a measurement of financial performance or
liquidity under U.S. GAAP. It should not be considered in
isolation or as a substitute for net income, operating income,
cash flows from operating, investing or financing activities or
any other measure calculated in accordance with U.S. GAAP. The
items excluded from Adjusted EBITDA are significant components in
understanding and evaluating financial performance and liquidity.
This calculation of Adjusted EBITDA may not be comparable to
similarly titled measures reported by other companies.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table reconciles Adjusted EBITDA, as defined, to net
cash provided by operating activities as derived directly from the
condensed consolidated financial statements (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
Nine Months Ended
|
|
|
|
|
September 30,
|
|
|
|
September 30,
|
|
|
|
|
2015
|
|
2014
|
|
|
|
2015
|
|
2014
|
|
Adjusted EBITDA
|
|
|
$
|
661
|
|
|
$
|
750
|
|
|
|
|
$
|
2,144
|
|
|
$
|
1,993
|
|
|
Interest expense, net
|
|
|
|
(242
|
)
|
|
|
(249
|
)
|
|
|
|
|
(723
|
)
|
|
|
(728
|
)
|
|
Provision for income taxes
|
|
|
|
(38
|
)
|
|
|
(39
|
)
|
|
|
|
|
(167
|
)
|
|
|
(16
|
)
|
|
(Loss) income from operations of entities sold or held for sale,
net of taxes
|
|
|
|
(5
|
)
|
|
|
1
|
|
|
|
|
|
(22
|
)
|
|
|
(5
|
)
|
|
Other non-cash expenses, net
|
|
|
|
39
|
|
|
|
26
|
|
|
|
|
|
63
|
|
|
|
69
|
|
|
Changes in operating assets and liabilities, net of effects of
acquisitions and divestitures
|
|
|
|
(304
|
)
|
|
|
(363
|
)
|
|
|
|
|
(680
|
)
|
|
|
(674
|
)
|
|
Net cash provided by operating activities
|
|
|
$
|
111
|
|
|
$
|
126
|
|
|
|
|
$
|
615
|
|
|
$
|
639
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(g)
|
Included in non-same-store income from operations and income from
continuing operations are pre-tax charges related to acquisition
costs of $2 million and $7 million for the three months ended
September 30, 2015 and 2014, respectively, and $6 million and $54
million for the nine months ended September 30, 2015 and 2014,
respectively. These acquisition costs include expenses related to
the acquisition of HMA of $5 million and $44 million for the three
and nine months ended September 30, 2014, respectively.
|
|
|
|
|
|
|
|
|
|
|
|
(h)
|
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,
|
|
|
|
2015
|
|
2014
|
|
|
2015
|
|
2014
|
|
Weighted-average number of shares outstanding - basic
|
|
115
|
|
113
|
|
|
115
|
|
111
|
|
Add effect of dilutive securities:
|
|
|
|
|
|
|
|
|
|
|
Stock awards and options
|
|
1
|
|
1
|
|
|
1
|
|
1
|
|
Weighted-average number of shares outstanding - diluted
|
|
116
|
|
114
|
|
|
116
|
|
112
|
|
|
|
|
|
|
|
|
|
|
|
(i)
|
For hospitals acquired in the HMA merger, same-store operating
results and statistical data reflect the periods from January 1
through September 30, 2015 and 2014, as if such hospitals were
owned during both comparable periods.
|
|
|
(j)
|
Income from continuing operations for the nine months ended
September 30, 2015, includes an impairment charge of approximately
$6 million related to the allocated reporting unit goodwill for
one hospital where a definitive agreement to sell the hospital was
entered into during the quarter ended June 30, 2015. Included in
income from continuing operations for the nine months ended
September 30, 2014, is an impairment charge of approximately $24
million for internal-use software, and an acceleration of
amortization for the nine months ended September 30, 2014, of
approximately $75 million, to adjust for its shortened remaining
life which ended on July 1, 2014. In connection with the HMA
acquisition, the Company further analyzed its intangible assets
related to internal-use software used in certain of its hospitals
for patient and clinical systems, including software required to
meet criteria for meaningful use attestation and ICD-10
compliance. This analysis resulted in management reassessing its
usage of certain software products and rationalizing that, with
the addition of the HMA hospitals in the first quarter of 2014,
those software applications were going to be discontinued and
replaced with new applications that better integrate meaningful
use and ICD-10 compliance, are more cost effective and can be
implemented at a greater efficiency of scale over future
implementations.
|
|
|
|
|
|
|
|
|
|
|
|
|
(k)
|
The following supplemental tables reconcile income from continuing
operations and net income attributable to Community Health
Systems, Inc. common stockholders, as reported, on a per share
(diluted) basis, with the adjustments described herein (total per
share amounts may not add due to rounding):
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
|
2015
|
|
2014
|
|
|
2015
|
|
2014
|
|
|
|
|
(per share - diluted)
|
|
|
(per share - diluted)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations, as reported
|
|
|
$
|
0.51
|
|
$
|
0.54
|
|
|
$
|
2.32
|
|
$
|
0.18
|
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
Loss from early extinguishment of debt
|
|
|
|
-
|
|
|
-
|
|
|
|
0.09
|
|
|
0.40
|
|
|
Amortization of software to be abandoned
|
|
|
|
-
|
|
|
-
|
|
|
|
-
|
|
|
0.42
|
|
|
Impairment of long-lived assets
|
|
|
|
-
|
|
|
-
|
|
|
|
0.04
|
|
|
0.13
|
|
|
Expenses related to the acquisition and integration of HMA
|
|
|
|
-
|
|
|
0.02
|
|
|
|
-
|
|
|
0.38
|
|
|
Expense from government settlement and related costs
|
|
|
|
-
|
|
|
0.41
|
|
|
|
0.01
|
|
|
0.42
|
|
|
Expense from fair value adjustments and legal expenses related to
cases covered by the CVR
|
|
|
|
-
|
|
|
0.04
|
|
|
|
0.05
|
|
|
0.12
|
|
|
Expenses related to the planned spin-off of Quorum Health
Corporation
|
|
|
|
0.05
|
|
|
-
|
|
|
|
0.05
|
|
|
-
|
|
|
Income from continuing operations, excluding adjustments
|
|
|
$
|
0.56
|
|
$
|
1.01
|
|
|
$
|
2.55
|
|
$
|
2.06
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
|
2015
|
|
2014
|
|
|
2015
|
|
2014
|
|
|
|
|
(per share - diluted)
|
|
|
(per share - diluted)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss), as reported
|
|
|
$
|
0.44
|
|
$
|
0.54
|
|
|
$
|
2.08
|
|
$
|
(0.07
|
)
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
Loss from early extinguishment of debt
|
|
|
|
-
|
|
|
-
|
|
|
|
0.09
|
|
|
0.40
|
|
|
Amortization of software to be abandoned
|
|
|
|
-
|
|
|
-
|
|
|
|
-
|
|
|
0.42
|
|
|
Impairment of long-lived assets
|
|
|
|
-
|
|
|
-
|
|
|
|
0.04
|
|
|
0.13
|
|
|
Expenses related to the acquisition and integration of HMA
|
|
|
|
-
|
|
|
0.02
|
|
|
|
-
|
|
|
0.38
|
|
|
Expense from government settlement and related costs
|
|
|
|
-
|
|
|
0.41
|
|
|
|
0.01
|
|
|
0.42
|
|
|
Expense from fair value adjustments and legal expenses related to
cases covered by the CVR
|
|
|
|
-
|
|
|
0.04
|
|
|
|
0.05
|
|
|
0.12
|
|
|
Expenses related to the planned spin-off of Quorum Health
Corporation
|
|
|
|
0.05
|
|
|
-
|
|
|
|
0.05
|
|
|
-
|
|
|
Net income, excluding adjustments
|
|
|
$
|
0.49
|
|
$
|
1.02
|
|
|
$
|
2.31
|
|
$
|
1.81
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(l)
|
The $0.01 per share (diluted) of expense for "Government
settlement and related costs" for the nine months ended September
30, 2015, is the net impact of several qui tam lawsuits settled in
principle during the nine months ended September 30, 2015, and
related legal expenses.
|
|
|
|
|
|
|
|
|
|
|
|
|
Regulation FD Disclosure
|
|
|
|
|
|
|
|
|
|
|
|
|
Set forth below is selected information concerning the Company's
projected consolidated operating results for the year ending
December 31, 2015. These projections update selected guidance
issued on August 3, 2015, and are based on the Company's
historical operating performance, current trends and other
assumptions that the Company believes are reasonable at this time.
The 2015 guidance should be considered in conjunction with the
assumptions included herein. See pages 17 and 18 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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2015 Projection Range
|
Net operating revenues less provision for bad debts (in millions)
|
|
|
$
|
19,600
|
|
|
to
|
|
$
|
19,800
|
|
Adjusted EBITDA (in millions)
|
|
|
$
|
2,900
|
|
|
to
|
|
$
|
3,025
|
|
Income from continuing operations per share - diluted
|
|
|
$
|
3.40
|
|
|
to
|
|
$
|
3.75
|
|
Same-store hospital annual adjusted admissions growth
|
|
|
|
0.0
|
%
|
|
to
|
|
|
1.5
|
%
|
Weighted-average diluted shares, in millions, for the fourth quarter
and the full year
|
|
|
|
115.5
|
|
|
to
|
|
|
116.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following assumptions were used in developing the 2015 guidance
provided above:
-
The Company's projections exclude the following:
-
Payments related to the CVRs issued in connection with the HMA
acquisition, and changes in the valuation of liabilities
underlying the CVR;
-
Losses from the early extinguishment of debt;
-
Impairment of long-lived assets;
-
Resolution of government investigations or other significant legal
settlements;
-
Costs incurred in connection with the planned spin-off transaction
of Quorum Health Corporation, which consists of 38 hospitals and
Quorum Health Resources, LLC; and
-
Other significant gains or losses that neither relate to the
ordinary course of business nor reflect the Company's underlying
business performance.
-
The Company has classified several small hospitals as held for sale,
and the operating results of these hospitals have been moved to
discontinued operations and have also been excluded from these
projections.
-
The previously assumed acquisition of MetroHealth Hospital in Grand
Rapids, Michigan, was terminated on August 3, 2015. The 2015
projections now assume no hospital acquisitions in 2015.
Other assumptions used in the above guidance:
-
Benefits to Adjusted EBITDA from Healthcare Reform in 2015 of an
additional $115 million to $150 million of net operating revenues
before government deductions.
-
Achievement of additional acquisition synergies related to the HMA
acquisition of at least an additional $150 million during 2015.
-
Health Information Technology (HITECH) electronic health records
incentive reimbursement of approximately $155 million to $165 million
for the year ended December 31, 2015.
-
Continuation and approval of the California hospital provider fee
program for 2015.
-
For comparison purposes, 2014 earnings per share of $3.29, included a
benefit from the reversal of a tax liability of approximately $0.08
per share (diluted) and the benefit of reduced amortization from the
abandonment of software of $0.09 per share (diluted) which the Company
does not anticipate recurring in 2015.
-
The settlement of certain claims related to the BP oil spill, for
which the Company previously expected to recognize up to $28 million,
are no longer expected to be recognized in 2015.
-
Same-store hospital annual adjusted admissions growth of 0.0% to 1.5%
for 2015, which does not take into account service closures and
weather-related or other unusual events.
-
Expressed as a percentage of net operating revenues, depreciation and
amortization of approximately 6.0% to 6.2% for 2015. Additionally,
this is a fixed cost and the percentages may change as revenue varies.
Such amounts exclude the possible impact of any future hospital fixed
asset impairments and acceleration of amortization of software to be
abandoned.
-
Interest expense, expressed as a percentage of net operating revenues,
of approximately 5.0% to 5.1%; however, interest expense is a fixed
cost and percentages may vary as revenue varies. Total fixed rate
debt, including swaps, is expected to average approximately 60% to 70%
of total debt during 2015.
-
Expressed as a percentage of net operating revenues, equity in
earnings of unconsolidated affiliates of approximately 0.2% to 0.3%
for 2015.
-
Expressed as a percentage of net operating revenues, net income
attributable to noncontrolling interests of approximately 0.5% to 0.6%
for 2015.
-
Expressed as a percentage of income from continuing operations before
income taxes, provision for income tax of approximately 32.0% to 34.0%
for 2015.
-
Capital expenditures are projected as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
Guidance
|
|
|
|
|
Total
|
|
|
|
|
|
$950
|
|
|
|
to
|
|
|
|
$1,100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
Net cash provided by operating activities, excluding cash flows
related to the CVR and settlement of legal contingencies, is projected
as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
Guidance
|
|
|
|
|
Total
|
|
|
|
|
|
$1,500
|
|
|
|
to
|
|
|
|
$1,650
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash provided by operating activities in 2015 will be negatively
impacted by approximately $300 million, primarily from a reduction in
tax refunds, and the timing of payroll payments, compared to the
adjusted cash flows from operations of $1.822 billion in 2014.
-
Weighted average shares outstanding are projected to be between
approximately 115.5 million to 116.5 million for the fourth quarter
and the year ended 2015. Weighted average shares outstanding have been
adjusted to include the estimated dilutive impact from "in-the-money"
stock options and restricted shares.
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;
-
implementation, effect of, and changes to, adopted and potential
federal and state healthcare reform legislation and other federal,
state or local laws or regulations affecting the healthcare industry;
-
the extent to which states support increases, decreases or changes in
Medicaid programs, implement healthcare exchanges or alter the
provision of healthcare to state residents through regulation or
otherwise;
-
risks associated with our substantial indebtedness, leverage, and debt
service obligations;
-
demographic changes;
-
changes in, or the failure to comply with, governmental regulations;
-
potential adverse impact of known and unknown government
investigations, audits, and Federal and State False Claims Act
litigation and other legal proceedings;
-
our ability, where appropriate, to enter into and maintain provider
arrangements with payors and the terms of these arrangements, which
may be further impacted by the consolidation of health insurers and
managed care companies;
-
changes in, or the failure to comply with, contract terms with payors
and changes in reimbursement rates paid by federal or state healthcare
programs or commercial payors;
-
changes in inpatient or outpatient Medicare and Medicaid payment
levels;
-
the effects related to the continued implementation of the
sequestration spending reductions and the potential for future deficit
reduction legislation;
-
increases in the amount and risk of collectability of patient accounts
receivable, including the impact of the implementation of ICD-10;
-
the efforts of insurers, healthcare providers and others to contain
healthcare costs, including the trend toward value-based purchasing;
-
our ongoing ability to demonstrate meaningful use of certified
electronic health record technology and recognize income for the
related Medicare or Medicaid incentive payments;
-
increases in wages as a result of inflation or competition for highly
technical positions and rising supply and drug costs due to market
pressure from pharmaceutical companies and new product releases;
-
liabilities and other claims asserted against us, including
self-insured malpractice claims;
-
competition;
-
our ability to attract and retain, at reasonable employment costs,
qualified personnel, key management, physicians, nurses and other
healthcare workers;
-
trends toward treatment of patients in less acute or specialty
healthcare settings, including ambulatory surgery centers or specialty
hospitals;
-
changes in medical or other technology;
-
changes in U.S. generally accepted accounting principles;
-
the availability and terms of capital to fund additional acquisitions
or replacement facilities or other capital expenditures;
-
our ability to successfully make acquisitions or complete divestitures;
-
our ability to successfully integrate any acquired hospitals,
including those of HMA, or to recognize expected synergies from
acquisitions;
-
the impact of the acquisition of HMA on third-party relationships;
-
the impact of seasonal severe weather conditions;
-
our ability to obtain adequate levels of general and professional
liability insurance;
-
timeliness of reimbursement payments received under government
programs;
-
effects related to outbreaks of infectious diseases;
-
the impact of the external, criminal cyber-attack suffered by us in
the second quarter of 2014, including potential reputational damage,
the outcome of our investigation and any potential governmental
inquiries, the outcome of litigation filed against us in connection
with this cyber-attack, the extent of remediation costs and additional
operating or other expenses that we may continue to incur, and the
impact of potential future cyber-attacks or security breaches;
-
the timing and completion of the previously announced planned spin-off;
-
the effects of the planned spin-off on our business, including our
ability to achieve the anticipated benefits of the spin-off; and
-
the other risk factors set forth in our other public filings with the
Securities and Exchange Commission, including our 2014 Form 10-K,
filed on February 25, 2015.
The consolidated operating results for the three and nine months ended
September 30, 2015, are not necessarily indicative of the results that
may be experienced for any future periods. The Company cautions that the
projections for calendar year 2015 set forth in this press release are
given as of the date hereof based on currently available information.
The Company undertakes no obligation to revise or update any
forward-looking statements, or to make any other forward-looking
statements, whether as a result of new information, future events or
otherwise.
View source version on businesswire.com: http://www.businesswire.com/news/home/20151102006671/en/
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