16. SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION

The Senior Notes due 2019, 2020 and 2022, which are senior unsecured obligations of CHS, the 5⅛% Senior Secured Notes due 2021, and the 6¼% Senior Secured Notes due 2023 (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. In addition, equity interests in non-guarantors have been pledged as collateral except for four hospitals owned jointly with non-profit, health organizations. 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’ deficit. 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 10. 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, subsidiaries of the Company sell and/or repurchase noncontrolling interests in consolidated subsidiaries, which may change subsidiaries between guarantors and non-guarantors. Amounts for prior periods have been revised to reflect the status of guarantors and non-guarantors as of March 31, 2018.



Condensed Consolidating Statement of Loss
Three Months Ended March 31, 2018

	Parent Guarantor		Issuer		Other Guarantors		Non - Guarantors		Eliminations		Consolidated

	(In millions)
Net operating revenues	$	-	$	(5)	$	2,243	$	1,451	$	-	$	3,689
Operating costs and expenses:
Salaries and benefits		-		-		824		824		-		1,648
Supplies		-		-		400		216		-		616
Other operating expenses		-		-		601		310		-		911
Government and other legal settlements and
related costs		-		-		5		-		-		5
Electronic health records incentive reimbursement		-		-		(1)		-		-		(1)
Rent		-		-		47		42		-		89
Depreciation and amortization		-		-		113		68		-		181
Impairment and (gain) loss on sale of businesses, net		-		-		16		12		-		28
Total operating costs and expenses		-		-		2,005		1,472		-		3,477
(Loss) income from operations		-		(5)		238		(21)		-		212
Interest expense, net		-		91		136		1		-		228
Loss from early extinguishment of debt		-		4		-		-		-		4
Equity in earnings of unconsolidated affiliates		25		(33)		21		-		(20)		(7)
(Loss) income from continuing operations before
income taxes		(25)		(67)		81		(22)		20		(13)
(Benefit from) provision for income taxes		-		(42)		47		(12)		-		(7)
(Loss) income from continuing operations		(25)		(25)		34		(10)		20		(6)
Discontinued operations, net of taxes:
Loss from discontinued operations, net of taxes		-		-		-		-		-		-
Net (loss) income		(25)		(25)		34		(10)		20		(6)
Less: Net income attributable to noncontrolling interests		-		-		-		19		-		19
Net (loss) income attributable to Community Health
Systems, Inc. stockholders	$	(25)	$	(25)	$	34	$	(29)	$	20	$	(25)



Condensed Consolidating Statement of Loss
Three Months Ended March 31, 2017

	Parent Guarantor		Issuer		Other Guarantors		Non - Guarantors		Eliminations		Consolidated
	(In millions)
Operating revenues (net of contractual
allowances and discounts)	$	-	$	(6)	$	2,879	$	2,295	$	-	$	5,168
Provision for bad debts		-		-		489		193		-		682
Net operating revenues		-		(6)		2,390		2,102		-		4,486
Operating costs and expenses:
Salaries and benefits		-		-		927		1,134		-		2,061
Supplies		-		-		430		319		-		749
Other operating expenses		-		-		599		458		-		1,057
Government and other legal settlements and
related costs		-		-		(41)		-		-		(41)
Electronic health records incentive reimbursement		-		-		(2)		(4)		-		(6)
Rent		-		-		51		58		-		109
Depreciation and amortization		-		-		124		112		-		236
Impairment and (gain) loss on sale of businesses, net		-		-		41		209		-		250
Total operating costs and expenses		-		-		2,129		2,286		-		4,415
(Loss) income from operations		-		(6)		261		(184)		-		71
Interest expense, net		-		70		147		12		-		229
Loss from early extinguishment of debt		-		21		-		-		-		21
Equity in earnings of unconsolidated affiliates		199		121		163		-		(486)		(3)
Loss from continuing operations before income taxes		(199)		(218)		(49)		(196)		486		(176)
Provision for (benefit from) income taxes		-		(19)		71		(52)		-		-
(Loss) income from continuing operations		(199)		(199)		(120)		(144)		486		(176)
Discontinued operations, net of taxes:
Loss from operations of entities sold or
held for sale		-		-		(3)		2		-		(1)
Loss from discontinued operations, net of taxes		-		-		(3)		2		-		(1)
Net (loss) income		(199)		(199)		(123)		(142)		486		(177)
Less: Net income attributable to noncontrolling interests		-		-		-		22		-		22
Net (loss) income attributable to Community Health
Systems, Inc. stockholders	$	(199)	$	(199)	$	(123)	$	(164)	$	486	$	(199)


Condensed Consolidating Statement of Comprehensive Loss
Three Months Ended March 31, 2018

	Parent Guarantor		Issuer		Other Guarantors		Non - Guarantors		Eliminations		Consolidated
		(In millions)
Net (loss) income	$	(25)	$	(25)	$	34	$	(10)	$	20	$	(6)
Other comprehensive income (loss), net of income taxes:
Net change in fair value of interest rate swaps, net of tax		18		18		-		-		(18)		18
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 (loss)		17		17		(1)		-		(16)		17
Comprehensive (loss) income		(8)		(8)		33		(10)		4		11
Less: Comprehensive income attributable to
noncontrolling interests		-		-		-		19		-		19
Comprehensive (loss) income attributable to
Community Health Systems, Inc. stockholders	$	(8)	$	(8)	$	33	$	(29)	$	4	$	(8)



Condensed Consolidating Statement of Comprehensive Loss
Three Months Ended March 31, 2017

	Parent Guarantor		Issuer		Other Guarantors		Non - Guarantors		Eliminations		Consolidated
		(In millions)
Net (loss) income	$	(199)	$	(199)	$	(123)	$	(142)	$	486	$	(177)
Other comprehensive income, net of income taxes:
Net change in fair value of interest rate swaps, net of tax		5		5		-		-		(5)		5
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		8		8		3		-		(11)		8
Comprehensive (loss) income		(191)		(191)		(120)		(142)		475		(169)
Less: Comprehensive income attributable to
noncontrolling interests		-		-		-		22		-		22
Comprehensive (loss) income attributable to
Community Health Systems, Inc. stockholders	$	(191)	$	(191)	$	(120)	$	(164)	$	475	$	(191)



Condensed Consolidating Balance Sheet
March 31, 2018
	Parent				Other		Non -
	Guarantor		Issuer		Guarantors		Guarantors		Eliminations		Consolidated

	(In millions)
ASSETS
Current assets:
Cash and cash equivalents	$	-	$	-	$	334	$	90	$	-	$	424
Patient accounts receivable		-		-		439		2,014		-		2,453
Supplies		-		-		287		155		-		442
Prepaid income taxes		17		-		-		-		-		17
Prepaid expenses and taxes		-		-		153		55		-		208
Other current assets		-		1		130		318		-		449
Total current assets		17		1		1,343		2,632		-		3,993
Intercompany receivable		-		13,578		4,489		7,184		(25,251)		-
Property and equipment, net		-		-		4,397		2,574		-		6,971
Goodwill						2,869		1,835		-		4,704
Deferred income taxes		64		-		-		-		-		64
Other assets, net		-		51		1,635		1,024		(1,131)		1,579
Net investment in subsidiaries		-		21,133		12,308		-		(33,441)		-
Total assets	$	81	$	34,763	$	27,041	$	15,249	$	(59,823)	$	17,311
LIABILITIES AND DEFICIT
Current liabilities:
Current maturities of long-term debt	$	-	$	-	$	29	$	8	$	-	$	37
Accounts payable		-		-		588		304		-		892
Accrued interest		-		229		-		2		-		231
Accrued liabilities		-		-		614		489		-		1,103
Total current liabilities		-		229		1,231		803		-		2,263
Long-term debt		-		13,002		214		639		-		13,855
Intercompany payable		828		21,120		24,049		13,435		(59,432)		-
Deferred income taxes		19		-		-		-		-		19
Other long-term liabilities		9		1,121		983		370		(1,131)		1,352
Total liabilities		856		35,472		26,477		15,247		(60,563)		17,489
Redeemable noncontrolling interests in
equity of consolidated subsidiaries		-		-		-		523		-		523
Deficit:
Community Health Systems, Inc. stockholders’
deficit:
Common stock		1		-		-		-		-		1
Additional paid-in capital		2,014		296		(245)		1,460		(1,511)		2,014
Accumulated other comprehensive loss		(16)		(16)		(9)		(9)		34		(16)
(Accumulated deficit) retained earnings		(2,774)		(989)		818		(2,046)		2,217		(2,774)
Total Community Health Systems, Inc.
stockholders’ deficit		(775)		(709)		564		(595)		740		(775)
Noncontrolling interests in equity of
consolidated subsidiaries		-		-		-		74		-		74
Total deficit		(775)		(709)		564		(521)		740		(701)
Total liabilities and deficit	$	81	$	34,763	$	27,041	$	15,249	$	(59,823)	$	17,311



Condensed Consolidating Balance Sheet
December 31, 2017
	Parent				Other		Non -
	Guarantor		Issuer		Guarantors		Guarantors		Eliminations		Consolidated

	(In millions)
ASSETS
Current assets:
Cash and cash equivalents	$	-	$	-	$	497	$	66	$	-	$	563
Patient accounts receivable, net of allowance
for doubtful accounts		-		-		355		2,029		-		2,384
Supplies		-		-		288		156		-		444
Prepaid income taxes		17		-		-		-		-		17
Prepaid expenses and taxes		-		-		146		52		-		198
Other current assets		-		-		152		310		-		462
Total current assets		17		-		1,438		2,613		-		4,068
Intercompany receivable		-		13,381		5,857		7,109		(26,347)		-
Property and equipment, net		-		-		4,448		2,604		-		7,052
Goodwill		-		-		2,882		1,841		-		4,723
Deferred income taxes		62		-		-		-		-		62
Other assets, net		15		39		1,594		939		(1,042)		1,545
Net investment in subsidiaries		-		21,717		10,890		-		(32,607)		-
Total assets	$	94	$	35,137	$	27,109	$	15,106	$	(59,996)	$	17,450
LIABILITIES AND DEFICIT
Current liabilities:
Current maturities of long-term debt	$	-	$	-	$	25	$	8	$	-	$	33
Accounts payable		-		-		663		304		-		967
Accrued interest		-		228		-		1		-		229
Accrued liabilities		-		-		644		483		-		1,127
Total current liabilities		-		228		1,332		796		-		2,356
Long-term debt		-		12,998		216		666		-		13,880
Intercompany payable		833		21,582		24,028		13,310		(59,753)		-
Deferred income taxes		19		-		-		-		-		19
Other long-term liabilities		9		1,018		997		378		(1,042)		1,360
Total liabilities		861		35,826		26,573		15,150		(60,795)		17,615
Redeemable noncontrolling interests in
equity of consolidated subsidiaries		-		-		-		527		-		527
Deficit:
Community Health Systems, Inc. stockholders’
deficit:
Common stock		1		-		-		-		-		1
Additional paid-in capital		2,014		(252)		204		234		(186)		2,014
Accumulated other comprehensive loss		(21)		(21)		(4)		(4)		29		(21)
(Accumulated deficit) retained earnings		(2,761)		(416)		336		(876)		956		(2,761)
Total Community Health Systems, Inc.
stockholders’ deficit		(767)		(689)		536		(646)		799		(767)
Noncontrolling interests in equity of
consolidated subsidiaries		-		-		-		75		-		75
Total deficit		(767)		(689)		536		(571)		799		(692)
Total liabilities and deficit	$	94	$	35,137	$	27,109	$	15,106	$	(59,996)	$	17,450



Condensed Consolidating Statement of Cash Flows
Three Months Ended March 31, 2018

	Parent				Other		Non -
	Guarantor		Issuer		Guarantors		Guarantors		Eliminations		Consolidated
	(In millions)
Net cash provided by (used in) operating
activities	$	26	$	(58)	$	38	$	100	$	-	$	106

Cash flows from investing activities:
Acquisitions of facilities and other related
businesses		-		-		(3)		(5)		-		(8)
Purchases of property and equipment		-		-		(119)		(51)		-		(170)
Proceeds from disposition of hospitals
and other ancillary operations		-		-		10		1		-		11
Proceeds from sale of property and equipment		-		-		-		3		-		3
Purchases of available-for-sale securities
and equity securities		-		-		(11)		(8)		-		(19)
Proceeds from sales of available-for-sale securities
and equity securities		-		-		28		6		-		34
Increase in other investments		-		-		(14)		(14)		-		(28)
Net cash used in investing activities		-		-		(109)		(68)		-		(177)

Cash flows from financing activities:
Repurchase of restricted stock shares for
payroll tax withholding requirements		(1)		-		-		-		-		(1)
Deferred financing costs and other debt-related
costs		-		-		(11)		-		-		(11)
Redemption of noncontrolling investments in
joint ventures		-		-		-		(3)		-		(3)
Distributions to noncontrolling investors in
joint ventures		-		-		-		(23)		-		(23)
Changes in intercompany balances with
affiliates, net		(25)		69		(91)		47		-		-
Borrowings under credit agreements		-		-		10		-		-		10
Proceeds from receivables facility		-		-		-		49		-		49
Repayments of long-term indebtedness		-		(11)		-		(78)		-		(89)
Net cash (used in) provided by financing
activities		(26)		58		(92)		(8)		-		(68)
Net change in cash and cash equivalents		-		-		(163)		24		-		(139)
Cash and cash equivalents at beginning of period		-		-		497		66		-		563
Cash and cash equivalents at end of period	$	-	$	-	$	334	$	90	$	-	$	424



Condensed Consolidating Statement of Cash Flows
Three Months Ended March 31, 2017

	Parent				Other		Non -
	Guarantor		Issuer		Guarantors		Guarantors		Eliminations		Consolidated
	(In millions)
Net cash (used in) provided by operating
activities	$	-	$	(124)	$	234	$	132	$	-	$	242

Cash flows from investing activities:
Acquisitions of facilities and other related
businesses		-		-		(1)		(1)		-		(2)
Purchases of property and equipment		-		-		(93)		(53)		-		(146)
Purchases of available-for-sale securities
and equity securities		-		-		(8)		(4)		-		(12)
Proceeds from sales of available-for-sale securities
and equity securities		-		-		20		6		-		26
Increase in other investments		-		-		(30)		(7)		-		(37)
Net cash used in
investing activities		-		-		(112)		(59)		-		(171)

Cash flows from financing activities:
Repurchase of restricted stock shares for payroll
tax withholding requirements		(5)		-		-		-		-		(5)
Deferred financing costs and other
debt-related costs		-		(40)		-		-		-		(40)
Proceeds from noncontrolling investors in joint
ventures		-		-		-		5		-		5
Redemption of noncontrolling investments in joint
ventures		-		-		-		(4)		-		(4)
Distributions to noncontrolling investors in joint
ventures		-		-		-		(28)		-		(28)
Changes in intercompany balances with
affiliates, net		5		157		(132)		(30)		-		-
Borrowings under credit agreements		-		596		12		2		-		610
Issuance of long-term debt		-		2,200		-		-		-		2,200
Proceeds from receivables facility		-		-		-		26		-		26
Repayments of long-term indebtedness		-		(2,789)		(31)		(6)		-		(2,826)
Net cash provided by (used in) financing
activities		-		124		(151)		(35)		-		(62)
Net change in cash and cash equivalents		-		-		(29)		38		-		9
Cash and cash equivalents at beginning of period		-		-		174		64		-		238
Cash and cash equivalents at end of period	$	-	$	-	$	145	$	102	$	-	$	247