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 held by the Company in non-guarantor subsidiaries have been pledged as collateral under the Notes, except for equity interests held in three hospitals owned jointly with a non-profit, health organization. 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 ABL Facility and Receivables Facility that are 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, 2019.



Condensed Consolidating Statement of Loss
Three Months Ended March 31, 2019

	Parent Guarantor		Issuer		Other Guarantors		Non - Guarantors		Eliminations		Consolidated
	(In millions)
Net operating revenues	$	-	$	42	$	2,073	$	1,261	$	-	$	3,376
Operating costs and expenses:
Salaries and benefits		-		-		801		741		-		1,542
Supplies		-		-		373		185		-		558
Other operating expenses		-		-		529		282		-		811
Government and other legal settlements and
related costs		-		-		5		-		-		5
Electronic health records incentive reimbursement		-		-		-		-		-		-
Lease cost and rent		-		-		41		39		-		80
Depreciation and amortization		-		-		94		59		-		153
Impairment and (gain) loss on sale of businesses, net		-		-		24		14		-		38
Total operating costs and expenses		-		-		1,867		1,320		-		3,187
Income (loss) from operations		-		42		206		(59)		-		189
Interest expense, net		-		138		136		(17)		-		257
Loss from early extinguishment of debt		-		31		-		-		-		31
Equity in earnings of unconsolidated affiliates		118		(2)		77		-		(198)		(5)
(Loss) income before income taxes		(118)		(125)		(7)		(42)		198		(94)
(Benefit from) provision for income taxes		-		(7)		(1)		15		-		7
Net (loss) income		(118)		(118)		(6)		(57)		198		(101)
Less: Net income attributable to noncontrolling interests		-		-		-		17		-		17
Net (loss) income attributable to Community Health
Systems, Inc. stockholders	$	(118)	$	(118)	$	(6)	$	(74)	$	198	$	(118)



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)	$	2,285	$	1,409	$	-	$	3,689
Operating costs and expenses:
Salaries and benefits		-		-		847		801		-		1,648
Supplies		-		-		406		210		-		616
Other operating expenses		-		-		607		304		-		911
Government and other legal settlements and
related costs		-		-		5		-		-		5
Electronic health records incentive reimbursement		-		-		(1)		-		-		(1)
Lease cost and rent		-		-		47		42		-		89
Depreciation and amortization		-		-		116		65		-		181
Impairment and (gain) loss on sale of businesses, net		-		-		16		12		-		28
Total operating costs and expenses		-		-		2,043		1,434		-		3,477
(Loss) income from operations		-		(5)		242		(25)		-		212
Interest expense, net		-		91		143		(6)		-		228
Loss from early extinguishment of debt		-		4		-		-		-		4
Equity in earnings of unconsolidated affiliates		25		(34)		22		-		(20)		(7)
(Loss) income before income taxes		(25)		(66)		77		(19)		20		(13)
(Benefit from) provision for income taxes		-		(41)		44		(10)		-		(7)
Net (loss) income		(25)		(25)		33		(9)		20		(6)
Less: Net income attributable to noncontrolling interests		-		-		-		19		-		19
Net (loss) income attributable to Community Health
Systems, Inc. stockholders	$	(25)	$	(25)	$	33	$	(28)	$	20	$	(25)


Condensed Consolidating Statement of Comprehensive Loss
Three Months Ended March 31, 2019

	Parent Guarantor		Issuer		Other Guarantors		Non - Guarantors		Eliminations		Consolidated
		(In millions)
Net (loss) income	$	(118)	$	(118)	$	(6)	$	(57)	$	198	$	(101)
Other comprehensive (loss) income, net of income taxes:
Net change in fair value of interest rate swaps, net of tax		(2)		(2)		-		-		2		(2)
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		-		-		-		-		-		-
Other comprehensive income (loss)		-		-		2		-		(2)		-
Comprehensive (loss) income		(118)		(118)		(4)		(57)		196		(101)
Less: Comprehensive income attributable to
noncontrolling interests		-		-		-		17		-		17
Comprehensive (loss) income attributable to
Community Health Systems, Inc. stockholders	$	(118)	$	(118)	$	(4)	$	(74)	$	196	$	(118)



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)	$	33	$	(9)	$	20	$	(6)
Other comprehensive (loss) income, 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)		32		(9)		4		11
Less: Comprehensive income attributable to
noncontrolling interests		-		-		-		19		-		19
Comprehensive (loss) income attributable to
Community Health Systems, Inc. stockholders	$	(8)	$	(8)	$	32	$	(28)	$	4	$	(8)



Condensed Consolidating Balance Sheet
March 31, 2019
	Parent				Other		Non -
	Guarantor		Issuer		Guarantors		Guarantors		Eliminations		Consolidated
	(In millions)
ASSETS
Current assets:
Cash and cash equivalents	$	-	$	-	$	217	$	60	$	-	$	277
Patient accounts receivable		-		-		1,974		386		-		2,360
Supplies		-		-		258		139		-		397
Prepaid income taxes		3		-		-		-		-		3
Prepaid expenses and taxes		-		-		147		50		-		197
Other current assets		-		-		100		261		-		361
Total current assets		3		-		2,696		896		-		3,595
Intercompany receivable		-		12,566		4,896		6,178		(23,640)		-
Property and equipment, net		-		-		3,948		2,138		-		6,086
Goodwill		-		-		2,754		1,799		-		4,553
Deferred income taxes		66		-		-		-		-		66
Other assets, net		-		22		1,114		873		-		2,009
Net investment in subsidiaries		-		21,884		11,716		-		(33,600)		-
Total assets	$	69	$	34,472	$	27,124	$	11,884	$	(57,240)	$	16,309
LIABILITIES AND DEFICIT
Current liabilities:
Current maturities of long-term debt	$	-	$	155	$	25	$	25	$	-	$	205
Current operating lease liabilities		-		-		77		66		-		143
Accounts payable		-		3		559		301		-		863
Accrued interest		-		250		-		-		-		250
Accrued liabilities		-		1		595		451		-		1,047
Total current liabilities		-		409		1,256		843		-		2,508
Long-term debt		-		13,163		146		76		-		13,385
Intercompany payable		1,694		22,481		24,648		11,722		(60,545)		-
Deferred income taxes		29		-		-		-		-		29
Long-term operating lease liabilities		-		-		252		243		-		495
Other long-term liabilities		9		2		690		276		-		977
Total liabilities		1,732		36,055		26,992		13,160		(60,545)		17,394
Redeemable noncontrolling interests in
equity of consolidated subsidiaries		-		-		-		505		-		505
Deficit:
Community Health Systems, Inc. stockholders’
deficit:
Common stock		1		-		-		-		-		1
Additional paid-in capital		2,007		(354)		161		(583)		776		2,007
Accumulated other comprehensive loss		(10)		(10)		(11)		(2)		23		(10)
(Accumulated deficit) retained earnings		(3,661)		(1,219)		(18)		(1,269)		2,506		(3,661)
Total Community Health Systems, Inc.
stockholders’ (deficit) equity		(1,663)		(1,583)		132		(1,854)		3,305		(1,663)
Noncontrolling interests in equity of
consolidated subsidiaries		-		-		-		73		-		73
Total (deficit) equity		(1,663)		(1,583)		132		(1,781)		3,305		(1,590)
Total liabilities and deficit	$	69	$	34,472	$	27,124	$	11,884	$	(57,240)	$	16,309



Condensed Consolidating Balance Sheet
December 31, 2018
	Parent				Other		Non -
	Guarantor		Issuer		Guarantors		Guarantors		Eliminations		Consolidated
	(In millions)
ASSETS
Current assets:
Cash and cash equivalents	$	-	$	-	$	135	$	61	$	-	$	196
Patient accounts receivable		-		-		1,972		380		-		2,352
Supplies		-		-		261		141		-		402
Prepaid income taxes		3		-		-		-		-		3
Prepaid expenses and taxes		-		-		132		64		-		196
Other current assets		-		-		120		280		-		400
Total current assets		3		-		2,620		926		-		3,549
Intercompany receivable		-		12,698		4,875		6,316		(23,889)		-
Property and equipment, net		-		-		3,992		2,147		-		6,139
Goodwill		-		-		2,760		1,799		-		4,559
Deferred income taxes		69		-		-		-		-		69
Other assets, net		-		25		956		562		-		1,543
Net investment in subsidiaries		-		21,519		11,698		-		(33,217)		-
Total assets	$	72	$	34,242	$	26,901	$	11,750	$	(57,106)	$	15,859
LIABILITIES AND DEFICIT
Current liabilities:
Current maturities of long-term debt	$	-	$	155	$	22	$	27	$	-	$	204
Accounts payable		-		-		593		294		-		887
Accrued interest		-		206		-		-		-		206
Accrued liabilities		-		-		635		460		-		1,095
Total current liabilities		-		361		1,250		781		-		2,392
Long-term debt		-		13,167		147		78		-		13,392
Intercompany payable		1,572		22,178		24,646		11,819		(60,215)		-
Deferred income taxes		26		-		-		-		-		26
Other long-term liabilities		9		2		714		283		-		1,008
Total liabilities		1,607		35,708		26,757		12,961		(60,215)		16,818
Redeemable noncontrolling interests in
equity of consolidated subsidiaries		-		-		-		504		-		504
Deficit:
Community Health Systems, Inc. stockholders’
deficit:
Common stock		1		-		-		-		-		1
Additional paid-in capital		2,017		(327)		162		(566)		731		2,017
Accumulated other comprehensive loss		(10)		(10)		(5)		(9)		24		(10)
(Accumulated deficit) retained earnings		(3,543)		(1,129)		(13)		(1,212)		2,354		(3,543)
Total Community Health Systems, Inc.
stockholders’ (deficit) equity		(1,535)		(1,466)		144		(1,787)		3,109		(1,535)
Noncontrolling interests in equity of
consolidated subsidiaries		-		-		-		72		-		72
Total (deficit) equity		(1,535)		(1,466)		144		(1,715)		3,109		(1,463)
Total liabilities and deficit	$	72	$	34,242	$	26,901	$	11,750	$	(57,106)	$	15,859



Condensed Consolidating Statement of Cash Flows
Three Months Ended March 31, 2019

	Parent				Other		Non -
	Guarantor		Issuer		Guarantors		Guarantors		Eliminations		Consolidated
	(In millions)
Net cash (used in) provided by operating
activities	$	-	$	(59)	$	130	$	62	$	-	$	133
Cash flows from investing activities:
Acquisitions of facilities and other related
businesses		-		-		(3)		(1)		-		(4)
Purchases of property and equipment		-		-		(102)		(19)		-		(121)
Proceeds from disposition of hospitals
and other ancillary operations		-		18		138		5		-		161
Purchases of available-for-sale securities
and equity securities		-		-		(9)		(6)		-		(15)
Proceeds from sales of available-for-sale securities
and equity securities		-		-		20		12		-		32
Increase in other investments		-		-		(32)		(2)		-		(34)
Net cash provided by (used in)
investing activities		-		18		12		(11)		-		19
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		-		(25)		-		-		-		(25)
Proceeds from noncontrolling investors in
joint ventures		-		-		-		1		-		1
Redemption of noncontrolling investments in
joint ventures		-		-		-		(1)		-		(1)
Distributions to noncontrolling investors in
joint ventures		-		-		-		(27)		-		(27)
Changes in intercompany balances with
affiliates, net		1		83		(62)		(22)		-		-
Borrowings under credit agreements		-		-		12		-		-		12
Issuance of long-term debt		-		1,840		-		-		-		1,840
Proceeds from ABL facility		-		25		-		-		-		25
Repayments of long-term indebtedness		-		(1,882)		(10)		(3)		-		(1,895)
Net cash provided by (used in)
financing activities		-		41		(60)		(52)		-		(71)
Net change in cash and cash equivalents		-		-		82		(1)		-		81
Cash and cash equivalents at beginning of period		-		-		135		61		-		196
Cash and cash equivalents at end of period	$	-	$	-	$	217	$	60	$	-	$	277



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)	$	108	$	30	$	-	$	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		-		-		1		2		-		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		-		-		(108)		(69)		-		(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)
Proceeds from noncontrolling investors in joint
ventures		-		-		-		-		-		-
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		(136)		92		-		-
Borrowings under credit agreements		-		-		10		-		-		10
Issuance of long-term debt		-		-		-		-		-		-
Proceeds from ABL facility		-		-		49		-		-		49
Repayments of long-term indebtedness		-		(11)		(76)		(2)		-		(89)
Net cash (used in) provided by financing
activities		(26)		58		(164)		64		-		(68)
Net change in cash and cash equivalents		-		-		(164)		25		-		(139)
Cash and cash equivalents at beginning of period		-		-		499		64		-		563
Cash and cash equivalents at end of period	$	-	$	-	$	335	$	89	$	-	$	424