Community Health Systems' CEO Discusses Q1 2012 Results - Earnings Call Transcript

Community Health Systems, Inc. (CYH)

Q1 2012 Earnings Call

April 27, 2012 11:00 am ET


Lizbeth R. Schuler – Vice President, Investor Relations

Wayne T. Smith – Chairman, President and Chief Executive Officer

W. Larry Cash – Executive Vice President and Chief Financial Officer


Adam Feinstein – Barclays capital

A.J. Rice – UBS

Gary Taylor – Citigroup



Good morning. My name is Matthew and I will be your conference operator today. At this time, I’d like to welcome everyone to the Community Health System First Quarter Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. (Operator instructions)

Thank you. Vice President of Investor Relations, Lizbeth Schuler, you may begin your conference.

Lizbeth R. Schuler

Thank you, Matthew. Good morning and welcome to Community Health Systems first quarter 2012 conference call.

Before we begin the call, I would like to read the following disclosure statement. This presentation may contain certain forward-looking statements provided by Company management. These statements are intended to be covered by the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995.

Forward-looking statements include all statements that do not relate solely to historical or current facts, including statements regarding future operations, financial results, cash flows, cost and cost management initiatives, and can also be identified by the use of words like may, believe, think, will, would, should, expect, project, target, estimate, guidance, anticipate, intend, plan, initiative, continue or words and phrases of similar meanings. These forward-looking statements speak only as of the date hereof and are based on our current plans and expectations and are subject to a number of known and unknown uncertainties and risks, many of which are beyond our control.

These risks and uncertainties are described in heading such as Risk Factors in our Annual Report on Form 10-K and other reports filed with the Securities and Exchange Commission. As a consequence, current plans, anticipated actions, and future financial positions and results of operations may differ significantly from those expressed in any forward-looking statements in today’s presentation. You are cautioned not to rely unduly on such forward-looking statements when evaluating the information presented, and we do not have any obligation to and do not intent to update any of these forward-looking statements.

The presentation also contains certain non-GAAP financial measures. This presentation and the Company’s earnings releases for the first quarter of 2012 located on the Company’s Investor Relations page at include a reconciliation of the difference between certain non-GAAP financial measures with the most directly comparable financial measures calculated in accordance with GAAP. These non-GAAP financial measures should not be considered as an alternative to the GAAP financial measures.

References to the Company or Community Health Systems used herein refer to Community Health Systems, Inc. and its affiliate unless otherwise stated or indicated by context.

With that said, I would like to turn the call over to Mr. Wayne Smith, Chairman, President and Chief Executive Officer. Mr. Smith?

Wayne T. Smith

Thanks, Lib. Good morning, and thank you for joining Community Health Systems quarterly conference call.

Larry Cash, our Executive Vice President and Chief Financial officer is also on the call with me. The purpose of this call is to review our financial and operating results for the first quarter ended March 31, 2012. We issued a press release and an 8-K after the market closed yesterday that included our financial statements. A slide presentation accompanies our prepared remarks for those of you listening to the live broadcast of this conference call on our website.

I’d like to begin the call with some comments about our quarterly results and then turn the call over to Larry, who will follow with additional details of our financial results. We are very pleased with our consistent financial and operating results for the first quarter ended March of 31, 2012.

First, our same-store admissions were down 2.3% for the quarter, better than forecasted when we present our fourth quarter results in February. Net revenue for the first quarter increased 11.6%, $3.3 billion versus $3 billion in 2011. Reported adjusted EBITDA for the first quarter of 2012 was $535 million, an increase of 17.2%. EBITDA was affected by several one-time adjustments, we recorded approximately $71.8 million for the industry-wide budget neutrality agreements settling the SSI adjustment update implemented by CMS.

EBITDA was also affected by $14 million reserve established for certain specific legal matters, income from continuing operations, including loss on the early extinguishment of debt was $0.85 per share diluted. Adding back the loss from the extinguishment of debt of $0.44 including favorable one time adjustments of $0.38, our EPS for the quarter would have been $0.91.

With that, I’d like to review some key operating accomplishments for the quarter. The company recruited 423 new physicians during the first quarter 2012 compared to 281 for the same period in 2011. In addition, we added 44 midlevels during the quarter. Physician recruiting remains a key component of our operating strategy. Adding new physicians improves not only quality, but also the available of services provided in our communities.

As we discussed last quarter, we purchased the assets of Moses Taylor Health Systems Scranton, Pennsylvania, a two hospital system on January 1, 2012. Trailing revenue for this acquisition was $200 million with a lower single-digit margin and the price was approximately $150 million.

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