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Community Health Systems, Inc. Announces Third Quarter 2012 Results With Net Operating Revenues Of $3.2 Billion

Stocks in this article: CYH

(c) EBITDA consists of net income attributable to Community Health Systems, Inc. before interest, income taxes, and depreciation and amortization. Adjusted EBITDA is EBITDA adjusted to exclude discontinued operations, gain/loss from early extinguishment of debt and net income attributable to noncontrolling interests. The Company has from time to time sold noncontrolling interests in certain of its subsidiaries or acquired subsidiaries with existing noncontrolling interest ownership positions. The Company believes that it is useful to present adjusted EBITDA because it excludes the portion of EBITDA attributable to these third-party interests and clarifies for investors the Company’s portion of EBITDA generated by continuing operations. The Company uses adjusted EBITDA as a measure of liquidity. The Company has included this measure because it believes it provides investors with additional information about the Company’s ability to incur and service debt and make capital expenditures. Adjusted EBITDA is the basis for a key component in the determination of the Company’s compliance with some of the covenants under the Company’s senior secured credit facility, as well as to determine the interest rate and commitment fee payable under the senior secured credit facility.

Adjusted EBITDA is not a measurement of financial performance or liquidity under U.S. GAAP. It should not be considered in isolation or as a substitute for net income, operating income, cash flows from operating, investing or financing activities, or any other measure calculated in accordance with U.S. GAAP. The items excluded from adjusted EBITDA are significant components in understanding and evaluating financial performance and liquidity. This calculation of adjusted EBITDA may not be comparable to similarly titled measures reported by other companies.

The following table reconciles adjusted EBITDA, as defined, to net cash provided by operating activities as derived directly from the condensed consolidated financial statements (in thousands):

  Three Months Ended   Nine Months Ended
September 30, September 30,
2012   2011 2012   2011
Adjusted EBITDA $ 477,254 453,512 $ 1,495,843   1,372,883
Interest expense, net (158,565 ) (159,480 ) (462,347 ) (485,928 )
Provision for income taxes (25,700 ) (36,717 ) (121,038 ) (125,630 )
Loss from operations of entities sold, net of taxes - (3,103 ) (466 ) (4,546 )
Other non-cash expenses, net 15,596 20,901 51,645 46,123

Net changes in operating assets and liabilities, net of effects of acquisitions and divestitures

  (13,647 )   (39,563 )   (185,772 )   17,333  
Net cash provided by operating activities $ 294,938   $ 235,550   $ 777,865     820,235  


Footnotes continued on the next page.


Footnotes to Financial Highlights, Financial Statements and Selected Operating Data (Continued)

(d) Included in non-same-store income from operations and income from continuing operations for the nine months ended September 30, 2012, is approximately $102 million of net operating revenue and approximately $9 million of related expenses from an industry-wide settlement with the United States Department of Health and Human Services and Centers for Medicare and Medicaid Services based on a claim that acute-care hospitals in the U.S. were underpaid from the Medicare inpatient prospective payment system in federal fiscal years 1999 through 2011. The underpayments resulted from calculations related to the rural floor budget neutrality adjustments implemented in connection with the Balanced Budget Act of 1997. In addition, included in net income attributable to noncontrolling interests is approximately $3 million related to this settlement. Also included is an unfavorable adjustment to net operating revenue of approximately $21 million related to the newly issued Supplemental Security Income ratios for federal fiscal years 2006 through 2009 utilized for calculating Medicare Disproportionate Share Hospital reimbursements. These adjustments resulted in an after-tax benefit to net income of $0.48 per share (diluted).

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