EX-99.1 3 cyh-ex99_1.htm EX-99.1 EX-99.1

Exhibit Number

99.1

COMMUNITY HEALTH SYSTEMS, INC.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

On July 24, 2023, certain subsidiaries of the Company entered into a definitive asset purchase agreement, as amended (the “Purchase Agreement”) with Florida Health Sciences Center, Inc., a Florida non-profit corporation, and certain of its affiliates, providing for the sale of substantially all of the assets, and the assumption of certain liabilities, related to the following acute care hospitals (and certain related businesses): Bravera Health Brooksville (120 licensed beds) in Brooksville, Florida, Bravera Health Seven Rivers (128 licensed beds) in Crystal River, Florida, and Bravera Health Spring Hill (124 licensed beds) in Spring Hill, Florida, (collectively, the “Bravera Health hospitals”) (the “Transaction”). On December 1, 2023, the Transaction was completed pursuant to the terms of the Purchase Agreement. The purchase price paid to the Company in connection with the Transaction at a preliminary closing on November 30, 2023, after giving effect to estimated working capital and purchase price adjustments, was approximately $294 million in cash.

The Company has determined that the operations of the Bravera Health hospitals that were divested in the Transaction do not meet the definition of discontinued operations pursuant to Financial Accountings Standards Board Accounting Standards Codification 205 (ASC 205), “Presentation of Financial Statements.”

The accompanying unaudited pro forma condensed consolidated balance sheet of the Company is presented as if the disposition of the Bravera Health hospitals had occurred as of September 30, 2023. The estimated gain on sale in connection with the Transaction is reflected in the unaudited pro forma condensed balance sheet within accumulated deficit.

The accompanying unaudited pro forma condensed consolidated statements of (loss) income for the nine months ended September 30, 2023 and the year ended December 31, 2022 (collectively, the “Pro Forma Periods”) include certain pro forma adjustments to illustrate the estimated effect of the Company’s disposition, as if the Transaction had occurred on January 1, 2022. The amounts included in the historical columns represent the Company’s historical balance sheet and statements of (loss) income for the respective Pro Forma Periods presented.

The accompanying unaudited pro forma condensed consolidated financial statements have been prepared in accordance with Article 11 of Regulation S-X and do not include all of the information and note disclosures required by generally accepted accounting principles of the United States (“GAAP”). Pro forma financial information is intended to provide information about the continuing impact of a transaction by showing how a specific transaction might have affected historical financial statements. Pro forma financial information illustrates only the isolated and objectively measurable (based on historically determined amounts) effects of a particular transaction, and excludes effects based on judgmental estimates of how historical management practices and operating decisions may or may not have changed as a result of the transaction. Therefore, pro forma financial information does not include information about the possible or expected impact of current actions taken by management in response to the Transaction, as if management’s actions were carried out in previous reporting periods.

The unaudited pro forma condensed consolidated financial information is subject to the assumptions and adjustments described in the accompanying notes. These assumptions and adjustments are based on information presently available. Actual adjustments may differ materially from the information presented. The unaudited pro forma condensed consolidated financial statements are based on the historical financial statements of the Company for each period presented and in the opinion of the Company’s management, all adjustments and disclosures necessary for a fair presentation of the pro forma data have been made. These unaudited pro forma condensed consolidated financial statements are presented for illustrative purposes only and are not necessarily indicative of the results of operations or financial condition that would have been achieved had events reflected been completed as of the dates indicated, and may not be useful in predicting the impact of the Transaction on the future financial condition and results of operations of the Company due to a variety of factors. These unaudited pro forma condensed consolidated financial statements and the notes thereto should be read in conjunction with the Company’s financial statements for the three and nine months ended September 30, 2023, included in the Company’s Quarterly Report on Form 10-Q filed on October 26, 2023, and the Company’s financial statements for the year ended December 31, 2022, included in the Company’s Annual Report on Form 10-K filed on February 15, 2023.

Unaudited Pro Forma Condensed Consolidated Balance Sheet

 

(In millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

September 30, 2023

 

 

 

 

 

 

Pro Forma

 

 

 

 

 

 

As Reported

 

 

Adjustments

 

 

Pro Forma

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

 

91

 

 

$

 

294

 

a

$

 

385

 

Patient accounts receivable

 

 

 

2,160

 

 

 

 

-

 

 

 

 

2,160

 

Supplies

 

 

 

325

 

 

 

 

-

 

 

 

 

325

 

Prepaid income taxes

 

 

 

98

 

 

 

 

-

 

 

 

 

98

 

Prepaid expenses and taxes

 

 

 

249

 

 

 

 

-

 

 

 

 

249

 

Other current assets

 

 

 

325

 

 

 

 

(12

)

b

 

 

313

 

Total current assets

 

 

 

3,248

 

 

 

 

282

 

 

 

 

3,530

 

Property and equipment

 

 

 

9,367

 

 

 

 

-

 

 

 

 

9,367

 

Less accumulated depreciation and amortization

 

 

 

(4,207

)

 

 

 

-

 

 

 

 

(4,207

)

Property and equipment, net

 

 

 

5,160

 

 

 

 

-

 

 

 

 

5,160

 

Goodwill

 

 

 

3,943

 

 

 

 

-

 

 

 

 

3,943

 

Deferred income taxes

 

 

 

49

 

 

 

 

-

 

 

 

 

49

 

Other assets, net

 

 

 

2,274

 

 

 

 

(224

)

b

 

 

2,050

 

Total assets

 

$

 

14,674

 

 

$

 

58

 

 

$

 

14,732

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ DEFICIT

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

 

 

 

 

Current maturities of long-term debt

 

$

 

22

 

 

$

 

-

 

 

$

 

22

 

Current operating lease liabilities

 

 

 

121

 

 

 

 

-

 

 

 

 

121

 

Accounts payable

 

 

 

837

 

 

 

 

-

 

 

 

 

837

 

Accrued liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Employee compensation

 

 

 

513

 

 

 

 

-

 

 

 

 

513

 

Accrued interest

 

 

 

184

 

 

 

 

-

 

 

 

 

184

 

Other

 

 

 

472

 

 

 

 

(14

)

b

 

 

458

 

Total current liabilities

 

 

 

2,149

 

 

 

 

(14

)

 

 

 

2,135

 

Long-term debt

 

 

 

11,820

 

 

 

 

-

 

 

 

 

11,820

 

Deferred income taxes

 

 

 

344

 

 

 

 

11

 

c

 

 

355

 

Long-term operating lease liabilities

 

 

 

560

 

 

 

 

-

 

 

 

 

560

 

Other long-term liabilities

 

 

 

694

 

 

 

 

-

 

 

 

 

694

 

Total liabilities

 

 

 

15,567

 

 

 

 

(3

)

 

 

 

15,564

 

Redeemable noncontrolling interests in equity of consolidated subsidiaries

 

 

 

329

 

 

 

 

-

 

 

 

 

329

 

STOCKHOLDERS’ DEFICIT

 

 

 

 

 

 

 

 

 

 

 

 

Community Health Systems, Inc. stockholders’ deficit:

 

 

 

 

 

 

 

 

 

 

 

 

Preferred stock

 

 

 

-

 

 

 

 

-

 

 

 

 

-

 

Common stock

 

 

 

1

 

 

 

 

-

 

 

 

 

1

 

Additional paid-in capital

 

 

 

2,170

 

 

 

 

-

 

 

 

 

2,170

 

Accumulated other comprehensive loss

 

 

 

(23

)

 

 

 

-

 

 

 

 

(23

)

Accumulated deficit

 

 

 

(3,611

)

 

 

 

61

 

d

 

 

(3,550

)

Total Community Health Systems, Inc. stockholders’ deficit

 

 

 

(1,463

)

 

 

 

61

 

 

 

 

(1,402

)

Noncontrolling interests in equity of consolidated subsidiaries

 

 

 

241

 

 

 

 

-

 

 

 

 

241

 

Total stockholders’ deficit

 

 

 

(1,222

)

 

 

 

61

 

 

 

 

(1,161

)

Total liabilities and stockholders’ deficit

 

$

 

14,674

 

 

$

 

58

 

 

$

 

14,732

 


 

 


 

Unaudited Pro Forma Condensed Consolidated Statement of Loss

 

(In millions, except per share amounts)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended September 30, 2023

 

 

 

 

 

Pro Forma

 

 

 

 

 

 

 

As Reported

 

 

Adjustments

 

 

 

Pro Forma

 

Net operating revenues

$

 

9,308

 

 

$

 

(228

)

 e

 

$

 

9,080

 

Operating costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Salaries and benefits

 

 

4,040

 

 

 

 

(90

)

 e

 

 

 

3,950

 

Supplies

 

 

1,499

 

 

 

 

(36

)

 e

 

 

 

1,463

 

Other operating expenses

 

 

2,524

 

 

 

 

(62

)

 e

 

 

 

2,462

 

Lease cost and rent

 

 

240

 

 

 

 

(5

)

 e

 

 

 

235

 

Depreciation and amortization

 

 

384

 

 

 

 

(11

)

 e

 

 

 

373

 

Impairment and (gain) loss on sale of businesses, net

 

 

(9

)

 

 

 

-

 

 

 

 

 

(9

)

Total operating costs and expenses

 

 

8,678

 

 

 

 

(204

)

 e

 

 

 

8,474

 

Income from operations

 

 

630

 

 

 

 

(24

)

 

 

 

 

606

 

Interest expense, net

 

 

621

 

 

 

 

-

 

 

 

 

 

621

 

Equity in earnings of unconsolidated affiliates

 

 

(5

)

 

 

 

-

 

 

 

 

 

(5

)

Income (loss) before income taxes

 

 

14

 

 

 

 

(24

)

 

 

 

 

(10

)

Provision for income taxes

 

 

84

 

 

 

 

(5

)

 c

 

 

 

79

 

Net loss

 

 

(70

)

 

 

 

(19

)

 

 

 

 

(89

)

Less: Net income attributable to noncontrolling interests

 

 

110

 

 

 

 

-

 

 

 

 

 

110

 

Net loss attributable to Community Health Systems,

 

 

 

 

 

 

 

 

 

 

 

 

Inc. stockholders

$

 

(180

)

 

$

 

(19

)

 

 

$

 

(199

)

Loss per share attributable to Community

 

 

 

 

 

 

 

 

 

 

 

 

Health Systems, Inc. stockholders:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

$

 

(1.38

)

 

 

 

 

 

 

$

 

(1.53

)

Diluted

$

 

(1.38

)

 

 

 

 

 

 

$

 

(1.53

)

Weighted-average number of shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

130

 

 

 

 

 

 

 

 

 

130

 

Diluted

 

 

130

 

 

 

 

 

 

 

 

 

130

 

 

Unaudited Pro Forma Condensed Consolidated Statement of Income

 

(In millions, except per share amounts)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year Ended December 31, 2022

 

 

 

 

 

Pro Forma

 

 

 

 

 

 

 

As Reported

 

 

Adjustments

 

 

 

Pro Forma

 

Net operating revenues

$

 

12,211

 

 

$

 

(271

)

 e

 

$

 

11,940

 

Operating costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Salaries and benefits

 

 

5,330

 

 

 

 

(107

)

 e

 

 

 

5,223

 

Supplies

 

 

1,975

 

 

 

 

(43

)

 e

 

 

 

1,932

 

Other operating expenses

 

 

3,336

 

 

 

 

(84

)

 e

 

 

 

3,252

 

Depreciation and amortization

 

 

-

 

 

 

 

-

 

 

 

 

 

-

 

Lease cost and rent

 

 

317

 

 

 

 

(6

)

 e

 

 

 

311

 

Pandemic relief funds

 

 

(173

)

 

 

 

8

 

 e

 

 

 

(165

)

Depreciation and amortization

 

 

534

 

 

 

 

(16

)

 e

 

 

 

518

 

Impairment and (gain) loss on sale of businesses, net

 

 

71

 

 

 

 

(72

)

 d

 

 

 

(1

)

Total operating costs and expenses

 

 

11,390

 

 

 

 

(320

)

 

 

 

 

11,070

 

Income from operations

 

 

821

 

 

 

 

49

 

 

 

 

 

870

 

Interest expense, net

 

 

858

 

 

 

 

-

 

 

 

 

 

858

 

Gain from early extinguishment of debt

 

 

(253

)

 

 

 

-

 

 

 

 

 

(253

)

Gain from CoreTrust transaction

 

 

(119

)

 

 

 

-

 

 

 

 

 

(119

)

Equity in earnings of unconsolidated affiliates

 

 

(14

)

 

 

 

-

 

 

 

 

 

(14

)

Income before income taxes

 

 

349

 

 

 

 

49

 

 

 

 

 

398

 

Provision for income taxes

 

 

170

 

 

 

 

6

 

 c, d

 

 

 

176

 

Net income

 

 

179

 

 

 

 

43

 

 

 

 

 

222

 

Less: Net income attributable to noncontrolling interests

 

 

133

 

 

 

 

-

 

 

 

 

 

133

 

Net income attributable to Community Health Systems,

 

 

 

 

 

 

 

 

 

 

 

 

Inc. stockholders

$

 

46

 

 

$

 

43

 

 

 

$

 

89

 

Earnings per share attributable to Community

 

 

 

 

 

 

 

 

 

 

 

 

Health Systems, Inc. stockholders:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

$

 

0.35

 

 

 

 

 

 

 

$

 

0.69

 

Diluted

$

 

0.35

 

 

 

 

 

 

 

$

 

0.68

 

Weighted-average number of shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

129

 

 

 

 

 

 

 

 

 

129

 

Diluted

 

 

130

 

 

 

 

 

 

 

 

 

130

 

 

 


NOTES TO THE UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The following items resulted in adjustments in the unaudited pro forma condensed consolidated financial information:

a)
Adjustment represents cash consideration received from the sale of the Bravera Health hospitals of approximately $294 million.
b)
Adjustments represent the elimination of assets and liabilities held for sale attributable to the Bravera Health hospitals.
c)
Adjustments represent the impact to income taxes associated with the sale of the Bravera Health hospitals. The benefit for the nine months ended September 30, 2023 relates to the elimination of revenues, costs and expenses set forth in Note (e). For the year ended December 31, 2022, a benefit of approximately $5 million related to the elimination of revenues, costs and expenses set forth in Note (e) is offset by income tax expense of approximately $11 million related to the gain on sale. The estimated tax effect of pro forma adjustments is calculated at the statutory rate for the respective period adjusted for discrete impacts including changes in valuation allowances.
d)
Adjustments reflect the pre-tax gain on sale of the Bravera Health hospitals of $72 million ($61 million net of tax) calculated as follows:

Cash received

 $

 

294

 

Less: Carrying value of the Bravera Health hospitals

 

 

(118

)

Less: Goodwill allocated to sale of the Bravera Health hospitals

 

 

(104

)

Pro forma gain before income taxes

 

 

72

 

Provision for income taxes

 

 

(11

)

Pro forma net gain on sale of the Bravera Health hospitals

 $

 

61

 

e)
Adjustments reflect the elimination of revenues, costs and expenses directly attributable to the Bravera Health hospitals. Adjustments do not include certain general corporate overhead costs previously allocated to the Bravera Health hospitals that will have a continuing effect on the Company post-closing.