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 September 30, 2014.



Condensed Consolidating Balance Sheet
September 30, 2014
	Parent				Other		Non -
	Guarantor		Issuer		Guarantors		Guarantors		Eliminations		Consolidated
	(In millions)
ASSETS
Current assets:
Cash and cash equivalents	$	-	$	-	$	64	$	157	$	-	$	221
Patient accounts receivable, net of allowance
for doubtful accounts		-		-		1,186		2,080		-		3,266
Supplies		-		-		374		179		-		553
Prepaid income taxes		123		-		-		-		-		123
Deferred income taxes		318		-		-		-		-		318
Prepaid expenses and taxes		-		-		160		53		-		213
Other current assets		-		-		314		364		-		678
Total current assets		441		-		2,098		2,833		-		5,372
Intercompany receivable		1,129		16,418		3,010		7,880		(28,437)		-
Property and equipment, net		-		-		6,639		3,659		-		10,298
Goodwill		-		-		5,459		3,477		-		8,936
Other assets, net		-		310		1,821		1,115		(628)		2,618
Net investment in subsidiaries		3,205		18,082		7,187		-		(28,474)		-
Total assets	$	4,775	$	34,810	$	26,214	$	18,964	$	(57,539)	$	27,224

LIABILITIES AND EQUITY
Current liabilities:
Current maturities of long-term debt	$	-	$	154	$	57	$	8	$	-	$	219
Accounts payable		-		-		791		269		-		1,060
Deferred income taxes		-		-		-		-		-		-
Accrued interest		-		162		1		1		-		164
Accrued liabilities		5		-		1,193		539		-		1,737
Total current liabilities		5		316		2,042		817		-		3,180
Long-term debt		-		15,861		161		771		-		16,793
Intercompany payable		-		14,610		19,250		15,382		(49,242)		-
Deferred income taxes		877		-		-		-		-		877
Other long-term liabilities		11		818		1,148		360		(628)		1,709
Total liabilities		893		31,605		22,601		17,330		(49,870)		22,559
Redeemable noncontrolling interests in
equity of consolidated subsidiaries		-		-		-		695		-		695
Equity:
Community Health Systems, Inc. stockholders’
equity:
Preferred stock		-		-		-		-		-		-
Common stock		1		-		-		-		-		1
Additional paid-in capital		2,059		1,172		1,318		683		(3,173)		2,059
Treasury stock, at cost		(7)		-		-		-		-		(7)
Accumulated other comprehensive (loss)
income		(48)		(48)		(15)		3		60		(48)
Retained earnings		1,877		2,081		2,310		165		(4,556)		1,877
Total Community Health Systems, Inc.
stockholders’ equity		3,882		3,205		3,613		851		(7,669)		3,882
Noncontrolling interests in equity of
consolidated subsidiaries		-		-		-		88		-		88
Total equity		3,882		3,205		3,613		939		(7,669)		3,970
Total liabilities and equity	$	4,775	$	34,810	$	26,214	$	18,964	$	(57,539)	$	27,224



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 September 30, 2014

	Parent Guarantor		Issuer		Other Guarantors		Non - Guarantors		Eliminations		Consolidated
	(In millions)
Operating revenues (net of contractual
allowances and discounts)	$	-	$	(5)	$	3,418	$	2,150	$	-	$	5,563
Provision for bad debts		-		-		460		308		-		768
Net operating revenues		-		(5)		2,958		1,842		-		4,795
Operating costs and expenses:
Salaries and benefits		-		-		1,207		984		-		2,191
Supplies		-		-		469		264		-		733
Other operating expenses		-		-		724		397		-		1,121
Government settlement and related costs reserve		-		-		77		-		-		77
Electronic health records incentive reimbursement		-		-		(63)		(25)		-		(88)
Rent		-		-		57		53		-		110
Depreciation and amortization						187		93				280
Amortization of software to be abandoned		-		-		-		-		-		-
Total operating costs and expenses		-		-		2,658		1,766		-		4,424
Income from operations		-		(5)		300		76		-		371
Interest expense, net		-		13		219		18		-		250
Loss from early extinguishment of debt		-		-		-		-		-		-
Equity in earnings of unconsolidated affiliates		(62)		(66)		(33)		-		149		(12)
Impairment of long-lived assets		-		-		-		-		-		-
Income from continuing operations before income taxes		62		48		114		58		(149)		133
Provision for (benefit from) income taxes		-		(14)		44		10		-		40
Income from continuing operations		62		62		70		48		(149)		93
Discontinued operations, net of taxes:
(Loss) income from operations of entities held for sale		-		-		(6)		7		-		1
Impairment of hospitals held for sale		-		-		-		-		-		-
(Loss) income from discontinued operations, net of taxes		-		-		(6)		7		-		1
Net (loss) income		62		62		64		55		(149)		94
Less: Net income attributable to noncontrolling interests		-		-		-		32		-		32
Net income (loss) attributable to Community Health
Systems, Inc. stockholders	$	62	$	62	$	64	$	23	$	(149)	$	62



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

	Parent Guarantor		Issuer		Other Guarantors		Non - Guarantors		Eliminations		Consolidated
	(In millions)
Operating revenues (net of contractual
allowances and discounts)	$	-	$	(4)	$	2,367	$	1,347	$	-	$	3,710
Provision for bad debts		-		-		350		186		-		536
Net operating revenues		-		(4)		2,017		1,161		-		3,174
Operating costs and expenses:
Salaries and benefits		-		-		891		623		-		1,514
Supplies		-		-		313		169		-		482
Other operating expenses		-		-		457		248		-		705
Government settlement and related costs reserve		-		-		98		-		-		98
Electronic health records incentive reimbursement		-		-		(49)		(16)		-		(65)
Rent		-		-		40		30		-		70
Depreciation and amortization		-		-		132		61		-		193
Total operating costs and expenses		-		-		1,882		1,115		-		2,997
Income from operations		-		(4)		135		46		-		177
Interest expense, net		-		(1)		135		20		-		154
Loss from early extinguishment of debt		-		-		-		-		-		-
Equity in earnings of unconsolidated affiliates		(4)		(78)		(14)		-		84		(12)
Impairment of long-lived assets		-		-		-		-		-		-
Income from continuing operations before income taxes		4		75		14		26		(84)		35
Provision for (benefit from) income taxes		-		71		(67)		3		-		7
Income from continuing operations		4		4		81		23		(84)		28
Discontinued operations, net of taxes:
(Loss) income from operations of entities held for sale		-		-		(6)		-		-		(6)
Impairment of hospitals held for sale		-		-		-		-		-		-
(Loss) income from discontinued operations, net of taxes		-		-		(6)		-		-		(6)
Net (loss) income		4		4		75		23		(84)		22
Less: Net income attributable to noncontrolling interests		-		-		-		18		-		18
Net income (loss) attributable to Community Health
Systems, Inc. stockholders	$	4	$	4	$	75	$	5	$	(84)	$	4



Condensed Consolidating Statement of Loss
Nine Months Ended September 30, 2014

	Parent Guarantor		Issuer		Other Guarantors		Non - Guarantors		Eliminations		Consolidated
	(In millions)
Operating revenues (net of contractual
allowances and discounts)	$	-	$	(13)	$	9,937	$	6,060	$	-	$	15,984
Provision for bad debts		-		-		1,398		827		-		2,225
Net operating revenues		-		(13)		8,539		5,233		-		13,759
Operating costs and expenses:
Salaries and benefits		-		-		3,601		2,816		-		6,417
Supplies		-		-		1,368		736		-		2,104
Other operating expenses		-		-		2,095		1,167		-		3,262
Government settlement and related costs		-		-		77		-		-		77
Electronic health records incentive reimbursement		-		-		(147)		(65)		-		(212)
Rent		-		-		170		150		-		320
Depreciation and amortization						574		243				817
Amortization of software to be abandoned		-		-		45		30		-		75
Total operating costs and expenses		-		-		7,783		5,077		-		12,860
Income from operations		-		(13)		756		156		-		899
Interest expense, net		-		84		596		48		-		728
Loss from early extinguishment of debt		-		73		-		-		-		73
Equity in earnings of unconsolidated affiliates		8		(96)		(44)		-		97		(35)
Impairment of long-lived assets		-		-		24		-		-		24
(Loss) income from continuing operations before income taxes		(8)		(74)		180		108		(97)		109
Provision for (benefit from) income taxes		-		(66)		69		13		-		16
(Loss) income from continuing operations		(8)		(8)		111		95		(97)		93
Discontinued operations, net of taxes:
(Loss) income from operations of entities held for sale		-		-		(20)		16		-		(4)
Impairment of hospitals held for sale		-		-		-		(22)		-		(22)
(Loss) income from discontinued operations, net of taxes		-		-		(20)		(6)		-		(26)
Net (loss) income		(8)		(8)		91		89		(97)		67
Less: Net income attributable to noncontrolling interests		-		-		-		75		-		75
Net (loss) income attributable to Community Health
Systems, Inc. stockholders	$	(8)	$	(8)	$	91	$	14	$	(97)	$	(8)



Condensed Consolidating Statement of Income
Nine Months Ended September 30, 2013

	Parent Guarantor		Issuer		Other Guarantors		Non - Guarantors		Eliminations		Consolidated
	(In millions)
Operating revenues (net of contractual
allowances and discounts)	$	-	$	(11)	$	7,148	$	4,024	$	-	$	11,161
Provision for bad debts		-		-		1,057		476		-		1,533
Net operating revenues		-		(11)		6,091		3,548		-		9,628
Operating costs and expenses:
Salaries and benefits		-		-		2,691		1,900		-		4,591
Supplies		-		-		957		511		-		1,468
Other operating expenses		-		-		1,350		760		-		2,110
Government settlement and related costs		-		-		98		-		-		98
Electronic health records incentive reimbursement		-		-		(76)		(32)		-		(108)
Rent		-		-		119		89		-		208
Depreciation and amortization		-		-		388		186		-		574
Total operating costs and expenses		-		-		5,527		3,414		-		8,941
Income from operations		-		(11)		564		134		-		687
Interest expense, net		-		2		403		59		-		464
Loss from early extinguishment of debt		-		1		-		-		-		1
Equity in earnings of unconsolidated affiliates		(113)		(194)		(46)		-		317		(36)
Impairment of long-lived assets		-		-		-		-		-		-
Income from continuing operations before income taxes		113		180		207		75		(317)		258
Provision for (benefit from) income taxes		-		67		2		9		-		78
Income from continuing operations		113		113		205		66		(317)		180
Discontinued operations, net of taxes:
(Loss) income from operations of entities held for sale		-		-		(17)		2		-		(15)
Impairment of hospitals held for sale		-		-		-		-		-		-
(Loss) income from discontinued operations, net of taxes		-		-		(17)		2		-		(15)
Net (loss) income		113		113		188		68		(317)		165
Less: Net income attributable to noncontrolling interests		-		-		-		52		-		52
Net income (loss) attributable to Community Health
Systems, Inc. stockholders	$	113	$	113	$	188	$	16	$	(317)	$	113


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

	Parent Guarantor		Issuer		Other Guarantors		Non - Guarantors		Eliminations		Consolidated
		(In millions)
Net income	$	62	$	62	$	64	$	55	$	(149)	$	94
Other comprehensive income, net of taxes
Net change in fair value of interest rate swaps, net of tax		11		11		-		-		(11)		11
Net change in fair value of available-for-sale securities,
net of tax		(5)		(5)		(5)		-		10		(5)
Amortization and recognition of unrecognized pension
cost components, net of tax		1		1		1		-		(2)		1
Other comprehensive income		7		7		(4)		-		(3)		7
Comprehensive income		69		69		60		55		(152)		101
Less: Comprehensive income attributable to
noncontrolling interests		-		-		-		32		-		32
Comprehensive income attributable to Community
Health Systems, Inc. stockholders	$	69	$	69	$	60	$	23	$	(152)	$	69



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

	Parent Guarantor		Issuer		Other Guarantors		Non - Guarantors		Eliminations		Consolidated
		(In millions)
Net income	$	4	$	4	$	75	$	23	$	(84)	$	22
Other comprehensive income, net of taxes
Net change in fair value of interest rate swaps, net of tax		10		10		-		-		(10)		10
Net change in fair value of available-for-sale securities,
net of tax		1		1		1		-		(2)		1
Amortization and recognition of unrecognized pension
cost components, net of tax		1		1		1		-		(2)		1
Other comprehensive income		12		12		2		-		(14)		12
Comprehensive income		16		16		77		23		(98)		34
Less: Comprehensive income attributable to
noncontrolling interests		-		-		-		18		-		18
Comprehensive income attributable to Community
Health Systems, Inc. stockholders	$	16	$	16	$	77	$	5	$	(98)	$	16



Condensed Consolidating Statement of Comprehensive Loss
Nine Months Ended September 30, 2014

	Parent Guarantor		Issuer		Other Guarantors		Non - Guarantors		Eliminations		Consolidated
		(In millions)
Net (loss) income	$	(8)	$	(8)	$	91	$	89	$	(97)	$	67
Other comprehensive income, net of income taxes:
Net change in fair value of interest rate swaps, net of tax		20		20		-		-		(20)		20
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		19		19		(1)		-		(18)		19
Comprehensive income		11		11		90		89		(115)		86
Less: Comprehensive income attributable to
noncontrolling interests		-		-		-		75		-		75
Comprehensive income attributable to Community
Health Systems, Inc. stockholders	$	11	$	11	$	90	$	14	$	(115)	$	11



Condensed Consolidating Statement of Comprehensive Income
Nine Months Ended September 30, 2013

	Parent Guarantor		Issuer		Other Guarantors		Non - Guarantors		Eliminations		Consolidated
		(In millions)
Net income	$	113	$	113	$	188	$	68	$	(317)	$	165
Other comprehensive income, net of income taxes:
Net change in fair value of interest rate swaps, net of tax		47		47		-		-		(47)		47
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		2		2		2		-		(4)		2
Other comprehensive income		52		52		5		-		(57)		52
Comprehensive income		165		165		193		68		(374)		217
Less: Comprehensive income attributable to
noncontrolling interests		-		-		-		52		-		52
Comprehensive income attributable to Community
Health Systems, Inc. stockholders	$	165	$	165	$	193	$	16	$	(374)	$	165



Condensed Consolidating Statement of Cash Flows
Nine Months Ended September 30, 2014

	Parent				Other		Non -
	Guarantor		Issuer		Guarantors		Guarantors		Eliminations		Consolidated
	(In millions)
Net cash (used in) provided by operating
activities	$	96	$	144	$	657	$	(258)	$	-	$	639

Cash flows from investing activities:
Acquisitions of facilities and other related
equipment		-		-		(2,840)		(201)		-		(3,041)
Purchases of property and equipment		-		-		(390)		(170)		-		(560)
Proceeds from disposition of ancillary operations		-		-		-		12		-		12
Proceeds from sale of property and equipment		-		-		33		7		-		40
Purchases of available-for-sale securities		-		-		(23)		(175)		-		(198)
Proceeds from sales of available-for-sale securities		-		-		24		167		-		191
Increase in other investments		-		-		(284)		(103)		-		(387)
Net cash used in investing activities		-		-		(3,480)		(463)		-		(3,943)

Cash flows from financing activities:
Proceeds from exercise of stock options		42		-		-		-		-		42
Repurchase of restricted stock shares for payroll
tax withholding requirements		(11)		-		-		-		-		(11)
Stock buy-back		-		-		-		-		-		-
Deferred financing costs and
other-debt related costs		-		(272)		-		-		-		(272)
Excess tax benefit relating to
stock-based compensation		4		-		-		-		-		4
Proceeds from noncontrolling investors in joint
ventures		-		-		-		10		-		10
Redemption of noncontrolling investments in joint
ventures		-		-		-		(8)		-		(8)
Distributions to noncontrolling investors in joint
ventures		-		-		-		(74)		-		(74)
Changes in intercompany balances with
affiliates, net		(131)		(3,195)		2,665		661		-		-
Borrowings under credit agreements		-		8,307		38		3		-		8,348
Issuance of long-term debt		-		4,000		-		-		-		4,000
Proceeds from receivables facility		-		-		-		204		-		204
Repayments of long-term indebtedness		-		(8,984)		(54)		(53)		-		(9,091)
Net cash provided by (used in) financing
activities		(96)		(144)		2,649		743		-		3,152
Net change in cash and cash equivalents		-		-		(174)		22		-		(152)
Cash and cash equivalents at beginning of period		-		-		238		135		-		373
Cash and cash equivalents at end of period	$	-	$	-	$	64	$	157	$	-	$	221



Condensed Consolidating Statement of Cash Flows
Nine Months Ended September 30, 2013

	Parent				Other		Non -
	Guarantor		Issuer		Guarantors		Guarantors		Eliminations		Consolidated
	(In millions)
Net cash (used in) provided by operating
activities	$	(81)	$	6	$	495	$	21	$	-	$	441

Cash flows from investing activities:
Acquisitions of facilities and other related
equipment		-		-		(9)		(25)		-		(34)
Purchases of property and equipment		-		-		(356)		(65)		-		(421)
Proceeds from sale of property and equipment		-		-		1		3		-		4
Purchases of available-for-sale securities		-		-		-		-		-		-
Proceeds from sales of available-for-sale securities		-		-		-		-		-		-
Increase in other investments		-		-		(191)		(43)		-		(234)
Net cash used in investing activities		-		-		(555)		(130)		-		(685)

Cash flows from financing activities:
Proceeds from exercise of stock options		109		-		-		-		-		109
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		-		(13)		-		-		-		(13)
Excess tax benefit relating to
stock-based compensation		7		-		-		-		-		7
Proceeds from noncontrolling investors in joint
ventures		-		-		-		-		-		-
Redemption of noncontrolling investments in joint
ventures		-		-		-		(6)		-		(6)
Distributions to noncontrolling investors in joint
ventures		-		-		-		(60)		-		(60)
Changes in intercompany balances with
affiliates, net		7		183		(196)		6		-		-
Borrowings under credit agreements		-		792		21		1		-		814
Issuance of long-term debt		-		-		-		-		-		-
Proceeds from receivables facility		-		-		-		320		-		320
Repayments of long-term indebtedness		-		(968)		(20)		(141)		-		(1,129)
Net cash provided by (used in) financing
activities		81		(6)		(195)		120		-		-
Net change in cash and cash equivalents		-		-		(255)		11		-		(244)
Cash and cash equivalents at beginning of period		-		-		272		116		-		388
Cash and cash equivalents at end of period	$	-	$	-	$	17	$	127	$	-	$	144