Delaware | 001-15925 | 13-3893191 | ||
(State or other jurisdiction of incorporation) |
(Commission File Number) | (I.R.S. Employer Identification No.) |
Date: July 28, 2011 | COMMUNITY HEALTH SYSTEMS, INC. (Registrant) |
|||
By: | /s/ Wayne T. Smith | |||
Wayne T. Smith | ||||
Chairman of the Board, President and Chief Executive Officer (principal executive officer) |
||||
By: | /s/ W. Larry Cash | |||
W. Larry Cash | ||||
Executive Vice President, Chief Financial Officer and Director (principal financial officer) |
||||
By: | /s/ T. Mark Buford | |||
T. Mark Buford | ||||
Senior Vice President and Chief Accounting Officer (principal accounting officer) |
||||
2
Exhibit Number | Description | |
99.1
|
Community Health Systems, Inc. Press Release dated July 28, 2011 |
3
Investor Contact:
|
W. Larry Cash | |
Executive Vice President | ||
and Chief Financial Officer | ||
(615) 465-7000 |
Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Net operating revenues (d) |
$ | 3,433,829 | $ | 3,080,646 | $ | 6,787,881 | $ | 6,149,258 | ||||||||
Adjusted EBITDA (c) |
$ | 462,301 | $ | 441,678 | $ | 919,371 | $ | 868,910 | ||||||||
Income from continuing operations (d)(e)(f) |
$ | 92,874 | $ | 88,379 | $ | 184,479 | $ | 172,736 | ||||||||
Net income attributable to Community Health Systems, Inc. |
$ | 35,389 | $ | 70,065 | $ | 96,713 | $ | 140,072 | ||||||||
Basic earnings (loss) per share attributable to Community Health Systems, Inc. common stockholders (i): |
||||||||||||||||
Continuing operations |
$ | 0.82 | $ | 0.77 | $ | 1.64 | $ | 1.53 | ||||||||
Discontinued operations (g) |
(0.43 | ) | (0.02 | ) | (0.58 | ) | (0.01 | ) | ||||||||
Net income |
$ | 0.39 | $ | 0.75 | $ | 1.06 | $ | 1.51 | ||||||||
Diluted earnings (loss) per share attributable to Community Health Systems, Inc. common stockholders (i): |
||||||||||||||||
Continuing operations |
$ | 0.81 | $ | 0.76 | $ | 1.62 | $ | 1.51 | ||||||||
Discontinued operations (g) |
(0.43 | ) | (0.02 | ) | (0.57 | ) | (0.01 | ) | ||||||||
Net income |
$ | 0.39 | $ | 0.74 | $ | 1.05 | $ | 1.49 | ||||||||
Weighted-average number of shares outstanding (h): |
||||||||||||||||
Basic |
91,131 | 93,359 | 91,070 | 92,492 | ||||||||||||
Diluted |
91,784 | 94,712 | 91,961 | 93,779 | ||||||||||||
Net cash provided by operating activities |
$ | 397,174 | $ | 242,432 | $ | 584,685 | $ | 541,792 |
For footnotes, see pages 11 and 12. |
Three Months Ended June 30, | ||||||||||||||||
2011 | 2010 | |||||||||||||||
% of Net | % of Net | |||||||||||||||
Operating | Operating | |||||||||||||||
Amount | Revenues | Amount | Revenues | |||||||||||||
Net operating revenues (d) |
$ | 3,433,829 | 100.0 | % | $ | 3,080,646 | 100.0 | % | ||||||||
Operating costs and expenses: |
||||||||||||||||
Salaries and benefits |
1,384,096 | 40.3 | % | 1,231,559 | 40.0 | % | ||||||||||
Provision for bad debts |
433,002 | 12.6 | % | 367,002 | 11.9 | % | ||||||||||
Supplies |
449,279 | 13.1 | % | 430,574 | 14.0 | % | ||||||||||
Other operating expenses |
654,737 | 19.0 | % | 559,962 | 18.2 | % | ||||||||||
Rent |
62,431 | 1.8 | % | 60,851 | 2.0 | % | ||||||||||
Depreciation and amortization |
161,376 | 4.7 | % | 149,779 | 4.8 | % | ||||||||||
Total operating costs and expenses |
3,144,921 | 91.5 | % | 2,799,727 | 90.9 | % | ||||||||||
Income from operations (d)(e)(f) |
288,908 | 8.5 | % | 280,919 | 9.1 | % | ||||||||||
Interest expense, net |
163,230 | 4.8 | % | 160,759 | 5.2 | % | ||||||||||
Equity in earnings of unconsolidated affiliates |
(12,017 | ) | -0.3 | % | (10,980 | ) | -0.4 | % | ||||||||
Income from continuing operations
before income taxes |
137,695 | 4.0 | % | 131,140 | 4.3 | % | ||||||||||
Provision for income taxes |
44,821 | 1.3 | % | 42,761 | 1.4 | % | ||||||||||
Income from continuing operations (f) |
92,874 | 2.7 | % | 88,379 | 2.9 | % | ||||||||||
Discontinued operations, net of taxes (g): |
||||||||||||||||
Income (loss) from operations of entities sold and held for sale |
235 | 0.1 | % | (2,037 | ) | -0.1 | % | |||||||||
Impairment of hospitals held for sale |
(39,562 | ) | -1.2 | % | | 0.0 | % | |||||||||
Loss from discontinued operations, net of taxes |
(39,327 | ) | -1.1 | % | (2,037 | ) | -0.1 | % | ||||||||
Net income |
53,547 | 1.6 | % | 86,342 | 2.8 | % | ||||||||||
Less: Net income attributable to noncontrolling interests |
18,158 | 0.6 | % | 16,277 | 0.5 | % | ||||||||||
Net income attributable to Community Health Systems, Inc. |
$ | 35,389 | 1.0 | % | $ | 70,065 | 2.3 | % | ||||||||
Basic earnings (loss) per share attributable to Community Health Systems, Inc. common stockholders: |
||||||||||||||||
Continuing operations |
$ | 0.82 | $ | 0.77 | ||||||||||||
Discontinued operations |
(0.43 | ) | (0.02 | ) | ||||||||||||
Net income |
$ | 0.39 | $ | 0.75 | ||||||||||||
Diluted earnings (loss) per share attributable to Community Health Systems, Inc. common stockholders (i): |
||||||||||||||||
Continuing operations |
$ | 0.81 | $ | 0.76 | ||||||||||||
Discontinued operations |
(0.43 | ) | (0.02 | ) | ||||||||||||
Net income |
$ | 0.39 | $ | 0.74 | ||||||||||||
Weighted-average number of shares
outstanding (h): |
||||||||||||||||
Basic |
91,131 | 93,359 | ||||||||||||||
Diluted |
91,784 | 94,712 | ||||||||||||||
Six Months Ended June 30, | ||||||||||||||||
2011 | 2010 | |||||||||||||||
% of Net | % of Net | |||||||||||||||
Operating | Operating | |||||||||||||||
Amount | Revenues | Amount | Revenues | |||||||||||||
Net operating revenues |
$ | 6,787,881 | 100.0 | % | $ | 6,149,258 | 100.0 | % | ||||||||
Operating costs and expenses: |
||||||||||||||||
Salaries and benefits |
2,763,463 | 40.7 | % | 2,478,240 | 40.3 | % | ||||||||||
Provision for bad debts |
832,971 | 12.3 | % | 733,503 | 11.9 | % | ||||||||||
Supplies |
907,096 | 13.4 | % | 852,686 | 13.9 | % | ||||||||||
Other operating expenses |
1,269,530 | 18.6 | % | 1,116,581 | 18.2 | % | ||||||||||
Rent |
125,601 | 1.9 | % | 122,908 | 2.0 | % | ||||||||||
Depreciation and amortization |
319,531 | 4.7 | % | 293,682 | 4.7 | % | ||||||||||
Total operating costs and expenses |
6,218,192 | 91.6 | % | 5,597,600 | 91.0 | % | ||||||||||
Income from operations (e)(f) |
569,689 | 8.4 | % | 551,658 | 9.0 | % | ||||||||||
Interest expense, net |
326,448 | 4.8 | % | 320,182 | 5.3 | % | ||||||||||
Equity in earnings of unconsolidated affiliates |
(30,151 | ) | -0.4 | % | (23,570 | ) | -0.4 | % | ||||||||
Income from continuing operations
before income taxes |
273,392 | 4.0 | % | 255,046 | 4.1 | % | ||||||||||
Provision for income taxes |
88,913 | 1.3 | % | 82,310 | 1.3 | % | ||||||||||
Income from continuing operations (f) |
184,479 | 2.7 | % | 172,736 | 2.8 | % | ||||||||||
Discontinued operations, net of taxes (g): |
||||||||||||||||
Loss from operations of entities sold and held for sale |
(1,443 | ) | 0.0 | % | (1,398 | ) | 0.0 | % | ||||||||
Impairment of hospitals held for sale |
(47,930 | ) | -0.7 | % | | 0.0 | % | |||||||||
Loss on sale |
(3,234 | ) | -0.1 | % | | 0.0 | % | |||||||||
Loss from discontinued operations, net of taxes |
(52,607 | ) | -0.8 | % | (1,398 | ) | 0.0 | % | ||||||||
Net income |
131,872 | 1.9 | % | 171,338 | 2.8 | % | ||||||||||
Less: Net income attributable to noncontrolling interests |
35,159 | 0.5 | % | 31,266 | 0.5 | % | ||||||||||
Net income attributable to Community Health Systems, Inc. |
$ | 96,713 | 1.4 | % | $ | 140,072 | 2.3 | % | ||||||||
Basic earnings (loss) per share attributable to Community Health Systems, Inc. common stockholders (i): |
||||||||||||||||
Continuing operations |
$ | 1.64 | $ | 1.53 | ||||||||||||
Discontinued operations |
(0.58 | ) | (0.01 | ) | ||||||||||||
Net income |
$ | 1.06 | $ | 1.51 | ||||||||||||
Diluted earnings (loss) per share attributable to Community Health Systems, Inc. common stockholders (i): |
||||||||||||||||
Continuing operations |
$ | 1.62 | $ | 1.51 | ||||||||||||
Discontinued operations |
(0.57 | ) | (0.01 | ) | ||||||||||||
Net income |
$ | 1.05 | $ | 1.49 | ||||||||||||
Weighted-average number of shares
outstanding (h): |
||||||||||||||||
Basic |
91,070 | 92,492 | ||||||||||||||
Diluted |
91,961 | 93,779 | ||||||||||||||
For the Three Months Ended June 30, | ||||||||||||||||||||||||
Consolidated | Same-Store | |||||||||||||||||||||||
2011 | 2010 | %Change | 2011 | 2010 | %Change | |||||||||||||||||||
Number of hospitals (at end of period) |
130 | 122 | 122 | 122 | ||||||||||||||||||||
Licensed beds (at end of period) |
19,361 | 17,911 | 17,917 | 17,911 | ||||||||||||||||||||
Beds in service (at end of period) |
16,617 | 15,614 | 15,510 | 15,614 | ||||||||||||||||||||
Admissions |
168,336 | 167,352 | 0.6 | % | 158,054 | 167,352 | -5.6 | % | ||||||||||||||||
Adjusted admissions |
332,180 | 315,414 | 5.3 | % | 313,299 | 315,414 | -0.7 | % | ||||||||||||||||
Patient days |
737,850 | 707,624 | 691,706 | 707,624 | ||||||||||||||||||||
Average length of stay (days) |
4.4 | 4.2 | 4.4 | 4.2 | ||||||||||||||||||||
Occupancy rate (average beds in service) |
49.1 | % | 49.8 | % | 49.0 | % | 49.8 | % | ||||||||||||||||
Net operating revenues |
$ | 3,433,829 | $ | 3,080,646 | 11.5 | % | $ | 3,258,355 | $ | 3,080,654 | 5.8 | % | ||||||||||||
Net inpatient revenues as a % of total net operating revenues |
46.4 | % | 49.1 | % | 46.0 | % | 49.1 | % | ||||||||||||||||
Net outpatient revenues as a % of
total net operating revenues |
51.5 | % | 49.0 | % | 51.9 | % | 49.0 | % | ||||||||||||||||
Income from operations (f) |
$ | 288,908 | $ | 280,919 | 2.8 | % | $ | 295,741 | $ | 283,880 | 4.2 | % | ||||||||||||
Income from operations as a
% of net operating revenues |
8.5 | % | 9.1 | % | 9.1 | % | 9.2 | % | ||||||||||||||||
Depreciation and amortization |
$ | 161,376 | $ | 149,779 | $ | 155,809 | $ | 149,779 | ||||||||||||||||
Equity in earnings of unconsolidated affiliates |
$ | (12,017 | ) | $ | (10,980 | ) | $ | (12,017 | ) | $ | (10,980 | ) | ||||||||||||
Liquidity Data: |
||||||||||||||||||||||||
Adjusted EBITDA (c) |
$ | 462,301 | $ | 441,678 | 4.7 | % | ||||||||||||||||||
Adjusted EBITDA as a % of net
operating revenues |
13.5 | % | 14.3 | % | ||||||||||||||||||||
Net cash provided by operating activities |
$ | 397,174 | $ | 242,432 | ||||||||||||||||||||
Net cash provided by operating activities as
a % of net operating revenues |
11.6 | % | 7.9 | % |
For the Six Months Ended June 30, | ||||||||||||||||||||||||
Consolidated | Same-Store | |||||||||||||||||||||||
2011 | 2010 | %Change | 2011 | 2010 | %Change | |||||||||||||||||||
Number of hospitals (at end of period) |
130 | 122 | 122 | 122 | ||||||||||||||||||||
Licensed beds (at end of period) |
19,361 | 17,911 | 17,917 | 17,911 | ||||||||||||||||||||
Beds in service (at end of period) |
16,617 | 15,614 | 15,510 | 15,614 | ||||||||||||||||||||
Admissions |
344,666 | 340,728 | 1.2 | % | 325,860 | 340,728 | -4.4 | % | ||||||||||||||||
Adjusted admissions |
664,146 | 631,822 | 5.1 | % | 630,277 | 631,822 | -0.2 | % | ||||||||||||||||
Patient days |
1,519,663 | 1,453,086 | 1,435,916 | 1,453,086 | ||||||||||||||||||||
Average length of stay (days) |
4.4 | 4.3 | 4.4 | 4.3 | ||||||||||||||||||||
Occupancy rate (average beds in service) |
51.1 | % | 51.5 | % | 51.0 | % | 51.5 | % | ||||||||||||||||
Net operating revenues |
$ | 6,787,881 | $ | 6,149,258 | 10.4 | % | $ | 6,493,526 | $ | 6,149,363 | 5.6 | % | ||||||||||||
Net inpatient revenues as a % of
total net operating revenues |
47.7 | % | 49.9 | % | 47.4 | % | 49.9 | % | ||||||||||||||||
Net outpatient revenues as a % of
total net operating revenues |
50.2 | % | 48.0 | % | 50.5 | % | 48.0 | % | ||||||||||||||||
Income from operations (f) |
$ | 569,689 | $ | 551,658 | 3.3 | % | $ | 593,471 | $ | 556,876 | 6.6 | % | ||||||||||||
Income from operations as a
% of net operating revenues |
8.4 | % | 9.0 | % | 9.1 | % | 9.1 | % | ||||||||||||||||
Depreciation and amortization |
$ | 319,531 | $ | 293,682 | $ | 310,465 | $ | 293,682 | ||||||||||||||||
Equity in earnings of unconsolidated affiliates |
$ | (30,151 | ) | $ | (23,570 | ) | $ | (30,151 | ) | $ | (23,507 | ) | ||||||||||||
Liquidity Data: |
||||||||||||||||||||||||
Adjusted EBITDA (c) |
$ | 919,371 | $ | 868,910 | 5.8 | % | ||||||||||||||||||
Adjusted EBITDA as a % of net
operating revenues |
13.5 | % | 14.1 | % | ||||||||||||||||||||
Net cash provided by operating activities |
$ | 584,685 | $ | 541,792 | ||||||||||||||||||||
Net cash provided by operating activities as
a % of net operating revenues |
8.6 | % | 8.8 | % |
June 30, | December 31, | |||||||
2011 | 2010 | |||||||
ASSETS |
||||||||
Current assets |
||||||||
Cash and cash equivalents |
$ | 191,432 | $ | 299,169 | ||||
Patient accounts receivable, net of allowance for doubtful accounts of $1,793,404
and $1,639,198 at June 30, 2011 and December 31, 2010, respectively |
1,792,404 | 1,714,542 | ||||||
Supplies |
342,268 | 329,114 | ||||||
Prepaid income taxes |
| 118,464 | ||||||
Deferred income taxes |
115,819 | 115,819 | ||||||
Prepaid expenses and taxes |
117,458 | 100,754 | ||||||
Other current assets |
175,109 | 193,331 | ||||||
Total current assets |
2,734,490 | 2,871,193 | ||||||
Property and equipment |
8,798,266 | 8,383,122 | ||||||
Less accumulated depreciation and amortization |
(2,291,842 | ) | (2,058,685 | ) | ||||
Property and equipment, net |
6,506,424 | 6,324,437 | ||||||
Goodwill |
4,227,970 | 4,150,247 | ||||||
Other assets, net |
1,356,531 | 1,352,246 | ||||||
Total assets |
$ | 14,825,415 | $ | 14,698,123 | ||||
LIABILITIES |
||||||||
Current liabilities |
||||||||
Current maturities of long-term debt |
$ | 70,112 | $ | 63,139 | ||||
Accounts payable |
583,924 | 526,338 | ||||||
Current income tax payable |
349 | | ||||||
Deferred income taxes |
8,882 | 8,882 | ||||||
Accrued interest |
145,146 | 146,415 | ||||||
Accrued liabilities |
854,329 | 897,266 | ||||||
Total current liabilities |
1,662,742 | 1,642,040 | ||||||
Long-term debt |
8,781,443 | 8,808,382 | ||||||
Deferred income taxes |
608,177 | 608,177 | ||||||
Other long-term liabilities |
1,026,069 | 1,001,675 | ||||||
Total liabilities |
12,078,431 | 12,060,274 | ||||||
Redeemable noncontrolling interests in equity of consolidated subsidiaries |
376,658 | 387,472 | ||||||
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;
93,210,424 shares issued and 92,234,875 shares outstanding
at June 30, 2011, and 93,644,862 shares issued and 92,669,313 shares outstanding at December 31, 2010 |
932 | 936 | ||||||
Additional paid-in capital |
1,119,205 | 1,126,751 | ||||||
Treasury stock, at cost, 975,549 shares at June 30, 2011 and
December 31, 2010 |
(6,678 | ) | (6,678 | ) | ||||
Accumulated other comprehensive loss |
(200,533 | ) | (230,927 | ) | ||||
Retained earnings |
1,396,095 | 1,299,382 | ||||||
Total Community Health Systems, Inc. stockholders equity |
2,309,021 | 2,189,464 | ||||||
Noncontrolling interests in equity of consolidated subsidiaries |
61,305 | 60,913 | ||||||
Total equity |
2,370,326 | 2,250,377 | ||||||
Total liabilities and equity |
$ | 14,825,415 | $ | 14,698,123 | ||||
Six Months Ended | ||||||||
June 30, | ||||||||
2011 | 2010 | |||||||
Cash flows from operating activities |
||||||||
Net income |
$ | 131,872 | $ | 171,338 | ||||
Adjustments to reconcile net income
to net cash provided by operating activities: |
||||||||
Depreciation and amortization |
324,367 | 301,060 | ||||||
Stock-based compensation expense |
20,732 | 20,418 | ||||||
Loss on sale |
3,234 | | ||||||
Impairment of hospitals held for sale |
47,930 | | ||||||
Excess tax benefit relating to stock-based compensation |
(4,659 | ) | (10,104 | ) | ||||
Other non-cash expenses, net |
4,313 | (2,342 | ) | |||||
Changes in operating assets and liabilities, net of effects of acquisitions
and divestitures: |
||||||||
Patient accounts receivable |
(83,082 | ) | (63,896 | ) | ||||
Supplies, prepaid expenses and other current assets |
9,374 | (1,147 | ) | |||||
Accounts payable, accrued liabilities and income taxes |
129,518 | 114,100 | ||||||
Other |
1,086 | 12,365 | ||||||
Net cash provided by operating activities |
584,685 | 541,792 | ||||||
Cash flows from investing activities |
||||||||
Acquisitions of facilities and other related equipment |
(204,264 | ) | (2,413 | ) | ||||
Purchases of property and equipment |
(351,383 | ) | (263,924 | ) | ||||
Proceeds from disposition of hospitals and other ancillary operations |
18,464 | | ||||||
Proceeds from sale of property and equipment |
8,034 | 2,307 | ||||||
Increase in other non-operating assets |
(75,211 | ) | (64,258 | ) | ||||
Net cash used in investing activities |
(604,360 | ) | (328,288 | ) | ||||
Cash flows from financing activities |
||||||||
Proceeds from exercise of stock options |
18,831 | 53,615 | ||||||
Deferred financing costs |
(234 | ) | | |||||
Excess tax benefit relating to stock-based compensation |
4,659 | 10,104 | ||||||
Stock buy-back |
(50,002 | ) | (12,242 | ) | ||||
Proceeds from noncontrolling investors in joint ventures |
863 | 5,155 | ||||||
Redemption of noncontrolling investments in joint ventures |
(3,303 | ) | (2,395 | ) | ||||
Distributions to noncontrolling investors in joint ventures |
(30,078 | ) | (29,371 | ) | ||||
Repayments of long-term indebtedness |
(28,798 | ) | (34,157 | ) | ||||
Net cash used in financing activities |
(88,062 | ) | (9,291 | ) | ||||
Net change in cash and cash equivalents |
(107,737 | ) | 204,213 | |||||
Cash and cash equivalents at beginning of period |
299,169 | 344,541 | ||||||
Cash and cash equivalents at end of period |
$ | 191,432 | $ | 548,754 | ||||
(a) | The following table provides information needed to calculate income per share which is adjusted for noncontrolling interests (in thousands). |
Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Income from continuing operations attributable to Community
|
||||||||||||||||
Health Systems, Inc. common stockholders: |
||||||||||||||||
Income from continuing operations, net of taxes |
$ | 92,874 | $ | 88,379 | $ | 184,479 | $ | 172,736 | ||||||||
Less: Income from continuing operations attributable to
noncontrolling interests, net of taxes |
18,158 | 16,313 | 35,159 | 31,332 | ||||||||||||
Income from continuing operations attributable to Community |
||||||||||||||||
Health Systems, Inc. common stockholders basic and diluted |
$ | 74,716 | $ | 72,066 | $ | 149,320 | $ | 141,404 | ||||||||
Loss from discontinued operations attributable to Community |
||||||||||||||||
Health Systems, Inc. common stockholders: |
||||||||||||||||
Loss from discontinued operations, net of taxes |
$ | (39,327 | ) | $ | (2,037 | ) | $ | (52,607 | ) | $ | (1,398 | ) | ||||
Less: Loss from discontinued operations attributable to
noncontrolling interests, net of taxes |
| (36 | ) | | (66 | ) | ||||||||||
Loss from discontinued operations attributable to Community |
||||||||||||||||
Health Systems, Inc. common stockholders basic and diluted |
$ | (39,327 | ) | $ | (2,001 | ) | $ | (52,607 | ) | $ | (1,332 | ) | ||||
(b) | Continuing operating results exclude discontinued operations for the three and six months ended June 30, 2011 and 2010. Both financial and statistical results exclude entities in discontinued operations (including three hospitals held for sale at June 30, 2011) for all periods presented. | |
(c) | 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 Companys 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 Companys ability to incur and service debt and make capital expenditures. Adjusted EBITDA is the basis for a key component in the determination of the Companys compliance with some of the covenants under the Companys 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. |
Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Adjusted EBITDA |
$ | 462,301 | $ | 441,678 | $ | 919,371 | $ | 868,910 | ||||||||
Interest expense, net |
(163,230 | ) | (160,759 | ) | (326,448 | ) | (320,182 | ) | ||||||||
Provision for income taxes |
(44,821 | ) | (42,761 | ) | (88,913 | ) | (82,310 | ) | ||||||||
Income (loss) from operations of entities sold
and held for sale, net of taxes |
235 | (2,037 | ) | (1,443 | ) | (1,398 | ) | |||||||||
Other non-cash expenses, net |
27,990 | 10,117 | 25,222 | 15,350 | ||||||||||||
Net changes in operating assets and liabilities,
net of effects of acquisitions |
114,699 | (3,806 | ) | 56,896 | 61,422 | |||||||||||
Net cash provided by operating activities |
$ | 397,174 | $ | 242,432 | $ | 584,685 | $ | 541,792 | ||||||||
(d) | Total non-same-store consolidated net operating revenues for the three months ended June 30, 2011 included revenue related to the final settlement of a rate related reimbursement dispute resolved in the Companys favor and total non-same-store consolidated operating costs and expenses for the three months ended June 30, 2011 included an operating expense charge related to the final settlement of a real estate lawsuit against the Company. The net favorable pre-tax impact of these settlements on income from continuing operations was approximately $1 million. | |
(e) | Included in income from operations and income from continuing operations for the three and six months ended June 30, 2011, are the following non-same-store charges: |
| Pre-tax charges of $4.1 million and $5.6 million, respectively, related to acquisition costs (other than Tenet Healthcare Corporation (Tenet)); | ||
| Pre-tax charges of $1.0 million and $2.2 million, respectively, for system conversion costs; and | ||
| Pre-tax charges of $1.2 million and $3.1 million, respectively, for Tenet acquisition costs. |
(f) | Included in non-same-store income from operations and income from continuing operations for the three months and six months ended June 30, 2011, are pre-tax legal and other costs of $6.2 million with an after-tax impact of $4.0 million ($0.04 EPS) related to the Tenet lawsuit, governmental investigations and shareholder lawsuits. | |
(g) | Included in discontinued operations for the three and six months ended June 30, 2011, are the following: |
| Effective February 1, 2011, the Company sold Willamette Community Medical Group, which is a physician clinic operating as Oregon Medical Group, located in Springfield, Oregon, with a carrying amount of net assets, including an allocation of reporting unit goodwill, of $19.7 million to Oregon Healthcare Resources, LLC, for $14.6 million in cash. | ||
| One hospital classified as being held for sale at both March 31, 2011 and June 30, 2011, for which a definitive agreement has been executed. The estimated after-tax loss on sale is approximately $8.4 million. | ||
| Two hospitals, one in Tulsa, Oklahoma, and one in Claremore, Oklahoma, for which a definitive agreement has been executed are classified as being held for sale at June 30, 2011. The estimated after-tax loss on sale is approximately $39.6 million. |
(h) | 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 June 30, |
Six Months Ended June 30, |
|||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Weighted-average number of shares
outstanding basic |
91,131 | 93,359 | 91,070 | 92,492 | ||||||||||||
Add effect of dilutive securities: |
||||||||||||||||
Stock awards and options |
653 | 1,353 | 891 | 1,287 | ||||||||||||
Weighted-average number of shares
outstanding diluted |
91,784 | 94,712 | 91,961 | 93,779 | ||||||||||||
(i) | Total per share amounts may not add due to rounding. |
Updated | ||||||||
2011 Projection Range | ||||||||
Net operating revenues (in millions) |
$13,600 | to | $14,000 | |||||
Adjusted EBITDA (in millions) |
$1,830 | to | $1,855 | |||||
Income from continuing operations per share diluted |
$3.20 | to | $3.35 | |||||
Same-store hospital annual admissions/adjusted admissions growth |
-1.0% | to | 1.0 | % | ||||
Weighted-average diluted shares (in millions) |
92 | to | 93 | |||||
Acquisitions of new hospitals |
2 | to | 3 |
| The Companys 2011 projection range does not include hospitals currently held for sale. | |
| Projected 2011 same-store hospital annual adjusted admissions growth does not take into account service closures and other unusual events. | |
| Expressed as a percent of net operating revenues, the provision for bad debts is projected to be approximately 12.4% to 12.7% for 2011. 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 4.7% to 4.8% for 2011; however, this is a fixed cost and the percentages may vary as revenue varies. Such amounts exclude the possible impact of any future fair-value adjustments to investments and hospital fixed asset impairments. | |
| 2011 projection includes an estimate of $0.05 to $0.08 per share (diluted) of acquisition costs (including the terminated Tenet acquisition) that are required to be expensed. | |
| The Companys 2011 projection range does not take into account the legal expense and other expenses to be incurred related to the Tenet lawsuit, governmental investigations, and shareholder lawsuits. |
| For the purpose of providing interest expense guidance, the Company assumes that the borrowing rate under the Companys $7.2 billion Senior Secured Credit Facility for 2011 will remain relatively stable with the rates existing currently, particularly since the Company is a party to interest rate swap agreements (with original maturities of at least two years) resulting in total fixed debt including swaps being 93% of total 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 4.7% to 4.9% for 2011; however, these percentages will vary as revenue and interest rates vary. The 2011 projections do not assume any changes to the financing terms of the Senior Secured Credit Facility or any new financing arrangements, which have not been previously announced. | |
| On September 15, 2010, the Company adopted a new open market repurchase program for up to four million shares of the Companys common stock, not to exceed $100 million in purchases. The new repurchase program will conclude at the earliest of three years, when the maximum number of shares has been repurchased or when the maximum dollar amount has been reached. Through July 28, 2011, approximately 2.2 million shares with a value of approximately $63.8 million were purchased and retired under this repurchase plan. | |
| Expressed as a percentage of net operating revenues, equity in earnings of unconsolidated affiliates is projected to be approximately 0.3% to 0.5% for 2011. | |
| Expressed as a percentage of net operating revenues, net income attributable to noncontrolling interests is projected to be approximately 0.5% to 0.6% for 2011. | |
| Expressed as a percentage of income from continuing operations before income taxes, provision for income tax is projected to be approximately 31.0% to 33.0% for 2011. | |
| Capital expenditures are projected as follows (in millions): |
2011 | ||||||||
Guidance | ||||||||
Total |
$750 | to | $825 |
| Expressed as a percentage of net operating revenues, meaningful use certified electronic health records incentive payments are currently projected to be approximately 0.05% to 0.15%, in excess of related operating expenses for 2011. The Companys accounting is based on current revenue recognition rules which could change, as various accounting task forces are evaluating accounting for this type of incentive payments. | |
| Net cash provided by operating activities are projected as follows (in millions): |
2011 | ||||||||
Guidance | ||||||||
Total |
$1,150 | to | $1,250 |
| The Companys guidance does not take into account resolution of government investigations, Tenet-related lawsuits, and other significant lawsuits not resolved at July 28, 2011. |
| general economic and business conditions, both nationally and in the regions in which we operate; | ||
| implementation and effect of recently-adopted and potential federal and state healthcare legislation; | ||
| 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 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. |
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