18. SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION

The Senior Notes due 2019, 2020 and 2022, which are senior unsecured obligations of CHS, and the 5⅛% Senior Secured Notes due 2018 and 2021 (collectively, “the Notes”) are guaranteed on a senior basis by the Company and by certain of its existing and subsequently acquired or organized 100% owned domestic subsidiaries. The Notes are fully and unconditionally guaranteed on a joint and several basis, with exceptions considered customary for such guarantees, limited to the release of the guarantee when a subsidiary guarantor’s capital stock is sold, or a sale of all of the subsidiary guarantor’s assets used in operations. The following condensed consolidating financial statements present Community Health Systems, Inc. (as parent guarantor), CHS (as the issuer), the subsidiary guarantors, the subsidiary non-guarantors and eliminations. These condensed consolidating financial statements have been prepared and presented in accordance with SEC Regulation S-X Rule 3-10 “Financial Statements of Guarantors and Issuers of Guaranteed Securities Registered or Being Registered.”

The accounting policies used in the preparation of this financial information are consistent with those elsewhere in the condensed consolidated financial statements of the Company, except as noted below:

•Intercompany receivables and payables are presented gross in the supplemental condensed consolidating balance sheets.

•Cash flows from intercompany transactions are presented in cash flows from financing activities, as changes in intercompany balances with affiliates, net.

•Income tax expense is allocated from the parent guarantor to the income producing operations (other guarantors and non-guarantors) and the issuer through stockholders’ equity. As this approach represents an allocation, the income tax expense allocation is considered non-cash for statement of cash flow purposes.

•Interest expense, net has been presented to reflect net interest expense and interest income from outstanding long-term debt and intercompany balances.

The Company’s intercompany activity consists primarily of daily cash transfers for purposes of cash management, the allocation of certain expenses and expenditures paid for by the Parent on behalf of its subsidiaries, and the push down of investment in its subsidiaries. This activity also includes the intercompany transactions between consolidated entities as part of the Receivables Facility that is further discussed in Note 11. The Company’s subsidiaries generally do not purchase services from one another; thus, the intercompany transactions do not represent revenue generating transactions. All intercompany transactions eliminate in consolidation.

From time to time, the Company sells and/or repurchases noncontrolling interests in consolidated subsidiaries, which may change subsidiaries between guarantors and non-guarantors. Amounts for prior periods are revised to reflect the status of guarantors or non-guarantors as of June 30, 2014.



Condensed Consolidating Balance Sheet
June 30, 2014
	Parent				Other		Non -
	Guarantor		Issuer		Guarantors		Guarantors		Eliminations		Consolidated
	(In millions)
ASSETS
Current assets:
Cash and cash equivalents	$	-	$	-	$	206	$	183	$	-	$	389
Patient accounts receivable, net of allowance
for doubtful accounts		-		-		1,056		2,065		-		3,121
Supplies		-		-		370		180		-		550
Prepaid income taxes		193		-		-		-		-		193
Deferred income taxes		317		-		-		-		-		317
Prepaid expenses and taxes		-		-		149		54		-		203
Other current assets		-		-		277		347		-		624
Total current assets		510		-		2,058		2,829		-		5,397
Intercompany receivable		1,179		16,522		3,087		7,869		(28,657)		-
Property and equipment, net		-		-		7,126		3,691		-		10,817
Goodwill		-		-		5,267		3,252		-		8,519
Other assets, net		-		319		1,778		1,045		(605)		2,537
Net investment in subsidiaries		3,135		17,838		6,936		-		(27,909)		-
Total assets	$	4,824	$	34,679	$	26,252	$	18,686	$	(57,171)	$	27,270

LIABILITIES AND EQUITY
Current liabilities:
Current maturities of long-term debt	$	-	$	146	$	54	$	9	$	-	$	209
Accounts payable		-		-		718		282		-		1,000
Deferred income taxes		-		-		-		-		-		-
Accrued interest		-		232		-		1		-		233
Accrued liabilities		4		-		1,216		507		-		1,727
Total current liabilities		4		378		1,988		799		-		3,169
Long-term debt		-		15,903		127		692		-		16,722
Intercompany payable		-		14,450		19,396		15,226		(49,072)		-
Deferred income taxes		1,043		-		-		-		-		1,043
Other long-term liabilities		2		812		1,190		383		(605)		1,782
Total liabilities		1,049		31,543		22,701		17,100		(49,677)		22,716
Redeemable noncontrolling interests in
equity of consolidated subsidiaries		-		-		-		689		-		689
Equity:
Community Health Systems, Inc. stockholders’
equity:
Preferred stock		-		-		-		-		-		-
Common stock		1		-		-		-		-		1
Additional paid-in capital		2,021		1,150		1,284		656		(3,090)		2,021
Treasury stock, at cost		(7)		-		-		-		-		(7)
Accumulated other comprehensive (loss)
income		(55)		(55)		(13)		-		68		(55)
Retained earnings		1,815		2,041		2,280		151		(4,472)		1,815
Total Community Health Systems, Inc.
stockholders’ equity		3,775		3,136		3,551		807		(7,494)		3,775
Noncontrolling interests in equity of
consolidated subsidiaries		-		-		-		90		-		90
Total equity		3,775		3,136		3,551		897		(7,494)		3,865
Total liabilities and equity	$	4,824	$	34,679	$	26,252	$	18,686	$	(57,171)	$	27,270



Condensed Consolidating Balance Sheet
December 31, 2013
	Parent				Other		Non -
	Guarantor		Issuer		Guarantors		Guarantors		Eliminations		Consolidated
	(In millions)
ASSETS
Current assets:
Cash and cash equivalents	$	-	$	-	$	238	$	135	$	-	$	373
Patient accounts receivable, net of allowance
for doubtful accounts		-		-		866		1,457		-		2,323
Supplies		-		-		256		115		-		371
Prepaid income taxes		107		-		-		-		-		107
Deferred income taxes		101		-		-		-		-		101
Prepaid expenses and taxes		-		-		98		29		-		127
Other current assets		-		-		262		83		-		345
Total current assets		208		-		1,720		1,819		-		3,747
Intercompany receivable		579		9,541		4,534		3,810		(18,464)		-
Property and equipment, net		-		-		4,657		2,394		-		7,051
Goodwill		-		-		2,530		1,894		-		4,424
Other assets, net		-		144		1,454		828		(531)		1,895
Net investment in subsidiaries		3,194		9,335		4,030		-		(16,559)		-
Total assets	$	3,981	$	19,020	$	18,925	$	10,745	$	(35,554)	$	17,117

LIABILITIES AND EQUITY
Current liabilities:
Current maturities of long-term debt	$	-	$	152	$	13	$	2	$	-	$	167
Accounts payable		-		-		734		215		-		949
Deferred income taxes		3		-		-		-		-		3
Accrued interest		-		111		-		1		-		112
Accrued liabilities		4		-		871		352		-		1,227
Total current liabilities		7		263		1,618		570		-		2,458
Long-term debt		-		8,718		51		517		-		9,286
Intercompany payable		-		6,226		13,060		8,266		(27,552)		-
Deferred income taxes		906		-		-		-		-		906
Other long-term liabilities		-		619		671		218		(531)		977
Total liabilities		913		15,826		15,400		9,571		(28,083)		13,627
Redeemable noncontrolling interests in
equity of consolidated subsidiaries		-		-		-		358		-		358
Equity:
Community Health Systems, Inc. stockholders’
equity:
Preferred stock		-		-		-		-		-		-
Common stock		1		-		-		-		-		1
Additional paid-in capital		1,256		1,175		1,274		595		(3,044)		1,256
Treasury stock, at cost		(7)		-		-		-		-		(7)
Accumulated other comprehensive (loss)
income		(67)		(67)		(11)		-		78		(67)
Retained earnings		1,885		2,086		2,262		157		(4,505)		1,885
Total Community Health Systems, Inc.
stockholders’ equity		3,068		3,194		3,525		752		(7,471)		3,068
Noncontrolling interests in equity of
consolidated subsidiaries		-		-		-		64		-		64
Total equity		3,068		3,194		3,525		816		(7,471)		3,132
Total liabilities and equity	$	3,981	$	19,020	$	18,925	$	10,745	$	(35,554)	$	17,117



Condensed Consolidating Statement of Income
Three Months Ended June 30, 2014

	Parent Guarantor		Issuer		Other Guarantors		Non - Guarantors		Eliminations		Consolidated
	(In millions)
Operating revenues (net of contractual
allowances and discounts)	$	-	$	(5)	$	3,387	$	2,149	$	-	$	5,531
Provision for bad debts		-		-		456		296		-		752
Net operating revenues		-		(5)		2,931		1,853		-		4,779
Operating costs and expenses:
Salaries and benefits		-		-		1,240		988		-		2,228
Supplies		-		-		481		257		-		738
Other operating expenses		-		-		703		417		-		1,120
Electronic health records incentive reimbursement		-		-		(61)		(23)		-		(84)
Rent		-		-		59		52		-		111
Depreciation and amortization						200		82				282
Amortization of software to be abandoned		-		-		19		14		-		33
Total operating costs and expenses		-		-		2,641		1,787		-		4,428
Income from operations		-		(5)		290		66		-		351
Interest expense, net		-		31		206		18		-		255
Loss from early extinguishment of debt		-		-		-		-		-		-
Equity in earnings of unconsolidated affiliates		(42)		(61)		(24)		-		116		(11)
Income from continuing operations before income taxes		42		25		108		48		(116)		107
Provision for (benefit from) income taxes		-		(17)		42		7		-		32
Income from continuing operations		42		42		66		41		(116)		75
Discontinued operations, net of taxes:
(Loss) income from operations of entities held for sale		-		-		(8)		8		-		-
Impairment of hospitals held for sale		-		-		-		(5)		-		(5)
Loss from discontinued operations, net of taxes		-		-		(8)		3		-		(5)
Net income (loss)		42		42		58		44		(116)		70
Less: Net income attributable to noncontrolling interests		-		-		-		28		-		28
Net income (loss) attributable to Community Health
Systems, Inc. stockholders	$	42	$	42	$	58	$	16	$	(116)	$	42



Condensed Consolidating Statement of Income
Three Months Ended June 30, 2013

	Parent Guarantor		Issuer		Other Guarantors		Non - Guarantors		Eliminations		Consolidated
	(In millions)
Operating revenues (net of contractual
allowances and discounts)	$	-	$	(4)	$	2,389	$	1,326	$	-	$	3,711
Provision for bad debts		-		-		375		145		-		520
Net operating revenues		-		(4)		2,014		1,181		-		3,191
Operating costs and expenses:
Salaries and benefits		-		-		899		629		-		1,528
Supplies		-		-		324		169		-		493
Other operating expenses		-		-		461		252		-		713
Electronic health records incentive reimbursement		-		-		(16)		(8)		-		(24)
Rent		-		-		40		30		-		70
Depreciation and amortization		-		-		129		63		-		192
Total operating costs and expenses		-		-		1,837		1,135		-		2,972
Income from operations		-		(4)		177		46		-		219
Interest expense, net		-		(11)		141		24		-		154
Loss from early extinguishment of debt		-		-		-		-		-		-
Equity in earnings of unconsolidated affiliates		(30)		(24)		(13)		-		58		(9)
Income from continuing operations before income taxes		30		31		49		22		(58)		74
Provision for (benefit from) income taxes		-		1		18		2		-		21
Income from continuing operations		30		30		31		20		(58)		53
Discontinued operations, net of taxes:
(Loss) income from operations of entities held for sale		-		-		(9)		3		-		(6)
Impairment of hospitals held for sale		-		-		-		-		-		-
Loss from discontinued operations, net of taxes		-		-		(9)		3		-		(6)
Net income (loss)		30		30		22		23		(58)		47
Less: Net income attributable to noncontrolling interests		-		-		-		17		-		17
Net income (loss) attributable to Community Health
Systems, Inc. stockholders	$	30	$	30	$	22	$	6	$	(58)	$	30



Condensed Consolidating Statement of Loss
Six Months Ended June 30, 2014

	Parent Guarantor		Issuer		Other Guarantors		Non - Guarantors		Eliminations		Consolidated
	(In millions)
Operating revenues (net of contractual
allowances and discounts)	$	-	$	(9)	$	6,519	$	3,910	$	-	$	10,420
Provision for bad debts		-		-		938		518		-		1,456
Net operating revenues		-		(9)		5,581		3,392		-		8,964
Operating costs and expenses:
Salaries and benefits		-		-		2,393		1,832		-		4,225
Supplies		-		-		899		472		-		1,371
Other operating expenses		-		-		1,369		772		-		2,141
Electronic health records incentive reimbursement		-		-		(84)		(40)		-		(124)
Rent		-		-		114		96		-		210
Depreciation and amortization		-		-		388		149		-		537
Amortization of software to be abandoned		-		-		45		30		-		75
Total operating costs and expenses		-		-		5,124		3,311		-		8,435
Income from operations		-		(9)		457		81		-		529
Interest expense, net		-		71		376		31		-		478
Loss from early extinguishment of debt		-		73		-		-		-		73
Equity in earnings of unconsolidated affiliates		70		(31)		(9)		-		(52)		(22)
Impairment of long-lived assets		-		-		24		-		-		24
(Loss) income from continuing operations before income taxes		(70)		(122)		66		50		52		(24)
Provision for (benefit from) income taxes		-		(52)		25		3		-		(24)
(Loss) income from continuing operations		(70)		(70)		41		47		52		-
Discontinued operations, net of taxes:
(Loss) income from operations of entities held for sale		-		-		(14)		9		-		(5)
Impairment of hospitals held for sale		-		-		-		(22)		-		(22)
Loss from discontinued operations, net of taxes		-		-		(14)		(13)		-		(27)
Net (loss) income		(70)		(70)		27		34		52		(27)
Less: Net income attributable to noncontrolling interests		-		-		-		43		-		43
Net (loss) income attributable to Community Health
Systems, Inc. stockholders	$	(70)	$	(70)	$	27	$	(9)	$	52	$	(70)



Condensed Consolidating Statement of Income
Six Months Ended June 30, 2013

	Parent Guarantor		Issuer		Other Guarantors		Non - Guarantors		Eliminations		Consolidated
	(In millions)
Operating revenues (net of contractual
allowances and discounts)	$	-	$	(7)	$	4,780	$	2,677	$	-	$	7,450
Provision for bad debts		-		-		707		290		-		997
Net operating revenues		-		(7)		4,073		2,387		-		6,453
Operating costs and expenses:
Salaries and benefits		-		-		1,800		1,276		-		3,076
Supplies		-		-		644		342		-		986
Other operating expenses		-		-		894		511		-		1,405
Electronic health records incentive reimbursement		-		-		(27)		(16)		-		(43)
Rent		-		-		79		60		-		139
Depreciation and amortization		-		-		256		125		-		381
Total operating costs and expenses		-		-		3,646		2,298		-		5,944
Income from operations		-		(7)		427		89		-		509
Interest expense, net		-		3		268		39		-		310
Loss from early extinguishment of debt		-		1		-		-		-		1
Equity in earnings of unconsolidated affiliates		(109)		(117)		(31)		-		233		(24)
Impairment of long-lived assets		-		-		-		-		-		-
Income from continuing operations before income taxes		109		106		190		50		(233)		222
Provision for (benefit from) income taxes		-		(3)		67		6		-		70
Income from continuing operations		109		109		123		44		(233)		152
Discontinued operations, net of taxes:
(Loss) income from operations of entities held for sale		-		-		(10)		1		-		(9)
Impairment of hospitals held for sale		-		-		-		-		-		-
Loss from discontinued operations, net of taxes		-		-		(10)		1		-		(9)
Net income (loss)		109		109		113		45		(233)		143
Less: Net income attributable to noncontrolling interests		-		-		-		34		-		34
Net income (loss) attributable to Community Health
Systems, Inc. stockholders	$	109	$	109	$	113	$	11	$	(233)	$	109


Condensed Consolidating Statement of Comprehensive Income
Three Months Ended June 30, 2014

	Parent Guarantor		Issuer		Other Guarantors		Non - Guarantors		Eliminations		Consolidated
		(In millions)
Net income	$	42	$	42	$	58	$	44	$	(116)	$	70
Other comprehensive income (loss), net of taxes
Net change in fair value of interest rate swaps		-		-		-		-		-		-
Net change in fair value of available-for-sale securities		3		3		3		-		(6)		3
Amortization and recognition of unrecognized
pension cost components		-		-		-		-		-		-
Other comprehensive income (loss)		3		3		3		-		(6)		3
Comprehensive income		45		45		61		44		(122)		73
Less: Comprehensive income attributable to
noncontrolling interests		-		-		-		28		-		28
Comprehensive income attributable to Community
Health Systems, Inc. stockholders	$	45	$	45	$	61	$	16	$	(122)	$	45



Condensed Consolidating Statement of Comprehensive Income
Three Months Ended June 30, 2013

	Parent Guarantor		Issuer		Other Guarantors		Non - Guarantors		Eliminations		Consolidated
		(In millions)
Net income	$	30	$	30	$	22	$	23	$	(58)	$	47
Other comprehensive income (loss), net of taxes
Net change in fair value of interest rate swaps		21		21		-		-		(21)		21
Net change in fair value of available-for-sale securities		-		-		-		-		-		-
Amortization and recognition of unrecognized
pension cost components		-		-		-		-		-		-
Other comprehensive income (loss)		21		21		-		-		(21)		21
Comprehensive income		51		51		22		23		(79)		68
Less: Comprehensive income attributable to
noncontrolling interests		-		-		-		17		-		17
Comprehensive income attributable to Community
Health Systems, Inc. stockholders	$	51	$	51	$	22	$	6	$	(79)	$	51



Condensed Consolidating Statement of Comprehensive Loss
Six Months Ended June 30, 2014

	Parent Guarantor		Issuer		Other Guarantors		Non - Guarantors		Eliminations		Consolidated
		(In millions)
Net (loss) income	$	(70)	$	(70)	$	27	$	34	$	52	$	(27)
Other comprehensive income, net of income taxes:
Net change in fair value of interest rate swaps, net of tax		9		9		-		-		(9)		9
Net change in fair value of available-for-sale securities, net
of tax		3		3		3		-		(6)		3
Amortization and recognition of unrecognized pension
cost components, net of tax		-		-		-		-		-		-
Other comprehensive income		12		12		3		-		(15)		12
Comprehensive (loss) income		(58)		(58)		30		34		37		(15)
Less: Comprehensive income attributable to
noncontrolling interests		-		-		-		43		-		43
Comprehensive (loss) income attributable to Community
Health Systems, Inc. stockholders	$	(58)	$	(58)	$	30	$	(9)	$	37	$	(58)



Condensed Consolidating Statement of Comprehensive Income
Six Months Ended June 30, 2013

	Parent Guarantor		Issuer		Other Guarantors		Non - Guarantors		Eliminations		Consolidated
		(In millions)
Net income	$	109	$	109	$	113	$	45	$	(233)	$	143
Other comprehensive income, net of income taxes:
Net change in fair value of interest rate swaps, net of tax		37		37		-		-		(37)		37
Net change in fair value of available-for-sale securities, net
of tax		2		2		2		-		(4)		2
Amortization and recognition of unrecognized pension
cost components, net of tax		1		1		1		-		(2)		1
Other comprehensive income		40		40		3		-		(43)		40
Comprehensive income		149		149		116		45		(276)		183
Less: Comprehensive income attributable to
noncontrolling interests		-		-		-		34		-		34
Comprehensive income attributable to Community
Health Systems, Inc. stockholders	$	149	$	149	$	116	$	11	$	(276)	$	149



Condensed Consolidating Statement of Cash Flows
Six Months Ended June 30, 2014

	Parent				Other		Non -
	Guarantor		Issuer		Guarantors		Guarantors		Eliminations		Consolidated
	(In millions)
Net cash (used in) provided by operating
activities	$	69	$	196	$	392	$	(143)	$	-	$	514

Cash flows from investing activities:
Acquisitions of facilities and other related
equipment		-		-		(2,828)		(213)		-		(3,041)
Purchases of property and equipment		-		-		(282)		(79)		-		(361)
Proceeds from disposition of ancillary operations		-		-		-		12		-		12
Proceeds from sale of property and equipment		-		-		2		1		-		3
Purchases of available-for-sale securities		-		-		-		(137)		-		(137)
Proceeds from sales of available-for-sale securities		-		-		-		123		-		123
Increase in other investments		-		-		(185)		(66)		-		(251)
Net cash used in investing activities		-		-		(3,293)		(359)		-		(3,652)

Cash flows from financing activities:
Proceeds from exercise of stock options		14		-		-		-		-		14
Repurchase of restricted stock shares for payroll
tax withholding requirements		(11)		-		-		-		-		(11)
Stock buy-back		-		-		-		-		-		-
Deferred financing costs and
other-debt related costs		-		(269)		-		-		-		(269)
Excess tax benefit relating to
stock-based compensation		3		-		-		-		-		3
Proceeds from noncontrolling investors in joint
ventures		-		-		-		10		-		10
Redemption of noncontrolling investments in joint
ventures		-		-		-		(6)		-		(6)
Distributions to noncontrolling investors in joint
ventures		-		-		-		(44)		-		(44)
Changes in intercompany balances with
affiliates, net		(75)		(3,282)		2,855		502		-		-
Borrowings under credit agreements		-		7,455		20		13		-		7,488
Issuance of long-term debt		-		4,000		-		-		-		4,000
Proceeds from receivables facility		-		-		-		133		-		133
Repayments of long-term indebtedness		-		(8,100)		(6)		(58)		-		(8,164)
Net cash provided by (used in) financing
activities		(69)		(196)		2,869		550		-		3,154
Net change in cash and cash equivalents		-		-		(32)		48		-		16
Cash and cash equivalents at beginning of period		-		-		238		135		-		373
Cash and cash equivalents at end of period	$	-	$	-	$	206	$	183	$	-	$	389



Condensed Consolidating Statement of Cash Flows
Six Months Ended June 30, 2013

	Parent				Other		Non -
	Guarantor		Issuer		Guarantors		Guarantors		Eliminations		Consolidated
	(In millions)
Net cash (used in) provided by operating
activities	$	(83)	$	4	$	431	$	(43)	$	-	$	309

Cash flows from investing activities:
Acquisitions of facilities and other related
equipment		-		-		(5)		(5)		-		(10)
Purchases of property and equipment		-		-		(254)		(41)		-		(295)
Proceeds from sale of property and equipment		-		-		1		1		-		2
Purchases of available-for-sale securities		-		-		-		-		-		-
Proceeds from sales of available-for-sale securities		-		-		-		-		-		-
Increase in other investments		-		-		(110)		(25)		-		(135)
Net cash used in investing activities		-		-		(368)		(70)		-		(438)

Cash flows from financing activities:
Proceeds from exercise of stock options		104		-		-		-		-		104
Repurchase of restricted stock shares for payroll
tax withholding requirements		(15)		-		-		-		-		(15)
Stock buy-back		(27)		-		-		-		-		(27)
Deferred financing costs and
other-debt related costs		-		-		-		(1)		-		(1)
Excess tax benefit relating to
stock-based compensation		6		-		-		-		-		6
Proceeds from noncontrolling investors in joint
ventures		-		-		-		-		-		-
Redemption of noncontrolling investments in joint
ventures		-		-		-		-		-		-
Distributions to noncontrolling investors in joint
ventures		-		-		-		(38)		-		(38)
Changes in intercompany balances with
affiliates, net		15		221		(209)		(27)		-		-
Borrowings under credit agreements		-		275		20		1		-		296
Issuance of long-term debt		-		-		-		-		-		-
Proceeds from receivables facility		-		-		-		300		-		300
Repayments of long-term indebtedness		-		(500)		(14)		(119)		-		(633)
Net cash provided by (used in) financing
activities		83		(4)		(203)		116		-		(8)
Net change in cash and cash equivalents		-		-		(140)		3		-		(137)
Cash and cash equivalents at beginning of period		-		-		272		116		-		388
Cash and cash equivalents at end of period	$	-	$	-	$	132	$	119	$	-	$	251