EX-99.1 3 d492000dex991.htm EX-99.1 EX-99.1

Exhibit Number 99.1

COMMUNITY HEALTH SYSTEMS, INC.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

On December 30, 2022, one or more affiliates of Community Health Systems, Inc. (the “Company”) entered into a definitive asset purchase agreement, as amended (the “Purchase Agreement”) for the sale of substantially all of the assets of Plateau Medical Center (“Plateau”) (25 licensed beds) in Oak Hill, West Virginia, to affiliates of Vandalia Health, Inc. (the “Transaction”). Effective April 1, 2023, one or more affiliates of the Company completed the sale of Plateau 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 March 31, 2023 was approximately $92 million in cash.

The Company has determined that the operations of Plateau 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 Plateau had occurred as of December 31, 2022. The estimated gain on sale in connection with the Transaction is reflected in the unaudited pro forma condensed balance sheet within retained earnings.

The accompanying unaudited pro forma condensed consolidated statement of income for the year ended December 31, 2022 (the “Pro Forma Period”) includes 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 statement of income for the Pro Forma Period 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 the 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 consolidated financial statements for the year ended December 31, 2022, included in the Company’s Annual Report on Form 10-K filed on February 17, 2023.

 

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Unaudited Pro Forma Condensed Consolidated Balance Sheet

(In millions)

 

     December 31, 2022  
           Pro Forma        
     As Reported     Adjustments     Pro Forma  

ASSETS

       

Current assets

       

Cash and cash equivalents

    $ 118     $ 92  a    $ 210  

Patient accounts receivable

      2,040       —         2,040  

Supplies

      353       —         353  

Prepaid income taxes

      99       —         99  

Prepaid expenses and taxes

      237       —         237  

Other current assets

      235       (2 )b      233  
  

 

 

    

 

 

    

 

 

  

Total current assets

      3,082       90       3,172  
  

 

 

    

 

 

    

 

 

  

Property and equipment

      9,639       —         9,639  

Less accumulated depreciation and amortization

      (4,274 )      —         (4,274 ) 
  

 

 

    

 

 

    

 

 

  

Property and equipment, net

      5,365       —         5,365  
  

 

 

    

 

 

    

 

 

  

Goodwill

      4,166       —         4,166  
  

 

 

    

 

 

    

 

 

  

Deferred income taxes

      49       —         49  
  

 

 

    

 

 

    

 

 

  

Other assets, net

      2,007       (56 )b      1,951  
  

 

 

    

 

 

    

 

 

  

Total assets

    $ 14,669     $ 34     $ 14,703  
  

 

 

    

 

 

    

 

 

  

LIABILITIES AND STOCKHOLDERS’ DEFICIT

       

Current liabilities

       

Current maturities of long-term debt

    $ 21     $ —       $ 21  

Current operating lease liabilities

      148       —         148  

Accounts payable

      773       —         773  

Accrued liabilities:

       

Employee compensation

      637       —         637  

Accrued interest

      189       —         189  

Other

      418       (2 )b      416  
  

 

 

    

 

 

    

 

 

  

Total current liabilities

      2,186       (2 )      2,184  
  

 

 

    

 

 

    

 

 

  

Long-term debt (g)

      11,614       —         11,614  
  

 

 

    

 

 

    

 

 

  

Deferred income taxes

      354       6  c      360  
  

 

 

    

 

 

    

 

 

  

Long-term operating lease liabilities

      605       —         605  
  

 

 

    

 

 

    

 

 

  

Other long-term liabilities

      644       —         644  
  

 

 

    

 

 

    

 

 

  

Total liabilities

      15,403       4       15,407  
  

 

 

    

 

 

    

 

 

  

Redeemable noncontrolling interests in equity of consolidated subsidiaries

      541       —         541  
  

 

 

    

 

 

    

 

 

  

STOCKHOLDERS’ DEFICIT

       

Community Health Systems, Inc. stockholders’ deficit:

       

Preferred stock

      —         —         —    

Common stock

      1       —         1  

Additional paid-in capital

      2,084       —         2,084  

Accumulated other comprehensive loss

      (21 )      —         (21 ) 

Accumulated deficit

      (3,431 )      30  d      (3,401 ) 
  

 

 

    

 

 

    

 

 

  

Total Community Health Systems, Inc. stockholders’ deficit

      (1,367 )      30       (1,337 ) 

Noncontrolling interests in equity of consolidated subsidiaries

      92       —         92  
  

 

 

    

 

 

    

 

 

  

Total stockholders’ deficit

      (1,275 )      30       (1,245 ) 
  

 

 

    

 

 

    

 

 

  

Total liabilities and stockholders’ deficit

    $ 14,669     $ 34     $ 14,703  
  

 

 

    

 

 

    

 

 

  

 

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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     $ (53 )e    $ 12,158  

Operating costs and expenses:

       

Salaries and benefits

      5,330       (22 )e      5,308  

Supplies

      1,975       (6 )e      1,969  

Other operating expenses

      3,336       (13 )e      3,323  

Lease cost and rent

      317       (1 )e      316  

Pandemic relief funds

      (173 )      —    e      (173 ) 

Depreciation and amortization

      534       (3 )e      531  

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

      71       (36 )d      35  
  

 

 

    

 

 

    

 

 

  

Total operating costs and expenses

      11,390       (81 )      11,309  
  

 

 

    

 

 

    

 

 

  

Income from operations

      821       28       849  

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       28       377  

Provision for income taxes

      170       4  c, d      174  
  

 

 

    

 

 

    

 

 

  

Net income

      179       24       203  

Less: Net income attributable to noncontrolling interests

      133       —         133  
  

 

 

    

 

 

    

 

 

  

Net income attributable to Community Health Systems, Inc. stockholders

    $ 46     $ 24     $ 70  
  

 

 

    

 

 

    

 

 

  

Earnings per share attributable to Community Health Systems, Inc. stockholders:

       

Basic

    $ 0.35       $ 0.49  
  

 

 

      

 

 

  

Diluted

    $ 0.35       $ 0.48  
  

 

 

      

 

 

  

Weighted-average number of shares outstanding:

       

Basic

      129         127  
  

 

 

      

 

 

  

Diluted

      130         130  
  

 

 

      

 

 

  

 

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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 Plateau of approximately $92 million.

 

  b.

Adjustments represent the elimination of assets and liabilities held for sale attributable to Plateau.

 

  c.

Adjustment represents a net increase in income taxes of approximately $4 million associated with the sale of Plateau. An approximate $6 million increase in income taxes related to the gain on sale is offset by a $2 million benefit related to the elimination of revenues, costs and expenses referenced in Note (e). 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 Plateau of $36 million ($30 million net of tax) calculated as follows:

 

Cash received

    $ 92  

Less: Carrying value of Plateau

      (23 ) 

Less: Goodwill allocated to sale of Plateau

      (33 ) 
  

 

 

  

Pro forma gain before income taxes

      36  

Provision for income taxes

      (6 ) 
  

 

 

  

Pro forma net gain on sale of Plateau

    $ 30  
  

 

 

  

 

  e.

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

 

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