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Community Health Systems, Inc. Previews Second Quarter 2017 Operating Results

FRANKLIN, Tenn.--(BUSINESS WIRE)--Community Health Systems, Inc. (NYSE: CYH) (the “Company”) today announced preliminary financial and operating results for the three months ended June 30, 2017. These results are based on information available to management as of the date of this press release and are subject to revision upon finalization of the Company’s quarterly accounting and financial reporting procedures.

Financial and statistical data for 2016 include the following in operating results through the effective date of each respective transaction:

  • On April 29, 2016, the Company completed the spin-off of Quorum Health Corporation (“QHC”), comprised of 38 affiliated hospitals and related outpatient services in 16 states, together with Quorum Health Resources, LLC, a subsidiary providing management advisory and consulting services to non-affiliated hospitals. Same-store operating results and statistical data exclude information for the hospitals divested in the spin-off of QHC in the comparable period in 2016.
  • On April 29, 2016, the Company sold its unconsolidated minority equity interests in Valley Health System, LLC and Summerlin Hospital Medical Center, LLC, both joint ventures with Universal Health Systems, Inc. comprising a total of five hospitals in Las Vegas, Nevada.
  • On December 31, 2016, the Company sold an 80% majority ownership interest in its home care division to a subsidiary of Almost Family, Inc. Same-store operating results exclude the home care division in the comparable period in 2016.
  • On May 1, 2017, the Company sold 11 hospitals as part of its ongoing portfolio rationalization efforts. Same-store operating results exclude the results of these hospitals divested in 2017 and the comparable period in 2016. An additional nine hospitals were sold effective June 30, 2017 and July 1, 2017. Actual and same-store operating results include the results of these hospitals in 2017 and the comparable period in 2016.

The Company anticipates net operating revenues for the three months ended June 30, 2017, will be approximately $4.144 billion, compared with $4.590 billion for the same period in 2016. Loss from continuing operations attributable to Community Health Systems, Inc. common stockholders for the three months ended June 30, 2017, is expected to be approximately $(131) million, or $(1.17) per share (diluted), compared with a loss of $(1.431) billion, or $(12.90) per share (diluted) for the three months ended June 30, 2016. Net loss attributable to Community Health Systems, Inc. common stockholders is expected to be approximately $(137) million, or $(1.22) per share (diluted) for the three months ended June 30, 2017, compared with $(1.432) billion, or $(12.91) per share (diluted) for the same period in 2016. Adjusted EBITDA for the three months ended June 30, 2017, is expected to be approximately $435 million, compared with $563 million for the same period in 2016.

The anticipated results for the three months ended June 30, 2017, include a loss of $(0.77) per share (diluted) related to impairment and (gain) loss on sale of businesses, loss of $(0.06) per share (diluted) from early extinguishment of debt, loss of $(0.04) per share (diluted) related to government and other legal settlements, loss of $(0.01) per share (diluted) related to employee termination benefits and other restructuring charges, and loss of $(0.04) per share (diluted) related to expense from fair value adjustments on the CVR agreement liability accounted for at fair value related to the HMA legal proceedings, and related legal expenses. Excluding these items, the Company anticipates the loss from continuing operations attributable to Community Health Systems, Inc. common stockholders to be a loss of $(0.25) per share (diluted) for the three months ended June 30, 2017.

Net cash provided by operating activities for the three months ended June 30, 2017, is expected to be approximately $261 million, with total net cash provided by operating activities for the six months ended June 30, 2017 expected to be approximately $503 million. This compares with $338 million for the three months ended June 30, 2016, and $632 million for the six months ended June 30, 2016.

The consolidated operating results for the three months ended June 30, 2017, reflect a 10.8 percent decrease in total admissions and an 11.2 percent decrease in total adjusted admissions, compared with the same period in 2016. On a same-store basis, both admissions and adjusted admissions decreased 2.5 percent during the three months ended June 30, 2017, compared with the same period in 2016. On a same-store basis, net operating revenues decreased 0.7 percent during the three months ended June 30, 2017, compared with the same period in 2016.

Same-store consolidated salaries and benefits expense is expected to decrease as a percentage of consolidated net operating revenues from 46.3 percent for the three months ended June 30, 2016, to approximately 46.2 percent for the three months ended June 30, 2017. Same-store consolidated supplies expense as a percentage of consolidated net operating revenues is expected to be unchanged at 16.9 percent for both of the three months ended June 30, 2017 and June 30, 2016. Same-store consolidated other operating expenses are expected to increase as a percentage of consolidated net operating revenues from 22.2 percent for the three months ended June 30, 2016, to approximately 24.0 percent for the three months ended June 30, 2017.

The lower than anticipated results were primarily caused by lower than expected volume and the resulting lower net operating revenues. The results were also impacted by increases in medical specialist fees, purchased services and information systems expense.

The Company completed its divestitures of one hospital on June 30, 2017 and eight hospitals on July 1, 2017, bringing its total completed divestitures to 20, out of the previously announced 30 hospitals subject to definitive agreements. The Company expects to complete the sale of the remaining 10 hospitals subject to definitive agreements by September 30, 2017.

In addition to the previously announced divestiture of 30 hospitals, the Company continues to receive interest from acquirers for certain of its hospitals. The Company is pursuing this interest for sale transactions involving hospitals with a combined total of at least $1.5 billion in annual net revenue and combined mid-single digit Adjusted EBITDA margins.

The Company is also providing a preliminary update to its 2017 annual guidance for Adjusted EBITDA to reflect changes to projected consolidated operating results for the year ending...


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