EX-99.1 2 g22079exv99w1.htm EX-99.1 exv99w1
     
(CHS LOGO)   Exhibit Number
99.1
Investor Contact:   W. Larry Cash
Executive Vice President
and Chief Financial Officer
(615) 465-7000
COMMUNITY HEALTH SYSTEMS, INC. ANNOUNCES
FOURTH QUARTER 2009 RESULTS WITH NET OPERATING REVENUES OF $3.1 BILLION
 
     FRANKLIN, TENN. (February 17, 2010) — Community Health Systems, Inc. (NYSE: CYH) today announced financial and operating results for the fourth quarter and year ended December 31, 2009.
     Net operating revenues for the three months ended December 31, 2009, totaled $3.1 billion, an 11.1 percent increase compared with $2.8 billion for the same period in 2008. Income from continuing operations increased to $84.1 million for the three months ended December 31, 2009, compared with $62.0 million for the same period in 2008. Income from continuing operations attributable to Community Health Systems, Inc. common stockholders increased to $0.70 per share (diluted), on 92.7 million weighted average shares outstanding for the three months ended December 31, 2009, compared with $0.57 per share (diluted), on 91.8 million weighted average shares outstanding for the same period in 2008. Net income attributable to Community Health Systems, Inc. increased 8.7 percent to $65.1 million, or $0.70 per share (diluted), for the three months ended December 31, 2009, compared with $59.9 million, or $0.65 per share (diluted), for the same period in 2008.
     Adjusted EBITDA for the three months ended December 31, 2009, was $434.4 million, compared with $389.6 million for the same period in 2008, representing an 11.5 percent increase. Adjusted EBITDA is EBITDA adjusted to exclude discontinued operations, gain/loss from early extinguishment of debt and net income attributable to noncontrolling interests. The Company uses adjusted EBITDA as a measure of liquidity. Net cash provided by operating activities for the three months ended December 31, 2009, was $175.7 million, compared with $372.2 million for the same period in 2008.
     The consolidated financial results for the three months ended December 31, 2009, reflect a 4.0 percent increase in total admissions compared with the prior year period. This increase was due primarily to acquisitions during the past twelve months. On a same-store basis, admissions decreased 0.5 percent and adjusted admissions increased 1.6 percent, compared with the same period in 2008. On a same-store basis, net operating revenues increased 7.3 percent, compared with the same period in 2008.
     Net operating revenues for the twelve months ended December 31, 2009, totaled $12.1 billion, a 10.9 percent increase compared with $10.9 billion for the same period in 2008. Income from continuing operations increased to $304.8 million for the twelve months ended December 31, 2009, compared with $233.7 million for the same period in 2008. Income from continuing operations attributable to Community Health Systems, Inc. common stockholders increased to $2.64 per share (diluted), on 91.5 million weighted average shares outstanding for the twelve months ended December 31, 2009, compared with $2.11 per share (diluted), on 94.3 million weighted average shares outstanding for the same period in 2008. Net income attributable to Community Health Systems, Inc. was $243.1 million, or $2.66 per share (diluted), for the twelve months ended December 31, 2009, compared with $218.3 million, or $2.32 per share (diluted), for the same period in 2008.
     Adjusted EBITDA for the year ended December 31, 2009, was $1.7 billion, compared with $1.5 billion for the same period in 2008, representing a 10.4 percent increase. Net cash provided by operating activities for the year ended December 31, 2009, was $1.1 billion, compared with $1.1 billion for the same period in 2008.
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CYH Announces Fourth Quarter 2009 Results
Page 2
February 17, 2010
     The consolidated financial results for the year ended December 31, 2009, reflect a 3.6 percent increase in total admissions compared with the year ended December 31, 2008. This increase was due primarily to acquisitions during the past twelve months. On a same-store basis, admissions decreased 1.5 percent and adjusted admissions increased 0.7 percent, compared with the same period in 2008. On a same-store basis, net operating revenues increased 5.9 percent, compared with the same period in 2008.
     On January 4, 2010, the Company announced that a subsidiary had closed on its transaction with Rockwood Clinic, P.S., a multi-specialty clinic with 32 locations across the Inland Northwest region of Eastern Washington State and Western Idaho effective December 31, 2009.
     Commenting on the results, Wayne T. Smith, chairman, president and chief executive officer of Community Health Systems, Inc., stated, “We are very pleased to report another successful year for Community Health Systems. Our financial and operating performance for the fourth quarter 2009 reflects our proven ability to deliver consistent quarterly results, even in the face of a challenging economy. We ended the year with record consolidated revenues of over $12.1 billion, up eleven percent over the previous year. Our results also reflect the continued success of our centralized operating strategy as evidenced by favorable annual same-store revenue growth and solid margin expansion. We have continued to focus on improving the performance at the individual hospital level in all of our markets, especially at our more recently acquired facilities.
     “As we look ahead to 2010, we see additional opportunities for continued growth for Community Health Systems,” added Smith. “As a national hospital operator, our geographically diverse portfolio has always been one of our strengths, especially in an uncertain economic environment. Our hospitals have strong positions in each of their respective markets and no one state represents a disproportionate percentage of our revenues or admissions. We remain focused on the fundamentals of our business and believe our proven success in enhancing essential healthcare services, driving efficiencies, and recruiting and retaining qualified physicians in our markets will continue to support our long term growth strategies.”
     Included on pages 13, 14 and 15 of this press release are tables setting forth the Company’s updated 2010 guidance. This guidance reaffirms the Company’s previous annual earnings guidance provided on October 28, 2009, as modified to reflect certain changes as detailed in the guidance assumptions.
     Located in the Nashville, Tennessee, suburb of Franklin, Community Health Systems, Inc. is the largest publicly-traded hospital company in the United States and a leading operator of general acute care hospitals in non-urban and mid-size markets throughout the country. Through its subsidiaries, the Company currently owns, leases or operates 122 hospitals in 29 states with an aggregate of approximately 18,000 licensed beds. Its hospitals offer a broad range of inpatient and surgical services, outpatient treatment and skilled nursing care. In addition, through its QHR subsidiary, the Company provides management and consulting services to over 150 independent non-affiliated general acute care hospitals located throughout the United States. Shares in Community Health Systems, Inc. are traded on the New York Stock Exchange under the symbol “CYH.”
     Community Health Systems, Inc. will hold a conference call to discuss this press release on Thursday, February 18, 2010, at 10:30 a.m. Central, 11:30 a.m. Eastern. 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, or at www.earnings.com. 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 through March 18, 2010. Copies of the Company’s Form 8-K (including this press release) and conference call slide show are available on the Company’s website at www.chs.net.
     Statements contained in this news release regarding expected operating results, acquisition transactions or divestitures and other events are forward-looking statements that involve risk and uncertainties. Actual future events or results may differ materially from these statements. Readers are referred to the documents filed by Community Health Systems, Inc. with the Securities and Exchange Commission, including the Company’s annual report on Form 10-K, current reports on Form 8-K and quarterly reports on Form 10-Q. These filings identify important risk factors and other uncertainties that could cause actual results to differ from those contained in the forward-looking statements. The Company undertakes no obligation to revise or update any forward-looking statements, or to make any other forward-looking statements, whether as a result of new information, future events or otherwise.
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CYH Announces Fourth Quarter 2009 Results
Page 3
February 17, 2010
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
Financial Highlights (a)(b)(c)(d)
($ in thousands, except per share amounts)
(Unaudited)
                                 
    Three Months Ended   Year Ended
    December 31,   December 31,
    2009   2008   2009   2008
Net operating revenues
   $ 3,091,146     $ 2,781,078     $ 12,107,613     $ 10,919,095  
Adjusted EBITDA (e)
   $ 434,421     $ 389,635     $ 1,671,397     $ 1,513,329  
Income from continuing operations (f)(g)(h)(i)
   $ 84,126     $ 61,973     $ 304,805     $ 233,727  
Net income attributable to Community Health Systems, Inc.
   $ 65,088     $ 59,900     $ 243,150     $ 218,304  
 
                                
Income from continuing operations attributable to Community Health Systems, Inc. common stockholders per share:
                                
Basic (a)
   $ 0.71     $ 0.57     $ 2.67     $ 2.13  
Diluted (a)
   $ 0.70     $ 0.57     $ 2.64     $ 2.11  
Net income attributable to Community Health Systems, Inc. common stockholders per share:
                                
Basic
   $ 0.71     $ 0.65     $ 2.68     $ 2.34  
Diluted
   $ 0.70     $ 0.65     $ 2.66     $ 2.32  
Weighted-average number of shares outstanding:
                                
Basic (j)
     91,178       91,515       90,615       93,372  
Diluted (j)
     92,699       91,833       91,517       94,289  
 
                                
Net cash provided by operating activities
   $ 175,669     $ 372,225     $ 1,076,429     $ 1,056,581  
 
For footnotes, see pages 10, 11 and 12.
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CYH Announces Fourth Quarter 2009 Results
Page 4
February 17, 2010
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Income (a)(b)(c)(d)
($ in thousands, except per share amounts)
(Unaudited)
                                 
    Three Months Ended  
    December 31,  
    2009     2008  
            % of Net             % of Net  
            Operating             Operating  
    Amount     Revenue     Amount     Revenue  
Net operating revenues
   $ 3,091,146       100.0 %   $ 2,781,078       100.0 %
 
                        
 
                                
Operating costs and expenses:
                                
Salaries and benefits
     1,228,063       39.7 %     1,112,377       40.0 %
Provision for bad debts
     381,720       12.3 %     319,376       11.5 %
Supplies
     431,780       14.0 %     392,156       14.1 %
Other operating expenses
     557,061       18.1 %     521,838       18.8 %
Rent
     62,921       2.0 %     55,681       2.0 %
Depreciation and amortization
     144,645       4.7 %     125,873       4.5 %
 
                        
Total operating costs and expenses
     2,806,190       90.8 %     2,527,301       90.9 %
 
                        
 
                                
Income from operations (h)
     284,956       9.2 %     253,777       9.1 %
Interest expense, net
     161,755       5.2 %     167,632       6.0 %
Gain from early extinguishment of debt
     —       0.0 %     (3,853 )     -0.1 %
Equity in earnings of unconsolidated affiliates
     (4,820 )     -0.2 %     (9,985 )     -0.4 %
Impairment of long-lived and other assets (i)
     12,477       0.5 %     5,000       0.2 %
 
                        
Income from continuing operations before income taxes
     115,544       3.7 %     94,983       3.4 %
Provision for income taxes (i)
     31,418       1.0 %     33,010       1.2 %
 
                        
Income from continuing operations (h)(i)
     84,126       2.7 %     61,973       2.2 %
 
                        
 
                                
Discontinued operations, net of taxes (d):
                                
Income from operations of hospitals sold and hospitals held for sale (g)
     —       —       8,383       0.3 %
(Loss) gain on sale of hospitals, net
     —       —       —       0.0 %
 
                        
Income from discontinued operations
     —       —       8,383       0.3 %
 
                        
Net income
     84,126       2.7 %     70,356       2.5 %
Less: Net income attributable to noncontrolling interests (a)
     19,038       0.6 %     10,456       0.3 %
 
                        
Net income attributable to Community Health Systems, Inc.
   $ 65,088       2.1 %   $ 59,900       2.2 %
 
                        
 
                                
Income from continuing operations attributable to Community Health Systems, Inc. common stockholders per share (a):
                                
Basic
   $ 0.71             $ 0.57          
 
                            
Diluted
   $ 0.70             $ 0.57          
 
                            
Discontinued operations attributable to Community Health Systems, Inc. common stockholders per share (a):
                                
Basic
   $ 0.00             $ 0.09          
 
                            
Diluted
   $ 0.00             $ 0.08          
 
                            
Net income attributable to Community Health Systems, Inc. common stockholders per share (a)(k):
                                
Basic
   $ 0.71             $ 0.65          
 
                            
Diluted
   $ 0.70             $ 0.65          
 
                            
Weighted-average number of shares outstanding (j):
                                
Basic
     91,178               91,515          
 
                            
Diluted
     92,699               91,833          
 
                            
 
For footnotes, see pages 10, 11 and 12.
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CYH Announces Fourth Quarter 2009 Results
Page 5
February 17, 2010
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Income (a)(b)(c)(d)
($ in thousands, except per share amounts)
(Unaudited)
                                 
    Year Ended  
    December 31,  
    2009     2008  
            % of Net             % of Net  
            Operating             Operating  
    Amount     Revenue     Amount     Revenue  
Net operating revenues
   $ 12,107,613       100.0 %   $ 10,919,095       100.0 %
 
                        
 
                                
Operating costs and expenses:
                                
Salaries and benefits
     4,842,330       40.0 %     4,367,664       40.0 %
Provision for bad debts
     1,460,307       12.1 %     1,218,612       11.2 %
Supplies
     1,685,493       13.9 %     1,531,376       14.0 %
Other operating expenses
     2,237,475       18.5 %     2,099,010       19.2 %
Rent
     247,132       2.0 %     231,167       2.1 %
Depreciation and amortization
     566,211       4.7 %     499,386       4.6 %
 
                        
Total operating costs and expenses
     11,038,948       91.2 %     9,947,215       91.1 %
 
                        
 
                                
Income from operations (h)
     1,068,665       8.8 %     971,880       8.9 %
Interest expense, net
     648,964       5.4 %     652,468       6.0 %
Gain from early extinguishment of debt
     (2,385 )     0.0 %     (2,525 )     0.0 %
Equity in earnings of unconsolidated affiliates
     (36,521 )     -0.3 %     (42,063 )     -0.4 %
Impairment of long-lived and other assets (i)
     12,477       0.0 %     5,000       0.0 %
 
                        
Income from continuing operations before income taxes
     446,130       3.7 %     359,000       3.3 %
Provision for income taxes (i)
     141,325       1.2 %     125,273       1.2 %
 
                        
Income from continuing operations (f)(h)(i)
     304,805       2.5 %     233,727       2.1 %
 
                        
 
                                
Discontinued operations, net of taxes (d):
                                
Income from operations of hospitals sold and hospitals held for sale (g)
     1,977       0.0 %     9,427       0.1 %
(Loss) gain on sale of hospitals, net
     (405 )     0.0 %     9,580       0.1 %
 
                        
Income from discontinued operations
     1,572       0.0 %     19,007       0.2 %
 
                        
Net income
     306,377       2.5 %     252,734       2.3 %
Less: Net income attributable to noncontrolling interests (a)
     63,227       0.5 %     34,430       0.3 %
 
                        
Net income attributable to Community Health Systems, Inc.
   $ 243,150       2.0 %   $ 218,304       2.0 %
 
                        
 
                                
Income from continuing operations attributable to Community Health Systems, Inc. common stockholders per share (a):
                                
Basic
   $ 2.67             $ 2.13          
 
                            
Diluted
   $ 2.64             $ 2.11          
 
                            
Discontinued operations attributable to Community Health Systems, Inc. common stockholders per share (a):
                                
Basic
   $ 0.01             $ 0.21          
 
                            
Diluted
   $ 0.01             $ 0.21          
 
                            
Net income attributable to Community Health Systems, Inc. common stockholders per share (a)(k):
                                
Basic
   $ 2.68             $ 2.34          
 
                            
Diluted
   $ 2.66             $ 2.32          
 
                            
Weighted-average number of shares outstanding (j):
                                
Basic
     90,615               93,372          
 
                            
Diluted
     91,517               94,289          
 
                            
 
For footnotes, see pages 10, 11 and 12.
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CYH Announces Fourth Quarter 2009 Results
Page 6
February 17, 2010
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
Selected Operating Data (b)(c)(d)
($ in thousands)
(Unaudited)
                                                 
    For the Three Months Ended December 31,
    Consolidated   Same-Store
    2009   2008   % Change   2009   2008   % Change
Number of hospitals (at end of period)
     122       119               119       119          
Licensed beds (at end of period)
     18,140       17,411               17,348       17,411          
Beds in service (at end of period)
     15,897       15,194               15,200       15,194          
Admissions
     171,648       165,051       4.0 %     164,171       165,051       -0.5 %
Adjusted admissions
     317,175       299,156       6.0 %     303,862       299,156       1.6 %
Patient days
     733,571       700,360               694,366       700,360          
Average length of stay (days)
     4.3       4.2               4.2       4.2          
Occupancy rate (average beds in service)
     50.1 %     50.1 %             49.6 %     50.1 %        
Net operating revenues
   $ 3,091,146     $ 2,781,078       11.1 %   $ 2,984,043     $ 2,780,451       7.3 %
Net inpatient revenue as a % of total net operating revenues
     50.4 %     50.6 %             50.2 %     50.6 %        
Net outpatient revenue as a % of total net operating revenues
     47.3 %     47.5 %             47.6 %     47.5 %        
Income from operations (h)
   $ 284,956     $ 253,777       12.3 %   $ 283,211     $ 253,221       11.8 %
Income from operations as a % of net operating revenues
     9.2 %     9.1 %             9.5 %     9.1 %        
 
                                                
Depreciation and amortization
   $ 144,645     $ 125,873             $ 139,731     $ 125,873          
 
                                                
Equity in earnings of unconsolidated affiliates
   $ (4,820 )   $ (9,985 )           $ (4,706 )   $ (9,982 )        
 
                                                
Liquidity Data:
                                                
Adjusted EBITDA (e)
   $ 434,421     $ 389,635       11.5 %                        
Adjusted EBITDA as a % of net operating revenues
     14.1 %     14.0 %                                
 
                                                
Net cash provided by operating activities
   $ 175,669     $ 372,225                                  
 
                                                
Net cash provided by operating activities as a % of net operating revenues
     5.7 %     13.4 %                                
 
For footnotes, see pages 10, 11 and 12.
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CYH Announces Fourth Quarter 2009 Results
Page 7
February 17, 2010
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
Selected Operating Data (b)(c)(d)
($ in thousands)
(Unaudited)
                                                 
    For The Year Ended December 31,
    Consolidated   Same-Store
    2009   2008   % Change   2009   2008   % Change
Number of hospitals (at end of period)
     122       119               119       119          
Licensed beds (at end of period)
     18,140       17,411               17,348       17,411          
Beds in service (at end of period)
     15,897       15,194               15,200       15,194          
Admissions
     692,569       668,526       3.6 %     658,215       668,526       -1.5 %
Adjusted admissions
     1,275,888       1,207,756       5.6 %     1,215,606       1,207,750       0.7 %
Patient days
     2,937,194       2,835,795               2,768,470       2,835,795          
Average length of stay (days)
     4.2       4.2               4.2       4.2          
Occupancy rate (average beds in service)
     51.3 %     52.3 %             51.1 %     52.3 %        
Net operating revenues
   $ 12,107,613     $ 10,919,095       10.9 %   $ 11,556,401     $ 10,917,362       5.9 %
Net inpatient revenue as a % of total net operating revenues
     50.1 %     50.2 %             49.7 %     50.2 %        
Net outpatient revenue as a % of total net operating revenues
     47.6 %     47.5 %             48.0 %     47.5 %        
Income from operations (f)(h)
   $ 1,068,665     $ 971,880       10.0 %   $ 1,078,969     $ 969,737       11.3 %
Income from operations as a % of net operating revenues
     8.8 %     8.9 %             9.3 %     8.9 %        
 
                                                
Depreciation and amortization
   $ 566,211     $ 499,386             $ 545,408     $ 499,386          
 
                                                
Equity in earnings of unconsolidated affiliates
   $ (36,521 )   $ (42,063 )           $ (36,145 )   $ (43,777 )        
 
                                                
Liquidity Data:
                                                
Adjusted EBITDA (e)
   $ 1,671,397     $ 1,513,329       10.4 %                        
Adjusted EBITDA as a % of net operating revenues
     13.8 %     13.9 %                                
 
                                                
Net cash provided by operating activities
   $ 1,076,429     $ 1,056,581                                  
 
                                                
Net cash provided by operating activities as a % of net operating revenues
     8.9 %     9.7 %                                
 
For footnotes, see pages 10, 11 and 12.
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CYH Announces Fourth Quarter 2009 Results
Page 8
February 17, 2010
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets (a)
(in thousands, except share data)
(Unaudited)
                 
    December 31,     December 31,  
    2009     2008  
ASSETS
                
Current assets
                
Cash and cash equivalents
   $ 344,541     $ 220,655  
Patient accounts receivable, net of allowance for doubtful accounts of $1,417,188 and $1,111,131 at December 31, 2009, and December 31, 2008, respectively
     1,617,903       1,625,470  
Supplies
     302,609       275,696  
Prepaid income taxes
     45,414       92,710  
Deferred income taxes
     80,714       91,875  
Prepaid expenses and taxes
     89,475       73,792  
Other current assets
     194,339       224,852  
 
            
Total current assets
     2,674,995       2,605,050  
 
            
Property and equipment
     7,787,256       7,110,357  
Less accumulated depreciation and amortization
     (1,655,010 )     (1,215,952 )
 
            
Property and equipment, net
     6,132,246       5,894,405  
 
            
Goodwill
     4,157,927       4,166,091  
 
            
Other assets, net
     1,056,304       1,152,708  
 
            
Total assets
   $ 14,021,472     $ 13,818,254  
 
            
 
                
LIABILITIES
                
Current liabilities
                
Current maturities of long-term debt
   $ 66,470     $ 33,904  
Accounts payable
     428,565       532,595  
Deferred income taxes
     28,397       6,740  
Accrued interest
     145,201       153,234  
Accrued liabilities
     789,163       782,944  
 
            
Total current liabilities
     1,457,796       1,509,417  
 
            
Long-term debt
     8,844,638       8,938,185  
 
            
Deferred income taxes
     475,812       460,793  
 
            
Other long-term liabilities
     858,952       888,557  
 
            
Total liabilities
     11,637,198       11,796,952  
 
            
 
                
Redeemable noncontrolling interests in equity of consolidated subsidiaries (a)
     368,857       348,816  
 
            
 
                
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; 94,013,537 shares issued and 93,037,988 shares outstanding at December 31, 2009, and 92,483,166 shares issued and 91,507,617 shares outstanding at December 31, 2008
     940       925  
Additional paid-in capital
     1,158,359       1,136,108  
Treasury stock, at cost, 975,549 shares at December 31, 2009 and December 31, 2008
     (6,678 )     (6,678 )
Accumulated other comprehensive loss
     (221,385 )     (295,575 )
Retained earnings
     1,019,399       776,249  
 
            
Total Community Health Systems, Inc. stockholders’ equity
     1,950,635       1,611,029  
Noncontrolling interests in equity of consolidated subsidiaries (a)
     64,782       61,457  
 
            
Total equity
     2,015,417       1,672,486  
 
            
Total liabilities and equity
   $ 14,021,472     $ 13,818,254  
 
            
 
For footnotes, see pages 10, 11 and 12.

 

 

CYH Announces Fourth Quarter 2009 Results
Page 9
February 17, 2010
COMMUNITY HEALTH SYSTEMS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
                 
    Year Ended  
    December 31,  
    2009     2008  
Cash flows from operating activities
                
Net income
   $ 306,377     $ 252,734  
Adjustments to reconcile net income to net cash provided by operating activities:
                
Depreciation and amortization
     566,543       506,694  
Deferred income taxes
     34,268       159,870  
Stock-based compensation expense
     44,501       52,105  
Loss (gain) on sale of hospitals and partnership interest, net
     405       (17,687 )
Income tax payable increase (excess tax benefit) relating to stock-based compensation
     3,472       (1,278 )
Gain on early extinguishment of debt
     (2,385 )     (2,525 )
Impairment of long-lived and other assets
     12,477       5,000  
Other non-cash expenses, net
     22,870       3,577  
Changes in operating assets and liabilities, net of effects of acquisitions and divestitures:
                
Patient accounts receivable
     58,390       (49,578 )
Supplies, prepaid expenses and other current assets
     (34,535 )     (34,397 )
Accounts payable, accrued liabilities and income taxes
     86,098       119,869  
Other
     (22,052 )     62,197  
 
            
Net cash provided by operating activities
     1,076,429       1,056,581  
 
            
 
                
Cash flows from investing activities
                
Acquisitions of facilities and other related equipment
     (263,773 )     (161,907 )
Purchases of property and equipment
     (576,888 )     (692,233 )
Proceeds from disposition of hospitals and other ancillary operations
     89,514       365,636  
Proceeds from sale of property and equipment
     4,019       13,483  
Increase in other non-operating assets
     (120,054 )     (190,450 )
 
            
Net cash used in investing activities
     (867,182 )     (665,471 )
 
            
 
                
Cash flows from financing activities
                
Proceeds from exercise of stock options
     12,759       1,806  
(Income tax payable increase) excess tax benefit relating to stock-based compensation
     (3,472 )     1,278  
Deferred financing costs
     (82 )     (3,136 )
Stock buy-back
     —       (90,188 )
Proceeds from noncontrolling investors in joint ventures
     29,838       14,329  
Redemption of noncontrolling investments in joint ventures
     (7,268 )     (77,587 )
Distributions to noncontrolling investors in joint ventures
     (58,963 )     (46,890 )
Borrowings under credit agreement
     200,000       131,277  
Repayments of long-term indebtedness
     (258,173 )     (234,918 )
 
            
Net cash used in financing activities
     (85,361 )     (304,029 )
 
            
 
                
Net change in cash and cash equivalents
     123,886       87,081  
Cash and cash equivalents at beginning of period
     220,655       133,574  
 
            
Cash and cash equivalents at end of period
   $ 344,541     $ 220,655  
 
            
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CYH Announces Fourth Quarter 2009 Results
Page 10
February 17, 2010
Footnotes to Financial Statements
(a)   On January 1, 2009, the Company adopted revisions to U.S. generally accepted accounting principles (U.S. GAAP) related to consolidations, the provisions of which, among other things, require that minority interests be renamed noncontrolling interests and that a company present a consolidated net income measure that includes the amounts attributable to both the controlling and noncontrolling interests for all periods presented. The following table provides information needed to calculate income per share which is adjusted for noncontrolling interests.
                                 
    Three Months Ended     Year Ended  
    December 31,     December 31,  
    2009     2008     2009     2008  
Income from continuing operations attributable to Community
                                
Health Systems, Inc. common stockholders:
                                
Income from continuing operations, net of tax
   $ 84,126     $ 61,973     $ 304,805     $ 233,727  
Less: Income from continuing operations attributable to noncontrolling interests, net of taxes
     19,038       9,876       62,872       34,902  
 
                        
Income from continuing operations attributable to Community
                                
Health Systems, Inc. common stockholders — basic and diluted
   $ 65,088     $ 52,097     $ 241,933     $ 198,825  
 
                        
Income (loss) from discontinued operations attributable to Community
                                
Health Systems, Inc. common stockholders:
                                
Income from discontinued operations, net of tax
   $ —     $ 8,383     $ 1,572     $ 19,007  
Less: Income (loss) from discontinued operations attributable to noncontrolling interests, net of taxes
     —       580       355       (472 )
 
                        
Income from discontinued operations attributable to Community
                                
Health Systems, Inc. common stockholders — basic and diluted
   $ —     $ 7,803     $ 1,217     $ 19,479  
 
                        
    For the balance sheet presentation, U.S. GAAP requires that minority interests be renamed noncontrolling interests and that a company present such noncontrolling interests as a component of equity for all periods presented, except for the redeemable noncontrolling interests, which are presented as a component of mezzanine equity.
 
(b)   Continuing operating results exclude discontinued operations for all periods presented, as applicable.
 
(c)   On March 31, 2009, the Company completed the settlement of all pending litigation that resulted in the conveyance by two of the Company’s indirect subsidiaries of their 80% partnership interest in the partnership that owns Presbyterian Hospital of Denton located in Denton, Texas, to the minority partner of that partnership for approximately $100 million. For 2008, the Denton, Texas, hospital had net operating revenues of approximately $150 million with an EBITDA margin in the double digits. This hospital is included in discontinued operations for all applicable periods presented.
 
(d)   During the second quarter 2009, the Company made the decision to retain a hospital and related businesses previously classified as being held for sale. Results of operations, assets and liabilities and cash flows for this retained hospital and related businesses are reported as continuing operations for all periods presented.
 
(e)   EBITDA 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, gain/loss from early extinguishment of debt and net income attributable to noncontrolling interests. 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 included this measure 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 is the basis for a key component in the determination of the Company’s compliance with some of the covenants under the Company’s senior secured credit facility, as well as 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.
 
Footnotes continued on the next page.
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CYH Announces Fourth Quarter 2009 Results
Page 11
February 17, 2010
Footnotes to Financial Statements (Continued)
    The following table reconciles adjusted EBITDA, as defined, to net cash provided by operating activities as derived directly from the condensed consolidated financial statements for the three months and year ended December 31, 2009 and 2008 (in thousands):
                                 
    Three Months Ended     Year Ended  
    December 31,     December 31,  
    2009     2008     2009     2008  
Adjusted EBITDA
   $ 434,421     $ 389,635     $ 1,671,397     $ 1,513,329  
Interest expense, net
     (161,755 )     (167,632 )     (648,964 )     (652,468 )
Provision for income taxes
     (31,418 )     (33,010 )     (141,325 )     (125,273 )
Income (loss) from operations of hospitals sold and hospitals held for sale, net of taxes
     —       8,383       1,977       9,427  
Other non-cash expenses, net
     53,036       170,876       105,443       213,475  
Net changes in operating assets and liabilities, net of effects of acquisitions
     (118,615 )     3,973       87,901       98,091  
 
                        
Net cash provided by operating activities
   $ 175,669     $ 372,225     $ 1,076,429     $ 1,056,581  
 
                        
(f)   Included in income from continuing operations for the year ended December 31, 2009, is a gain from early extinguishment of debt of $2.4 million with an after-tax impact of $1.5 million related to the repurchases on the open market and cancellation of $126.5 million of Senior Notes and the early payment of $110.4 million of term loans under the Company’s Credit Facility. Included in income from continuing operations for the year ended December 31, 2008, is a gain from early extinguishment of debt of $2.5 million with an after-tax impact of $1.6 million related to the repurchases on the open market and cancellation of $110 million of Senior Notes and an unrelated pre-tax gain of $5.7 million with an after-tax impact of $3.5 million from the sale of some excess land previously held by the Company.
 
(g)   Included in discontinued operations for the applicable periods are the following:
  •   Presbyterian Hospital of Denton (255 licensed beds) located in Denton, Texas, which was conveyed to the noncontrolling partner on March 31, 2009; and,
 
  •   Russell County Medical Center (78 licensed beds) located in Lebanon, Virginia, nine hospitals with an aggregate total of 1,058 licensed beds located in Alabama, Arkansas, Missouri, Oregon and Tennessee, and one hospital located in the Republic of Ireland (122 licensed beds), all of which were sold during the first quarter of 2008.
(h)   Included in income from operations and income from continuing operations for the three months and year ended December 31, 2009, are the following non-same-store charges:
  •   Pre-tax charges of $3.1 million and $6.7 million, respectively, related to acquisition costs required to be expensed pursuant to revised business combination accounting rules that became effective January 1, 2009; and,
 
  •   Pre-tax charges of $1.5 million and $8.5 million, respectively, for system conversion costs related to conversion of Triad’s former IT systems to the Company’s IT system.
(i)   Income from continuing operations for the three months ended and the year ended December 31, 2009, reflects an impact on earnings from the following recorded in the three months ended December 31, 2009, as follows:
                 
    Year Ended  
    December 31, 2009  
    After-Tax Gain        
    (Loss) Impact (In     Gain (Loss)  
    Millions)     Impact Per Share  
• Impairment of long-lived and other assets
   $ (7,757 )   $ (0.08 )
• Recognized anticipated tax benefit from adjustment and revaluation of deferred tax accounts
     2,996       0.03  
 
            
 
                
Combined Impact for 4th Quarter 2009
   $ (4,761 )   $ (0.05 )
 
            
 
Footnotes continued on the next page.
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CYH Announces Fourth Quarter 2009 Results
Page 12
February 17, 2010
Footnotes to Financial Statements (Continued)
(j)   The following table sets forth components reconciling the basic weighted-average number of  shares to the diluted weighted-average number of shares (in thousands):
                                 
    Three Months Ended     Year Ended  
    December 31,     December 31,  
    2009     2008     2009     2008  
Weighted-average number of shares outstanding — basic
     91,178       91,515       90,615       93,372  
Add effect of dilutive securities:
                                
Stock awards and options
     1,521       318       902       917  
 
                        
Weighted-average number of shares outstanding — diluted
     92,699       91,833       91,517       94,289  
 
                        
(k)   Total per share amounts may not add due to rounding.
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CYH Announces Fourth Quarter 2009 Results
Page 13
February 17, 2010
Regulation FD Disclosure
     The following table sets forth selected information concerning the Company’s updated projected consolidated operating results for the year ending December 31, 2010. These projections are based on the Company’s historical operating performance, current trends and other assumptions that the Company believes are reasonable at this time. This guidance reaffirms the Company’s previous annual earnings guidance for 2010 provided on October 28, 2009, as modified to reflect certain changes as detailed in the guidance assumptions below. Also disclosed is additional detail concerning the earnings guidance, including the Company’s projection range for income from continuing operations per share by quarter for 2010. See page 15 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:
                         
    Updated 2010
    Projection
    Range
Net operating revenues (in millions)
   $ 12,900     to   $ 13,200  
Adjusted EBITDA (in millions)
   $ 1,745     to   $ 1,775  
Income from continuing operations per share — diluted
   $ 2.85     to   $ 3.00  
Same hospitals annual admissions/adjusted admissions growth
     0.0 %   to     2.0 %
Weighted average diluted shares (in millions)
     93     to     94  
Acquisitions of new hospitals
             2          
Income from Continuing Operations Per Share — Diluted
                        
1st quarter ending March 31
   $ 0.70     to   $ 0.76  
2nd quarter ending June 30
   $ 0.70     to   $ 0.74  
3rd quarter ending September 30
   $ 0.70     to   $ 0.74  
4th quarter ending December 31
   $ 0.75     to   $ 0.76  
The following assumptions were used in developing the 2010 guidance provided above:
•   Projected 2010 same hospital annual admissions/adjusted admissions growth does not take into account service closures and other unusual events.
•   Expressed as a percentage of net operating revenues, the provision for bad debts is projected to be approximately 12.4% to 12.8% for 2010. These percentages may vary depending on changes in payor mix.
•   Expressed as a percent of net operating revenues, depreciation and amortization is projected to be approximately 4.6% to 4.8% for 2010; however, this is a fixed cost and the percentages may vary as revenue varies. Excludes possible impact of any future fair-value adjustments to investments and hospital fixed assets.
•   2010 projection assumes an estimate of $0.03 to $0.04 per share (diluted) of acquisition costs will be expensed pursuant to revised business combination accounting rules that became effective January 1, 2009.
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CYH Announces Fourth Quarter 2009 Results
Page 14
February 17, 2010
•   For the purpose of providing interest expense guidance, the Company assumes that the borrowing rate under the Company’s $7.2 billion Senior Secured Credit Facility for 2010 will remain relatively stable with the rates existing currently, particularly since the Company is a party to interest rate swap agreements (with original maturities equal to or greater than 2 years) in an amount equal to approximately 90% of our outstanding debt. These swap agreements limit the effect of changes in interest rates. Based on these assumptions, expressed as a percentage of net operating revenues, interest expense is projected to be approximately 5.0% to 5.3% of net revenue guidance for 2010; however, these percentages will vary as revenue and interest rates vary. No new financing is currently anticipated.
•   On December 9, 2009, the Company adopted a new open market repurchase program for up to three million shares of the Company’s common stock, not to exceed $100 million in purchases. The repurchase program will conclude at the earlier of three years or when the maximum number of shares has been repurchased or the maximum dollar amount has been reached. No significant share purchases have been assumed for 2010.
•   Expressed as a percentage of net operating revenues, equity in earnings of unconsolidated affiliates is projected to be approximately 0.3% to 0.4% for 2010.
•   Expressed as a percentage of net operating revenues, net income attributable to noncontrolling interests is projected to be approximately 0.5% to 0.7% for 2010.
•   Expressed as a percentage of income from continuing operations before income taxes, provision for income tax is projected to be approximately 31.0% to 34.0% for 2010. The income tax projection includes possible additional unrecognized tax benefits and tax revaluations that may be recognized prior to the end of 2010.
•   Capital expenditures, excluding any significant information system upgrades that may be made related to electronic health records, is projected as follows (in millions):
                         
            2010        
            Guidance        
     
Total
   $   650     to   $   750  
•   Net cash provided by operating activities are projected as follows (in millions):
                         
            2010        
            Guidance        
     
Total
   $  1,000     to   $  1,100  
•   The Company’s guidance does not take into account resolution of certain pending government investigations and lawsuits.
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CYH Announces Fourth Quarter 2009 Results
Page 15
February 17, 2010
     The projections set forth in this report constitute forward-looking statements within the meaning of Section 27A of the Securities Act, Section 21E of the Exchange Act and the Private Securities Litigation Reform Act of 1995. Although the Company believes that these forward-looking statements are based on reasonable assumptions, these assumptions are inherently subject to significant economic and competitive uncertainties and contingencies, which are difficult or impossible to predict accurately and are beyond the control of the Company. Accordingly, the Company cannot give any assurance that its expectations will in fact occur and cautions that actual results may differ materially from those in the forward-looking statements. A number of factors could affect the future results of the Company or the healthcare industry generally and could cause the Company’s expected results to differ materially from those expressed in this filing.
These factors include, among other things:
  •   general economic and business conditions, both nationally and in the regions in which we operate;
 
  •   legislative proposals for healthcare reform and universal access to healthcare coverage;
 
  •   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;
 
  •   our ability, where appropriate, to enter into and maintain managed care provider arrangements and the terms of these arrangements;
 
  •   changes in, or the failure to comply with, managed care provider contracts could result in disputes and changes in reimbursement that could be applied retroactively;
 
  •   changes in inpatient or outpatient Medicare and Medicaid payment levels;
 
  •   increases in the amount and risk of collectability of patient accounts receivable;
 
  •   increases in wages as a result of inflation or competition for highly technical positions and rising supply 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, without significant employment costs, qualified personnel, key management, physicians, nurses and other health care 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;
 
  •   our ability to successfully acquire additional hospitals and complete the sale of hospitals held for sale;
 
  •   our ability to successfully integrate any acquired hospitals or to recognize expected synergies from such acquisitions;
 
  •   our ability to obtain adequate levels of general and professional liability insurance;
 
  •   timeliness of reimbursement payments received under government programs; and
 
  •   the other risk factors set forth in our public filings with the Securities and Exchange Commission.
     The consolidated operating results for the quarter and year ended December 31, 2009, are not necessarily indicative of the results that may be experienced for any such future period or for any future year, including 2010.
     The Company cautions that the projections for calendar year 2010 set forth in this press release are given as of the date hereof based on currently available information. The Company is not undertaking any obligation to update these projections as conditions change or other information becomes available.
- END -